AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 30, 1999
REGISTRATION NO. 333-90881
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------
AMENDMENT NO. 3
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------
SAVVIS COMMUNICATIONS CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 6719 43-1809960
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
------------------
SAVVIS COMMUNICATIONS CORPORATION
12007 SUNRISE VALLEY DRIVE
RESTON, VA 20191
(703) 453-7500
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
------------------
STEVEN M. GALLANT, ESQ.
VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY
SAVVIS COMMUNICATIONS CORPORATION
12007 SUNRISE VALLEY DRIVE
RESTON, VA 20191
(703) 453-7500
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------
Copies to:
<TABLE>
<S> <C>
CHRISTINE M. PALLARES, ESQ. ANDREW R. SCHLEIDER, ESQ.
HOGAN & HARTSON L.L.P. SHEARMAN & STERLING
885 THIRD AVENUE 599 LEXINGTON AVENUE
NEW YORK, NY 10022 NEW YORK, NY 10022
(212) 409-9800 (212) 848-4000
</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 statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
<PAGE>
CALCULATION OF REGISTRATION FEE
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TITLE OF EACH CLASS OF AMOUNT TO BE PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED(1) OFFERING PRICE PER SHARE(2) AGGREGATE OFFERING PRICE REGISTRATION FEE(3)
<S> <C> <C> <C> <C>
Common Stock, $.01 par value.. 14,680,850 shares $ 25.00 $367,021,250 $97,944
</TABLE>
- --------------------------------------------------------------------------------
(1) The amount of the securities registered includes any securities which the
underwriters have options of purchasing to cover over-allotments.
(2) Estimated solely for the purpose of determining the registration fee
pursuant to Rule 457(a) under the Securities Act of 1933.
(3) Includes $77,094 paid herewith in connection with an increase in the
proposed maximum aggregate offering price. Also includes $20,850 paid on
November 12, 1999.
------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
EXPLANATORY NOTE
THIS REGISTRATION STATEMENT CONTAINS TWO FORMS OF PROSPECTUSES, ONE TO BE
USED IN CONNECTION WITH AN UNDERWRITTEN PUBLIC OFFERING IN THE UNITED STATES AND
CANADA AND ONE TO BE USED IN A CONCURRENT UNDERWRITTEN PUBLIC OFFERING OUTSIDE
THE UNITED STATES AND CANADA. THE TWO PROSPECTUSES ARE IDENTICAL EXCEPT FOR THE
FRONT AND BACK COVER PAGES AND THE SECTION ENTITLED "UNDERWRITING." THE FORM OF
U.S. PROSPECTUS IS INCLUDED IN THIS REGISTRATION STATEMENT AND IS FOLLOWED BY
THE ALTERNATE PAGES TO BE USED IN THE INTERNATIONAL PROSPECTUS. EACH OF THE
ALTERNATE PAGES FOR THE INTERNATIONAL PROSPECTUS INCLUDED IN THIS REGISTRATION
STATEMENT IS LABELED "INTERNATIONAL PROSPECTUS--ALTERNATE PAGE." FINAL FORMS OF
EACH PROSPECTUS WILL BE FILED WITH THE SECURITIES AND EXCHANGE COMMISSION UNDER
RULE 424(B) UNDER THE SECURITIES ACT OF 1933.
<PAGE>
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED DECEMBER 30, 1999
P R O S P E C T U S
- -------------------
10,212,766 SHARES
[LOGO]
SAVVIS COMMUNICATIONS CORPORATION
COMMON STOCK
---------------
This is SAVVIS Communications Corporation's initial public offering of
common stock. SAVVIS Communications Corporation is selling all of the shares.
The U.S. underwriters are offering 10,212,766 shares in the U.S. and Canada and
the international managers are offering 2,553,191 shares outside the U.S. and
Canada.
We expect the public offering price to be between $22.00 and $25.00 per
share. Currently, no public market exists for the shares. After pricing of the
offering, we expect that the shares will be quoted on the Nasdaq National Market
System under the symbol "SVVS."
INVESTING IN THE COMMON STOCK INVOLVES RISKS THAT ARE DESCRIBED IN THE
"RISK FACTORS" SECTION BEGINNING ON PAGE 10 OF THIS PROSPECTUS.
---------------
<TABLE>
<CAPTION>
PER SHARE TOTAL
----------- ------
<S> <C> <C>
Public offering price ........................ $ $
Underwriting discount ........................ $ $
Proceeds, before expenses, to SAVVIS ......... $ $
</TABLE>
The U.S. underwriters may also purchase up to an additional 1,531,915
shares at the public offering price, less the underwriting discount, within 30
days from the date of this prospectus to cover over-allotments. The
international managers may similarly purchase up to an additional 382,978
shares.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
The shares will be ready for delivery on or about , 2000.
---------------
Joint Book-Running Managers
MERRILL LYNCH & CO. MORGAN STANLEY DEAN WITTER
---------------
BEAR, STEARNS & CO. INC.
---------------
The date of this prospectus is , 2000
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
<PAGE>
(MAP OF THE WORLD SHOWS LOCATIONS OF SAVVIS' PRIVATENAPSM, ATM SWITCHES, FRAME
RELAY SWITCHES, CAPACITY AND POINTS OF PRESENCE)
[GRAPHIC OMITTED]
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
Prospectus Summary ..................................................................... 3
Risk Factors ........................................................................... 10
Forward-Looking Statements ............................................................. 22
Use of Proceeds ........................................................................ 23
Dividend Policy ........................................................................ 23
Capitalization ......................................................................... 24
Dilution ............................................................................... 25
Unaudited Pro Forma Consolidated Financial Statements .................................. 26
Selected Historical Consolidated Financial Data ........................................ 31
Management's Discussion and Analysis of Financial Condition and Results of Operations .. 33
Business ............................................................................... 42
Management ............................................................................. 64
Transactions with Affiliates ........................................................... 73
Principal Stockholders ................................................................. 74
Description of Capital Stock ........................................................... 77
Shares Available for Future Sale ....................................................... 80
United States Tax Consequences to Non-U.S. Holders of Common Stock ..................... 81
Underwriting ........................................................................... 84
Validity of the Shares ................................................................. 87
Experts ................................................................................ 87
Change in Certifying Accountants ....................................................... 87
Where You May Find Additional Information .............................................. 88
Index to Financial Statements .......................................................... F-1
</TABLE>
---------------------
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. WE
HAVE NOT, AND THE UNDERWRITERS HAVE NOT, AUTHORIZED ANY OTHER PERSON TO PROVIDE
YOU WITH DIFFERENT INFORMATION. IF ANYONE PROVIDES YOU WITH DIFFERENT
INFORMATION, YOU SHOULD NOT RELY ON IT. WE ARE NOT, AND THE UNDERWRITERS ARE
NOT, MAKING AN OFFER TO SELL THESE SECURITIES IN ANY JURISDICTION WHERE THE
OFFER OR SALE IS NOT PERMITTED. YOU SHOULD ASSUME THAT THE INFORMATION APPEARING
IN THIS PROSPECTUS IS ACCURATE ONLY AS OF THE DATE ON THE FRONT COVER OF THIS
PROSPECTUS. OUR BUSINESS, FINANCIAL CONDITION, RESULTS OF OPERATIONS AND
PROSPECTS MAY HAVE CHANGED SINCE THAT DATE.
MARKET DATA AND SEVERAL INDUSTRY FORECASTS USED THROUGHOUT THIS PROSPECTUS
WERE OBTAINED FROM MARKET RESEARCH, PUBLICLY AVAILABLE INFORMATION AND INDUSTRY
PUBLICATIONS. INDUSTRY PUBLICATIONS GENERALLY STATE THAT THE INFORMATION
CONTAINED IN THOSE PUBLICATIONS HAS BEEN OBTAINED FROM SOURCES BELIEVED TO BE
RELIABLE, BUT THAT THE ACCURACY AND COMPLETENESS OF THAT INFORMATION IS NOT
GUARANTEED.
<PAGE>
PROSPECTUS SUMMARY
The information below is only a summary of more detailed information
included in other sections of this prospectus. This summary may not contain all
the information that is important to you or that you should consider before
buying shares in the offering. The other information is important, so please
read this entire prospectus carefully.
The terms "SAVVIS," "we," "us" and "our" as used in this prospectus refer
to SAVVIS Communications Corporation, a Delaware corporation, formerly SAVVIS
Holdings Corporation, and its subsidiaries, except where by the context it is
clear that such terms mean only SAVVIS Communications Corporation.
Unless otherwise indicated, all information in this prospectus assumes the
underwriters do not exercise their over-allotment option and reflects the
72,000-for-1 stock split of our outstanding common stock on July 22, 1999.
Unless otherwise indicated, the information in this prospectus about our network
assumes that the transfer of the network assets from Bridge to SAVVIS has been
completed. This offering is conditioned on the transfer of the Bridge network
assets to us and the execution of the network services and related agreements.
SAVVIS
OUR BUSINESS
We are a rapidly growing provider of high quality, high performance global
data networking and Internet-related services to medium and large businesses,
multinational corporations and Internet service providers. We currently offer
the following services:
o MANAGED DATA NETWORKING SERVICES that provide secure, high quality data
communication links over our network to connect a customer's
geographically dispersed offices, known as intranets, or to connect with
its customers and suppliers, known as extranets.
o HIGH BANDWIDTH INTERNET ACCESS SERVICES including dedicated access and
digital subscriber line, commonly known as DSL, services and Internet
security services which connect our customers to the Internet at speeds
ranging from 128 kilobits to 155 megabits per second.
o COLOCATION SERVICES that allow our customers to locate their
mission-critical content and networking hardware in our data centers which
provide a highly secure, fault tolerant environment.
Simultaneously with the closing of this offering, we will acquire the
Internet protocol network assets of Bridge and the employees of Bridge who have
operated that network. This transfer will significantly expand our managed data
networking services, which we began offering in September 1999. Upon the
transfer of the Bridge network to us and pursuant to a network services
agreement between Bridge and us, Bridge will use the SAVVIS ProActiveSM Network
to deliver Bridge content and applications to over 4,500 financial institutions
that are Bridge customers, including 75 of the top 100 banks in the world and 45
of the top 50 brokerage firms in the United States. We currently provide
Internet access services directly to approximately 800 customers, including
eBay, Inc., Adforce, Inc. and Charter Communications International.
THE SAVVIS PROACTIVE(SM) NETWORK
The SAVVIS ProActiveSM Network was created through the combination, in
September 1999, of the Bridge network, which was constructed to meet the
exacting requirements of the financial services industry worldwide, and the
SAVVIS network, which was constructed to provide high quality Internet access in
the United States. Both of these networks have been operational since 1996 and
we refer to the combined network as the "SAVVIS ProActiveSM Network."
3
<PAGE>
The SAVVIS ProActiveSM Network interconnects over 6,000 buildings in 83 of
the world's major commercial centers in 43 countries. Our network architecture
is based on asynchronous transfer mode, commonly known as ATM, frame relay and
Internet protocol technologies. Additionally, our 83 city global system connects
to eight private Internet access points, which we call PrivateNAPs(SM), where
our network connects to a number of Internet service providers, including Sprint
Corporation, Cable & Wireless plc and UUNET, a MCI Worldcom company.
These PrivateNAPsSM, which will be expanded to 12 by March 2000, use our
proprietary routing policies to reduce data loss and enhance performance by
avoiding the congested public access points on the Internet. We measure the
performance of our access services using data loss and transmission delay, or
latency, measurements. The high performance of our Internet access services has
been verified by data collected by Keynote Systems, Inc., an independent
research firm, in which we have consistently rated among the top Internet
backbone providers in terms of performance as measured by mean download times
throughout 1999.
RELATIONSHIP WITH BRIDGE
In April 1999, we were acquired by Bridge. Bridge is a global provider of
high quality, real-time and historical financial information, including coverage
of equities, fixed income, foreign exchange and commodities, which it delivers
to an estimated 250,000 trading terminals around the globe as of December 30,
1999. Bridge owned approximately 72% of our outstanding common stock prior to
this offering. Welsh, Carson, Anderson & Stowe, a private equity fund with
extensive experience in the communications and information services industries
owned approximately 41% of Bridge's outstanding voting stock prior to this
offering.
Over the last four years, Bridge constructed a sophisticated network based
on Internet protocol and ATM technologies to service some of the largest
financial institutions and institutional investors in the world. These financial
market participants rely on information received continuously from Bridge to
make trading and investment decisions throughout the business day. Bridge must
deliver this information instantaneously and reliably. Accordingly, Bridge built
a highly redundant, fault tolerant network to deliver high volume, real-time
financial data and news around the globe.
Since January 1996, Bridge has converted a substantial portion of its
customers from less technologically advanced protocols to its Internet protocol
network. As of December 30, 1999, Bridge's Internet protocol network served an
estimated 115,000 terminals. Bridge has advised us that it intends to convert
the remaining 135,000 terminals on its network to the SAVVIS ProActiveSM Network
over the next three years. As of December 30, 1999, Bridge's proprietary network
monitoring and customer support systems managed over 10,000 routers and over
11,000 servers. Additionally, Bridge has a highly experienced group of network
engineers, technical support representatives and customer call center personnel
to support their services and has agreed to make their services available to us.
Acquisition of Bridge's Network Assets and Ongoing Relationship with
Bridge. Simultaneously with the closing of this offering, we will acquire
Bridge's Internet protocol network assets and the employees of Bridge who
operate them, and we will enter into a network services agreement with Bridge
that commits Bridge to purchase at least $ million of network services from us
in 2000. This amount will increase by 10% in each of 2001 and 2002. Thereafter,
Bridge will be required to purchase at least 80% of their network requirements
from us, declining to 60% in 2006 through the end of the agreement in 2010. We
have instituted a lead referral program for Bridge's approximately 500 sales
representatives worldwide to generate sales leads for us. We will also enter
into a number of other agreements with Bridge under which Bridge will transfer a
number of highly skilled people to us and we will purchase various support
services from it.
4
<PAGE>
COMPETITIVE STRENGTHS
Our target customers are businesses that are intensive users of data
communications and require high quality service for their global data networking
and Internet needs. We believe our competitive strengths in servicing these
customers include:
o large number of sophisticated users already connected to our network;
o unique network engineered for real-time performance;
o global network presence;
o single source service offering; and
o world-class service through proprietary systems.
BUSINESS STRATEGY
Our objective is to tap the rapidly growing market for reliable, high speed
data communications and Internet services. Key elements of our strategy to
achieve this objective, include:
o provide a single source for managed data network services and high
quality Internet services;
o capitalize on Bridge's relationships to penetrate its customer base;
o target potential customers in buildings already connected to our
network;
o expand our network and PrivateNAPSM infrastructure;
o grow domestic and international distribution channels;
o provide enabling infrastructure for e-commerce services; and
o develop and market new services.
RISK FACTORS
You should consider carefully the following risk factors, the information
contained in "Risk Factors" and the other information in this prospectus before
deciding to invest in our common stock:
o A significant portion of our revenues is expected to come from Bridge, and
the loss of Bridge as a customer or reduced demand from Bridge would
materially affect our business;
o If Bridge is unable to meet its financial commitments to us, we will be
adversely affected;
o Our limited operating history, and the fact that we only recently began
offering data networking and colocation services, makes it difficult for
you to evaluate our performance;
o Our historical financial information will not be comparable to our future
financial performance; and
o We expect to continue to incur substantial losses and negative operating
cash flow. We incurred losses of approximately $2.2 million, $14.5 million
and $21.7 million in 1996, 1997 and 1998, respectively, and had negative
cash flows from operating activities for each of these years. We also had
losses of approximately $29.2 million, and negative cash flows from
operating activities of approximately $16.1 million, in the first nine
5
<PAGE>
months of 1999. We expect to incur significant net losses and negative
cash flow from operating activities at least through 2002. As of September
30, 1999, our accumulated deficit was approximately $22.6 million, which
reflects our losses since Bridge acquired our company on April 7, 1999.
Our principal executive office is located at 12007 Sunrise Valley Drive,
Reston, Virginia 20191, and our telephone number is (703) 453-7500.
6
<PAGE>
THE OFFERING
Common stock offered:
U.S. offering............ 10,212,766 shares
International offering... 2,553,191 shares
Total.................. 12,765,957 shares
Common stock to be
outstanding after
this offering........... 87,769,782 shares.
Over-allotment option.... 1,914,893 shares.
Use of proceeds......... We will receive net proceeds from this offering of
approximately $279.3 million, assuming a per share
price of $23.50. We intend to use these net proceeds
to pay a portion of the purchase price for the
Bridge network assets, for capital expenditures
relating to our network expansion, and for other
general corporate purposes.
Dividend policy......... We do not intend to pay dividends on our common
stock for the foreseeable future. We plan to retain
any earnings for use in the operation of our
business and to fund future growth.
Nasdaq National Market
Symbol.................. "SVVS"
This information is based on our shares outstanding on December 22, 1999.
This information excludes 3,495,736 shares of common stock underlying options
granted under our stock option plans outstanding as of December 22, 1999 at a
weighted average exercise price of $.50 per share.
7
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL DATA
We derived the summary historical consolidated financial data presented
below as of and for each of the three years ended December 31, 1996, 1997 and
1998 from our audited consolidated financial statements. We derived the summary
historical consolidated financial data presented below for the nine months ended
September 30, 1998, the period from January 1, 1999 to April 6, 1999 and the
period from April 7, 1999 to September 30, 1999 and as of September 30, 1999
from our unaudited consolidated financial statements. We prepared the unaudited
financial statements on substantially the same basis as our audited financial
statements and, in our opinion, the unaudited financial statements include all
adjustments necessary for a fair presentation of the results of operations for
those periods. Historical results are not necessarily indicative of the results
to be expected in the future, and results of interim periods are not necessarily
indicative of results for the entire year. You should read the information set
forth below together with the discussion under "Unaudited Pro Forma Consolidated
Financial Statements," "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and our financial statements and the notes
to those financial statements that are in the back of this prospectus.
On April 7, 1999, Bridge acquired all our equity securities and accounted
for this acquisition as a purchase transaction. Since the purchase transaction
resulted in our company becoming a wholly owned subsidiary of Bridge, SEC rules
required us to establish a new basis of accounting for the purchased assets and
liabilities. The accounting for the purchase transaction has been "pushed down"
to the financial statements of SAVVIS. Therefore, the purchase price has been
allocated to the underlying assets purchased and liabilities assumed based on
the estimated fair market values of these assets and liabilities on the
acquisition date. Solely as a result of the application of fair value
accounting, intangibles, goodwill, other liabilities and stockholders' equity
were increased, and fixed assets were decreased, in the SAVVIS unaudited
consolidated balance sheet. The SAVVIS unaudited historical consolidated balance
sheet data as of September 30, 1999 and unaudited consolidated statement of
operations data for the period from April 7, 1999 through September 30, 1999
give effect to our acquisition by Bridge and are labeled "Successor." The SAVVIS
unaudited historical financial data for the periods prior to the acquisition are
labeled "Predecessor."
On September 10, 1999, Bridge sold in a private placement approximately 25%
of its equity ownership in SAVVIS to existing stockholders of Bridge, at which
time Welsh Carson purchased from Bridge a 12% interest in SAVVIS.
Pro forma data for the year ended December 31, 1998 and the nine months
ended September 30, 1999 give effect to the acquisition of our company by
Bridge, our purchase of network assets from Bridge and this offering as if they
had occurred at the beginning of 1998 for the statement of operations data and
at September 30, 1999 for the balance sheet data. For more detailed information
on the pro forma financial data, see "Unaudited Pro Forma Consolidated Financial
Statements."
EBITDA represents earnings (loss) before depreciation and amortization,
interest income and expense and income tax expense (benefit). We have included
information concerning EBITDA because our management believes that such
information is used by investors and other interested parties in our industry as
one measure of a company's operating performance and liquidity. EBITDA is not
determined in accordance with generally accepted accounting principles, is not
indicative of cash used by operating activities and should not be considered in
isolation or as an alternative to, or more meaningful than, measures of
operating performance determined in accordance with generally accepted
accounting principles. Additionally, EBITDA as used in this prospectus may not
be comparable to similarly titled measures of other companies, as other
companies may not calculate it in a similar manner.
8
<PAGE>
<TABLE>
<CAPTION>
PREDECESSOR
--------------------------------------
HISTORICAL PRO FORMA
-------------------------------------- --------------
YEAR ENDED
YEAR ENDED DECEMBER 31, DECEMBER 31,
-------------------------------------- --------------
1996 1997 1998 1998
----------- ------------ ------------- --------------
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Revenues ...................... $ 290 $ 2,758 $ 13,674 $ 13,674
Direct costs and operating
expenses:
Data communications
and operations ............. 1,044 11,072 20,889 20,889
Selling, general and
administrative ............. 1,204 5,130 12,245 12,245
Depreciation and
amortization ............... 153 631 2,208 45,876
-------- --------- ---------- ------------
Total direct costs and
operating expenses ......... 2,401 16,833 35,342 79,010
-------- --------- ---------- ------------
Loss from operations .......... (2,111) (14,075) (21,668) (65,336)
Interest expense, net ......... 60 427 75 4,042
-------- --------- ---------- ------------
Net loss ...................... $ (2,171) $ (14,502) $ (21,743) $ (69,453)
======== ========= ========== ============
Basic and diluted net loss
per share .................... $ (2.42) $ (15.69) $ (16.28) $ (0.82)
Weighted average number
of shares .................... 895,764 933,922 1,482,151 84,765,957
OTHER FINANCIAL DATA:
EBITDA ........................ $ (1,958) $ (13,444) $ (19,460)
Capital expenditures .......... 884 697 1,688
Cash used in operating
activities ................... (1,293) (10,502) (20,560)
Cash used in investing
activities ................... (884) (697) (2,438)
Cash provided by financing
activities ................... 2,740 12,024 24,121
<CAPTION>
PREDECESSOR SUCCESSOR
------------------------------ ---------------
HISTORICAL
------------------------------
HISTORICAL PRO FORMA
NINE MONTHS PERIOD FROM PERIOD FROM NINE MONTHS
ENDED JANUARY 1 TO APRIL 7 TO ENDED
SEPTEMBER 30, APRIL 6, SEPTEMBER 30, SEPTEMBER 30,
--------------- -------------- --------------- --------------
1998 1999 1999 1999
--------------- -------------- --------------- --------------
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Revenues ...................... $ 8,914 $ 5,440 $ 12,192 $ 17,632
Direct costs and operating
expenses:
Data communications
and operations ............. 14,609 6,429 13,095 19,524
Selling, general and
administrative ............. 7,353 4,751 11,142 15,893
Depreciation and
amortization ............... 1,500 793 9,747 30,185
---------- ----------- ------------ ------------
Total direct costs and
operating expenses ......... 23,462 11,973 33,984 65,602
---------- ----------- ------------ ------------
Loss from operations .......... (14,548) (6,533) (21,792) (47,970)
Interest expense, net ......... 113 135 782 3,484
---------- ----------- ------------ ------------
Net loss ...................... $ (14,661) $ (6,668) $ (22,574) $ (51,454)
========== =========== ============ ============
Basic and diluted net loss
per share .................... $ (11.31) $ (4.51) $ (0.31) $ (0.61)
Weighted average number
of shares .................... 1,435,792 1,670,709 72,000,000 84,765,957
OTHER FINANCIAL DATA:
EBITDA ........................ $ (13,048) $ (5,740) $ (12,045)
Capital expenditures .......... 1,308 275 855
Cash used in operating
activities ................... (15,530) (6,185) (9,945)
Cash used in investing
activities ................... (2,058) (275) (855)
Cash provided by financing
activities ................... 24,445 4,533 12,189
</TABLE>
<TABLE>
<CAPTION>
PREDECESSOR SUCCESSOR PRO FORMA
---------------------------------- --------------------- --------------
HISTORICAL HISTORICAL
---------------------------------- ---------------------
AS OF DECEMBER 31, AS OF
---------------------------------- AS OF SEPTEMBER 30, SEPTEMBER 30,
1996 1997 1998 1999 1999
-------- ------------ ------------ --------------------- --------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents ..................... $573 $ 1,398 $ 2,521 $ 1,983 $181,283
Goodwill and intangibles, net ................. -- -- 1,197 30,322 30,322
Total assets .................................. 1,888 4,313 11,454 41,422 308,722
Debt and capital lease obligations ............ 1,126 9,495 2,759 23,237 69,237
Redeemable preferred stock, net of discount and
deferred financing costs ..................... 500 5,261 37,937 -- --
Stockholders' equity (deficit) ................ (693) (15,395) (35,157) 9,172 230,472
</TABLE>
9
<PAGE>
RISK FACTORS
You should consider carefully the following risks and the other information
in this prospectus before deciding to invest in our common stock.We have
separated the risks into three groups:
o risks related to our business;
o risks related to our industry; and
o risks related to this offering.
If any of the following risks actually occurs, our business, prospects,
financial condition and results of operations could be materially adversely
affected. In any such case, the market price of our common stock could decline
and you could lose all or most of your investment in our company.
RISKS RELATED TO OUR BUSINESS
A SIGNIFICANT PORTION OF OUR REVENUES IS EXPECTED TO COME FROM BRIDGE, AND THE
LOSS OF BRIDGE AS A CUSTOMER OR REDUCED DEMAND FROM BRIDGE WOULD MATERIALLY
ADVERSELY AFFECT OUR BUSINESS.
Bridge is our largest customer and is expected to remain our largest
customer for the foreseeable future. We will provide data networking services to
Bridge under a ten-year network services agreement, although the agreement could
be terminated prior to its term if we default in our performance, including if
we fail to meet our service level commitments, or Bridge could unexpectedly be
unable to perform its obligations under the agreement. The loss of Bridge as a
customer, or reduced demand from Bridge, would materially reduce our expected
revenues and, consequently, would have a material adverse effect on our
business.
IF BRIDGE IS UNABLE TO MEET ITS FINANCIAL COMMITMENTS TO US, WE WILL BE
ADVERSELY AFFECTED.
We are relying on Bridge to meet its financial commitments to us.
The following selected financial information for the years ended December
31, 1996, 1997 and 1998 was derived from Bridge's audited financial statements.
The financial information for the nine months ended September 30, 1999 was
provided by Bridge and is unaudited.
<TABLE>
<CAPTION>
NINE MONTHS
FISCAL YEARS ENDED DECEMBER 31, ENDED
------------------------------------------- SEPTEMBER 30,
1996 1997 1998 1999
------------- ----------- ------------- --------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Statement of Operations Data
- ----------------------------
Revenues ...................................... $ 268,811 $ 409,926 $ 892,141 $1,003,642
Loss from operations .......................... (40,543) (33,647) (69,046) (42,213)
Net loss ...................................... (60,619) (63,800) (129,355) (109,738)
Other Financial Data
EBITDA before acquisition related
writeoffs .................................... 25,072 55,648 163,548 170,831
Cash used in operating activities ............. (897) 10,404 46,304 (62,272)
Cash used in investing activities ............. (314,453) (56,948) (498,936) (164,901)
Cash provided by financing activities ......... 322,679 43,384 473,812 198,631
</TABLE>
Bridge has informed us it expects to continue to use cash in its operating
activities for the fiscal year ended December 31, 1999 and that the cash used in
operating activities in 1999 was primarily due to temporary working capital
pressures experienced in the course of integrating its recent acquisitions, as
well as declines in revenues resulting from the termination of non-Y2K compliant
products and efforts to convert customers from less technologically advanced
protocol products to Bridge's new technology products.
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The increases in working capital are attributable to (1) billing delays
resulting from conversions from the non-Y2K compliant billing systems of
acquired companies to the Bridge billing system, (2) billing issues resulting
from the migration of customers from the less technologically advanced protocol
products of acquired companies to Bridge's new technology products, (3) the
payment of one-time accruals related to companies acquired in 1998 and (4) a
reduction in general accounts payable of acquired companies to more sustainable
levels than existed as of December 31, 1998.
As of September 30, 1999, Bridge had $1,248 million of indebtedness, $470
million of redeemable preferred stock and a stockholders' deficit of $390
million.
OUR LIMITED HISTORY, AND THE FACT THAT WE ONLY RECENTLY BEGAN OFFERING DATA
NETWORKING AND COLOCATION SERVICES, MAKES IT DIFFICULT FOR YOU TO EVALUATE OUR
PERFORMANCE.
Although we began commercial operations in 1996, we only recently began
offering data networking and colocation services. We expect to generate a
substantial portion of our revenues from these services in the future. In
addition, many of our executive officers and key technical employees joined us
recently, and we have adopted our business strategies recently. Because of our
limited operating history, you have very limited operating and financial data
about us upon which to base an evaluation of our performance and prospects and
an investment in our common stock. Therefore, you should consider and evaluate
our prospects in light of the risks and difficulties frequently encountered by
rapidly growing companies, particularly companies in the rapidly evolving data
networking, Internet access and colocation markets.
OUR HISTORICAL FINANCIAL INFORMATION WILL NOT BE COMPARABLE TO OUR FUTURE
FINANCIAL PERFORMANCE.
Upon completion of this offering, we will acquire Bridge's Internet
protocol network assets and enter into an agreement to provide data networking
services to Bridge. As a result, the historical financial information included
in this prospectus will not necessarily reflect our results of operations,
financial position and cash flows in the future once we have acquired Bridge's
network assets and entered into the network services and related agreements.
WE EXPECT TO CONTINUE TO INCUR SUBSTANTIAL LOSSES AND HAVE NEGATIVE OPERATING
CASH FLOW.
We incurred losses of approximately $2.2 million, $14.5 million and $21.7
million in 1996, 1997 and 1998, respectively, and had negative cash flows from
operating activities for each of these years. As a result of those losses and
working capital deficiencies, our independent auditors' report on our 1996 and
1997 financial statements included an explanatory paragraph regarding our
ability to continue as a going concern. Our 1998 financial statements did not
include a similar explanatory paragraph because Bridge intended to support and
fund our operations throughout 1999. Following completion of this offering,
however, Bridge does not intend to fund our operations. From the acquisition by
Bridge of our company on April 7, 1999 through September 30, 1999, we had a loss
of approximately $22.6 million and net cash used in operating activities of
approximately $9.9 million. As of September 30, 1999, our accumulated deficit
was approximately $22.6 million. We expect our operating expenses to increase
significantly, especially in the areas of data communications and operations, as
a result of the acquisition of Bridge's network assets, and sales and marketing,
as we continue to develop and expand our business. As a result, we will need to
increase our revenues significantly to generate cash flow from our operations.
Under the network services agreement that we will enter into when we purchase
Bridge's network assets, the amount we charge Bridge for the use of the network
as configured on the date of the transfer is based on the estimated cash costs
of operating that network. As a result, we will incur losses from the operation
of the network to provide services to Bridge until we use the network to provide
additional services to Bridge or other customers. We cannot guarantee that we
will sell enough additional services to become profitable. We expect to incur
significant net losses, negative cash flow from operating activities and
negative EBITDA at least through 2002.
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WE WILL REQUIRE ADDITIONAL CAPITAL TO CONDUCT OUR BUSINESS, BUT WE CURRENTLY DO
NOT HAVE A CREDIT FACILITY OR OTHER SOURCE OF FUNDING.
As we develop and expand our business, we will require significant capital
to fund our capital expenditures, operating deficits and working capital needs,
as well as our debt service requirements. We believe that our existing cash,
cash equivalents, short-term investments and anticipated vendor financing,
together with the net proceeds from this offering, will be sufficient to meet
our capital requirements only through the end of 2000. We currently estimate
that we will make approximately $160 million of capital expenditures in 2000,
exclusive of our purchase of the network assets from Bridge, and we expect to
make significant capital expenditures in the following years. In addition, we
expect to incur significant negative cash flow from operating activities and
negative EBITDA at least through 2002. The actual amounts and timing of our
future capital requirements may vary significantly from our estimates. Our
capital needs may exceed our current expectations because of factors such as
acquisitions that we may make, changes in the demand for our services,
regulatory developments, the competitive environment in our markets or failure
to expand our business as expected. In that case, we may need to seek additional
capital sooner than we expect, and such additional financing may not be
available on acceptable terms or at all. If we are unable to raise additional
capital when needed, we may have to delay or abandon some or all of our
expansion plans or otherwise forego market opportunities. We do not currently
have a credit facility from which we could access additional capital.
IF WE ARE NOT RELEASED FROM REGULATION UNDER THE BANK HOLDING COMPANY ACT, WE
WOULD NOT BE ABLE TO EXPAND OUR BUSINESS AS WE EXPECT.
State Street Corporation, a bank holding company, currently owns
approximately 7.7% of the outstanding voting capital stock of Bridge on a fully
diluted basis and approximately 2% of our outstanding common stock. State Street
also has the right to elect one member of Bridge's board of directors. At the
time State Street made an investment in Bridge in 1996, State Street agreed with
the Federal Reserve Board to regard Bridge as a subsidiary of State Street for
purposes of the Bank Holding Company Act, and Bridge agreed to restrict its
activities and its investments to those permitted for bank holding company
subsidiaries under Regulation Y of the Federal Reserve Board. At the time Bridge
acquired us in April 1999, State Street and Bridge agreed that we also would be
regarded as a subsidiary of a bank holding company and subject to the applicable
restrictions on our activities. Permitted activities for a bank holding company
subsidiary include the transmission of data, provided that no more than 30% of
the revenue generated by a bank holding company subsidiary from that activity is
derived from the transmission of data that is not financial, banking or economic
in nature. Accordingly, in connection with Bridge's acquisition of our company
in April 1999, Bridge undertook to ensure that at least 70% of our revenue would
be derived from the transmission of qualifying data. We believe that the
services we will provide to Bridge under the network services agreement will
satisfy this requirement initially.
State Street has agreed that it will cooperate with Bridge to ensure that,
by the close of business April 30, 2000, we will no longer be subject to the
activity and investment limitations of Regulation Y. State Street may be able to
accomplish this objective through compliance with new provisions of the Bank
Holding Company Act enacted on November 12, 1999, which take effect on March 11,
2000. In the event State Street does not comply with its commitment and we
remain subject to the activity and investment limitations of the Bank Holding
Company Act, revenues from Bridge and/or revenues from the transmission of other
qualifying data will need to represent at least 70% of our revenue. As a result,
we may not be able to expand our business as currently contemplated.
OUR FAILURE TO MANAGE OUR GROWTH EFFECTIVELY COULD IMPAIR OUR BUSINESS.
We expect our business to continue to grow rapidly, which may significantly
strain our management, financial, customer support, sales, marketing and
administrative resources, as well as our network operations and our management
and billing systems. Such a strain on our managerial, operational and
administrative capabilities could adversely affect the quality of our services
and our
12
<PAGE>
ability to generate revenues. To manage our growth effectively, we will have to
further enhance the efficiency of our operational support and other back office
systems, and of our financial systems and controls. We will also have to expand,
train and manage our employees and third-party providers to handle the increased
volume and complexities of our business. In addition, if we fail to project
traffic volume and routing preferences correctly, or fail to determine the
appropriate means of expanding our network, we could lose customers, make
inefficient use of our network, and have higher costs and lower profit margins.
OUR SUBSTANTIAL ONGOING RELATIONSHIPS WITH BRIDGE WILL BE CRITICAL TO OUR
SUCCESS. IF BRIDGE TERMINATES ANY OF THESE RELATIONSHIPS, OUR BUSINESS
PROSPECTS WILL BE IMPAIRED.
Bridge will provide to us many technical, administrative and operational
services and related support functions, including technical and customer support
service and project management in the procurement and installation of equipment.
Bridge will also provide to us additional administrative and operational
services, such as payroll and accounting functions, benefit management and
office space. If Bridge unexpectedly stops providing these services for any
reason, we could face significant challenges and costs in assuming these
services or finding an alternative to Bridge. This could impair our operations,
adversely affect our reputation and harm our financial results.
WE ARE CONTROLLED BY PARTIES WHOSE INTERESTS MAY NOT BE ALIGNED WITH YOURS.
Bridge and investment partnerships sponsored by Welsh, Carson, Anderson &
Stowe, or Welsh Carson, owned approximately 72% and 12% of our common stock,
respectively, prior to this offering. In addition, Welsh Carson owns
approximately 41% of Bridge's outstanding voting stock. Consequently, Bridge
controls us and is in a position to elect our entire board of directors and
control all matters affecting us. In addition, Welsh Carson may be deemed to be
a controlling person of Bridge.
Some decisions concerning our operations or financial structure may present
conflicts of interest between Bridge and Welsh Carson and our other
stockholders. For example, Bridge or Welsh Carson may make investments in other
entities engaged in the telecommunications business, some of which may compete
with us. Also, Bridge and Welsh Carson are under no obligation to bring us any
investment or business opportunities of which they are aware, even if these
opportunities are within our scope and objectives.
Upon the completion of this offering, we will enter into a number of
agreements with Bridge relating to the acquisition of Bridge's global Internet
protocol network and to our provision of global data networking services to
Bridge and Bridge will provide various support services to us. Because we are
controlled by Bridge, we cannot assure you that these agreements are comparable
to those that would have been reached had the terms been negotiated on an arms'
length basis.
WE DEPEND ON KEY PERSONNEL. IF WE ARE UNABLE TO HIRE AND RETAIN QUALIFIED
PERSONNEL, WE MAY BE UNABLE TO IMPLEMENT OUR BUSINESS STRATEGY EFFECTIVELY.
Our future performance depends to a significant degree on the continued
contributions of our management team, sales force and key technical personnel.
In particular, we depend on Robert McCormick, our Chairman of the Board, Chief
Executive Officer and President. Mr. McCormick was appointed Chief Executive
Officer and President in November 1999. In addition, our business plan
contemplates the significant expansion of our sales and marketing staff. The
industries in which we compete are characterized by a high level of employee
mobility and aggressive recruiting of skilled personnel. As a result, we may
have difficulty in hiring and retaining highly skilled employees. Our future
performance depends on our ability to attract, retain and motivate highly
skilled employees.
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<PAGE>
FAILURES IN OUR NETWORK OR WITH THE NETWORK OPERATIONS CENTER COULD DISRUPT OUR
ABILITY TO PROVIDE OUR DATA NETWORKING, INTERNET ACCESS AND COLOCATION SERVICES,
WHICH COULD EXPOSE US TO LIABILITY AND INCREASE OUR CAPITAL COSTS.
Our ability to successfully implement our business plan depends upon our
ability to provide high quality, reliable services. Interruptions in our ability
to provide our data networking, Internet access and colocation services to our
customers could adversely affect our business and reputation. Our operations
depend upon our ability to protect our equipment and network infrastructure,
including connections to our backbone providers, and our customers' data and
equipment, against damage from natural disasters, as well as power loss,
telecommunications failure and similar events. The occurrence of a natural
disaster or other unanticipated problem could result in interruptions in the
services we provide to our customers and could seriously harm our business and
business prospects.
WE ARE HIGHLY DEPENDENT ON OUR SUPPLIERS, AND ANY INTERRUPTIONS COULD IMPAIR OUR
SERVICE TO OUR CUSTOMERS.
If we are unable to obtain required products or services from third-party
suppliers on a timely basis and at an acceptable cost, we may be unable to
provide our data networking, Internet access and colocation services on a
competitive and timely basis. We are dependent on other companies to supply
various key components of our infrastructure, including network equipment,
backbone connectivity, the connections from our customers to our network, which
we call local access, and connection to other Internet network providers. If our
suppliers fail to provide products or services on a timely basis and at an
acceptable cost, we may be unable to meet our customer service commitments and,
as a result, we may experience increased costs or loss of revenue.
IF WE ARE UNABLE TO EXPAND OUR NETWORK AS EXPECTED, OUR RESULTS OF OPERATIONS
WOULD BE ADVERSELY AFFECTED.
Our success will depend on our ability to continue to expand our network on
a timely, cost-effective basis. A number of factors could hinder the expansion
of our network. These factors include cost overruns, the unavailability of
appropriate facilities, communications capacity or additional capital, strikes,
shortages, delays in obtaining governmental or other third-party approvals,
natural disasters and other casualties, and other events that we cannot foresee.
In addition, expanding or enhancing our network, including through hardware or
software upgrades, could result in unexpected interruptions of services to our
customers.
IF OUR ESTIMATES REGARDING OUR TRAFFIC LEVELS ARE NOT CORRECT, WE MAY HAVE TOO
MUCH OR TOO LITTLE CAPACITY.
We rely on other carriers to provide several transmission services. Because
our leased capacity costs are generally fixed monthly payments based on the
capacity made available to us, failing to correctly estimate the transmission
capacity we will need could increase the cost and reduce the quality of our
services. Underestimation of traffic levels could lead to a shortage of
capacity, requiring us to lease more capacity, which may be at unfavorable
rates, or could lead to a lower quality of service because of increased data
loss and latency. Overestimation of traffic levels, because our traffic volumes
decrease or do not grow as expected, would result in idle capacity, thereby
increasing our per-unit costs.
OUR BRAND IS NOT AS WELL KNOWN AS SOME OF OUR COMPETITORS'. FAILURE TO DEVELOP
BRAND RECOGNITION COULD HURT OUR ABILITY TO COMPETE EFFECTIVELY.
We need to strengthen our brand awareness to realize our strategic and
financial objectives. Many of our competitors have well-established brands
associated with the provision of data networking, Internet access and colocation
services. The promotion and enhancement of our brand also will depend in part on
our success in continuing to provide high quality Internet access services and
in providing high quality data networking and colocation services. We cannot
assure you that we will be able to maintain or achieve these levels of quality.
14
<PAGE>
ANY BREACH OF SECURITY OF OUR NETWORK COULD NEGATIVELY IMPACT OUR BUSINESS.
Our network may be vulnerable to unauthorized access, computer viruses and
other disruptive problems caused by customers, employees or others. Computer
viruses, unauthorized access or other disruptive problems could lead to
interruptions, delays or cessation of service to our customers and these
customers' end users. Unauthorized access also could potentially jeopardize the
security of confidential information stored in the computer systems of our
customers, which might result in our liability to our customers, and also might
deter potential customers. We may be unable to implement security measures in a
timely manner or, if and when implemented, these measures could be circumvented
as a result of accidental or intentional actions. In the past, some of these
security measures have occasionally been circumvented by third parties.
Eliminating computer viruses and alleviating other security problems may require
interruptions, delays or cessation of service to our customers and these
customers' end users. Any breach of security on our network may result in a loss
of customers and damage to our reputation.
WE MAY NOT BE ABLE TO MEET THE OBLIGATIONS UNDER OUR SERVICE LEVEL AGREEMENTS.
We have service level agreements with many of our Internet access customers
in which we provide various guarantees regarding our levels of service. In
addition, the network services agreement with Bridge will have required levels
of service and we offer service level agreements to other data networking
customers. If we fail to provide the levels of service required by these
agreements, our customers may be entitled to terminate their relationship with
us or receive service credits for their accounts. If Bridge or a significant
number of other customers become entitled to exercise, and do exercise, these
rights, our revenues could be materially reduced.
WE MAY MAKE ACQUISITIONS OR ENTER INTO JOINT VENTURES OR STRATEGIC ALLIANCES,
EACH OF WHICH IS ACCOMPANIED BY INHERENT RISKS.
If appropriate opportunities present themselves, we may make acquisitions
or investments or enter into joint ventures or strategic alliances with other
companies. Risks commonly encountered in such transactions include:
o the difficulty of assimilating the operations and personnel of the
combined companies;
o the risk that we may not be able to integrate the acquired services,
products or technologies with our current services, products and
technologies;
o the potential disruption of our ongoing business;
o the inability to retain key technical and managerial personnel;
o the inability of management to maximize our financial and strategic
position through the successful integration of acquired businesses;
o increases in reported losses as a result of charges for in-process
research and development and amortization of goodwill and other
intangible assets;
o adverse impact on our annual effective tax rate;
o difficulty in maintaining controls, procedures and policies; and
o the impairment of relationships with employees, suppliers and customers
as a result of any integration.
WE FACE REGULATORY RESTRICTIONS IN A SIGNIFICANT NUMBER OF COUNTRIES THAT HAVE
DELAYED AND MAY PREVENT US FROM ACQUIRING OR OPERATING BRIDGE ASSETS LOCATED IN
THESE COUNTRIES.
Regulatory restrictions in a significant number of countries are expected
to prevent us from acquiring, as part of the Bridge network asset transfer, the
Bridge network assets located in these
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<PAGE>
countries. These assets represent approximately 4% of the net book value of the
assets to be acquired from Bridge. These countries include:
o Europe--Greece, Hungary, Italy and Poland;
o Africa--South Africa;
o Middle East--Bahrain, Kuwait, Saudi Arabia and the United Arab Emirates;
o Asia Pacific--China, Macau, Malaysia, Taiwan and Thailand; and
o The Americas/Caribbean--Mexico, Peru and Venezuela.
Under the Bridge agreements, Bridge will agree to operate the assets in
these countries until we receive the requisite approvals. We will be obligated
to acquire these assets from Bridge in these countries at book value once we
have received the required approvals. We cannot assure you, however, that we
will be able to comply with the regulatory and other requirements necessary to
exercise our rights to acquire these assets. Until we acquire the assets located
in Greece, Hungary, Italy, Poland, South Africa, Macau, Taiwan, Mexico, Peru and
Venezuela, Bridge has agreed to operate these assets, bill us for the costs
directly associated with doing so and pay us our revenues associated with these
services. In addition, until we acquire the assets located in the remaining
countries listed above, Bridge has agreed to operate these assets and cover the
costs of operation. In all countries where we have received regulatory approval
to acquire and operate the Bridge assets, we will be permitted to deliver
network services to Bridge, but not necessarily data networking services to
third parties.
NUMEROUS FACTORS MAY CAUSE FLUCTUATIONS IN OUR QUARTERLY REVENUES AND OPERATING
RESULTS, AS WELL AS IMPACT OUR LONG-TERM VIABILITY.
Our quarterly revenues and operating results have fluctuated in the past
and are likely to fluctuate significantly from quarter to quarter in the future
due to a number of factors. These factors include the following:
o demand for and market acceptance of our data networking, Internet access
and colocation services;
o the fixed nature of most of our costs in the short term;
o the timing and magnitude of capital expenditures, including costs
relating to the expansion of operations;
o increasing sales, marketing and other operating expenses;
o the compensation of our sales personnel based on achievement of periodic
sales quotas;
o our practice of purchasing data transmission capacity before customers
are secured and our ability to generate revenues for our services;
o changes in our revenue mix between usage-based and fixed rate pricing
plans; and
o fluctuations in the duration of the sales cycle for our services.
Other factors, which are beyond our control, may also affect us, including:
o conditions specific to the data networking, Internet access and
colocation services industries, as well as general economic factors;
o the announcement or introduction of new or enhanced services by our
competitors;
o ur ability to obtain, and the pricing for, local access connections; and
o changes in the prices we pay Internet backbone providers;
Accordingly, we believe that period-to-period comparisons of our results of
operations are not meaningful and should not be relied upon as indications of
future performance. In addition, these factors may impact our long-term
viability.
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It is possible that in some future periods our results of operations may
fall below the expectations of investors. In this event, the price of our common
stock may fall. You should not rely on quarter-to-quarter comparisons of our
results of operations as an indication of future performance.
OUR FAILURE TO BE YEAR 2000 COMPLIANT COULD MATERIALLY AFFECT OUR BUSINESS.
The year 2000 issue is the result of computer programs being written using
two digits rather than four to define the applicable year. As a result, our
computer programs that have date-sensitive software and software of companies
into which our network is interconnected may recognize a date using "00" as the
year 1900 rather than the year 2000. This could result in system failures or
miscalculations causing disruptions of operations, including a temporary
inability to process transactions, send invoices or engage in similar normal
business activities. If the systems of other companies on whose services we
depend or with whom our systems interconnect are not year 2000 compliant, it
could disrupt our operations and cause us to lose revenue as we seek to remedy
any problems. The year 2000 issue is discussed at greater length in
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Impact of Year 2000 Issue."
WE MAY BE LIABLE FOR THE MATERIAL THAT CONTENT PROVIDERS DISTRIBUTE OVER OUR
NETWORK.
The law relating to the liability of private network operators for
information carried on or disseminated through their networks is currently
unsettled. We may become subject to legal claims relating to the content
disseminated on our network. For example, lawsuits may be brought against us
claiming that material on our network on which one of our customers relied was
inaccurate. Claims could also involve matters such as defamation, invasion of
privacy and copyright infringement. Content providers operating private networks
have been sued in the past, sometimes successfully, based on the content of
material. If we need to take costly measures to reduce our exposure to these
risks, or are required to defend ourselves against such claims, our business
could be adversely affected.
RISKS RELATED TO OUR INDUSTRY
DATA NETWORKING, INTERNET ACCESS AND COLOCATION SERVICES ARE NEW AND RAPIDLY
GROWING MARKETS, BUT THIS GROWTH MAY NOT CONTINUE.
According to industry sources, the market for data networking services has
been growing rapidly. If the data networking services market does not grow as
expected, or our anticipated share of that market does not grow as expected, our
revenues could be less than expected.
In addition, the market for Internet access and related services, such as
colocation services, is in an early stage of growth. As a consequence, current
and future competitors are likely to introduce competing services, and it is
difficult to predict the rate at which the market will grow or at which new or
increased competition will result in market saturation. We face the risk that
the market for high performance Internet access and related services may fail to
develop or may develop more slowly than we expect, or that our services may not
achieve widespread market acceptance. Furthermore, we may be unable to market
and sell our services successfully and cost-effectively to a sufficiently large
number of customers.
WIDESPREAD COMMERCIAL USE OF THE INTERNET MAY BE HAMPERED BY POOR PERFORMANCE.
Despite growing interest in the varied commercial uses of the Internet,
many businesses have been deterred from purchasing Internet access services for
a number of reasons, including inconsistent or unreliable quality of service,
lack of availability of cost-effective, high-speed options, a limited number of
local access points for corporate users, inability to integrate business
applications on the Internet, the need to deal with multiple and frequently
incompatible vendors and a lack of tools to simplify Internet access and use.
Capacity constraints caused by growth in the use of the Internet may, if left
unresolved, impede further development of the Internet to the extent that users
experience delays, transmission errors and other difficulties.
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GROWTH IN INTERNET ACCESS BUSINESS MAY BE HAMPERED BY SOME COMPANIES' RELUCTANCE
TO ADOPT INTERNET STRATEGIES FOR COMMERCE AND COMMUNICATION.
The adoption of Internet strategies for commerce and communications,
particularly by those individuals and enterprises that have historically relied
upon alternative means of commerce and communication, generally requires an
understanding and acceptance of a new way of conducting business and exchanging
information. In particular, enterprises that have already invested substantial
resources in other means of conducting commerce and exchanging information may
be particularly reluctant or slow to adopt a new strategy that may make their
existing personnel and infrastructure obsolete. The failure of the market for
business-related Internet services to further develop could cause our revenues
to grow more slowly than anticipated and reduce the demand for our Internet
access and colocation services.
OUR ABILITY TO COMPETE FOR INTERNET ACCESS BUSINESS MAY BE WEAKENED IF THE
PROBLEMS OF INTERNET CONGESTION, TRANSMISSION DELAYS AND DATA LOSS ARE
RESOLVED.
If the Internet becomes subject to a form of central management, or if
Internet backbone providers establish an economic settlement arrangement
regarding the exchange of traffic between data networks, the problems of
congestion, latency and data loss addressed by our Internet access services
could be largely resolved and our ability to compete for business in this market
could be adversely affected.
THE MARKETS FOR DATA NETWORKING, INTERNET ACCESS AND COLOCATION ARE HIGHLY
COMPETITIVE, AND WE MAY NOT BE ABLE TO COMPETE EFFECTIVELY.
The markets for data networking, Internet access and colocation services
are extremely competitive, and there are few significant barriers to entry. We
expect that competition will intensify in the future, and we may not have the
financial resources, technical expertise, sales and marketing abilities or
support capabilities to compete successfully in these markets. Many of our
existing Internet access data networking and colocation competitors have greater
market presence, engineering and marketing capabilities and financial,
technological and personnel resources than we do. As a result, as compared to
us, our competitors may:
o develop and expand their networking infrastructures and service offerings
more efficiently or more quickly;
o adapt more rapidly to new or emerging technologies and changes in
customer requirements;
o take advantage of acquisitions and other opportunities more effectively;
o develop products and services that are superior to ours or have greater
market acceptance;
o adopt more aggressive pricing policies and devote greater resources to
the promotion, marketing, sale, research and development of their
products and services;
o make more attractive offers to our existing and potential employees;
o establish cooperative relationships with each other or with third
parties; and
o more effectively take advantage of existing relationships with customers
or exploit a more widely recognized brand name to market and sell their
services.
Our competitors include:
o backbone providers that may provide us connectivity services, including
AT&T, Cable & Wireless plc, GTE Internetworking, ICG Communications,
Inc., Sprint Corporation and UUNET, a MCI Worldcom company;
o global, national and regional telecommunications companies, including
regional Bell operating companies and providers of satellite bandwidth
capacity; and
o global, national and regional Internet service providers.
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We expect that new competitors will enter the data networking, Internet
access and colocation markets. Such new competitors could include computer
hardware, software, media and other technology and telecommunications companies,
as well as satellite and cable companies. A number of telecommunications
companies and online service providers currently offer, or have announced plans
to offer or expand, their data networking services. Further, the ability of some
of these potential competitors to bundle other services and products with their
data networking services could place us at a competitive disadvantage. Various
companies are also exploring the possibility of providing, or are currently
providing, high-speed data services using alternative delivery methods,
including the cable television infrastructure, direct broadcast satellites, all
optical networks, wireless cable and wireless local access. In addition,
Internet backbone providers may benefit from technological developments, such as
improved router technology, that will enhance the quality of their services.
OUR FAILURE TO ACHIEVE DESIRED PRICE LEVELS COULD IMPACT OUR ABILITY TO ACHIEVE
PROFITABILITY OR POSITIVE CASH FLOW.
We expect competition and other factors to continue to cause pricing
pressure in the markets we serve and will serve after the Bridge asset transfer.
Prices for data networking, Internet access and colocation services have
decreased significantly in recent years, and we expect significant price
declines in the future. In addition, by bundling their services and reducing the
overall cost of their services, telecommunications companies that compete with
us may be able to provide customers with reduced communications costs in
connection with their data networking, Internet access or colocation services,
thereby significantly increasing pricing pressure on us. We may not be able to
offset the effects of any such price reductions even with an increase in the
number of our customers, higher revenues from enhanced services, cost reductions
or otherwise. In addition, we believe that the data networking, Internet access
and colocation industries are likely to continue to encounter consolidation in
the future. Increased price competition or consolidation in these markets could
result in an erosion of our revenues and operating margins and could prevent us
from becoming profitable.
NEW TECHNOLOGIES COULD DISPLACE OUR SERVICES OR RENDER THEM OBSOLETE.
New technologies or industry standards have the potential to replace or
provide lower cost alternatives to our Internet access services and the data
networking and colocation services that we will provide after the Bridge asset
transfer. The adoption of such new technologies or industry standards could
render these services obsolete or unmarketable. For example, these services rely
on the continued widespread commercial use of the set of protocols, services and
applications for linking computers known as Internet protocol. Alternative sets
of protocols, services and applications for linking computers could emerge and
become widely adopted. Improvements in Internet protocol could emerge that would
allow for the assignment of priorities to data packets in order to ensure their
delivery in the manner customers prefer, as well as other improvements, which
could eliminate one advantage of the ATM architecture of our network. We cannot
guarantee that we will be able to identify new service opportunities
successfully and develop and bring new products and services to market in a
timely and cost-effective manner, or that products, software and services or
technologies developed by others will not render our current and future services
non-competitive or obsolete. In addition, we cannot assure you that our current
and future services will achieve or sustain market acceptance or be able to
address effectively the compatibility and interoperability issues raised by
technological changes or new industry standards. If we fail to anticipate the
emergence of, or obtain access to, a new technology or industry standard, we may
incur increased costs if we seek to use those technologies and standards or our
competitors that use such technologies and standards may use them more
cost-effectively than we do.
THE DATA NETWORKING AND INTERNET ACCESS INDUSTRIES ARE HIGHLY REGULATED IN MANY
OF THE COUNTRIES IN WHICH WE PLAN TO PROVIDE SERVICES, WHICH COULD RESTRICT OUR
ABILITY TO CONDUCT BUSINESS INTERNATIONALLY.
Following the Bridge asset transfer, we will be subject to varying degrees
of regulation in each of the jurisdictions in which we provide services. Local
laws and regulations, and their interpretation, differ significantly among those
jurisdictions. Future regulatory, judicial and legislative changes may have a
material adverse effect on our ability to deliver services within various
jurisdictions.
19
<PAGE>
National regulatory frameworks that are consistent with the policies and
requirements of the World Trade Organization have only recently been, or are
still being, put in place in many countries outside the U.S. and certain
European countries. These nations are in the early stages of providing for and
adapting to a liberalized telecommunications market. As a result, in these
markets, we may encounter more protracted and difficult procedures to obtain
licenses and negotiate interconnection agreements.
Following the Bridge asset transfer, our operations will be dependent on
licenses and authorizations from governmental authorities in each jurisdiction
in which we plan to operate. These licenses and authorizations generally will
contain clauses pursuant to which we may be fined or our license may be revoked
in certain circumstances. Such revocation may be on short notice, at times as
short as 30 days' written notice to us. We may not be able to obtain or retain
the licenses necessary for our operations. In addition, in connection with the
transfer of the Bridge assets, we need to obtain licenses from certain non-U.S.
jurisdictions in order to provide our services in those jurisdictions.
ADOPTION OR MODIFICATION OF GOVERNMENT REGULATIONS RELATING TO THE INTERNET
COULD HARM OUR BUSINESS.
There is currently only a small body of laws and regulations directly
applicable to access to or commerce on the Internet. However, existing laws have
been applied to Internet transactions in a number of cases. Moreover, due to the
increasing popularity and use of the Internet, international, national, federal,
state and local governments may adopt laws and regulations that affect the
Internet. The nature of any new laws and regulations and the manner in which
existing and new laws and regulations may be interpreted and enforced cannot be
predicted accurately. The adoption of any future laws or regulations might
decrease the growth of the Internet, decrease demand for our services, impose
taxes or other costly technical requirements or otherwise increase the cost of
doing business on the Internet or in some other manner have a significantly
harmful effect on us or our customers. The U.S. government also may seek to
regulate some segments of our activities as it has with basic telecommunications
services. Moreover, the applicability to the Internet of existing laws governing
intellectual property ownership and infringement, copyright, trademarks, trade
secret, obscenity, libel, employment, personal privacy and other issues is
uncertain and developing. We cannot predict accurately the impact, if any, that
future laws and regulations or changes in laws and regulations may have on our
business.
RISKS RELATED TO THIS OFFERING
A SIGNIFICANT NUMBER OF OUR SHARES ARE ELIGIBLE FOR RESALE. THEIR RESALE COULD
REDUCE OUR STOCK PRICE AND IMPAIR OUR ABILITY TO RAISE FUNDS IN NEW STOCK
OFFERINGS.
Immediately after the completion of this offering, we will have 87,769,782
shares of common stock outstanding and available for resale beginning at various
points of time in the future. Sales of substantial amounts of shares of our
common stock in the public market after this offering, or the perception that
those sales will occur, could cause the market price of our common stock to
decline. Those sales also might make it more difficult for us to sell equity and
equity-related securities in the future at a time and at a price that we
consider appropriate. In particular, Bridge has indicated to us that it intends
in the future to sell a portion of its shares of our common stock.
OUR MANAGEMENT WILL HAVE BROAD DISCRETION OVER ALLOCATION OF PROCEEDS FROM THIS
OFFERING.
We expect that the net proceeds to us from the sale of the common stock in
this offering will be approximately $279.3 million, after deducting the
underwriting discounts and commissions and estimated offering expenses. Our
management will have broad discretion to allocate the net proceeds to uses they
deem appropriate. We may be unable to yield a significant return on any
investment of the proceeds.
20
<PAGE>
OUR CERTIFICATE OF INCORPORATION, BYLAWS AND DELAWARE LAW CONTAIN PROVISIONS
THAT COULD DISCOURAGE A TAKEOVER.
Our certificate of incorporation and Delaware law contain provisions which
may make it more difficult for a third party to acquire us, including provisions
that give the board of directors the power to issue shares of preferred stock.
We have also chosen to be subject to Section 203 of the Delaware General
Corporation Law, which prevents a stockholder of more than 15% of a company's
voting stock from entering into business combinations set forth under Section
203 with that company.
YOU WILL SUFFER IMMEDIATE AND SUBSTANTIAL DILUTION.
Assuming an offering price of $23.50 per share, the midpoint of the range
shown on the cover page of this prospectus, the price you will pay for our
common stock in this offering will be substantially higher than the negative
$.29 pro forma tangible book value per share of our outstanding common stock as
of September 30, 1999. As a result, you will experience immediate dilution of
$21.13 in tangible book value per share, and our current stockholders will
experience an immediate increase in the tangible book value per share of their
shares of common stock of $2.66. In addition, between July and November 1999, we
granted options to purchase approximately 6,391,000 shares of our common stock
at a weighted average exercise price of $.50 per share. As of December 22, 1999,
options to purchase approximately 3.5 million shares remained outstanding. To
the extent that these options are exercised, you will be diluted further.
21
<PAGE>
FORWARD-LOOKING STATEMENTS
This prospectus includes forward-looking statements based on our current
beliefs and assumptions. These beliefs and assumptions are based on information
currently available to us. These forward-looking statements are subject to risks
and uncertainties. Forward-looking statements include the information concerning
our possible or assumed future results of operations.
Forward-looking statements are not guarantees of performance. Our future
results and requirements may differ materially from those described in the
forward-looking statements. Many of the factors that will determine these
results and requirements are beyond our control. In addition to the risks and
uncertainties discussed in "Prospectus Summary," "Business" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations," you
should consider those discussed under "Risk Factors."
These forward-looking statements speak only as of the date of this
prospectus. Except as required by law, we do not intend to update or revise any
forward-looking statements to reflect events or circumstances after the date of
this prospectus, including changes in our business strategy or planned capital
expenditures, or to reflect the occurrence of unanticipated events.
22
<PAGE>
USE OF PROCEEDS
We estimate that the net proceeds from this offering will be approximately
$279.3 million, or $321.5 million if the underwriters exercise their
over-allotment option in full. This is based on an initial public offering price
of $23.50 per share, the midpoint of the range shown on the cover page of this
prospectus and after deducting estimated underwriting discounts and commissions
and offering expenses payable by us.
We expect to use an aggregate of $100 million of the net proceeds of this
offering to pay a portion of the purchase price for Bridge's Internet protocol
network assets. In the event we receive more than $300 million from the sale of
common stock in this offering, 50% of the excess will be applied to the balance
of the purchase price. Approximately $160 million of the remaining net proceeds
will be used for capital expenditures, although we plan to obtain vendor
financing for a portion of such expenditures, with any additional remaining
proceeds being used for general corporate purposes. We also may use a portion of
the net proceeds of this offering for acquisitions or investments. We have no
present commitments or agreements with respect to any material capital
expenditures, acquisitions or investments. Pending the application of the
proceeds towards one of the uses described above, we intend to invest the net
proceeds in short-term, interest-bearing, investment-grade securities.
We will purchase Bridge's Internet protocol network assets simultaneously
with the closing of this offering. The closing of this offering is conditioned
on the acquisition of those assets and our and Bridge's entering into the
network services agreement.
DIVIDEND POLICY
We have never declared or paid any cash dividends on our common stock, and
we do not intend to pay any cash dividends on our common stock in the
foreseeable future. We intend to retain any earnings to finance the expansion of
our business and for general corporate purposes.
23
<PAGE>
CAPITALIZATION
The following table sets forth our cash and cash equivalents and
capitalization as of September 30, 1999:
o on an actual basis, after adjusting for the "push down" accounting in
connection with the acquisition of our company by Bridge, see footnote 1 to
our unaudited financial statements that are in the back of this
prospectus; and
o on a pro forma, as adjusted basis to give effect to our receipt of proceeds
of $300 million in this offering, net of discounts, commissions and
expenses payable by us, and the use of an aggregate of $100 million of the
proceeds to pay a portion of the purchase price for the acquisition of
network assets from Bridge.
The network assets are to be recorded at Bridge's historical net book
value, with the excess of the purchase price over that amount being treated as a
reduction of stockholders' equity.
See "Use of Proceeds," "Unaudited Pro Forma Consolidated Financial
Statements," "Management's Discussion and Analysis of Financial Condition and
Results of Operations," "Business--Bridge Relationship" and our financial
statements and the notes to those financial statements that are in the back of
this prospectus.
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1999
-------------------------
PRO FORMA
AS
ACTUAL ADJUSTED
------------ ------------
(DOLLARS IN THOUSANDS,
EXCEPT SHARE DATA)
<S> <C> <C>
Cash and cash equivalents ....................................... $ 1,983 $ 181,283
========= =========
Capitalized lease obligations, including current maturities ..... $ 5,967 $ 30,967
Due to Bridge under notes and sublease obligations .............. 17,270 38,270
--------- ---------
Subtotal ..................................................... 23,237 69,237
--------- ---------
Stockholders' equity:
Common stock. $.01 par value per share; 125,000,000 shares
authorized, 72,000,000 issued and outstanding (actual),
and 84,765,957 issued and oustanding (pro forma as
adjusted) ................................................... 720 848
Additional paid-in capital ................................... 31,026 252,198
Accumulated deficit .......................................... (22,574) (22,574)
--------- ---------
Total stockholders' equity .................................. 9,172 230,472
--------- ---------
Total capitalization ......................................... $ 32,409 $ 299,709
========= =========
</TABLE>
24
<PAGE>
DILUTION
Our net tangible book value as of September 30, 1999 was approximately
negative $21 million or approximately negative $.29 per share of common stock.
Net tangible book value per share represents total tangible assets less total
liabilities, divided by the number of shares of common stock outstanding on that
date. Dilution per share is the difference between the amount per share paid by
purchasers of shares of common stock in this offering and the pro forma, as
adjusted net tangible book value per share reflecting this offering and the
purchase of the network assets from Bridge. After giving effect to our sale of
the 12,765,957 shares of common stock offered in this offering at an assumed
initial public offering price of $23.50 per share, the midpoint of the range
shown on the cover of this prospectus, our pro forma, as adjusted, net tangible
book value as of September 30, 1999 would have been $231 million, or $2.37 per
share. This represents an immediate increase in pro forma net tangible book
value to existing stockholders of $2.66 per share and an immediate dilution to
new investors of $21.13 per share. The following table illustrates this per
share dilution, assuming no exercise of the underwriters' over-allotment option:
<TABLE>
<CAPTION>
<S> <C> <C>
Assumed initial public offering price per share .......... $ 23.50
Net tangible book value per share as of September 30,
1999 ................................................. $ (.29)
Increase attributable to new investors ................ 2.66
------
Pro forma, as adjusted, net tangible book value per share
after this offering ..................................... 2.37
--------
Dilution in pro forma net tangible book value per share to
new investors ........................................... $ 21.13
========
</TABLE>
Assuming the underwriters exercise their over-allotment option in full, our
as adjusted pro forma net tangible book value as of September 30, 1999 would
have been approximately $2.80 per share, representing an immediate increase in
net tangible book value of $3.10 per share to our existing stockholders and an
immediate dilution to new investors in net tangible book value of $20.70 per
share.
The following table summarizes, as of September 30, 1999, assuming the sale
of 12,765,957 shares of common stock offered in this offering at a price of
$23.50 per share, the number of shares of common stock purchased from us, the
total consideration paid to us and the average price per share paid by the
existing stockholders and by the new investors, before deducting the estimated
underwriting discounts and commissions and other expenses:
<TABLE>
<CAPTION>
SHARES PURCHASED CASH CONSIDERATION(1) AVERAGE CASH PRICE
------------------------ -------------------------- -------------------
NUMBER PERCENT AMOUNT PERCENT PER SHARE
------------ --------- -------------- --------- -------------------
<S> <C> <C> <C> <C> <C>
Bridge ................................. 53,870,279 64% $ 0% $ --
Other stockholders ..................... 18,129,721 21% 9,064,861 3% 0.50
---------- -- ------------ - ------
Existing stockholders .................. 72,000,000 9,064,861
New investors in this offering ......... 12,765,957 15% 300,000,000 97% $ 23.50
---------- -- ------------ -- -------
Total ................................. 84,765,957 100% $309,064,861 100%
========== === ============ ===
</TABLE>
- ----------------
(1) Cash consideration does not include the value of Bridge stock exchanged in
Bridge's acquisition of us on April 7, 1999, and the cash consideration of
$9,064,861 represents the gross amount received by Bridge in its private
placement of our stock to Bridge's stockholders.
The discussion and table above assumes none of the options outstanding
under our stock option plans as of September 30, 1999 are exercised. As of
September 30, 1999, there were options outstanding to purchase a total of
6,063,840 shares of common stock at a weighted average exercise price of $.50
per share. To the extent that any of these options are exercised, you will be
diluted further.
25
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
The unaudited pro forma consolidated statement of operations for the nine
months ended September 30, 1999 and for the year ended December 31, 1998 give
effect to the following, as if each had occurred on January 1, 1998:
o the acquisition of our company by Bridge in April 1999;
o our receipt of $300 million in this offering, less estimated discounts,
commissions and expenses payable by us; and o our purchase and sublease
of the network assets from Bridge and our issuance of a note to Bridge in
connection with the purchase.
The unaudited pro forma consolidated balance sheet as of September 30, 1999
gives effect to the following, as if each had occurred on September 30, 1999:
o our receipt of proceeds of $300 million in this offering, less estimated
discounts, commissions and expenses payable by us; o our purchase and
sublease of the network assets from Bridge; and
o our use of proceeds of this offering to pay a portion of the purchase
price of the asset.
As a result of SEC rules and as discussed in note 1 to our unaudited
consolidated financial statements in the back of this prospectus, we have
applied "push down" accounting to our historical financial statements. In these
unaudited pro forma consolidated financial statements, "Predecessor " represents
the historical results of our operations prior to the purchase of our company by
Bridge on April 7, 1999. "Successor" represents the historical consolidated
balance sheet and results of our operations for the period subsequent to that
purchase and the effects of the "push down" from April 7, 1999 through September
30, 1999.
The network assets to be purchased from Bridge are recorded in the
unaudited pro forma consolidated financial statements at Bridge's historical net
book value of those assets. The excess of the purchase price over the historical
net book value of the assets will be treated as a reduction in stockholders'
equity.
The pro forma adjustments and the assumptions on which they are based are
further described in the accompanying notes to the unaudited pro forma
consolidated financial statements. You should read the unaudited pro forma
consolidated financial statements together with our historical financial
statements and the notes to those financial statements that are in the back of
this prospectus.
The pro forma consolidated financial statements are for illustrative
purposes only. You should not rely on the unaudited pro forma consolidated
financial statements as being indicative of the results that actually would have
occurred if the transactions had occurred on the dates indicated or that may be
obtained in the future.
26
<PAGE>
SAVVIS COMMUNICATIONS CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
ADJUSTMENTS
-------------------------------------
HISTORICAL BRIDGE
--------------------------- ACQUISITION OF PURCHASE OF
PREDECESSOR SUCCESSOR SAVVIS NETWORK ASSETS PRO FORMA
------------- ------------- ------------------ ------------------ ----------------------
<S> <C> <C> <C> <C> <C>
Revenues ....................... $ 5,440 $ 12,192 $ 17,632
---------- ---------- -------------
Direct costs and operating
expenses:
Data communications and
operations .................. 6,429 13,095 19,524
Selling, general and
administrative .............. 4,751 11,142 15,893
Depreciation and
amortization ................ 793 9,747 $ (855) (1) $ 20,500 (3) 30,185
---------- ---------- -------- --------- -------------
Total direct costs and operating
expenses ...................... 11,973 33,984 (855) 20,500 65,602
---------- ---------- -------- ----------- -------------
Loss from operations ........... (6,533) (21,792) 855 (20,500) (47,970)
Net interest expense ........... 135 782 2,567 (4) 3,484
---------- ---------- ----------- -------------
Net loss ....................... $ (6,668) $ (22,574) $ 855 $ (23,067) $ (51,454)
========== ========== ======== =========== =============
Basic and diluted net loss per
share ......................... $ (4.51) $ (0.31) $ (0.61) (7)
========== ========== =============
Weighted average number of
shares ........................ 1,670,709 72,000,000 84,765,957 (7)
========== ========== =============
</TABLE>
See notes to the unaudited pro forma consolidated financial statements.
27
<PAGE>
SAVVIS COMMUNICATIONS CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
ADJUSTMENTS
-------------------------------------
BRIDGE
HISTORICAL ACQUISITION OF PURCHASE OF
PREDECESSOR SAVVIS NETWORK ASSETS PRO FORMA
------------- ------------------ ------------------ ---------------------
<S> <C> <C> <C> <C>
Revenues .......................................... $ 13,674 $ 13,674
Direct costs and operating expenses:
Data communications and operations ............... 20,889 20,889
Selling, general and administrative .............. 12,245 12,245
Depreciation and amortization .................... 2,208 $ 16,335 (2) $ 27,333 (3) 45,876
---------- --------- --------- -------------
Total direct costs and operating expenses ......... 35,342 16,335 27,333 79,010
---------- ----------- ----------- -------------
Loss from operations .............................. (21,668) (16,335) (27,333) (65,336)
Net interest expense .............................. 75 4,042 (4) 4,117
---------- ----------- -------------
Net loss .......................................... $ (21,743) $ (16,335) $ (31,375) $ (69,453)
========== =========== =========== =============
Basic and diluted net loss per share .............. $ (16.28) $ (0.82)(7)
========== =============
Weighted average number of shares ................. 1,482,151 84,765,957 (7)
========== =============
</TABLE>
See notes to the unaudited pro forma consolidated financial statements.
28
<PAGE>
SAVVIS COMMUNICATIONS CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 1999
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
ADJUSTMENTS
----------------------------------------
SALE OF COMMON PURCHASE OF PRO FORMA
HISTORICAL STOCK NETWORK ASSETS AS ADJUSTED
------------ ------------------- -------------------- ------------
<S> <C> <C> <C> <C>
ASSETS:
Cash and cash equivalents ............................ $ 1,983 $ 279,300 (6) $ (100,000)(5) $181,283
Accounts receivable, net ............................. 2,106 2,106
Other current assets ................................. 489 489
------- --------
CURRENT ASSETS ................................... 4,578 279,300 (100,000) 183,878
Property, plant and equipment ........................ 5,995 88,000 (5) 93,995
Goodwill and intangible assets ....................... 30,322 30,322
Other long-term assets ............................... 527 527
------- --------
Total ......................................... $41,422 $ 279,300 $ (12,000) $308,722
======= ============ ============ ========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Accounts payable ..................................... $ 5,089 $ 5,089
Accrued expenses ..................................... 1,095 1,095
Current portion of capital lease obligations ......... 1,986 $ 8,000 (5) 9,986
Due to Bridge ........................................ 17,270 17,270
Other accrued liabilities ............................ 2,385 2,385
------- --------
CURRENT LIABILITIES .............................. 27,825 (8,000) 35,825
Due to Bridge ........................................ -- 21,000 (5) 21,000
Long-term portion of capital lease obligations 3,981 17,000 (5) 20,981
Other liabilities .................................... 444 444
------- --------
TOTAL LIABILITIES ................................ 32,250 -- 46,000 78,250
Stockholders' equity ................................. 9,172 $ 279,300 (6) (58,000)(5) 230,472
------- ------------ ------------ --------
Total ......................................... $41,422 $ 279,300 $ (12,000) $308,722
======= ============ ============ ========
</TABLE>
See notes to the unaudited pro forma consolidated financial statements.
29
<PAGE>
SAVVIS COMMUNICATIONS CORPORATION
NOTES TO THE UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
1) To record depreciation and amortization expense of $9,685 associated with
fixed assets, intangible assets and excess of purchase price over fair value
of net assets acquired when Bridge acquired our company. These expenses were
offset by the reversal of historical amortization and depreciation expense
of $10,540.
2) To record depreciation and amortization expense of $18,543 associated with
fixed assets, intangible assets and excess of purchase price over fair value
of net assets acquired when Bridge acquired our company. These expenses were
offset by the reversal of historical depreciation and amortization expense
of $2,208.
3) To reflect depreciation and amortization on the additional $88,000 net book
value of the network assets acquired and subleased from Bridge. Depreciation
on such assets, excluding approximately $6,000 of uninstalled equipment, has
been computed using the straight line method with an estimated remaining
life of assets of three years.
4) To reflect interest expense on borrowings from Bridge and under sublease
arrangements assuming that network assets with a $82,000 net book value,
plus $6,000 in equipment awaiting installation, were purchased or subleased
from Bridge for $150,000 less $4,000 of call assets, and assuming an
interest rate of 10% on the note payable to Bridge and 9% on the subleases.
5) To reflect the purchase of network assets together with related borrowings
from Bridge and the sublease from Bridge, assuming a purchase price of
$150,000 less $4,000 of call assets, with the payment of $100,000 of the
purchase price in cash from the offering proceeds of this offering, $25,000
in the form of capital subleases and $21,000 in the form of a promissory
note to Bridge. These amounts exclude the net book value of assets outside
the United States that may be purchased in the future, once we obtain
regulatory approvals. The excess of the purchase price of the assets over
their net book value has been reflected as a reduction of stockholders'
equity.
6) To reflect the proceeds, net of issuance costs, from the sale of 12,765,957
shares of common stock in this offering, at an assumed initial public
offering price of $23.50 per share.
7) Pro forma loss per share is calculated using the total shares of common
stock that will be outstanding after this offering.
30
<PAGE>
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
We derived the selected historical consolidated financial data presented
below as of and for each of the three years ended December 31, 1996, 1997 and
1998 from our audited consolidated financial statements. Our consolidated
financial statements as of and for the years ended December 31, 1996, and 1997
have been audited by Ernst & Young LLP, independent auditors. Our consolidated
financial statements as of and for the year ended December 31, 1998 have been
audited by Deloitte & Touche LLP, independent auditors. We began commercial
operations in 1996.
We derived the selected consolidated financial data presented below for the
nine months ended September 30, 1998, the period from January 1 to April 6,
1999, and the period from April 7 to September 30, 1999 and as of September 30,
1999 from our unaudited consolidated financial statements. We prepared the
unaudited financial statements on substantially the same basis as our audited
financial statements and, in our opinion, the unaudited financial statements
include all adjustments necessary for a fair presentation of the results of
operations for those periods. Historical results are not necessarily indicative
of the results to be expected in the future, and results of interim periods are
not necessarily indicative of results for the entire year. You should read the
information set forth below together with the discussion under the "Unaudited
Pro Forma Consolidated Financial Statements," "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and our financial
statements and the notes to those financial statements that are in the back of
this prospectus.
On April 7, 1999, Bridge acquired all our equity securities and accounted
for this acquisition as a purchase transaction. Since the purchase transaction
resulted in our company becoming a wholly owned subsidiary of Bridge, SEC rules
required us to establish a new basis of accounting for the purchased assets and
liabilities. The accounting for the purchase transaction has been "pushed down"
to the financial statements of SAVVIS. Therefore, the purchase price has been
allocated to the underlying assets purchased and liabilities assumed based on
the estimated fair market values of these assets and liabilities at the
acquisition date. Solely as a result of the application of fair value
accounting, intangibles, goodwill, other liabilities and stockholders' equity
were increased, and fixed assets were decreased, in the SAVVIS unaudited
consolidated balance sheet. The SAVVIS unaudited historical consolidated balance
sheet data as of September 30, 1999 and unaudited consolidated statement of
operations data for the period from April 7, 1999 through September 30, 1999
reflect our acquisition by Bridge and are labeled "Successor." The SAVVIS
historical financial data for the periods prior to the acquisition are labeled
"Predecessor."
On September 10, 1999, Bridge sold in a private placement approximately 25%
of its equity ownership in SAVVIS to existing shareholders of Bridge, at which
time Welsh Carson purchased from Bridge a 12% interest in SAVVIS.
EBITDA represents earnings (loss) before depreciation and amortization,
interest income and expense and income tax expense (benefit). We have included
information concerning EBITDA because our management believes that such
information is used by investors and other interested parties in our industry as
one measure of a company's operating performance and liquidity. EBITDA is not
determined in accordance with generally accepted accounting principles, is not
indicative of cash used by operating activities and should not be considered in
isolation or as an alternative to, or more meaningful than, measures of
operating performance determined in accordance with generally accepted
accounting principles. Additionally, EBITDA as used in this prospectus may not
be comparable to similarly titled measures of other companies, as other
companies may not calculate it in a similar manner.
31
<PAGE>
<TABLE>
<CAPTION>
PREDECESSOR
------------------------------------------------------------------------------
PERIOD FROM
YEAR ENDED DECEMBER 31, NINE MONTHS ENDED JANUARY 1 TO
------------------------------------------- SEPTEMBER 30, APRIL 6,
1996 1997 1998 1998 1999
------------- -------------- -------------- ------------------- --------------
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues ...................................... $ 290 $ 2,758 $ 13,674 $ 8,914 $ 5,440
Direct costs and operating expenses:
Data communications and operations 1,044 11,072 20,889 14,609 6,429
Selling, general and administrative .......... 1,204 5,130 12,245 7,353 4,751
Depreciation and amortization ................ 153 631 2,208 1,500 793
--------- ---------- ---------- ---------- ----------
Total direct costs and operating
expenses .................................. 2,401 16,833 35,342 23,462 11,973
--------- ---------- ---------- ---------- ----------
Loss from operations .......................... (2,111) (14,075) (21,668) (14,548) (6,533)
Interest expense, net ......................... 60 427 75 113 135
Net loss ...................................... $ (2,171) $ (14,502) $ (21,743) $ (14,661) $ (6,668)
========= ========== ========== ========== ==========
Net loss available to common
stockholders ................................. $ (2,171) $ (14,653) $ (24,134) $ (16,237) $ (7,540)
========= ========== ========== ========== ==========
Basic and diluted net loss per share .......... $ (2.42) $ (15.69) $ (16.28) $ (11.31) $ (4.51)
Weighted average number of shares ............. 895,764 933,922 1,482,151 1,435,792 1,670,709
OTHER FINANCIAL DATA:
EBITDA ........................................ $ (1,958) $ (13,444) $ (19,460) $ (13,048) $ (5,740)
Capital expenditures .......................... 884 697 1,688 1,308 275
Cash used in operating activities ............. (1,293) (10,502) (20,560) (15,530) (6,185)
Cash used in investing activities ............. (884) (697) (2,438) (2,058) (275)
Cash provided by financing activities ......... 2,740 12,024 24,121 24,445 4,533
<CAPTION>
SUCCESSOR
--------------
PERIOD FROM
APRIL 7 TO
SEPTEMBER 30,
1999
--------------
(DOLLARS IN
THOUSANDS,
EXCEPT
SHARE AMOUNTS)
<S> <C>
STATEMENT OF OPERATIONS DATA:
Revenues ...................................... $ 12,192
Direct costs and operating expenses:
Data communications and operations 13,095
Selling, general and administrative .......... 11,142
Depreciation and amortization ................ 9,747
-----------
Total direct costs and operating
expenses .................................. 33,984
-----------
Loss from operations .......................... (21,792)
Interest expense, net ......................... 782
Net loss ...................................... $ (22,574)
===========
Net loss available to common
stockholders ................................. $ (22,574)
===========
Basic and diluted net loss per share .......... $ (0.31)
Weighted average number of shares ............. 72,000,000
OTHER FINANCIAL DATA:
EBITDA ........................................ $ (12,045)
Capital expenditures .......................... 855
Cash used in operating activities ............. (9,945)
Cash used in investing activities ............. (855)
Cash provided by financing activities ......... 12,189
</TABLE>
<TABLE>
<CAPTION>
PREDECESSOR SUCCESSOR
-------------------------------------- --------------
AS OF DECEMBER 31,
-------------------------------------- AS OF
SEPTEMBER 30,
1996 1997 1998 1999
-------- ------------ ------------ --------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents ...................... $ 573 $ 1,398 $ 2,521 $ 1,983
Goodwill and intangibles, net .................. -- -- 1,197 30,322
Total assets ................................... 1,888 4,313 11,454 41,422
Debt and capital lease obligations ............. 1,126 9,495 2,759 23,237
Redeemable preferred stock, net of
discount and deferred financing costs ......... 500 5,261 37,937 --
Stockholders' equity (deficit) ................. (693) (15,395) (35,157) 9,172
</TABLE>
32
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion together with our financial
statements and the notes to those financial statements that are in the back of
this prospectus.
OVERVIEW
We are a rapidly growing provider of high quality, high performance global
data networking and Internet-related services to medium and large businesses,
multinational corporations and Internet service providers. To provide our
Internet access services, we use the SAVVIS ProActiveSM Network, a data
communications network that uses our eight PrivateNAPsSM and our proprietary
routing policies to reduce data loss and enhance performance by avoiding the
congested public access points on the Internet.
We began commercial operations in 1996, offering Internet access services
to local and regional Internet service providers. Our customer base has grown
from 15 customers at the end of 1996 to over 800.
On March 4, 1998, we acquired Interconnected Associates, Inc., a regional
Internet service provider serving approximately 170 customers in Seattle,
Washington and Portland, Oregon, for $750,000 in cash and shares of our common
stock with an estimated fair value of $583,000. We accounted for the acquisition
using the purchase method of accounting.
On April 7, 1999, we were acquired by Bridge in a stock-for-stock
transaction that was accounted for as a "purchase transaction" under Accounting
Principles Board Opinion No. 16. Under the terms of the transaction, Bridge
issued approximately 3,011,000 shares of its common stock together with
approximately 239,000 options and warrants on its common stock in exchange for
all of our outstanding equity securities. Since the purchase transaction
resulted in our company becoming a wholly owned subsidiary of Bridge, SEC rules
required us to establish a new basis of accounting for the assets purchased and
liabilities assumed. As a result, the purchase price has been allocated to the
underlying assets purchased and liabilities assumed based on estimated fair
market value of these assets and liabilities on the acquisition date, and the
difference between the purchase price and the fair market value was recorded as
goodwill. The accounting for the purchase transaction has been "pushed down" to
our financial statements. The impact of the acquisition on our balance sheet,
solely as a result of the application of fair value accounting, was to increase
intangibles, goodwill, other liabilities and stockholders' equity, and to
decrease fixed assets. As a result of the acquisition and the "push down"
accounting, our results of operations following the acquisition, particularly
our depreciation and amortization, are not comparable to our results of
operations prior to the acquisition.
On September 10, 1999, Bridge sold in a private placement approximately 25%
of its equity ownership in SAVVIS to the existing stockholders of Bridge, at
which time Welsh Carson purchased from Bridge a 12% interest in SAVVIS.
Simultaneously with the completion of this offering, we will acquire
Bridge's global Internet protocol network, which has been integrated with our
network since September 1999, for total consideration of approximately $150
million. At that time, we will enter into a 10-year network services agreement
with Bridge under which we will provide managed data networking services to
Bridge. The purchase will substantially increase our depreciation and
amortization. Our fees will be based upon the actual cash cost to Bridge of
operating the network as configured on October 31, 1999, as adjusted for changes
to the network related to Bridge's network requirements through the date of
transfer. Our fees for additional services provided during the first year beyond
the original network will be based on the estimated cost to provide the
services. After the first year of the agreement the prices for services provided
over our network will be mutually agreed upon or determined by binding
arbitration. However, Bridge has agreed that:
(1) the amount paid to us under the agreement during the second year will
not be less than 110% of the rates and charges as determined for the
first year of the agreement;
33
<PAGE>
(2) the amount paid to us under the agreement for the third year of the
agreement will not be less than 120% of the rates and charges as
determined for the first year of the agreement;
(3) the amount paid to us under the agreement for the fourth, fifth and
sixth years will not be less than 80% of the total amount paid by Bridge
and its subsidiaries for Internet protocol data transport services; and
(4) the amount paid to us under the agreement for the seventh through tenth
years will not be less than 60% of the total amount paid by Bridge and
its subsidiaries for Internet protocol data transport services.
Because under the network services agreement the amounts paid to us for the
services to be provided over the original network acquired from Bridge are based
upon the cash cost to operate the original network, the purchase of the network
and provision of services under the network services agreement will result in
losses and negative cash flow from operations until we can sell additional
services over that network to Bridge or other customers. However, because Bridge
is paying us the estimated cash cost to operate the original network and the
estimated total cost for additional network facilities, we expect any additional
revenues generated from the use of the network to generate higher incremental
operating margins.
Bridge will also agree to provide to us various services, including
technical support, customer support and project management in the procurement
and installation of equipment. In addition, Bridge will agree to provide to us
additional administrative and operational services, such as payroll and
accounting functions, benefit management and office space, until we develop the
capabilities to perform these services ourselves. We expect to generally develop
these capabilities by the end of 2000. For a more detailed description of our
arrangements with Bridge, see "Business--Bridge Relationship."
Revenue. Our revenue will be derived primarily from the sale of data
networking, Internet access and colocation services. Through December 31, 1998,
our revenue was primarily derived from the sale of Internet access services to
local and regional Internet service providers in the United States. Beginning in
late 1998, we also began to offer Internet security and colocation services to
corporate customers. Beginning in September 1999, we began to offer managed data
networking services.
We charge each customer an initial installation fee that typically ranges
from $500 to $5,000 and a fixed monthly fee that varies depending on the
services provided, the bandwidth used and the quality of service level chosen.
Our customer agreements are typically for 12 to 36 months. As of November 30,
1999, approximately 6% of our customer agreements, representing approximately 5%
of our revenues for the month of November 1999, were month-to-month and were
able to be terminated on 30 days' notice. We expect the proportion of customers
on month-to-month agreements will continue to decrease as we add new customers
and our sales force continues to pursue longer renewals.
Prices for telecommunication services, including the services we offer,
have decreased significantly over the past several years and we expect this
trend to continue for the foreseeable future.
We expect that a substantial portion of our revenues will be generated by
our network services agreement with Bridge. As of September 30, 1999, Bridge had
an estimated 105,000 trading terminals connected to its Internet protocol
network and an estimated 145,000 trading terminals connected over networks using
older protocols. Bridge has informed us that it expects to convert its remaining
customers to the Internet protocol network over the next three years. We expect
that, to the extent these customers are converted, Bridge will order additional
services from us under the network services agreement. We cannot assure you that
any of these customers will be converted or as to what schedule any conversions
will be completed.
While we expect our revenues from Bridge to increase, we expect them to
decrease as a percentage of our total revenues as we expand our data networking,
Internet access and colocation customer base. We believe data networking and
colocation services will increase as a percentage of our non-Bridge recurring
revenues as we expand these service offerings.
34
<PAGE>
DIRECT COSTS AND EXPENSES. Direct costs and expenses are comprised of the
following items:
Data communications and operations. Data communications and operations
expenses include the cost of:
o connections to other Internet service providers;
o leasing local access lines;
o transmission connections;
o engineering salaries and related benefits;
o other related repairs and maintenance items;
o leasing routers and switches;
o leasing colocation space; and
o installing local access lines at customer sites.
These costs will also include the cost of the network operations center, as
well as the customer help desk and other services that will be provided by
Bridge under the technical services agreement. Data communications and
operations expenses will increase significantly with the inclusion of the Bridge
network. In addition, we expect that these costs will increase in total dollars
as we expand our network and increase our customer base, but we expect that they
will decrease as a percentage of revenues.
Selling, general and administrative. Selling, general and administrative
expenses include the cost of:
o sales and marketing salaries and related benefits;
o advertising and direct marketing;
o sales commissions and referral payments;
o office rental;
o administrative support personnel;
o bad debt expense; and
o travel.
We anticipate that these expenses will increase significantly in total
dollars as we add more sales personnel and administrative support personnel and
increase our marketing initiatives to support the acquisition of the Bridge
network and for the expansion of our customer base. Annual facility expenses are
expected to increase significantly beginning in the year 2000 as a result of
newly leased headquarters facility in Herndon, Virginia. Our incremental cost
will approximate $2.3 million per year. We expect that selling, general and
administrative expenses will decrease as a percentage of revenues.
Depreciation and amortization. Depreciation and amortization expense
consists primarily of the depreciation and amortization of communications
equipment, capital leases, goodwill and intangibles. We expect these expenses to
increase as we make significant investments in the network as we expand our
business. Generally, depreciation is calculated using the straight-line method
over the useful life of the associated asset, which ranges from three to five
years. Goodwill resulting from our acquisition by Bridge is being amortized over
three years and other intangibles are being amortized over one to three years.
Interest expense. Historical interest expense is related to debt to banks,
convertible notes, loans from Bridge and capitalized leases. In connection with
our purchase of Bridge's Internet protocol network assets, we will enter into
subleases with Bridge relating to their capitalized leases for
35
<PAGE>
network equipment that Bridge could not directly assign to us. We expect to
issue a three-year promissory note to Bridge for a portion of the purchase price
in connection with the purchase of the Bridge network assets. See
"Business--Bridge Relationship." As a result, our interest expense will
increase.
Income tax expense. We incurred operating losses from inception through
September 30, 1999 and, therefore, have not recorded a provision for income
taxes in our historical financial statements. We have recorded a valuation
allowance for the full amount of our net deferred tax assets because we believe
that the future realization of the tax benefit is uncertain. As of December 31,
1998, we had net operating loss carry forwards of approximately $30 million.
Section 382 of the Internal Revenue Code restricts the utilization of net
operating losses and other carryover tax attributes upon the occurrence of an
ownership change, as defined. Such an ownership change occurred during 1999 as a
result of the acquisition of our company by Bridge. Management believes that
this limitation will not materially restrict our ability to utilize the net
operating losses over the carryforward periods ranging from 15 to 20 years.
As we expand our network, increase our employee base to support our
expanded operations and invest in our marketing and sales operations, we expect
our losses, net cash used in operating activities and negative EBITDA to
increase substantially for the foreseeable future.
RESULTS OF OPERATIONS
The historical financial information included in this prospectus will not
reflect our future results of operations, financial position and cash flows. Our
results of operations, financial position and cash flows subsequent to the
purchase of Bridge's network and the commencement of the related agreements will
not be comparable to prior periods.
Nine Months Ended September 30, 1999 Compared to Nine Months Ended September
30, 1998
The following discussion compares the combined results of operations of
SAVVIS and our predecessor for the nine months ended September 30, 1999, with
those of our predecessor for the nine months ended September 30, 1998. The
combined results consist of the sum of the financial data from January 1, 1999
through April 6, 1999 for the predecessor and from April 7, 1999 through
September 30, 1999 for SAVVIS. The acquisition by Bridge resulted in a new basis
of accounting, which impacted depreciation and amortization in the period
subsequent to April 7, 1999.
Revenue. Revenue was approximately $17.6 million for the first nine months
of 1999, compared to approximately $8.9 million for the first nine months of
1998, an increase of 98%. This $8.7 million increase was primarily due to
increased marketing and sales efforts and the resulting increase in the number
of customers to 577 from 386, as well as a nominal increase in services to
existing customers.
Data Communications and Operations. Data communications and operations
expenses were approximately $19.5 million for the first nine months of 1999
compared to approximately $14.6 million for the first nine months of 1998, a 34%
increase. This approximately $4.9 million increase was due to costs associated
with the expansion of our network and the increase in our customer base, and the
hiring of additional engineering personnel.
Selling, General and Administrative. Selling, general and administrative
expenses were approximately $15.9 million for the first nine months of 1999,
compared to approximately $7.4 million for the first nine months of 1998, an
increase of 115%. This approximately $8.5 million increase was due to the
increase in the size of our sales force in connection with our increased
marketing efforts. As a result, our personnel expenses and the related
recruiting and travel costs, sales, marketing and administrative departmental
costs and professional service expenses increased accordingly.
Depreciation and Amortization. Depreciation and amortization expenses were
approximately $10.5 million for the first nine months of 1999, compared to
approximately $1.5 million for the first nine months of 1998. Approximately $8.1
million of the approximately $9.0 million increase was
36
<PAGE>
attributed to the amortization of goodwill and other intangibles resulting from
Bridge's acquisition of our company effective April 7, 1999, while the remaining
increase primarily resulted from increased capital expenditures for equipment in
connection with the continuing expansion of our network.
Interest Expense, Net. Interest expense, net was approximately $.9 million
for the first nine months of 1999, compared to approximately $.1 million for the
nine months ended September 30, 1998. The approximately $.8 million increase in
interest expense, net was attributable to interest on amounts due to Bridge
advanced to us to fund our operations and an increase in capitalized lease
obligations incurred to expand the network.
Net Loss. Net loss was approximately $29.2 million for the first nine
months of 1999, compared to approximately $14.7 million for the first nine
months of 1998.
Year Ended December 31, 1998 Compared to Year Ended December 31, 1997
Revenue. Revenue was $13.7 million in 1998 compared to $2.8 million in
1997, an increase of 389%. This $10.9 million increase was primarily due to
increased marketing and sales efforts and the resulting substantial increase in
the number of customers.
Data Communications and Operations. Data communications and operations
expenses were $20.9 million in 1998, compared to $11.1 million in 1997, an
increase of 88%. This $9.8 million increase was due to costs associated with the
expansion of our network and the increase in the customer base.
Selling, General and Administrative. Selling, general and administrative
expenses were $12.2 million in 1998, compared to $5.1 million in 1997, an
increase of 139%. The principal increase in these expenses resulted from the
increased size of our sales force in the second half of 1998. Marketing and
administrative costs also increased in 1998 to support the increased number of
customers.
Depreciation and Amortization. Depreciation and amortization expenses were
$2.2 million in 1998, compared to $.6 million in 1997, an increase of 267%.
Depreciation and amortization expense increased due to the purchase of
communications equipment for the expansion of our network and the acquisition of
Interconnected Associates.
Interest Expense, Net. Interest expense, net was $.1 million in 1998,
compared to $.4 million in 1997, a decrease of 75%. This $.3 million decrease
was directly attributed to the conversion of a portion of our convertible notes
into equity securities in connection with our corporate reorganization in March
1998 and interest income earned on proceeds received in the transaction.
Net Loss. Net loss was $21.7 million in 1998, compared to $14.5 million in
1997, a 50% increase.
Year Ended December 31, 1997 Compared to the Year Ended December 31, 1996
Revenue. Revenue was $2.8 million in 1997 compared to $.3 million in 1996
(our first year of operations). This $2.5 million increase was primarily due to
increased marketing and sales efforts and the resulting increase in the number
of customers.
Data Communications and Operations. Data communications and operations
expenses were $11.1 million in 1997, compared to $1.0 million in 1996. This
$10.1 million increase was due to costs associated with the expansion of our
network and the increase in our customer base.
Selling, General and Administrative. Selling, general and administrative
expenses were $5.1 million in 1997, compared to $1.2 million in 1996. This $3.9
million increase was primarily attributable to the expansion of our business,
including personnel expenses, sales and marketing costs and professional
services expenses.
Depreciation and Amortization. Depreciation and amortization expenses were
$.6 million in 1997, compared to $.2 million in 1996. This $.4 million increase
is attributable to the purchase of communications equipment for the expansion of
our network.
37
<PAGE>
Interest Expense, Net. Interest expense, net was $.4 million in 1997,
compared to $.1 million in 1996. This $.3 million increase is attributable to
interest on capitalized lease obligations that we entered into in 1997 and the
interest on convertible notes and bank debt.
Net Loss. Net loss was $14.5 million in 1997, compared to $2.2 million in
1996.
LIQUIDITY AND CAPITAL RESOURCES
We have historically generated negative cash flows from operations. We
generated negative cash flows from operations of $15.5 million and $16.1 million
for the first nine months of 1998 and 1999, respectively, and $1.3 million,
$10.5 million and $20.6 million for 1996, 1997 and 1998, respectively.
From January 1, 1996 through September 30, 1999, we have expended
approximately $90 million for operating purposes and for the construction,
maintenance and expansion of our network. Net cash used in investing activities
was approximately $1.1 million for the first nine months of 1999, and $.9
million, $.7 million and $2.4 million for 1996, 1997 and 1998, respectively. Net
cash used in investing activities in each period primarily reflects purchases of
property and equipment not financed with capital leases. In March 1998, we used
approximately $.8 million in cash and stock with a fair value of approximately
$.6 million to acquire Interconnected Associates. See note 5 to our audited
financial statements that are in the back of this prospectus. Net cash provided
by financing activities was $16.7 million for the first nine months of 1999, and
$2.7 million, $12.0 million and $24.1 million for 1996, 1997 and 1998,
respectively. We obtained funds through issuances of equity securities and
convertible notes, bank financing, capital lease obligations and advances from
Bridge pursuant to demand notes. As of September 30, 1999, we had outstanding
demand loans from Bridge of approximately $17.3 million.
We expect our capital expenditures will total approximately $1.2 million
for 1999. We expect to have capital expenditures, excluding the purchase of the
Bridge network assets, of approximately $160 million in 2000 as we build out
colocation facilities, deploy ATM devices, and expand our network to 24 new
cities.
Upon completion of this offering, we will acquire Bridge's Internet
protocol network assets for total consideration of approximately $150 million
less $4 million of call assets. Of this amount, $25 million will be paid by
entering into capitalized sublease obligations with Bridge. Of the remaining
purchase price, $100 million will be paid with a portion of the net proceeds of
this offering. In the event we receive more than $300 million from the sale of
common stock in this offering, 50% of the excess will be applied to the balance
of the purchase price and, then only after the balance of the purchase price is
paid, to the remaining outstanding debt to Bridge. Any remaining purchase price
not paid out of proceeds from this offering will be paid by the issuance of a
three-year promissory note that will bear interest at 10% per year.
In connection with our acquisition of Bridge's network assets, Bridge will
assign to us numerous agreements for the purchase of communications services. To
obtain the suppliers' consents to such assignments, in several instances, Bridge
will guarantee our performance under these agreements. In the event Bridge is
ever required to make payments to these suppliers on our behalf, Bridge will be
entitled to reduce its payments to us under the network services agreement in a
like amount. We are currently discussing with several of these suppliers the
release of Bridge from its guarantee obligations in exchange for the placement
of deposits or stand-by letters of credit by us. We estimate that we may be
required to deposit between $10 to $15 million for such purposes.
We have arrangements with various suppliers of communications services that
require us to maintain minimum spending levels, some of which increase over
time. Our aggregate minimum spending level is approximately $28 million in 2000.
In specific instances, we are able to choose among a variety of communications
services offered to meet these spending minimums. We are currently exceeding all
of our spending minimums and expect to continue to do so as our network
requirements expand. However, if our network requirements were to decrease, we
could be obligated to make payments to these suppliers for services we do not
need.
38
<PAGE>
Although we plan to invest significantly in equipment and in network
expansion, except as described in the preceding paragraph, we have no material
commitments for such items at this time. As we expand our network, increase our
employee base to support our expanded operations and invest in our marketing and
sales organizations, we expect to have significant cash requirements for the
foreseeable future.
We believe that the net proceeds of this offering, together with our
existing cash and cash equivalents, and anticipated vendor financings, will be
sufficient to fund our capital needs through the end of 2000. We are currently
in discussions with two separate vendors to obtain vendor financing for network
equipment purchases. In the absence of proceeds from this offering we would be
required to seek capital from external sources and curtail expansion plans. See
"Risk Factors--Risks Related to Our Business--We will require additional capital
to conduct our business, but we currently do not have a credit facility or other
source of funding." We will need to raise a significant amount of capital to
fund our capital expenditures, operating deficits, working capital needs and
debt service requirements after 2000. We intend to seek equity or debt financing
from external sources to meet our cash needs after 2000. We cannot assure you
that such additional funding will be available on terms satisfactory to us or at
all.
IMPACT OF THE YEAR 2000
Many computers, software, and other equipment include computer code in
which calendar year data is abbreviated to only two digits. As a result of this
design decision, some of these systems could fail to operate or fail to produce
correct results if "00" is interpreted to mean 1900, rather than 2000. These
problems are widely expected to increase in frequency and severity as the year
2000 approaches, and are commonly referred to as the "Year 2000 problem."
General Readiness Assessment. The Year 2000 problem may affect the network
infrastructure, computers, software and other equipment that we use, operate or
maintain for our operations. As a result, we have formalized our Year 2000
compliance plan, which has been substantially implemented by a team assigned
this task. As part of our Year 2000 compliance plan, the project team has
compiled a listing of all mission-critical items, both developed internally and
purchased from outside sources, that may be impacted by the Year 2000 problem.
We then obtained information from the independent third parties whose products
or services we use to identify the Year 2000 readiness of all mission-critical
items. Substantially all mission-critical items that were found not to be
compliant were then upgraded to a compliant version, model or release.
Mission-critical items that were internally developed were created with Year
2000 compliance in mind, and have been thoroughly tested. We have purchased and
developed all of our hardware and software since 1995. As a result, we have no
legacy systems that are most commonly afflicted with Year 2000 problems.
Costs of assessing and addressing Year 2000 compliance. The costs of
upgrading the various hardware or software that were found not to be compliant
as well as the cost of assessing and addressing Year 2000 compliance issues were
approximately $100,000. These costs were absorbed into normal operating expense
and salary structures.
Risks associated with Year 2000 problems. We believe that we have
identified and resolved all Year 2000 problems that could significantly harm our
business operations. However, we believe that it is not possible to determine
with complete certainty that all Year 2000 problems affecting us have been
identified or corrected. The number of devices and systems that could be
affected and the interactions among these devices and systems are numerous.
In such cases where we do not have the ability to perform our own tests on
third party technologies, we have found written assertions of compliance from
all of our significant vendors and third parties on their websites. No one can
accurately predict which Year 2000-related failures will occur or the severity,
timing, duration, or financial consequences of these potential failures. As a
result, we believe that the following are possible:
o A significant number of operational inconveniences and inefficiencies for
us, our suppliers and our customers that will divert management's time and
attention, and financial and human resources from ordinary business
activities;
39
<PAGE>
o Possible business disputes and claims, including claims under our Service
Level Agreements, due to Year 2000 problems experienced by our customers
and incorrectly attributed to our services or performance, which we
believe will be resolved in the ordinary course of business;
o A few serious business disputes alleging that we failed to comply with the
terms of customer contracts or industry standards of performance, some of
which could result in litigation or contract termination;
o One or more of our telecommunication and/or Internet access providers may
encounter difficulties related to the Year 2000 problem and, as a result,
may not be able to send data to or receive data from one or more of our
PrivateNAPsSM.
Contingency Plans. We believe our company is Year 2000 compliant.
Therefore, our contingency plans mostly take the form of fast and efficient
responses to Year 2000 problems identified as they materialize. Specifically:
o We will have staff from each of our technical departments present on site
at midnight on December 31, 1999, as well as additional staff "on call."
o We will also make arrangements with vendors of key mission-critical
equipment and software to ensure that they have staff present or "on call"
to immediately address any issues that arrive with the Year 2000.
o Where feasible, we will have backup systems in place so that we may
transition functionality from affected systems.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities," which establishes accounting and reporting standards
for derivative instruments and hedging activities. As amended by Statement of
Financial Accounting Standards No. 137, this standard will be effective for us
for the fiscal years and quarters beginning after June 15, 2000, and requires
that an entity recognize all derivatives as either assets or liabilities in the
statement of financial position and measure those instruments at fair value. We
are currently evaluating the impact of this standard.
In April 1998, the American Institute of Certified Public Accountants
issued Statement of Position 98-5, "Reporting on the Costs of Start-Up
Activities." This standard requires companies to expense the costs of start-up
activities and organization costs as incurred and is effective for fiscal years
beginning after December 15, 1998. We do not expect that adoption of this
standard will have a material impact on our results of operations.
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131, "Disclosures About Segments of an
Enterprise and Related Information," which establishes annual and interim
reporting standards for an enterprise's business segments and related
disclosures about its products, services, geographic areas and major customers.
Our adoption of this standard did not affect our financial position, results of
operations or cash flows for any period presented.
QUALITATIVE AND QUANTITATIVE MARKET RISKS
Our primary market risk exposures relate to changes in interest rates.
Following the purchase of Bridge's global Internet protocol network assets, we
expect to expand our business internationally, and as a result, we will be
exposed to changes in foreign currency exchange rates.
Our financial instruments that are sensitive to changes in interest rates
are our borrowings from Bridge, all of which were entered into for other than
trading purposes. These demand notes bear interest at a fixed rate of 8%. In
addition, in connection with our purchase of Bridge's network assets,
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we expect to issue a three-year promissory note that will bear interest at an
annual rate of 10%. Because the interest rate on these notes is fixed, changes
in interest rates will not directly impact our cash flows. As of December 31,
1998, the aggregate fair value of our borrowings approximated their carrying
value.
Although our functional currency will be the United States dollar, a
significant portion of our revenue in the future may be derived from our sales
and operations outside the United States, and we expect to incur a significant
portion of our operating costs outside the United States. As a result, changes
in foreign currency exchange rates may have a significant effect on our future
results of operations. We may engage in hedging transactions to mitigate foreign
exchange risk.
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BUSINESS
We are a rapidly growing provider of high quality, high performance global
data networking and Internet-related services to medium and large businesses,
multinational corporations and Internet service providers. Bridge Information
Systems, one of the leading content providers to the financial services
industry, utilizes the SAVVIS ProActiveSM Network to deliver Bridge's content
and applications to over 4,500 financial institutions, including 75 of the top
100 banks in the world and 45 of the top 50 brokerage firms in the United
States. We currently offer a wide range of managed data network services, high
bandwidth Internet access services and colocation services.
The SAVVIS ProActiveSM Network was constructed to meet the real-time data
delivery requirements of the most demanding customers. Our network has been
operational since 1996 and has over 6,000 buildings on-net in 83 of the world's
major commercial centers in 43 countries. Our network architecture is based on
ATM, frame relay and Internet protocol technologies. Additionally, our 83-city
global system connects to eight PrivateNAPsSM, which will be expanded to 12 by
March 2000, allowing us to bypass the congested public Internet access points.
This network design enables us to provide real-time data delivery and guarantee
low latency and low data loss. The network also allows us to tailor our service
offerings to our customers' needs and to offer a range of quality of service
levels.
We began commercial operations in 1996, offering Internet access services
to local and regional Internet service providers. In April 1999, we were
acquired by Bridge, a global provider of real-time and historical financial
information and news regarding stocks, bonds, foreign exchange and commodities
to the financial services industry. As of December 30, 1999 Bridge had an
estimated 250,000 network terminals installed worldwide of which an estimated
115,000 terminals are connected to the SAVVIS ProActiveSM Network, Bridge
expects to connect the remaining terminals to our network over the next three
years. Bridge is a privately held company based in St. Louis, Missouri, whose
principal shareholder is Welsh Carson, a leading private equity firm with
extensive experience in the communication and information services industries.
The high performance of our Internet access services has been verified by data
collected by Keynote Systems, Inc. in which we have consistently rated among the
top Internet backbone providers in terms of performance based on mean download
times throughout 1999. We currently provide Internet access services directly to
approximately 800 customers, including eBay Inc., Adforce, Inc. and Charter
Communications International.
Following the Bridge asset transfer, our revenue will be derived primarily
from the sale of data networking, Internet access and colocation services.
Through December 31, 1998, our revenue was primarily derived from the sale of
Internet access services to local and regional Internet service providers in the
United States. Beginning in late 1998, we expanded our service offering to
corporate customers as well.
We charge each customer an initial installation fee that typically ranges
from $500 to $5,000 and a monthly fixed fee that varies depending on the
services provided, the bandwidth used and the quality of service level chosen.
Our customer agreements are typically for 12 to 36 months. As of November 30,
1999, approximately 6% of our customer agreements, representing approximately 5%
of our revenues for the month of November 1999, were month-to-month and were
able to terminated on 30 days' notice. We expect the proportion of customers on
month-to-month agreements will continue to decrease as we add new customers and
our sales force continues to pursue longer renewals.
RELATIONSHIP WITH BRIDGE
In April 1999, we were acquired by Bridge, a leading provider of content to
financial services companies. Upon the completion of this offering, we will
purchase Bridge's global Internet protocol network, which has been integrated
with our network since September 1999, for total consideration of approximately
$150 million. As a result, the SAVVIS ProActiveSM Network will be one of the
largest global data networks in the world, interconnecting over 6,000 buildings
in 83 of the world's major commercial centers in 43 countries.
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In addition, upon completion of this offering, we will enter into a 10-year
network services agreement with Bridge that commits Bridge to purchase at least
$ million of network services from us in 2000. This amount will increase by 10%
in each of 2001 and 2002. Thereafter, Bridge will be required to purchase at
least 80% of its network services from us, declining to 60% in 2006 through the
end of the agreement in 2010. We will also enter into a number of other
agreements with Bridge that contemplate, among other things, the transfer of
Bridge's technical and support personnel to us, and our purchase from Bridge of
support and administrative services, including help-desk services and network
operations center services.
Following the completion of this offering and the purchase of Bridge's
network assets, we will become a provider of managed data networking services to
Bridge. At that time, we will connect Bridge to over 4,500 of its financial
services company customers, including 75 of the top 100 banks in the world and
45 of the top 50 brokerage firms in the United States, to allow Bridge to
deliver its content and applications. We intend to aggressively market our
services to occupants of the 6,000 buildings connected to the SAVVIS ProActiveSM
Network, in particular to Bridge's customer base.
MARKET OVERVIEW
Market Opportunity. As the Internet has emerged as a strategic business
component, investment in Internet services has begun to increase dramatically.
According to International Data Corporation, an independent research firm, the
demand for U.S. Internet and e-commerce services was $2.9 billion in 1997 and is
expected to grow to $22 billion by 2002, a 50% compound annual growth rate. In
addition, demand for data transport services is growing rapidly as evidenced by
International Data Corporation's estimate that Internet service providers'
corporate access revenues will grow from $2.9 billion in 1998 to $12 billion by
2003, a 32.5% compound annual growth rate. We believe a significant Internet
market will continue to be Internet infrastructure and usage.
Internet network services. Since the commercialization of the Internet in
the early 1990s, businesses have rapidly established corporate Internet sites
and connectivity as a means to expand customer reach and improve communications
efficiency. Internet access service is now one of the fastest growing segments
of the global telecommunications services market. According to International
Data Corporation, the number of Internet users worldwide reached 38 million in
1996 and is forecasted to grow to over 170 million by the year 2000. Internet
access services represent the means by which Internet service providers
interconnect users to the Internet or to corporate intranets and extranets.
Access services include dial-up access for mobile workers and small businesses
and high-speed dedicated access used primarily by mid-sized and larger
organizations. In addition to Internet access services, Internet services
providers are increasingly providing a range of value-added services, including
shared and dedicated Web hosting and server colocation, security services, and
advanced applications such as Internet protocol-based voice, fax and video
services.
Corporate data network services. Other than Internet-related services, the
majority of business data communications today take place over private or
managed corporate data and electronic data interchange networks. According to
International Data Corporation, the market for data network services in the U.S.
grew from approximately $3.0 billion in 1997 to approximately $5.5 billion in
1998. International Data Corporation expects that the market for data network
services in the U.S. will continue to grow rapidly to reach approximately $12.8
billion in 2003.
Today, organizations employ local data networks, or local area networks, to
interconnect personal computers and workstations. The highly successful use of
local area networks for information-sharing, messaging and other applications
has led organizations to aggressively deploy wide area networks, which
effectively interconnect local area networks and replicate their functionality
across a much broader geographic area. The demand for wide area networks has
grown as a result of today's competitive business environment. Factors
stimulating higher demand include the need to provide broader and more
responsive customer service and to operate faster and more effectively between
operating units, suppliers and other business partners. In addition, as
businesses become more global in nature, the ability to access business
information across the enterprise has become a competitive necessity.
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Convergence between the Internet and corporate data networking. Today, many
businesses are utilizing Internet-related services as lower-cost alternatives to
certain traditional telecommunications services. The near ubiquity and
relatively low cost of the Internet have resulted in its widespread use for
certain applications, most notably Web access and e-mail. Internet protocol has
become the communications protocol of choice for the desktop and for local area
networks. As a result, Internet protocol wide area network implementation
requires no protocol conversion, reducing overhead and improving performance.
Many corporations are connecting their remote locations using intranets to
enable more efficient communications with employees, providing remote access for
mobile workers and reducing telecommunications costs by using value-added
services such as Internet protocol-based fax and video-conferencing.
Industry analysts expect the market for both Internet protocol-based data
networking services and Internet access to grow rapidly as companies increase
their use of the Internet, intranets extranets and privately managed Internet
protocol networks. According to industry analyst Forrester Research, Inc., an
independent research firm, the total market for Internet services is projected
to grow from $6.2 billion in 1997 to approximately $49.7 billion in 2002 .
Rapid growth in e-commerce. While most corporations' early use of the
Internet was to establish an Internet marketing presence, businesses today are
using the Internet much more aggressively: to generate new revenues, to increase
efficiency through improved communications with suppliers and other third
parties, and to improve internal communications. The rapid growth of e-commerce
encompasses both business-to-business and business-to-consumer communications
and transactions, and the projected growth of these markets over the next five
years is dramatic. Forrester Research, Inc. projects that the market for
business-to-business e-commerce will grow from $43 billion in 1998 to $1.3
trillion in 2003. In addition, Forrester Research, Inc. projects that the market
for business-to-consumer e-commerce will grow from $8 billion to $108 billion
over the same period.
Outsourcing of Internet-related services. In order to capitalize fully on
the new opportunities presented by the Internet and e-commerce, businesses will
require high quality, reliable and flexible data communications and
infrastructure services capable of supporting mission-critical applications. We
believe that an increasing number of businesses will seek to outsource these
services to third-party providers for several reasons. First, the rapid growth
of Internet-related businesses has created a shortage of information technology
personnel skilled in Internet protocol and e-commerce development. Second, many
companies believe that establishing leadership in their industry with respect to
Internet-related services is important to the future of their business. Given
this posture, time to market is critical and turning to a specialized,
third-party provider can often shorten time to market. Finally, many
infrastructure services require significant up-front investment. Many companies
will choose to preserve their capital to invest in activities that are integral
to their business strategy and seek to develop their infrastructure by
purchasing services rather than investing in networks, systems and equipment.
Rapid growth in colocation and Web site hosting. While in the past only the
largest companies provisioned their own data networking services, until recently
businesses of all sizes typically housed, maintained and monitored their own web
and content servers. As Internet-enabled applications become mission-critical,
larger and more difficult to develop and maintain and require increasing amounts
of investment, we believe a substantial number of businesses will outsource
their colocation and web site hosting requirements to third parties. Forrester
Research, Inc. projects that the web site hosting business, including
colocation, dedicated and shared hosting, will grow from less than $1 billion in
1998 to almost $15 billion by 2003. We believe that companies seeking Internet
protocol expertise, high levels of security, fault-tolerant infrastructure,
local and remote support and the cost benefits of a shared infrastructure will
be most likely to outsource these services.
Limitations of Internet protocol and the Internet. Despite the remarkable,
rapid success of Internet protocol, the Internet faces limitations that may
serve as a bottleneck between the full potential of Internet protocol and its
use in mission-critical applications. First, in Internet protocol routing,
packet data travels through the network without a pre-defined path or guaranteed
delivery.
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Individual packets may travel separate paths and arrive at the network
destination at different times. Second, Internet protocol packets cannot be
identified as belonging to one class of traffic or another. For example, in a
given flow of Internet protocol packets it is not possible to separate
"real-time" traffic, such as voice over Internet protocol, from lower priority
traffic, such as e-mail. Each of these issues limits the utility of Internet
protocol for mission-critical, real-time enterprise networks. While we believe
that an improved version of Internet protocol will be implemented, the timing
and efficiency of these improvements remain uncertain.
Bottlenecks at Network Access Points. The Internet is a network of
networks. Communication among these networks takes place at access points where
they interconnect. Despite the near ubiquity of the Internet, there are only a
few major public network access points. However, since the introduction of
network access points, the volume of Internet traffic has increased
dramatically, often overwhelming network access points' capacity to handle the
smooth exchange of traffic. The public network access points are now space
constrained, have inadequate power and air conditioning, have poor security,
often employ older, less technologically advanced switching technologies, have
limited or no available maintenance or support staff, and are not centrally
managed. No single entity has the economic incentive or ability to facilitate
problem resolution, to optimize peering of data networks, or to bring about
centralized routing administration. As a consequence of the lack of
coordination, and in order to avoid the increasing congestion at the public
network access points, selected backbone providers have established connections
at private network access points, connecting to other backbone providers for the
exchange of traffic and bypassing public network access points.
COMPETITIVE STRENGTHS
Our target customers are those businesses that are intensive users of data
communications that require a high quality of service for their global data
networking and Internet needs. Our competitive strengths in servicing these
customers include:
Large number of sophisticated users connected to our network. Bridge uses
the SAVVIS ProActiveSMNetwork to deliver its content and applications to over
4,500 financial services firms, including 75 of the top 100 banks in the world
and 45 of the top 50 brokerage firms in the U.S. Because these financial
services firms depend on up-to-the-minute information and cutting edge
technology to successfully compete in their businesses, they are among the
world's most demanding users of corporate data services. The SAVVIS ProActiveSM
Network was designed and is operated to high standards of speed and redundancy
to satisfy their requirements, with multiple backbone connections, local access
lines and ATM switches. With the SAVVIS ProActiveSM Network in place, the
marginal cost of providing additional services to existing Bridge customers is
low. Additionally, the marginal cost of making our high quality services
available to new customers, including medium and small businesses and new
vertical markets, is also low. We believe providing service to Bridge to enable
them to deliver content to the world's leading financial institutions will
significantly advance our brand building efforts and enhance our prospects for
winning new business.
Unique network engineered for real-time performance. Our network
architecture allows us to deliver data services to the most demanding customers
that require real-time delivery of large volumes of data, such as financial
services participants that rely on data sent on our network to make trading and
investment decisions throughout the day. The high performance of our Internet
access services has been verified by data collected by Keynote Systems, Inc. in
which we have consistently rated among the top Internet backbone providers in
terms of performance as measured by mean download times throughout 1999. In
order to achieve this, we designed our network to be highly redundant, including
multiple backbone connections, local access lines and Internet connections. In
addition, our system of PrivateNAPsSM allows our Internet traffic to bypass the
heavily congested public access points of the Internet, thereby reducing data
loss and latency, and improving reliability and performance. We also use
proprietary routing and network management policies to enhance our network
efficiency and to maintain a high quality of service. The reliability and
functionality of our network allows us to provide our customers with a range of
services and quality of service levels that we believe are unique to the
industry.
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Global network presence. We will operate one of the largest managed data
networks in the world, reaching 43 countries, with facilities in 83 major
cities, including 58 international cities and 25 U.S. cities. We intend to
continue to extend the scope of our network by connecting an additional 24
cities in 2000. We have over 6,000 buildings connected to our network. Because
our network is already connected to these buildings as a result of our
relationship with Bridge, we can deliver our services to Bridge's customers and
the other tenants with low marginal cost and a time-to-market advantage.
Single source service offering. We provide our customers with a single
source for a wide range of global data networking, Internet access and
colocation services. Our global data networking services include managed data,
virtual private network and dial-up access services. Our Internet-related
services include dedicated access, DSL and Internet security services. All of
our services are offered on a service-only basis and a fully managed basis, with
service and equipment included, depending on customer requirements and the
capabilities of their internal information technology staff.
World-class service through proprietary systems. The global data network
operations center in St. Louis and regional network operations centers in London
and Singapore are equipped with sophisticated network monitoring, management,
reporting and diagnostic tools for network troubleshooting. These systems enable
real-time remote monitoring and management of our network equipment and customer
service. Our customers have a single point of contact, 24 hours a day, 365 days
a year, for support inquiries, and receive prompt notification of events that
might impact service quality, such as network congestion, equipment failures and
network or power outages. Our global data network, based on the unique
combination of ATM technology and our PrivateNAPsSM, also enables us to provide
our customers an extremely high level of service. We commit this level of
service to our customers in writing in service level agreements. Our service
level agreements are guarantees to our customers of high quality service
measured in terms of network availability, latency and data loss.
BUSINESS STRATEGY
Our objective is to tap the rapidly growing market for reliable, high speed
data communications and Internet services. In pursuit of this objective, we
intend to:
Provide a single source for managed data network services and high quality
Internet services. Data communications and the Internet are mission-critical to
thousands of businesses worldwide and, according to industry studies, the market
for these services continues to grow rapidly. Corporations are continually
expanding and enhancing existing networks and deploying new services in response
to this growth. By providing a wide range of services for both Internet and
managed data networking services, we offer a single source solution to the key
challenges faced by corporate information technology managers implementing
Internet, intranet and extranet applications. Since the requirements and
internal capabilities of customers vary significantly, we offer our services on
a service-only basis and a fully managed basis, with service and equipment
included.
Capitalize on Bridge relationships to penetrate its customer base. We
intend to aggressively market our services to the over 4,500 Bridge customers
already connected to our network through both our sales force and the over 500
Bridge sales representatives around the world. We provide incentives to Bridge
employees to refer Bridge customers to us. Since Bridge customers are already
connected to our network, we believe we enjoy significant time-to-market, cost
and quality advantages and enhanced customer retention when delivering our
services to these customers.
Target potential customers in buildings connected to our network. We intend
to actively market our services to the businesses in the over 6,000 buildings
worldwide that are connected to our network. These buildings are generally
located in central business districts of major cities and are typically occupied
by multiple businesses. Because our network is already in place, we expect to
enjoy time-to-market, cost and quality advantages when delivering services to
current and new customers located in these buildings.
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Expand our network and PrivateNAPSM infrastructure. We intend to leverage
the substantial investments made in our network infrastructure and service and
support capabilities to service new customer segments, including large
corporations in other targeted vertical markets, medium and small businesses and
Internet service providers. We intend to continue to expand our data network
infrastructure to connect new cities and new buildings to our network. Over the
next two years, we expect to establish facilities in 48 additional cities
worldwide. We believe that this expansion will allow us to continue to expand
our customer base, improve our service offerings and improve our economies of
scale. We also intend to continue the expansion of our PrivateNAPsSM with the
addition of four PrivateNAPsSM in early 2000. Given the high volume of traffic
that is carried on our network, we are also evaluating the purchase of local and
long haul fiber to further reduce network operating costs.
Grow domestic and international distribution channels. We intend to
aggressively grow our distribution channels. We expect to significantly increase
the size of our sales force for both global data networking services and
Internet access services in 2000 and enter into distribution arrangements with
companies licensed to provide our services in markets where we do not directly
hold such licenses. We will also attempt to establish relationships with our
Internet service provider customers who are interested in cross-selling our
global data networking services to their existing customer base.
Provide enabling infrastructure for e-commerce services. We believe that
many of our target customers, particularly the financial services companies that
receive Bridge content and applications, are aggressively pursuing e-commerce
strategies. We believe that our unique network architecture of ATM technology
and PrivateNAPsSM, highly available domestic and international dial access
platforms and security services will enable businesses to communicate with
customers and suppliers over the Internet and secure websites. As a result, we
believe that we are well positioned to help our customers capitalize on the
substantial anticipated growth in e-commerce.
Develop and market new services. We intend to continue to develop new
services, such as voice and video, that will enable us to further leverage our
network infrastructure and our customer base. For example, we have deployed ATM
to the edge of our network and intend to aggressively deploy ATM devices at
customer premises allowing for the provision of multiple network applications
with different quality of service levels over the same local access lines and
customer equipment. The deployment of these devices will allow our customers to
combine services that they may currently buy from multiple vendors, each on a
different network, onto our network at a reduced cost. We are also in the
process of upgrading and expanding our colocation data center facilities to over
250,000 square feet of space, and expect to offer complex web hosting services
at these facilities. We intend to further expand our relationship with Bridge to
develop tailored product offerings which bundle news, financial content and
trading applications with our data networking services. We also intend to
develop bundled content or applications and network services with other trading
partners targeted at new vertical markets.
SAVVIS SERVICES
We believe that we are well positioned to solve the major problems
currently facing Internet and data networking customers. We designed the SAVVIS
ProActiveSM Network to offer a guaranteed, superior level of performance for
both Internet and data networking services. We deliver a comprehensive range of
high performance, quality of service differentiated products, including data
networking, Internet access, intranets, extranets, colocation and other
services.
A common feature among all of the services that we provide to our customers
is the substantial flexibility to choose among a range of offerings, including
on a service-only basis and a fully managed basis. On a service-only basis, the
customer is responsible for the design and integration of its network and the
purchase of network hardware, relying on us only for network services. On a
fully managed basis, we are responsible for the design, implementation,
integration and ongoing support of the customer's network.
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Global Data Networking Services
The SAVVIS ProActiveSM Network provides a reliable, high quality
environment to transfer private corporate data among offices, employees,
customers and suppliers because our network uses multiple backbones, switches
and local connections to attain a high level of redundancy and is monitored 24
hours a day, 365 days a year. Because all of our global data networking services
are carried over a single network, we are able to offer these services on a
cost-effective basis relative to less technologically advanced private line
networks, while providing comparable quality and security and significant
improvements in redundancy, flexibility and scalability.
Managed Data Networking. Managed data networking services provide data
communication links over a shared network environment. Because we operate,
manage and monitor our global network end-to-end, we are able to provide our
customers with higher performance and greater reliability than networks that
utilize the public Internet. Customers can connect to our data network using
ATM, frame relay or Internet protocol technologies. Customers contract for
connectivity to our global network and configure software-based permanent
virtual circuits that emulate much of the functionality of private lines, but
with improved scalability and redundancy and the ability to "burst" beyond
the stated capacity of the permanent virtual circuits. Our managed data
networking services are designed for those customers that require a very high
level of quality and security for their networking services.
Virtual Private Network Services. For customers who want to realize the cost
benefits of a shared network but do not require the level of performance and
security of our managed data networking services, we offer our Internet-based
virtual private network services. Virtual private networks utilize the
near-ubiquity of the Internet to provide cost-effective connectivity for
businesses with large numbers of sites, mobile workers or sites that do not
have high bandwidth requirements or that are in remote locations. A typical
Internet-based virtual private network supports dial-up access, resulting in
extensive geographic coverage and, together with the implementation of
tunneling, encryption, authentication and access control technologies, can
establish a secure link between the mobile worker and the corporate network
environment. One of our primary competitive advantages is that our
Internet-based virtual private network customers are served by our high
performance network.
Packet Transport Services. We offer point-to-point data connection services,
which are implemented as ATM or frame relay permanent virtual circuits, for
customers requiring high bandwidth point-to-point network communications.
Dial Access. By the end of 2000, we plan to offer local dial access in over
20 U.S. markets, toll- free dial access for all other U.S. markets as well as
international dial access. By the middle of 2001, we expect to provide local
dial access in approximately 100 U.S. cities, increasing to approximately 300
U.S. cities by the end of 2001. Our dial access service will enable mobile
workers, telecommuters and small-office and home-office users to connect to
our high quality global data network. This service is targeted at those
businesses with extensive extranets designed for e-commerce services and
companies with a significant number of mobile workers who demand reliable,
high-quality dial-up services.
Internet Access Services
We offer our customers in the U.S. a broad range of Internet access
services designed to meet the varied needs of corporate customers and regional
Internet service providers. Our Internet access services range from high-speed
continuous access provided by dedicated telephone circuits to lower-cost dial-up
services. The principal features of our Internet access services are the high
performance, reliability and flexibility provided by the SAVVIS ProActiveSM
Network that is connected to our system of PrivateNAPsSM allowing our customers
to bypass the congested public Internet access points. We plan to make these
services available outside the U.S. beginning in the third quarter of 2000. The
high performance of our Internet access services has been verified by data
collected by Keynote Systems, Inc. in which we have consistently rated among the
top Internet backbone providers in terms of performance as measured by mean
download times throughout 1999.
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Dedicated Access. We offer customers a range of bandwidth options, from 128
kilobits per second to 155 Mbps on a fully dedicated or burstable basis. We
also provide all required Internet protocol addresses, primary and secondary
domain name service, newsfeed service and network time protocol.
Ethernet Service. For customers that seek a cost-effective 100% fiber optic
network technology for high-speed Internet access, we offer our 10 Mbps
Ethernet service. Our Ethernet service transmits information through a
customer's existing local area network router. This service is an
intermediate upgrade between our 1.5 Mbps service and our fractional 45 Mbps
service.
DSL Service. For commercial customers that seek cost-effective continuous
connectivity for high-speed Internet access, we offer symmetric DSL services
at speeds up to 1.5 Mbps. DSL services transmit information through a
customer's existing copper telephone lines by encoding the information in a
digital format. We currently offer DSL services in 16 U.S. cities, and we
expect to add service to approximately 12 additional cities by the end of
2000.
Wholesale Internet Access. We provide wholesale Internet access to local and
regional Internet service providers who use our network to connect their
customers to the Internet.
Internet Security Services. For companies using the Internet, protection from
internal and external threats to their corporate network is extremely
important. We offer a broad range of security services designed to provide a
customer with the ability to:
o authenticate users attempting to gain access to its network;
o prevent intruders from accessing its network;
o protect the integrity of the content on its network; and
o encrypt secured transmissions of company data through the Internet.
We evaluate and assess a customer's security needs, recommend appropriate
security services, and implement, manage, monitor and maintain these services.
We also perform security audits to find deficiencies in a customer network and
in host computers attached to that network and recommend appropriate services.
Our security services utilize the products and services of Netrex, Inc., a
well-known Internet security provider.
Colocation Services
We offer customers a secure, fault-tolerant environment in which to locate
their mission-critical content and networking hardware. We provide these
services in colocation data center facilities that are currently being upgraded
and expanded to over 250,000 square feet of space. These state-of-the-art
facilities are located directly on our network to provide high quality,
cost-effective Internet access and hosting to the web sites of our colocation
customers. We expect to complete upgrades and expansions during 2000 in Boston,
London, New York, St. Louis, Los Angeles, San Francisco, Dallas, Chicago and
Washington, D.C. By using our colocation facilities, customers enjoy a highly
secure, fault-tolerant environment and direct access to our global data network
and avoid significant capital outlays required to construct such facilities on
their own. Customers have physical and remote access to our colocation
facilities 24 hours a day, 365 days a year, to manage, monitor and maintain
their equipment, or they may engage us to provide support services. Our
colocation services are targeted at content providers, Internet-centric
businesses and application service providers.
SALES AND MARKETING
We contact potential new customers through our direct sales force and our
recently implemented lead referral program. Our direct salespeople together with
our sales engineers develop sales proposals for potential new customers. After a
sale is completed and the services are implemented, the client solutions team
assumes the management of the customer relationship, handling support issues and
selling additional services and connectivity as the customer's business grows.
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Direct Sales
Our direct sales force consisted of approximately 100 sales representatives
and sales engineers in the U.S. as of December 15, 1999. Our direct sales force
is specialized along product lines, which enables our sales representatives to
develop an expertise in a specific product area, including customer applications
and requirements. This specialization also allows us to customize our sales
compensation arrangements to the sales cycle, revenue and margin characteristics
of each product. All sales representatives take part in an extensive training
program designed to develop in-depth technical expertise so they can better
understand customers' complex networking needs and develop customized solutions.
Our sales force is divided between our Global Networking Sales Division and
our Internet Access Sales Division. We employ a distributed sales model for
global networking sales to facilitate a consultative sales approach. Because we
only recently began marketing our global data networking services, our global
data networking sales force currently consists of eight people based in six
major cities in the U.S. We intend to rapidly expand our sales force and
establish a sales presence in 14 additional cities worldwide by the end of the
first quarter of 2000. In contrast, we have a centralized sales model for our
Internet Access Sales Division. Our Internet access sales force consists of
approximately 100 representatives based in Reston, Virginia. We intend to locate
additional centralized sales teams in Europe, Asia and Latin America by the end
of 2001.
Bridge Lead Referrals
We expect to capitalize on our relationship with Bridge, a major content
provider to financial services companies, to generate sales leads in the
financial services market. As of December 15, 1999, Bridge had approximately 500
sales representatives worldwide, located in the world's key financial centers.
These sales representatives support a customer base of over 4,500 financial
services companies already connected to our network. We expect to be able to
provide these businesses with additional services in a rapid, cost-effective and
scaleable manner. In addition to Bridge, we believe that additional content
providers will be interested in establishing lead referral programs. A
relationship with SAVVIS will enable a content provider to deliver their service
in a real-time, high quality manner and provide an incremental revenue
opportunity through a lead referral commission.
Alternate Channels. In addition to relationships with content providers, we
intend to develop new distribution arrangements with Internet-related and
communications companies. Many of these companies lack our network
infrastructure or sales and technical support expertise for high value-added
data services. By entering into relationships with us, these carriers will be
able to generate additional revenues, provide a more complete service bundle and
reduce customer churn. We intend to pursue distribution opportunities with
Internet service providers, competitive local exchange carriers, DSL companies
and other communications and Internet-related companies in the U.S., Europe,
Asia and Latin America.
Client Solutions Team. Our client solutions team is responsible for
customer relationship management. The team alerts customers when their bandwidth
utilization approaches capacity and advises customers on methods to improve the
performance and security of their network using additional SAVVIS services. This
team is also able to cross-sell to existing customers additional services, such
as advising a managed data networking client on Internet and e-commerce
services.
Marketing. Our marketing programs are designed to build national and global
awareness of the SAVVIS brand name and its association with high performance,
high quality corporate data networking services and Internet services. We use
brand awareness and direct marketing programs to generate leads, accelerate the
sales process, retain existing customers and promote new products to existing
customers. Our print advertisements are placed in trade journals, newspapers and
special-interest publications. We participate in industry trade shows, such as
Networld+InterOP, IT Expo and Internet World. At the recent 1999
Networld+InterOP show, our virtual private network services were named the "Best
of Show" for wide area network services. We also use direct mail, e-newsletters,
widespread fax distributions, surveys, telemarketing, Internet marketing,
on-line and
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on-site seminars, collateral materials, advertising, welcome kits and direct
response programs to communicate with existing customers and to reach potential
new customers. Many of these marketing programs are co-funded by our suppliers.
Our marketing programs are targeted at information technology executives, as
well as senior marketing and finance managers. We closely track the impact and
effectiveness of our primary marketing programs.
Sales Force Automation. We use our proprietary sales force automation
system to manage all pre-sales communications with our prospective customers.
All distribution and tracking of sales leads occur through this system. Sales
leads are imported from data sources such as corporate web sites, telemarketing,
direct mail and national advertising campaigns, and assigned regionally to the
desktops of the appropriate sales representatives. All contact with these
prospects is documented in the sales force automation system through every step
of the sales cycle, from initial contact to contract receipt. In addition, this
system allows sales management to monitor the sales activity of their specific
sales representatives and generate sales forecasts based on that activity.
Further, our sales force automation system tracks all marketing communications
with the prospect allowing us to measure the effectiveness of various collateral
materials and marketing campaigns in an effort to maximize our marketing
dollars. Lastly, our sales people use our sales force automation system to track
and manage their personal sales prospects and to send customized packages of
sales literature, brochures and faxes directly from their computer desktops,
thereby improving sales efficiency.
CUSTOMERS
We currently provide services to approximately 800 customers. Upon
completion of the Bridge asset transfer, Bridge will enter into a network
services agreement with us and will be our largest customer. At that time, we
will connect Bridge to its over 4,500 customers, including 75 of the top 100
banks in the world and 45 of the top 50 brokerage firms in the U.S, and to its
information suppliers, allowing Bridge to deliver its content and applications.
No individual customer accounted for more than 5% of our revenues during the
nine months ended September 30, 1999. We expect that Bridge will account for a
significant percentage of our revenues during 2000. We also provide services to
many Internet service providers and Internet-centric businesses.
The following is a list of some of our largest customers based on monthly
billings for September 1999:
<TABLE>
<S> <C> <C>
Adforce, Inc. FastLane Communications, Inc. Planet Digital Network
CDM On-Line dba Primary Info Space.com Inc./Output Technologies, Inc.
Network Michigan Internet Coop Assoc., Ltd Scottsdale Securities
Charter Communications Omron Electronics WebVision, Inc.
International Pair Networks Ziplink LLC
eBay PDQ.Net, Inc
Everyones Internet, Inc. Pentele Data Inc.
</TABLE>
Our contracts with our customers are typically for one to three years in
length. The Bridge network services agreement will be for ten years. Many of our
customer contracts contain service level agreements that provide for service
credits should we fail to maintain specified levels of quality.
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CUSTOMER SERVICE
Our goal is to provide the highest level of customer service in the
industry. We believe that high quality customer service is critical to
attracting and retaining customers and to satisfying the rapidly growing data
networking requirements and Internet services needs of these customers. Our
comprehensive approach to customer service and satisfaction includes a focus on:
o providing written guarantees of service quality;
o providing services on a service only basis and a fully managed basis,
with service and equipment included, that are tailored to meet customer
needs; and
o providing effective management, monitoring and support for our customers'
data networks.
We believe our network architecture, proprietary routing policies and
industry leading service level agreements provide our customers with very high
service quality. We are able to offer our customers different levels of service
priority for their different data transmission needs over one high-quality
network. For example, e-commerce and real-time applications, such as voice, can
be assigned the highest level of quality of service, while other applications,
such as e-mail, can be assigned a lower priority of service. By assigning the
highest level of service only to mission-critical or real-time applications,
customers can lower their overall data services costs without compromising their
data networking requirements.
Customer Call Centers. Customer support personnel located in call centers
in St. Louis, Missouri, London, England and Singapore handle service inquiries
from our customers 24 hours a day, 365 days a year, and provide this service in
eight local languages. These personnel are organized in client teams and highly
trained to identify and resolve customer issues rapidly and completely. Our
customer call center support services are supplied to us by Bridge under a ten
year technical services agreement. Bridge reported to us that in September 1999
its call centers answered an average of 6,000 calls per week, maintained an
average hold time of under 15 seconds and resolved 98% of customer issues with
front-line support personnel. To track trouble tickets and customer information,
Bridge uses a proprietary management platform based on Vantive enterprise
software, a highly scalable platform for problem tracking and customer record
access and maintenance that is easily accessible by personnel at all of our
network operations centers. We use an integrated client/circuit information
database that allows our customer support personnel to quickly access a
customer's profile from any of our support centers. In our local markets we or
Bridge have available to us over 270 field technicians who are experts in
Internet protocol, Unix, NT and ISDN technology and who are generally able to
respond to customer requests within two hours.
Management, Monitoring and Maintenance. We provide our customers with
detailed monitoring, reporting and management tools that allow them to review
their usage patterns, network availability, outage events, latency and data
loss. These tools allow our customers to evaluate the performance of our service
against our service level guarantee as well as review utilization and
performance data to facilitate their network planning and design activities.
Service Level Agreements. The consistent, reliable performance of the
SAVVIS ProActiveSM Network enables us to provide effective service level
agreements to our customers. We believe that companies unable to support a
commensurate level of predictable network performance will not be able to
provide service level agreements with value to the customer or will do so at
substantial risk to their own business.
SAVVIS PROACTIVESM NETWORK INFRASTRUCTURE
Overview
The following description of the SAVVIS ProActiveSM Network gives effect to
the acquisition of Bridge's Internet protocol network which will be completed
simultaneously with the completion of this offering.
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The SAVVIS ProActiveSM Network is one of the largest managed data networks
in the world, reaching 43 countries, with facilities in 83 major cities,
including 58 international cities and 25 U.S. cities. Our network interconnects
over 6,000 buildings worldwide and is based on ATM, frame relay and Internet
protocol technologies. In addition, our network incorporates eight
PrivateNAPsSM, which will be expanded to 12 by March 2000 and which allow our
Internet traffic to bypass the congested public Internet access points.
We have designed our network to enable us to offer our customers high
speed, high quality services, as well as a range of quality of service levels
and multiple levels of redundancy. Our network is designed with:
Open System Architectures. Our network is based on ATM, frame relay and
Internet protocol technologies. These are open systems networking protocols that
are in widespread use in data communications. Internet protocol is the most
commonly used and fastest growing networking protocol in the world. By carrying
Internet protocol on our network, we generally allow our customers to connect to
their customers, suppliers and remote offices using equipment already installed
in their networks and the networks to which they connect. Additionally, by using
ATM and frame relay in our network, we enhance network utilization and quality
of service, and we are able to easily communicate with third party networks for
the delivery of traffic on and off our network without procuring special
interface technologies or devices.
Quality of Service Differentiation. Our network architecture allows us to
offer and guarantee different levels of service priority for customers'
different data transmission needs. For example, e-commerce and real-time
applications, such as voice, can be assigned the highest level of priority,
while other applications, such as e-mail, can be assigned a lower priority of
service. By offering a quality of service differentiated product, we enable
customers to select a price/performance combination that is appropriate for
their needs. As we deploy ATM devices at the customer premises in the first
quarter of 2000, customers will be able to run multiple applications, such as
Internet access, intranet and private voice, over the same equipment and local
access, thereby saving on local network transport and equipment costs.
High Reliability. We utilize multiple, redundant circuits, switches and
physical locations to substantially reduce the effects of a single point of
failure within our network. This redundancy, combined with our switching and
routing equipment, generally enables us to automatically reroute traffic when a
failure occurs, resulting in higher overall network performance and integrity.
Our backbone switches also incorporate high levels of equipment-specific
redundancies, resulting in higher levels of availability than those found in
basic routing platforms. We also employ uninterruptable power supplies and/or
electric generator back-ups at each switching facility, designed to limit the
impact of local power outages on our network.
Global Network Components
The components of our network include the following:
Switching Facilities. There are over 175 Lucent ATM and frame relay
switches, providing a highly redundant switch backbone deployed throughout the
SAVVIS ProActiveSM Network. We have over 300 backbone routers installed and
there are approximately 10,000 Nortel routers located in office buildings and on
Bridge's customers' premises. Our switches are located in secure facilities,
which provide highly reliable, direct access to high-speed telecommunications
infrastructure. In each switching facility, we rent space, install networking
equipment, including ATM or frame relay switches, routers and high-speed analog
and digital modems.
Backbone Capacity. Our network is designed with a highly redundant backbone
infrastructure, including diversely routed long haul and local access
connections from multiple carriers. We interconnect our switching facilities
through high speed lines leased from a variety of carriers, including Qwest
Communications International, Inc., MCI Worldcom, Inc. and Broadwing, Inc.,
formerly known as IXC Communications, Inc. Our leased line connections range in
capacity from 45 Mbps and 155 Mbps in the U.S. and 45 Mbps internationally. To
enhance our redundancy, we lease
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ATM service from Sprint Corporation. This service is delivered using the highest
quality of service mode available and our service connections range in capacity
from 45 Mbps through 620 Mbps. The combination of our leased lines and Sprint
ATM service makes our transmission backbone highly redundant so that at least
two diverse paths exist between all of our switching facilities. The "fault
tolerant" configuration of our network allows data packets to travel on many
alternate paths to connect points on our network.
PrivateNAPsSM. For our customers' Internet traffic, we have built private
network access points, or PrivateNAPsSM, where we connect to the Internet
backbones operated by Sprint Corporation, Cable & Wireless plc and UUNET, a MCI
Worldcom company. At each of our PrivateNAPsSM, we are connected to these
carriers through transit agreements that allow us to connect to their Internet
networks for a monthly fee. Since we are a paying customer of each of these
Internet backbone providers, we believe we realize better response times,
installation intervals, service levels and routing flexibility than Internet
service providers that rely solely on free public or private peering
arrangements. We currently operate eight PrivateNAPsSM in the U.S. and plan to
add four additional PrivateNAPsSM in early 2000. In addition, to enhance our
carrier redundancy, at each of our PrivateNAPsSM, we connect to other Internet
backbones through peering arrangements where each party to the peering
arrangement agrees to carry the other party's traffic for free. We have peering
arrangements in place with AboveNet Communications, Inc., DIGEX, Incorporated,
Exodus Communications, Inc., Frontier GlobalCenter, Level 3 Communications, LLC,
PSINet Inc. and Williams Communications Group, Inc. These peering arrangements
allow for settlement-free, direct connections between networks, where local
access charges are generally split evenly between the applicable parties.
Smaller Internet service providers typically connect to our network through
transit agreements that allow them to connect to our network for a fee.
Our PrivateNAPSM architecture combined with our proprietary routing
policies enables us to route customer traffic directly onto the Internet
backbone of its destination for a substantial portion of global Internet
addresses. This network architecture allows our customers' Internet traffic to
generally bypass congested public Internet network access points, thereby
reducing data loss and latency and improving reliability and performance. In
addition, customers directly connected to the same PrivateNAPSM get one-hop
access, meaning their data pass through only one router, when communicating with
each other, and two customers connected to different PrivateNAPsSM enjoy two-hop
access, meaning their data pass through only two routers, when communicating
with each other, in both cases completely bypassing the public Internet.
Dial Access Platforms. We are currently deploying 25 Nortel dial access
platforms in over 20 cities in the U.S., which we expect to have completed by
the end of 2000. By mid-2001, we expect to have deployed dial access in
approximately 100 U.S. cities, increasing to approximately 300 U.S. cities by
the end of 2001. Our dial coverage will be supplemented by toll free dial access
where we do not have local dial access, and by the end of 2001 the platforms are
expected to contain over 20,000 ports.
Colocation. We are in the process of upgrading and expanding our Internet
colocation data center facilities to over 250,000 square feet of space. We
expect to complete the upgrade and expansion during 2000 in Boston, London, New
York, St. Louis, Los Angeles, San Francisco, Dallas, Chicago and Washington,
D.C. All of these facilities will be served by multiple 2.5 gigabits per second
connections for local access. Development is underway to elevate these
facilities to state-of-the-art levels with high availability, mission-critical
environments, including uninterruptable power supplies, back-up generators, fire
suppression, separate cooling zones and seismically braced racks. These
facilities will be accessible 24 hours a day, 365 days a year, both locally and
remotely, and will have high levels of physical security. These facilities
include two fully redundant colocation facilities in St. Louis, Missouri, each
of which will contain approximately 90,000 square feet, approximately 60,000 of
which will be subleased to Bridge.
Network Operations Centers
We have a global network operations center in St. Louis, Missouri, which
operates 24 hours a day, 365 days a year, and is staffed by over 20 skilled
technicians. We also have regional network operations centers in London and
Singapore. These regional centers operate for the 12 hours per day
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of peak business activity in their respective regions, ensuring 24-hour backup
for the St. Louis facility. From these network operations centers, we remotely
monitor the components of the SAVVIS ProActiveSM Network, including our
PrivateNAPsSM, and perform network diagnostics and equipment surveillance. The
network operations centers use sophisticated, proprietary network management
platforms based on the Lucent NavisCore, HP OpenView, and Nortel Optivity
programs to monitor and manage our switching facilities and our routers.
TECHNOLOGY OVERVIEW
Private networks. Private networks typically comprise a number of private,
leased lines that interconnect multiple corporate locations. The advantages of
private lines include quality, since capacity is reserved for the exclusive use
of the network owner, and security, since the owner's data transmissions are not
commingled with those of other customers. Private line networks have been most
popular in the U.S., where capacity prices are lowest. While private lines are
typically secure and reliable, they do not use network capacity efficiently and
are not flexible or scalable as changes in network topology are implemented.
Shared networks. Until recently, prices for long-haul telecommunications
capacity outside of the U.S., particularly international capacity, were
relatively expensive. Since the advent of data networking, only users with
extremely high capacity requirements invested in private networks in these
locations. Most other users employed shared networking technologies, whereby
multiple corporate locations would be interconnected with the data network of a
major telecommunications carrier or value-added network service provider for
carriage to the appropriate destination.
X.25 was an early open shared network protocol that was designed to support
mission-critical communications over analog networks. X.25 has been extremely
popular outside of the U.S., where until recently private line networks have
remained expensive, and in developing markets where the telecommunications
infrastructure is sometimes unreliable. X.25 contemplates extensive error
detection and data recovery processes, which slows the effective rate of
transmission.
Today, ATM, frame relay and Internet protocol are driving the migration of
traffic from private line networks to shared networks and from older open
protocols such as X.25 to newer architectures.
Frame Relay. Frame relay evolved from X.25 networks and today is widely
used for applications such as local area network-to-local area network
communications. Unlike X.25, frame relay does not perform any complex error
detection or error recovery of data. As a result, it is a simpler and faster
technology. Frame relay circuits are effective to create a network of
interconnected sites because each site needs only one link into the frame relay
network to communicate with all other sites. Frame relay is less costly than
point-to-point private networks, and its software-defined "virtual circuits"
make it easier to alter network topology as connectivity requirements change.
One limitation of the frame relay protocol is its application for real-time
services. Frame relay packets are variable in length, and as large data files
transit the network they can cause delays at key aggregation and switching
points, often causing other traffic to be delayed. These delays can materially
degrade the quality of real-time services such as voice and video.
ATM. The ATM protocol was specifically designed to support the transmission
of all types of content, including data, video and voice, over a single network.
ATM is unique in its ability to prioritize cells to ensure that real-time data
takes priority over less time-sensitive material when transiting the network.
This enables service providers to offer service guarantees with a greater degree
of confidence and facilitates the introduction of real-time services that are
difficult under other protocols. Additionally, ATM data cells are small and
fixed in size, facilitating high speed switching at speeds up to 2.5 billion
bits per second. One limitation of ATM is that the benefits created by the
small, fixed nature of ATM cells also create incremental traffic on the network.
Each cell requires its own identification and addressing information, which is
repeated in each of many individual ATM cells that comprise a given data
transmission. The replication of this "header" information generates additional
overhead for the network, requiring the network operator to provision additional
transmission capacity.
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Internet Protocol. Internet protocol is a simple, highly scalable protocol
that is a core element of the architecture of the Internet and can be used
across most network technologies in use today. Internet protocol has also become
the communications protocol of choice for the desktop and the local area
network, thus data networking over Internet protocol requires no protocol
conversion, reducing overhead and improving performance. The protocol does not
distinguish among classes of traffic, which limits its ability to deliver
real-time services.
Our Network. We have built the SAVVIS ProActiveSM Network to take advantage
of the rapid growth of Internet protocol in corporate networks, to offer
customers the ability to run multiple applications on a single network and to
allow customers to choose the quality of service level which best meets their
needs. By building our network to run Internet protocol over ATM we allow our
customers to overcome the limitations of Internet protocol and designate the
level of priority to be accorded to their traffic.
COMPETITION
The markets that we serve are intensely competitive. In addition, we expect
to face significant additional competition in the future from existing
competitors and new market entrants. Many of our competitors have greater
financial, technical and marketing resources, larger customer bases, greater
name recognition and more established relationships in the industries that we
operate in than we do.
We believe that a highly reliable network infrastructure, a broad range of
quality products and services, a knowledgeable sales force and the quality of
customer support are the primary competitive factors in our targeted markets and
that price is generally secondary to these factors. We believe that we presently
are well positioned to compete favorably with respect to most of these factors.
Our current and potential competitors in our targeted markets include:
Data Networking Companies. Several data networking companies such as Equant
N.V., Infonet Services Corporation, Concert Management Services Inc. and Global
One offer data networking services to business customers worldwide. These
services include ATM and frame relay, private line, Internet access and network
outsourcing. These companies have significant experience in offering tailored
services and market their expertise in providing these services and related
technology. There are also a number of new entrants, such as Digital Island
Inc., that are targeting specific niches to deliver customers' data traffic
worldwide.
Internet Service Providers. Our current and potential competitors in the
market include Internet service providers with a significant regional, national
or global presence targeting business customers, such as Apex Global Information
Services, Inc., AT&T Corp., Cable & Wireless plc, GTE Internetworking, ICG
Communications, Inc., Intermedia Communications Inc., PSINet Inc., Sprint
Corporation, UUNET, a MCI Worldcom company, Concentric Network Corporation and
Verio Inc. Many of these companies are developing Internet-based virtual private
network services that attempt to replicate some or all of the functionality of
our managed data networking services.
Telecommunications Carriers. Many large carriers, including AT&T Corp.,
British Telecommunications plc, Cable & Wireless plc, MCI WorldCom, Inc.,
Deutsche Telekom AG and Sprint Corporation, offer data networking and Internet
access services. They compete with us by bundling various services such as local
and long distance voice, data transmission and video services to their business
customers. We believe that there is a move toward horizontal integration by
telecommunications companies through acquisitions of or joint ventures with
Internet service providers to meet the Internet access and data networking
requirements of business customers. Accordingly, we expect to experience
increased competition from these telecommunications carriers.
Other Competitors. Because we offer a broad range of services, we
encounter competition from numerous businesses which provide one or more
similar services. For example, we compete with companies such as Exodus
Communications, Inc., Qwest Communications International Inc., Global Crossing
Ltd., DIGEX, Incorporated and Level 3 Communications, Inc. in the colocation
facilities market.
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BRIDGE RELATIONSHIP
Upon completion of this offering, we will acquire Bridge's Internet
protocol network and enter into a number of agreements with Bridge.
Master Establishment and Transition Agreement. The master establishment and
transition agreement transfers Bridge's global Internet protocol network to us
for $150 million. Under this agreement, a Bridge subsidiary that owns all of
Bridge's U.S. network assets will transfer them to one of our subsidiaries. The
transfers of non-U.S. assets will be effected under local transfer agreements to
be entered into by the appropriate Bridge and SAVVIS subsidiaries.
The transfer of several portions of the Bridge network requires contractual
consents from certain of Bridge's counterparties or regulatory approvals in
certain jurisdictions which, as of the closing date, may not yet be obtained.
Bridge will continue to own and operate those portions of the network while we
continue to seek the appropriate consents. Under the master establishment and
transition agreement, once the requisite consents and approvals have been
acquired in each jurisdiction, we will have an an obligation to purchase the
assets from Bridge in that jurisdiction. In jurisdictions where we expect the
purchase to occur within one year of the closing date of the Bridge asset
transfer, Bridge will operate the facilities on our behalf and we will reimburse
Bridge for all costs directly associated with the use, maintenance and operation
of those assets and we will be paid for the use of those assets by Bridge under
the network services agreement. Our obligation to acquire these assets expires
upon the later of ten years from the closing date or expiration of the network
services agreement.
Under the master establishment and transition agreement, Bridge will be
responsible for all liabilities associated with its Internet protocol network
prior to the transfer to us, and we will be responsible for liabilities after
the transfer. Bridge will make several limited representations in the agreement
relating to corporate authority, title and existence of the assets being
transferred, as well as that the transfer is of the entire network, other than
the assets that could not be transferred. The agreement will further provide
that we will indemnify Bridge for some of the representations and warranties and
with respect to our responsibility for our assumed liabilities.
Network Services Agreement. Under the network services agreement, Bridge
will agree to use our network for the collection and distribution of the
financial information provided by Bridge to its customers and for Bridge's
internal managed data network needs for ten years from the closing date. The
agreement may be extended by Bridge for an additional five-year period by giving
us notice one year before the expiration of the initial ten-year term. Upon
termination of the agreement, we will be required to continue to provide network
services to Bridge for an additional five years, at rates in effect at the
termination date.
The purchase will substantially increase our depreciation and amortization.
For the first year of the agreement, our fees will be based upon the actual cash
cost to Bridge of operating the network as configured on the date we acquired
it, the original network. Our fees for additional services provided during the
first year beyond the original network will be based on the estimated cost to
provide the services. After the first year of the agreement the prices for
services provided over our network will be mutually agreed upon or determined by
binding arbitration. However, Bridge has agreed that:
(1) the amount paid to us under the agreement during the second year will
not be less than 110% of the rates and charges as determined for the
first year of the agreement;
(2) the amount paid to us under the agreement for the third year of the
agreement will not be less than 120% of the rates and charges as
determined for the first year of the agreement;
(3) the amount paid to us under the agreement for the fourth, fifth and
sixth years will not be less than 80% of the total amount paid by Bridge
and its subsidiaries for Internet protocol data transport services; and
(4) the amount paid to us under the agreement for the seventh through tenth
years will not be less than 60% of the total amount paid by Bridge and
its subsidiaries for Internet protocol data transport services.
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In addition we will charge Bridge for additional bandwidth and additional
customers at a rate established on an annual basis. Additions to the existing
network will be charged at a rate established on an annual basis. If we and
Bridge cannot agree on this annual rate, and Bridge still desires for us to
provide such service, then we will submit prices to an independent arbitrator
who will assign the price quoted by the party that in the arbitrator's opinion
came closest to quoting a fair market price. In those instances where the
addition is outside of the existing network, we will negotiate the terms of the
expansion with Bridge on a case-by-case basis, including any additional charges
to be paid to us by Bridge to defray the cost of such expansion. If we cannot
reach agreement with Bridge, and Bridge still desires for us to provide such
service, then we will submit prices to an independent arbitrator who will assign
the price quoted by the party that in the arbitrator's opinion came closest to
quoting a fair market price.
We will also agree that the network will perform in accordance with certain
quality of service standards within a period of twelve months from the date of
transfer of the network. If those standards are not met with respect to a
customer site in any month, Bridge will be entitled to receive, upon request, a
credit for one month's charges for that site. The Bridge network services
agreement will contain quality of service levels and will provide for credits if
the levels are not maintained. In addition, a material breach of the service
levels would allow Bridge to terminate the agreement and/or collect up to $50
million as liquidated damages not more than once in any 36-month period.
The agreement will provide for the creation of a strategic advisory
committee comprised of three of our senior executives and three from Bridge,
with an additional outside consultant to be appointed by both parties. The
mission of the committee will be to review the performance of the networks, to
serve as a forum for the consideration and discussion of issues related to the
network, and to discuss issues related to the future development of the SAVVIS
ProActiveSM Network in the context of the relationship of SAVVIS and Bridge. We
will agree to use our commercially reasonable best efforts to comply with the
recommendations of the committee.
Bridge will agree that during the term of the network services agreement
and for the next five years after the termination of this agreement. Bridge will
not compete with us anywhere in the world in providing packet-data transport
network services, other than investments in a competitor not to exceed 10% of
the outstanding capital stock of that competitor.
Local Network Access Agreement. In most jurisdictions outside the United
States, the charges that we pay for the local circuit between our distribution
frame, which usually is located in a central office of the local
telecommunications provider, and the Bridge customer premises, will be charged
back to Bridge at a rate intended to recover our costs.
Equipment Colocation Permit. Some network assets to be purchased are
located in premises currently leased by Bridge. Subject to the receipt of any
required landlord consents, Bridge will agree to allow us to keep our equipment
in those locations, or colocate this equipment in these premises, for a period
of time coterminous with the underlying rights which Bridge has to such
facilities, which range from one to five years. Our costs for this space will be
a total of $_____ per year.
Technical Services Agreement. Pursuant to the technical services agreement,
Bridge will provide us with services, including help desk support, installation,
maintenance and repair of equipment, customer related services such as
processing service orders and provisioning interconnection. In addition, Bridge
will agree to manage the colocation of third-party equipment in our facilities,
which includes facilities management, such as power, heating, air conditioning,
lighting and other utilities, the provision of racks for equipment installation
with "smart card" access, and installation, monitoring and maintenance of
equipment. Bridge also will manage our network operation centers. This agreement
will remain in effect so long as the network services agreement is in effect.
Rates for the services provided under this agreement are fixed for the first
year. After the first year, we will negotiate new rates and if we and Bridge
cannot agree on new rates, then we will submit prices to an independent
arbitrator. Bridge is required to meet quality of service standards set forth in
the agreement, and, if Bridge fails to meet the standards, we will be entitled
to a refund of all amounts paid for the non-complying service plus the costs we
incurred to have that service provided by a third party.
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Administrative Services Agreement. For a period of three years, and from
then on from year to year until Bridge or we terminate the agreement, Bridge
will provide us with various administrative services, including payroll and
accounting functions, benefit management and the provision of office space. We
have the right to take over one or more of these functions before the
termination of the agreement. Bridge will charge us for these services in a
manner that is intended to permit Bridge to recover the costs of providing the
services.
Promissory Note. We will pay for the Bridge network assets partially with a
three-year promissory note. The promissory note will bear interest, payable
semi-annually, at an annual rate of 10%. Principal will be payable at maturity.
REGULATORY MATTERS
As with any provider of global data networking and Internet access
services, we face regulatory and market access barriers in various countries
resulting from restrictive laws, policies and licensing requirements. Our six
major markets consist of the United States, the United Kingdom, Germany, France,
Italy and Japan. Data networking and Internet access services are now open to
competition in all of these foreign markets, but a license is required. We
believe that we are licensed to provide data networking and Internet access
services as an independent operator under the applicable telecommunications
regulations in the United Kingdom, Germany and France. We have made application
for a license in Italy to offer services to Bridge and third parties. In Japan,
we are currently authorized to provide data networking services only to Bridge
and are in the process of making application for the appropriate license to
offer services to third parties.
In most other countries that we believe represent significant revenue
potential, our data networking and Internet access services are now open to
competition, although in most cases a license is required. In some of these
countries, including Australia, Denmark, Finland, Hong Kong, the Netherlands and
Norway, we are authorized to provide data networking and Internet access
services to Bridge and third parties. However, in the remainder of these
countries, including Brazil, Canada, Chile, India, Indonesia and the
Philippines, we are authorized to offer data networking services only to Bridge,
or to offer only data networking services, but not Internet access services, to
Bridge, and third parties. Our business plan does not contemplate selling
significant services outside of the U.S., except to Bridge, in the near term.
Therefore, we do not believe that our inability to offer services to third
parties in these countries is significant.
In addition, we face regulatory and market access barriers in countries in
which we do not operate but in which we have an obligation to purchase the
Bridge Internet protocol network assets that we have not already acquired in the
Bridge asset transfer. These Bridge network assets generally will not be
transferred to us as part of the Bridge asset transfer because of
telecommunications licensing or other regulatory requirements.
We are in the process of seeking regulatory approvals in some countries to
offer services to Bridge and third parties, including Greece, Hungary, Italy,
Malaysia, Taiwan, Thailand, Peru, Mexico and Venezuela. We cannot assure you
that we will obtain any of these approvals.
World Trade Organization Agreement and its Implications
On February 15, 1997, 69 countries at the World Trade Organization reached
an agreement to liberalize market access and introduce national treatment in
basic telecommunications services. Since then, two of the 69 participants have
submitted improved basic telecommunications schedules and three World Trade
Organization members who did not participate in the negotiations have submitted
commitments, bringing the total number of governments with basic
telecommunications schedules to 72. In February 1998, the results of the World
Trade Organization negotiations on market access for basic telecommunications
services formally entered into force and became binding on the signatory
countries.
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Despite the World Trade Organization agreement, regulatory obstacles
continue to exist in a number of signatory countries. First, some signatory
countries made only limited commitments in terms of the services that they were
willing to liberalize and the timeframe in which they were willing to do so.
Second, some less developed signatory countries are not well prepared for
competition or for effectively regulating a liberalized market; gaining the
requisite experience and expertise is likely to be a long and difficult process.
Finally, even in liberalized countries, there remains considerable
"post-liberalization red tape," such as complicated licensing rules, certain
foreign ownership limits, high fees and undeveloped competition and
interconnection safeguards.
Corporate Presence. In a number of jurisdictions, we are permitted to
provide data networking or Internet access services to local customers only
after first establishing a corporate presence, by way of either the
incorporation of a subsidiary or the registration of a branch or representative
office. We have or will establish such a local presence in each of the
jurisdictions where such a presence is legally required.
Regulatory Analysis by Service Type
Data Networking Services. The core of our data networking services business
is providing managed data networking services to corporate customers. The
managed data networking services that we provide are generally characterized as
data transmission services or value added services for licensing purposes. We
are authorized by law or by license (either individual license or a general
authorization obtainable by simple notification or declaration by an automatic
"class" license) to provide these services in the foreign countries in which we
expect to generate significant revenue from data networking services. In the
European Union member countries, such services may be provided upon, the
satisfaction of a simple registration, notification or authorization procedure.
Internet Access Services. The Internet access services that we provide in
the U.S. do not require any authorization. The Internet access services that we
offer outside of the U.S. generally do not require any authorization beyond
those required for managed data networking services and value added services.
However, because the regulation of Internet access is ill-defined or in flux in
some countries, there is a risk that customers are using our network to access
the Internet in countries that may prohibit, or wish to prohibit, such access.
We may limit this risk by discontinuing such access if measures are taken or
threatened by the pertinent authorities to restrict the use of our network for
Internet access.
Substantive Regulation in Key Markets
The regulatory regimes applicable to the United States, the United Kingdom,
Germany, France, Italy and Japan, which will be our six major markets following
the Bridge asset transfer, as well as that of the European Union, are summarized
below.
United States. The regulatory framework governing the provision of
telecommunications services in the United States permits us to offer all of our
planned data networking services without significant legal constraints. We
provide these services on a resale basis or a facilities basis. To the extent
that a future service requires prior authorization, either by the Federal
Communications Commission, or FCC, or by a state public utility commission, we
believe there is no significant risk that such an application would be denied or
would face processing delays that would have a material adverse effect on us.
Nevertheless, services offered over the Internet or using Internet protocol
may present distinct regulatory issues, as is also the case in the European
Union. The regulatory classification and treatment of some of these services has
not been resolved authoritatively in the United States, and it is possible that
certain Internet-related services will be subject to prior authorization and to
as yet undefined terms and conditions under which such authorizations may be
granted.
The provision of basic telecommunications services on a common carrier
basis is subject to regulation in the United States. An entity that provides
such services on a common carrier basis is classified as a telecommunications
carrier. Interstate and international common carrier services
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provided by a telecommunications carrier are subject to the FCC's jurisdiction
under Title II of the Communications Act. Intrastate telecommunications services
are subject to regulation by the relevant state Public Utility Commission.
We believe that the products and services we offer are not subject to
regulation, but there is some risk that the FCC or a state commission could
determine that our products and services should require specific authorization
or other regulations. If that were to be the case, these regulatory requirements
could include prior authorization requirements, tariffing requirements and the
payment of contributions to federal and state-created subsidy mechanisms
applicable to providers of telecommunications services. Some of these
contributions would be required whether or not we would be subject to
authorization or tariff requirements.
There also is some uncertainty about the regulatory status of voice
services provided on data networks. If we were to offer voice services in the
future, there is some risk that those services could be subject to regulation
and that those services could be treated similarly to voice services provided
over conventional circuit-switched network facilities for purposes of making
payments to local telephone companies for origination and termination of calls
and for other purposes.
European Union. In the last ten years, the European Union has established a
comprehensive and flexible regulatory system, culminating in the full
liberalization of telecommunication networks and services effective on January
1, 1998. By that date, 10 European Union member countries were required to adopt
a fully liberalized telecommunications regime. These countries are Austria,
Belgium, Denmark, Finland, France, Germany, Italy, Netherlands, Sweden and the
United Kingdom. The remaining European Union member countries were allowed to
delay full liberalization of their telecommunications regime until December 1,
1998, in the case of Spain, and January 1, 2000, in the case of Luxembourg,
Ireland, Portugal and Greece. Currently, only Greece and Portugal do not have a
fully liberalized telecommunications regime.
The process of opening up the telecommunications markets in the European
Union was achieved through European Union legislation called directives.
Directives are addressed to and binding on European Union member countries and
require implementation into national law. There are two types of European Union
Directives relating to telecommunications: first, directives adopted by the
European Commission aimed at liberalizing European Union markets and, second,
directives adopted by the European Council aimed at ensuring that a minimum set
of harmonized rules, to ensure fair competition, applies throughout the European
Union. All 15 European Union member countries were obligated to incorporate the
principles contained in these directives into their respective domestic legal
frameworks. However, the impact of the European Union directives has been
affected in some cases by late or inadequate implementation, as well as the
irregular enforcement by the domestic regulatory authorities of some European
Union member states.
United Kingdom. The Telecommunications Act of 1984 provides the regulatory
framework for the provision of telecommunications services in the United
Kingdom. The authorization regime established by this act is largely
infrastructure based, meaning that "systems" are licensed, with licenses for the
provision of specific services being the exception. This authorization regime
also is based on licenses, rather than regulations or other generally applicable
instruments. There are two broad types of licenses, individual and class.
Finally, with minor exceptions, regulatory treatment under this act does not
hinge on whether the license applies to data or voice.
We provide our managed data networking services and value added services on
an international basis. This license authorizes the provision of
telecommunications of any description, other than international switched voice,
broadcasting and conditional access services. This license allows the connection
of the licensee's telecommunications system to essentially any other licensed
system, and allows the commercial supply of services to third parties from up to
20 premises. Internet access services are not subject to additional
service-specific regulation.
Germany. The legal framework for the deregulation in the
telecommunications sector in Germany was transformed by the Telecommunications
Act of 1996, which became effective on August 1, 1996, and its implementing
ordinances adopted since then. This act has liberalized most
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<PAGE>
telecommunications services, subject to a licensing regime that is fundamentally
in conformity with European Community law. However, some telecommunications
services, such as asynchronous DSL, are not liberalized. Nevertheless, the
managed data networking services and value added services that we offer can be
provided in Germany upon notifying the regulatory authorities, which we have
done.
France. The legal framework for regulation in the telecommunications sector
in France was transformed by the Telecommunications Act of 1996, which became
effective on July 28, 1996, and subsequent decrees on interconnection, universal
service, numbering, licensing and rights-of-way. This act has liberalized most
telecommunications services, subject to a licensing regime that is in conformity
with European Community law. The data networking services we provide, whether
managed data networking services or Internet access services, currently do not
require any form of authorization.
Italy. Pursuant to law No. 103/1995 and subsequent decrees, the provision
of telecommunications services in Italy is subject to the granting of two
specific authorizations from the Ministry of Communications. One authorization
relates to provision of telecommunications services through direct access to the
public network, including Internet access services, and one authorization
relates to provision of packet- and circuit-switched data services or simple
resale of capacity, including data transmission. For the provision of
telecommunications services through switched access to the public network, a
notice must be filed with the Ministry of Communication. Voice telephony and
telecommunications infrastructures are subject to an individual license. We are
in the process of filing the two requests for authorization.
Japan. The legal framework for regulation in the telecommunications sector
in Japan is the Telecommunications Business Law. This law requires a special
type 2 license if a company makes its international communication facility,
including privately leased international lines, available to any third party for
the purpose of telecommunication by that third party. In this context, the term
"telecommunication" encompasses the act of data transmission. Accordingly, if a
company provides its customers access to an overseas database through its leased
lines, it will be required to obtain a special type 2 license. However, if a
company were to replicate the database in Japan and permit access to the
database from within the country, the Telecommunications Business Act would not
apply, even if all the information were transmitted directly to the database
from an overseas parent company or subsidiary. Under the Telecommunications
Business Act, information transfers exclusively between a parent company and its
subsidiary are exempt from licensing. Moreover, if a company provides Internet
access services directly or indirectly through the local Internet access
providers that hold a type 1 license or a special type 2 license, it will only
be required to obtain a general type 2 license. We are in the process of
applying for a special type 2 license.
Regulatory assessment of other markets
Europe (excluding European Union member countries). Telecommunications
services are liberalized in varying degrees in European countries that are not
European Union member countries. As a matter of practice, Switzerland and Norway
conform their regulatory frameworks to the European Union model. By contrast, in
Hungary, upon filing the necessary notification, a foreign owned subsidiary may
provide limited data networking services to a defined group and, upon receipt of
necessary licenses, may provide Internet access services. In Poland, however,
minimum local ownership requirements limit greatly the extent to which data
networking or Internet access services may be provided.
Asia (excluding Japan). Regulatory regimes vary greatly in character
throughout Asia. At the liberalized end of the range, countries such as
Australia and New Zealand have liberalized policies that require no licenses to
provide data networking and Internet access services. Other countries, such as
Taiwan, are open to competition, but require service providers to comply with
extensive licensing procedures. At the more restrictive end, countries such as
Indonesia and India require some minimum level of domestic ownership in order to
provide data networking and Internet access services to persons other than
Bridge.
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INTELLECTUAL PROPERTY
We do not own any patents or registered trademarks or hold any material
licenses, franchises or concessions. We enter into confidentiality and invention
assignment agreements with our employees and consultants and control access to
and distribution of our proprietary information. Despite our efforts to protect
our proprietary rights, departing employees and other unauthorized parties may
attempt to copy or otherwise obtain and use our products and technology.
Monitoring unauthorized use of our products and technology is difficult, and we
cannot be certain that the steps we have taken will prevent misappropriation of
our technology, particularly in foreign countries where the laws may not protect
our proprietary rights as fully as in the United States.
EMPLOYEES
As of November 30, 1999, we employed 209 full-time persons, 59 of whom were
engaged in engineering, operations and customer service, 121 in sales and
marketing, and 29 in finance and administration. None of our employees is
represented by a labor union, and we have not experienced any work stoppages to
date. We consider our employee relations to be good.
FACILITIES
Our executive offices are located in Reston, Virginia and consist of
approximately 10,500 square feet that are leased under an agreement that expires
in 2004. We lease facilities for our sales offices and network equipment in a
number of metropolitan areas and specific cities. We also lease approximately
10,000 square feet from Bridge in St. Louis, Missouri. We are negotiating a ten
and a half year lease for an 80,000 square foot facility in Herndon, Virginia to
house our executive management, sales and marketing personnel and our
Washington, D.C. colocation data center facility. We believe that our existing
facilities, including the additional space, are adequate for our current needs
and that suitable additional or alternative space will be available in the
future on commercially reasonable terms as needed.
LEGAL PROCEEDINGS
From time to time, we may be involved in litigation relating to claims
arising out of our ordinary course of business. We are not currently involved in
any material legal proceedings.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table shows the names and ages of our directors, executive
officers and significant employees and the positions they hold with our company.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------- ----- ------------------------------------------
<S> <C> <C>
Robert A. McCormick ........... 34 President and Chief Executive Officer and
Chairman of the Board
Richard Bubenik ............... 38 Executive Vice President and Chief
Technical Officer
David J. Frear ................ 43 Executive Vice President, Chief Financial
Officer and Director
James D. Mori ................. 44 Executive Vice President and Chief
Operating Officer
Clyde A. Heintzelman .......... 61 Director
Thomas E. McInerney ........... 58 Director
Patrick J. Welsh .............. 56 Director
Thomas M. Wendel .............. 63 Director
Steven M. Gallant ............. 40 Vice President, General Counsel and
Secretary
</TABLE>
ROBERT A. MCCORMICK has served as Chairman of our board of directors since
April 1999. He has also served as our President and Chief Executive Officer
since November 1999. Mr. McCormick served as Executive Vice President and Chief
Technical Officer of Bridge from January 1997 to December 1999, and held
various engineering, design and development positions at Bridge from 1988 to
January 1997. Mr. McCormick attended the University of Colorado at Boulder.
RICHARD BUBENIK joined us in December 1996 and has served as our Executive
Vice President and Chief Technical Officer since July 1999. Dr. Bubenik served
as our Assistant Vice President -- Engineering from December 1996 to September
1997, Vice President -- Engineering from October 1997 to April 1999 and Senior
Vice President Network Engineering from April 1999 to July 1999. From May 1993
to December 1996, Dr. Bubenik was a Software Development Manager for Ascom
Nexion, a network switch/router equipment supplier. Dr. Bubenik holds a Ph.D.
in Computer Science from Rice University, M.S. and B.S. degrees in Computer
Science from Washington University and a B.S. degree in Electrical Engineering
from Washington University.
DAVID J. FREAR has served as our Executive Vice President and Chief
Financial Officer since July 1999, and as a director of our company since
October 1999. Mr. Frear was an independent consultant in the telecommunications
industry from August 1998 until June 1999. From October 1993 to July 1998, Mr.
Frear was Senior Vice President and Chief Financial Officer of Orion Network
Systems Inc., a Nasdaq listed international satellite communications company
that was acquired by Loral Space & Communications in March 1998. Mr. Frear was
Chief Financial Officer of Millicom Incorporated, a Nasdaq listed international
cellular paging and cable television company, from 1990 to 1993. He previously
was an investment banker at Bear, Stearns & Co., Inc. and Credit Suisse. Mr.
Frear received his C.P.A. in 1979 and received an M.B.A. degree from the
University of Michigan.
JAMES D. MORI has served as our Executive Vice President and Chief
Operating Officer since October 1999. Prior to joining us, Mr. Mori was
employed by Sprint Corporation as National Account Manager (from April 1987 to
December 1989), Branch Manager (from January 1990 to December 1991), Regional
Sales Director (from January 1992 to March 1996), Vice President -- Sales (from
March 1996 to February 1997) and Area Director (from February 1997 to October
1999). From January 1980 to March 1987, Mr. Mori served as National Account
Manager of Digital Equipment Corporation, Southwestern Bell and AT&T
Information Systems. Mr. Mori received a B.S. in Business Administration from
the University of Missouri.
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CLYDE A. HEINTZELMAN has served as a director of our company since December
1998. Mr. Heintzelman has served as the President of Net2000 Communications,
Inc., a provider of broadband business telecommunications services, since
November 1999. From December 1998 to November 1999, Mr. Heintzelman served as
our President and Chief Executive Officer and from May 1995 to December 1998, he
served as Chief Operating Officer and President of DIGEX Incorporated, a
national Internet services provider that was acquired by Intermedia
Communications, Inc. in July 1996. From January 1995 to April 1995, he was an
independent consultant and provided services primarily to Hekimian Laboratories,
Inc., a developer of data network testing capabilities. In January 1992, he
participated in founding CSI, a company focused on building hardware and
software products for switched wide area networks using ISDN technology, and
from January 1992 to December 1994, he served as Vice President -- Sales &
Marketing of CSI. Mr. Heintzelman serves as a director of Optelecom, Inc., a
Nasdaq listed company that develops, manufactures and sells fiber optic
communications products and laser systems, Net2000 Communications, and Tata
Consultancy Services, a software and services company. Mr. Heintzelman received
a B.A. in Marketing from the University of Delaware.
THOMAS E. MCINERNEY has served as a director of our company since October
1999. Mr. McInerney has served as a general partner of Welsh Carson, a
principal stockholder of our company, and other associated partnerships, since
1987. Prior to joining Welsh Carson, Mr. McInerney was President and Chief
Executive Officer of Dama Telecommunications Corporation, a voice and data
communications services company which he co-founded in 1982. Mr. McInerney has
also been President of the Brokerage Services Division and later Group Vice
President -- Financial Services of ADP, with responsibility for the ADP
divisions that serve the securities, commodities, bank, thrift and electronic
funds transfer industries. He has also held positions with the American Stock
Exchange, Citibank and American Airlines. Mr. McInerney serves as a director of
Mede America Corporation, The BISYS Group, Inc., Centennial Cellular Corp., The
Cerplex Group, Inc. and Spectra Site Holdings, Inc. He is also a director of
Bridge and several other private companies. Mr. McInerney received a B.A. from
St. Johns University, and attended New York University Graduate School of
Business Administration.
PATRICK J. WELSH has served as a director of our company since October
1999. Mr. Welsh was a co-founder of Welsh Carson, a principal stockholder of
our company, and has served as a general partner of Welsh Carson and affiliated
entities since 1979. Prior to 1979, Mr. Welsh was President and a director of
Citicorp Venture Capital, Ltd., an affiliate of Citicorp engaged in venture
capital investing. Mr. Welsh serves as a director of Accredo Health,
Incorporated. He also serves as a director of Bridge and several other private
companies. Mr. Welsh received a B.A. from Rutgers University and an M.B.A. from
the University of California at Los Angeles.
THOMAS M. WENDEL has served as a director of our company since April 1999.
He has been Chairman of the Board of Bridge since January 1996, and President
and Chief Executive Officer of Bridge since September 1995. From 1986 to
September 1995, Mr. Wendel served as founding President and Chief Executive
Officer of Liberty Brokerage, Inc., a United States government securities
brokerage firm. From 1982 to 1986, Mr. Wendel was with Paine Webber Inc., where
he held several senior management positions, including Chief Financial Officer
and head of Operations and Systems. Mr. Wendel also served as Executive Vice
President and Managing Director of Paine Webber where he was responsible for
investment banking involving thrifts and commercial banks, mortgage sales and
trading, and mortgage banking. Prior to 1982, Mr. Wendel was Senior Vice
President and Chief Financial Officer of Pan American World Airways. While at
Pan American, he also held several senior management positions including overall
responsibility for Data Systems and Communications, Airline Planning, Property
and Facilities, Corporate Budgets, Treasury, Accounting, Aircraft Sales, and
Office Services. Mr. Wendel holds a B.S. in Mathematics, an M.A. in Economics,
an M.B.A., and several academic honors including Phi Kappa Phi and a National
Defense Graduate Fellowship in Mathematics. He was the co-author of Introduction
to Data Processing and COBOL published by McGraw-Hill in 1969.
STEVEN M. GALLANT has served as our Vice President, General Counsel and
Secretary since December 1996. From July 1991 to December 1996, Mr. Gallant was
a partner with The Stolar
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Partnership where he specialized in the areas of corporate finance, mergers and
acquisitions and general corporate law. Mr. Gallant received a B.A. from the
University of Denver, a J.D. from Washington University and an L.L.M. in
Taxation from New York University.
Members of our board of directors are elected each year at our annual
meeting of stockholders, and serve until the next annual meeting of stockholders
and until their respective successors have been elected and qualified. Following
the completion of this offering, we intend to increase the number of positions
on our board of directors to seven. The board anticipates appointing two
independent directors to fill the resulting positions, who will serve on our
board until the next annual meeting of stockholders or until their earlier
resignation or removal. Our officers are elected annually by our board of
directors and serve at the board's discretion.
In November 1999, we entered into an agreement with Mr. Heintzelman in
connection with his resignation as our President and Chief Executive Officer.
Pursuant to the agreement, Mr. Heintzelman has agreed to serve on our board of
directors for a one-year term that will expire in November 2000. See
"--Arrangements with Executive Officers."
COMMITTEES OF THE BOARD OF DIRECTORS
Our board of directors has established an audit committee and a
compensation committee. The audit committee consists of Thomas E. McInerney,
Patrick J. Welsh and Thomas M. Wendel. The responsibilities of the audit
committee include:
o recommending to our board of directors an independent audit firm to audit
our financial statements and to perform services related to the audit;
o reviewing the scope and results of the audit with our independent
auditors;
o considering the adequacy of our internal accounting control procedures;
and
o considering auditors' independence.
The compensation committee consists of Thomas E. McInerney and Robert A.
McCormick. The compensation committee determines the salaries and incentive
compensation of our management and key employees and administers our stock
option plan.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the last fiscal year, Mr. McCormick served on our compensation
committee. Mr. McCormick has served as the Chairman of our board since April
1999, and became our President and Chief Executive Officer in November 1999.
Mr. McCormick served as Executive Vice President and Chief Technical Officer of
Bridge through December 1999. See "Transactions with Affiliates."
In 1999, none of our executive officers served as a director or member of
the compensation committee of another entity, any of whose executive officers
served on our board of directors or on our compensation committee.
DIRECTOR COMPENSATION
Directors currently do not receive any cash compensation from us for their
services, although we reimburse them for out-of-pocket expenses related to
attending meetings of the board of directors.
EXECUTIVE COMPENSATION
The following table provides you with information about compensation earned
during fiscal 1999 by our Chief Executive Officers and the other three most
highly compensated executive officers employed by us, whose salaries and bonuses
for such year were in excess of $100,000. We use the term "named executive
officers" to refer to these officers in this prospectus.
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SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
-----------------
ANNUAL COMPENSATION SECURITIES ALL
-------------------- UNDERLYING STOCK OTHER
NAME AND PRINCIPAL POSITION SALARY BONUS OPTIONS COMPENSATION
- --------------------------------------- ---------- ------- ----------------- -----------------
<S> <C> <C> <C> <C>
Robert A. McCormick(1) ................ $ 45,139 -- 500,000 --
President, Chief Executive Officer and
Chairman of the Board
Clyde A. Heintzelman(2) ............... 218,146 -- 100,000 $ 265,905(3)
David J. Frear(4) ..................... 122,276 -- 400,000 --
Executive Vice President and
Chief Financial Officer
Richard Bubenik ....................... 159,258 -- 200,000 --
Executive Vice President and
Chief Technical Officer
</TABLE>
- ---------------------
(1) Mr. McCormick became our President and Chief Exeuctive Officer in November
1999.
(2) Mr. Heintzelman became our President and Chief Executive Officer in December
1998 and resigned from these positions in November 1999.
(3) Consists of monthly payments previously made or to be made to Mr.
Heintzelman in connection with his resignation. See "Arrangements with
Executive Officers."
(4) Mr. Frear became our Executive Vice President and Chief Financial Officer in
July 1999.
OPTION GRANTS IN LAST FISCAL YEAR
The following table shows grants of stock options to each of the named
executive officers during 1999. The percentages in the table below are based on
options to purchase a total of 3,047,258 shares of our common stock granted to
our employees and directors in 1999. The exercise price per share of each option
was equal to the fair market value of the common stock on the date of grant as
determined by the compensation committee of our board of directors. Potential
realizable values are net of exercise price before taxes and are based on the
assumption that our common stock appreciates at the annual rate shown,
compounded annually, from the date of grant until the expiration of the ten-year
term. The numbers are calculated based on the requirements of the SEC and do not
reflect our estimate of future stock price growth.
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OPTION GRANTS IN 1999
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
---------------------------------------------------------------
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL
NUMBER OF RATES OF STOCK
SECURITIES PRICE APPRECIATION FOR
UNDERLYING PERCENT OF TOTAL EXERCISE OPTION TERM
OPTIONS OPTIONS GRANTED TO PRICE PER EXPIRATION -------------------------
NAME GRANTED EMPLOYEES IN 1999 SHARE(1) DATE 5% 10%
- ---------------------------------- ------------ -------------------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Robert A. McCormick (1) .......... 500,000 16.4% $ 0.50 7/22/09 $407,224 $648,436
Clyde A. Heintzelman (2) ......... 100,000 3.3% 0.50 7/22/09 81,445 129,687
David J. Frear (3) ............... 400,000 13.1% 0.50 7/22/09 325,779 518,749
Richard Bubenik (4) .............. 200,000 6.6% 0.50 7/22/09 162,890 259,374
</TABLE>
- ---------------------
(1) All these options vested on the date of grant. If Mr. McCormick were to
resign, we would have the right to repurchase any shares that have been
purchased by Mr. McCormick upon exercise of these options at the lower of
$0.50 per share or the fair market value of the shares. This right will be
eliminated with respect to 79,500 shares on the first anniversary of the
date of the option grant and with respect to the balance of the shares at
the rate of 125,000 shares on each of the second, third and fourth
anniversaries of the date of grant.
(2) All these options vested on the date of Mr. Heintzelman's resignation.
(3) All these options vested on the date of grant. If Mr. Frear were to resign,
we would have the right to repurchase any shares that have been purchased by
Mr. Frear upon exercise of these options at the lower of $.50 per share or
the fair market value of the shares. This right will be eliminated with
respect to 100,000 shares upon completion of this offering and with respect
to the balance of the shares at the rate of 8,333 shares per month beginning
on the first anniversary of the date of the option grant through the fourth
anniversary of the date of grant.
(4) These options become exercisable at the rate of 4,167 each month, beginning
on the date of grant.
AGGREGATE OPTION EXERCISES IN 1999 AND FISCAL YEAR-END OPTION VALUES
The following table sets forth as of December 31, 1999, for each of the
named executive officers listed:
o the total number of shares received upon exercise of options during 1999;
o the value realized upon that exercise;
o the total number of unexercised options to purchase our common stock
(exercisable and unexercisable); and
o the value of such options which were in-the-money at December 31, 1999.
There was no public trading market for our common stock as of December 31,
1999. Accordingly, in order to present the values realized upon exercise of
options and the values of unexercised in-the-money options shown below we
subtracted the applicable exercise price from a price of $23.50 per share, the
midpoint of the price range for our common stock shown on the cover page of this
prospectus.
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<PAGE>
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY
DECEMBER 31, 1999(1) OPTIONS AT DECEMBER 31, 1999
----------------------------- ----------------------------
SHARES ACQUIRED VALUE
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------------ ----------------- -------------- ------------- --------------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Robert A. McCormick .......... 500,000 $11,500,000 -- -- -- --
Clyde A. Heintzelman ......... 218,224 5,019,152 -- -- -- --
David J. Frear ............... 400,000 9,200,000 -- -- -- --
Richard Bubenik .............. 40,065 921,495 0 166,667 0 $3,833,342
</TABLE>
- ---------------------
STOCK OPTION PLAN
Background. On July 22, 1999, our board of directors approved the adoption
of our 1999 SAVVIS stock option plan, and our stockholders approved the stock
option plan on the same date. The purpose of our 1999 stock option plan is to
enhance our ability to attract, retain and compensate highly qualified employees
and other individuals providing us with services. The option plan permits the
granting of options to purchase shares of common stock intended to qualify as
incentive stock options under the Internal Revenue Code of 1986, or the Internal
Revenue Code, and options that do not qualify as incentive stock options, or
non-qualified options. Grants may be made under our stock option plan to
employees and directors of our company or any related company and to any other
individual whose participation in the stock option plan is determined by our
board of directors to be in our best interests. As of November 30, 1999, options
to purchase 6,041,804 shares of common stock were outstanding under the stock
option plan. No options may be granted under the stock option plan after July
22, 2009.
The number of shares of common stock available for issuance under the
option plan is 8,000,000 subject to adjustment for stock dividends, splits and
other similar events. If any shares of common stock covered by a grant are not
purchased or are forfeited, or if a grant otherwise terminates without delivery
of any shares of common stock subject to the option, then the number of shares
of common stock counted against the total number of shares available under the
stock option plan with respect to such grant will, to the extent of any such
forfeiture or termination, again be available for making grants under the stock
option plan.
The stock option plan is administered by our compensation committee. The
compensation committee has the full power and authority to take all actions and
to make all determinations required or provided for under the plan, any option,
or option agreement, to the extent such actions are consistent with the terms of
the plan. The board of directors may take any action the compensation committee
is authorized to take. To the extent permitted by law, the compensation
committee or board may delegate its authority under the plan to a member of the
board or one of our executive officers.
Option Terms. The option price of each option will be determined by the
compensation committee. However, the option price may not be less than either
100% of the fair market value of our common stock on the date of grant or less
than par value in the case of incentive stock options and less than par value
only in the case of non-qualified stock options. To qualify as incentive stock
options, options must meet various federal tax requirements, including limits on
the value of shares subject to incentive stock options which first become
exercisable in any one calendar year, and a shorter term and higher minimum
exercise price in the case of any grants to 10% stockholders.
The term of each option will be fixed by the compensation committee. The
compensation committee will determine at what time or times each option may be
exercised and the period of time, if any, after retirement, death, disability or
termination of employment during which options may be exercised. However, all
options shall automatically vest upon a termination of employment caused by the
optionee's death, disability, or retirement. Options may be made exercisable in
installments, and the compensation committee may accelerate the exercisability
of options. Except to the extent otherwise expressly set forth in an option
agreement relating to a non-qualified option, options are not transferable other
than by will or the laws of descent and distribution. The compensation
69
<PAGE>
committee may include in any option agreement any provisions relating to
forfeitures of options that it deems appropriate, including prohibitions on
competing with our company and other detrimental conduct.
If an optionee elects to exercise his or her option, he or she must pay the
option exercise price in full either in cash or cash equivalents. To the extent
permitted by the option agreement or the compensation committee, the optionee
may also pay the option exercise price by the delivery of common stock to the
extent that the common stock is publicly traded, or other property. The
compensation committee may also allow the optionee to defer payment of the
option price, or may cause us to loan the option price to the optionee or to
guarantee that any shares to be issued will be delivered to a broker or lender
in order to allow the optionee to borrow the option price. If the compensation
committee so permits, the exercise price may also be delivered to us by a broker
pursuant to irrevocable instructions to the broker from the participant.
Corporate Transactions. Options granted under the stock option plan will
terminate in connection with corporate transactions involving our company as
listed below, except to the extent the options are continued or substituted for
in connection with the transaction. In the event of a termination of the options
in connection with a corporate transaction and subject to any limitations
imposed in an applicable option agreement, the options will be fully vested and
exercisable for a period to be determined by the board of directors immediately
before the completion of the corporate transaction. A corporate transaction
occurs in the event of:
o a dissolution or liquidation of our company;
o a merger, consolidation or reorganization of our company with one or more
other entities in which our company is not the surviving entity;
o a sale of substantially all of our assets to another person or entity; or
o any transaction, including, without limitation, a merger or
reorganization in which our company is the surviving entity, approved by
the board that results in any person or entity, other than persons who
are holders of stock of our company at the time the plan was approved by
the stockholders and other than an affiliate, owning 80 percent or more
of the combined voting power of all classes of our stock.
The board of directors may also in its discretion and only to the extent
provided in an option agreement cancel outstanding options in connection with a
corporate transaction. Holders of cancelled options will receive a payment for
each cancelled option.
Amendments and Termination. The board of directors may at any time amend or
discontinue the stock option plan, except that the maximum number of shares
available for grant as incentive stock options and the class of persons eligible
to receive grants under the plan may not be changed without stockholder
approval.
Adjustments for Stock Dividends and Similar Events. The compensation
committee will make appropriate adjustments in outstanding awards to reflect
common stock dividends, splits and other similar events.
FEDERAL INCOME TAX CONSEQUENCES
Incentive Stock Options. The grant of an option will not be a taxable event
for the optionee or us. An optionee will not recognize taxable income upon
exercise of an incentive stock option, except that the alternative minimum tax
may apply. Any gain realized upon a disposition of common stock received
pursuant to the exercise of an incentive stock option will be taxed as long-term
capital gain if the optionee holds the shares for at least two years after the
date of grant and for one year after the date of exercise, known as the holding
period requirement. We will not be entitled to any business expense deduction
with respect to the exercise of an incentive stock option, except as discussed
below.
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For the exercise of an option to qualify for the foregoing tax treatment,
the optionee generally must be an employee of our company or a subsidiary from
the date the option is granted through a date within three months before the
date of exercise of the option. In the case of an optionee who is disabled, the
three-month period for exercise following termination of employment is extended
to one year. In the case of an employee who dies, both the time for exercising
incentive stock options after termination of employment and the holding period
for common stock received pursuant to the exercise of the option are waived.
If all of the foregoing requirements are met except the holding period
requirement mentioned above, the optionee will recognize ordinary income upon
the disposition of the common stock in an amount generally equal to the excess
of the fair market value of the common stock at the time the option was
exercised over the option exercise price (but not in excess of the gain realized
on the sale). The balance of the realized gain, if any, will be capital gain. We
will be allowed a business expense deduction to the extent the optionee
recognizes ordinary income subject to Section 162(m) of the Internal Revenue
Code, as summarized below.
If an optionee exercises an incentive stock option by tendering common
stock with a fair market value equal to part or all of the option exercise
price, the exchange of shares will be treated as a nontaxable exchange. This
nontaxable treatment would not apply, however, if the optionee had acquired the
shares being transferred pursuant to the exercise of an incentive stock option
and had not satisfied the holding period requirement summarized above. If the
exercise is treated as a nontaxable exchange, the optionee would have no taxable
income from the exchange and exercise, other than minimum taxable income as
discussed above, and the tax basis of the shares exchanged would be treated as
the substituted basis for the shares received. If the optionee used shares
received pursuant to the exercise of an incentive stock option, or another
statutory option, as to which the optionee had not satisfied the applicable
holding period requirement, the exchange would be treated as a taxable
disqualifying disposition of the exchanged shares.
If, pursuant to an option agreement, we withhold shares in payment of the
option price for incentive stock options, the transaction should generally be
treated as if the withheld shares had been sold in a disqualifying disposition
after exercise of the option, so that the optionee will realize ordinary income
with respect to such shares. The shares paid for by the withheld shares should
be treated as having been received upon exercise of an incentive stock option,
with the tax consequences described above. However, the Internal Revenue Service
has not ruled on the tax treatment of shares received on exercise of an
incentive stock option where the option exercise price is paid with withheld
shares.
Non-Qualified Options. The grant of an option will not be a taxable event
for the optionee or us. Upon exercising a non-qualified option, an optionee will
recognize ordinary income in an amount equal to the difference between the
exercise price and the fair market value of the common stock on the date of
exercise. However, if the optionee is subject to restrictions imposed by the
securities laws, the measurement date will be deferred, unless the optionee
makes a special tax election within 30 days after exercise. Upon a subsequent
sale or exchange of shares acquired pursuant to the exercise of a non-qualified
option, the optionee will have taxable gain or loss, measured by the difference
between the amount realized on the disposition and the tax basis of the shares.
This difference generally is the amount paid for the shares plus the amount
treated as ordinary income at the time the option was exercised.
If we comply with applicable reporting requirements and with the
restrictions of Section 162(m) of the Internal Revenue Code, we will be entitled
to a business expense deduction in the same amount and generally at the same
time as the optionee recognizes ordinary income. Under Section 162(m) of the
Internal Revenue Code, if the optionee is one of certain specified executive
officers, then, unless a number of exceptions apply, we are not entitled to
deduct compensation with respect to the optionee, including compensation related
to the exercise of shares options, to the extent such compensation in the
aggregate exceeds $1.0 million for the taxable year. Options issuable under the
stock incentive plan are intended to comply with the exception to Section 162(m)
for "performance-based" compensation.
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<PAGE>
If the optionee surrenders common stock in payment of part or all of the
exercise price for non-qualified options, the optionee will not recognize gain
or loss with respect to the shares surrendered, regardless of whether the shares
were acquired pursuant to the exercise of an incentive stock option, and the
optionee will be treated as receiving an equivalent number of shares pursuant to
the exercise of the option in a nontaxable exchange. The basis of the shares
surrendered will be treated as the substituted tax basis for an equivalent
number of option shares received and the new shares will be treated as having
been held for the same holding period as had expired with respect to the
transferred shares. The difference between the total option exercise price and
the total fair market value of the shares received pursuant to the exercise of
the option will be taxed as ordinary income. The optionee's basis in the
additional shares will be equal to the amount included in the optionee's income.
If, pursuant to an option agreement, we withhold shares in payment of the
option price for non-qualified options or in payment of tax withholding, the
transaction should generally be treated as if the withheld shares had been sold
for an amount equal to the exercise price after exercise of the option.
ARRANGEMENTS WITH EXECUTIVE OFFICERS
Mr. Heintzelman became our President and Chief Executive Officer under an
employment agreement dated December 4, 1998. On November 12, 1999 we entered
into an additional agreement with Mr. Heintzelman in connection with his
resignation, entitling him to continue to receive his base salary of
approximately $20,800 per month through December 3, 2000. In addition, under
these agreements, Mr. Heintzelman is entitled to a prorated portion of his bonus
for 1999 in an amount to be established by our board of directors, but in no
event less than 25% of his annual base salary. Under the agreement dated
November 12, 1999, Mr. Heintzelman agreed to serve on our board of directors for
a one-year term that will expire in November of 2000. While Mr. Heintzelman will
not separately be compensated for his services on the board of directors during
this one-year term, he will continue to be eligible to participate in benefit
plans as though he had remained employed by us. All of Mr. Heintzelman's stock
options vested fully on the date of his resignation and Mr. Heintzelman has
exercised all of his options since that date.
In his employment agreement of December 4, 1998, Mr. Heintzelman agreed to
preserve the confidentiality and the proprietary nature of all information
relating to us and our business for three years after the term of his agreements
ends. In addition, Mr. Heintzelman is obligated under this agreement not to
compete with us and not to solicit the business of our customers for one year
following the term of his employment agreement. He will assist in the transition
of his position and help to ensure our ability to retain our key employees. Mr.
Heintzelman has also released our company, Bridge and our and Bridge's employees
and directors from all claims arising from his employment.
Arrangement with Mr. Frear. On June 14, 1999, we entered into an
arrangement with Mr. Frear pursuant to which he agreed to serve as our Chief
Financial Officer. As part of this arrangement, Mr. Frear is entitled to an
annual base salary of $250,000, subject to periodic review and adjustment, and a
discretionary annual bonus of approximately 50% of his base salary, based on his
personal and overall corporate performance. Mr. Frear is entitled to medical,
disability and life insurance and other benefits in accordance with our general
policies.
In connection with his employment, Mr. Frear received 400,000 options to
purchase shares of our common stock at an exercise price of $.50 per share. All
of Mr. Frear's options have vested. In the event Mr. Frear were to resign, we
would have the right to repurchase any shares that have been purchased by Mr.
Frear upon exercise of the options at fair market value or $.50 per share,
whichever is lower. This repurchase right is eliminated with respect to 100,000
shares at the completion of this offering and with respect to the balance of the
shares at the rate of 8,333 shares per month beginning on the first anniversary
of the date of the option grant through the fourth anniversary of the date of
grant. In addition, upon completion of this offering, Mr. Frear will receive a
number of options equal to .25% of our then outstanding shares of common stock
on a fully diluted basis at an exercise price per share equal to the public
offering price. The options have a term of ten years.
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<PAGE>
If our common stock is not traded on a national securities market with a
public float of at least $75 million by June 14, 2001, or if we are not in the
process of registering our common stock on that date, Mr. Frear will be entitled
to receive the fair market value of his options that have vested less the
exercise price of those options.
If we were to terminate Mr. Frear's employment without cause, or if Mr.
Frear were to terminate his employment for good reason, Mr. Frear would be
entitled to salary continuation and continuation of all benefits for one year
following the termination of his employment and a pro rata payment of his bonus
through the date of termination. In addition, our right to be repurchase his
shares would be terminated.
Arrangement with Mr. Mori. On September 30, 1999, we entered into an
agreement with Mr. Mori pursuant to which he became our Chief Operating Officer
effective September 25, 1999. Under his agreement, Mr. Mori is entitled to an
annual base salary of $200,000, as well as a discretionary bonus of 50% to 100%
of his base salary based on his personal and overall corporate performance. We
also granted Mr. Mori options to purchase 225,000 shares of our common stock at
an exercise price of $.50 per share. All of Mr. Mori's options have vested. In
the event Mr. Mori were to resign, we would have the right to repurchase any
shares that have been purchased by Mr. Mori upon exercise of the options at fair
market value or $.50 per share, whichever is lower. This repurchase right is
eliminated at a rate of 4,687 shares per month and will terminate after four
years of the date of grant. Under his agreement, Mr. Mori is entitled to
benefits commensurate with those available to Bridge executives of comparable
rank.
If we were to terminate Mr. Mori's employment without cause prior to the
second anniversary of his employment, Mr. Mori would be entitled to receive a
severance payment of $450,000. In the event we terminate Mr. Mori's employment
without cause after the second anniversary of his employment, and either we are
not a public company or we are a public company and our shares on the date of
termination trade at a price less than $15 per share, Mr. Mori will also receive
a payment of $450,000. Mr. Mori will receive a similar payment if he were to
resign as a result of an acquisition of more than 30% of our voting shares by an
entity other than Bridge, if he were to be instructed to relocate from the St.
Louis metropolitan area, or if he were to be reassigned to a position entailing
materially reduced responsibilities or opportunities for compensation.
We have agreed to indemnify Mr. Mori for legal expenses arising from his
defense in the event that his previous employer asserts a claim that his
employment by us violates the non-competition provision of his employment
agreement with his previous employer. In addition, in the event that Mr. Mori's
previous employer succeeds in preventing his employment by us, we have agreed to
employ Mr. Mori in an executive position unrelated to SAVVIS for 18 months on
the same economic terms as are described above.
TRANSACTIONS WITH AFFILIATES
Mr. Wendel, a director of our company, is also President, Chief Executive
Officer and Chairman of the Board of Bridge. Mr. McCormick, our President and
Chief Executive Officer and the Chairman of our Board, served as the Executive
Vice President and Chief Technical Officer of Bridge through December 1999.
Messrs. McInerney and Welsh serve as directors of our company, as well as
directors of Bridge. In addition, Messrs. McInerney and Welsh are general
partners of Welsh Carson, one our principal stockholders and also a principal
stockholder of Bridge.
As of September 30, 1999, we had outstanding demand loans from Bridge of
approximately $17.3 million. These loans bear interest at a rate of 8% per year.
We used the proceeds of these loans to fund our working capital requirements.
We will enter into several agreements with Bridge, including a master
establishment and transition agreement, an equipment colocation permit, a
network services agreement, an administrative services agreement, a technical
services agreement and a local network services agreement. In connection with
these agreements we will execute a promissory note in favor of Bridge. The terms
of these agreements and the note are described under the heading "Business --
Bridge Relationship."
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<PAGE>
PRINCIPAL STOCKHOLDERS
The following table provides you with information about the beneficial
ownership of shares of our common stock as of December 22, 1999, and as adjusted
to reflect the sale of shares in this offering, by:
o each person who, to our knowledge, beneficially owns more than 5% of our
common stock;
o each of our directors and named executive officers; and
o all our directors and executive officers as a group.
Beneficial ownership is determined under the rules of the SEC and includes
voting or investment power with respect to the common stock.
Unless indicated otherwise below, the address for each listed director and
officer is SAVVIS Communications Corporation, 12007 Sunrise Valley Drive,
Reston, Virginia 20191. The persons named in the table have sole voting and
investment power with respect to all shares of common stock shown as
beneficially owned by them, subject to community property laws where applicable
and the information contained in this table and the notes that follow. The total
number of shares of common stock outstanding used in calculating the percentage
for each person named in the table includes the shares of common stock
underlying options held by that person that are exercisable within 60 days of
December 22, 1999, but excludes shares of common stock options held by all other
persons. Percentage of beneficial ownership is based on 75,003,825 shares of
common stock outstanding as of December 22, 1999, and 86,756,506 shares of
common stock outstanding after completion of this offering.
<TABLE>
<CAPTION>
PERCENTAGE BENEFICIALLY
AMOUNT AND OWNED
NATURE OF ----------------------
BENEFICIAL BEFORE AFTER
NAME AND ADDRESS OWNERSHIP OFFERING OFFERING
- ----------------------------------------------- ------------ ---------- ---------
<S> <C> <C> <C>
Bridge Information Systems, Inc. (1) .......... 53,870,279 71.8% 62.1%
Welsh, Carson, Anderson & Stowe (2) ........... 8,844,642 11.8% 10.2%
Clyde A. Heintzelman .......................... 218,224 * *
Robert A. McCormick ........................... 500,000 * *
David J. Frear (3) ............................ 400,000 * *
Richard Bubenik (4) ........................... 48,398 * *
Thomas M. Wendel .............................. 450,000 * *
Patrick J. Welsh (5) .......................... 8,843,413 11.8% 10.2%
Thomas E. McInerney (6) ....................... 8,883,118 11.8% 10.2%
All executive officers and directors as a group
(7 persons) .................................. 10,559,701 14.1% 12.2%
</TABLE>
- ---------------------
* Less than one percent.
(1) Does not include shares held by Welsh, Carson, Anderson & Stowe, as
described in note 2 below. The address of Bridge Information Systems, Inc.
is 717 Office Parkway, St. Louis, Missouri 63141.
(2) Includes 4,635,958 shares of common stock held by Welsh, Carson, Anderson &
Stowe VI, L.P. ("WCAS VI"), 3,475,566 shares held by Welsh, Carson, Anderson
& Stowe VII, L.P. ("WCAS VII"), 65,357 shares held by WCAS Information
Partners, L.P. ("WCAS IP") and 667,761 shares held by WCAS Capital Partners
II, L.P. ("WCAS CP II"). The respective sole general partners of WCAS VI,
WCAS VII, WCAS IP and WCAS CP II are WCAS VI Partners, L.P., WCAS VII
Partners, L.P., WCAS INFO Partners and WCAS CP II Partners. The individual
general partners of each of these partnerships include some or all of Bruce
K. Anderson, Russell L. Carson, Anthony J. de Nicola, James B. Hoover,
Thomas E. McInerney, Robert A. Minicucci, Charles G. Moore, III, Andrew M.
Paul, Paul B. Qucally, Rudolph E. Rupert, Jonathan M. Rather, Lawrence B.
Sorrel, Richard H. Stowe, Laura M. VanBuren and Patrick J. Welsh. The
individual general partners who are also directors of SAVVIS are Patrick J.
Welsh and Thomas E.
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<PAGE>
McInerney. Each of the foreging persons may be deemed to be the beneficial
owner of the common stock owned by the limited partnerships of whose general
partner he or she is a general partner. WCAS VI, WCAS VII, WCAS IP and WCAS
CP II, in the aggregate, own approximately 38.5% of the outstanding equity
securities of Bridge. The address of Welsh, Carson, Anderson & Stowe is 320
Park Avenue, New York, NY 10022.
(3) Includes 400,000 shares of common stock subject to exercisable options.
(4) Includes 8,333 shares of common stock subject to options that are
exercisable within 60 days of December 22, 1999.
(5) Includes 8,779,285 shares held by Welsh, Carson, Anderson & Stowe, as
described in note 2 above.
(6) Includes 8,844,642 shares held by Welsh, Carson, Anderson & Stowe, as
described in note 2 above.
OWNERSHIP OF BRIDGE SERIES A COMMON STOCK AND BRIDGE SERIES D PREFERRED STOCK
The following table provides you with information about the beneficial
ownership of shares of Bridge's Series A common stock and Bridge's Series D
preferred stock as of December 22, 1999, by:
o each of our directors and named executive officers; and
o all of our directors and executive officers as a group.
Beneficial ownership is determined under the rules of the SEC and includes
voting or investment power with respect to the Series A common stock and the
Series D preferred stock. The persons named in the table have sole voting and
investment power with respect to all shares of common stock shown as
beneficially owned by them, subject to community property laws where applicable
and the information contained in this table and the notes that follow. The total
number of shares of Series A common stock outstanding used in calculating the
percentage for each person named in the table includes the shares of Series A
common stock underlying options held by that person that are exercisable within
60 days of December 22, 1999, but excludes shares of Series A common stock
options held by all other persons. Percentage of beneficial ownership is based
on 37,018,168 shares of Bridge Series A common stock and 1,950,000 shares of
Bridge Series D preferred stock outstanding as of December 22, 1999. As of
December 22, 1999, none of our executive officers or directors owned any shares
of Bridge's Series E preferred stock or Series F preferred stock.
<TABLE>
<CAPTION>
NUMBER OF SHARES OF NUMBER OF SHARES OF PERCENT OF
SERIES A COMMON PERCENT OF SERIES D PREFERRED SERIES D PREFERRED
STOCK BENEFICIALLY SERIES A COMMON STOCK STOCK BENEFICIALLY STOCK BENEFICIALLY
NAME AND ADDRESS OWNED BENEFICIALLY OWNED OWNED OWNED
- --------------------------------- --------------------- ----------------------- --------------------- -------------------
<S> <C> <C> <C> <C>
Robert A. McCormick (1) ......... 112,000 * -- --
Clyde A. Heintzelman ............ -- -- -- --
David J. Frear .................. -- -- -- --
Richard Bubenik ................. -- -- -- --
Thomas M. Wendel (2) ............ 680,050 1.8% -- --
Patrick J. Welsh ................ 21,449,846(3) 57% 348,971(5) 17%
Thomas E. McInerney ............. 21,543,540(4) 58% 352,222(6) 17%
All named executive officers and
directors as a group (7 persons) 22,490,666 60% 352,222 17%
</TABLE>
- ----------------
(1) Includes 112,000 shares of Series A common stock subject to options that are
exercisable within 60 days of November 30, 1999.
(2) Includes 680,050 shares of Series A common stock subject to options that are
exercisable within 60 days of November 30, 1999.
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<PAGE>
(3) Includes 12,989,080 shares of Bridge's Series A common stock held by WCAS
VI, 6,324,767 shares of Series A common stock held by WCAS VII, and
1,980,923 shares of Series A common stock held by WCAS CP II.
(4) Includes 12,989,080 shares of Bridge's Series A common stock held by WCAS
VI, 6,324,767 shares of Series A common stock held by WCAS VII, 155,728
shares of Series A common stock held by WCAS IP and 1,980,923 shares held by
WCAS CP II.
(5) Includes 342,471 shares of Bridge's Series D preferred stock held by WCAS VI
and 3,250 shares of Series D preferred stock held by WCAS VII.
(6) Includes 342,471 shares of Bridge's Series D preferred stock held by WCAS
VI, 3,250 shares of Series D preferred stock held by WCAS VII and 4,551
shares of Series D preferred stock held by WCAS IP.
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DESCRIPTION OF CAPITAL STOCK
Our authorized capital stock consists of 125,000,000 shares of common
stock, par value $.01 per share, and 50,000,000 shares of preferred stock, par
value $.01 per share, the rights, preferences and privileges of which may be
established from time to time by our board of directors. As of December 22,
1999, 75,003,825 shares of our common stock were outstanding and no shares of
our preferred stock were outstanding. As of December 22, 1999, we had 232
stockholders.
COMMON STOCK
Each holder of record of common stock of record is entitled to one vote for
each share on all matters properly submitted to the stockholders for their vote.
Our certificate of incorporation does not allow cumulative voting for the
election of directors, which means that the holders of a majority of the shares
voted can elect all the directors then standing for election. Subject to
preferences that may be applicable to any preferred stock outstanding at the
time, holders of our common stock are entitled to receive ratable dividends, if
any, as may be declared from time to time by our board of directors out of funds
legally available for that purpose. In the event of our liquidation, dissolution
or winding up, holders of common stock would be entitled to share in our assets
remaining after the payment of liabilities and liquidation preferences on any
outstanding preferred stock. Holders of our common stock have no preemptive or
conversion rights or other subscription rights and there are no redemption or
sinking fund provisions applicable to the common stock. All outstanding shares
of common stock are, and the shares of common stock offered by us in this
offering will be, when issued and paid for, fully paid and non-assessable. The
rights, preferences and privileges of holders of common stock may be adversely
affected by the rights of the holders of shares of any series of preferred stock
that we may authorize and issue in the future.
PREFERRED STOCK
The board of directors is authorized, subject to Delaware law, without
stockholder approval, from time to time to issue up to an aggregate of
50,000,000 shares of preferred stock in one or more series. The board of
directors may fix the rights, preferences and privileges of the shares of each
series and any qualifications, limitations or restrictions. Issuance of
preferred stock, while providing desirable flexibility in connection with
possible acquisitions and other corporate purposes, could have the effect of
making it more difficult for a third party to acquire, or of discouraging a
third party from attempting to acquire, a majority of our outstanding voting
stock. We have no present plans to issue any shares of preferred stock.
LIMITATION OF LIABILITY OF DIRECTORS AND OFFICERS
As permitted by the Delaware General Corporation Law, our certificate of
incorporation provides that our directors will not be personally liable to us or
our stockholders for monetary damages for breach of fiduciary duty as a
director, except for liability:
o for any breach of the director's duty of loyalty to us or our
stockholders;
o for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
o under Section 174 of the Delaware General Corporation Law, relating to
unlawful dividends or unlawful stock purchases or redemptions; or
o for any transaction from which the director derives an improper personal
benefit.
As a result of this provision, we and our stockholders may be unable to
obtain monetary damages from a director for breach of his or her duty of care.
Our certificate of incorporation and bylaws provide for the indemnification
of our directors and officers to the fullest extent authorized by the Delaware
General Corporation Law. In addition, our certificate of incorporation provides
that if the Delaware General Corporation Law is amended to
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authorize the further elimination or limitation of the liability of a director,
then the liability of our directors will be eliminated or limited to the fullest
extent permitted by the amended Delaware Law. The indemnification provided under
our certificate of incorporation and bylaws includes the right to be paid
expenses in advance of any proceeding for which indemnification may be had,
provided that the payment of these expenses incurred by a director or officer in
advance of the final disposition of a proceeding may be made only upon delivery
to us of an undertaking by or on behalf of the director or officer to repay all
amounts paid in advance if it is ultimately determined that the director or
officer is not entitled to be indemnified.
We believe that the provisions in our certificate of incorporation and
bylaws are necessary to attract and retain qualified persons as directors and
officers.
ANTI-TAKEOVER PROVISIONS
Provisions of Delaware law and our certificate of incorporation and bylaws
summarized below could hinder or delay an attempted takeover of us. These
provisions could have the effect of discouraging attempts to acquire us or
remove incumbent management even if some or a majority of our stockholders
believe this action to be in their best interest, including attempts that might
result in the stockholders receiving a premium over the market price for their
shares of common stock.
CERTIFICATE OF INCORPORATION AND BY-LAW PROVISION
Under our bylaws, only the board of directors, the Chairman or Vice
Chairman of the board, the board of directors and the President may call special
meetings of stockholders. The stockholders may not call a special meeting.
The foregoing provisions could have the effect of delaying until the next
stockholders' meeting stockholder actions which are favored by the holders of a
majority of our outstanding voting securities. These provisions may also
discourage another person or entity from making a tender offer for our common
stock because such person or entity, even if it acquired a majority of our
outstanding voting securities, would be able to take action as a stockholder,
such as electing new directors or approving a merger, only at a duly called
stockholders meeting.
DELAWARE ANTI-TAKEOVER LAW
We will be subject to the provisions of Section 203 of the Delaware General
Corporation Law regulating corporate takeovers. Section 203 prevents a Delaware
corporation, including those that are listed on the Nasdaq National Market, from
engaging, in several circumstances, in a "business combination," which includes
a merger or sale of more than 10% of the corporation's assets, with any
"interested stockholder" for a period of three years after the date of the
transaction in which the person became an interested stockholder. An interested
stockholder is a stockholder who owns 15% or more of the corporation's
outstanding voting stock, as well as affiliates and associates of that person.
This is the case unless:
o the transaction that resulted in the stockholder's becoming an interested
stockholder was approved by the board of directors prior to the date the
interested stockholder attained that status;
o upon completion of the transaction that resulted in the stockholder's
becoming an interested stockholder, the interested stockholder owned at
least 85% of the voting stock of the corporation outstanding at the time
the transaction began, excluding those shares owned by (1) persons who
are directors and also officers and (2) employee stock compensation plans
in which employee participants do not have the right to determine
confidentially whether shares held subject to the plan will be tendered
in a tender or exchange offer, or
o on or after the date the interested stockholder attained that status, the
business combination is approved by the board of directors and authorized
at an annual or special meting of stockholders by the affirmative vote of
at least two-thirds of the outstanding voting stock that is not owned by
the interested stockholder.
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A Delaware corporation may "opt out" of Section 203 with an express
provision in its original certificate of incorporation or an express
stockholder's amendment approved by at least a majority of the outstanding
voting shares. We have not "opted out" of the provisions of the Section 203.
This statutory provision could prohibit or delay mergers or other takeover or
change-in-control attempts with respect to SAVVIS and, accordingly, may
discourage attempts to acquire us.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for our common stock is ChaseMellon
Shareholder Services.
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SHARES AVAILABLE FOR FUTURE SALE
Following this offering, we will have 87,769,782 shares of our common stock
outstanding, assuming the underwriters do not exercise their over-allotment
options (89,684,675 shares if the underwriters exercise their over-allotment
options in full). All of the shares (including any subject to the over-allotment
option) we sell in this offering will be freely tradable without restriction or
further registration under the Securities Act, except that any shares purchased
by our affiliates, as that term is defined in Rule 144 under the Securities Act,
may generally only be sold in compliance with the limitations of Rule 144 below.
The remaining 75,003,825 shares of common stock outstanding following this
offering are restricted securities under the terms of the Securities Act. Sales
of several of the restricted shares to be outstanding upon completion of this
offering will be limited by lock-up agreements as described under
"Underwriting."
RULE 144
In general, under Rule 144, a stockholder who owns restricted shares that
have been outstanding for at least one year is entitled to sell, within any
three-month period, a number of these restricted shares that does not exceed the
greater of:
o 1% of the then outstanding shares of common stock, or approximately
877,697 shares immediately after this offering, or
o the average weekly trading volume in the common stock on the Nasdaq
National Market during the four calendar weeks preceding filing of a
notice on Form 144 with respect to the sale.
In addition, our affiliates must comply with the restrictions and
requirements of Rule 144, other than the one-year holding period requirement, to
sell shares of common stock that are not restricted securities. Sales under Rule
144 are also governed by manner of sale provisions and notice requirements, and
current public information about us must be available.
Under Rule 144(k), a stockholder who is not currently, and who has not been
for at least three months before the sale, an affiliate of ours and who owns
restricted shares that have been outstanding for at least two years may resell
these restricted shares without compliance with the above requirements. The one-
and two-year holding periods described above do not begin to run until the full
purchase price is paid by the person acquiring the restricted shares from us or
an affiliate of ours.
RULE 701
In general, under Rule 701 of the Securities Act as currently in effect,
any of our employees, consultants or advisors who purchases shares of our common
stock from us in connection with a compensatory stock or option plan or other
written agreement is eligible to resell those shares 90 days after the effective
date of this offering in reliance on Rule 144, but without compliance with some
of the restrictions, including the holding period, contained in Rule 144.
STOCK OPTIONS
As soon as practicable after this offering, we intend to file a
registration statement under the Securities Act covering 8,000,000 shares of
common stock reserved for issuance under our 1999 Stock Option Plan, and we
expect the registration statement to become effective upon filing. As of
November 30, 1999, options to purchase 6,041,804 shares of common stock were
outstanding. Accordingly, shares registered under this registration statement
will, provided options have vested and Rule 144 volume limitations applicable to
our affiliates are complied with, be available for sale in the open market
shortly after this offering closes, and in the case of our officers, directors
and stockholders who have entered into lock-up agreements, after the 180-day
lock-up agreements expire.
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UNITED STATES TAX CONSEQUENCES TO
NON-U.S. HOLDERS OF COMMON STOCK
GENERAL
The following is a general discussion of the principal U.S. federal income
and estate tax consequences of the ownership and disposition of our common
stock that may be relevant to you if you are a non-U.S. Holder. For purposes of
this discussion, a non-U.S. holder is a beneficial owner of common stock that
is any of the following for U.S. federal income tax purposes:
o a nonresident alien individual;
o a foreign corporation;
o a nonresident alien fiduciary of a foreign estate or trust; or
o 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 of this prospectus. All of these are subject to
change, possibly with retroactive effect, or different interpretations. If you
are considering buying our common stock you should consult your own tax advisor
about current and possible future tax consequences of holding and disposing of
our common stock in your particular situation.
DISTRIBUTIONS
If distributions are paid on the shares of our 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, and then will
constitute a return of capital that is applied against your basis in the common
stock to the extent these distributions exceed those earnings and profits.
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 the reduced 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, 2000 may be on a
less than the gross amount of the distribution if the distribution exceeds a
reasonable estimate made by us 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.
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Under current U.S. Treasury regulations, dividends paid before January 1,
2001 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, 2000 eliminate this presumption, subject to transition rules, and a non-U.S.
holder who wishes to claim the benefit of an applicable treaty rate, and avoid
back-up withholding, as discussed below, would be required to satisfy applicable
certification and other requirements.
For dividends paid after December 31, 2000, 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 Internal Revenue Service certification procedures or, in the case
of payments made outside the U.S. with respect to an offshore account,
documentary evidence procedures. Further, to claim the benefit of a reduced rate
of withholding under a tax treaty for dividends paid after December 31, 2000, a
non-U.S. holder must comply with modified IRS certification requirements.
Special rules also apply to dividend payments made after December 31, 2000 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, 2000 dividends on your
possible investment in our common stock.
A non-U.S. holder eligible for a reduced rate of U.S. withholding tax under
an income tax treaty 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 generally will 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 applies:
o 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 specified items, unless it qualifies for a lower rate under an
applicable income tax treaty and duly demonstrates that it qualifies.
o 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 sale or other disposition, and specified 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, despite the fact that the individual is not considered a
resident of the United States.
o 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 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
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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 our common stock.
FEDERAL ESTATE TAX
Common stock owned by an individual who is not a citizen or resident, as
defined for U.S. estate tax purposes, of the United States at the time of death
will be included in that individual'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 that holder and the tax
withheld with respect to those 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 specified payments to persons that fail to furnish
required information under the U.S. information reporting requirements. See the
discussion under "--Distributions" above for rules regarding backup withholding
on dividends paid to non-U.S. holders, after December 31, 2000.
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 our 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
our common stock effected outside the U.S. if that broker:
o is a U.S. person;
o is a foreign person that derives 50% or more of its gross income for
specified periods from the conduct of a trade or business in the U.S.;
o is a "controlled foreign corporation" as defined in the Internal Revenue
Code; or
o is a foreign partnership with specified U.S. connections, for payments
made after December 31, 2000.
Information reporting requirements will not apply in the above cases if the
broker has documentary evidence in its records that the beneficial owner is a
non-U.S. holder and specified conditions are met or the beneficial owner
otherwise establishes an exemption.
Payment by or though a U.S. office of a broker of the proceeds of a sale of
our 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 THE PRINCIPAL TAX CONSEQUENCES OF
THE OWNERSHIP, SALE OR OTHER DISPOSITION OF OUR COMMON STOCK BY NON-U.S. HOLDERS
FOR U.S. FEDERAL INCOME AND ESTATE TAX PURPOSES. YOU ARE URGED TO CONSULT YOUR
OWN TAX ADVISOR WITH RESPECT TO THE PARTICULAR TAX CONSEQUENCES TO YOU OF
OWNERSHIP AND DISPOSITION OF OUR COMMON STOCK, INCLUDING THE EFFECT OF ANY
STATE, LOCAL, FOREIGN OR OTHER TAX LAWS.
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UNDERWRITING
We intend to offer in the U.S. and Canada and elsewhere through the
international managers. Merrill Lynch, Pierce, Fenner & Smith Incorporated,
Morgan Stanley & Co. Incorporated and Bear, Stearns & Co. Inc. are acting as
U.S. representatives of the U.S. underwriters named below. Subject to the terms
and conditions set forth in a U.S. purchase agreement between our company and
the U.S. underwriters, and concurrently with the sale of 2,553,191 shares to
the international managers, we have agreed to sell to the U.S. underwriters,
and the U.S. underwriters severally have agreed to purchase from us, the number
of shares listed opposite their names below.
<TABLE>
<CAPTION>
NUMBER
U.S. UNDERWRITER OF SHARES
- ------------------------------------------------ -----------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated ................. .......
Morgan Stanley & Co. Incorporated .........
Bear, Stearns & Co. Inc. ..................
Total ......................... ....... 10,212,766
==========
</TABLE>
We have also entered into an international purchase agreement with the
international managers for sale of the shares outside the U.S. and Canada for
whom Merrill Lynch International, Morgan Stanley & Co International Limited and
Bear, Stearns International Limited are acting as lead managers. Subject to the
terms and conditions in the international purchase agreement, and concurrently
with the sale of 10,212,766 shares to the U.S. underwriters pursuant to the U.S.
purchase agreement, we have agreed to sell to the international managers, and
the international managers severally have agreed to purchase 2,553,191 shares
from us. The initial public offering price per share and the total underwriting
discount per share are identical under the U.S. purchase agreement and the
international purchase agreement.
The U.S. underwriters and the international managers have agreed to
purchase all of the shares sold under the U.S. and international purchase
agreements if any of the shares are purchased. If an underwriter defaults, the
U.S. and international purchase agreements provide the purchase commitments of
the nondefaulting underwriters may be increased or the purchase agreements may
be terminated. The closings for the sale of shares to be purchased by the U.S.
underwriters and the international managers are conditioned on one another.
We have agreed to indemnify the U.S. underwriters and the international
managers against liabilities specified in the U.S. and international purchase
agreements, including liabilities under the Securities Act, or to contribute to
payments the U.S. underwriters and the international managers may be required
to make in respect of those liabilities.
The underwriters are offering the shares, subject to prior sale, when, as
and if issued to and accepted by them, subject to approval of legal matters by
their counsel, including the validity of the shares, and other conditions
contained in the purchase agreements, such as the receipt by the underwriters of
officer's certificates and legal opinions. The underwriters reserve the right to
withdraw, cancel or modify offers to the public and to reject orders in whole or
in part.
COMMISSIONS AND DISCOUNTS
The U.S. representatives have advised us that the U.S. underwriters propose
initially to offer the shares to the public at the initial public offering price
on the cover page of this prospectus and to dealers at that price less a
concession not in excess of $ per share. The underwriters may allow, and the
dealers may reallow, a discount not in excess of $ per share to other dealers.
After this offering, the public offering price, concession and discount may be
changed.
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The following table shows the public offering price, underwriting discount
and proceeds before expenses to SAVVIS. The information assumes either no
exercise or full exercise by the U.S. underwriters and the international
managers of their over-allotment options.
<TABLE>
<CAPTION>
PER SHARE WITHOUT OPTION WITH OPTION
----------- ---------------- ------------
<S> <C> <C> <C>
Public offering price ......................... $ $ $
Underwriting discount ......................... $ $ $
Proceeds, before expenses, to SAVVIS .......... $ $ $
</TABLE>
The expenses of the offering, not including the underwriting discount, are
estimated at $1,950,000 and are payable by SAVVIS.
OVER-ALLOTMENT OPTION
We have granted options to the U.S. underwriters to purchase up to
1,531,915 additional shares at the public offering price less the underwriting
discount. The U.S. underwriters may exercise this option for 30 days from the
date of this prospectus solely to cover any over-allotments. If the underwriters
exercise these options, each will be obligated, subject to conditions contained
in the purchase agreements, to purchase a number of additional shares
proportionate to that U.S. underwriter's initial amount reflected in the above
table.
We have also granted options to the international managers, exercisable for
30 days from the date of this prospectus up to 382,978 additional shares to
cover any over-allotments on terms similar to those granted to the U.S.
underwriters.
INTERSYNDICATE AGREEMENT
The U.S. underwriters and the international managers have entered into an
intersyndicate agreement that provides for the coordination of their activities.
Under the intersyndicate agreement, the U.S. underwriters and the international
managers may sell shares to each other for purposes of resale at the initial
public offering price, less an amount not greater than the selling concession.
Under the intersyndicate agreement, the U.S. underwriters and any dealer to whom
they sell shares will not offer to sell or sell shares to persons who are
non-U.S. or non-Canadian persons or to persons they believe intend to resell to
persons who are non-U.S. or non-Canadian persons, except in the case of
transactions under the intersyndicate agreement. Similarly, the international
managers and any dealer to whom they sell shares will not offer to sell or sell
shares to U.S. persons or Canadian persons or to persons they believe intend to
resell to U.S. or Canadian persons, except in the case of transactions under the
intersyndicate agreement.
RESERVED SHARES
At our request, the underwriters have reserved for sale, at the initial
public offering price, up to %, of the shares offered by this prospectus for
sale to some of our directors, officers, employees, business associates and
related persons. If these persons purchase reserved shares, this will reduce the
number of shares available for sale to the general public. Any reserved shares
which are not orally confirmed for purchase within one day of the pricing of
this offering will be offered by the underwriters to the general public on the
same terms as the other shares offered by this prospectus.
We are concurrently offering shares at the initial public offering
price directly to some of our employees pursuant to this prospectus in
jurisdictions outside the U.S. where the underwriters are prohibited by law
from selling the shares. These shares are included in the 10,212,766 shares
being sold pursuant to this prospectus.
NO SALES OF SIMILAR SECURITIES
We and our executive officers and directors and each stockholder who holds
an aggregate of 2% of our outstanding common stock prior to this offering have
agreed, with exceptions, not to sell or transfer any common stock for 180 days
after the date of this prospectus without first obtaining the written consent of
Merrill Lynch. Specifically, we and these other individuals have agreed not to
directly or indirectly
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o offer, pledge, sell or contract to sell any common stock,
o sell any option or contract to purchase any common stock,
o purchase any option or contract to sell any common stock,
o grant any option, right or warrant for the sale of any common stock,
o lend or otherwise dispose of or transfer any common stock,
o request or demand that we file a registration statement related to the
common stock, or
o enter into any swap or other agreement that transfers, in whole or in
part, the economic consequence of ownership of any common stock whether
any such swap or transaction is to be settled by delivery of shares or
other securities, in cash or otherwise.
This lockup provision applies to common stock and to securities convertible
into or exchangeable or exercisable for or repayable with common stock. It also
applies to common stock owned now or acquired later by the person executing the
agreement or for which the person executing the agreement later acquires the
power of disposition.
QUOTATION ON THE NASDAQ NATIONAL MARKET
We expect the shares to be approved for quotation on the Nasdaq National
Market, subject to notice of issuance under the symbol "SVVS."
Before this offering, there has been no public market for our common stock.
The initial public offering price will be determined through negotiations
between our company and the U.S. representatives and lead managers. In addition
to prevailing market conditions, the factors to be considered in determining the
initial public offering price are:
o the valuation multiples of publicly traded companies that the U.S.
representatives and lead managers believe to be comparable to us,
o our financial information,
o the history of, and the prospects for, our company and the industry in
which we compete,
o an assessment of our management, its past and present operations, and the
prospects for, and timing of, our future revenues,
o the present state of our development, and
o the above factors in relation to market values and various valuation
measures of other companies engaged in activities similar to ours.
An active trading market for the shares may not develop. It is also
possible that after the offering the shares will not trade in the public market
at or above the initial public offering price.
The underwriters do not expect to sell more than 5% of the shares in the
aggregate to accounts over which they exercise discretionary authority.
PRICE STABILIZATION, SHORT POSITIONS AND PENALTY BIDS
Until the distribution of the shares is completed, SEC rules may limit the
underwriters and selling group members from bidding for and purchasing our
common stock. However, the representatives may engage in transactions that
stabilize the price of the common stock, such as bids or purchases to peg, fix
or maintain that price.
If the underwriters create a short position in the common stock in
connection with the offering, i.e., if they sell more shares than are listed on
the cover page of this prospectus, the U.S. representatives may reduce that
short position by purchasing common stock in the open market. The U.S.
representatives may also elect to reduce any short position by exercising all or
part of the
86
<PAGE>
over-allotment option described above. Purchases of the common stock to
stabilize its price or to reduce a short position may cause the price of the
common stock to be higher than it might be in the absence of such purchases.
The U.S. representatives may also impose a penalty bid on underwriters and
selling group members. This means that if the U.S. representatives purchase
shares in the open market to reduce the underwriters' short position or to
stabilize the price of such shares, they may reclaim the amount of the selling
concession from the underwriters and selling group members who sold those
shares. The imposition of a penalty bid may also affect the price of the shares
in that it discourages resales of those shares.
Neither we nor any of the underwriters makes any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of the common stock. In addition, neither
we nor any of the underwriters makes any representation that the U.S.
representatives or the lead managers will engage in such transactions or that
these transactions, once commenced, will not be discontinued without notice.
OTHER RELATIONSHIPS
The underwriters and their respective affiliates provide and have provided
banking, advisory and other financial services to SAVVIS and Bridge and certain
of their affiliates in the ordinary course of the underwriters' businesses and
may do so from time to time in the future. The underwriters have received
customary compensation in connection with these transactions.
An affiliate of Morgan Stanley & Co. Incorporated owns 1,396,177 shares of
Bridge's class A common stock. Pursuant to an offer made by Bridge to all of its
accredited investor shareholders, on September 10, 1999 an affiliate of Morgan
Stanley Co. Incorporated purchased 457,507 units from Bridge for an aggregate
purchase price of $915,014. Each unit consists of one share of common stock of
SAVVIS and $1.50 principal amount of Bridge subordinated notes.
On October 12, 1999, Goldman Sachs Credit Partners L.P. and Merrill Lynch
Capital Corporation, an affiliate of Merrill Lynch, committed to make available
to Bridge up to $100 million in aggregate principal amount of senior
subordinated bridge loans, subject to terms and conditions set forth in the
commitment letter. On November 24, 1999, Goldman, Sachs and Merrill Lynch
Capital loaned $50 million to Bridge pursuant to a bridge loan agreement. If the
bridge loan is not repaid 12 months after closing date, Bridge is required to
deliver warrants to purchase Bridge common stock to Goldman, Sachs and Merrill
Lynch Capital. Each of Goldman, Sachs and Merrill Lynch Capital received
customary compensation in connection with this transaction.
VALIDITY OF THE SHARES
The validity of the shares of common stock offered through this prospectus
will be passed upon for us by Hogan & Hartson L.L.P., New York, New York.
Several legal matters relating to the securities will be passed upon for the
underwriters by Shearman & Sterling, New York, New York.
EXPERTS
The consolidated financial statements of SAVVIS Communications Corporation,
a Delaware Corporation, as of December 31, 1998 and for the year ended December
31, 1998 included in this prospectus have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their report appearing in this prospectus,
and are included in reliance upon the report of such firm given upon their
authority as experts in accounting and auditing.
The consolidated financial statements of SAVVIS Communications Corporation,
a Missouri corporation and a wholly owned subsidiary of Savvis Communications
Corporation, a Delaware corporation, formerly known as Savvis Holdings
Corporation, as of December 31, 1997 and for each of the two years in the period
ended December 31, 1997, included in this prospectus have been
87
<PAGE>
audited by Ernst & Young, LLP, independent auditors, as set forth in their
reports dated April 23, 1998 (which contain an explanatory paragraph describing
conditions that raise substantial doubt about the company's ability to continue
as a going concern) appearing in this prospectus, and are included in reliance
on such reports given upon the authority of such firm as experts in accounting
and auditing.
CHANGE IN CERTIFYING ACCOUNTANTS
Upon our acquisition by Bridge on April 7, 1999, Deloitte & Touche LLP,
Bridge's independent accountants, replaced Ernst & Young LLP who had been our
independent accountants for the years ended December 31, 1996 and 1997. Ernst &
Young LLP's reports on our financial statements for each of those years were
unqualified, but included an explanatory paragraph surrounding uncertainties
regarding our ability to continue as a going concern. The decision to change
auditors was precipitated by the acquisition and was approved by the board of
directors.
During the two years in the period ended December 31, 1997, and subsequent
thereto, there were no disagreements with Ernst & Young LLP on any matter of
accounting principles or practices, financial statement disclosure, or auditing
scope or procedure, which disagreements, if not resolved to their satisfaction,
would have caused them to make reference to the subject matter of the
disagreements in connection with their reports.
WHERE YOU MAY FIND ADDITIONAL INFORMATION
We have filed with the SEC a registration statement on Form S-1 under the
Securities Act with respect to the common stock to be sold in this offering.
This prospectus does not contain all of the information set forth in the
registration statement and the exhibits and schedules to the registration
statement. For further information with respect to us and the common stock to be
sold in this offering, we refer you to the registration statement and the
exhibits and schedules filed as part of the registration statement. Statements
contained in this prospectus concerning the contents of any contract or any
other document are not necessarily complete. If a contract or document has been
filed as an exhibit to the registration statement, we refer you to the copy of
the contract or document that has been filed. Each statement in this prospectus
relating to a contract or document filed as an exhibit is qualified in all
respects by the filed exhibit. The registration statement, including exhibits
and schedules filed with it, may be inspected without charge at the SEC's public
reference rooms at:
o Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549;
o Seven World Trade Center, 13th Floor, New York, New York 10048; or
o Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661.
Copies of all or any part of the registration statement may be obtained
from such office after payment of fees prescribed by the SEC. Please call the
SEC at 1-800-SEC-0330 for further information on the operation of the public
reference rooms. The SEC also maintains a Web site that contains registration
statements, reports, proxy and information statements and other information
regarding registrants that file electronically with the SEC at
http://www.sec.gov.
We intend to provide our stockholders with annual reports containing
consolidated financial statements audited by an independent public accounting
firm.
88
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
SAVVIS COMMUNICATIONS CORPORATION
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Consolidated Balance Sheet as of September 30, 1999 (unaudited) .......................... F-2
Consolidated Statements of Operations for the nine month period ended September 30, 1998,
the period January 1 to April 6, 1999 and the period April 7 to September 30, 1999
(unaudited).............................................................................. F-3
Consolidated Statement of Changes in Stockholders' Equity for the period January 1, 1999
to September 30, 1999 (unaudited) ....................................................... F-4
Consolidated Statements of Cash Flows for the nine month period ended September 30, 1998,
the period January 1 to April 6, 1999 and the period April 7 to September 30, 1999
(unaudited).............................................................................. F-5
Notes to Consolidated Financial Statements (unaudited) .................................... F-6
Independent Auditors' Report - Deloitte & Touche LLP ...................................... F-10
Independent Auditors' Report - Ernst & Young LLP .......................................... F-11
Consolidated Balance Sheets as of December 31, 1997 and 1998 .............................. F-12
Consolidated Statements of Operations for the years ended December 31, 1996, 1997 and F-13
1998
Consolidated Statements of Changes in Stockholders' Equity (Deficit) for the years ended
December 31, 1996, 1997 and 1998 ........................................................ F-14
Consolidated Statements of Cash Flows for the years ended December 31, 1996, 1997 and
1998..................................................................................... F-15
Notes to Consolidated Financial Statements ................................................ F-16
</TABLE>
F- 1
<PAGE>
SAVVIS COMMUNICATIONS CORPORATION
CONSOLIDATED BALANCE SHEET - UNAUDITED
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SEPTEMBER 30,
1999
--------------
<S> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ............................................................. $ 1,983
Accounts receivable, less allowance for doubtful accounts of $355...................... 2,106
Prepaid expenses ...................................................................... 479
Other current assets .................................................................. 10
---------
Total current assets ............................................................... 4,578
PROPERTY AND EQUIPMENT -- Net (Note 3) ................................................... 5,995
GOODWILL AND INTANGIBLE ASSETS -- Net of Accumulated amortization of $8,144............... 30,322
OTHER LONG-TERM ASSETS ................................................................... 527
---------
TOTAL .............................................................................. $ 41,422
=========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable ...................................................................... $ 5,089
Accrued expenses ...................................................................... 1,095
Due to Bridge Information Systems ..................................................... 17,270
Current portion of capital lease obligations (Note 4) ................................. 1,986
Other accrued liabilities ............................................................. 2,385
---------
Total current liabilities .......................................................... 27,825
CAPITAL LEASE OBLIGATIONS, LESS CURRENT PORTION (NOTE 4) ................................. 3,981
OTHER ACCRUED LIABILITIES ................................................................ 444
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, $.01 par value, 125,000,000 shares authorized, 72,000,000 shares issued
and outstanding ...................................................................... 720
Additional paid-in capital ............................................................ 31,026
Accumulated deficit ................................................................... (22,574)
---------
Total stockholders' equity ......................................................... 9,172
---------
TOTAL .............................................................................. $ 41,422
=========
</TABLE>
See notes to unaudited consolidated financial statements.
F-2
<PAGE>
SAVVIS COMMUNICATIONS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS - UNAUDITED
(DOLLARS IN THOUSANDS EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
PREDECESSOR SUCCESSOR
--------------------------------- --------------
NINE MONTHS PERIOD FROM
ENDED PERIOD FROM APRIL 7 TO
SEPTEMBER 30, JANUARY 1 TO SEPTEMBER 30,
1998 APRIL 6, 1999 1999
--------------- --------------- --------------
<S> <C> <C> <C>
REVENUES ............................................... $ 8,914 $ 5,440 $ 12,192
DIRECT COSTS AND OPERATING EXPENSES:
Data communications and operations .................... 14,609 6,429 13,095
Selling, general and administrative ................... 7,353 4,751 11,142
Depreciation and amortization ......................... 1,500 793 9,747
---------- ---------- -----------
Total direct costs and operating expenses ........... 23,462 11,973 33,984
---------- ---------- -----------
LOSS FROM OPERATIONS ................................... (14,548) (6,533) (21,792)
INTEREST EXPENSE, NET .................................. 113 135 782
---------- ---------- -----------
LOSS BEFORE INCOME TAXES ............................... (14,661) (6,668) (22,574)
INCOME TAXES ........................................... -- -- --
---------- ---------- -----------
NET LOSS ............................................... (14,661) (6,668) (22,574)
PREFERRED STOCK DIVIDENDS .............................. (1,208) (628) --
AMORTIZATION OF DEFERRED FINANCING COSTS AND DISCOUNT ON
SERIES C PREFERRED STOCK .............................. (368) (244) --
---------- ---------- -----------
NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS ........... $ (16,237) $ (7,540) $ (22,574)
========== ========== ===========
BASIC AND DILUTED LOSS PER COMMON SHARE ................ $ (11.31) $ (4.51) $ (0.31)
========== ========== ===========
WEIGHTED AVERAGE SHARES OUTSTANDING .................... 1,435,792 1,670,709 72,000,000
========== ========== ===========
</TABLE>
See notes to unaudited consolidated financial statements.
F-3
<PAGE>
SAVVIS COMMUNICATIONS CORPORATION
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY - UNAUDITED
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
NUMBER OF SHARES AMOUNTS TOTAL
-------------------------- ------------------------------------------------------- -------------
ADDITIONAL DEFERRED
COMMON TREASURY COMMON PAID-IN COMPEN- ACCUMULATED TREASURY
STOCK STOCK STOCK CAPITAL SATION DEFICIT STOCK
------------ ------------- -------- ------------ --------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1999 ..... 1,753,751 127,838 $ 2 $ 5,954 $ (78) $ (40,971) $ (64) $ (35,157)
Issuance of common stock upon
exercise of stock options .. 68,333 -- -- 28 -- -- -- 28
Recognition of deferred
compensation ............... -- -- -- -- 78 -- -- 78
Acquisition of the Company by
Bridge Information Systems . 70,177,916 (127,838) 718 25,044 40,971 64 66,797
Net loss .................... (22,574) (22,574)
--------- ---------
BALANCE, SEPTEMBER 30, 1999 .. 72,000,000 -- $720 $31,026 $ -- $ (22,574) $ -- $ 9,172
========== ======== ==== ======= ===== ========= ===== =========
</TABLE>
See notes to unaudited consolidated financial statements.
F-4
<PAGE>
SAVVIS COMMUNICATIONS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS -- UNAUDITED
(IN THOUSANDS)
<TABLE>
<CAPTION>
PREDECESSOR SUCCESSOR
--------------------------------------- -------------------
NINE MONTHS PERIOD FROM
ENDED SEPTEMBER PERIOD FROM JANUARY APRIL 7 TO
30, 1998 1 TO APRIL 6, 1999 SEPTEMBER 30, 1999
----------------- --------------------- -------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net cash used in operating activities ................. $ (15,530) $ (6,185) $ (9,945)
INVESTING ACTIVITIES:
Capital expenditures -- net ........................... (1,308) (275) (855)
Acquisition of IXA, net of cash acquired .............. (750) -- --
--------- -------- --------
Net cash used in investing activities ............... (2,058) (275) (855)
--------- -------- --------
FINANCING ACTIVITIES:
Purchase of treasury stock ............................ (15) -- --
Proceeds from common stock issuance ................... 5 -- --
Exercise of stock options ............................. -- 28 --
Proceeds from Series C preferred stock issuance........ 22,500 -- --
Proceeds from issuance of Series C warrants ........... 3,700 -- --
Payment of Series C deferred financing costs .......... (1,747) -- --
Principal payments under capital lease obligations..... (503) (182) (381)
Proceeds from issuance of senior convertible
bridge notes ........................................ 1,800 -- --
Principal payments on borrowings from senior
bridge notes ........................................ (1,053) -- --
Proceeds from borrowings from Bridge
Information Systems Notes ........................... -- 4,700 12,570
Principal payments on borrowings from bank
notes payable ....................................... (242) (13) --
--------- -------- --------
Net cash provided by financing activities ............. 24,445 4,533 12,189
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS ........................................... 6,857 (1,927) 1,389
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD ......... 1,398 2,521 594
--------- -------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD ............... $ 8,255 $ 594 $ 1,983
========= ======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Non-cash investing and financing activities:
Debt incurred under capital lease obligations ......... $ 1,059 $ 2,634 $ 1,153
Preferred stock dividends accrued ..................... 1,208 628 --
Amortization of deferred financing costs .............. 158 76 --
Accretion of preferred stock discount ................. 210 168 --
Senior convertible notes exchanged for preferred
stock ............................................... 9,200 -- --
Issuance of common stock in acquisition of IXA ........ 583 -- --
Cash paid during the year for interest ................ 165 99 267
</TABLE>
See notes to unaudited consolidated financial statements.
F-5
<PAGE>
SAVVIS COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- UNAUDITED
(DOLLARS IN THOUSANDS EXCEPT SHARE AMOUNTS)
1. PRESENTATION
The accompanying unaudited consolidated financial statements of Savvis
Communications Corporation, a Delaware Corporation, formerly Savvis Holdings
Corporation (the "Company" or "Savvis"), have been prepared in accordance with
generally accepted accounting principles for interim financial information and
with the instructions of Article 10 of Regulation S-X. Accordingly, the interim
financial statements do not include all of the information and footnotes
required by generally accepted accounting principles for annual financial
statements.
On April 7, 1999 (the "acquisition date"), Savvis was acquired by a
wholly-owned subsidiary of Bridge Information Systems ("Bridge") in an all
stock transaction that was accounted for as a "purchase transaction" under
Accounting Principles Board Opinion No. 16. Pursuant to the terms of the
transaction, Bridge issued approximately 3,011,000 shares of its common stock,
together with 239,000 options and warrants to purchase its common stock, in
exchange for all the outstanding equity interests of Savvis. This transaction
was valued at approximately $31,746 based on the fair value of the securities
exchanged, as determined by independent valuation specialists, and the direct
costs of the acquisition. In accordance with the accounting requirements of the
Securities and Exchange Commission, purchase transactions that result in one
entity becoming substantially wholly-owned by the acquirer establish a new
basis of accounting in the acquired entity's records for the purchased assets
and liabilities. Thus, the purchase price has been allocated to the underlying
assets purchased and liabilities assumed based on their estimated fair market
values at the acquisition date. Solely as a result of the application of fair
value accounting, intangibles, goodwill, other liabilities and additional
paid-in capital were increased, and fixed assets were decreased in the Savvis
unaudited consolidated financial satements.
On September 10, 1999, Bridge sold in a private placement approximately
25% of its equity ownership in Savvis to existing shareholders of Bridge.
In the opinion of the Company's management, the accompanying unaudited
consolidated financial statements contain all adjustments, including all normal
recurring adjustments, necessary to present fairly the Company's financial
position as of September 30, 1999 and the results of operations and cash flows
for the period subsequent to the Company's purchase by Bridge through September
30 (successor) and from January 1, 1999 through April 6, 1999 (predecessor) and
the nine months ended September 30, 1998 (predecessor). The results of
operations are not necessarily indicative of results that may be expected for
any other interim period or for the full year.
The financial statements should be read in conjunction with the
consolidated financial statements and notes thereto for the three years in the
period ended December 31, 1998 included elsewhere in this prospectus. Except as
described above, the accounting policies used in preparing these consolidated
financial statements are the same as those described in the consolidated
financial statements for the three years in the period ended December 31, 1998.
F-6
<PAGE>
SAVVIS COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- UNAUDITED
(DOLLARS IN THOUSANDS EXCEPT SHARE AMOUNTS)- (CONTINUED )
2. BUSINESS COMBINATIONS
As discussed in Note 1, Bridge issued approximately 3,011,000 shares of
its common stock, together with 239,000 options and warrants to purchase its
common stock, for all the outstanding equity interests of Savvis. The total
cost of the acquisition exceeded the fair value of Savvis' net assets by
$23,767 which is being amortized over 3 years. In addition, a portion of the
purchase price was allocated to the following tangible and intangible assets:
<TABLE>
<CAPTION>
ALLOCATED
ASSET PURCHASE PRICE LIFE
- -------------------------------- ---------------- ------------
<S> <C> <C>
Property and equipment ......... $5,600 36-60months
Trademark ...................... 9,500 36
Non-compete agreement .......... 2,700 12
Other intangibles .............. 2,500 12
</TABLE>
Also, in connection with the acquisition, Bridge assumed liabilities of
Savvis in the amount of $12,321.
3. PROPERTY AND EQUIPMENT
Property and equipment consisted of the following at September 30, 1999:
<TABLE>
<S> <C>
Computer equipment ................................ $ 641
Communications equipment .......................... 1,025
Purchased software ................................ 104
Furniture and fixtures ............................ 334
Leasehold improvements ............................ 372
Equipment under capital lease obligations ......... 5,079
--------
7,555
Less: accumulated depreciation .................... (1,560)
--------
Property and equipment, net ....................... $ 5,995
========
</TABLE>
4. NOTES PAYABLE AND CAPITAL LEASE OBLIGATIONS
Notes payable consisted of borrowings by Savvis from Bridge. The
outstanding balance on the notes was $17,270 at September 30, 1999 and interest
accrues at a rate of 8% per annum. The carrying value of the note approximates
fair value at September 30, 1999.
F-7
<PAGE>
SAVVIS COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- UNAUDITED
(DOLLARS IN THOUSANDS EXCEPT SHARE AMOUNTS)- (CONTINUED )
4. NOTES PAYABLE AND CAPITAL LEASE OBLIGATIONS--(CONTINUED)
Savvis leases various equipment under capital leases. Future minimum lease
payments under capital leases are as follows at September 30, 1999:
<TABLE>
<S> <C>
1999 (Three months) ............................ $ 370
2000 ........................................... 2,948
2001 ........................................... 2,940
2002 ........................................... 634
--------
Total capital lease obligations ............. 6,892
Less amount representing interest .............. (925)
Less current portion ........................... (1,986)
--------
Long-term capital lease obligations ......... $ 3,981
========
</TABLE>
5. STOCK SPLIT
On July 22, 1999, the Board of Directors of the successor company declared
a 72,000-for-1 stock split on the Company's shares of common stock. As a
result, the Company had 125 million shares authorized, 72 million shares issued
and outstanding with a $.01 par value for each share of common stock. All
references to shares outstanding for the successor company have been adjusted
retroactively for the stock split.
6. STOCK OPTION ACTIVITY
Upon Bridge's acquisition of the Company on April 7, 1999, all outstanding
Savvis stock options were exchanged for Bridge stock options and included as
part of the purchase consideration. Subsequently, on July 22 1999, the Company's
Board of Directors adopted a new stock option plan and authorized 8 million
stock options to be granted under the plan. Between July and September, 1999,
the Company granted options to purchase 3,674,000 shares of its common stock to
certain employees of Bridge. In that same period, the Company granted options to
purchase up to 2,389,840 shares of its common stock to certain of its employees.
The Company has elected to follow APB Opinion No. 25, Accounting for Stock
Issued to Employees ("APB 25") and related interpretations in accounting for
its employee stock option plan. Under the provisions of APB 25, no compensation
expense was recorded as the $.50 exercise price approximated the estimated fair
value of the stock at the date of the grant, as determined by an independent
valuation specialist. Pro forma information regarding net income is required by
SFAS No. 123 and has been determined as if the Company had accounted for its
employee stock options under the fair value method of SFAS No. 123. The fair
value of these options was estimated at the date of grant using the minimum
value method. Under this method, the expected volatility of the Company's
common stock is not estimated, as there is no market for the Company's common
stock in which to monitor stock price volatility. The calculation of the fair
value of the options granted assumed a risk-free interest rate of approximately
5.0%, an assumed dividend yield of zero, and an expected life of the options of
three years. The weighted average fair value of options granted was $.07. For
purposes of pro forma disclosures, the estimated fair value of the options is
amortized to expense over the options' estimated vesting period.
Had compensation cost for the Company's stock option plan been determined
consistent with the provisions of SFAS No. 123 based on the fair value at the
grant date, the Company's pro forma net loss would not have been significantly
different than the net loss reported.
F-8
<PAGE>
SAVVIS COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- UNAUDITED
(DOLLARS IN THOUSANDS EXCEPT SHARE AMOUNTS)- (CONTINUED )
7. RELATED PARTY TRANSACTIONS
In connection with Bridge's acquisition of the Company, as discussed in
Note 1, Bridge has partially funded the Company's operations during 1999 and
has committed to continue to fund the Company's operations through the
remainder of 1999. At September 30, 1999, the Company had amounts payable to
Bridge of $17,270. See Note 8 for a discussion of other relationships between
the Company and Bridge arising from the execution of the Master Establishment
and Transition Agreement and other related agreements.
8. SUBSEQUENT EVENTS
The Board of Directors of SAVVIS has authorized management of the Company
to file a registration statement with the Securities and Exchange Commission
for the initial public offering of the Company's common stock. The Company
contemplates using a portion of the proceeds from the proposed public offering
to finance a portion its purchase of Bridge's Internet protocol network assets
as discussed below. The remaining proceeds will be used to finance growth.
Simultaneously with the completion of the public offering, the Company
will purchase or sublease Bridge's global Internet protocol network assets for
approximately $150,000 less the book value of all the assets not transferred
because of regulatory restrictions (the "Call Assets") (approximately $4,000).
The purchase price of the assets will be paid partially with cash and partially
with a promissory note. For accounting purposes, the assets are to be
transferred from Bridge to Savvis at their historical net book value of
approximately $88,000. The excess of the purchase price over the historical net
book value of the assets transferred is to be accounted for as a reduction of
stockholders' equity. In addition, this agreement establishes a right for
Savvis to purchase the Call Assets at their net book values. At the time any
call right is exercised, such assets will be recorded at their net book value.
At the time of the asset purchase, the Company will also enter into a
10-year network services agreement with Bridge under which the Company will
provide managed data networking services to Bridge. Fees will be based upon the
actual cost to Bridge of operating the network as configured on the date it is
acquired. Fees for additional services provided during the first year beyond
the original network will be based on the estimated cost to provide the
services. After the first year of the agreement the prices for services
provided over the network will be mutually agreed upon or determined by binding
arbitration, except that:
(1) the amount paid to the Company under the agreement during the second
year will not be less than 100% of the rates and charges as determined
for the first year of the agreements;
(2) the amount paid to the Company under the agreement for the third year
of the agreement will not be less than 120% of the rates and charges as
determined for the first year of the agreement;
(3) the amount paid to the Company under the agreement for the fourth,
fifth and sixth years will not be less than 80% of the total amount
paid by Bridge and its subsidiaries for data transport services; and
(4) the amount paid to the Company under the agreement for the seventh
through tenth years will not be less than 60% of the total amount paid
by Bridge and the subsidiaries for data transport services.
Upon transfer of the assets, Bridge is also to provide various services,
including technical support, customer support and project management in the
procurement and installation of equipment. In addition, Bridge is to provide
additional administrative and operational services, such as payroll and
accounting functions, benefit management and office space, until the Company
develops the capabilities to perform these services.
* * * * * *
F-9
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of
Savvis Communications Corporation:
We have audited the accompanying consolidated balance sheet of Savvis
Communications Corporation and subsidiaries, formerly SAVVIS Holdings
Corporation (the "Company") as of December 31, 1998, and the related
consolidated statements of operations, changes in stockholders' deficit, and
cash flows for the year then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of Savvis Communications
Corporation and subsidiaries as of December 31, 1998, and the results of their
operations and their cash flows for the year then ended, in conformity with
generally accepted accounting principles.
/s/ DELOITTE & TOUCHE LLP
St. Louis, Missouri
August 12, 1999
F-10
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors of Savvis Communications Corporation:
We have audited the accompanying consolidated balance sheet of Savvis
Communications Corporation and subsidiaries (the "Company"), a Missouri
corporation and a wholly-owned subsidiary of Savvis Communications Corporation,
a Delaware corporation formerly known as Savvis Holdings Corporation as of
December 31, 1997 and the related consolidated statements of operations,
changes in stockholders' equity (deficit), and cash flows for each of the two
years in the period ended December 31, 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.We conducted our
audits in accordance with generally accepted auditing standards. Those
standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of Savvis Communications
Corporation and subsidiaries as of December 31, 1997 and the results of their
operations and their cash flows for each of the two years in the period ended
December 31, 1997 in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming the
Company will continue as a going concern. The Company has incurred operating
losses and has a working capital deficiency. These conditions raise substantial
doubt about the Company's ability to continue as a going concern. The financial
statements do not include any adjustments to reflect the possible future
effects on the recoverability and classification of assets or the amounts and
classification of liabilities that may result from the outcome of this
uncertainty.
/s/ ERNST & YOUNG, LLP
St. Louis, Missouri
April 23, 1998
F-11
<PAGE>
SAVVIS COMMUNICATIONS CORPORATION
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1997 AND 1998
(DOLLARS IN THOUSANDS EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
1997 1998
------------ ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents .................................................. $ 1,398 $ 2,521
Accounts receivable, less allowance for doubtful accounts of $128 in
1997 and $149 in 1998..................................................... 623 2,649
Prepaid expenses ........................................................... 304 120
Other current assets ....................................................... 29 21
--------- ---------
Total current assets .................................................... 2,354 5,311
PROPERTY AND EQUIPMENT -- Net (Note 6) ...................................... 1,906 4,753
GOODWILL AND INTANGIBLE ASSETS -- Net of accumulated amortization of
$423........................................................................ -- 1,197
OTHER LONG-TERM ASSETS ...................................................... 53 193
--------- ---------
TOTAL ....................................................................... $ 4,313 $ 11,454
========= =========
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable ........................................................... $ 3,993 $ 4,498
Accrued compensation payable ............................................... 326 1,140
Deferred revenue ........................................................... 359 71
Notes payable to bank -- current portion (Note 7) .......................... 220 13
Current portion of capital lease obligations (Note 7) ...................... 318 1,097
Other accrued liabilities ............................................... 274 206
--------- ---------
Total current liabilities ............................................... 5,490 7,025
--------- ---------
CAPITAL LEASE OBLIGATIONS, LESS CURRENT PORTION (NOTE 7) .................... 491 1,649
NOTES PAYABLE TO BANK (NOTE 7) .............................................. 13 --
SENIOR CONVERTIBLE NOTES (NOTE 7) ........................................... 5,400 --
SENIOR CONVERTIBLE BRIDGE NOTES (NOTE 7) .................................... 3,053 --
COMMITMENTS AND CONTINGENCIES (NOTE 11) .....................................
REDEEMABLE PREFERRED STOCK (NOTE 4):
Series A, $.01 par value, 1,000,000 shares authorized, 480,228 issued
and outstanding in 1997 .................................................. 5,261 --
Series A, $.001 par value, 517,410 shares authorized, 502,410 Issued
and outstanding, liquidation preference of $5,345 ........................ -- 5,345
Series B, $.001 par value, 5,649,241 shares authorized, 5,649,241 issued
and outstanding, liquidation preference of $5,649......................... -- 5,649
Series C, $.001 par value, 30,000,000 shares authorized, 30,000,000 issued
and outstanding, liquidation preference of $30,000 -- net of
unamortized discount ..................................................... -- 26,943
STOCKHOLDERS' DEFICIT:
Common stock; $.01 par value, 38,000,000 authorized, 1,000,894 issued
and outstanding in 1997, $.001 par value, 50,000,000 shares
authorized, 1,753,751 issued and outstanding in 1998 ..................... 10 2
Additional paid-in capital ................................................. 1,481 5,954
Accumulated deficit ........................................................ (16,837) (40,971)
Deferred compensation ...................................................... -- (78)
Treasury stock ............................................................. (49) (64)
--------- ---------
Total stockholders' deficit ................................................ (15,395) (35,157)
--------- ---------
TOTAL ....................................................................... $ 4,313 $ 11,454
========= =========
</TABLE>
See notes to consolidated financial statements.
F-12
<PAGE>
SAVVIS COMMUNICATIONS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
(DOLLARS IN THOUSANDS EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
1996 1997 1998
----------- ------------ ------------
<S> <C> <C> <C>
REVENUES:
Service ............................................... $ 194 $ 2,395 $ 12,827
Installation .......................................... 82 317 538
Other ................................................. 14 46 309
-------- --------- ---------
Total revenue ...................................... 290 2,758 13,674
-------- --------- ---------
DIRECT COSTS AND OPERATING EXPENSES:
Data communications and operations .................... 1,044 11,072 20,889
Selling, general and administrative ................... 1,204 5,130 12,245
Depreciation and amortization ......................... 153 631 2,208
-------- --------- ---------
Total direct costs and operating expenses .......... 2,401 16,833 35,342
-------- --------- ---------
LOSS FROM OPERATIONS ................................... (2,111) (14,075) (21,668)
NONOPERATING INCOME (EXPENSE):
Interest income ....................................... -- -- 383
Interest expense ...................................... (60) (427) (458)
-------- --------- ---------
Total nonoperating income (expense) ................ (60) (427) (75)
-------- --------- ---------
LOSS BEFORE INCOME TAXES ............................... (2,171) (14,502) (21,743)
INCOME TAXES (NOTE 10) ................................. -- -- --
-------- --------- ---------
NET LOSS ............................................... (2,171) (14,502) (21,743)
PREFERRED STOCK DIVIDENDS .............................. -- (151) (1,821)
AMORTIZATION OF DEFERRED FINANCING COSTS AND DISCOUNT ON
SERIES C PREFERRED STOCK .............................. -- -- (570)
-------- --------- ---------
NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS ........... $ (2,171) $ (14,653) $ (24,134)
======== ========= =========
BASIC AND DILUTED LOSS PER COMMON SHARE ................ $ (2.42) $ (15.69) $ (16.28)
======== ========= =========
WEIGHTED AVERAGE SHARES OUTSTANDING .................... 895,764 933,922 1,482,151
======== ========= =========
</TABLE>
See notes to consolidated financial statements.
F-13
<PAGE>
SAVVIS COMMUNICATIONS CORPORATION
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
YEARS ENDED DECEMBER 31 1996, 1997 AND 1998
(DOLLARS IN THOUSANDS EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
NUMBER OF SHARES
-----------------------
COMMON TREASURY
STOCK STOCK
------------ ----------
<S> <C> <C>
BALANCE, JANUARY 1, 1996 ............. 776,050 --
Issuance of common stock ............ 224,844 --
Issuance of common stock upon
Exercise of stock options .......... -- --
Net loss ............................
BALANCE, DECEMBER 31, 1996 ........... 1,000,894 --
Purchase of shares for treasury ..... -- 122,838
Dividends declared on Series A
Preferred Stock ....................
Net loss ............................
BALANCE, DECEMBER 31, 1997 ........... 1,000,894 122,838
Transfer to additional paid--in
capital related to change in par
value ..............................
Issuance of common stock ............ 50
Issuance of in-the-money options
Issuance of common stock for
acquisition of IXA ................. 728,575 --
Issuance of common stock upon
exercise of stock options .......... 24,232 --
Dividends declared on Series C
Preferred Stock ....................
Amortization of deferred
financing costs and discount on
Series C Preferred Stock ...........
Purchase of shares for treasury ..... -- 5,000
Issuance of Series C warrants
(Note 3) ...........................
Net loss ............................ -- --
--------- -------
BALANCE, DECEMBER 31, 1998 ........... 1,753,751 127,838
========= =======
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
AMOUNTS
-------------------------------------------------------------------------
ADDITIONAL
COMMON PAID--IN DEFERRED ACCUMULATED TREASURY
STOCK CAPITAL COMPENSATION DEFICIT STOCK TOTAL
-------- ----------- -------------- ------------- --------- -------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1996 ............. $ 8 $ 93 $ -- $ (13) $ -- $ 88
Issuance of common stock ............ 2 1,366 -- -- -- 1,368
Issuance of common stock upon
Exercise of stock options .......... -- 22 -- -- -- 22
Net loss ............................ (2,171) (2,171)
--------- ---------
BALANCE, DECEMBER 31, 1996 ........... 10 1,481 -- (2,184) -- (693)
Purchase of shares for treasury ..... -- (49) (49)
Dividends declared on Series A
Preferred Stock .................... (151) (151)
Net loss ............................ (14,502) (14,502)
--------- ---------
BALANCE, DECEMBER 31, 1997 ........... 10 1,481 -- (16,837) (49) (15,395)
Transfer to additional paid--in
capital related to change in par
value .............................. (9) 9 --
Issuance of common stock ............ 1 -- -- 1
Issuance of in-the-money options 171 (78) -- -- 93
Issuance of common stock for
acquisition of IXA ................. 1 582 -- -- -- 583
Issuance of common stock upon
exercise of stock options .......... -- 10 -- -- -- 10
Dividends declared on Series C
Preferred Stock .................... (1,821) (1,821)
Amortization of deferred
financing costs and discount on
Series C Preferred Stock ........... (570) -- (570)
Purchase of shares for treasury ..... -- (15) (15)
Issuance of Series C warrants
(Note 3) ........................... 3,700 -- 3,700
Net loss ............................ -- -- -- (21,743) -- (21,743)
----- ------ ----- --------- ----- ---------
BALANCE, DECEMBER 31, 1998 ........... $ 2 $5,954 $ (78) $ (40,971) $ (64) $ (35,157)
===== ====== ===== ========= ===== =========
</TABLE>
See notes to consolidated financial statements
F-14
<PAGE>
SAVVIS COMMUNICATIONS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
1996 1997 1998
------------ ------------- -------------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net loss ........................................................... $ (2,171) $ (14,502) $ (21,743)
Reconciliation of net loss to net cash used in Operating ..........
Depreciation and amortization ................................... 153 631 2,208
Gain on early extinguishment of lease obligations ............... -- -- (18)
Compensation expense relating to the issuance of options . -- -- 93
Net changes in operating assets and liabilities - net of effect
of acquisition:
Accounts receivable ............................................ (96) (527) (1,885)
Other current assets ........................................... (33) 4 63
Other assets ................................................... -- (53) (141)
Prepaid expenses ............................................... (53) (250) 183
Accounts payable ............................................... 676 3,316 61
Deferred revenue ............................................... 65 294 (288)
Other accrued liabilities ...................................... 166 585 907
-------- --------- ---------
Net cash used in operating activities ......................... (1,293) (10,502) (20,560)
-------- --------- ---------
INVESTING ACTIVITIES:
Capital expenditures - net ........................................ (884) (697) (1,688)
Acquisition of IXA ................................................ -- -- (750)
-------- --------- ---------
Net cash used in investing activities ......................... (884) (697) (2,438)
-------- --------- ---------
FINANCING ACTIVITIES:
Purchase of treasury stock ........................................ -- (49) (15)
Proceeds from common stock issuance ............................... 1,369 -- 1
Exercise of stock options ......................................... 22 -- 10
Proceeds from Series A preferred stock issuance ................... 500 250 --
Proceeds from Series C preferred stock issuance ................... -- -- 22,500
Proceeds from issuance of Series C warrants ....................... -- -- 3,700
Payment of Series C deferred financing costs ...................... -- -- (1,747)
Principal payments under capital lease obligations ................ (20) (218) (793)
Proceeds from issuance of senior convertible notes ................ -- 5,400 --
Proceeds from issuance of senior convertible bridge notes ......... -- 3,053 1,800
Principal payments on borrowings from senior Convertible
bridge notes .................................................... -- -- (1,053)
Proceeds from borrowings from notes payable ....................... 950 3,725 --
Principal payments on borrowings from bank notes Payable . (81) (137) (282)
-------- --------- ---------
Net cash provided by financing activities ..................... 2,740 12,024 24,121
-------- --------- ---------
NET INCREASE IN CASH AND CASH EQUIVALENTS .......................... $ 563 $ 825 $ 1,123
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR ....................... 10 573 1,398
-------- --------- ---------
CASH AND CASH EQUIVALENTS, END OF YEAR ............................. $ 573 $ 1,398 $ 2,521
======== ========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Non-cash investing and financing activities:
Debt incurred under capital lease obligations ................... $ 277 $ 718 $ 2,835
Forgiveness of capital lease obligations in exchange for
property ....................................................... -- -- 279
Preferred stock dividends ....................................... -- 151 1,821
Amortization of financing costs ................................. -- -- 234
Accretion of preferred stock discount ........................... -- -- 336
Senior convertible notes exchanged for preferred stock .......... -- -- 9,200
Issuance of common stock in acquisition of IXA .................. -- -- 583
Cash paid for interest .......................................... 24 227 262
</TABLE>
See notes to consolidated financial statements.
F-15
<PAGE>
SAVVIS COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
(DOLLARS IN THOUSANDS EXCEPT SHARE AMOUNTS)
1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BUSINESS -- SAVVIS Communications Corporation, a Delaware corporation,
formerly Savvis Holdings Corporation ("Holdings"), together with its wholly
owned subsidiary, Savvis Communications Corporation, a Missouri corporation
("SCC"), and its predecessor company, Savvis Communications Enterprises L.L.C.
("LLC"), are referred to herein collectively as the "Company". The Company was
formed in November 1995 with $101 of capital and commenced commercial
operations in 1996. The Company provides high-speed Internet access and
high-end private Intranet services to corporations throughout the United
States. The Company also offers colocation services, network operations, and
related engineering services.
The Company's operations are subject to risks and uncertainties,
including, among others, actual and prospective competition by entities with
greater financial and other resources, risks associated with the development of
the Internet market, risks associated with growth and domestic expansion, risks
associated with limited experience in the market, technology and regulatory
risks, and dependence upon sole and limited source suppliers.
PRINCIPLES OF CONSOLIDATION -- The Company's consolidated financial
statements include the accounts of Holdings, SCC and LLC. On March 4, 1998 the
Company entered into a transaction, which is discussed below, that modified the
corporate structure so that Holdings became the holding company of SCC.
On July 31, 1997, SCC formed the LLC as a prerequisite to obtaining $5,400
in financing through the issuance of senior convertible promissory notes. The
LLC functioned as SCC's primary operating entity, owning all customer contracts
entered into in connection with the business, from July 30, 1997 until it was
merged back into the Company on April 30, 1998.
Ownership of the LLC was split between Class B shares, of which SCC owned
all 8,750,000 shares, and Class A shares, of which the LLC's senior convertible
promissory noteholders owned all 5,400,000 shares. Both classes of stock had
equal voting rights and liquidation preferences.
No portion of the 1997 net loss of the LLC was assigned to the Class A
minority interest in the LLC, and as such, these financial statements reflect
all of the LLC's 1997 net loss. This treatment was deemed appropriate, as the
minority shareholders interest in the LLC, along with the $5,400 in senior
convertible promissory notes, was converted into Series B convertible preferred
stock of Holdings on March 4, 1998. The LLC was subsequently merged into SCC on
April 30, 1998 and SCC's Class B shares in the LLC and the senior noteholders'
Class A interest in the LLC were terminated. See Note 3 for further discussion
of the corporate reorganization.
All intercompany balances and transactions have been eliminated in
consolidation.
CASH AND CASH EQUIVALENTS -- All highly liquid investments with a maturity
of three months or less are considered to be cash equivalents.
PROPERTY AND EQUIPMENT -- Property and equipment are recorded at cost and
depreciated using the straight-line method over estimated useful lives of three
to five years. Leasehold improvements are amortized over the term of the
related lease.
OTHER ASSETS -- Other assets consist primarily of deposits for network
services.
EQUIPMENT UNDER CAPITAL LEASES -- The Company leases certain of its data
communications equipment and other fixed assets under capital lease agreements.
The assets and liabilities under capital leases are recorded at the lesser of
the present value of aggregate future minimum lease payments, including
estimated bargain purchase options, or the fair value of the assets under
lease. Assets under these capital leases are amortized over the terms of the
leases, which are generally three years.
F-16
<PAGE>
SAVVIS COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS- (CONTINUED)
1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES-
(CONTINUED)
GOODWILL AND INTANGIBLE ASSETS -- Goodwill is being amortized over ten
years and intangible assets over one to two years, all using the straight-line
method. The goodwill life was determined at the acquisition date based on
market and industry factors.
LONG-LIVED ASSETS -- The Company periodically evaluates the net realizable
value of long--lived assets, including intangible assets, goodwill and property
and equipment, relying on a number of factors including operating results,
business plans, economic projections and anticipated future cash flows. An
impairment in the carrying value of an asset is recognized when the expected
future operating cash flows to be derived from the asset are less than its
carrying value. In addition, the Company's evaluation considers nonfinancial
data such as market trends, product and development cycles, and changes in
management's market emphasis. There has been no impairment recognized during
the years ended 1996, 1997 and 1998.
FAIR VALUE OF FINANCIAL INSTRUMENTS -- The fair value of borrowings are
estimated by discounting the future cash flows using borrowing rates for
similar arrangements with similar maturities.
REVERSE STOCK SPLIT -- On September 4, 1997, the Board of Directors of the
Company declared a 1-for-20 reverse stock split on the Company's shares of
common and Series A preferred stock. The par value of shares of common and
Series A preferred stock remained $0.01 per share until the formation of
Holdings in March of 1998, at which time the par value changed to $0.001 per
share. All references in the financial statements referring to shares, per
share amounts, options, and warrants have been adjusted retroactively for the
reverse stock split.
REVENUE RECOGNITION AND DEFERRED REVENUE -- Service revenues consist
primarily of monthly Internet access service fees, which are fixed monthly
amounts. Services were billed one month in advance in both 1996 and 1997. For
all years, any services billed and payments received in advance of providing
services are deferred until the period such services are earned. Equipment
sales and installation charges are recognized when equipment is delivered and
installation is completed.
ADVERTISING COSTS -- Advertising costs are expensed as incurred.
INCOME TAXES -- SCC was originally incorporated as an S Corporation under
the provisions of the Internal Revenue Code. Under S Corporation provisions,
SCC generally did not pay any federal or state corporate income tax on its
taxable income. Instead, SCC's taxable loss was reported by the stockholders on
their individual income tax returns. Effective November 12, 1996, SCC changed
its tax status from an S Corporation to a C Corporation. Accordingly, income
taxes for the Company for fiscal 1998 and 1997 are accounted for under the
liability method, which provides for the establishment of deferred tax assets
and liabilities for the net tax effects of temporary differences between the
carrying amounts of assets and liabilities for financial reporting purposes and
for income tax purposes.
EMPLOYEE STOCK OPTIONS -- The Company accounts for employee stock options
in accordance with Accounting Principles Board (APB) Opinion No. 25, Accounting
for Stock Issued to Employees. Under APB No. 25, the Company recognizes
compensation cost based on the intrinsic value of the equity instrument awarded
as determined at grant date. The Company is also subject to disclosure
requirements under Statement of Financial Accounting Standards ("SFAS") No.
123, Accounting for Stock-Based Compensation which requires pro forma
information as if the fair value method prescribed by SFAS No. 123 had been
applied (see Note 9).
NEW ACCOUNTING STANDARDS -- In June 1997, the Financial Accounting
Standards Board ("FASB") issued Statement of Financial Accounting Standards
("SFAS") No. 131, Disclosures about Segments of an Enterprise and Related
Information, which establishes standards for the way that public enterprises
report information about operating segments in annual financial statements and
F-17
<PAGE>
SAVVIS COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS- (CONTINUED)
1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES-
(CONTINUED)
requires that those enterprises report selected information about operating
segments in interim financial reports issued. SFAS No. 131 is effective for
years beginning after December 15, 1997. The statement has not had an impact on
the Company's financial statement disclosures as its financial statements
reflect how the "chief operating decision maker" manages the business, i.e., as
a single segment.
In June 1997, FASB issued SFAS No. 130, Reporting Comprehensive Income,
which establishes standards for the reporting and display of comprehensive
income and its components in the financial statements. SFAS No. 130 is
effective for years beginning after December 15, 1997. The statement has not
had an impact on the Company's financial statements as the Company has no other
comprehensive income to report.
In February 1997, FASB issued SFAS No. 128, Earnings Per Share, which
replaced primary and fully diluted earnings per share with basic and diluted
earnings per share. SFAS No. 128 is effective for years ending after December
31, 1997. All loss per share amounts for all periods have been presented to
conform to SFAS No. 128. All stock options and warrants outstanding have been
excluded from the computation of diluted loss per share, as their effect would
be antidilutive, and accordingly, there is no reconciliation between basic and
diluted loss per share for each of the years presented.
In April 1998, the American Institute of Certified Public Accountants
issued Statement of Position ("SOP") 98-5, Reporting on the Costs of Start-Up
Activities. This standard requires companies to expense the costs of start-up
activities and organization costs as incurred. In general, SOP 98-5 is
effective for fiscal years beginning after December 15, 1998. The adoption of
SOP 98-5 is not expected to have a material impact on the Company's results of
operations.
In June 1998, FASB issued SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities, which establishes accounting and reporting
standards for derivative instruments and hedging activities. SFAS No. 133 was
amended by SFAS No. 137, which delays the effective date of SFAS No. 133 to
fiscal years and quarters beginning after June 15, 2000. SFAS No. 133 requires
that an entity recognize all derivatives as either assets or liabilities in the
statement of financial position and measure those instruments at fair value.
The Company is assessing the requirements of SFAS No. 133 and the effects, if
any, on the Company's financial position, results of operations and cash flows.
CONCENTRATIONS OF CREDIT RISK -- Financial instruments that potentially
subject the Company to concentrations of credit risk consist principally of
accounts receivable. This risk is limited due to the large number of customers
comprising the Company's customer base. The Company periodically reviews the
credit quality of its customers and generally does not require collateral.
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 accompanying notes. Actual results could differ from those
estimates.
RECLASSIFICATIONS -- Certain 1996 and 1997 information has been
reclassified to conform to the 1998 presentation.
2. SUBSEQUENT EVENTS
PURCHASE BY BRIDGE INFORMATION SYSTEMS, INC. -- On April 7, 1999, the
Company was purchased by Bridge Information Systems, Inc. ("Bridge"). Pursuant
to the terms of the transaction, Bridge issued approximately 3,011,000 shares
of its common stock together with 289,000 options and warrants to purchase its
common stock in exchange for all outstanding equity interests of the Company.
To
F-18
<PAGE>
SAVVIS COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS- (CONTINUED)
2. SUBSEQUENT EVENTS- (CONTINUED)
effect the transaction, the Series A, B and C Preferred Shareholders received
their respective liquidation preferences (see Note 4) in the form of Bridge
common stock. The Company's Series C warrant holders also exercised their
warrants and participated with the other common shareholders and employee
option holders in exchanging their common shares for remaining Bridge common
shares. Series A warrant holders and those holding common warrants with a
strike price per warrant of $4.13 exchanged their warrants for warrants to
purchase Bridge common stock. Company stock options outstanding at the date of
the transaction were converted into options to purchase Bridge common stock.
Subsequent to the purchase, Bridge has the intent to support and fund
operations of Savvis throughout fiscal year 1999.
STOCK OPTION ACTIVITY (UNAUDITED) -- Also on July 22, 1999, the Company's
Board of Directors adopted a new stock option plan and authorized 8 million
stock options to be granted under the plan. Between July and September 1999, the
Company granted options to purchase 3,674,000 shares of the its common stock to
selected employees of Bridge Information Systems, Inc. In that same period, the
Company granted options to purchase up to 2,389,840 shares of its common stock
to selected employees. All of these options were granted pursuant to the 1999
Stock Option Plan.
PRIVATE PLACEMENT (UNAUDITED) -- On September 10, 1999, Bridge, 100%
parent of Savvis, sold in a private placement 18,129,721 shares of Savvis
common stock to Bridge shareholders.
PROPOSED PUBLIC OFFERING OF COMMON STOCK (UNAUDITED) -- The Board of
Directors of SAVVIS has authorized management of the Company to file a
registration statement with the Securities and Exchange Commission for the
initial public offering of the Company's common stock. The Company contemplates
using the proceeds from the proposed public offering to finance a portion of
its purchase of Bridge's Internet protocol network assets for capital
expenditures and general corporate purposes, and to finance its growth.
3. CORPORATE REORGANIZATION AND FINANCIAL TRANSACTIONS
The Company was originally organized in November 1995 and operated as SCC.
Subsequently, the Company entered into the following transactions:
In 1996, SCC issued 46,996 shares of Series A convertible preferred stock
at a price of $10.64 per share. In conjunction with the issuance, 175,047
warrants to purchase Series A preferred stock were issued. The warrants had an
exercise period of five years from the date of issue at an exercise price of
$10.64, which approximated the market value of the stock at the date of
issuance.
Between February 7 and July 31, 1997, SCC entered into the following
transactions:
o Issuance of convertible notes to investors totaling $3,700. These notes,
along with a $500 convertible note issued in 1996 plus accrued interest, were
converted into 409,736 shares of Series A convertible preferred stock at a
price of $10.64 per share on July 31, 1997. The 175,047 warrants to purchase
Series A preferred stock were canceled upon conversion of the notes on July
31, 1997.
On July 31, 1997, SCC formed the LLC, which functioned as SCC's primary
operating entity, as a prerequisite for the following transactions:
o Issuance of senior convertible notes (senior notes) for $5,400. In return for
lending the LLC $5,400, the senior noteholders received 5.4 million Class A
shares of the LLC for an aggregate nominal fee of $1,000. The senior notes
were unsecured, accrued interest at a rate of 8% per annum, and had a term of
five years.
F-19
<PAGE>
SAVVIS COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS- (CONTINUED)
3. CORPORATE REORGANIZATION AND FINANCIAL TRANSACTIONS- (CONTINUED)
Between October 31 and December 31, 1997, LLC entered into the following
transactions:
o Issuance of $3,100 in senior convertible bridge notes ("senior bridge
notes").
o Issuance of 349,228 five-year detachable warrants in conjunction with the
issuance of the senior bridge notes. (See discussion below regarding
subsequent exchange)
o Issuance of 23,496 shares of Series A convertible preferred stock at a price
of $10.64 per share.
During 1998 an additional $1,800 of LLC senior bridge notes were issued.
On March 3, 1998, the Company's owners formed Holdings. At this time,
Holdings entered into the following transactions:
o Issuance of 502,410 shares of Series A Preferred Stock in Holdings in
exchange for all outstanding Series A Preferred Stock of SCC (480,228
shares) plus accrued dividends.
o Issuance of 15,000 warrants to purchase Series A Preferred Stock of Holdings
at $10.64 per share in exchange for an equal amount of Series A Preferred
Stock Warrants of SCC with the same strike price. The exercise period for
these warrants expires on May 29, 2002.
o Conversion of $5,400 in senior notes and accrued interest of $249 to
5,649,241 Class B shares of the LLC. These Class B shares were then
immediately exchanged for an equal number of shares of Series B Preferred
Stock in Holdings. In conjunction with the transaction, the 5.4 million
Class A shares of the LLC were cancelled.
o Issuance of 1,606,682 shares of $.001 par common stock of Holdings in
exchange for all of the $.01 par common stock of SCC.
o Issuance of 22,000,000 shares of Class C Preferred Stock and 7,578,506
detachable Series C common stock warrants of Holdings for $18,200 in cash
and exchange of $3,800 of LLC senior bridge notes. The remaining senior
bridge notes were repaid from the proceeds of the financing.
o Issuance of 349,228 warrants to purchase common stock at a strike price of
$4.13 were exchanged for an equal amount of warrants to purchase common
stock of SCC with the same strike price. The warrants expire on the earlier
of ten years from the date of issuance or five years from the date of an
initial public offering.
On July 1, 1998, Holdings issued an additional 8,000,000 shares of Series
C Preferred Stock and 2,755,821 detachable common stock warrants for $8,000 in
cash.
The Company, based on an independent valuation, assigned $3,700 to the
value of the detachable Series C common stock warrants issued in the March 1998
and July 1998 transactions. The $3,700 was recorded as a discount on the
preferred stock and an increase in additional paid in capital. Financing costs
of $1,800 were recorded as a discount against the preferred stock. This
resulted in $24,600 of value assigned to the Series C Preferred Stock, with the
difference between such value and the $30,000 redemption value being amortized
through the mandatory redemption date. Amortization is being charged to
accumulated deficit.
4. REDEEMABLE PREFERRED STOCK AND STOCK WARRANTS
HOLDINGS SERIES A PREFERRED STOCK -- The Series A Preferred ranks junior
to the Series C Preferred and the Series B Preferred, but senior to all other
classes of stock as to liquidation, dividends, redemptions, and any other
payment or distribution with respect to capital stock. The Series A Preferred
shall be redeemed on December 31, 2003, after (i) all shares of Series C
Preferred have been redeemed by payment in full of the aggregate Series C
liquidation preference and (ii) all
F-20
<PAGE>
SAVVIS COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS- (CONTINUED)
4. REDEEMABLE PREFERRED STOCK AND STOCK WARRANTS - (CONTINUED)
shares of Series B Preferred have been redeemed by payment in full of the
aggregate Series B redemption price. The mandatory redemption price for each
share of the Series A Preferred shall be equal to the greater of the Series A
liquidation preference or the fair market value per share of the Series A
Preferred, as determined in accordance with the Certificate of Incorporation.
Holders of the Series A Preferred shall be entitled to convert each share of
Series A Preferred into 3.5946 shares of common stock. The Series A conversion
ratio is subject to adjustment in connection with certain issuances of capital
stock of the holders and as otherwise set forth in the Certificate of
Incorporation. Each holder of Series A Preferred shall be required to convert
all of its shares of Series A Preferred, at the then -- effective Series A
conversion ratio, upon (i) the vote of 66 2/3 percent of the then --
outstanding shares of Series A Preferred or (ii) upon the demand of the Company
in connection with the public offering and sale of shares of capital stock of
the Company resulting in gross proceeds of at least $10,000. Holders of Series
A Preferred shall be entitled to vote on all matters on which the common
stockholders may vote. Each share of Series A Preferred shall be entitled to
3.5946 votes. The Series A Preferred holders are not entitled to dividends.
HOLDINGS SERIES B PREFERRED STOCK -- The Series B Preferred ranks junior
to the Series C Preferred, but senior to all other classes of the Company's
stock as to liquidation, dividends, redemptions, and any other payment or
distribution with respect to capital stock. The Series B Preferred shall be
redeemed on December 31, 2003 after all shares of Series C Preferred have been
redeemed by payment in full of the aggregate Series C liquidation preference.
The mandatory redemption price for each share of the Series B Preferred shall
be equal to the greater of the Series B liquidation preference or the then --
applicable fair market value per share of the Series B Preferred, as determined
in accordance with the Certificate of Incorporation. At any time, holders of
the Series B Preferred shall be entitled to convert each share of Series B
Preferred into 0.337838 share of common stock. The Series B conversion ratio is
subject to adjustment in connection with certain issuances of capital stock of
the Company and as otherwise set forth in the Certificate of Incorporation.
Each holder of Series B Preferred shall be required to convert all of its
shares of Series B Preferred, at the then--effective Series B conversion ratio,
upon (i) the vote of 66 2/3 percent of the then--outstanding shares of Series B
Preferred and the Series A Preferred (voting together as a class) or (ii) upon
the demand of the Company in connection with the public offering and sale of
shares of capital stock of the Company resulting in gross proceeds of at least
$10,000. Holders of Series B Preferred shall be entitled to vote on all matters
on which the common stockholders may vote. Each share of Series B Preferred
shall be entitled to approximately 0.33784 vote. The Series B Preferred holders
are not entitled to dividends.
HOLDINGS SERIES C PREFERRED STOCK -- The Series C Preferred ranks senior
to all other classes of stock of the Company as to liquidation, dividends,
redemptions, and any other payments and has a liquidation preference equal to
the Series C price per share of $1 plus accrued and unpaid dividends
("liquidation preference"). Dividends accrue quarterly at 8 percent and may be
paid in cash, and to the extent not paid in cash, such dividends will be added
to the liquidation preference of the Series C Preferred for the first five
years at the option of the Company; thereafter dividends are payable in cash.
The Series C Preferred shall be redeemed on December 31, 2003 at a mandatory
price equal to the liquidation preference. The Company is required, upon the
demand of holders of at least 25 percent of the outstanding Series C Preferred,
to redeem all of the Series C Preferred upon a change of control, failure to
make any required dividend payments, and certain other conditions as defined in
the agreement. The Company has the option to redeem the Series C Preferred in
whole or in part upon ten business days' notice for an amount equal to the
liquidation preference. Holders of Series C Preferred shall be entitled to vote
on all matters on which the common stockholders may vote and are entitled to
0.34448 vote per share. In addition, the Certificate of Incorporation provides
that for so long as at least 1 million shares of Series C Preferred are
outstanding, the holders of 66 2/3 percent of the Series C Preferred shall be
entitled to elect four of the Company's seven directors.
F-21
<PAGE>
SAVVIS COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS- (CONTINUED)
4. REDEEMABLE PREFERRED STOCK AND STOCK WARRANTS - (CONTINUED)
SCC SERIES A PREFERRED STOCK -- SCC Series A Preferred, which was
exchanged on March 4, 1998 for Holdings Series A Preferred plus accrued
dividends, ranked senior to all other then outstanding classes of stock as to
liquidation, dividends, redemptions, and any other payment or distribution with
respect to capital stock. The Series A Preferred was redeemable beginning
February 2002 and continuing through 2004 at the mandatory redemption price.
The mandatory redemption price for each share of the Series A Preferred was
equal to the greater of the Series A original issuance price or the fair market
value per share of the Series A Preferred, as determined in accordance with the
Certificate of Incorporation, plus accrued and unpaid dividends. Effective
August 1, 1997, the terms of the Series A Preferred were amended to entitle the
holders to a dividend rate of 8 percent per annum on the Original Series A
Issuance Price. Holders of the Series A Preferred were entitled to convert each
share of Series A Preferred into such number of fully paid and nonassessable
shares of common stock as determined by dividing the Original Series A Issuance
Price ($10.64) by the conversion price of such series (Series A Conversion
Price) in effect at the time of conversion. The initial Series A Conversion
Price per share was the Original Series A Issuance Price, subject to certain
adjustment provisions of the Agreement. Each holder of Series A Preferred was
required to convert all of its shares of Series A Preferred, at the then --
effective Series A conversion ratio, upon (i) written consent of 70 percent of
the then -- outstanding shares of Series A Preferred or (ii) upon the demand of
the Company in connection with the public offering and sale of shares of
capital stock of the Company resulting in gross proceeds of at least $10,000.
Holders of Series A Preferred were entitled to vote on all matters on which the
common stockholders could vote. Each share of Series A Preferred was entitled
to the number of votes equal to the number of shares of Common Stock into which
such shares of Series A Preferred were convertible.
See Note 2 for discussion of the redemption of all of the Holdings
Preferred Stock subsequent to December 31, 1998.
COMMON STOCK WARRANTS -- SCC issued 349,228 warrants to purchase common
stock at a strike price of $4.13 per warrant in October 1997 in conjunction
with the issuance of the senior bridge notes. These warrants were subsequently
exchanged for an equal amount of warrants to purchase common stock of Holdings
with the same strike price and remained outstanding as of December 31, 1998.
The warrants expire on the earlier of 10 years from the date of issuance or
five years from the date of an initial public offering. Management believes the
value of the warrants is insignificant.
SERIES C WARRANTS -- In connection with the issuance of Series C Preferred
Stock in March and July of 1998, the Company issued 10,334,327 of detachable
warrants to purchase common stock of the Company for $.01 per share. The
warrants were assigned a value of $3,700. The warrants are exercisable at any
time except that no more than 75 percent of the warrants are exercisable prior
to March 3, 2000. The warrants expire 10 years from date of issuance. The
warrants provide, subject to certain clawback provisions in the event of a
qualified public offering, the Series C Preferred holders with 44.88 percent of
the common stock of the Company on a fully diluted basis. All Series C warrants
were outstanding as of December 31, 1998.
SERIES A WARRANTS -- SCC issued 15,000 warrants to purchase Series A
Preferred shares of the Company for $10.64 per share to certain investors and
consultants for the performance of services on May 28, 1997. These warrants
vested immediately. Compensation expense recorded with respect to these
warrants was $160 in 1997. These warrants were subsequently exchanged for an
identical number of warrants to purchase Series A Preferred shares of Holdings
on March 4, 1998 and remained outstanding as of December 31, 1998.
5. BUSINESS COMBINATION
On March 4, 1998, the Company acquired all of the outstanding shares of
Interconnected Associates, Inc. ("IXA") for $750 in cash and 728,575 shares of
the Company's common stock. IXA,
F-22
<PAGE>
SAVVIS COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS- (CONTINUED)
5. BUSINESS COMBINATION- (CONTINUED)
which commenced operations in 1994, was a regional Internet service provider
serving approximately 200 customers from facilities in Seattle and Portland.
The acquisition was accounted for using the purchase method of accounting.
<TABLE>
<S> <C>
Fair value of intangible assets acquired, including goodwill ......... $1,620
Fair value of property acquired ...................................... 369
Net liabilities assumed .............................................. (656)
------
Total purchase price .............................................. 1,333
Fair value of common stock issued .................................... (583)
------
Total cash paid ................................................... $ 750
======
</TABLE>
The following summarized pro forma (unaudited) information assumes that
the acquisition consummated in 1998 had occurred at the beginning of each
period:
<TABLE>
<CAPTION>
1997 1998
------------ ------------
<S> <C> <C>
Revenues .......... $ 4,474 $ 13,903
Net loss .......... (14,494) (22,020)
</TABLE>
In management's opinion, the pro forma combined results of operations are
not indicative of the actual results that would have occurred had the
acquisition been consummated as of that time or of future operations of the
combined companies under the ownership and operation of the Company.
6. PROPERTY AND EQUIPMENT
Property and equipment consisted of the following at December 31:
<TABLE>
<CAPTION>
1997 1998
---------- -----------
<S> <C> <C>
Computer equipment ...................................... $ 259 $ 837
Communications equipment ................................ 1,000 1,771
Purchased software ...................................... 104 182
Furniture and fixtures .................................. 58 383
Leasehold improvements .................................. 88 217
Equipment under capital lease obligations ............... 995 3,553
------ --------
2,504 6,943
Less accumulated depreciation and amortization .......... (598) (2,190)
------ --------
$1,906 $ 4,753
====== ========
</TABLE>
Effective January 1, 1998, the Company decreased the estimated remaining
useful lives of its computer equipment, communications equipment and software
from five years to three years to more closely reflect the actual service lives
of such equipment. The effect of the change was to increase depreciation
expense and net loss by approximately $486 for the year ended December 31,
1998.
Accumulated amortization for equipment under capital leases for 1997 and 1998
was $209 and $831, respectively. Amortization expense for 1996, 1997 and 1998
was $814, $186 and $23, respectively.
F-23
<PAGE>
SAVVIS COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS- (CONTINUED )
7. NOTES PAYABLE AND CAPITAL LEASE OBLIGATIONS
Notes payable and convertible notes payable consisted of the following at
December 31:
<TABLE>
<CAPTION>
1997 1998
----------- --------
<S> <C> <C>
Senior convertible notes, interest at 8%, converted to Series B
preferred stock of Holdings on March 4, 1998 ...................... $ 5,400 $ --
Senior convertible bridge notes, interest at 8%, converted to Series
C preferred stock of Holdings on March 4, 1998 .................... 3,053 --
Note payable to bank, interest at 9.375%, monthly principal and
interest payments of $6, matured February 14, 1999................. 85 13
Note payable to bank, interest at 9.25%, monthly principal and
interest payments of $8, matured August 1, 1999.................... 148
-------
8,686 13
Less current portion ............................................... (220) (13)
------- -----
Long-term portion .................................................. $ 8,466 $ --
======= =====
</TABLE>
The carrying value of the notes approximates fair value at December 31,
1997 and 1998. The senior notes and senior bridge notes were unsecured, accrued
interest at a rate of 8% per annum, and had a term of five years. See Note 3
for discussion of the conversion of senior convertible and senior bridge notes.
The notes payable to the bank are secured by property and equipment purchased
with the proceeds and a general lien on the assets of the Company. The note
bearing the 9.25% rate was paid off during 1998.
The Company leases various equipment under capital leases.
Future minimum lease payments under capital leases are as follows:
<TABLE>
<S> <C>
1999 ............................................ $ 1,343
2000 ............................................ 1,187
2001 ............................................ 614
--------
Total capital lease obligations ............. 3,144
Less amount representing interest ............... (398)
Less current portion ............................ (1,097)
--------
Long-term capital lease obligations ......... $ 1,649
========
</TABLE>
8. EMPLOYEE STOCK OPTIONS
Prior to 1997, the Company granted non--qualified stock options to its
employees as directed by the Company's Board of Directors. In January 1997, the
Company established the 1997 stock option plan, under which it is authorized to
grant up to 500,000 of either incentive stock options or non--qualified stock
options to it employees. Options under this plan become exercisable over a
three--year vesting period from the date of grant and expire ten years after
the date of grant. The Company issued 204,658 options under this plan during
1997.
Additionally, on July 8, 1997, the Company granted an employee 20,000
options to purchase the Company's common stock at $2.96 per share. These
options vested immediately and have a ten-year life.
Effective October 15, 1997, the Company's Board of Directors amended and
restated the 1997 stock option plan and authorized an additional 381,431
options to be granted under the plan. As part of this amendment, the Board of
Directors authorized the existing option holders to exchange their
F-24
<PAGE>
SAVVIS COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS- (CONTINUED)
8. EMPLOYEE STOCK OPTIONS - (CONTINUED)
options for incentive stock options priced at $.40 per share, with a vesting
period of four years from the employee's start date. The incentive options vest
6/48 six months from the employee's start date and then 1/48 monthly
thereafter. Accordingly, options with respect to 233,547 shares of the
Company's common stock were cancelled, and new options with respect to the same
number of shares were granted with an exercise price of $.40 per share, the
existing estimated fair market value of the Company's common stock at the time.
An additional 541,308 options were also granted during 1997 under the same
terms as the incentive options. Two option holders, representing 6,032 options,
elected not to exchange, and accordingly, these options remained outstanding
under their original terms at the end of 1997. Of these options, 5,432 were
forfeited during 1998.
In 1998, the Company's Board of Directors established the 1998 stock
option plan, under which it authorized to grant 2,812,834 and granted 2,326,371
options. These options vest on varying bases over four years beginning at the
later date of six months after the employee's start date or the grant date, and
expire 10 years from the grant date.
The Company has elected to follow APB Opinion No. 25, Accounting for Stock
Issued to Employees ("APB 25") and related interpretations in accounting for
its employee stock option plans. Under the provisions of APB 25, compensation
expense is recognized to the extent the value of the Company's stock exceeds
the exercise price of options at the date of grant. During 1998, the Company
recognized $93 of compensation expense for option grants in 1998 with strike
prices that were below the value of the Company's stock.
Pro forma information regarding net income is required by SFAS No. 123 and
has been determined as if the Company had accounted for its employee stock
options under the fair value method of SFAS No. 123. The fair value of these
options was estimated at the date of grant using the minimum value method.
Under this method, the expected volatility of the Company's common stock is not
estimated, as there is no market for the Company's common stock in which to
monitor stock price volatility. The calculation of the fair value of the
options granted in 1996, 1997 and 1998 assumes a risk-free interest rate of 6.7
percent, 6.2 percent and 5.0 percent, respectively, an assumed dividend yield
of zero, and an expected life of the options of three years. The weighted
average fair value of options granted was $.03, $.07 and $.17 per share in
1996, 1997 and 1998, respectively. For purposes of pro forma disclosures, the
estimated fair value of the options is amortized to expense over the options'
vesting periods.
Had compensation cost for the Company's stock option plan been determined
consistent with the provisions of SFAS No. 123 based on the fair value at the
grant date, the Company's pro forma net loss would have been increased to the
pro forma amounts indicated below:
<TABLE>
<CAPTION>
1996 1997 1998
------------ ------------- -------------
<S> <C> <C> <C>
Net loss:
As reported .................................. $ (2,171) $ (14,502) $ (21,743)
Pro forma .................................... (2,171) (14,516) (21,773)
Basic and diluted net loss per share: .........
As reported .................................. $ (2.42) $ (15.69) $ (16.28)
Pro forma .................................... (2.42) (15.71) (14.69)
</TABLE>
F-25
<PAGE>
SAVVIS COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS- (CONTINUED)
8. EMPLOYEE STOCK OPTIONS - (CONTINUED)
The following tables summarizes stock option activity for the three years
ended December 31, 1998:
<TABLE>
<CAPTION>
NUMBER OF WEIGHTED
SHARES PRICE AVERAGE
OF COMMON PER EXERCISE
STOCK OPTIONS SHARE PRICE
--------------- ----------------- ---------
<S> <C> <C> <C>
Balance, December 31, 1995 .................. -- $ $ --
Granted .................................... 41,129 .20 0.20
------
Balance, December 31, 1996 .................. 41,129 .20 0.20
Granted .................................... 999,513 .40 - 2.96 0.67
Forfeited .................................. (6,208) 1.20 1.20
Cancelled .................................. (233,547) .20 - 1.60 1.29
--------
Balance, December 31, 1997 .................. 800,887 .20 - 2.96 0.46
Granted .................................... 2,326,371 .30 - .80 0.73
Exercised .................................. (24,232) .40 0.40
Forfeited .................................. (187,700) .20 - .80 0.38
---------
Balance, December 31, 1998 .................. 2,915,326 $.30 - $2.96 $0.67
=========
Options exercisable at December 31, 1996..... --
=========
Options exercisable at December 31, 1997..... 184,008 $.20 - $2.96 $ 0.68
=========
Options exercisable at December 31, 1998..... 709,881 $.30 - $2.96 $ 0.50
=========
</TABLE>
The following table summarizes information about the options outstanding
and exercisable at December 31, 1998:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
- -------------------------------------- ---------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
REMAINING EXERCISE EXERCISE
SHARES LIFE PRICE SHARES PRICE
- ----------- ----------- ---------- --------- ---------
<S> <C> <C> <C> <C>
342,696 9.93 $ 0.30 310,437 $ 0.30
657,855 8.81 0.40 261,301 0.40
1,894,175 9.59 0.80 117,889 0.80
600 8.08 1.60 254 1.60
20,000 8.50 2.96 20,000 2.96
- --------- -------
2,915,326 9.51 $ 0.67 709,881 $ 0.50
========= =======
</TABLE>
9. EMPLOYEE SAVINGS PROGRAM
The Company sponsors an employee savings plan that qualifies as a defined
contribution arrangement under Section 401(k) of the Internal Revenue Code. All
employees may contribute a percentage of their base salary, subject to
limitations. The plan was put into place during 1998. All employer
contributions are discretionary under plan provisions. The Company made no
contributions to the plan during 1998.
10. INCOME TAXES
No provision for income taxes was provided for the years ended December
31, 1996, 1997, and 1998 as the potential deferred tax benefit of $208, $3,044,
and $6,853, respectively, resulting primarily from the net operating losses,
was fully offset by a provision to provide a valuation allowance against such
deferred tax benefit.
F-26
<PAGE>
SAVVIS COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS- (CONTINUED)
10. INCOME TAXES- (CONTINUED)
The components of deferred income tax assets and liabilities are as
follows at December 31:
<TABLE>
<CAPTION>
1997 1998
---------- -----------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards ......... $ 3,234 $ 10,215
Other .................................... 44 87
-------- ---------
Gross deferred tax assets ............. 3,278 10,302
Deferred tax liabilities:
Intangible assets ........................ -- (109)
Other .................................... (26) (88)
-------- ---------
Net deferred tax assets ............... 3,252 10,105
Valuation allowances ...................... (3,252) (10,105)
-------- ---------
$ -- $ --
======== =========
</TABLE>
At December 31, 1997 and 1998, the Company recorded a valuation allowance
of $3,252 and $10,105, respectively, against the net deferred tax asset due to
the uncertainty of its ultimate realization. The valuation allowance increased
by $3,044 from December 31, 1996 to December 31, 1997 and by $6,853 from
December 31, 1997 to December 31, 1998.
Section 382 of the Internal Revenue Code restricts the utilization of net
operating losses and other carryover tax attributes upon the occurrence of an
ownership change, as defined. Such an ownership change occurred during 1998 as
a result of the corporate reorganization and financing transactions (see Note
3). Management believes such limitation will not restrict the Company's ability
to utilize the net operating losses over the 20--year carryforward period.
At December 31, 1998, the Company has approximately $30,000 in U.S.
Federal net operating loss carryforwards expiring between 2011 and 2018.
The effective income tax rate differed from the statutory federal income
tax rate as follows for the years ended December 31:
<TABLE>
<CAPTION>
1996 1997 1998
---------- ---------- ----------
<S> <C> <C> <C>
Pretax loss ...................................... 34% 34% 34%
Federal income tax portion of changes in
valuation allowance ............................. (10) (16) (32)
Minority interest in net operating loss .......... (18) (1)
S Corporation loss ............................... (24)
Other - net ...................................... (0) (0) (1)
------ ------ ------
Effective income tax rate ........................ 0% 0% 0%
===== ===== =====
</TABLE>
F-27
<PAGE>
SAVVIS COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS- (CONTINUED )
11. COMMITMENTS AND CONTINGENCIES
The Company leases communications equipment and office space under various
operating leases. Future minimum lease payments at December 31, 1998 are as
follows:
<TABLE>
<CAPTION>
NETWORK OTHER OFFICE
EQUIPMENT EQUIPMENT SPACE TOTAL
----------- ----------- --------- ---------
<S> <C> <C> <C> <C>
1999 ............... $ 378 $158 $1,106 $1,642
2000 ............... 1,115 126 1,086 2,327
2001 ............... 101 906 1,007
2002 ............... 38 918 956
2003 ............... 13 932 945
Thereafter ......... 901 901
------ ---- ------ ------
Total .......... $1,493 $436 $5,849 $7,778
====== ==== ====== ======
</TABLE>
Rental expense under operating leases for the years ended December 31,
1996, 1997 and 1998, was $110, $1,924, and $1,905, respectively.
EMPLOYMENT AGREEMENT -- On December 4, 1998 the Company entered into an
employment agreement with the Company's new President and Chief Executive
Officer. In connection with his employment, the executive received an option to
purchase the number of shares of the Company's common stock, which constituted
5% of the current fully diluted number of all shares of common stock. One-third
of the options vested immediately with the balance to vest over 42 months. All
unvested options vested immediately upon the purchase of the Company by Bridge.
See Note 2 for discussion of the purchase.
LITIGATION -- The Company is subject to various legal proceedings and
other actions arising out of the normal course of business. While the results
of such proceedings and actions cannot be predicted, management believes, based
on the advice of legal counsel, that the ultimate outcome of such proceedings
and actions will not have a material adverse effect on the Company's financial
position, results of operations or cash flows.
12. VALUATION AND QUALIFYING ACCOUNTS
Activity in the Company's allowance for doubtful accounts was as follows:
<TABLE>
<CAPTION>
ADDITIONS
BALANCE AT CHARGED TO
BEGINNING OF COSTS AND BALANCE AT
YEAR EXPENSES DEDUCTIONS END OF YEAR
-------------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
December 31, 1996 ......... $ -- $ 16 $ -- $ 16
December 31, 1997 ......... 16 254 (142) 128
December 31, 1998 ......... 128 278 (257) 149
</TABLE>
* * * * * *
F-28
<PAGE>
================================================================================
Through and including ______, 2000 (the 25th day after the date of this
prospectus), all dealers effecting transactions in these securities, 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.
10,212,766 SHARES
[LOGO]
SAVVIS COMMUNICATIONS CORPORATION
COMMON STOCK
----------------
P R O S P E C T U S
----------------
MERRILL LYNCH & CO.
MORGAN STANLEY DEAN WITTER
BEAR, STEARNS & CO. INC.
, 2000
================================================================================
<PAGE>
INTERNATIONAL PROSPECTUS -- ALTERNATE PAGE
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED DECEMBER 30, 1999
P R O S P E C T U S
- -------------------
2,553,191 SHARES
[LOGO]
SAVVIS COMMUNICATIONS CORPORATION
COMMON STOCK
---------------
This is SAVVIS Communications Corporation's initial public offering of
common stock. SAVVIS Communications Corporation is selling all of the shares.
The international managers are offering 2,553,191 shares outside the U.S. and
Canada and the U.S. underwriters are offering 10,212,766 shares in the U.S. and
Canada.
We expect the public offering price to be between $22.00 and $25.00 per
share. Currently, no public market exists for the shares. After pricing of the
offering, we expect that the shares will be quoted on the Nasdaq National
Market System under the symbol "SVVS."
INVESTING IN THE COMMON STOCK INVOLVES RISKS THAT ARE DESCRIBED IN THE
"RISK FACTORS" SECTION BEGINNING ON PAGE 10 OF THIS PROSPECTUS.
---------------
<TABLE>
<CAPTION>
PER SHARE TOTAL
----------- ------
<S> <C> <C>
Public offering price ........................ $ $
Underwriting discount ........................ $ $
Proceeds, before expenses, to SAVVIS ......... $ $
</TABLE>
The international managers may also purchase up to an additional 382,978
shares at the public offering price, less the underwriting discount, within 30
days from the date of this prospectus to cover over-allotments. The U.S.
underwriters may similarly purchase up to an additional 1,531,915 shares.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus is truthful or complete. Any representation to the contrary is
a criminal offense.
The shares will be ready for delivery on or about , 2000.
---------------
Joint Book-Running Managers
MERRILL LYNCH INTERNATIONAL MORGAN STANLEY DEAN WITTER
---------------
BEAR, STEARNS INTERNATIONAL LIMITED
---------------
The date of this prospectus is , 2000
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an
offer to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
<PAGE>
INTERNATIONAL PROSPECTUS--ALTERNATE PAGE
UNDERWRITING
We intend to offer the shares outside the U.S. and Canada through the
international managers and in the U.S. and Canada through the U.S.
underwriters. Merrill Lynch International, Morgan Stanley & Co. International
Limited and Bear, Stearns International Limited are acting as lead managers for
the international managers named below. Subject to the terms and conditions
described in an international purchase agreement between our company and the
international managers, and concurrently with the sale of 10,212,766 shares to
the U.S. underwriters, we have agreed to sell to the international managers,
and the international managers severally have agreed to purchase from us, the
number of shares listed opposite its name below.
<TABLE>
<CAPTION>
NUMBER
INTERNATIONAL MANAGER OF SHARES
- ---------------------------------------------------------- ------------
<S> <C>
Merrill Lynch International ........................
Morgan Stanley & Co. International Limited .........
Bear, Stearns International Limited ................
-----------
Total .............................................. 2,553,191
===========
</TABLE>
We have also entered into a U.S. purchase agreement with the U.S.
underwriters for sale of the shares in the U.S. and Canada for whom Merrill
Lynch, Pierce, Fenner & Smith Incorporated, Morgan Stanley & Co. Incorporated
and Bear, Stearns & Co. Inc. are acting as U.S. representatives. Subject to the
terms and conditions in the U.S. purchase agreement, and concurrently with the
sale of 2,553,191 shares to the international managers pursuant to the
international purchase agreement, we have agreed to sell to the U.S.
underwriters, and the U.S. underwriters severally have agreed to purchase
10,212,766 shares from us. The initial public offering price per share and the
total underwriting discount per share are identical under the international
purchase agreement and the U.S. purchase agreement.
The international managers and the U.S. underwriters have agreed to
purchase all of the shares sold under the international and U.S. purchase
agreements if any of these shares are purchased. If an underwriter defaults,
the U.S. and international purchase agreements provide that the purchase
commitments of the nondefaulting underwriters may be increased or the purchase
agreements may be terminated. The closings for the sale of shares to be
purchased by the international managers and the U.S. underwriters are
conditioned on one another.
We have agreed to indemnify the international managers and the U.S.
underwriters against liabilities specified in the U.S. and international
purchase agreements, including liabilities under the Securities Act, and to
contribute to payments the international managers and U.S. underwriters may be
required to make in respect of those liabilities.
The underwriters are offering the shares, subject to prior sale, when, as
and if issued to and accepted by them, subject to approval of legal matters by
their counsel, including the validity of the shares, and other conditions
contained in the purchase agreements, such as the receipt by the underwriters
of officer's certificates and legal opinions. The underwriters reserve the
right to withdraw, cancel or modify offers to the pubilc and to reject orders
in whole or in part.
COMMISSIONS AND DISCOUNTS
The lead managers have advised us that the international managers propose
initially to offer the shares to the public at the initial public offering
price listed on the cover page of this prospectus, and to dealers at that price
less a concession not in excess of $ per share. The international managers
may allow, and the dealers may reallow, a discount not in excess of $ per
share to other dealers. After this offering, the public offering price,
concession and discount may be changed.
The following table shows the public offering price, underwriting discount
and proceeds before expenses to SAVVIS. The information assumes either no
exercise or full exercise or full exercise by the international managers and
the U.S. underwriters of their over-allotment options.
31
<PAGE>
INTERNATIONAL PROSPECTUS--ALTERNATE PAGE
<TABLE>
<CAPTION>
PER SHARE WITHOUT OPTION WITH OPTION
----------- ---------------- ------------
<S> <C> <C> <C>
Public offering price ............... $ $ $
Underwriting discount ............... $ $ $
Proceeds, before expenses, to SAVVIS. $ $ $
</TABLE>
The expenses of the offering, not including the underwriting discount, are
estimated at $ and are payable by SAVVIS.
OVER-ALLOTMENT OPTION
We have granted options to the international managers to purchase up to
382,978 additional shares at the public offering price less the underwriting
discount. The international managers may exercise these options for 30 days
from the date of this prospectus solely to cover any over-allotments. If the
international managers exercise these options, each international manager will
be obligated, subject to conditions contained in the purchase agreements, to
purchase a number of additional shares proportionate to that international
manager's initial amount reflected in the above table.
We have also granted options to the U.S. underwriters, exercisable for 30
days from the date of this prospectus, to purchase up to 1,531,915 additional
shares to cover any over-allotments on terms similar to those granted to the
international managers.
INTERSYNDICATE AGREEMENT
The international managers and the U.S. underwriters have entered into an
intersyndicate agreement that provides for the coordination of their
activities. Under the intersyndicate agreement, the international managers and
the U.S. underwriters may sell shares to each other for purposes of resale at
the initial public offering price, less an amount not greater than the selling
concession. Under the intersyndicate agreement, the international managers and
any dealer to whom they sell shares will not offer to sell or sell shares to
U.S. or Canadian persons or to persons they believe intend to resell to U.S. or
Canadian persons, except in the case of transactions under the intersyndicate
agreement. Similarly, the U.S. underwriters and any dealer to whom they sell
shares will not offer to sell or sell shares to persons who are non-U.S. or
non-Canadian persons or to persons they believe intend to resell to persons who
are non-U.S. or non-Canadian persons, except in the case of transactions under
the intersyndicate agreement.
RESERVED SHARES
At our request, the underwriters have reserved for sale, at the initial
public offering price, up to % of the shares offered by this prospectus
for sale to some of our directors, officers, employees, business associates and
related persons. If these persons purchase reserved shares, this will reduce
the number of shares available for sale to the general public. Any reserved
shares that are not orally confirmed for purchase within one day of the pricing
of the offering will be offered by the underwriters to the general public on
the same terms as the other shares offered by this prospectus.
We are concurrently offering 2,553,191 shares at the initial public
offering price directly to some of our employees pursuant to this prospectus in
jurisdictions outside the United States where the underwriters are prohibited
by law from selling the shares. These shares are included in the shares
being sold pursuant to this prospectus.
NO SALES OF SIMILAR SECURITIES
We, our executive officers and directors and each stockholder who holds an
aggregate of 2% of our outstanding common stock prior to this offering have
agreed, with exceptions, not to sell or transfer any common stock for 180 days
after the date of this prospectus without first obtaining the written consent
of Merrill Lynch. Specifically, we and these individuals have agreed not to
directly or indirectly
32
<PAGE>
INTERNATIONAL PROSPECTUS--ALTERNATE PAGE
o offer, pledge, sell, or contract to sell any common stock,
o sell any option or contract to purchase any common stock,
o purchase any option or contract to sell any common stock,
o grant any option, right or warrant for the sale of any common stock,
o lend or otherwise dispose of or transfer any common stock,
o request or demand that we file a registration statement related to the
common stock, or
o enter into any swap or other agreement that transfers, in whole or in
part, the economic consequence of ownership of any common stock whether
any such swap or transaction is to be settled by delivery of shares or
other securities, in cash or otherwise.
This lockup provision applies to common stock and to securities
convertible into or exchangeable or exercisable for or repayable with common
stock. It also applies to common stock owned now or acquired later by the
person executing the agreement or for which the person executing the agreement
later acquires the power of disposition.
QUOTATION ON THE NASDAQ NATIONAL MARKET
We expect the shares to be approved for quotation on the Nasdaq National
Market, subject to notice of issuance, under the symbol "SVVS."
Before this offering, there has been no public market for our common
stock. The initial public offering price will be determined through
negotiations between our company and the U.S. representatives and lead
managers. In addition to prevailing market conditions, the factors to be
considered in determining the initial public offering price are
o the valuation multiples of publicly traded companies that the U.S.
representatives and the lead managers believe to be comparable to us,
o our financial information,
o the history of, and the prospectus for, our company and the industry in
which we compete,
o an assessment of our management, its past and present operations, and the
prospects for, and timing of, our future revenues,
o the present state of our development,
o the above factors in relation to market values and various valuation
measures of other companies engaged in activities similar to ours.
An active trading market for the shares may not develop. It is also
possible that after the offering the shares will not trade in the public market
at or above the initial public offering price.
PRICE STABILIZATION, SHORT POSITIONS AND PENALTY BIDS
Until the distribution of the shares is completed, SEC rules may limit
underwriters and selling group members from bidding for and purchasing our
common stock. However, the U.S. representatives may engage in transactions that
stabilize the price of the common stock, such as bids or purchases to peg, fix
or maintain that price.
If the underwriters create a short position in the common stock in
connection with the offering, i.e., if they sell more shares than are listed on
the cover of this prospectus, the U.S. representatives may reduce that short
position by purchasing shares in the open market. The U.S. representatives
33
<PAGE>
INTERNATIONAL PROSPECTUS --ALTERNATE PAGE
may also elect to reduce any short position by exercising all or part of the
over-allotment option described above. Purchases of the common stock to
stabilize its price or to reduce a short position may cause the price of the
common stock to be higher than it might be in the absence of such purchases.
The U.S. representatives may also impose a penalty bid on underwriters and
selling group members. This means that if the U.S. representatives purchase
shares in the open market to reduce the underwriter's short position or to
stabilize the price of such shares, they may reclaim the amount of the selling
concession from the underwriters and selling group members who sold those
shares. The imposition of a penalty bid may also affect the price of the shares
in that it discourages resales of those shares.
Neither we nor any of the underwriters makes any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of the common stock. In addition, neither
we nor any of the underwriters makes any representation that the U.S.
representatives or the lead managers will engage in these transactions or that
these transactions, once commenced, will not be discontinued without notice.
UK SELLING RESTRICTIONS
Each international manager has agreed that
o it has not offered or sold and will not offer or sell any shares of
common stock to persons in the United Kingdom, except to persons whose
ordinary activities involve them in acquiring, holding, managing or
disposing of investments (as principal or agent) for the purposes of
their businesses or otherwise in circumstances which do not constitute an
offer to the public in the United Kingdom within the meaning of the
Public Offers of Securities Regulations 1995;
o 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 common stock in, from or otherwise involving the United
Kingdom; and
o 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
issuance of common stock to a person who is of a kind described in
Article 11(3) of the Financial Services Act 1986 (Investment
Advertisements) (Exemptions) Order 1996 as amended by the Financial
Services Act 1986 (Investment Advertisements) (Exemptions) Order 1997 or
is a person to whom such document may otherwise lawfully be issued or
passed on.
NO PUBLIC OFFERING OUTSIDE THE UNITED STATES
No action has been or will be taken in any jurisdiction except in the
United States that would permit a public offering of the shares of common
stock, or the possession, circulation or distribution of this prospectus or any
other material relating to our company or shares of our common stock in any
jurisdiction where action for that purpose is required. Accordingly, the shares
of our common stock may not be offered or sold, directly or indirectly, and
neither this prospectus nor any other offering material or advertisements in
connection with the shares of common stock may be distributed or published, in
or from any country or jurisdiction except in compliance with any applicable
rules and regulations of any such country or jurisdiction.
Purchasers of the shares offered by this prospectus may be required to pay
stamp taxes and other charges in accordance with the laws and practices of the
country of purchase in addition to the offering price on the cover page of this
prospectus.
OTHER RELATIONSHIPS
The underwriters and their respective affiliates provide and have provided
banking, advisory and other financial services to SAVVIS and Bridge and certain
of their affiliates in the ordinary course of the underwriters' businesses and
may do so from time to time in the future. The underwriters have received
customary compensation in connection with these transactions.
34
<PAGE>
INTERNATIONAL PROSPECTUS--ALTERNATE PAGE
An affiliate of Morgan Stanley & Co. Incorporated owns 1,396,177 shares of
Bridge's class A common stock. Pursuant to an offer made by Bridge to all of
its accredited investor shareholders, on September 10, 1999 an affiliate of
Morgan Stanley Co. Incorporated purchased 457,507 units from Bridge for an
aggregate purchase price of $915,014. Each unit consists of one share of common
stock of SAVVIS and $1.50 principal amount of Bridge subordinated notes.
On October 12, 1999, Goldman Sachs Credit Partners L.P. and Merrill Lynch
Capital Corporation, an affiliate of Merrill Lynch, committed to make available
to Bridge up to $100 million in aggregate principal amount of senior
subordinated bridge loans, subject to terms and conditions set forth in the
commitment letter. On November 24, 1999, Goldman, Sachs and Merrill Lynch
Capital loaned $50 million to Bridge pursuant to a bridge loan agreement. If
the bridge loan is not repaid 12 months after closing date, Bridge is required
to deliver warrants to purchase Bridge common stock to Goldman, Sachs and
Merrill Lynch Capital. Each of Goldman, Sachs and Merrill Lynch Capital
received customary compensation in connection with this transaction.
35
<PAGE>
INTERNATIONAL PROSPECTUS -- ALTERNATE PAGE
================================================================================
Through and including ______, 2000 (the 25th day after the date of this
prospectus), all dealers effecting transactions in these securities, 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.
2,553,191 SHARES
[LOGO]
SAVVIS COMMUNICATIONS CORPORATION
COMMON STOCK
----------------
P R O S P E C T U S
----------------
MERRILL LYNCH INTERNATIONAL
MORGAN STANLEY DEAN WITTER
BEAR, STEARNS INTERNATIONAL LIMITED
, 2000
================================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth all fees and expenses, other than the
underwriting discounts and commissions, payable by the Registrant in connection
with the sale of the common stock being registered. All amounts shown are
estimates except for the SEC registration fee and the NASD filing fee.
<TABLE>
<CAPTION>
AMOUNT
-------------
<S> <C>
SEC registration fee ........................ $ 97,944
NASD filing fee ............................. 30,500
Nasdaq National Market listing fee .......... 95,000
Blue sky fees and expenses .................. 10,000
Accounting fees and expenses ................ 500,000
Legal fees and expenses ..................... 500,000
Printing and engraving expenses ............. 450,000
Transfer agent fees and expenses ............ 3,500
Miscellaneous expenses ...................... 263,056
----------
Total .................................... $1,950,000
==========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Under Section 145 of the Delaware General Corporation Law, a corporation
may indemnify its directors, officers, employees and agents and its former
directors, officers, employees and agents and those who serve, at the
corporation's request, in such capacities with another enterprise, against
expenses (including attorneys' fees), as well as judgments, fines and
settlements in nonderivative lawsuits, actually and reasonably incurred in
connection with the defense of any action, suit or proceeding in which they or
any of them were or are made parties or are threatened to be made parties by
reason of their serving or having served in such capacity. The Delaware General
Corporation Law provides, however, that such person must have acted in good
faith and in a manner such person reasonably believed to be in (or not opposed
to) the best interests of the corporation and, in the case of a criminal
action, such person must have had no reasonable cause to believe his or her
conduct was unlawful. In addition, the Delaware General Corporation Law does
not permit indemnification in an action or suit by or in the right of the
corporation, where such person has been adjudged liable to the corporation,
unless, and only to the extent that, a court determines that such person fairly
and reasonably is entitled to indemnity for costs the court deems proper in
light of liability adjudication. Indemnity is mandatory to the extent a claim,
issue or matter has been successfully defended.
The Registrant's certificate of incorporation contains provisions that
provide that no director of the Registrant shall be liable for breach of
fiduciary duty as a director, except for (1) any breach of the directors' duty
of loyalty to the Registrant or its stockholders; (2) acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of
the law; (3) liability under Section 174 of the Delaware General Corporation
Law; or (4) any transaction from which the director derived an improper
personal benefit. The indemnification provided under the Registrant's
certificate of incorporation includes the right to be paid expenses in advance
of any proceeding for which indemnification may be had, provided that the
director or officer undertakes to repay such amount if it is determined that
the director or officer is not entitled to indemnification.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
Since the Registrant's formation on March 3, 1998, it has issued and sold
the securities described below in the following unregistered transactions:
II-1
<PAGE>
(1) On March 4, 1998, in connection with its formation, the Registrant
issued 1,606,682 shares of its common stock in exchange for all of
the outstanding common stock of SAVVIS Communications Corporation, a
Missouri corporation ("SCC"), in connection with the reorganization
of SCC and SAVVIS Communications Enterprises, L.L.C., a Missouri
limited liability company (the "LLC"). These issuances were effected
in reliance on the exemptions from registration provided by Section
4(2) of the Securities Act.
(2) Between March and July 1998, in a series of related transactions,
the Registrant sold to First Union Capital Partners, Inc., BCI
Growth IV, L.P. and R-H Capital Partners, L.P. a total of 18,226,228
shares of its Series C Redeemable Preferred Stock for $18,226,228;
to J.P. Morgan Investment Corporation and Sixty Wall Street SBIC
Fund, L.P. a total of 8,000,000 shares of its Series C Redeemable
Preferred Stock for $8,000,000; and to the holders of convertible
promissory notes of SCC and the LLC a total of 3,773,772 shares of
its Series C Redeemable Preferred Stock in exchange for all the
outstanding notes. The Registrant issued to these investors warrants
to purchase up to a total of 10,334,327 shares of its common stock,
at an exercise price of $.01 per share. These sales were effected in
reliance on the exemptions from registration provided by Section
4(2) of the Securities Act.
(3) On March 4, 1998, the Registrant issued 502,410 shares of its Series
A Convertible Preferred Stock in exchange for all of the outstanding
shares of SCC's Series A Convertible Preferred Stock. In addition,
the Registrant issued warrants to purchase up to 15,000 shares of
its Series A Convertible Preferred Stock at an exercise price of
$10.64 per share in exchange for warrants to purchase an equal
amount of shares of SCC's Series A Convertible Preferred Stock, and
warrants to purchase up to 349,228 shares of its common stock at an
exercise price of $4.13 per share in exchange for warrants to
purchase an equal amount of shares of SCC's common stock. These
issuances were effected in reliance on the exemption from
registration provided by Section 4(2) of the Securities Act.
(4) On March 4, 1998, the Registrant issued 5,649,241 shares of its
Series B Convertible Preferred Stock in exchange for an equal amount
of Class B shares of the LLC. These issuances were effected in
reliance on the exemption from registration provided by Section 4(2)
of the Securities Act.
(5) On March 4, 1998, the Registrant issued 728,575 shares of its common
stock in exchange for the outstanding securities of Interconnected
Associates, Inc. These issuances weres effected in reliance on the
exemption from registration provided by Section 4(2) of the
Securities Act.
(6) Between May 1998 and March 1999, the Registrant issued options to
purchase a total of 1,560,968 shares of its common stock to a total
of 177 employees, at exercise prices ranging from $.30 to $1.10 per
share. These options were granted under the Registrant's 1998 Stock
Option Plan. These issuances were effected in reliance on the
exemption from registration provided by Rule 701 promulgated under
Section 3(b) of the Securities Act.
(7) Between July and September 1999, the Registrant granted options to
purchase 3,674,000 shares of the Registrant's common stock to 121
employees of Bridge Information Systems, Inc. ("Bridge") at an
exercise price of $.50 per share. In that same period, the
Registrant granted options to purchase up to 2,389,840 shares of its
common stock to 92 of its employees at an exercise price of $.50 per
share. All of these options were granted pursuant to the
Registrant's 1999 Stock Option Plan. In October the Registrant
granted its employees the right to convert options to purchase
236,882 shares of common stock of Bridge into options to purchase
236,882 shares of common stock of the Registrant at
II-2
<PAGE>
an exercise price of $.50 per share. These issuances were effected in
reliance on the exemption from registration provided by Rule 701
promulgated under Section 3(b) of the Securities Act.
(8) During 1998 and 1999, Registrant issued 92,565 shares of its common
stock pursuant to the exercise of stock options by its employees for
an aggregate purchase price of $36,100. These issuances were
effected in reliance on the exemption from registration provided by
Rule 701 promulgated under Section 3(b) of the Securities Act.
Each of the foregoing transactions was effected without the use of an
underwriter.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
<TABLE>
<CAPTION>
NUMBER EXHIBIT DESCRIPTION
- -------------- -----------------------------------------------------------------------------------------------
<S> <C>
1.1* Form of Underwriting Agreement
3.1* * Amended and Restated Certificate of Incorporation of the Registrant
3.2* * Amended and Restated Bylaws of the Registrant
4.1* Form of Common Stock Certificate
5.1* Opinion of Hogan & Hartson L.L.P. as to the validity of the shares being offered
10.1* * 1999 Stock Option Plan
10.2 Form of Incentive Stock Option Agreement under the 1999 Stock Option Plan
10.3 Form of Incentive Stock Option Agreement under the 1999 Stock Option Plan
10.4 Form of Non-Qualified Stock Option Agreement under the 1999 Stock Option Plan
10.5 Amended and Restated Agreement and Plan of Merger, dated February 19, 1999, among the
Registrant, SAVVIS Acquisition Corp. and Bridge Information Systems, Inc.
10.6 Employment Agreement, dated December 4, 1998, between the Registrant and Clyde A.
Heintzelman
10.7 Letter Agreement, dated November 12, 1999, between the Registrant and Clyde A.
Heintzelman
10.8 Letter Agreement, dated June 14, 1999, between the Registrant and David J. Frear
10.9 Letter Agreement, dated September 30, 1999, between the Registrant and James D. Mori
10.10 Form of Master Establishment and Transition Agreement between the Registrant and Bridge
Information Systems, Inc., including as Exhibit B a Form of Administrative Services Agreement,
as Exhibit E a Form of Local Contract of Assignment and Assumption, as Exhibit F a Form of
Local Asset Transfer Agreement, as Exhibit H a Form of Equipment Colocation Permit, as
Exhibit I a Form of Promissory Note, and as Exhibit J a Form of Call Asset Transfer Agreement.
10.11 + Form of Network Services Agreement between SAVVIS Communications Corporation and
Bridge Information Systems, Inc.
10.12 +** Form of Technical Services Agreement between SAVVIS Communications Corporation and
Bridge Information Systems, Inc.
10.13* Managed Network Agreement, dated January 31, 1995, between Sprint Communications
Company L.P. and Bridge Data Company.
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
NUMBER EXHIBIT DESCRIPTION
- ------------- -----------------------------------------------------------------------------------------
<S> <C>
10.14* Amendment One to the Managed Network Agreement, dated August 23, 1995, between
Sprint Communications Company L.P. and Bridge Data Company.
10.15* Amendment Two to the Managed Network Agreement, dated August 16, 1995, between
Sprint Communications Company L.P. and Bridge Data Company.
10.16* Amendment Three to the Managed Network Agreement, dated March 1, 1996, between
Sprint Communications Company L.P. and Bridge Data Company.
10.17* Amendment Four to the Managed Network Agreement, dated July 29, 1996, between Sprint
Communications Company L.P. and Bridge Data Company.
10.18* Amendment Five to the Managed Network Agreement, dated December 5, 1996, between
Sprint Communications Company L.P. and Bridge Data Company.
10.19* Amendment Six to the Managed Network Agreement, dated May 23, 1997 between Sprint
Communications Company L.P. and Bridge Data Company.
10.20* Amendment Seven to the Managed Network Agreement, dated August 28, 1998 between
Sprint Communications Company L.P. and Bridge Data Company.
10.21* Service Agreement, dated 1996, between the Registrant and IXC Carrier, Inc.
10.22* Amendment No. 1, dated 1996, to the Service Agreement between the Registrant and IXC
Carrier, Inc.
10.23* Master Internet Services Agreement, effective June 4, 1999, between the Registrant and
UUNET Technologies, Inc.
10.24* Internet MCI Dedicated Access Agreement, dated April 16, 1998 between the Registrant and
network MCI, Inc.
11.1* Statement regarding computation of net income per share
16.1 Letter Re Change in Certifying Accountant
21.1* * Subsidiaries of the Registrant
23.1 Consent of Deloitte & Touche LLP
23.2 Consent of Ernst & Young LLP
23.3* Consent of Hogan & Hartson L.L.P. (included in Exhibit 5.1)
24.1* * Power of attorney (included in the signature page to this registration statement)
27.1 Financial Data Schedule
</TABLE>
- ------------------
* To be filed by amendment.
** Previously filed.
+ Request for Confidential Treatment
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes to provide to the
underwriters at the closing specified in the Underwriting Agreement,
certificates in such denominations and registered in such names as may be
required by the underwriters to permit prompt delivery to each purchaser.
II-4
<PAGE>
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities
Act and is, therefore, unenforceable. If a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed
by the final adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act,
each post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 3 to this Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of St. Louis, State of Missouri, on December 30, 1999.
SAVVIS COMMUNICATIONS CORPORATION
By: /s/ Robert McCormick
------------------------------------
Robert McCormick
President and Chief Executive Officer and
Chairman of the Board
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 3 to this registration statement has been signed by the following persons,
in the capacities indicated below, on the dates indicated.
II-6
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ----------------------------- ---------------------------------- ------------------
<S> <C> <C>
/s/ ROBERT MCCORMICK President and Chief Executive December 30, 1999
- --------------------------- Officer and Chairman of the Board
Robert McCormick (principal executive officer)
* Executive Vice President, Chief December 30, 1999
- --------------------------- Financial Officer and Director
David J. Frear
(principal financial officer and
principal accounting officer)
* Director December 30, 1999
- ---------------------------
Clyde A. Heintzelman
* Director December 30, 1999
- ---------------------------
Thomas McInerney
* Director December 30, 1999
- ---------------------------
Patrick Welsh
* Director December 30, 1999
- ---------------------------
Thomas M. Wendel
</TABLE>
*By: /s/ Robert McCormick
-----------------------
Robert McCormick
Attorney-in-Fact
and Agent
II-7
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
NUMBER EXHIBIT DESCRIPTION
- -------------- -----------------------------------------------------------------------------------------------
<S> <C>
1.1* Form of Underwriting Agreement
3.1* * Amended and Restated Certificate of Incorporation of the Registrant
3.2* * Amended and Restated Bylaws of the Registrant
4.1* Form of Common Stock Certificate
5.1* Opinion of Hogan & Hartson L.L.P. as to the validity of the shares being offered
10.1* * 1999 Stock Option Plan
10.2 Form of Incentive Stock Option Agreement under the 1999 Stock Option Plan
10.3 Form of Incentive Stock Option Agreement under the 1999 Stock Option Plan
10.4 Form of Non-Qualified Stock Option Agreement under the 1999 Stock Option Plan
10.5 Amended and Restated Agreement and Plan of Merger, dated February 19, 1999, among the
Registrant, SAVVIS Acquisition Corp. and Bridge Information Systems, Inc.
10.6 Employment Agreement, dated December 4, 1998, between the Registrant and Clyde A.
Heintzelman
10.7 Letter Agreement, dated November 12, 1999, between the Registrant and Clyde A.
Heintzelman
10.8 Letter Agreement, dated June 14, 1999, between the Registrant and David J. Frear
10.9 Letter Agreement, dated September 30, 1999, between the Registrant and James D. Mori
10.10 Form of Master Establishment and Transition Agreement between the Registrant and Bridge
Information Systems, Inc., including as Exhibit B a Form of Administrative Services Agreement,
as Exhibit E a Form of Local Contract of Assignment and Assumption, as Exhibit F a Form of
Local Asset Transfer Agreement, as Exhibit H a Form of Equipment Colocation Permit, as
Exhibit I a Form of Promissory Note, and as Exhibit J a Form of Call Asset Transfer Agreement.
10.11 + Form of Network Services Agreement between SAVVIS Communications Corporation and
Bridge Information Systems, Inc.
10.12 +** Form of Technical Services Agreement between SAVVIS Communications Corporation and
Bridge Information Systems, Inc.
10.13* Managed Network Agreement, dated January 31, 1995, between Sprint Communications
Company L.P. and Bridge Data Company.
10.14* Amendment One to the Managed Network Agreement, dated August 23, 1995, between Sprint
Communications Company L.P. and Bridge Data Company.
10.15* Amendment Two to the Managed Network Agreement, dated August 16, 1995, between Sprint
Communications Company L.P. and Bridge Data Company.
10.16* Amendment Three to the Managed Network Agreement, dated March 1, 1996, between Sprint
Communications Company L.P. and Bridge Data Company.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NUMBER EXHIBIT DESCRIPTION
- ------------- -----------------------------------------------------------------------------------------
<S> <C>
10.17* Amendment Four to the Managed Network Agreement, dated July 29, 1996, between Sprint
Communications Company L.P. and Bridge Data Company.
10.18* Amendment Five to the Managed Network Agreement, dated December 5, 1996, between
Sprint Communications Company L.P. and Bridge Data Company.
10.19* Amendment Six to the Managed Network Agreement, dated May 23, 1997 between Sprint
Communications Company L.P. and Bridge Data Company.
10.20* Amendment Seven to the Managed Network Agreement, dated August 28, 1998 between
Sprint Communications Company L.P. and Bridge Data Company.
10.21* Service Agreement, dated 1996, between the Registrant and IXC Carrier, Inc.
10.22* Amendment No. 1, dated 1996, to the Service Agreement between the Registrant and IXC
Carrier, Inc.
10.23* Master Internet Services Agreement, effective June 4, 1999, between the Registrant and
UUNET Technologies, Inc.
10.24* Internet MCI Dedicated Access Agreement, dated April 16, 1998 between the Registrant and
network MCI, Inc.
11.1* Statement regarding computation of net income per share
16.1 Letter Re Change in Certifying Accountant
21.1* * Subsidiaries of the Registrant
23.1 Consent of Deloitte & Touche LLP
23.2 Consent of Ernst & Young LLP
23.3* Consent of Hogan & Hartson L.L.P. (included in Exhibit 5.1)
24.1* * Power of attorney (included in the signature page to this registration statement)
27.1 Financial Data Schedule
</TABLE>
- ------------------
* To be filed by amendment.
** Previously filed.
+ Request for Confidential Treatment
<TABLE>
<CAPTION>
EXHIBIT 10.2
====================================================================================================================================
Optionee Grant Date Initial Vesting Expiration Date Option Price Per Number of
Date Share Options Granted
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
====================================================================================================================================
</TABLE>
INCENTIVE STOCK OPTION AGREEMENT
UNDER THE
SAVVIS HOLDINGS CORPORATION
1999 STOCK OPTION PLAN
SAVVIS Holdings Corporation, a Delaware corporation (the
"Company"), and the employee of the Company named above or a Related Company
(the "Optionee"), hereby agree as follows:
SECTION 1. GRANT OF OPTIONS. In conformity with the SAVVIS Holdings Corporation
1999 Stock Option Plan (the "Plan"), the provisions of which are incorporated
herein by this reference, and pursuant to authorization of the Committee charged
with the administration thereof (the "Committee"), the Company hereby grants to
Optionee Incentive Stock Options (the "Options") to purchase all or any part of
the number of shares of common stock of the Company, par value $0.01 per share,
set forth above under the caption "Number of Options Granted," on the terms and
conditions herein set forth. To the maximum extent permitted by law and
regulation, except as provided in Section 3(f), the Option shall constitute and
be treated at all times by Optionee and the Company as an "incentive stock
option" as defined under Section 422(b) of the Internal Revenue Code of 1986, as
amended (the "Code"), and the remainder of the Option shall constitute and be
treated at all times by Optionee and the Company as a "non-qualified stock
option" for federal income tax purposes and shall not constitute and shall not
be treated as an "incentive stock option" (as so defined). The grant hereunder
is made on the Grant Date set forth above (the "Grant Date"). Capitalized terms
not defined in this Agreement shall have the meanings given in the Plan.
SECTION 2. OPTION PRICE. The purchase price per share of the Stock covered by
the Options (the "Option Price") shall be the Option Price Per Share set forth
above. The Board of Directors of the Company (the "Board") has determined that
the Option Price is at least equal to the Fair Market Value of the Stock as of
the Grant Date.
SECTION 3. EXERCISABILITY.
(a) Except as otherwise provided in this Agreement, the Options shall
vest as follows: (i) 6/48 of such Options shall vest on Initial Vesting Date as
set forth above and (ii) 1/48 of such options shall vest on the same date of
each month thereafter for the succeeding 42 months. Notwithstanding the
foregoing, the Options shall be exercisable in full no later than ten years
after the Grant Date.
(b) If certain events described in Section 9 or Section 10 occur while
the Options remain outstanding and unexercised, any Options which have not yet
vested shall immediately vest and become exercisable without Committee approval,
and the provisions of Section 8 automatically shall lapse.
(c) The Options shall immediately vest on the date death, Disability, or
Retirement of the Optionee occurs.
(d) The Committee may accelerate the dates on which the Options become
exercisable at any time and for any reason.
(e) The Optionee shall not exercise the Options unless the Optionee has
been an employee of the Company or a Related Company at all times during the
period beginning on the Grant Date and (i) ending on the day three months before
the date of such exercise; or (ii) if Optionee ceases to be such an employee as
a result of Disability, ending on the day one year before the date of such
exercise; or (iii) if Optionee ceases to be such an employee as a result of
Retirement (even if also as a result of Disability), ending on the day five
years before the date of such exercise. Notwithstanding the foregoing, if the
Optionee dies while employed by the Company or a Related Company or at any time
thereafter while the Options remain exercisable, the Options may be exercised
until the earlier to occur of the Expiration Date or the date three years after
the date of death, and shall not be exercised thereafter.
<PAGE>
(f) The exercisability of the Options shall not be affected by any change
of duties or position of the Optionee so long as the Optionee continues to be an
employee of the Company or a Related Company. For purposes of this Agreement,
services as a consultant, advisor or independent contractor shall be considered
services as an employee and services provided to a Related Company shall be
considered services provided to the Company. Any Options which remain
unexercised for more than three months after Optionee ceases providing services
as a common law employee shall cease to constitute an "incentive stock option"
under Section 422 of the Code and shall thereafter be treated as a Non-Qualified
Stock Option, as defined in the Plan.
(g) An individual who is granted a leave of absence by the Company or a
Related Company for any reason shall be considered to remain employed by the
Company or a Related Company until the leave expires or a date two years after
the date the leave commenced, whichever occurs first.
(h) For purposes of this Agreement, "Retirement" means voluntary
termination by Optionee of his or her employment with the Company or a Related
Company after Optionee (i) attains age 60, and (ii) has completed 20 years of
service with the Company.
SECTION 4. TERMINATION. The Options shall terminate and cease to be exercisable
in accordance with the following provisions:
(a) Notwithstanding any other provisions of this Agreement, the Options
shall terminate at the close of business on the Expiration Date set forth above
or, if sooner, the business day before the tenth anniversary of the Grant Date
(as applicable, the "Expiration Date"), unless sooner terminated as provided
below. For this purpose, "business day" means a day on which the Company's
corporate headquarters is open for normal business.
(b) The Options shall terminate when they no longer may be exercised
pursuant to Section 3(e) or when they are forfeited as provided in Sections 7 or
8, if sooner than the Expiration Date.
SECTION 5. EXERCISES.
(a) The Options may be exercised only by the Optionee or his or her
guardian or legal representative during his or her lifetime, and only by the
Optionee's Post-Death Representatives after the Optionee's death. The term
"Post-Death Representatives" means the executor or administrator of the
Optionee's estate or the person or persons to whom the Optionee's rights under
this Agreement shall pass by his or her will or the laws of descent and
distribution.
(b) An exercise of the Options shall be made by delivering to the
Committee or its designee on the exercise date:
(i) a written notice (in the form of Exhibit A attached)
designating the number of shares to be purchased, which notice must contain such
other information as the Committee or its designee may require and be signed by
the Optionee or the person acting under Section 5(a) hereof, and
(ii) payment of the full amount of the Option Price of the Options
being exercised.
(c) An Optionee may pay the Option Price:
(i) in cash;
(ii) if the Stock is publicly traded (as defined in the Plan), in
Stock which, if acquired from the Company, has been held for at least six months
including by deemed or constructive transfers of shares in lieu of actual
transfer and physical delivery of certificates.
(iii) if the Stock is publicly traded (as defined in the Plan),
payment in full of the Option Price need not accompany the written notice of
exercise provided that the notice of exercise directs that the certificate or
certificates for the shares of Stock for which the Option is exercised be
delivered to a licensed broker acceptable to the Company as the agent for the
individual exercising the Option and, at the time such certificate or
certificates are delivered, the broker tenders to the Company cash (or cash
equivalents acceptable to the Company) equal to the option price for the shares
of Stock purchased pursuant to the exercise of the Option plus the amount (if
any) of Required Withholding Taxes.
(d) The date of exercise shall be the date the written notice and the
Option Price actually are received by the Committee or its designee, regardless
of the means of delivery.
2
<PAGE>
SECTION 6. WITHHOLDING TAXES. If as a result of the exercise of any Option
Required Withholding Taxes will become due, the Optionee shall, concurrently
with the exercise of such Option(s), pay to the Company or a Related Company the
amount of such Required Withholding Taxes in cash.
SECTION 7. NON-DISCLOSURE AGREEMENT.
(a) If, in connection with the Optionee's employment with the Company or
a Related Company and/or the grant of Options, the Optionee has entered into a
Non-Disclosure Agreement with the Company or Related Company, that agreement is
incorporated by reference herein.
(b) In the event the Optionee materially breaches the Non-Disclosure
Agreement, the Optionee shall have breached this Agreement and shall be liable
to the Company or a Related Company for any actual damages caused by such
breach, including the actual costs of investigating such action and enforcing
the Company's or a Related Company's rights hereunder (including court costs and
attorneys' fees). The Optionee acknowledges that monetary damages may be
inadequate to fully compensate the Company or a Related Company for the
consequences of any such breach; accordingly, the Company or Related Company
shall have the right to obtain injunctive and other appropriate equitable relief
in addition to obtaining actual damages as aforesaid.
(c) In addition to the foregoing, if the Optionee materially breaches the
Non-Disclosure Agreement, the Optionee shall have failed to satisfy a condition
subsequent to the grant or vesting of the Options.
Accordingly, in such event:
(i) all Options which have not previously been exercised shall be
forfeited to the Company, effective on the date on which the Optionee first
engages in the prohibited disclosure (the "Initial Breach Date");
(ii) all shares of Stock received upon exercise of Options either
within the 18-month period ending on the Initial Breach Date or thereafter, and
all shares of Stock received in stock splits or stock dividends paid in respect
of such Option shares, shall be forfeited to the Company (collectively,
"Forfeited Shares"); and
(iii) all cash or other dividends or distributions paid or
delivered to Optionee in respect of such forfeited shares of Stock (referred to
in clause (ii)), either during the 18-month period ending on the Initial
Disclosure Date or thereafter, shall be forfeited to the Company (collectively,
"Forfeited Distributions").
(d) The Company shall notify the Optionee in writing of any breach under
this Section within two years after the later of (i) the Initial Breach Date, or
(ii) the time when the Optionee ceases to be employed by the Company.
(e) Immediately upon the Optionee's receipt of notice setting forth a
breach of this provision referred to in paragraph (d), the Optionee shall:
(i) deliver to the Company all certificates representing Forfeited
Shares which he or she at that time owns or controls, in exchange for payment by
the Company of the Option Price paid by the Optionee for such Shares;
(ii) pay to the Company in cash the Fair Market Value, as of the
effective date of the forfeiture, of any Forfeited Shares which the Optionee no
longer owns or controls (including any such Shares withheld by the Company or
Related Company at Optionee's election to pay Withholding Taxes);
(iii) repay to the Company any and all cash Forfeited
Distributions; and
(iv) deliver to the Company any and all non-cash Forfeited
Distributions or, if the Optionee no longer owns or controls such Forfeited
Distributions, to pay to the Company in cash the fair market value, as of the
effective date of the forfeiture, of such Distributions.
All such deliveries and payment shall be made without adjustment for any
Withholding Taxes paid or withheld, interest, changes in the price of Stock
before or after the forfeiture date, or otherwise. The Optionee is solely
responsible for any taxes relating to Forfeited Shares, Forfeited Distributions,
or the Options.
(f) The provisions of this Section shall survive the vesting,
exercise, and/or termination of the Options, but shall terminate
upon the occurrence of a Change in Control, as defined below.
3
<PAGE>
SECTION 8. OTHER FORFEITURES; RELATED MATTERS.
(a) If the Optionee is dismissed from employment for good cause, both
vested and unvested Options shall immediately terminate and be forfeited to the
extent not previously exercised. For this purpose, "good cause" shall mean
willful misconduct, dereliction of duties, or conviction of a felony or a crime
the nature of which would cause the Optionee's continued employment to adversely
affect the reputation of the Company or a Related Company.
(b) By accepting this Agreement, the Optionee consents to a deduction
from any amounts owed to Optionee by the Company or a Related Company
(including, but not limited to, amounts owed as wages or other compensation,
fringe benefits, nonqualified retirement benefits, or vacation pay) to the
extent of the amounts owed by the Optionee to the Company or Related Company
pursuant to this Agreement. In the event that such set-off does not satisfy the
full amount owed to the Company or Related Company, the Optionee agrees to pay
the unpaid balance immediately to the Company or Related Company.
(c) The provisions of paragraph (a) and (b) of this Section shall survive
the vesting, exercise, and/or termination of the Options, but shall terminate
upon the occurrence of an acceleration date pursuant to Section 10(a).
SECTION 9. ADJUSTMENTS.
(a) In the event of (i) any change in the outstanding shares of Stock by
reason of any stock split (excluding the July 22, 1999 stock split), combination
of shares, stock dividend, reorganization, merger, consolidation, or other
corporate change having a similar effect, (ii) any separation of the Company
including a spin-off or other distribution of stock or property by the Company,
or (iii) any distribution to shareholders generally other than a normal
dividend, the Committee shall make such equitable adjustments to Option as it
shall deem appropriate in order to prevent the dilution or enlargement of the
economic value of the Option. Any such determination by the Committee shall be
conclusive and binding on all concerned.
(b) Upon the dissolution or liquidation of the Company, or upon a merger,
consolidation or reorganization of the Company with one or more other entities
in which the Company is not the surviving entity, or upon a sale of
substantially all of the assets of the Company to another person or entity, or
upon any transaction (including, without limitation, a merger or reorganization
in which the Company is the surviving entity) approved by the Board that results
in any person or entity (other than persons who are holders of stock of the
Company at the time the Plan is approved by the stockholders and other than an
affiliate) owning 80 percent or more of the combined voting power of all classes
of stock of the Company, the Option shall terminate, except to the extent
provision is made in connection with such transaction for the assumption of the
Option, or for the substitution for such Option of a new option covering the
stock of a successor entity, or a parent or subsidiary thereof, with appropriate
adjustments as to the number and kinds of shares and exercise price, in which
event the Option shall continue in the manner and under the terms so provided.
In the event of any such termination of the Option, Optionee shall have the
right (subject to the general limitations on exercise set forth herein),
immediately prior to the occurrence of such termination and during such period
occurring prior to such termination as the Committee in its sole discretion
shall designate, to exercise such Option in whole or in part, whether or not
such Option was otherwise exercisable at the time of such termination. The
Committee shall send written notice of an event that will result in such a
termination to the Optionee not later than the time at which the Company gives
notice thereof to its stockholders. Nothwithstanding the foregoing, in the event
of a transaction described in this Section 9(b), the Board of Directors may, in
its sole discretion, cancel any outstanding Options (provided, however, that the
limitations of Section 424 of the Code shall apply with respect to adjustments
made to ISOs) and pay or deliver, or cause to be paid or delivered, to the
holder thereof an amount in cash or securities having a value (as determined by
the Board of Directors acting in good faith) equal to the product of (A) the
number of shares of Common Stock (the "Option Shares") that, as of the date of
consummation of such transaction, the holder of such Option had become entitled
to purchase (and had not purchased) multiplied by (B) the amount, if any, by
which (1) the formula or fixed price per share paid to holders of shares of
Common Stock pursuant to such transaction exceeds (2) the options price
applicable to such Option Shares.
SECTION 10. CHANGE IN CONTROL
(a) Immediately upon an Involuntary Termination of Optionee's employment
within eighteen (18) months following a Change in Control or after a transaction
described in Section 9(b) of this Agreement in which the Option is assumed, the
Option, to the extent outstanding at the time but not otherwise fully
exercisable, shall automatically accelerate so that the Option shall become
immediately exercisable for all the Option shares at the time subject to the
Option and may be exercised for any or all of those Option Shares as fully
vested shares.
(b) The Option as accelerated shall remain so exercisable until the
earlier of (i) the Expiration Date or (ii) the expiration of the one (1)-year
period measured from the date of the Optionee's Involuntary Termination.
(c) For purposes of this Agreement, the following definitions shall be in
effect:
4
<PAGE>
(i) Involuntary Termination shall mean the termination of
Optionee's service by reason of:
(A) Optionee's involuntary dismissal or discharge by the
Company for reason other than "good cause," or
(B) Optionee's voluntary resignation following (x) a change
in Optionee's position with the Company which entails materially reduced
responsibilities, compensation, target bonus or equity incentive opportunities,
or (y) a relocation of Optionee from the metropolitan area in which Optionee was
located at the time of the Change in Control, provided and only if such change,
reduction or relocation is effected by the Company without Optionee's consent.
(ii) Change in Control occurs when any of the following events
occur:
(A) any Person (as defined herein) becomes the beneficial
owner directly or indirectly (within the meaning of Rule 13d-3 under the Act) of
more than 50% of the Company's then outstanding voting securities (measured on
the basis of voting power); or
(B) Individuals who, as of the date hereof, constitute the
Board (the "Incumbent Board") cease for any reason to constitute at least a
majority of the Board; provided, however, that any individual becoming a
director subsequent to the date hereof whose election, or nomination for
election by the Company's shareholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose initial assumption of
office occurs as a result of an actual or threatened election contest with
respect to the election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other than the
Board; or
(C) the closing of an agreement of merger or consolidation
with any other corporation or business entity, other than (x) a merger or
consolidation which would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity), in combination with the ownership of any trustee or other
fiduciary holding securities under an employee benefit plan of the Company, at
least 50% of the combined voting power of the voting securities of the Company
or such surviving entity outstanding immediately after such merger or
consolidation, or (y) a merger or consolidation effected to implement a
recapitalization of the Company (or similar transaction) in which no Person
acquires more than 50% of the combined voting power of the Company's then
outstanding securities; or
(D) concurrently with the liquidation or dissolution of the
Company or upon the closing of a sale or disposition by the Company of all or
substantially all of the Company's assets.
For purposes of this paragraph, "Person" means any individual, entity or group
within the meaning of Section 3(a)(9) of the Exchange Act, as modified and used
in Sections 13(d) and 14(d) thereof; however, a Person shall not include (aa)
the Company, (bb) Bridge Information Systems, Inc., (cc) a trustee or other
fiduciary holding securities under an employee benefit plan of the Company, (dd)
an underwriter temporarily holding securities pursuant to an offering of such
securities, (ee) a corporation owned, directly or indirectly, by the
shareholders of the Company in substantially the same proportions as their
ownership of Stock, (ff) any shareholder or group of shareholders of the
Company, or (gg) any person or entity or group acquiring securities of the
Company pursuant to an issuance of securities approved by the Board of Directors
of the Company.
SECTION 11. REPRESENTATIONS. Optionee represents and warrants to the Company
that, upon exercise of the Option, Optionee will be acquiring the shares of
Stock for Optionee's own account for the purpose of investment and not with a
view to or for sale in connection with any distribution thereof, and Optionee
understands that (i) neither the Option nor the Stock has been registered with
the Securities and Exchange Commission by reason of their issuance in a
transaction exempt from the registration requirements, and (ii) the shares
acquired pursuant to the Option must be held indefinitely by Optionee unless a
subsequent disposition thereof is registered under the Securities Act or is
exempt from such registration. The stock certificates for any shares of Stock
issued to Optionee will bear the following legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 AND MAY NOT
BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS
THEY HAVE BEEN REGISTERED UNDER THAT ACT OR AN EXEMPTION
FROM REGISTRATION IS AVAILABLE.
5
<PAGE>
SECTION 12. LIMITATION ON RIGHTS IN COMPANY STOCK.
(a) Neither the Optionee nor his or her Post-Death Representatives shall
have any of the rights of a shareholder with respect to shares of Stock covered
by the Options until shares of Stock are issued to him, her, or them upon
exercise of the Option.
(b) Prior to exercise of the Options, the Company may require the
Optionee to execute a restrictive stock agreement, lock-up agreement or any
other agreement restricting the Optionee's ability to transfer Stock subsequent
to the exercise of the Options in such form as the Company shall reasonably
determine to be appropriate.
SECTION 13. LIMITATIONS ON TRANSFERS. The Options shall not be transferable by
Optionee otherwise than by will or by the laws of descent and distribution.
SECTION 14. NO RIGHT TO EMPLOYMENT. Nothing in this Agreement or the Plan shall
confer on the Optionee any right or expectation to continue in the employ of his
or her employer or the Company, or to interfere in any manner with the absolute
right of the employer or the Company to change or terminate the Optionee's
employment at any time for any reason or no reason.
SECTION 15. AMENDMENTS. This Agreement may be amended in writing by the Company
and Optionee, provided that the Company may amend this Agreement unilaterally if
the amendment does not adversely affect or impair the rights of the Optionee.
The Company shall give notice to the Optionee of any such unilateral amendment
either before or promptly after the effective date thereof.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement in duplicate
as of the Grant Date.
SAVVIS HOLDINGS CORPORATION
By:
------------------------------------------
Vice President - General Counsel
------------------------------------------
Optionee
6
<PAGE>
EXHIBIT A
OPTION EXERCISE FORM
TO BE EXECUTED BY THE OPTIONEE TO
EXERCISE THE RIGHTS TO PURCHASE STOCK
EVIDENCED BY THE FOREGOING OPTION
TO: SAVVIS HOLDINGS CORPORATION
I, (First and Last Name) , a Participant under the SAVVIS Holdings
Corporation 1999 Stock Option Plan (the "Plan"), do hereby exercise the right to
purchase ___________ shares of Common Stock, $0.01 par value, of SAVVIS Holdings
Corporation pursuant to the Option dated (Date of Grant) under the Plan.
Enclosed herewith is
(i) $___________, or
(ii) shares of Common Stock, properly endorsed or
accompanied by a duly executed stock power, with a
Fair Market Value of $________________,
an amount equal to the total Option Price for the shares of Common Stock being
purchased pursuant to this Option Exercise Form.
Date:
---------------------- ---------------------------------------------
Signature
ADDRESS OF OPTIONEE:
----------------------------------------------
----------------------------------------------
----------------------------------------------
[Insert Optionee Address]
Send a completed copy of this Option Exercise Form to:
SAVVIS Holdings Corporation
717 Office Parkway
St. Louis, MO 63141-7115
Attn: Vice President and General Counsel
7
EXHIBIT 10.3
<TABLE>
<CAPTION>
============================================================================================================================
Optionee Grant Date Expiration Date Option Price Per Number of Options
Share Granted
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
============================================================================================================================
</TABLE>
INCENTIVE STOCK OPTION AGREEMENT
UNDER THE
SAVVIS HOLDINGS CORPORATION
1999 STOCK OPTION PLAN
SAVVIS Holdings Corporation, a Delaware corporation (the
"Company"), and the employee of the Company named above or a Related Company
(the "Optionee"), hereby agree as follows:
SECTION 1. GRANT OF OPTIONS. In conformity with the SAVVIS Holdings Corporation
1999 Stock Option Plan (the "Plan"), the provisions of which are incorporated
herein by this reference, and pursuant to authorization of the Committee charged
with the administration thereof (the "Committee"), the Company hereby grants to
Optionee Incentive Stock Options (the "Options") to purchase all or any part of
the number of shares of common stock of the Company, par value $0.01 per share,
set forth above under the caption "Number of Options Granted," on the terms and
conditions herein set forth. To the maximum extent permitted by law and
regulation, except as provided in Section 3(f), the Option shall constitute and
be treated at all times by Optionee and the Company as an "incentive stock
option" as defined under Section 422(b) of the Internal Revenue Code of 1986, as
amended (the "Code"), and the remainder of the Option shall constitute and be
treated at all times by Optionee and the Company as a "non-qualified stock
option" for federal income tax purposes and shall not constitute and shall not
be treated as an "incentive stock option" (as so defined). The grant hereunder
is made on the Grant Date set forth above (the "Grant Date"). Capitalized terms
not defined in this Agreement shall have the meanings given in the Plan.
SECTION 2. OPTION PRICE. The purchase price per share of the Stock covered by
the Options (the "Option Price") shall be the Option Price Per Share set forth
above. The Board of Directors of the Company (the "Board") has determined that
the Option Price is at least equal to the Fair Market Value of the Stock as of
the Grant Date.
SECTION 3. EXERCISABILITY.
(a) The Options are issued in exchange for certain options to purchase
shares of common stock of Bridge Information Systems, Inc. ("Bridge") acquired
by the Optionee in connection with the acquisition of the Company by Bridge and
shall be 100% vested on the Grant Date. Notwithstanding the foregoing, the
Options shall be exercisable in full no later than ten years after the Grant
Date.
(b) The Optionee shall not exercise the Options unless the Optionee has
been an employee of the Company or a Related Company at all times during the
period beginning on the Grant Date and (i) ending on the day three months before
the date of such exercise; or (ii) if Optionee ceases to be such an employee as
a result of Disability, ending on the day one year before the date of such
exercise; or (iii) if Optionee ceases to be such an employee as a result of
Retirement (even if also as a result of Disability), ending on the day five
years before the date of such exercise. Notwithstanding the foregoing, if the
Optionee dies while employed by the Company or a Related Company or at any time
thereafter while the Options remain exercisable, the Options may be exercised
until the earlier to occur of the Expiration Date or the date three years after
the date of death, and shall not be exercised thereafter.
(c) The exercisability of the Options shall not be affected by any change
of duties or position of the Optionee so long as the Optionee continues to be an
employee of the Company or a Related Company.
(d) An individual who is granted a leave of absence by the Company or a
Related Company for any reason shall be considered to remain employed by the
Company or a Related Company until the leave expires or a date two years after
the date the leave commenced, whichever occurs first.
(e) For purposes of this Agreement, "Retirement" means voluntary
termination by Optionee of his or her employment with the Company or a Related
Company after Optionee (i) attains age 60, and (ii) has completed 20 years of
service with the Company.
<PAGE>
(f) The exercisability of the Options shall not be affected by any change
of duties or position of the Optionee so long as the Optionee continues to be an
employee of the Company or a Related Company. For purposes of this Agreement,
services as a consultant, advisor or independent contractor shall be considered
services as an employee and services provided to a Related Company shall be
considered services provided to the Company. Any Options which remain
unexercised for more than three months after Optionee ceases providing services
as a common law employee shall cease to constitute an "incentive stock option"
under Section 422 of the Code and shall thereafter be treated as a Non-Qualified
Stock Option, as defined in the Plan.
SECTION 4. TERMINATION. The Options shall terminate and cease to be exercisable
in accordance with the following provisions:
(a) Notwithstanding any other provisions of this Agreement, the Options
shall terminate at the close of business on the Expiration Date set forth above
or, if sooner, the business day before the tenth anniversary of the Grant Date
(as applicable, the "Expiration Date"), unless sooner terminated as provided
below. For this purpose, "business day" means a day on which the Company's
corporate headquarters is open for normal business.
(b) The Options shall terminate when they no longer may be exercised
pursuant to Section 3(e) or when they are forfeited as provided in Sections 7 or
8, if sooner than the Expiration Date.
SECTION 5. EXERCISES.
(a) The Options may be exercised only by the Optionee or his or her
guardian or legal representative during his or her lifetime and only by the
Optionee's Post-Death Representatives after the Optionee's death. The term
"Post-Death Representatives" means the executor or administrator of the
Optionee's estate or the person or persons to whom the Optionee's rights under
this Agreement shall pass by his or her will or the laws of descent and
distribution.
(b) An exercise of the Options shall be made by delivering to the
Committee or its designee on the exercise date:
(i) a written notice (in the form of Exhibit A attached)
designating the number of shares to be purchased, which notice must contain such
other information as the Committee or its designee may require and be signed by
the Optionee or the person acting under Section 5(a) hereof, and
(ii) payment of the full amount of the Option Price of the Options
being exercised.
(c) An Optionee may pay the Option Price:
(i) in cash;
(ii) if the Stock is publicly traded (as defined in the Plan), in
Stock which, if acquired from the Company, has been held for at least six months
including by deemed or constructive transfers of shares in lieu of actual
transfer and physical delivery of certificates.
(iii) if the Stock is publicly traded (as defined in the Plan),
payment in full of the Option Price need not accompany the written notice of
exercise provided that the notice of exercise directs that the certificate or
certificates for the shares of Stock for which the Option is exercised be
delivered to a licensed broker acceptable to the Company as the agent for the
individual exercising the Option and, at the time such certificate or
certificates are delivered, the broker tenders to the Company cash (or cash
equivalents acceptable to the Company) equal to the option price for the shares
of Stock purchased pursuant to the exercise of the Option plus the amount (if
any) of Required Withholding Taxes.
(d) The date of exercise shall be the date the written notice and the
Option Price actually are received by the Committee or its designee, regardless
of the means of delivery.
SECTION 6. WITHHOLDING TAXES. If as a result of the exercise of any Option
Required Withholding Taxes will become due, the Optionee shall, concurrently
with the exercise of such Option(s), pay to the Company or a Related Company the
amount of such Required Withholding Taxes in cash.
SECTION 7. NON-DISCLOSURE AGREEMENT.
2
<PAGE>
(a) If in connection with the Optionee's employment with the Company or a
Related Company and/or the grant of Options the Optionee has entered into a
Non-Disclosure Agreement with the Company or Related Company, that agreement is
incorporated by reference herein.
(b) In the event the Optionee materially breaches the Non-Disclosure
Agreement, the Optionee shall have breached this Agreement and shall be liable
to the Company or a Related Company for any actual damages caused by such
breach, including the actual costs of investigating such action and enforcing
the Company's or a Related Company's rights hereunder (including court costs and
attorneys' fees). The Optionee acknowledges that monetary damages may be
inadequate to fully compensate the Company or a Related Company for the
consequences of any such breach; accordingly, the Company or Related Company
shall have the right to obtain injunctive and other appropriate equitable relief
in addition to obtaining actual damages as aforesaid.
(c) In addition to the foregoing, if the Optionee materially breaches the
Non-Disclosure Agreement, the Optionee shall have failed to satisfy a condition
subsequent to the grant or vesting of the Options. Accordingly, in such event:
(i) all Options which have not previously been exercised shall be
forfeited to the Company, effective on the date on which the Optionee first
engages in the prohibited disclosure (the "Initial Breach Date");
(ii) all shares of Stock received upon exercise of Options, either
within the 18-month period ending on the Initial Breach Date or thereafter, and
all shares of Stock received in stock splits or stock dividends paid in respect
of such Option shares, shall be forfeited to the Company (collectively,
"Forfeited Shares"); and
(iii) all cash or other dividends or distributions paid or
delivered to Optionee in respect of such forfeited shares of Stock (referred to
in clause (ii)), either during the 18-month period ending on the Initial
Disclosure Date or thereafter, shall be forfeited to the Company (collectively,
"Forfeited Distributions").
(d) The Company shall notify the Optionee in writing of any breach under
this Section within two years after the later of (i) the Initial Breach Date, or
(ii) the time when the Optionee ceases to be employed by the Company.
(e) Immediately upon the Optionee's receipt of notice setting forth a
breach of this provision referred to in paragraph (d), the Optionee shall:
(i) deliver to the Company all certificates representing Forfeited
Shares which he or she at that time owns or controls in exchange for payment by
the Company of the Option Price paid by the Optionee for such Shares;
(ii) pay to the Company in cash the Fair Market Value, as of the
effective date of the forfeiture, of any Forfeited Shares which the Optionee no
longer owns or controls (including any such Shares withheld by the Company or
Related Company at Optionee's election to pay Withholding Taxes);
(iii) repay to the Company any and all cash Forfeited
Distributions; and
(iv) deliver to the Company any and all non-cash Forfeited
Distributions or, if the Optionee no longer owns or controls such Forfeited
Distributions, to pay to the Company in cash the fair market value, as of the
effective date of the forfeiture, of such Distributions.
All such deliveries and payment shall be made without adjustment for any
Withholding Taxes paid or withheld, interest, changes in the price of Stock
before or after the forfeiture date, or otherwise. The Optionee is solely
responsible for any taxes relating to Forfeited Shares, Forfeited Distributions,
or the Options.
(f) The provisions of this Section shall survive the vesting, exercise,
and/or termination of the Options, but shall terminate upon the occurrence of a
Change in Control, as defined below.
SECTION 8. OTHER FORFEITURES; RELATED MATTERS.
(a) If the Optionee is dismissed from employment for good cause, both
vested and unvested Options shall immediately terminate and be forfeited to the
extent not previously exercised. For this purpose, "good cause" shall mean
willful misconduct, dereliction of duties, or conviction of a felony or a crime
the nature of which would cause the Optionee's continued employment to adversely
affect the reputation of the Company or a Related Company.
3
<PAGE>
(b) By accepting this Agreement, the Optionee consents to a deduction
from any amounts owed to Optionee by the Company or a Related Company
(including, but not limited to, amounts owed as wages or other compensation,
fringe benefits, nonqualified retirement benefits, or vacation pay) to the
extent of the amounts owed by the Optionee to the Company or Related Company
pursuant to this Agreement. In the event that such set-off does not satisfy the
full amount owed to the Company or Related Company, the Optionee agrees to pay
the unpaid balance immediately to the Company or Related Company.
(c) The provisions of paragraph (a) and (b) of this Section shall survive
the vesting, exercise, and/or termination of the Options, but shall terminate
upon the occurrence of an acceleration date pursuant to Section 10(a).
SECTION 9. ADJUSTMENTS.
(a) In the event of (i) any change in the outstanding shares of Stock by
reason of any stock split (excluding the July 22, 1999 stock split), combination
of shares, stock dividend, reorganization, merger, consolidation, or other
corporate change having a similar effect, (ii) any separation of the Company
including a spin-off or other distribution of stock or property by the Company,
or (iii) any distribution to shareholders generally other than a normal
dividend, the Committee shall make such equitable adjustments to Option as it
shall deem appropriate in order to prevent the dilution or enlargement of the
economic value of the Option. Any such determination by the Committee shall be
conclusive and binding on all concerned.
(b) Upon the dissolution or liquidation of the Company, or upon a merger,
consolidation or reorganization of the Company with one or more other entities
in which the Company is not the surviving entity, or upon a sale of
substantially all of the assets of the Company to another person or entity, or
upon any transaction (including, without limitation, a merger or reorganization
in which the Company is the surviving entity) approved by the Board that results
in any person or entity (other than persons who are holders of stock of the
Company at the time the Plan is approved by the stockholders and other than an
affiliate) owning 80 percent or more of the combined voting power of all classes
of stock of the Company, the Option shall terminate, except to the extent
provision is made in connection with such transaction for the assumption of the
Option, or for the substitution for such Option of a new option covering the
stock of a successor entity, or a parent or subsidiary thereof, with appropriate
adjustments as to the number and kinds of shares and exercise price, in which
event the Option shall continue in the manner and under the terms so provided.
In the event of any such termination of the Option, Optionee shall have the
right (subject to the general limitations on exercise set forth herein),
immediately prior to the occurrence of such termination and during such period
occurring prior to such termination as the Committee in its sole discretion
shall designate, to exercise such Option in whole or in part, whether or not
such Option was otherwise exercisable at the time such termination. The
Committee shall send written notice of an event that will result in such a
termination to the Optionee not later than the time at which the Company gives
notice thereof to its stockholders. Nothwithstanding the foregoing, in the event
of a transaction described in this Section 9(b), the Board of Directors may, in
its sole discretion, cancel any outstanding Options (provided, however, that the
limitations of Section 424 of the Code shall apply with respect to adjustments
made to ISO's) and pay or deliver, or cause to be paid or delivered, to the
holder thereof an amount in cash or securities having a value (as determined by
the Board of Directors acting in good faith) equal to the product of (A) the
number of shares of Common Stock (the "Option Shares") that, as of the date of
consummation of such transaction, the holder of such Option had become entitled
to purchase (and had not purchased) multiplied by (B) the amount, if any, by
which (1) the formula or fixed price per share paid to holders of shares of
Common Stock pursuant to such transaction exceeds (2) the options price
applicable to such Option Shares.
SECTION 10. REPRESENTATIONS. Optionee represents and warrants to the Company
that, upon exercise of the Option, Optionee will be acquiring the shares of
Stock for Optionee's own account for the purpose of investment and not with a
view to or for sale in connection with any distribution thereof, and Optionee
understands that (i) neither the Option nor the Stock has been registered with
the Securities and Exchange Commission by reason of their issuance in a
transaction exempt from the registration requirements, and (ii) the shares
acquired pursuant to the Option must be held indefinitely by Optionee unless a
subsequent disposition thereof is registered under the Securities Act or is
exempt from such registration. The stock certificates for any shares of Stock
issued to Optionee will bear the following legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 AND MAY NOT
BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS
THEY HAVE BEEN REGISTERED UNDER THAT ACT OR AN EXEMPTION
FROM REGISTRATION IS AVAILABLE.
SECTION 11. LIMITATION ON RIGHTS IN COMPANY STOCK.
4
<PAGE>
(a) Neither the Optionee nor his or her Post-Death Representatives shall
have any of the rights of a shareholder with respect to shares of Stock covered
by the Options until shares of Stock are issued to him, her, or them upon
exercise of the Option.
(b) Prior to exercise of the Options, the Company may require the
Optionee to execute a restrictive stock agreement, lock-up agreement or any
other agreement restricting the Optionee's ability to transfer Stock subsequent
to the exercise of the Options in such form as the Company shall reasonably
determine to be appropriate.
SECTION 12. LIMITATIONS ON TRANSFERS. The Options shall not be transferable by
Optionee otherwise than by will or by the laws of descent and distribution.
SECTION 13. NO RIGHT TO EMPLOYMENT. Nothing in this Agreement or the Plan shall
confer on the Optionee any right or expectation to continue in the employ of his
or her employer or the Company, or to interfere in any manner with the absolute
right of the employer or the Company to change or terminate the Optionee's
employment at any time for any reason or no reason.
SECTION 14. AMENDMENTS. This Agreement may be amended in writing by the Company
and Optionee, provided that the Company may amend this Agreement unilaterally if
the amendment does not adversely affect or impair the rights of the Optionee.
The Company shall give notice to the Optionee of any such unilateral amendment
either before or promptly after the effective date thereof.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement in duplicate
as of the Grant Date.
SAVVIS HOLDINGS CORPORATION
By:
-----------------------------------------
Vice President - General Counsel
-----------------------------------------
Optionee
5
<PAGE>
EXHIBIT A
OPTION EXERCISE FORM
TO BE EXECUTED BY THE OPTIONEE TO
EXERCISE THE RIGHTS TO PURCHASE STOCK
EVIDENCED BY THE FOREGOING OPTION
TO: SAVVIS HOLDINGS CORPORATION
I, (First Name and Last Name) , a Participant under the SAVVIS
Holdings Corporation 1999 Stock Option Plan (the "Plan"), do hereby exercise the
right to purchase ___________ shares of Common Stock, $0.01 par value, of SAVVIS
Holdings Corporation pursuant to the Option dated (Date of Grant) under the
Plan.
Enclosed herewith is
(i) $___________, or
(ii) shares of Common Stock, properly endorsed or accompanied by
a duly executed stock power, with a Fair Market Value of
$________________,
an amount equal to the total Option Price for the shares of Common Stock being
purchased pursuant to this Option Exercise Form.
Date:
-----------------------------------------
Signature
ADDRESS OF OPTIONEE:
-----------------------------------------
-----------------------------------------
-----------------------------------------
[Insert Optionee Address]
Send a completed copy of this Option Exercise Form to:
SAVVIS Holdings Corporation
717 Office Parkway
St. Louis, MO 63141-7115
Attn: Vice President and General Counsel
EXHIBIT 10.4
<TABLE>
<CAPTION>
=====================================================================================================================
OPTIONEE Grant Date Expiration Date Option Price Per Number of
Share Options Granted
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
=====================================================================================================================
</TABLE>
NON-QUALIFIED STOCK OPTION AGREEMENT
UNDER THE
SAVVIS HOLDINGS CORPORATION
1999 STOCK OPTION PLAN
SAVVIS Holdings Corporation, a Delaware corporation (the
"Company"), and the individual named above (the "Optionee"), hereby agree as
follows:
SECTION 1. GRANT OF OPTIONS. In conformity with the SAVVIS Holdings Corporation
1999 Stock Option Plan (the "Plan"), the provisions of which are incorporated
herein by this reference, and pursuant to authorization of the Committee charged
with the administration thereof (the "Committee"), the Company hereby grants to
Optionee Non-Qualified Stock Options (the "Options") to purchase all or any part
of the number of shares of common stock of the Company, par value $0.01 per
share, set forth above under the caption "Number of Options Granted," on the
terms and conditions herein set forth. These Options shall constitute and be
treated at all times by Optionee and the Company as a "non-qualified stock
option" for federal income tax purposes and shall not constitute and shall not
be treated as an "incentive stock option." The grant hereunder is made on the
Grant Date set forth above (the "Grant Date"). Capitalized terms not defined in
this Agreement shall have the meanings given in the Plan.
SECTION 2. OPTION PRICE. The purchase price per share of the Stock covered by
the Options (the "Option Price") shall be the Option Price Per Share set forth
above. The Board of Directors of the Company (the "Board") has determined that
the Option Price is at least equal to the Fair Market Value of the Stock as of
the Grant Date.
SECTION 3. EXERCISABILITY.
(a) The Optionee may exercise the Options (subject to the limitations on
exercise set forth in this Agreement and in the Plan), at any time, and from
time to time, after the Grant Date if the Options have not terminated.
Notwithstanding the foregoing, the Options shall be exercisable in full no later
than ten years after the Grant Date.
(b) The Optionee shall not exercise the Options unless the Optionee has
been an employee of the Company or a Related Company at all times during the
period beginning on the Grant Date and (i) ending on the day three months before
the date of such exercise; or (ii) if Optionee ceases to be such an employee as
a result of Disability, ending on the day one year before the date of such
exercise; or (iii) if Optionee ceases to be such an employee as a result of
Retirement (even if also as a result of Disability), ending on the day five
years before the date of such exercise. Notwithstanding the foregoing, if the
Optionee dies while employed by the Company or a Related Company or at any time
thereafter while the Options remain exercisable, the Options may be exercised
until the earlier to occur of the Expiration Date or the date three years after
the date of death, and shall not be exercised thereafter.
(c) The exercisability of the Options shall not be affected by any change
of duties or position of the Optionee so long as the Optionee continues to be an
employee of the Company or a Related Company. For purposes of this Agreement,
services as a consultant, advisor or independent contractor shall be considered
services as an employee and services provided to a Related Company shall be
considered services provided to the Company.
(d) An individual who is granted a leave of absence by the Company or a
Related Company for any reason shall be considered to remain employed by the
Company or a Related Company until the leave expires or a date two years after
the date the leave commenced, whichever occurs first.
<PAGE>
(e) For purposes of this Agreement, "Retirement" means voluntary
termination by Optionee of his or her employment with the Company or a Related
Company after Optionee (i) attains age 60, and (ii) has completed 20 years of
service with the Company.
SECTION 4. TERMINATION. The Options shall terminate and cease to be exercisable
in accordance with the following provisions:
(a) Notwithstanding any other provisions of this Agreement, the Options
shall terminate at the close of business on the Expiration Date set forth above
or, if sooner, the business day before the tenth anniversary of the Grant Date
(as applicable, the "Expiration Date"), unless sooner terminated as provided
below. For this purpose, "business day" means a day on which the Company's
corporate headquarters is open for normal business.
(b) The Options shall terminate when they no longer may be exercised
pursuant to Section 3(b) or when they are terminated as provided in Sections 8
or 9, if sooner than the Expiration Date.
SECTION 5. EXERCISES.
(a) The Options may be exercised by the Optionee, his or her guardian or
legal representative during his or her lifetime or a transferee pursuant to
Section 11, and by the Optionee's Post-Death Representatives or a transferee
after the Optionee's death. The term "Post-Death Representatives" means the
executor or administrator of the Optionee's estate or the person or persons to
whom the Optionee's rights under this Agreement shall pass by his or her will or
the laws of descent and distribution.
(b) An exercise of the Options shall be made by delivering to the
Committee or its designee on the exercise date:
(i) a written notice (in the form of Exhibit A attached)
designating the number of shares to be purchased, which notice must contain such
other information as the Committee or its designee may require and be signed by
the Optionee or the person acting under Section 5(a) hereof, and
(ii) payment of the full amount of the Option Price of the Options
being exercised.
(c) An Optionee may pay the Option Price:
(i) in cash;
(ii) if the Stock is publicly traded (as defined in the Plan), in
Stock which, if acquired from the Company, has been held for at least six months
including by deemed or constructive transfers of shares in lieu of actual
transfer and physical delivery of certificates;
(iii) if the Stock is publicly traded (as defined in the Plan),
payment in full of the Option Price need not accompany the written notice of
exercise provided that the notice of exercise directs that the certificate or
certificates for the shares of Stock for which the Options are exercised be
delivered to a licensed broker acceptable to the Company as the agent for the
individual exercising the Options and, at the time such certificate or
certificates are delivered, the broker tenders to the Company cash (or cash
equivalents acceptable to the Company) equal to the option price for the shares
of Stock purchased pursuant to the exercise of the Options plus the amount (if
any) of Required Withholding Taxes.
(d) The date of exercise shall be the date the written notice and the
Option Price actually are received by the Committee or its designee, regardless
of the means of delivery.
SECTION 6. WITHHOLDING TAXES. If as a result of the exercise of any Options,
Required Withholding Taxes will become due, the Optionee shall, concurrently
with the exercise of such Option(s), pay to the Company or a Related Company the
amount of such Required Withholding Taxes in cash.
2
<PAGE>
SECTION 7. RESTRICTIONS ON TRANSFERS OF STOCK
(a) Any shares of Stock acquired pursuant to the exercise of an Option
shall be Restricted Stock, and Optionee (or such other individual who is
entitled to exercise an Option) shall not sell, pledge, assign, gift, transfer
or otherwise dispose of any shares of Restricted Stock to any person or entity,
other than pursuant to Section 11, except in accordance with the following
schedule: as to twenty-five percent of the shares of Restricted Stock on the
first anniversary of the Grant Date (the first "Anniversary Date") and as to an
additional twenty-five percent of the shares of Restricted Stock after each of
the next three Anniversary Dates.
(b) With respect to either the whole or any part of the Restricted Stock,
the period during which it is subject to repurchase is the "Restricted Period."
During the Restricted Period and prior to the satisfaction of any other
restrictions prescribed by the Committee, the Optionee may not sell, transfer,
assign, pledge or otherwise encumber or dispose of the Restricted Stock except
to the extent provided in Section 11.
(c) Subject to Section 7(e) below, upon a termination of employment prior
to the termination of the Restricted period, the Company shall have the right to
repurchase the Restricted Stock at a price equal to the lesser of (i) Fair
Market Value and (ii) the Option Price. The Company shall deliver to the
Optionee, or other holder of such shares of Restricted Stock, notice that it is
exercising its repurchase right within 20 business days after the date of
termination of employment. In the event that the Company determines that it
cannot or will not exercise its right to purchase Restricted Stock pursuant to
this subsection, in whole or in part, the Company may assign its right
hereunder, in whole or in part, to a stockholder of the Company, a benefit plan
of the Company or an affiliate. The Company shall give reasonable written notice
to the Optionee of any assignment of its right. "Fair Market Value," for
purposes of this subsection, shall be determined by the Board in the same manner
specified in the Plan for determining the Option Price. A notice of repurchase
given pursuant to this subsection shall specify the price and date of closing of
such repurchase, which shall be no later than 30 days from the date the Company
exercises such right. In the event any such repurchase right is exercised in
accordance with this subsection, the holder of the Restricted Stock being
repurchased shall be obligated to sell such Restricted Stock pursuant to the
exercise of such right.
(d) With respect to the whole or any part of the Restricted Stock, upon
the expiration of the Restricted Period and the satisfaction of any other
conditions prescribed by the Committee, the restrictions applicable to the whole
or part of the Restricted Stock shall lapse, and a stock certificate
representing a number of shares of Stock equal to the number of shares of
Restricted Stock for which the restrictions have lapsed shall be delivered, free
of all the restrictions, to the Optionee or his or her beneficiary or estate, as
the case may be.
(e) If the Optionee dies, becomes disabled or retires before the end of
the Restricted Period, the restrictions on transfer of the Restricted Stock
shall lapse on the date of death, Disability or Retirement, and the Restricted
Stock shall be deliverable to the executors, administrators, legatees or
distributees of the Optionee's estate.
(f) The Committee may accelerate the dates on which the Restricted Stock
may be assigned, sold or otherwise transferred and/or the date the Restricted
Period shall terminate.
(g) The Optionee understands that the Optionee (and not the Company)
shall be responsible for Optionee's own federal, state, local or foreign tax
liability that may arise as a result of the transactions contemplated by this
Agreement. The Optionee is relying solely on the determination of Optionee's tax
advisors and or Optionee's own determinations, and not on any statements or
representations of the Company or any of its agents with regard to all such tax
matters. The Optionee understands that Section 83 of the Code taxes as ordinary
income the difference between the amount paid for the Restricted Stock and the
fair market value of the Restricted Stock as of the date any restrictions on the
Restricted Stock lapse. In this context, "restriction" includes the right of the
Company to buy back the Restricted Stock pursuant to its repurchase option. In
the event the Company has registered under the Exchange Act, "restriction" with
respect to officers, directors and 10% stockholders also means the period after
the purchase of the Restricted Stock during which such officers, directors and
10% stockholders could be subject to suit under Section 16(b) of the Exchange
Act. The Optionee understands that Optionee may elect to be taxed at the time
the Options are exercised for Restricted Stock rather than when and as the
Company's repurchase option or Section 16(b) period expires by filing an
election under Section 83(b) of the Code with the Internal Revenue Service
within 30 days from the date of exercising the Options.
3
<PAGE>
THE OPTIONEE ACKNOWLEDGES THAT IT IS THE OPTIONEE'S SOLE RESPONSIBILITY
AND NOT THE COMPANY'S TO FILE TIMELY THE ELECTION UNDER SECTION 83(b) OF THE
CODE, EVEN IF THE COMPANY OR ITS REPRESENTATIVES VOLUNTARILY ASSIST THE OPTIONEE
TO MAKE THIS FILING.
SECTION 8. OTHER FORFEITURES; RELATED MATTERS.
(a) If the Optionee is dismissed from employment for good cause, both
vested and unvested Options shall immediately terminate and be forfeited to the
extent not previously exercised. For this purpose, "good cause" shall mean
willful misconduct, dereliction of duties, or conviction of a felony or a crime
the nature of which would cause the Optionee's continued employment to adversely
affect the reputation of the Company or Related Company.
(b) By accepting this Agreement, the Optionee consents to a deduction
from any amounts owed to Optionee by the Company or Related Company (including,
but not limited to, amounts owed as wages or other compensation, fringe
benefits, nonqualified retirement benefits, or vacation pay) to the extent of
the amounts owed by the Optionee to the Company or Related Company pursuant to
this Agreement. In the event that such set-off does not satisfy the full amount
owed to the Company, the Optionee agrees to pay the unpaid balance immediately
to the Company or Related Company.
(c) The provisions of paragraph (a) and (b) of this Section shall survive
the vesting, exercise, and/or termination of the Options.
SECTION 9. ADJUSTMENTS.
(a) In the event of (i) any change in the outstanding shares of Stock by
reason of any stock split (excluding the July 22, 1999 stock split), combination
of shares, stock dividend, reorganization, merger, consolidation, or other
corporate change having a similar effect, (ii) any separation of the Company
including a spin-off or other distribution of stock or property by the Company,
or (iii) any distribution to shareholders generally other than a normal
dividend, the Committee shall make such equitable adjustments to Options as it
shall deem appropriate in order to prevent the dilution or enlargement of the
economic value of the Options. Any such determination by the Committee shall be
conclusive and binding on all concerned.
(b) Upon the dissolution or liquidation of the Company, or upon a merger,
consolidation or reorganization of the Company with one or more other entities
in which the Company is not the surviving entity, or upon a sale of
substantially all of the assets of the Company to another person or entity, or
upon any transaction (including, without limitation, a merger or reorganization
in which the Company is the surviving entity) approved by the Board that results
in any person or entity (other than persons who are holders of stock of the
Company at the time the Plan is approved by the stockholders and other than an
affiliate) owning 80 percent or more of the combined voting power of all classes
of stock of the Company, the Options shall terminate, except to the extent
provision is made in connection with such transaction for the assumption of the
Options, or for the substitution for such Options of new options covering the
stock of a successor entity, or a parent or subsidiary thereof, with appropriate
adjustments as to the number and kinds of shares and exercise price, in which
event the Options shall continue in the manner and under the terms so provided.
In the event of any such termination of the Options, Optionee shall have the
right (subject to the general limitations on exercise set forth herein),
immediately prior to the occurrence of such termination and during such period
occurring prior to such termination as the Committee in its sole discretion
shall designate, to exercise such Options in whole or in part, whether or not
such Options were otherwise exercisable at the time such termination. The
Committee shall send written notice of an event that will result in such a
termination to the Optionee not later than the time at which the Company gives
notice thereof to its stockholders. Notwithstanding the foregoing (but only if
expressly provided in any option agreement), in the event of a transaction
described in this Section 9(b), the Board of Directors may, in its sole
discretion, cancel any outstanding Options and pay or deliver, or cause to be
paid or delivered, to the holder thereof an amount in cash or securities having
a value (as determined by the Board of Directors acting in good faith) equal to
the product of (A) the number of shares of Common Stock (the "Option Shares")
that, as of the date of consummation of such transaction, the holder of such
Options had become entitled to purchase (and had not purchased) multiplied by
(B) the amount, if any, by which (1) the formula or fixed price per share paid
to holders of shares of Common Stock pursuant to such transaction exceeds (2)
the Option Price applicable to such Option Shares.
4
<PAGE>
SECTION 10. REPRESENTATIONS. Optionee represents and warrants to the Company
that, upon exercise of the Options, Optionee will be acquiring the shares of
Stock for Optionee's own account for the purpose of investment and not with a
view to or for sale in connection with any distribution thereof, and Optionee
understands that (i) neither the Options nor the Stock have been registered with
the Securities and Exchange Commission by reason of their issuance in a
transaction exempt from the registration requirements and (ii) the shares
acquired pursuant to exercise of the Options must be held indefinitely by
Optionee unless a subsequent disposition thereof is registered under the
Securities Act or is exempt from such registration. The stock certificates for
any shares of Stock issued to Optionee will bear the following legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 AND MAY NOT
BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS
THEY HAVE BEEN REGISTERED UNDER THAT ACT OR AN EXEMPTION
FROM REGISTRATION IS AVAILABLE.
SECTION 11. TRANSFERS. Optionee may transfer, not for value, all or part of
Options or Restricted Stock to any Family Member. For the purpose of this
Section 11, a "not for value" transfer is a transfer which is (i) a gift, (ii) a
transfer under a domestic relations order in settlement of marital property
rights; or (iii) a transfer to an entity in which more than fifty percent of the
voting interests are owned by Family Members (or the Optionee) in exchange for
an interest in that entity. Optionee must provide the Company with a notice of a
transfer of the Options or Restricted Stock in the form attached hereto as
Exhibit B. If requested by Optionee, the Company will cooperate with Optionee in
determining the value of the Company common stock at the time of the transfer.
Following a transfer under this Section 11, any such Options or Restricted Stock
shall continue to be subject to the same terms and conditions as were applicable
immediately prior to transfer. Subsequent transfers of transferred Options or
Restricted Stock are prohibited except to Family Members of the original
Optionee in accordance with this Section 11 or by will or the laws of descent
and distribution. The events of termination of employment or other relationship
of Section 3 hereof shall continue to be applied with respect to the original
Optionee, following which the Options shall be exercisable by the transferee
only to the extent and for the periods specified in Sections 3 and 4. "Family
Member" means a person who is a child, stepchild, grandchild, parent,
stepparent, niece, nephew, mother-in-law, father-in-law, son-in-law,
daughter-in-law, brother-in-law, or sister-in-law, including adoptive
relationships, of the Optionee, any person sharing the Optionee's household
(other than a tenant or employee), a trust in which these persons have more than
fifty percent of the beneficial interest, a foundation in which these persons
(or the Optionee) control the management of assets, and any other entity in
which these persons (or the Optionee) own more than fifty percent of the voting
interests.
SECTION 12. LIMITATION ON RIGHTS IN COMPANY STOCK.
(a) Neither the Optionee, his or her Post-Death Representatives nor a
transferee pursuant to Section 11 shall have any of the rights of a shareholder
with respect to shares of Stock covered by the Options until shares of Stock are
issued to him, her, or them upon exercise of the Options.
(b) Prior to exercise of the Options, the Company may require the
Optionee or a transferee pursuant to Section 11 to execute a restrictive stock
agreement, lock-up agreement or any other agreement restricting the Optionee's
ability to transfer Stock subsequent to the exercise of the Options in such form
as the Company shall reasonably determine to be appropriate.
SECTION 13. NO RIGHT TO EMPLOYMENT. Nothing in this Agreement or the Plan shall
confer on the Optionee any right or expectation to continue in the employ of his
or her employer or the Company or to interfere in any manner with the absolute
right of the employer or the Company to change or terminate the Optionee's
employment at any time for any reason or no reason.
SECTION 14. AMENDMENTS. This Agreement may be amended in writing by the Company
and Optionee, provided that the Company may amend this Agreement unilaterally if
the amendment does not adversely affect or impair the rights of the Optionee.
The Company shall give notice to the Optionee of any such unilateral amendment
either before or promptly after the effective date thereof.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement in duplicate as of the Grant Date.
5
<PAGE>
SAVVIS HOLDINGS CORPORATION
By:
---------------------------------------
Vice President - General Counsel
---------------------------------------
Optionee
6
<PAGE>
EXHIBIT A
OPTION EXERCISE FORM
TO BE EXECUTED BY THE OPTIONEE TO
EXERCISE THE RIGHTS TO PURCHASE STOCK
EVIDENCED BY THE FOREGOING OPTIONS
TO: SAVVIS HOLDINGS CORPORATION
I, (First and Last Name) , a Participant under the SAVVIS Holdings
Corporation 1999 Stock Option Plan (the "Plan"), do hereby exercise the right to
purchase ___________ shares of Common Stock, $0.01 par value, of SAVVIS Holdings
Corporation pursuant to the Options dated (Date of Grant) under the Plan.
Enclosed herewith is:
(i) $___________, or
(ii) shares of Common Stock, properly endorsed or accompanies by
a duly executed stock power, with a Fair Market Value of
$________________,
an amount equal to the total Option Price for the shares of Common Stock being
purchased pursuant to this Option Exercise Form.
Date:
---------------------------------------
Signature
ADDRESS OF OPTIONEE:
---------------------------------------
---------------------------------------
---------------------------------------
[Insert Optionee's Address]
Send a completed copy of this Option Exercise Form to:
SAVVIS Holdings Corporation
717 Office Parkway
St. Louis, MO 63141-7115
Attn: Vice President and General Counsel
7
<PAGE>
EXHIBIT B
OPTION/RESTRICTED STOCK TRANSFER NOTICE
NOTICE dated as of ____________, 199__ by _________________ (the "Optionee").
1. Optionee has given, transferred and delivered to [Family
Transferee] all of Optionee's right, title and interest in ________ shares of
Restricted Stock or in options to acquire ___________ shares of common stock of
the Company on the terms and conditions contained in the Option Agreement (copy
attached) pursuant to which the Options were granted.
2. By accepting this transfer, [Family Transferee] has agreed
to be bound by the terms and conditions of the Option Agreement, including any
restrictions contained therein, and the [Family Transferee's] signature on the
Notice indicates such agreement.
OPTIONEE
---------------------------------------
[Name]
AGREED:
[FAMILY TRANSFEREE]
- ---------------------------------------
[Name]
ADDRESS:
- ---------------------------------------
- ---------------------------------------
================================================================================
AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER
Among
BRIDGE INFORMATION SYSTEMS, INC.,
SAVVIS ACQUISITION CORP.,
and
SAVVIS HOLDINGS CORPORATION
Dated as of February 19, 1999
================================================================================
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
----
ARTICLE I
THE MERGER
<S> <C> <C>
SECTION 1.01 The Merger.............................................................2
SECTION 1.02 Effect of the Merger...................................................2
SECTION 1.03 Consummation of the Merger.............................................2
SECTION 1.04 Charter, Bylaws, Directors and Officers................................2
SECTION 1.05 Further Assurances.....................................................2
ARTICLE II
CONVERSION OF SECURITIES
SECTION 2.01 Exchange Ratio.........................................................3
SECTION 2.02 Stock Options, Series A Warrants, Rollover Warrants, Etc...............5
SECTION 2.03 Conversion of Capital Stock of Acquisition Corp........................5
SECTION 2.04 Dissenting Shares......................................................5
SECTION 2.05 Surrender and Exchange of Shares.......................................6
SECTION 2.06 Dissenting Shares After Payment of Fair Value..........................7
SECTION 2.07 Closing of Stock Transfer Books........................................7
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY
SECTION 3.01 Organization and Qualification.........................................7
SECTION 3.02 Authorization of Agreements, Etc.......................................8
SECTION 3.03 Validity...............................................................8
SECTION 3.04 Capitalization.........................................................8
SECTION 3.05 Financial Statements, Etc..............................................9
SECTION 3.06 Absence of Undisclosed Liabilities.....................................9
SECTION 3.07 Absence of Certain Changes or Events...................................9
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
SECTION 3.08 Governmental Approvals................................................10
SECTION 3.09 Litigation............................................................10
SECTION 3.10 Trade Secrets.........................................................11
SECTION 3.11 Title to Properties...................................................11
SECTION 3.12 Use of Real Property..................................................11
SECTION 3.13 Personal Property.....................................................12
SECTION 3.14 Intellectual Property Rights..........................................12
SECTION 3.15 Labor Matters.........................................................12
SECTION 3.16 Taxes.................................................................13
SECTION 3.17 Compliance with Law; Permits..........................................14
SECTION 3.18 Employee Benefit Plans................................................15
SECTION 3.19 Environmental Matters.................................................17
SECTION 3.20 Contracts.............................................................17
SECTION 3.21 Insurance.............................................................18
SECTION 3.22 Pending Transactions..................................................19
SECTION 3.23 Claims Against Officers and Directors.................................19
SECTION 3.24 Customers, Suppliers, Etc.............................................19
SECTION 3.25 Account Receivable and Advances.......................................20
SECTION 3.26 Improper and Other Payments...........................................20
SECTION 3.27 Accuracy of Statements................................................20
SECTION 3.28 Brokers...............................................................20
ARTICLE IV
REPRESENTATION AND WARRANTIES
OF PARENT
SECTION 4.01 Organization and Qualification........................................21
SECTION 4.02 Authorization of Agreements, Etc......................................21
SECTION 4.03 Validity..............................................................21
SECTION 4.04 Capitalization........................................................22
SECTION 4.05 Financial Statements..................................................22
SECTION 4.06 Absence of Undisclosed Liabilities....................................23
SECTION 4.07 Governmental Approvals................................................23
SECTION 4.08 Litigation............................................................23
SECTION 4.09 Compliance with Laws..................................................24
SECTION 4.10 Brokers...............................................................24
</TABLE>
iii
<PAGE>
<TABLE>
<CAPTION>
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF ACQUISITION CORP.
Page
----
<S> <C> <C>
SECTION 5.01 Organization and Qualification........................................24
SECTION 5.02 Authorization of Agreements, Etc......................................24
SECTION 5.03 Validity..............................................................25
SECTION 5.04 Governmental Approvals................................................25
SECTION 5.05 Brokers...............................................................25
ARTICLE VI
COVENANTS
SECTION 6.01 Conduct of the Company's Business.....................................25
SECTION 6.02 Stockholder Approval, Etc.............................................27
SECTION 6.03 Access to Information.................................................28
SECTION 6.04 Further Assurances....................................................29
SECTION 6.05 Inquiries and Negotiations............................................29
SECTION 6.06 Notification of Certain Matters.......................................30
SECTION 6.07 Employee Matters......................................................30
SECTION 6.08 Company Stock Plans...................................................31
SECTION 6.09 Warrants..............................................................31
SECTION 6.10 Indemnification.......................................................32
SECTION 6.11 Registration Rights...................................................33
SECTION 6.12 Representation Agreement..............................................33
SECTION 6.13 Pooling of Interests..................................................34
ARTICLE VII
CONDITIONS TO THE MERGER
SECTION 7.01 Conditions to Each Party's Obligation to Effect the Merger............34
SECTION 7.02 Conditions to the Obligation of the Company to Effect the Merger......35
SECTION 7.03 Conditions to the Obligation of Parent and Acquisition Corp.
to Effect the Merger..................................................36
</TABLE>
iv
<PAGE>
<TABLE>
<CAPTION>
ARTICLE VIII
TERMINATION AND ABANDONMENT
Page
----
<S> <C> <C>
SECTION 8.01 Termination and Abandonment...........................................38
SECTION 8.02 Effect of Termination.................................................38
ARTICLE IX
SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION
SECTION 9.01 Survival of Representations...........................................39
SECTION 9.02 General Indemnity.....................................................39
SECTION 9.03 Conditions of Indemnification.........................................39
SECTION 9.04 Limitations on Indemnification and Remedies...........................41
SECTION 9.05 Exclusive Remedies....................................................42
ARTICLE X
MISCELLANEOUS
SECTION 10.01 Expenses, Etc ....................................................42
SECTION 10.02 Publicity, Confidentiality............................................43
SECTION 10.03 Execution in Counterparts.............................................43
SECTION 10.04 Notices...............................................................43
SECTION 10.05 Waivers...............................................................44
SECTION 10.06 Amendments, Supplements, Etc..........................................44
SECTION 10.07 Entire Agreement......................................................44
SECTION 10.08 Applicable Law........................................................45
SECTION 10.09 Binding Effect, Benefits..............................................45
SECTION 10.10 Assignability.........................................................45
SECTION 10.11 Severability..........................................................45
SECTION 10.12 Variation and Amendment...............................................45
</TABLE>
v
<PAGE>
INDEX TO SCHEDULES AND EXHIBITS
Schedule Description
-------- -----------
I Stockholders
II Consideration
3.01(a) Jurisdictions
3.01(b) Subsidiaries
3.04 Capitalization
3.05 Financial Statements
3.06 Certain Liabilities
3.07 Certain Changes or Events
3.08 Governmental Approvals
3.09 Litigation
3.11 Liens and Encumbrances
3.12 Real Property Interests
3.13 Personal Property Interests
3.14 Intellectual Property Rights
3.15 Labor Matters
3.16 Taxes
3.17 Permits
3.18 Employee Benefit Plans
3.19 Environmental Matters
3.20 Contracts
3.21 Insurance
3.24 Customers; Suppliers, etc.
3.25 Accounts Receivable
3.26 Improper Payments
3.28 Brokers
4.07 Governmental Approvals
4.08 Litigation
4.11 Brokers
5.04 Governmental Approvals
5.5 Brokers
6.07 Employee Matters
vi
<PAGE>
<TABLE>
<CAPTION>
Exhibit Description
------- -----------
<S> <C> <C>
A Form of Escrow Agreement
B-1 Form of Opinion of Bryan Cave LLC
B-2 Form of Opinion of Reboul, MacMurray, Hewitt, Maynard
& Kristol
</TABLE>
vii
<PAGE>
AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER
AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER, dated as of
March 19, 1999, among BRIDGE INFORMATION SYSTEMS, INC., a Missouri corporation
("PARENT"), SAVVIS ACQUISITION CORP., a Delaware corporation and wholly-owned
subsidiary of Parent ("ACQUISITION CORP."), and SAVVIS HOLDINGS CORPORATION, a
Delaware corporation (the "COMPANY"). The Company and Acquisition Corp. are
hereinafter sometimes referred to as the "CONSTITUENT CORPORATIONS" and the
Company as the "SURVIVING CORPORATION".
WHEREAS, Parent, Acquisition Corp. and the Company desire that
Acquisition Corp. merge with and into the Company (the "MERGER"), upon the terms
and subject to the conditions set forth herein and in accordance with the
General Corporation Law of the State of Delaware (the "DELAWARE GCL"), with the
result that the Company shall continue as the surviving corporation and the
separate existence of Acquisition Corp. (except as it may be continued by
operation of law) shall cease; and
WHEREAS, Acquisition Corp. and the Company desire that at the
Effective Time (as hereinafter defined) (i) all outstanding shares of capital
stock of the Company (excluding (x) any shares of capital stock held in treasury
of the Company and (y) any Dissenting Shares (as hereinafter defined)) and (ii)
certain outstanding warrants, be converted into the right to receive fully paid
and nonassessable shares of Class A Common Stock, $.01 par value, of Parent
("PARENT COMMON STOCK"), as hereinafter provided; and
WHEREAS, Parent, Acquisition Corp. and the Company desire
that, immediately after the Effective Time and solely as a result of the Merger,
Parent will own all of the issued and outstanding capital stock of the Company;
and
WHEREAS, the respective Boards of Directors of Parent and
Acquisition Corp. have approved the Merger; and
WHEREAS, the Board of Directors of the Company has unanimously
approved the Merger;
WHEREAS, Parent, Acquisition Corp. and the Company entered
into an Agreement and Plan of Merger, dated as of February 17, 1999 (the
"Original Merger Agreement"); and
WHEREAS, Parent, Acquisition Corp. and the Company desire to
clarify certain provisions of the Original Merger Agreement pursuant to this
amendment and restatement; and
<PAGE>
NOW, THEREFORE, in consideration of the mutual
representations, warranties, covenants, agreements and conditions contained
herein, and in order to set forth the terms and conditions of the Merger and the
mode of carrying the same into effect, the parties hereto hereby agree as
follows:
ARTICLE I.
THE MERGER
SECTION 1.01. The Merger. Subject to the terms and conditions
of this Agreement, at the Effective Time, in accordance with this Agreement and
the Delaware GCL, Acquisition Corp. shall be merged with and into the Company,
the separate existence of Acquisition Corp. (except as it may be continued by
operation of law) shall cease, and the Company shall continue as the surviving
corporation.
SECTION 1.02. Effect of the Merger. Upon the effectiveness of
the Merger, the Surviving Corporation shall succeed to, and assume all the
rights and obligations of, the Company and Acquisition Corp. in accordance with
the Delaware GCL and the Merger shall otherwise have the effects set forth in
Section 259 of the Delaware GCL.
SECTION 1.03. Consummation of the Merger. As soon as
practicable after the satisfaction or waiver of the conditions to the
obligations of the parties to effect the Merger set forth herein, provided that
this Agreement has not been terminated previously, the parties hereto will cause
the Merger to be consummated by filing with the Secretary of State of the State
of Delaware a properly executed certificate of merger in accordance with the
Delaware GCL (the time of such filing being the "EFFECTIVE TIME").
SECTION 1.04. Charter, Bylaws, Directors and Officers. As of
the Effective Time, the Amended and Restated Certificate of Incorporation of the
Surviving Corporation shall be the Certificate of Incorporation of Acquisition
Corp., until thereafter amended in accordance with the provisions thereof and as
provided by the Delaware GCL. The Amended and Restated Bylaws of the Surviving
Corporation from and after the Effective Time shall be the Bylaws of Acquisition
Corp. as in effect immediately prior to the Effective Time, continuing until
thereafter amended in accordance with the provisions thereof and the Certificate
of Incorporation of the Surviving Corporation and as provided by the Delaware
GCL. The initial directors and officers, respectively, of the Surviving
Corporation shall be (i) the directors of Acquisition Corp. immediately prior to
the Effective Time and (ii) the officers of the Company immediately prior to the
Effective Time, respectively, in each case until their removal or until their
respective successors are duly elected and qualified.
SECTION 1.05. Further Assurances. If at any time after the
Effective Time the Surviving Corporation shall consider or be advised that any
deeds, bills of sale, assignments or
2
<PAGE>
assurances or any other acts or things are necessary, desirable or proper (i) to
vest, perfect or confirm, of record or otherwise, in the Surviving Corporation,
its right, title or interest in, to or under any of the rights, privileges,
powers, franchises, properties or assets of either of the Constituent
Corporations, or (ii) otherwise to carry out the purposes of this Agreement, the
Surviving Corporation and its proper officers and directors or their designees
shall be authorized to execute and deliver, in the name and on behalf of either
of the Constituent Corporations, all such deeds, bills of sale, assignments and
assurances and do, in the name and on behalf of such Constituent Corporation,
all such other acts and things necessary, desirable or proper to vest, perfect
or confirm its right, title or interest in, to or under any of the rights,
privileges, powers, franchises, properties or assets of such Constituent
Corporation and otherwise to carry out the purposes of this Agreement.
ARTICLE II.
CONVERSION OF SECURITIES
SECTION 2.01. Exchange Ratio. At the Effective Time, by virtue
of the Merger and without any action on the part of the holder thereof:
(a) Preferred Stock.
(i) Each share of Series A Convertible Preferred Stock, $.001
par value, of the Company ("COMPANY SERIES A PREFERRED STOCK"), issued
and outstanding immediately prior to the Effective Time (other than
shares to be canceled pursuant to paragraph (d) of this Section 2.01
and Dissenting Shares) shall be converted into the right to receive
.4907753 shares of Parent Common Stock (the "SERIES A EXCHANGE RATIO").
(ii) Each share of Series B Convertible Preferred Stock, $.001
par value, of the Company ("COMPANY SERIES B PREFERRED STOCK"), issued
and outstanding immediately prior to the Effective Time (other than
shares to be canceled pursuant to paragraph (d) of this Section 2.01
and Dissenting Shares) shall be converted into the right to receive
.0461255 shares of Parent Common Stock (the "SERIES B EXCHANGE RATIO").
(iii) Each share of Series C Redeemable Preferred Stock, $.001
par value, of the Company ("COMPANY SERIES C PREFERRED STOCK"), issued
and outstanding immediately prior to the Effective Time (other than
shares to be canceled pursuant to paragraph (d) of this Section 2.01
and Dissenting Shares) shall be converted into the right to receive the
number of shares of Parent Common Stock equal to the sum of (i)
.0461255 and (ii) the product of .0461255 and the amount of accrued but
unpaid dividends thereon (the "SERIES C EXCHANGE RATIO").
3
<PAGE>
(iv) Each warrant to purchase shares of Company Series A
Preferred Stock (the "SERIES A WARRANTS") shall be assumed by Parent
and automatically converted into a warrant to purchase the number of
shares of Parent Common Stock equal to the product of (x) the number of
shares of Company Series A Preferred Stock remaining subject (as of
immediately prior to the Effective Time) to the Series A Warrant and
(y) .4907753 (the "SERIES A WARRANT EXCHANGE RATIO"), as more fully
described in Section 6.09 hereof.
(b) Common Stock. Each share of Common Stock, $.001 par value,
of the Company ("COMPANY COMMON STOCK"), issued and outstanding immediately
prior to the Effective Time (other than shares to be canceled pursuant to
paragraph (d) of this Section 2.01 and Dissenting Shares) shall be converted
into the right to receive the number of shares of Parent Common Stock (the
"COMMON STOCK EXCHANGE RATIO"), determined by application of the following
formula:
(i) Add (A) the number of outstanding shares of Company Series
A Preferred Stock multiplied by the Series A Exchange Ratio, (B) the
number of outstanding shares of Company Series B Preferred Stock
multiplied by the Series B Exchange Ratio, (C) the number of
outstanding shares of Company Series C Preferred Stock by the Series C
Exchange Ratio and (D) the number of shares of Company Series A
Preferred Stock remaining subject (as of immediately prior to the
Effective Time) to the Series A Warrant multiplied by the Series A
Warrant Exchange Ratio. The total constitutes the "PREFERRED UNITS."
(ii) Subtract the Preferred Units from 3,250,000. The
remainder constitutes the "COMMON UNITS".
(iii) Add (A) the number of outstanding shares of Company
Common Stock, (B) the number of shares issuable upon exercise of the
outstanding options (the "OPTIONS") issued under the 1997 SAVVIS
Communications Stock Option Plan and the 1998 SAVVIS Holdings
Corporation Stock Option Plan (collectively, the "COMPANY STOCK OPTION
PLANS"), (C) 10,334,327 (the number of shares of Company Common Stock
issuable upon exercise of the warrants (the "SERIES C WARRANTS") issued
pursuant to the Warrant Agreement dated March 3, 1998 (the "SERIES C
WARRANT AGREEMENT")) and (D) 53,919 (the number of shares of Company
Common Stock issuable upon the conversion of the shares of Company
Series A Preferred Stock issuable upon exercise of the warrants (the
"SERIES A WARRANTS") of the Company). This total constitutes the
"COMMON EQUIVALENTS".
(iv) Divide the Common Units by the Common Equivalents to
determine the "COMMON STOCK EXCHANGE RATIO".
Each of the Common Stock Exchange Ratio, Series A Exchange
Ratio, Series B Exchange Ratio and Series C Exchange Ratio shall be calculated
as of five days prior to the
4
<PAGE>
Effective Time and set forth on Schedule II hereto (to be provided at the
Effective Time) along with the number of shares of Parent Common Stock issuable
to each of the stockholders of the Company named in Schedule I hereto (being
hereinafter called individually a "STOCKHOLDER" and collectively, the
"STOCKHOLDERS"), and each of the Company's warrant holders and option holders.
(c) Warrants. At the Effective Time, the Series C Warrants
shall be terminated and automatically converted into the right to receive the
number of shares of Parent Common Stock equal to the product of (i) the number
of shares of Company Common Stock issuable upon exercise of the Series C
Warrants and (ii) the Common Stock Exchange Ratio.
(d) Treasury Stock. Each share of capital stock that is held
in the treasury of the Company shall be canceled and retired and no capital
stock of Parent, cash or other consideration shall be paid or delivered in
exchange therefor.
SECTION 2.02. Stock Options, Series A Warrants, Rollover
Warrants, etc. (a) At the Effective Time, each outstanding option issued under
the Company Stock Option Plans shall be assumed by Parent and automatically
converted into an option to purchase shares of Parent Common Stock as provided
in Section 6.08 hereof.
(b) At the Effective Time, each outstanding Series A Warrant
shall be assumed by Parent and automatically converted into a warrant to
purchase shares of Parent Common Stock as provided in Section 6.09 hereof.
(c) At the Effective Time, each outstanding warrant (the
"ROLLOVER WARRANTS") issued pursuant to the Rollover Warrant Agreement dated as
of March 3, 1998, as supplemented (the "ROLLOVER WARRANT AGREEMENT"), shall be
assumed by Parent and automatically converted into a warrant to purchase shares
of Parent Common Stock as provided in Section 6.09 hereof.
SECTION 2.03. Conversion of Capital Stock of Acquisition
Corp.. At the Effective Time, each share of Common Stock of Acquisition Corp.
issued and outstanding immediately prior to the Effective Time shall remain
outstanding and, by virtue of the Merger, automatically and without any action
on the part of the holder thereof, be converted into and become one validly
issued, fully paid and nonassessable share of Common Stock of the Surviv ing
Corporation.
SECTION 2.04. Dissenting Shares. Notwithstanding anything in
this Agreement to the contrary, shares of capital stock of the Company that are
outstanding immediately prior to the Effective Time and that are held by
Stockholders who have not voted such shares in favor of the approval and
adoption of this Agreement and who shall have delivered a written demand for
appraisal of such shares in the manner provided in Section 262 of the Delaware
GCL ("DISSENTING SHARES") shall not be converted into or be exchangeable for the
right to receive the consideration provided in Section 2.01 of this Agreement,
but the holders of such shares shall be entitled to payment of the appraised
value of such shares in accordance with the provisions of
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Section 262 of the Delaware GCL; provided, however, that (i) if any holder of
Dissenting Shares shall subsequently deliver a written withdrawal of his demand
for appraisal of such shares (with the written approval of the Surviving
Corporation, if such withdrawal is not tendered within 60 days after the
Effective Time), or (ii) if any holder fails to perfect or loses his appraisal
rights as provided in Section 262 of the Delaware GCL, or (iii) if any holder of
Dissenting Shares fails to demand payment within the time period provided in
Section 262 of the Delaware GCL, such holder shall forfeit the right to
appraisal of such shares and such shares shall thereupon be deemed to have been
converted into and to have become exchangeable for, as of the Effective Time,
the right to receive the consideration provided in Section 2.01 of this
Agreement, without any interest thereon.
SECTION 2.05. Surrender and Exchange of Shares.
(a) Upon surrender by a Stockholder for cancellation of an
outstanding certificate or certificates, duly endorsed, that prior thereto
represented shares of the capital stock of the Company, Parent shall deliver to
such Stockholder a certificate representing the number of shares of Parent
Common Stock set forth opposite such Stockholder's name on Schedule II under the
heading "Number of Shares of Parent Common Stock Received".
(b) At the Effective Time, Parent shall deliver to the ESCROW
AGENT (the "Escrow Agent") designated under the escrow agreement substantially
in the form attached hereto as Exhibit A (the "Escrow Agreement") a certificate
or certificates representing 10% of the aggregate number of shares of Parent
Common Stock issuable to the Stockholders pursuant to Section 2.01(a) and (b)
hereto (such shares are collectively hereinafter referred to as the "ESCROWED
SHARES"). Schedule II will set forth the number of Escrowed Shares allocable to
each Stockholder under the heading "Number of Escrowed Shares".
(c) If a certificate representing shares of the capital stock
of the Company has been lost, stolen or destroyed, and a replacement certificate
has not been issued as of the Effective Time, the holder of such certificate
shall submit an affidavit describing the lost, stolen or destroyed certificate,
the number of shares evidenced thereby and affirming the status of that
certificate in lieu of surrendering such certificate to Parent, which shall deem
such certificate canceled. Until so surrendered, each outstanding certificate
that, prior to the Effective Time, represented shares of the capital stock of
the Company that shall have been converted as aforesaid shall be deemed for all
corporate purposes, except as hereinafter provided, to evidence the ownership of
the consideration into which such shares have been so converted.
(d) No certificates representing fractional shares of Parent
Common Stock shall be issued upon the surrender for exchange of certificates
evidencing stock of the Company held by the Stockholders, and such fractional
share interests will not entitle the owner thereof to vote or to any rights of a
shareholder of Parent. Each holder of shares of the capital stock of the Company
who would otherwise have been entitled to receive in the Merger a fraction of a
share of Parent Common Stock (after taking into account all certificates
surrendered by such holder)
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shall be entitled to receive from Parent at the Effective Time, in lieu thereof,
cash (without interest) in an amount equal to such fractional part of a share of
Parent Common Stock multiplied by $21.68 (the "PRICE PER SHARE"). It is
understood (i) that the payment of cash in lieu of fractional shares of Parent
Common Stock is solely for the purpose of avoiding the expense and inconvenience
to Parent of issuing fractional shares and does not represent separately
bargained for consideration; and (ii) that no holder of shares of Company
capital stock will receive cash in lieu of fractional shares of Parent Common
Stock in an amount greater than the value of one full share of Parent Common
Stock.
SECTION 2.06. Dissenting Shares After Payment of Fair Value.
Dissenting Shares, if any, after payment of fair value in respect thereto have
been made to dissenting Stockholders pursuant to the Delaware GCL, shall be
canceled.
SECTION 2.07. Closing of Stock Transfer Books. On and after
the Effective Time, there shall be no transfers on the stock transfer books of
the Company of shares of capital stock of the Company.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY
The Company represents and warrants to Parent and Acquisition
Corp. as follows:
SECTION 3.01. Organization and Qualification. (a) The Company
is a corporation duly incorporated, validly existing and in good standing under
the laws of the State of Delaware and has all requisite corporate power and
authority to own or lease and operate its properties and assets and to carry on
its business as it is now being conducted. The Company is duly qualified as a
foreign corporation to do business, and is in good standing, in each
jurisdiction in which the character of its properties owned or leased or the
nature of its activities makes such qualification necessary, except where the
failure to be so qualified would not have a material adverse effect on the
financial condition, operating results or business of the Company and its
Subsidiaries (as defined below) taken as a whole (a "COMPANY MATERIAL ADVERSE
EFFECT"). Schedule 3.01(a) sets forth those jurisdictions in which the Company
is so qualified.
(b) Except as set forth on Schedule 3.01(b) hereto, the
Company does not own of record or beneficially, directly or indirectly, (i) any
shares of capital stock or securities convertible into capital stock of any
other corporation or (ii) any participating interest in any partnership, joint
venture or other non-corporate business enterprise. Each Subsidiary is duly
organized, validly existing and in good standing under the laws of its state of
organization and has all requisite power and authority to own or lease and
operate its properties and assets and to
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carry on its business as it is now being conducted. Each Subsidiary is duly
qualified to do business, and is in good standing, in each jurisdiction in which
the character of its properties owned or leased or the nature of its activities
makes such qualification necessary, except where the failure to be so qualified
would not have a Company Material Adverse Effect. Schedule 3.01(b) sets forth
those jurisdictions in which each Subsidiary is so qualified.
"SUBSIDIARY" or "SUBSIDIARIES", when used with respect to the
Company, means any corporation or other business entity a majority of whose
outstanding equity securities is at the time owned, directly or indirectly, by
the Company and/or one or more other Subsidiaries of the Company.
SECTION 3.02. Authorization of Agreements, Etc. The Company
has all requisite corporate power and authority to enter into this Agreement and
the Escrow Agreement and to perform its obligations hereunder and thereunder.
The execution and delivery of this Agreement and the Escrow Agreement by the
Company and the performance by the Company of its obligations hereunder and
thereunder, have been duly authorized by all requisite corporate action of the
Company's Board of Directors and will not violate any provision of law, any
order of any court or other agency of government, the Certificate of
Incorporation or Bylaws of the Company, or any provision of any indenture,
agreement or other instrument to which the Company is a party or by which it or
any of its properties or assets is bound or affected, or conflict with, result
in a breach of or constitute (with due notice or lapse of time or both) a
default under any such indenture, agreement or other instrument, or result in
the creation or imposition of any liens, charges, pledges, security interests or
other encumbrances of any nature whatsoever ("Liens") upon the properties or
assets of the Company.
SECTION 3.03. Validity. Each of this Agreement and the Escrow
Agreement has been duly executed and delivered by the Company and, upon approval
by the requisite votes of the Company's stockholders, constitutes the legal,
valid and binding obligation of the Company, enforceable in accordance with its
terms.
SECTION 3.04. Capitalization. (a) The authorized capital stock
of the Company consists of (i) 50,000,000 shares of Company Common Stock and
(ii) 50,000,000 shares of Preferred Stock, $.001 par value ("COMPANY PREFERRED
STOCK"), of which 517,410 shares have been designated Company Series A Preferred
Stock, 5,649,241 shares have been designated Company Series B Preferred Stock
and 30,000,000 shares have been designated Company Series C Preferred Stock. Of
such authorized capital stock, 1,698,073 shares of Company Common Stock, 502,410
shares of Company Series A Preferred Stock, 5,649,241 shares of Company Series B
Preferred Stock and 30,000,000 shares of Company Series C Preferred Stock are
validly issued and outstanding, fully paid and nonassessable. Except as set
forth on Schedule 3.04, no subscription, warrant, option, convertible security,
stock appreciation or other right (contingent or other) to purchase or acquire
any shares of any class of capital stock of the Company or any Subsidiary is
authorized or outstanding and there is not any commitment of the Company or any
Subsidiaries to issue any shares, warrants, options or other such rights or to
distribute to holders
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of any class of its capital stock any evidences of indebtedness or assets.
Except as set forth on Schedule 3.04, neither the Company nor any Subsidiary has
any obligation (contingent or other) to purchase, redeem or otherwise acquire
any shares of its capital stock or any interest therein or to pay any dividend
or make any other distribution in respect thereof. Schedule 3.04 sets forth a
complete and correct list as of the date hereof of the holders of record of the
Company Common Stock and Company Preferred Stock and the holders of all options
or other rights to purchase capital stock of the Company, including by name of
the holder the number of shares or the number of shares obtainable on exercise
of options or rights held.
(b) Each of BCI Growth IV, L.P., First Union Capital Partners,
Inc., Sixty Wall Street SBIC Fund, L.P. and J.P. Morgan Investment Corporation
(representing, in the aggregate, at least two-thirds of the Company Series C
Preferred Stock) have (i) approved this Agreement, the Merger and the other
actions contemplated hereby (ii) waived its right to treat the Merger as a
Liquidation Event under Article Fifth, Section C.1.(c) of the Company's
Certificate of Incorporation, (iii) waived its rights under the put provisions
set forth in Sections 10 and 11 of the Series C Warrant Agreement and (iv)
agreed to terminate, as of the Effective Time, the Investor Rights and Voting
Agreement, as amended (the "INVESTOR RIGHTS AND VOTING AGREEMENT"), among the
Company and certain of its stockholders.
SECTION 3.05. Financial Statements, Etc. The Company has
previously furnished to Parent (i) the audited consolidated balance sheets of
the Company and the Subsidiaries as of December 31, 1997, 1996 and 1995 and the
related audited consolidated statements of operations, stockholders' equity and
cash flows for the three years then ended December 31, 1997, 1996 and 1995, in
each case certified by Ernst & Young LLP, Parent's independent auditors, and
(ii) the unaudited consolidated balance sheet of the Company and the
Subsidiaries as of December 31, 1998 and the related unaudited consolidated
statements of operations, stockholders' equity and cash flows for the twelve
months then ended (collectively, the "COMPANY FINANCIAL STATEMENTS"). The
Company Financial Statements are attached hereto as Schedule 3.05. The Company
Financial Statements were prepared from the books and records of the Company and
the Subsidiaries and present fairly in all material respects the consolidated
financial position of the Company and the Subsidiaries as of the respective
dates specified therein and the consolidated results of operations of the
Company and the Subsidiaries for the respective periods then ended, and were
prepared in conformity with generally accepted accounting principles in the
United States ("GAAP"), subject, in the case of the unaudited Company Financial
Statements, to the absence of certain footnote disclosures, normal year-end
audit adjustments and, if audited, a going concern qualification.
SECTION 3.06. Absence of Undisclosed Liabilities. Except as
would not have a Company Material Adverse Effect or to the extent (i) reflected
on the audited consolidated balance sheet of the Company and the Subsidiaries as
of December 31, 1997 referred to above, (ii) incurred since December 31, 1997 in
the ordinary course of business consistent with past practice, (iii) reflected
on the unaudited consolidated balance sheet of the Company and the Subsidiaries
as of December 31, 1998, or (iv) set forth on Schedule 3.06 hereto, neither the
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Company nor any of the Subsidiaries has any material liabilities or obligations
of any kind or nature, whether known or unknown or secured or unsecured (whether
absolute, accrued, contingent or otherwise, and whether due or to become due)
that would be required to be reflected on a balance sheet, or the notes thereto,
prepared in accordance with GAAP. Since December 31, 1997, neither the Company
nor any Subsidiary has suffered any Company Material Adverse Effect.
SECTION 3.07. Absence of Certain Changes or Events. Except as
set forth on Schedule 3.07 hereto, or as otherwise disclosed in the financial
statements of the Company and the Subsidiaries as of and for the twelve months
ended December 31, 1998 referred to above, since December 31, 1997, neither the
Company nor any of the Subsidiaries has (i) issued any stock, bonds or other
corporate securities, (ii) borrowed or refinanced any amount or incurred any
liabilities (absolute or contingent) in excess of $100,000, other than trade
payables incurred in the ordinary course of business consistent with past
practice, (iii) discharged or satisfied any claim in excess of $100,000 or
incurred or paid any obligation or liability (absolute or contingent) other than
current liabilities shown on the balance sheet of the Company as of December 31,
1997 and current liabilities incurred since the date of such balance sheet in
the ordinary course of business consistent with past practice, (iv) declared or
made any payment or distribution to stockholders or purchased or redeemed any
shares of its capital stock or other securities, (v) mortgaged, pledged or
subjected to lien any of its assets, tangible or intangible, other than liens
for current taxes not yet due and payable, (vi) sold, assigned or transferred
any of its tangible assets, or canceled any debts or claims, except in the
ordinary course of business consistent with past practice or as otherwise
contemplated hereby, (vii) sold, assigned or transferred any Intellectual
Property Rights (as hereinafter defined) or other intangible assets, (viii)
knowingly waived any rights of substantial value, whether or not in the ordinary
course of business, (ix) entered into, adopted, amended or terminated any bonus,
profit sharing, compensation, termination, stock option, stock appreciation
right, restricted stock, performance unit, pension, retirement, deferred
compensation, employment, severance or other employee benefit plan, agreement,
trust, fund or other arrangement for the benefit of any director, officer or
employee, or increased in any manner the compensation or fringe benefits of any
director or officer, or increased the compensation or fringe benefits of any
executive officer other than in the ordinary course of business consistent with
past practice, or made any payment of a cash bonus to any director or officer or
to any employee of, or consultant or agent to, the Company or any of the
Subsidiaries or made any other material change in the terms or conditions of
employment, (x) announced any plan or legally binding commitment to create any
employee benefit plan, program or arrangement or to amend or modify in any
material respect any existing employee benefit plan, program or arrangement,
(xi) except as contemplated by Section 6.08 hereof, eliminated the vesting
conditions or otherwise accelerated the payment of any compensation, including
any stock options, (xii) suffered any material damage, destruction or loss to
any of its assets or properties, (xiii) made any change in its accounting
systems, policies, principles or practices, (xiv) made any loans to any person
other than expense advances to employees in the ordinary course of business, or
(xv) to the extent not otherwise set forth herein, taken any action described in
Section 6.01 hereof.
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SECTION 3.08. Governmental Approvals. Except as set forth on
Schedule 3.08, no order, authorization, approval or consent from, or filing
with, any Federal or state governmental or public body or other authority having
jurisdiction over the Company is required for the execution, delivery and
performance by the Company of this Agreement and the Escrow Agreement, or is
necessary in order to ensure, with respect to the Company, the legality,
validity, binding effect or enforceability of this Agreement and the Escrow
Agreement.
SECTION 3.09. Litigation. Except as set forth on Schedule 3.09
hereto, (i) there is no action, suit, dispute, investigation, proceeding or
claim pending or, to the best knowledge of the Company, threatened against or
affecting the Company or any of the Subsidiaries, or their respective properties
or rights, or the business of the Company (the "BUSINESS"), before any court,
administrative agency, governmental body, arbitrator, mediator or other dispute
resolution body, and the Company is not aware of any facts or circumstances
which may give rise to any such action, suit, dispute, investigation, proceeding
or claim, (ii) the Company is not subject to any order, judgment, decree,
injunction, stipulation, or consent order of or with any court or other
governmental agency, and (iii) the Company has not entered into any agreement to
settle or compromise any proceeding pending or threatened against it which has
involved any obligation other than the payment of money or for which the Company
has any continuing obligation. No such pending or threatened actions, suits or
proceedings, if determined adversely, would, individually or in the aggregate
have a Company Material Adverse Effect.
SECTION 3.10. Trade Secrets. No third party has notified the
Company in writing that any person employed or otherwise affiliated with the
Company has, in respect of his or her activities to date, violated any of the
terms or conditions of his or her employment contract with any third party, or
disclosed or utilized any trade secrets or proprietary information or
documentation of any third party, or interfered in the employment relationship
between any third party and any of its employees. To the knowledge of the
Company, no person employed by or otherwise affiliated with the Company has
employed any trade secrets or any information or documentation proprietary to
any former employer, or violated any confidential relationship which such person
may have had with any third party.
SECTION 3.11. Title to Properties. The Company has good and
valid title to all of its assets and properties, in each case, free and clear of
any Liens, except (i) as described in Schedule 3.11, (ii) Liens for current
taxes not yet due, (iii) mechanic's and materialmen's and other similar Liens
which may have arisen in the ordinary course of business and which, in the
aggregate, would not have a Company Material Adverse Effect, and (iv) security
interests securing indebtedness, not in default for the purchase price of or
rental payments on property purchased or leased under capital lease arrangements
in the ordinary course of business (collectively, "PERMITTED LIENS").
SECTION 3.12. Use of Real Property. The Company owns no real
property. Each lease or agreement to which the Company is a party and under
which it is a lessee of any property, real or personal, owned by any third party
is a valid and subsisting agreement, without
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any default of the Company thereunder and, to the knowledge of the Company,
without any default thereunder of any other party thereto. The leased real
properties listed in Schedule 3.12 (the "LEASED PROPERTIES") hereto are used and
operated by the Company in material compliance and conformity with all such
applicable leases. The Company has not received notice of any material violation
of any applicable zoning or building regulation, ordinance or other law, order,
regulation or requirement relating to the leased real property or assets of the
Company and, to the best knowledge of the Company, there are no such violations.
The possession by the Company of such property has not been disturbed nor has
any claim been asserted in writing against the Company adverse to its rights in
such leasehold interests.
SECTION 3.13. Personal Property. Schedule 3.13 sets forth (i)
all of the tangible personal property used by the Company in its business having
an original acquisition cost of $200,000 or more, and (ii) all leases of
personal property binding upon the Company having an annual rental in excess of
$100,000. All of such tangible personal property is presently utilized by the
Company and the Subsidiaries in the ordinary course of its business and is in
good repair, ordinary wear and tear excepted.
SECTION 3.14. Intellectual Property Rights. The patents,
trademarks and trade names, trademark and trade name registrations, servicemark,
brandmark and brand name registrations and copyrights, the applications therefor
and the licenses with respect thereto (collectively, "INTELLECTUAL PROPERTY
RIGHTS") listed on Schedule 3.14 hereto constitute all material proprietary
rights owned or held by the Company or any of the Subsidiaries that are used in
the conduct of the Business. Except as set forth on Schedule 3.14, (i) the
Company and the Subsidiaries conduct the Business without infringement or claim
of infringement of any Intellectual Property Right of others and the conduct by
the Surviving Corporation after the Effective Time of the Business, in
substantially the same manner as it is currently conducted, will not infringe or
misappropriate or otherwise violate the Intellectual Property Rights of any
other person or constitute a breach or violation of any agreement relating to
the Intellectual Property Rights listed on Schedule 3.14 (other than as a result
of agreements to which Parent or any of its affiliates is a party); (ii) the
Company or a Subsidiary of the Company is, and after the consum mation of the
Merger will be, the sole and exclusive owner of each Intellectual Property Right
listed on Schedule 3.14, in each case free and clear of any Liens (other than
Permitted Liens) and, to the best knowledge of the Company, no person is
challenging, infringing, misappropriating or otherwise violating any such
Intellectual Property Rights or claiming that the conduct of the Business,
infringes, misappropriates or otherwise violates the Intellectual Property
Rights of any third party; (iii) the Company is not aware of any impediment to
the registration of any trademark that is the subject of any application for
registration listed on Schedule 3.14 that would have a Company Material Adverse
Effect; (iv) none of the Intellectual Property Rights listed on Schedule 3.14 is
the subject of any outstanding order, ruling, decree, judgment or stipulation;
(v) to the best knowledge of the Company, none of the activities of any employee
of the Company or any of the Subsidiaries on behalf thereof violates any
obligations of such employee to third parties, including, without limitation,
confidentiality or non-competition obligations under agreements with a former
employer; (vi) the Company is not aware of any use by a third party of
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any computer software programs or applications that the Company considers to be
a trade secret belonging to the Company or the Subsidiaries; and (vii) the
Company and the Subsidiaries have taken and are taking reasonable precautions to
protect all material trade secrets and other confidential information relating
to its proprietary computer software programs and applications or included in
the Intellectual Property Rights that are material to the conduct of the
Business.
SECTION 3.15. Labor Matters. Neither the Company nor any of
the Subsidiaries is or has been a party to any collective bargaining or union
agreement, and no such agreement is or has been applicable to any employees of
the Company or any of the Subsidiaries. There are not any controversies between
the Company or any of the Subsidiaries and any of such employees that might
reasonably be expected to materially adversely affect the conduct of the
Business, or any unresolved labor union grievances or unfair labor practice or
labor arbitration proceedings pending, or, to the best knowledge of the Company,
threatened relating to the Business. To the best knowledge of the Company, there
are no labor unions or other organizations representing or purporting to
represent any employees of the Company or any of the Subsidiaries and there are
not any organizational efforts currently being made or threatened involving any
of such employees. Except as set forth on Schedule 3.15 hereto, the Company and
the Subsidiaries are in compliance in all material respects with all laws and
regulations or other legal or contractual requirements regarding the terms and
conditions of employment of employees, former employees or prospective employees
or other labor related matters, including, without limitation, laws, rules,
regulations, orders, rulings, conciliation agreements, decrees, judgments and
awards relating to wages, hours, the payment of social security and similar
taxes, equal employment opportunity, employment discrimination, fair labor
standards and occupational health and safety, wrongful discharge or violation of
the personal rights of employees, former employees or prospective employees.
Neither the Company nor any of the Subsidiaries is liable for any arrears of
wages or any taxes or penalties for failure to comply with any of the foregoing.
SECTION 3.16. Taxes.
(a) Except as set forth on Schedule 3.16 hereto, each of the
Company, the Subsidiaries and any affiliated, combined or unitary group of which
any such entity is or was a member has (A) timely filed all Federal and all
material state, local and foreign returns, declarations, reports, estimates,
information returns and statements ("RETURNS") required to be filed by it in
respect of any Taxes (as hereinafter defined), (B) timely paid all Taxes that
are due and payable with respect to the periods covered by the Tax Returns
referred to in clause (A) without regard to whether such Taxes have been
assessed (except for audit adjustments not material in the aggregate or to the
extent that liability therefor is reserved for in the Company's most recent
audited financial statements), (C) established reserves that are adequate for
the payment of all Taxes not yet due and payable with respect to the results of
operations of the Company and the Subsidiaries, and (D) complied in all material
respects with all applicable laws, rules and regulations relating to the payment
and withholding of Taxes and has in all material
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respects timely withheld from employee wages and paid over to the proper
governmental authorities all amounts required to be so withheld and paid over.
(b) Schedule 3.16 sets forth the last taxable period through
which the Federal income Tax Returns of the Company and any of the Subsidiaries
have been examined by the Internal Revenue Service or otherwise closed. All
deficiencies asserted as a result of such examinations and any examination by
any applicable state, local or foreign taxing authority which have not been or
will not be appealed or contested in a timely manner have been paid, fully
settled or adequately provided for in the Company's most recent audited
financial statements. Except as set forth on Schedule 3.16, no Federal, state,
local or foreign Tax audits or other administrative proceedings or court
proceedings are currently pending with regard to any Federal or material state,
local or foreign Taxes for which the Company or any of the Subsidiaries would be
liable, and no deficiency for any such Taxes has been proposed, asserted or
assessed or, to the best knowledge of the Company or any of the Subsidiaries,
threatened pursuant to such examination of the Company or any of the
Subsidiaries by such Federal, state, local or foreign taxing authority with
respect to any period.
(c) Except as set forth on Schedule 3.16, neither the Company
nor any of the Subsidiaries has executed or entered into (or prior to the
Effective Time will execute or enter into) with the Internal Revenue Service or
any taxing authority (A) any agreement or other document extending or having the
effect of extending the period for assessments or collection of any Federal,
state, local or foreign Taxes for which the Company or any of the Subsidiaries
would be liable or (B) a closing agreement pursuant to Section 7121 of the
Internal Revenue Code, or any predecessor provision thereof or any similar
provision of state, local or foreign income tax law that relates to the assets
or operations of the Company or any of the Subsidiaries.
(d) Except as set forth on Schedule 3.16, neither the Company
nor any of the Subsidiaries is a party to any agreement providing for the
allocation or sharing of liability for any Taxes.
(e) The Company has made available to Parent complete and
accurate copies of all income and franchise Tax Returns and all other material
Tax Returns filed by or on behalf of the Company or any of the Subsidiaries for
the taxable years ended on or prior to December 31, 1997.
(f) The Company is not and has not been at any time over the
last five years a "U.S. real property holding corporation" (as defined in
Section 897(c)(2) of the Internal Revenue Code).
For purposes of this Agreement, "TAXES" shall mean all
Federal, state, local, foreign or other taxing authority income, franchise,
sales, use, ad valorem, property, payroll, social security, unemployment,
assets, value added, withholding, excise, severance, transfer, employment,
alternative or add-on minimum and other taxes, charges, fees, levies, imposts,
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duties, licenses or other assessments, together with any interest and any
penalties, additions to tax or additional amounts imposed by any taxing
authority.
SECTION 3.17. Compliance with Law; Permits. Neither the
Company nor any of the Subsidiaries is in any material respect in default under
or in violation of (i) any order or decree of any court, governmental authority,
arbitrator or arbitration board or tribunal or (ii) any laws, ordinances,
governmental rules or regulations to which the Company or any Subsidiary or any
of their respective properties or assets is subject. Schedule 3.17 hereto sets
forth a list of all material permits, authorizations, approvals, registrations,
variances and licenses ("Permits") issued to or used by the Company or any of
the Subsidiaries in connection with the conduct of the Business. Such Permits
constitute all Permits necessary for the Company or the Subsidiaries to own, use
and maintain their properties and assets or required for the conduct of the
Business in substantially the same manner as it is currently conducted. Each
Permit listed on Schedule 3.17 is in full force and effect and no proceeding is
pending or, to the best knowledge of the Company, threatened, to modify,
suspend, revoke or otherwise limit any of such Permits and no administrative or
governmental actions have been taken or, to the best knowledge of the Company,
threatened, in connection with the expiration or renewal of any of such Permits.
Except as set forth on Schedule 3.17, neither the Company or any of the
Subsidiaries nor the Surviving Corporation will be required, as a result of the
consummation of the transactions contemplated hereby, to obtain or renew any
material Permits.
SECTION 3.18. Employee Benefit Plans.
(a) Schedule 3.18 hereto sets forth a complete and accurate
list of each plan, program, arrangement, agreement or commitment that is an
employment, consulting or deferred compensation agreement, or an executive
compensation, incentive bonus or other bonus, employee pension, profit-sharing,
savings, retirement, stock option, stock purchase, severance pay, life, health,
disability or accident insurance plan, or vacation or other employee benefit
plan, program, arrangement, agreement or commitment ("PLANS"), including,
without limitation, each employee benefit plan (as defined under Section 3(3) of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
maintained by the Company or any of the Subsidiaries or any trade or business
(whether or not incorporated) which, together with such persons, would be
treated as a single employer under Title IV of ERISA or Section 414 of the
Internal Revenue Code (collectively, the "ERISA AFFILIATES") or to which any
ERISA Affiliate contributes or has any obligation to contribute to, or has or
may have any liability (including, without limitation, a liability arising out
of an indemnification, guarantee, hold harmless or similar agreement). Each Plan
is identified on Schedule 3.18, to the extent applicable, as one or more of the
following: an "employee pension plan" (as defined in Section 3(2)(A) of ERISA),
an "employee welfare plan" (as defined in Section 3(l) of ERISA), or as a plan
intended to be qualified under Section 401 of the Internal Revenue Code.
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(b) The Company and each of the Subsidiaries have complied,
and currently are in compliance, in all material respects with all laws and
regulations applicable to the Plans, including, without limitation, ERISA and
the Internal Revenue Code.
(c) Except as set forth on Schedule 3.18, no ERISA Affiliate
has maintained, adopted or established, contributed to or been required to
contribute to, or otherwise participated in or been required to participate in,
any employee benefit plan or other program or arrangement subject to Title IV of
ERISA (including, without limitation, a "multi-employer plan" (as defined in
Section 3(37) of ERISA) and a defined benefit plan (as defined in Section 3(35)
of ERISA)).
(d) Except as set forth on Schedule 3.18, neither the Company
nor any of the Subsidiaries provides or may be required to provide and no Plan,
other than a Plan that is an employee pension benefit plan (within the meaning
of Section 3(2)(A) of ERISA), provides or may be required to provide benefits,
including, without limitation, death, health or medical benefits (whether or not
insured), with respect to current or former employees of the Company or any of
the Subsidiaries beyond their retirement or other termination of service with
the Company or the Subsidiaries (other than (A) coverage mandated by applicable
law, (B) deferred compensation benefits accrued as liabilities on the books of
the Company or the Subsidiaries, or (C) benefits the full cost of which is borne
by the current or former employee (or his or her beneficiary)). No ERISA
Affiliate maintains any Plan under which any employee or former employee of any
of the ERISA Affiliates may receive medical benefits which cannot be modified or
terminated by the ERISA Affiliates at any time without the consent of any
person, and no employees or former employees of the ERISA Affiliates will have
any claim in respect of such benefits as of the Effective Time.
(e) The transactions contemplated hereby will not result in
(i) any portion of any amount paid or payable by the Company to a "disqualified
individual" (within the meaning of Section 28OG(c) of the Internal Revenue Code
and the regulations promulgated thereunder), whether paid or payable in cash,
securities of the Company or otherwise and whether considered alone or in
conjunction with any other amount paid or payable to such a "disqualified
individual," being an "excess parachute payment" within the meaning of Section
28OG(b)(1) of the Internal Revenue Code and the regulations promulgated
thereunder, (ii) except as provided in Section 6.07 hereof, any employee of the
Company or any of the Subsidiaries being entitled to severance pay, unemployment
compensation, or any other payment, (iii) except as provided in Section 6.08
hereof, an acceleration of the time of payment or vesting, or an increase in the
amount of compensation due to any such employee or former employee or (iv) any
prohibited transaction described in Section 406 of ERISA or Section 4975 of the
Internal Revenue Code for which an exemption is not available.
(f) No ERISA Affiliates has incurred any material liability
with respect to any Plan under ERISA (including, without limitation, Title I or
Title IV thereof, other than liability for premiums due to the Pension Benefit
Guaranty Corporation), the Internal Revenue Code or other applicable law, which
has not been satisfied in full or been accrued on the consolidated
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balance sheet of the Company and the Subsidiaries as of December 31, 1997
pending full satisfaction, and no event has occurred, and there exists no
condition or set of circumstances, which could result in the imposition of any
material liability under ERISA, the Internal Revenue Code or other applicable
law with respect to any Plan.
(g) With respect to each Plan that is funded wholly or
partially through an insurance policy, all premiums required to have been paid
to date under the insurance policy have been paid, and, except as set forth on
Schedule 3.18, as of the Effective Time there will be no liability of any of the
ERISA Affiliates under any such insurance policy or ancillary agreement with
respect to such insurance policy in the nature of a retroactive rate adjustment,
loss sharing arrangement or other actual or contingent liability arising wholly
or partially out of events occurring prior to the Effective Time.
(h) None of the ERISA Affiliates has made any contribution to
any Plan that may be subject to any excise tax under Section 4972 of the
Internal Revenue Code.
SECTION 3.19. Environmental Matters. The Company and the
Subsidiaries are in compliance in all material respects with all Federal, state
or local statutes, ordinances, orders, judgments, rulings or regulations
relating to environmental pollution or to environmental regulation or control.
Except as set forth on Schedule 3.19 hereto, to the best knowledge of the
Company, neither the Company, any of the Subsidiaries nor any of their
respective officers, employees, representatives or agents or any other person,
has treated, stored, processed, discharged, spilled or otherwise disposed of any
substance defined as hazardous or toxic by any applicable Federal, state or
local law, rule, regulation, order or directive, or any waste or by- product
thereof, at any real property or any other facility owned, leased or used by the
Company or any of the Subsidiaries, in violation of any applicable statutes,
regulations, ordinances or directives of any governmental authority or court,
which violations may result in a Company Material Adverse Effect. To the best
knowledge of the Company, no employee or other person has ever made a claim or
demand against the Company or any of the Subsidiaries based on alleged damage to
health caused by any such hazardous or toxic substance or by any waste or by-
product thereof. Except as set forth on Schedule 3.19, neither the Company nor
any of the Subsidiaries has been charged by any governmental authority with
improperly using, handling, storing, discharging or disposing of any such
hazardous or toxic substance or waste or by-product thereof or with causing or
permitting any pollution of any body of water. Except as set forth on Schedule
3.19, the Leased Properties and the Business are not subject to any pending or,
to the best knowledge of the Company, threatened administrative or judicial
proceeding under any environmental law and there are no facts or circumstances
known to the Company which may give rise to any proceeding. Except as set forth
on Schedule 3.19, to the best knowledge of the Company, there are no inactive,
closed, or abandoned storage or disposal areas or facilities or underground
storage tanks on the Leased Properties.
SECTION 3.20. Contracts. Schedule 3.20 lists all contracts and
arrangements of the following types to which the Company or any of the
Subsidiaries is a party or by which it is
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bound and which are material to the conduct of the Business or to the financial
condition or results of operations of the Company and the Subsidiaries, taken as
a whole:
(i) any contract or arrangement with a sales representative,
distributor, dealer, broker, sales agency, advertising agency or other
person engaged in sales, distribution or promotional activities, or any
contract to act as one of the foregoing on behalf of any person, which
is not terminable by the Company on 30 or fewer days' notice;
(ii) any contract or arrangement of any nature which involves
the payment or receipt of cash or other property, an unperformed
commitment, or goods or services, having a value in excess of $100,000;
(iii) any contract or arrangement pursuant to which the
Company has made or will make loans or advances, or has or will have
incurred indebtedness for borrowed money or become a guarantor or
surety or pledged its credit on or otherwise become responsible with
respect to any undertaking of another (except for the negotiation or
collection of negotiable instruments in transactions in the ordinary
course of business) in excess of $25,000;
(iv) any indenture, credit agreement, loan agreement, note,
mortgage, security agreement, lease of real property or personal
property, loan commitment or other contract or arrangement relating to
the borrowing of funds, an extension of credit or financing;
(v) any contract or arrangement involving a partnership, joint
venture or other cooperative undertaking;
(vi) any contract or arrangement involving any restrictions
with respect to the geographical area of operations or scope or type of
business of the Company or any of the Subsidiaries;
(vii) any power of attorney or agency agreement or arrangement
with any person pursuant to which such person is granted the authority
to act for or on behalf of the Company or any of the Subsidiaries, or
the Company or the Subsidiaries is granted the authority to act for or
on behalf of any person;
(viii) any contract not fully performed and relating to any
acquisition or disposition of the Company or any predecessor in
interest of the Company, or any acquisition or disposition of any
Subsidiary, division, line of business, or real property; and
(ix) any contract not specified above that is material to the
Company or any of the Subsidiaries.
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The Company has delivered to Parent complete and accurate
copies of the contracts and agreements set forth on Schedule 3.20, and, to the
best of the Company's knowledge, each such contract or agreement is a valid and
subsisting agreement, without any material default of the Company or any of the
Subsidiaries thereunder and, to the best knowledge of the Company, without any
material default thereunder of the other party thereto. Except as set forth on
Schedule 3.20, the Company has not received notice of any cancellation or
termination of, or of any threat to cancel or terminate, any such contracts or
agreements where such cancellation or termination would have a Company Material
Adverse Effect.
SECTION 3.21. Insurance.
(a) All policies of fire, liability, workers' compensation and
other forms of insurance providing insurance coverage to or for the Company or
any of the Subsidiaries for events or occurrences arising or taking place in the
case of occurrence type insurance, and for claims made and/or suits commenced in
the case of claims-made type insurance, between the date of this Agreement and
the Effective Time, are listed on Schedule 3.21 hereto, and, except as set forth
on Schedule 3.21, all premiums with respect thereto have been paid, and no
notice of cancellation or termination has been received with respect to any such
policy. All such policies are in full force and effect and, except as set forth
on Schedule 3.21, provide insurance in such amounts and against such risks as is
customary for companies engaged in similar businesses to protect the employees,
properties, assets, businesses and operations of the Company and the
Subsidiaries. All such policies will remain in full force and effect and will
not terminate or lapse by reason of any of the transactions contemplated hereby.
(b) The Company has provided Parent information concerning
each claim which in exceeds $100,000 and which has been made by the Company and
any of the Subsidiaries in the last two years under any workers' compensation,
general liability, property, directors' and officers' liability or other
insurance policy (except group medical insurance) applicable to the Company, the
Subsidiaries or any of their properties. Except as set forth in written
materials provided by the Company to Parent, to the knowledge of the Company,
there are no pending or threatened claims under any insurance policy, the
outcome of which would reasonably be expected to have a Company Material Adverse
Effect.
SECTION 3.22. Pending Transactions. Except for this Agreement
and the transactions contemplated hereby, neither the Company nor any of the
Subsidiaries is a party to or bound by any agreement, negotiation, discussion,
commitment or undertaking with respect to a merger or consolidation with, or an
acquisition of any material property and assets of, any other corporation or
person or the sale, lease or exchange of any material properties and assets to
any other person.
SECTION 3.23. Claims Against Officers and Directors. To the
knowledge of the Company, there are no pending or threatened claims against any
director, officer, employee or
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agent of the Company or any of the Subsidiaries or any other person which could
give rise to any claim for indemnification against the Company or the
Subsidiaries.
SECTION 3.24. Customers, Suppliers, Etc. The Company has
provided Parent information concerning the 25 largest customers in terms of
aggregate revenue to the Company and any of the Subsidiaries ("MAJOR CUSTOMERS")
and the 15 largest suppliers in terms of aggregate charges to the Company and
the Subsidiaries ("MAJOR SUPPLIERS") during the fiscal year ended December 31,
1998. Except to the extent set forth in Schedule 3.24, since December 31, 1998,
there has not been any material adverse change in the business relationship,
there has been no material dispute between the Company and any of the
Subsidiaries and any Major Customer or Major Supplier and, to the best of the
Company's knowledge, the Company has received no notice that any Major Customer
intends to reduce its purchases from the Company or any of the Subsidiaries or
that any Major Supplier intends to reduces its sale of goods or services to the
Company or any of the Subsidiaries.
SECTION 3.25. Accounts Receivable and Advances. Except as
disclosed on Schedule 3.25 or in the Company Financial Statements, (i) each
account receivable of the Company and the Subsidiaries (collectively, the
"ACCOUNTS RECEIVABLE") represents a sale made in the ordinary course of business
other than to affiliates and which arose pursuant to an enforceable written
contract for a bona fide sale of goods or for services performed, and the
Company and the Subsidiaries have performed all of their respective obligations
to produce the goods or perform the services to which such Accounts Receivable
relates, and (ii) to the best of knowledge of the Company, except to the extent
reserved for in the Company Financial Statements, no Accounts Receivable is
subject to any claim for reduction, counterclaim, set-off, recoupment or other
claim for credit, allowances or adjustments by the obligor thereof, in an amount
individually or in the aggregate that would have a Company Material Adverse
Effect.
SECTION 3.26. Improper and Other Payments. To the best of the
Company's knowledge, except as set forth on Schedule 3.26, neither the Company
nor any of the Subsidiaries, nor any director, officer, employee, agent or
representative of the Company or any of the Subsidiaries, nor any person acting
on behalf of any of them, has (i) made, paid or received any bribes, kickbacks
or other similar payments to or from any person, whether lawful or unlawful,
(ii) made any unlawful contributions, directly or indirectly, to a domestic or
foreign political party or candidate, or (iii) made any improper foreign payment
(as defined in the Foreign Corrupt Practices Act).
SECTION 3.27. Accuracy of Statements. Neither this Agreement
nor any schedule or exhibit hereto, nor the certificates required by Section
7.03(h), contains or will contain any untrue statement of a material fact or
omits or will omit to state a material fact necessary to make the statements
contained herein or therein, in light of the circumstances in which they are
made, not misleading.
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SECTION 3.28. Brokers. Except as set forth on Schedule 3.28,
neither the Company nor any of the Subsidiaries has used any broker or finder in
connection with the transactions contemplated hereby, and neither the Company
nor any of the Subsidiaries has or will have any liability or otherwise suffer
or incur any loss as a result of or in connection with any brokerage or finder's
fee or other commission of any person retained by the Company, any of the
Subsidiaries or the Stockholders in connection with any of the transactions
contemplated by this Agreement.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES
OF PARENT
Parent represents and warrants to the Company as follows:
SECTION 4.01. Organization and Qualification. (a) Parent is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Missouri and has all requisite corporate power and
authority to own or lease and operate its properties and assets and to carry on
its business as it is now being conducted. Parent is duly qualified as a foreign
corporation to do business, and is in good standing, in each jurisdiction in
which the character of its properties owned or leased or the nature of its
activities makes such qualification necessary, except where the failure to be so
qualified would not have a material adverse effect on the financial condition,
operating results or business of Parent and its subsidiaries taken as a whole (a
"PARENT MATERIAL ADVERSE EFFECT").
(b) Except in each case as would not have a Parent Material
Adverse Effect, each subsidiary of Parent (i) is duly organized, validly
existing and in good standing under the laws of its jurisdiction of formation
and has all requisite power and authority to own or lease and operate its
properties and assets and to carry on its business as it is now being conducted
and (ii) is duly qualified to do business, and is in good standing, in each
jurisdiction in which the character of its properties owned or leased or the
nature of its activities makes such qualification necessary.
SECTION 4.02. Authorization of Agreements, Etc. (a) Parent has
all requisite corporate power and authority to enter into this Agreement and the
Escrow Agreement and to perform its obligations hereunder. The execution and
delivery of this Agreement and the Escrow Agreement by Parent and the
performance by Parent of its obligations hereunder, have been duly authorized by
all requisite corporate action and, upon receipt of the requisite consent from
Parent's lenders under Parent's Credit and Guaranty Agreement, dated as of May
29, 1998 (as amended and restated as of July 7, 1998, the "PARENT'S CREDIT
AGREEMENT"), among Parent, Harris Trust and Savings Bank, as Agent, and the
lenders party thereto, will not violate any provision of law, any order of any
court or other agency of government, the Articles of Incorporation or Bylaws of
Parent, or any provision of any indenture, agreement or other
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instrument to which Parent is a party or by which it or any of its properties or
assets is bound or affected, or conflict with, result in a breach of or
constitute (with due notice or lapse of time or both) a default under any such
indenture, agreement or other instrument, or result in the creation or
imposition of any Liens upon the properties or assets of Parent or any of its
subsidiaries.
SECTION 4.03. Validity. Each of this Agreement and the Escrow
Agreement has been duly executed and delivered by Parent and constitutes the
legal, valid and binding obligation of Parent, enforceable against Parent in
accordance with its terms.
SECTION 4.04. Capitalization. (a) The authorized capital stock
of Parent consists of (i) 85,000,000 shares of Parent Common Stock, (ii)
15,000,000 shares of Class B Non-Voting Common Stock, $.01 par value, and (iii)
4,500,000 shares of Preferred Stock, $1.00 par value ("PARENT PREFERRED STOCK"),
of which 1,950,000 shares have been designated Series D Preferred Stock,
1,500,000 shares have been designated Series E Preferred Stock and 900,000
shares have been designated Series F Preferred Stock. Of such authorized capital
stock and as of the date hereof, 33,863,074 shares of Parent Common Stock, no
shares of such Class B NonVoting Common Stock, 1,950,000 shares of such Series D
Preferred Stock (which are currently convertible into an aggregate 24,375,000
shares of Parent Common Stock), 1,500,000 shares of such Series E Preferred
Stock (which are currently convertible into an aggregate 6,932,992 shares of
Parent Common Stock) and 900,000 shares of such Series F Preferred Stock (which
are currently convertible into an aggregate 4,159,795 shares of Parent Common
Stock) are validly issued and outstanding, fully paid and nonassessable.
(b) Except for (i) the shares of Parent Common Stock to be
issued pursuant to this Agreement and (ii) options outstanding on the date
hereof to acquire an aggregate 5,514,000 shares of Parent Common Stock pursuant
to Parent's existing stock option and restricted stock purchase plan, (A) no
subscription, warrant, option, convertible security or other right (contingent
or other) to purchase or acquire any shares of any class of capital stock of
Parent is authorized or outstanding; (B) there is not any commitment of Parent
to issue any shares, warrants, options or other such rights or to distribute to
holders of any class of its capital stock any evidences of indebtedness or
assets; and (C) Parent has no obligation (contingent or other) to purchase,
redeem or otherwise acquire any shares of its capital stock or any interest
therein or to pay any dividend or make any other distribution in respect
thereof.
(c) Parent has provided to the Company true, complete and
correct copies of Parent's Articles of Incorporation and Bylaws, in each case,
as in effect on the date hereof.
(d) The shares of Parent Common Stock to be issued to pursuant
to this Agreement have been duly authorized, and upon issuance to the
Stockholders entitled to receive such shares, will be validly issued and
outstanding, fully paid and nonassessable, and will be free of any Liens other
than (i) those created or suffered to exist by the shareholder to whom any such
shares are issued and (ii) restrictions on transfer imposed by this Agreement,
the Securities Act and any applicable state securities laws.
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(e) Prior to the Effective Time, the shares of Parent Common
Stock issuable upon exercise of the Rollover Warrants and the Company Stock
Options will be duly reserved by Parent for issuance upon exercise and, when so
issued and delivered, will be duly authorized, validly issued and outstanding,
fully paid and nonassessable shares of Parent Common Stock.
SECTION 4.05. Financial Statements. Parent has previously made
available to the Company (i) the audited consolidated balance sheet of Parent
and its subsidiaries as of December 31, 1997, and the related audited
consolidated statements of operations, stockholders' equity and cash flows for
the year then ended, in each case certified by Deloitte & Touche LLP, Parent's
independent auditors, and (ii) the unaudited consolidated balance sheet of
Parent and its subsidiaries as of December 31, 1998 and the related unaudited
consolidated statements of operations, stockholders' equity and cash flows for
the twelve months then ended (collectively, the "PARENT FINANCIAL STATEMENTS").
The Parent Financial Statements were prepared from the books and records of
Parent and its subsidiaries and present fairly the consolidated financial posi
tion of Parent and its subsidiaries as of the respective dates specified therein
and the consolidated results of operations of Parent and its subsidiaries for
the respective periods then ended, and were prepared in conformity with GAAP,
subject, in the case of the unaudited Parent Financial Statements, to (i)
purchase accounting adjustments resulting from the purchase of Dow Jones Market
Holdings, Inc. and certain assets of ADP Financial Information Services, Inc.,
(ii) the inclusion of certain footnote disclosures and (iii) normal year-end
audit adjustments.
SECTION 4.06. Absence of Undisclosed Liabilities. Except as
would not have a Parent Material Adverse Effect or to the extent (i) reflected
in Parent Financial Statements, (ii) not required to be reflected in Parent
Financial Statements in accordance with GAAP, (iii) incurred since December 31,
1998 in the ordinary course of business and consistent with past practice or
(iv) as referred to in Schedule 4.08, Parent has no liabilities or obligations
of any kind or nature, whether secured or unsecured (whether absolute, accrued,
contingent or otherwise, and whether due or to become due), including without
limitation any liabilities for Taxes due or to become due.
SECTION 4.07. Governmental Approvals. Except as set forth on
Schedule 4.07, no order, authorization, approval or consent from, or filing
with, any federal or state governmental or public body or other authority having
jurisdiction over Parent is required for the execution, delivery and performance
by Parent of this Agreement and the Escrow Agreement, or is necessary in order
to ensure, with respect to Parent, the legality, validity, binding effect or en
forceability of this Agreement and the Escrow Agreement.
SECTION 4.08. Litigation. Subject to the effect of the matters
disclosed on Schedule 4.08, to the best of Parent's knowledge, there are no
actions, suits, proceedings or claims pending before any court, arbitrator or
government agency against or affecting the Parent that (i) would enjoin or
prevent the consummation of the transactions contemplated by this Agreement or
(ii) could be expected to have a Parent Material Adverse Effect.
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SECTION 4.09. Employee Benefit Plans. (a) Parent has complied
and currently is in compliance, both as to form and operation, with the
applicable provisions of ERISA and the Code applicable to each of its Plans.
(b) Each Plan that is intended to qualify under Section 401(a)
of the Code does so qualify and is exempt from taxation pursuant to Section
501(a) of the Code.
(c) Parent has not maintained, contributed to or been required
to contribute to, nor do any of its employees participate in, a "multiemployer
plan" (as defined in Section 3(37) of ERISA) or a "defined benefit plan" (as
defined in Section 3(35) of ERISA). No amount is due or owing from Parent on
account of a multiemployer plan or on account of any withdrawal therefrom.
(d) Parent has not incurred any liability with respect to any
Plan under ERISA (including, without limitation, Title I or Title IV of ERISA),
the Code or other applicable law that has not been satisfied in full, and no
event has occurred, and there exists no condition or set of circumstances that
could result in the imposition of any liability under ERISA (including, without
limitation, Title I or Title IV of ERISA), the Code or other applicable law with
respect to any of the Plans.
SECTION 4.10. Compliance with Laws. Neither Parent nor any of
its subsidiaries is in default in any material respect under any order or decree
of any court, governmental authority, arbitrator or arbitration board or
tribunal or under any laws, ordinances, governmental rules or regulations to
which Parent or any of such subsidiaries or any of their respective properties
or assets is subject.
SECTION 4.11. Brokers. Except as set forth on Schedule 4.11,
neither Parent nor any of its subsidiaries has used any broker or finder in
connection with the transactions contemplated hereby, and neither the Parent nor
any of its subsidiaries has or shall have any liability or otherwise suffer or
incur any loss as a result of or in connection with any brokerage or finder's
fee or other commission of any person retained by the Parent, any of its
subsidiaries or the stockholders of Parent in connection with any of the
transactions contemplated by this Agreement.
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ARTICLE V.
REPRESENTATIONS AND WARRANTIES
OF ACQUISITION CORP.
Acquisition Corp. represents and warrants to the Company as
follows:
SECTION 5.01. Organization and Qualification. Acquisition
Corp. is a corporation duly incorporated, validly existing and in good standing
under the laws of the State of Delaware and has not engaged in any business
other than in connection with its formation and the negotiation of this
Agreement.
SECTION 5.02. Authorization of Agreements, Etc. Acquisition
Corp. has all requisite corporate power and authority to enter into this
Agreement and to perform its obligations hereunder. The execution and delivery
of this Agreement by Acquisition Corp. and the performance by Acquisition Corp.
of its obligations hereunder, have been duly authorized by all requisite
corporate action and will not violate any provision of law, any order of any
court or other agency of government, the Certificate of Incorporation or Bylaws
of Acquisition Corp., or any provision of any indenture, agreement or other
instrument to which Acquisition Corp. is a party or by which it or any of its
properties or assets is bound or affected, or conflict with, result in a breach
of or constitute (with due notice or lapse of time or both) a default under any
such indenture, agreement or other instrument, or result in the creation or
imposition of any Liens upon the properties or assets of Acquisition Corp.
SECTION 5.03. Validity. This Agreement has been duly executed
and delivered by Acquisition Corp. and constitutes the legal, valid and binding
obligation of Acquisition Corp., enforceable against Acquisition Corp. in
accordance with its terms.
SECTION 5.04. Governmental Approvals. Except as set forth on
Schedule 5.04, no order, authorization, approval or consent from, or filing
with, any federal or state governmental or public body or other authority having
jurisdiction over Acquisition Corp. is required for the execution, delivery and
performance by Acquisition Corp. of this Agreement, or is necessary in order to
ensure, with respect to Parent, the legality, validity, binding effect or
enforceability of this Agreement.
SECTION 5.05. Brokers. Acquisition Corp. has not used any
broker or finder in connection with the transactions contemplated hereby, and
Acquisition Corp. has not or shall not have any liability or otherwise suffer or
incur any loss as a result of or in connection with any brokerage or finder's
fee or other commission of any person retained by Acquisition Corp. in
connection with any of the transactions contemplated by this Agreement.
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ARTICLE VI.
COVENANTS
SECTION 6.01. Conduct of the Company's Business. The Company
covenants and agrees that, prior to the Effective Time, unless Parent shall
otherwise consent in writing or as otherwise expressly contemplated by this
Agreement:
(a) the business of the Company and the Subsidiaries shall be
conducted only in, and the Company and the Subsidiaries shall not take any
action except in, the ordinary course of business consistent with past practice
and each of the Company and the Subsidiaries shall use its best efforts to
preserve intact its present business organization, keep available the services
of its current officers and employees, maintain its assets (other than those
permitted to be disposed of hereunder) in good repair and condition, maintain
its books of account and records in the usual, regular and ordinary manner and
preserve its goodwill and ongoing business;
(b) the Company shall not directly or indirectly do any of the
following: (i) issue, sell, pledge, dispose of or encumber (or permit any of the
Subsidiaries to issue, sell, pledge, dispose of or encumber) (A) any capital
stock of any of the Subsidiaries, or (B) any property or assets (including
Intellectual Property Rights) of the Company or any of the Subsidiaries, except
inventory and immaterial assets in the ordinary course of business consistent
with past practice; (ii) amend or propose to amend its Certificate of
Incorporation or Bylaws; (iii) split, combine or reclassify any outstanding
shares of its capital stock, or declare, set aside or pay any dividend payable
in cash, stock, property or otherwise with respect to such shares (except for
any dividends paid in the ordinary course to the Company or to any Subsidiary);
(iv) redeem, purchase, acquire or offer to acquire (or permit any of the
Subsidiaries to redeem, purchase, acquire or offer to acquire) any shares of its
capital stock; or (v) enter into any contract, agreement, commitment or
arrangement with respect to any of the matters set forth in this paragraph (b);
(c) neither the Company nor any of the Subsidiaries shall (i)
issue, sell, pledge or dispose of, or agree to issue, sell, pledge or dispose
of, any additional shares of, or securities convertible or exchangeable for, or
any options, warrants or rights of any kind to acquire any shares of, its
capital stock of any class or other property or assets whether pursuant to the
Company Stock Option Plans or otherwise or, except as contemplated by Sections
6.08 and 6.09 hereof, modify the terms or any outstanding options, warrants or
rights to acquire the Company's capital stock; provided that the Company (W) may
issue shares of Company Common Stock upon the conversion of Company Series A
Preferred Stock or Series B Preferred Stock, (X) may issue shares of Company
Common Stock upon the exercise of currently outstanding options and warrants
referred to in Section 3.04 hereof, (Y) may issue shares of Company Common Stock
upon the exercise by the holders of options under the Company Stock Option Plans
and (Z) may issue options under the Company Stock Option Plans in the ordinary
course of business consistent with past practice; (ii) acquire (by merger,
consolidation or acquisition of stock or assets) any corporation, partnership or
other business organization or division thereof (except a Subsidiary) or any
material amount of assets; (iii) incur or guarantee any indebtedness for
borrowed money other than in the ordinary course of business and consistent with
past practices, or refinance any such indebtedness or issue or sell any debt
securities; (iv) enter into or modify any material contract, lease, agreement or
commitment, or permit or perform any act that would cause a material breach of
any such contract, lease, agreement or commitment; (v) terminate, modify,
assign, waive, release or relinquish any material contract rights or amend any
material rights or claims; (vi) discharge or satisfy any material claim or
settle or compromise any material
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claim, action, suit or proceeding pending or threatened against the Company or
any of the Subsidiaries, or, if the Company or any of the Subsidiaries may be
liable or obligated to provide indemnification, against the Company's directors
or officers, before any court, governmental agency or arbitrator; (vii) make any
loans, advances (except for travel and similar expenses to employees of the
Company in the ordinary course of business) or capital contributions to or
investments in, any other person, except as may be required under agreements in
effect as of and identified on Schedule 3.20 hereto and upon prior notice to
Parent; (viii) alter through merger, liquidation, reorganization, restructuring
or in any other manner the corporate structure or ownership of any Subsidiary;
(ix) violate or fail to perform any obligation imposed upon the Company or any
of the Subsidiaries by any applicable laws, orders or decrees, ordinances,
government rules or regulations or conciliation agreements if such violation or
failure would have a Company Material Adverse Effect; or (x) to the extent not
described herein, take any action described in Section 3.07 hereof;
(d) neither the Company nor any of the Subsidiaries shall
grant any increase in the salary or other compensation of its directors,
officers or employees, except reasonable salary increases, in the case of
employees who are not directors or executive officers of the Company or any of
the Subsidiaries, in the ordinary course of business consistent with past
practice, or grant any bonus to any employee (except pursuant to plans disclosed
herein) or enter into any employment agreement or make any loan (except for
expenses in the ordinary course of business) to or enter into any material
transaction of any other nature with any employee of the Company or any
Subsidiary;
(e) except as contemplated by Section 6.07, neither the
Company nor any of the Subsidiaries shall take any action to institute any new
severance or termination pay practices with respect to any directors, officers
or employees of the Company or the Subsidiaries or to increase the benefits
payable under its severance or termination pay practices;
(f) neither the Company nor any of the Subsidiaries shall
adopt or amend, in any material respect, any plan for the benefit or welfare of
any directors, officers or employees, except as contemplated hereby or as may be
required by applicable law or regulation;
(g) each of the Company and the Subsidiaries shall use its
best efforts, to the extent not prohibited by the foregoing provisions of this
Section 6.01, to maintain its relationships with its suppliers and customers,
clients, and others having business dealings with it, and if and as requested by
Parent or Acquisition Corp., (i) the Company shall use its best efforts to make
reasonable arrangements for representatives of Parent or Acquisition Corp. to
meet with customers and suppliers of the Company or any of the Subsidiaries, and
(ii) the Company shall schedule, and the management of the Company shall
participate in, meetings of representatives of Parent or Acquisition Corp. with
employees of the Company or any of the Subsidiaries; and
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(h) the Company shall provide to Parent a draft of any Federal
income Tax return or material state, local or foreign Tax return (other than
state or local sales and use taxes) required to be filed on behalf of the
Company or any Subsidiary between the date of this Agreement and the Effective
Time at least 15 days prior to the date on which such return is due and shall
not file any such return without the consent of Parent, such consent not to be
unreasonably withheld or delayed, unless such filing is required by law.
SECTION 6.02. Stockholder Approval; Etc. As soon as reasonably
practicable after the date of this Agreement, the Company shall take all action
necessary, subject to and in accordance with the Delaware GCL and its
Certificate of Incorporation and Bylaws, to obtain the requisite approval and
adoption of this Agreement and the Merger by the Company's stockholders at a
duly called meeting or by written consents pursuant to Section 228 of the
Delaware GCL and shall take such other actions as may be required by applicable
law.
SECTION 6.03. Access to Information. (a) Each of Parent and
the Company shall, and shall cause its respective subsidiaries, officers,
directors, employees, representatives, advisors and agents to, afford, from the
date hereof to the Effective Time, the officers, employees, representatives,
advisors and agents of the other party complete access at all reasonable times
to its officers, employees, agents, properties, books, records and workpapers,
and shall furnish each other party all financial, operating and other
information and data as Parent or Company, through its officers, employees or
agents, may reasonably request and shall promptly furnish to the other monthly
operating and financial reports in such form as Parent or the Company shall
reasonably request.
(b) The Company, at least three business days prior to the
Effective Date, shall deliver to Parent a list setting forth the names and
locations of each bank or other financial institution at which the Company and
the Subsidiaries has an account (giving the account numbers) or safe deposit box
and the names of all persons authorized to draw thereon or have access thereto,
and the names of all persons, if any, now holding powers of attorney or
comparable delegation of authority from the Company and any of the Subsidiaries
and a summary statement thereof.
(c) Each of Parent and the Company shall, and shall cause its
respective officers, directors, employees, representatives, advisors and agents
to, provide the officers, employees, representatives, advisors and agents of the
other party with such information concerning Parent or the Company as may be
necessary for each party to ascertain the accuracy and completeness of the
information supplied by Parent or the Company for Parent, Company or any other
person to complete any pre-merger notification report filed under (i) the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR ACT")
(and any additional information or documentary material supplied in response to
any request pursuant to Section 7A(e) of the HSR Act and the regulations
thereunder) or (ii) the Bank Holding Company Act.
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(d) If this Agreement is terminated prior to the Effective
Time, each of the parties hereto shall, and shall cause its officers, employees,
representatives, advisors and agents to, deliver to the other party, or if
requested, destroy, all confidential documents, work papers and other materials,
and all copies thereof, obtained by it or on its behalf from such other party as
a result of this Agreement or in connection herewith, whether so obtained before
or after the execution and delivery hereof.
(e) Each of the parties hereto and its officers and employees
shall not disclose or use any information so obtained, except as required by
applicable law or legal process without the prior written consent of the other
party; provided that any such information may be disclosed to a party's
financial advisors, accountants, counsel and other representatives, and lenders
and regulatory authorities whose approvals are required hereunder, as may be
appropriate or required in connection with the transactions contemplated hereby,
but only if such persons shall be specifically informed by such party of the
confidential nature of such information and agree to comply with the
restrictions contained herein, and to preserve the confidentiality of any such
information obtained. The agreements contained in this Section 6.03(e) do not
apply to information that (i) is or becomes generally available to the public
other than as a result of a disclosure by a receiving party or its
representatives, (ii) was known to the receiving party on a confidential basis
prior to its receipt, (iii) becomes available to a party on a non-confidential
basis from a source not bound by any duty of confidentiality to the other party
or (iv) is inde pendently developed by a receiving party without reference to
any confidential information.
(f) No investigation pursuant to this Section 6.03 shall
affect, add to or subtract from any representations or warranties of the parties
hereto or the conditions to the obligations of the parties hereto to effect the
Merger.
SECTION 6.04. Further Assurances. Subject to the terms and
conditions herein provided, each of the parties hereto agrees to use its best
efforts to take, or cause to be taken, all action and to do, or cause to be
done, all things necessary, proper or advisable to consummate and make effective
as promptly as practicable the transactions contemplated by this Agreement,
including, without limitation, using all reasonable efforts to obtain all
necessary waivers, consents and approvals and to effect all necessary
registrations and filings; provided that the foregoing shall not require Parent
to agree to make, or to require the Company or any of the Subsidiaries to make,
any divestiture of a significant asset in order to obtain any waiver, consent or
approval or to incur any material liability or expense.
SECTION 6.05. Inquiries and Negotiations. Neither the Company
nor any of the Subsidiaries, nor any of their respective affiliates, directors,
officers, employees, representatives, advisors or agents, shall, directly or
indirectly, encourage, solicit or initiate any discussions, submissions of
proposals or offers or negotiations with, or, subject to the fiduciary
obligations of the Company's Board of Directors under applicable law as advised
by counsel, participate in any negotiations or discussions with, or provide any
information or data of any nature whatsoever to, or otherwise cooperate in any
other way with, or assist or participate in, facilitate or encourage
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any effort or attempt by, any person, other than Parent and its affiliates,
representatives and agents, concerning any merger, consolidation, sale of
substantial assets, sale of shares of capital stock or other equity securities,
recapitalization, debt restructuring or similar transaction involving the
Company or any Subsidiary, or any division of the company or any of the
Subsidiaries (such transactions being hereinafter referred to as "Alternative
Transactions"). The Company shall immediately notify Parent if any proposal,
offer, inquiry or request from, or any discussions or negotiations are sought to
be initiated or continued with, the Company in respect of an Alterative
Transaction, and shall, in any such notice to Parent, indicate the identity of
the offeror and the terms and conditions of any proposals or offers or the
nature of any inquiries or contacts, and thereafter shall keep Parent informed
of the status and terms of any such proposals or offers and the status of any
such discussions or negotiations. The Company shall not release any third party
from, or waive any provision of, any confidentiality or standstill agreement
under which the Company is a beneficiary.
SECTION 6.06. Notification of Certain Matters. The Company
shall give prompt notice to Parent and Acquisition Corp., and Parent and
Acquisition Corp. shall give prompt notice to the Company, of (i) the
occurrence, or failure to occur, of any event that such party believes would be
likely to cause any of its representations or warranties contained in this
Agreement to be untrue or inaccurate in any material respect at any time from
the date hereof to the Effective Time and (ii) any material failure of the
Company, Parent or Acquisition Corp., as the case may be, or any officer,
director, employee or agent thereof, to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by it hereunder;
provided, however, that failure to give such notice shall not constitute a
waiver of any defense that may be validly asserted.
SECTION 6.07. Employee Matters. (a) Parent agrees that, as of
the Effective Time, except as set forth in Schedule 6.07, it shall cause the
Surviving Corporation to continue to employ all of the employees of the Company
and the Subsidiaries who are Active Employees (as hereinafter defined), it being
understood that nothing in this Agreement shall be deemed to create any
employment status other than employment at will. Employees who continue as
employees of the Surviving Corporation or any of the Subsidiaries shall be
entitled to participate in all employee benefit plans maintained by Parent or
the Surviving Corporation for employees of the Surviving Corporation generally.
It being understood and agreed, however, that nothing in this Section 6.07 shall
require Parent (i) to provide or continue for the benefit of any employees any
Plan currently maintained by the Company or any Subsidiary thereof, or (ii) to
maintain the organizational structure of the Business as in effect on the date
hereof.
For purposes of this Agreement, an employee shall be deemed to
be an "ACTIVE EMPLOYEE" if:
(i) at the Effective Time, the employee is performing work
duties for the Company or any of the Subsidiaries or is absent by
reason of a scheduled day off;
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(ii) at the Effective Time, the employee was absent from work
by reason of a sick day (not covered under clause (iii) below) or a
paid vacation day, personal day or holiday;
(iii) at the Effective Time, the employee was absent from work
by reason of a family or medical leave covered under Section 102 of the
Family and Medical Leave Act of 1993; or
(iv) at the Effective Time, the employee is absent from work
due to any other authorized leave under the policies or practices of
the Company or any of the Subsidiaries and such person returns to work
within the period permitted by such policies or practices, but not
later than 30 days after the Effective Time or such later time as may
be required by law.
(b) At the Effective Time, Parent shall assume all the
obligations of the Company under (i) the Employment Agreement, dated as of
December 4, 1998, between the Company and Clyde A. Heintzelman and (ii) the
Employment Agreement, dated as of July 1, 1998, between the Company and Ian D.
Brown.
SECTION 6.08. Company Stock Option Plans. At the Effective
Time, Parent shall assume all the obligations of the Company under the Company
Stock Option Plans and each of the Company Stock Options which is outstanding
immediately prior to the Effective Time shall be assumed by Parent and converted
automatically into an option to purchase shares of Parent Common Stock (a "NEW
OPTION") in an amount and at an exercise price determined as provided below:
(i) The number of shares of Parent Common Stock to be
subject to the New Option shall be equal to the product of the
number of shares of Company Common Stock remaining subject (as
of immediately prior to the Effective Time) to the original
option and the Common Stock Exchange Ratio, provided that any
fractional shares of Parent Common Stock resulting from such
multiplication shall be rounded down to the nearest share; and
(ii) The exercise price per share shall be equal to
(y) the aggregate exercise price for the shares of Company
Common Stock purchasable pursuant to such Company Stock Option
divided by (z) the number of full shares of Parent Common
Stock deemed purchasable pursuant to such New Option.
In the case of any option to which Section 421 of the Code applies by reason of
its qualification under Section 422 of the Code, the exercise price, the number
of shares purchasable pursuant to such option and the terms and conditions of
such option shall be determined in order to comply with 424(a) of the Code.
After the Effective Time, each New Option shall be exercisable and shall vest
upon the same terms and conditions as were applicable to the related Company
Stock
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Option immediately prior to the Effective Time, except that all references to
the Company shall be deemed to be references to Parent.
SECTION 6.09. Warrants.
(a) At the Effective Time, Parent shall assume all the
obligations of the Company under the Rollover Warrant Agreement and each of the
Rollover Warrants which is outstanding immediately prior to the Effective Time
shall be assumed by Parent and converted automatically into a warrant to
purchase shares of Parent Common Stock (a "NEW ROLLOVER WARRANT") in an amount
and at an exercise price determined as provided below:
(i) The number of shares of Parent Common Stock to be subject
to the New Rollover Warrant shall be equal to the product of the number
of shares of Company Common Stock remaining subject (as of immediately
prior to the Effective Time) to the original warrant and the Common
Stock Exchange Ratio, provided that any fractional shares of Parent
Common Stock resulting from such multiplication shall be rounded up or
down to the nearest share; and
(ii) The exercise price per share shall be equal to (y) the
aggregate exercise price for the shares of Company Common Stock
purchasable pursuant to such Rollover Warrant divided by (z) the number
of full shares of Parent Common Stock deemed purchasable pursuant to
such New Rollover Warrant.
After the Effective Time, each New Rollover Warrant shall be exercisable upon
the same terms and conditions as were applicable to the related New Rollover
Warrant in the New Rollover Warrant Agreement immediately prior to the Effective
Time, except that all references to the Company shall be deemed to be references
to Parent.
(b) At the Effective Time, Parent shall assume all the
obligations of the Company under the Series A Warrant Agreement and each of the
Series A Warrants which is outstanding immediately prior to the Effective Time
shall be assumed by Parent and converted automatically into a warrant to
purchase shares of Parent Common Stock (a "NEW SERIES A WARRANT") in an amount
and at an exercise price determined as provided below:
(i) the number of shares of Parent Common Stock to be subject
to the New Series A Warrant shall be equal to the product of (x) the
number of shares of Company Series A Preferred Stock remaining subject
(as of immediately prior to the Effective Time) to the original warrant
and (y) .4907753, provided that any fractional shares of Parent Common
Stock resulting from such multiplication shall be rounded up or down to
the nearest share; and
(ii) The exercise price per share shall be equal to (y) the
aggregate exercise price for the shares of the Company Series A
Preferred Stock purchasable (as of immediately
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prior to the Effective Time) pursuant to such Series A Warrant divided
by (z) the number of full shares of Parent Common Stock deemed
purchasable pursuant to such New Series A Warrant.
After the Effective Time, each New Series A Warrant shall be exercisable upon
the same terms and conditions as were applicable to the related New Series A
Warrant in the New Series A Warrant Agreement immediately prior to the Effective
Time, except that all references to the Company shall be deemed to be references
to Parent.
SECTION 6.10. Indemnification. From and after the Effective
Time, Parent agrees to cause the Surviving Corporation to indemnify and hold
harmless each current and former director and officer of the Company and each of
the Subsidiaries against any costs or expenses (including reasonable attorneys'
fees), judgements, fines, losses, claims, damages or liabilities incurred in
connection with any claim, action, suit, proceeding or investigation, whether
civil, criminal, administrative or investigative, arising out of matters
existing or occurring at or prior to the Effective Time, whether asserted or
claimed prior to, at or after the Effective Time, to the fullest extent that the
Company or such Subsidiary, as the case may be, would have been permitted under
its Certificate of Incorporation or Bylaws as in effect on the date hereof to
indemnify such person (and Parent shall cause the Surviving Corporation to
advance expenses as incurred to the fullest extent permitted under the
Certificate of Incorporation and Bylaws of the Company or such Subsidiary, as
the case may be, as in effect on the date hereof, provided the person to whom
expenses are advanced provides an undertaking to repay such advances if it is
ultimately determined that such person is not entitled to indemnification) and
provided further that the Parent determines in good faith that, with respect to
any civil action or proceeding, such person acted in good faith and in a manner
he reasonably believed to be in or not opposed to the best interests of the
Company or such Subsidiary, as the case may be, and, with respect to any
criminal action or proceeding, such person had no reasonable cause to believe
this conduct was unlawful.
SECTION 6.11. Registration Rights; Stockholders Agreement. The
shares of Parent Common Stock issued to the Stockholders hereunder shall, upon
the consummation of the transactions contemplated hereby, be accorded the same
registration rights as have been accorded to shares of "Restricted Stock" under
Section 5 of the Registration Rights Agreement, dated as of April 13, 1995, as
amended (the "REGISTRATION RIGHTS AGREEMENT"), among Parent and the several
parties named therein, with respect to any primary public offering by the Parent
of shares of Parent Common Stock. If, not later than 90 days after the Effective
Time and the consummation of the transactions as contemplated hereby, Parent and
the requisite percentage of stockholders of Parent (as set forth in the
Registration Rights Agreement) have not executed and delivered to such
Stockholders for their execution an amendment to the Registration Rights
Agreement providing for the rights and privileges as aforesaid, then Parent
shall instead promptly execute and deliver to such Stockholders for their
execution a separate registration rights agreement providing for same. Not later
than 60 days following the Effective Time Parent will deliver to the holders of
Company Series C Preferred Stock (as of immediately prior to the
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Effective Time) for execution an Amendment to the Stockholders Agreement, dated
as of August 11, 1995, as amended (the "STOCKHOLDERS AGREEMENT") which will
accord (i) observer rights accorded pursuant to Section 2 of the Stockholders
Agreement to a designee of the majority of the holders of Company Series C
Preferred Stock (as of immediately prior to the Effective Time) and reasonably
acceptable to Parent, (ii) pre-emptive rights accorded to other "Eligible
Holders" pursuant to Section 3 of the Stockholder Agreement to each holder of
such Company Series C Preferred Stock, (iii) co-sale rights accorded to other
"Eligible Holders" pursuant to Section 4 of the Stockholders Agreement to each
holder of such Company Series C Preferred Stock and (iv) information rights
accorded pursuant to Section 8 of the Stockholders Agreement to First Union
Capital Partners, Inc., BCI Growth IV, L.P., Gateway Partners, L.P., J.P. Morgan
Investment Corporation, Advantage Capital Missouri Partners I, L.P. and Jurgen
Manchot.
SECTION 6.12. Representation Agreements. The Company shall use
its best efforts to obtain from each Stockholder an Agreement (the
"REPRESENTATION AGREEMENT"), in form and substance satisfactory to Parent and
the Company, whereby such Stockholder (i) makes certain investment
representations and (ii) agrees to be bound by the terms and conditions set
forth in Article IX. Pursuant to the Representation Agreement, the Stockholders
shall also appoint a person or persons (in such capacity, collectively, the
"STOCKHOLDER AGENT") to act as the Stockholder's agent in connection with the
rights and duties set forth in Article IX of this Agreement and in the Escrow
Agreement.
SECTION 6.13. Pooling of Interests. Company shall not directly
or indirectly take any action that would result in the Merger not being
accounted for as a pooling of interests under GAAP.
ARTICLE VII.
CONDITIONS TO THE MERGER
SECTION 7.01. Conditions to Each Party's Obligation to Effect
the Merger. The respective obligations of each party to effect the Merger shall
be subject to the fulfillment at or prior to the Effective Time of the following
conditions:
(a) this Agreement and the Merger shall have been approved and
adopted by the requisite vote of the stockholders of the Company;
(b) the expiration or earlier termination of all waiting
periods under the HSR Act shall have occurred;
(c) the approval by the Board of Governors of the Federal
Reserve System pursuant to the Bank Holding Company Act;
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(d) no more than ten percent of the capital stock of the
Company shall in the aggregate be (i) subject to a written demand for appraisal
as provided in Section 262 of the Delaware GCL or (ii) consist of treasury
shares of the Company; provided, however, that the Company shall not waive such
condition without the written consent of at least two-thirds of the holders of
the Company Series C Preferred Stock;
(e) no preliminary or permanent injunction or other order,
decree or ruling issued by any court of competent jurisdiction nor any statute,
rule, regulation or order entered, promulgated or enacted by any governmental,
regulatory or administrative agency or authority shall be in effect that would
prevent the consummation of the Merger as contemplated hereby.
SECTION 7.02. Conditions to the Obligation of the Company to
Effect the Merger. The obligation of the Company to effect the Merger shall be
subject to the fulfillment at or prior to the Effective Time of the following
additional conditions:
(a) Representations and Warranties. The representations and
warranties of Parent and Acquisition Corp. contained in this Agreement shall be
true and correct in all material respects at the Effective Time with the same
force and effect as though such representations and warranties had been made at
and as of the Effective Time, and Parent and Acquisition Corp. shall have
certified to such effect to the Company in writing.
(b) Performance. Parent and Acquisition Corp. shall have
performed and complied with all agreements and conditions contained herein
required to be performed and complied with by it prior to or at the Effective
Time, and Parent and Acquisition Corp. shall have certified to such effect to
the Company in writing.
(c) Opinion of Counsel. The Company shall have received the
opinions of Bryan Cave LLP and Reboul, MacMurray, Hewitt, Maynard & Kristol,
counsel to the Company, substantially in the forms attached hereto as Exhibit
B-1 and B-2, respectively.
(d) Bank Consent. Parent shall have received the requisite
consent from its lenders under the Credit and Guaranty Agreement, dated as of
May 29, 1998 (as amended and restated as of July 7, 1998), among Parent, Harris
Trust and Savings Bank, as Agent, and the lenders party thereto.
(e) Supporting Documents. At or prior to the Effective Time,
the Company and its counsel shall have received copies of the following
supporting documents:
(i) copies of the Articles of Incorporation of Parent, and all
amendments thereto, certified as of a recent date by the Secretary of
State of the State of Missouri, and a certificate of said Secretary
dated as of a recent date as to the due incorporation and good standing
of Parent and listing all documents of Parent on file with said
Secretary;
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(ii) copies of the Certificate of Incorporation of Acquisition
Corp., and all amendments thereto, certified as of a recent date by the
Secretary of State of the State of Delaware, and a certificate of said
Secretary dated as of a recent date as to the due incorporation and
good standing of Acquisition Corp. and listing all documents of
Acquisition Corp. on file with said Secretary;
(iii) a certificate of the Secretary or an Assistant Secretary
of Parent as of the Effective Time certifying (w) that attached thereto
is a true and complete copy of the Bylaws of Parent as in effect on the
date of such certification; (x) that attached thereto is a true and
complete copy of resolutions adopted by the Board of Directors of
Parent authorizing the execution, delivery and performance of this
Agreement, and that all such resolutions are still in full force and
effect and are all the resolutions adopted in connection with the
transactions contemplated by this Agreement; (y) that the Articles of
Incorporation of Parent have not been amended since the date of the
last amendment referred to in the certificate delivered pursuant to
clause (i) above; and (z) as to the incumbency and specimen signature
of each officer of Parent executing this Agreement and any certificate
or instrument furnished pursuant hereto, and a certification by another
officer of Parent as to the incumbency and signature of the officer
signing the certificate referred to in this paragraph (iii); and
(iv) a certificate of the Secretary or an Assistant Secretary
of each of Acquisition Corp. as of the Effective Time certifying (w)
that attached thereto is a true and complete copy of the By-laws of
Acquisition Corp. as in effect on the date of such certification; (x)
that attached thereto is a true and complete copy of resolutions
adopted by the Board of Directors of Acquisition Corp. authorizing the
execution, delivery and performance of this Agreement, and that all
such resolutions are still in full force and effect and are all the
resolutions adopted in connection with the transactions contemplated by
this Agreement; (y) that the Certificate of Incorporation of
Acquisition Corp. have not been amended since the date of the last
amendment referred to in the certificate delivered pursuant to clause
(ii) above; and (z) as to the incumbency and specimen signature of each
officer of Acquisition Corp. executing this Agreement and any
certificate or instrument furnished pursuant hereto, and a
certification by another officer of Acquisition Corp. as to the
incumbency and signature of the officer signing the certificate
referred to in this paragraph (iv); and
(iv) such additional supporting documents and other
information with respect to the operations and affairs of Parent and
Acquisition Corp. as the Company or its counsel may reasonably request.
All such documents shall be reasonably satisfactory in form
and substance to the Company and its counsel.
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SECTION 7.03. Conditions to the Obligation of Parent and
Acquisition Corp. to Effect the Merger. The obligation of Parent and Acquisition
Corp. to effect the Merger shall be subject to the fulfillment at or prior to
the Effective Time of the following additional conditions:
(a) Representations and Warranties. The representations and
warranties of the Company contained in this Agreement shall be true and correct
in all material respects at the Effective Time with the same force and effect as
though such representations and warranties had been made at and as of the
Effective Time, and the Company shall have certified to such effect to Parent in
writing.
(b) Performance. The Company shall have performed and complied
with all agreements and conditions contained herein required to be performed and
complied with by it prior to or at the Effective Time, and the Company shall
have certified to such effect to Parent in writing.
(c) Legal Actions or Proceedings. No legal action or
proceeding shall have been instituted or threatened seeking to restrain,
prohibit, invalidate or otherwise affect the consummation of the transactions
contemplated hereby.
(d) Opinion of Counsel. Parent shall have received the opinion
of Thompson Coburn, counsel to the Company, in form and substance satisfactory
to Parent and its counsel.
(e) Employment Agreements. The Company and each of Michael
Gaddis, Ian Brown and Richard Bubenik shall have executed and delivered an
Employment Agreement substantially in accordance with the terms set forth in the
letters heretofore executed by Parent and each of them prior to the date of this
Agreement and in a form satisfactory to Parent and each party thereto.
(f) Termination of Investor Rights and Voting Agreement. Prior
to the Effective Time, Parent shall have received evidence satisfactory to
Parent and its counsel that the Investor Rights and Voting Agreement has been
terminated.
(g) Supporting Documents. At or prior to the Effective Time,
Parent and its counsel shall have received copies of the following supporting
documents:
(i) copies of the Certificate of Incorporation of the Company,
and all amendments thereto, certified as of a recent date by the
Secretary of State of the State of Delaware, and a certificate of said
Secretary dated as of a recent date as to the due incorporation and
good standing of the Company and listing all documents of the Company
on file with said Secretary;
(ii) a certificate of the Secretary or an Assistant Secretary
of the Company as of the Effective Time certifying (w) that attached
thereto is a true and complete copy of the
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By-laws of the Company as in effect on the date of such certification;
(x) that attached thereto is a true and complete copy of resolutions
adopted by the Board of Directors of the Company authorizing the
execution, delivery and performance of this Agreement, and that all
such resolutions are still in full force and effect and are all the
resolutions adopted in connection with the transactions contemplated by
this Agreement; (y) that the Certificate of Incorporation of the
Company has not been amended since the date of the last amendment
referred to in the certificate delivered pursuant to clause (i)(x)
above; and (z) as to the incumbency and specimen signature of each
officer of the Company executing this Agreement and any certificate or
instrument furnished pursuant hereto, and a certification by another
officer of the Company as to the incumbency and signature of the
officer signing the certificate referred to in this paragraph (ii); and
(iii) such additional supporting documents and other
information with respect to the operations and affairs of the Company
as Parent or its counsel may reasonably request.
All such documents shall be reasonably satisfactory in form
and substance to Parent and its counsel.
ARTICLE VIII.
TERMINATION AND ABANDONMENT
SECTION 8.01. Termination and Abandonment. This Agreement may
be terminated and the Merger may be abandoned at any time prior to the Effective
Time, whether before or after approval by the stockholders of the Company:
(a) by mutual action of the Boards of Directors of Parent and
the Company;
(b) by the Company, if the conditions set forth in Sections
7.01 and 7.02 shall not have been complied with or performed and such
noncompliance or nonperformance shall not have been cured or eliminate (or by
its nature cannot be cured or eliminated) by Parent and Acquisition Corp. on or
before May 31, 1999;
(c) by Parent or Acquisition Corp., if the conditions set
forth in Sections 7.01 and 7.03 shall not have been complied with or performed
and such noncompliance or nonperformance shall not have been cured or eliminated
(or by its nature cannot be cured or eliminated) by the Company on or before May
31, 1999; or
(d) by Parent or the Company (i) if there has been a material
breach of a representation or warranty made by the other party the effect of
which is a Company Material Adverse Effect or a Parent Material Adverse Effect,
as the case may be, or (ii) if there has been a
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breach by the other party in any material respect of the covenants set forth in
this Agreement which by its nature cannot be cured or eliminated.
SECTION 8.02 Effect of Termination. In the event of the
termination of this Agreement and the abandonment of the Merger pursuant to
Section 8.01, this Agreement shall thereafter become void and have no effect,
and no party hereto shall have any liability to any other party hereto or its
stockholders or directors or officers in respect thereof, and each party shall
be responsible for its own expenses, except as follows: (i) the obligations
imposed by Sections 6.03(d), 6.03(e). 10.01 and 10.02 hereof shall survive the
termination and (ii) nothing herein shall relieve any party from liability for
any willful breach or improper termination hereof.
ARTICLE IX.
SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION
SECTION 9.01. Survival of Representations. All representations
and warranties made by any party hereto in this Agreement or pursuant hereto
shall survive the Effective Time and shall terminate at the close of business on
the earlier of one year from the Effective Time or the completion of the first
audit of the Parent or the Company after the Effective Time (the "EXPIRATION
DATE").
SECTION 9.02. General Indemnity. (a) Subject to the terms and
conditions of this Article IX, the Stockholders, severally and not jointly,
shall indemnify, defend and hold Parent and the Company harmless from and
against all demands, claims, actions or causes of ac tion, assessments, losses,
damages, liabilities, costs and expenses, including, without limitation,
interest, penalties and reasonable attorneys' fees and expenses (hereinafter
collectively called "DAMAGES"), asserted against, resulting to, imposed upon or
incurred by Parent or the Company by reason of or resulting from or arising out
of:
(i) a breach of any representation, warranty or covenant of
the Company contained in this Agreement; and
(ii) any and all Taxes imposed on or incurred by the Company
for all taxable years (or portions thereof) ending on or prior to the
Effective Time, except to the extent such Taxes have been paid or
reserves have been established for such Taxes on the Company Financial
Statements.
(b) Subject to the terms and conditions of this Article IX,
Parent agrees to and shall indemnify, defend and hold the Stockholders harmless
from and against all Damages asserted against, resulting to, imposed upon or
incurred by them by reason of or resulting from or arising out of:
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(i) a breach of any representation, warranty or covenant of
Parent or Acquisition Corp. contained in this Agreement; and
(ii) any and all Taxes imposed on or incurred by the Company
for all taxable years and periods ending after the Effective Time
(including any short periods ending after the Effective Time).
SECTION 9.03. Conditions of Indemnification. The respective
obligations and liabilities of the Stockholders under paragraph (a) of Section
9.02 to Parent and the Company, on the one hand, and of Parent to the
Stockholders under paragraph (b) of Section 9.02, on the other hand (herein
sometimes called the "INDEMNIFYING PARTY"), to the other (herein sometimes
called the "PARTY TO BE INDEMNIFIED") under Section 9.02 hereof with respect to
claims resulting from the assertion of liability by third parties shall be
subject to the following terms and conditions:
(a) Within 20 days after receipt of notice of commencement of
any action or the assertion of any claim by a third party, the party to be
indemnified shall give the indemnifying party written notice thereof together
with a copy of such claim, process or other legal pleading (provided that
failure so to notify the indemnifying party of the assertion of a claim within
such period shall not affect its indemnity obligation hereunder except as and to
the extent that such failure shall adversely affect the defense of such claim),
and the indemnifying party shall have the right to undertake the defense thereof
by representatives of its own choosing.
(b) In the event that the indemnifying party, by the 30th day
after receipt of notice of any such claim (or, if earlier, by the tenth day
preceding the day on which an answer or other pleading must be served in order
to prevent judgment by default in favor of the person asserting such claim),
does not elect to defend against such claim, the party to be indemnified will
(upon further notice to the indemnifying party) have the right to undertake the
defense, compromise or settlement of such claim on behalf of and for the account
and risk of the indemnifying party, subject to the right of the indemnifying
party to assume the defense of such claim at any time prior to settlement,
compromise or final determination thereof.
(c) Except with the prior written consent of the indemnified
party, no indemnifying party, in the defense of such claim or litigation, shall
consent to entry of any judgment or order, interim or otherwise, or enter into
any settlement that provides for injunctive or other nonmonetary relief
affecting the indemnified party or that does not include as an unconditional
term thereof the giving by each claimant or plaintiff to such indemnified party
of a release from all liability with respect to such claim or litigation. In the
event that the indemnified party shall in good faith determine that the
indemnified party may have available to it one or more defenses or counterclaims
that are inconsistent with one or more of those that may be available to the
indemnifying party in respect of such claim or any litigation relating thereto,
the indemnified party shall have the right at all times to take over and assume
control over the defense, settlement, negotiations or litigation relating to
such claim at the sole cost of the indemnifying party; provided, however, that
if the indemnified party does so take over and
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assume control, the indemnified party shall not settle such claim or litigation
without the written consent of the indemnifying party, such consent not to be
unreasonably withheld.
(d) In connection with any such indemnification, the
indemnified party shall cooperate in all reasonable requests of the indemnifying
party. Any notices required to given to or by, and all other actions or
decisions required to be taken or made by, the Stockholders as the "indemnifying
party" as provided in this Section 9.03, shall be given to or by, or shall be
taken or made by, the individual or entity appointed as the Stockholder Agent in
accordance with the Representation Agreement and any action so taken shall bind
all Stockholders.
SECTION 9.04. Limitations on Indemnification and Remedies. (a)
Notwithstanding the foregoing, no party shall receive indemnification payments
with respect to Damages or Taxes pursuant to this Article IX until the aggregate
indemnification payments payable to such party exceed $500,000, whereupon such
party shall be entitled to receive indemnification payments for all such Damages
and Taxes.
(b) Notwithstanding anything herein to the contrary,
(i) the maximum liability of each Stockholder for each
indemnification obligation hereunder shall not exceed such
Stockholder's pro rata share thereof as set forth on Schedule II hereto
under the heading "Percentage Interest in Escrowed Shares";
(ii) the maximum liability of each Stockholder for aggregate
indemnification payments pursuant to this Article IX shall not exceed
the product of (x) the number of shares set forth opposite such
Stockholder's name under the heading "Number of Escrowed Shares" and
(y) the Price Per Share; and
(iii) the maximum aggregate liability of the Stockholders for
indemnification obligations pursuant to this Article IX shall not
exceed the product of (i) the aggregate number of Escrowed Shares and
(ii) the Price Per Share.
(c) Each Stockholder's indemnification obligations with
respect to any claim hereunder shall be satisfied by surrender from the Escrowed
Shares to Parent for cancellation the number of shares of Parent Common Stock
that, when multiplied by the Price Per Share, equals the amount of such
Stockholder's liability hereunder. The Escrow Agent and the Stockholders Agent
shall maintain a register (the "ESCROW REGISTER") of the number of Escrowed
Shares to which each Stockholder is entitled, which shall reflect the following
adjustments:
(i) Any indemnification obligations arising out of the
Representation Agreement or a breach by a Stockholder of any of its
covenants therein, shall be borne and satisfied solely by the breaching
Stockholder by surrender and cancellation of the applicable number of
such Stockholder's Escrowed Shares, and the Escrow Register shall
reflect the corresponding reduction in the number of such Stockholder's
Escrowed Shares.
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(ii) Any other indemnification obligations arising hereunder,
shall be borne and satisfied pro rata by all Stockholders in accordance
with the respective percentage shares as set forth on Schedule II under
the heading "Percentage Interest in Escrowed Shares" by surrender and
cancellation of the applicable number of each Stockholder's Escrowed
Shares, and the Escrow Register shall reflect the corresponding
reduction in the number of each Stockholder's Escrowed Shares.
(iii) Any Stockholder, at its sole option, may elect to
satisfy its indemnification obligations with respect to any claim
hereunder by payment in cash to Parent, and upon such payment, the
Escrow Register shall reflect that such Stockholder's pro rata Escrowed
Shares were not reduced.
(d) On the first business day after the Expiration Date, the
Escrow Agent shall release all remaining Escrowed Shares (as reflected on the
Escrow Register) to the Stockholder Agent, who shall hold such shares in trust
for the Stockholders, pro rata in accordance with the Escrow Register, except to
the extent that Parent has delivered a notice of claim pursuant to Section
9.03(a) and such claim has not been resolved, in which case the Escrow Agent
shall retain a number of Escrowed Shares that, when multiplied by the Price Per
Share, shall be equal to the amount of such pending claim. Upon resolution of
any pending claims, the Escrow Agent shall release all remaining shares to the
Stockholder Agent as set forth above. Upon receipt of the Escrowed Shares, the
Stockholder Agent shall present the stock certificates therefor to Parent and
Parent shall issue and deliver to the Stockholder Agent, stock certificates in
the name of each Stockholder entitled thereto in the respective amounts
specified in writing by the Stockholder Agent to Parent.
(e) Any indemnification obligations hereunder shall be offset
by any applicable insurance or other reimbursement payments received or tax
benefit realized by the indemnified party with respect to such obligation.
SECTION 9.05. Exclusive Remedies. Parent's rights to
indemnification under this Article IX with respect to any Damages shall be its
sole and exclusive remedy for money damages under this Agreement, and Parent
shall not be entitled to pursue, and hereby expressly waives, any and all rights
that may otherwise be available either at law or in equity with respect thereto,
except for rights with respect to any fraudulent or intentional acts or
intentional misrepresentations.
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ARTICLE X.
MISCELLANEOUS
SECTION 10.01. Expenses, Etc. Whether or not the transactions
contemplated by this Agreement are consummated, neither the Company, on the one
hand, nor Parent and Acquisition Corp., on the other hand, shall have any
obligation to pay any of the fees and expenses of the other incident to the
negotiation, preparation and execution of this Agreement, including the fees and
expenses of counsel, accountants, investment bankers and other experts and
Parent shall pay all such fees and expenses incurred by Acquisition Corp. The
Company, on the one hand, and Parent and Acquisition Corp., on the other hand,
shall indemnify the other and hold it harmless from and against any claims for
finders' fees or brokerage commissions in relation to or in connection with such
transactions as a result of any agreement or understanding between such
indemnifying party and any third party.
SECTION 10.02. Publicity, Confidentiality. The Company and
Parent agree that this Agreement and the exchange of information pursuant
thereto is confidential and they will not disclose or issue any press release or
make any other public announcement concerning this Agreement or the transactions
contemplated hereby without the prior consent of the other party or as required
by law.
SECTION 10.03. Execution in Counterparts. For the convenience
of the parties, this Agreement may be executed in one or more counterparts, each
of which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
SECTION 11.04. Notices. All notices that are required or may
be given pursuant to the terms of this Agreement shall be in writing and shall
be sufficient in all respects if given in writing and delivered by hand or
national overnight courier service, transmitted by telecopy or mailed by
registered or certified mail, postage prepaid, and shall be deemed given upon
receipt, as follows:
If to Parent to:
717 Office Parkway
St. Louis, Missouri 63141-7155
Telecopy Number: (314) 468-4399
Attention: Chief Executive Officer
with copies to:
Reboul, MacMurray, Hewitt, Maynard & Kristol
45 Rockefeller Plaza
New York, New York 10111
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Telecopy Number: (212) 841-5725
Attention: Alan D. Granquist, Esq.
If to the Company, to:
SAVVIS Holdings Corporation
7777 Bonhomme
Suite 1501
St. Louis, MO 63105
Telecopy Number: (314) 719-2499
Attention: Steven M. Gallant
with a copy to:
Thompson Coburn
One Mercantile Center
St. Louis, Missouri 63101
Telecopy Number: (314) 552-7000
Attention: Thomas A. Litz, Esq.
or such other address or addresses as any party hereto shall have designated by
notice in writing to the other parties hereto.
SECTION 10.05. Waivers. The Company, on the one hand, and
Parent and Acquisition Corp., on the other hand, may, by written notice to the
other, (i) extend the time for the performance of any of the obligations or
other actions of the other under this Agreement; (ii) waive any inaccuracies in
the representations or warranties of the other contained in this Agreement or in
any document delivered pursuant to this Agreement; (iii) waive compliance with
any of the conditions of the other contained in this Agreement; or (iv) waive
performance of any of the obligations of the other under this Agreement. Except
as provided in the preceding sentence, no action taken pursuant to this
Agreement, including, without limitation, any investigation by or on behalf of
any party, shall be deemed to constitute a waiver by the party taking such
action of compliance with any representations, warranties, covenants or
agreements contained in this Agreement. The waiver by any party hereto of a
breach of any provision of this Agreement shall not operate or be construed as a
waiver of any subsequent breach.
SECTION 10.06. Amendments, Supplements, Etc. At any time, this
Agreement may be amended or supplemented by such additional agreements, articles
or certificates, as may be determined by the parties hereto to be necessary,
desirable or expedient to further the purposes of this Agreement, or to clarify
the intention of the parties hereto, or to add to or modify the covenants, terms
or conditions hereof or to effect or facilitate any governmental approval or
acceptance of this Agreement or to effect or facilitate the filing or recording
of this Agreement or
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the consummation of any of the transactions contemplated hereby. Any such
instrument must be in writing and signed by all of the parties hereto.
SECTION 10.07. Entire Agreement. This Agreement and its
Schedules and Exhibits, and the documents to be executed or delivered at the
Effective Time in connection herewith, constitute the entire agreement among the
parties hereto with respect to the subject matter hereof and supersede all prior
agreements and understandings, oral and written, among the parties hereto with
respect to the subject matter hereof. No representation, warranty, promise,
inducement or statement of intention has been made by any party that is not
embodied in this Agreement or such other documents, and none of the parties
shall be bound by, or be liable for, any alleged representation, warranty,
promise, inducement or statement of intention not embodied herein or therein. As
used herein, the "best knowledge" or "awareness" of the Company shall refer to
the knowledge of each director and executive officer of the Company and each of
the Subsidiaries after due inquiry.
SECTION 10.08. APPLICABLE LAW. THIS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK,
WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES.
SECTION 10.09. Binding Effect, Benefits. This Agreement shall
inure to the benefit of and be binding upon the parties hereto and their
respective successors and assigns. Except for the provisions of Section 6.10
hereof, nothing in this Agreement, expressed or implied, is intended to confer
on any person other than the parties hereto or their respective successors and
assigns, any rights, remedies, obligations or liabilities under or by reason of
this Agreement.
SECTION 10.10. Assignability. Neither this Agreement nor any
of the parties' rights hereunder shall be assignable by any party hereto prior
to the Effective Time without the prior written consent of the other parties
hereto. After the Effective Time, no assignment shall operate to release the
original parties hereto.
SECTION 10.11. Severability. Any term or provision of this
Agreement that is invalid or unenforceable in any jurisdiction shall, as to that
jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without rendering invalid or unenforceable the remaining terms
and provisions of this Agreement or affecting the validity or enforceability of
any of the terms or provisions of this Agreement in any other jurisdiction.
SECTION 10.12. Variation and Amendment. This Agreement may be
varied or amended at any time before or after the approval and adoption of this
Agreement by the stockholders of Parent and the Company by action of the
respective Boards of Directors of the Company, Parent and Acquisition Corp.,
without action by the stockholders thereof, provided that after approval and
adoption of this Agreement by the Company's stockholders no such variance or
amendment shall, without consent of such stockholder(s), reduce the
consideration
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that the holders of the capital stock of the Company shall be entitled to
receive upon the Effective Time pursuant to Section 2.01 hereof or amend the
provisions of Article IX.
IN WITNESS WHEREOF, the parties have executed and delivered
this Agreement as of the day and year first above written.
BRIDGE INFORMATION SYSTEMS, INC.
By /s/ DARYL A. RHODES
-----------------------------
Name: DARYL A. RHODES
Title: TREASURER
SAVVIS ACQUISITION CORP.
By /s/ DARYL A. RHODES
-----------------------------
Name: DARYL A. RHODES
Title: TREASURER
SAVVIS HOLDINGS CORPORATION
By /s/ CLYDE A. HEINTZELMAN
-----------------------------
Name: CLYDE A. HEINTZELMAN
Title: PRESIDENT/CEO
* * * * *
The schedules and exhibits to this agreement have been omitted and will be
furnished to the SEC's staff upon request.
* * * * *
46
EXHIBIT 10.6
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into as
of the 4th day of December, 1998, by and between Savvis Communications
Corporation (the "Employer") and Clyde A. Heintzelman (the "Executive").
WITNESSETH:
WHEREAS:
(1) Employer desires to retain Executive's services, upon the terms and
conditions hereafter described, and Executive desires to be employed by Employer
upon such terms and conditions;
(2) Executive understands and acknowledges that in connection with this
proposed employment Executive will meet important customers and referral sources
of Employer, and learn of confidential business information, ways of doing
business, and trade secrets of Employer of which Executive was not aware, and
that accordingly Executive's agreement to and compliance with the covenants and
terms set forth in Sections 7 and 8 of this Agreement are a material and
essential condition to Employer's agreement to employ Executive;
NOW, THEREFORE, in consideration of the premises, and the promises,
covenants and agreements hereinafter described, Employer and Executive agree as
follows:
1. Employment. Employer hereby employs Executive, and Executive hereby
accepts employment with Employer, upon and subject to the terms and conditions
set forth in this Agreement. Employer shall at all times during Executive's
employment nominate Executive for a seat on Employer's Board of Directors and
use its reasonable efforts to cause Executive to be elected to the Board.
2. Duties. Executive shall serve as the President and Chief Executive
Officer of Employer, and perform, under and according to Employer's direction
and control and to the best of Executive's abilities, all executive, advisory,
administrative, and/or managerial duties (if any) which may be assigned or
delegated to Executive from time to time by the Board of Directors of Employer
or the Chairman of the Board of directors ("Chairman"). Executive shall carry
out, follow and comply with all directives, rules, and policies of Employer and
the Board and Chairman, shall have the authority and responsibilities
customarily exercised by a President and Chief Executive Officer, subject to the
Board's direction and control, and without additional compensation shall provide
services to, and serve as an officer and/or director of, any subsidiary,
affiliate or other business or venture in which Employer may hold an interest,
as the Board of Directors may direct.
<PAGE>
Executive also shall be responsible for operating Employer at a level of
profitability and financial performance established by Employer's Board of
Directors from time to time. Executive shall consult with Employer's Board of
Directors and the Chairman, as requested by such Board from time to time, on all
manners including without limitation the development of an annual budget.
Executive shall exert Executive best efforts and devote substantially
all of Executive's working time, attention and energies to Employer's business
and the performance of Executive duties, and shall not engage in any other
business activity, whether or not such employment or business activity is
pursued for gain, profit or other pecuniary advantage, without Employer's
express prior written consent; provided, however, that (1) Executive may serve
on the Board of Directors of another corporation provided such activities and
service do not violate any other covenant or term of this Agreement, interfere
with the performance of Executive's duties for Employer, or create a conflict of
interest or the appearance of a conflict of interest with respect to Employer;
(2) if the same does not violate any other covenant or term of this Agreement,
Executive may invest Executive's personal assets in any form or manner so long
as it does not require Executive's services or advice in the operation of any
business in which such investment is made (but nothing in this Agreement shall
restrict Executive's right to invest in Employer or the Company (defined
below)).
3. Term of Employment.
(a) Executive's employment with Employer commences as of the
date first written above, and unless earlier terminated pursuant to the
provisions of Section 3(b), terminates at the close of business on December 3,
2000 (the "Term"), provided, however, that commencing on December 2, 2000, and
on each annual anniversary of such date (such date and each annual anniversary
being called a "Renewal Date"), this Agreement automatically shall extend for an
additional one-year period upon the terms described in this paragraph, unless 60
days or more prior to the Renewal Date, either party gives notice to the other
in accordance with Section 14 that such party elects not to renew the employment
term. If such notice of non-renewal is given, then Executive's employment shall
terminate at the expiration of the then current term. In the case of each such
renewal (i) Executive shall be compensated as set out in Section 4(a)-(b); and
(ii) all other terms of this Agreement (including those respecting termination)
shall remain in full force and effect. The parties acknowledge their intentions
that the foregoing provisions could (through the failure to elect not to renew
or to exercise rights under Section 3(b)) result in a perpetual employment
without any definite duration during Executive's life.
(b) Notwithstanding the foregoing, prior to the expiration of
the Term (as the same may be extended) (i) Employer may terminate Executive's
employment, without prior notice, "Cause" (meaning Executive's failure or
refusal
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to perform any stated duty, misconduct or dishonesty by Executive in connection
with the performance of this Agreement or any other of Executive's duties
hereunder, disloyalty, misappropriation of funds by Executive, Executive's being
convicted of any crime constituting a felony, fraudulent or unethical conduct by
Executive related to or affecting Executive's employment, failure of Executive
to meet or achieve specific business plans or objectives as determined by the
Board of Directors of Employer and which have been made known to Executive
(which is not remedied within 10 days after written notice of the same is given
by Employer), or any other breach of this Agreement (which is not remedied
within 10 days after written notice of the same is given by Employer); (ii)
Executive's employment terminates immediately upon Executive's death; (iii)
Executive's employment may be terminated, at Employer's option, if, due to
physical or mental illness, injury, or condition Executive is unable to perform
any essential function of Executive's position with reasonable accommodation for
a period of more than 90 consecutive days; (iv) Executive may terminate his
employment for "Good Reason" (meaning (x) any violation of a term of this
Agreement by Employer which is not remedied within 10 days after written notice
of the same is given by Executive, (y) the assignment of Executive to duties
which result in a substantial diminution of Executive's position, duties or
responsibilities as provided for in this Agreement (excluding an isolated and
inadvertent action which is remedied by Employer within 10 days after written
notice of the same is given by Executive or a temporary or occasional assignment
by the Board or the Chairman made for reasons of business necessity in the good
faith judgment of the Board of its Chairman), or (z) without Executive's
consent, relocation of Executive from Employer's corporate offices to be
established in the Reston, Virginia area, or the closing or relocation of such
corporate offices, in violation of the provisions of Section 5).
(c) Upon termination of Executive's employment hereunder,
Executive shall be entitled only to receive any compensation accrued but unpaid
as of such date, and shall deliver to Employer all property of Employer.
However, in the event Executive validly terminates his employment prior to the
expiration of the Term for Good Reason (as defined above), or Executive's
employment is terminated pursuant to Section 3(b)(ii) or (iii), then,
notwithstanding the provisions of Section 4(b), Executive shall be eligible to
receive as and when described below, with respect to the fiscal year in which
employment terminates, a pro-rated portion of the Executive's Bonus under the
bonus plan for Executive in effect for that fiscal year provided the performance
goals for the Bonus plan for the entire fiscal year are in fact achieved. The
pro-rated portion shall be paid at the same time the Bonus otherwise would have
been payable under the Agreement if Executive had remained in Employer's employ,
and shall be equal to a percentage of the Bonus equal to the percentage of the
fiscal year during which Executive was employed by Employer.
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If Executive validly terminates Executive's employment for Good Reason
as described above, or if Employer terminates Executive's employment (excluding
a termination under Section 3(b)(i), (ii) or (iii)) without cause or in
violation of this Agreement prior to the expiration of the Term, then Executive
shall be entitled to receive, as and when described below, an amount equal to
the then current rate of Base Salary being paid to Employer (excluding bonuses,
benefits, or other compensation), provided that during the time payments are
being made to Executive, Executive complies with the provisions of Section 7 and
8 whether or not they otherwise would be enforceable, and provided further that
Executive first executes and delivers to Employer a document in form and
substance satisfactory to Employer, releasing, waiving, and agreeing not to sue
on any claims or causes of action which Executive then may have or hold against
Employer, the Company, or any of their respective affiliates, employees,
directors, insurors or agents arising out of or relating to Executive's
employment, this Agreement or its termination, or any facts occurring prior to
that date, and all conditions to making that release and waiver legal effective
have been satisfied. This sum will be paid out in 12 equal consecutive monthly
installments on the Employer's regular monthly paydays, commencing with the
month following the month Executive's employment terminates and all such
conditions have been satisfied. These payments are in addition to any prorated
bonus to which Executive may be entitled under the provisions of the immediately
preceding paragraph.
(d) The provisions of Section 3, 7, 8 and 9 of this Agreement,
and any related provisions, shall survive and continue after the termination of
this Agreement and after the termination of Executive's employment.
4. Compensation. For the services rendered pursuant to this Agreement's
terms, during Executive's employment (except for any period in excess of 90 days
during which Executive may be restricted in performing duties for Employer by
reason of a Court Order) Executive shall receive the following:
(a) Base Salary. Executive shall be compensated at any annual
rate of $250,000 ("Base Salary"). Payments will be made at least once a month on
a regular payday of Employer.
(b) Bonus. Executive shall be entitled to receive a bonus
("Bonus"), payable and determined as described below, for each fiscal year
(starting with the 1999 fiscal year) in which Executive meets the performance
goals established by the Employer's Board of Directors after consultation with
Executive for such fiscal year and was employed by Employer at the end of the
fiscal year. The Bonus will be paid within thirty (30) days after the Employer's
audited financial statements for such fiscal year are issued. With respect to
any such Bonus plan and goals established by Employer's Board of Directors.
Executive shall be eligible to qualify for a bonus of at least 25% of Base
Salary, and the Board of Directors may establish
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a bonus of up to 50% of Base Salary, upon meeting the bonus plan and goals
established by the Board.
(c) Review. Employer will review the compensation spelled out
above, on an annual basis, to determine whether any adjustment more favorable to
Executive should be made. Executive shall be reviewed prior to January 31, 2000.
(d) Withholding. Employer shall withhold from Executive's
compensation all amounts owed Employer (if any) and all amounts required to be
withheld under federal, state or local law.
(e) Benefit Plans. During Executive's employment with
Employer, Employer will pay the cost of Executive's participation in any group
health insurance plan then maintained by Employer to the same limited extent
provided to employees of Employer generally. Executive will be entitled to
participate in any other benefit plan of Employer offered by Employer to its
employees generally, provided Executive is eligible to participate under the
terms of any such plan at standard rates.
(f) Options. Executive shall be granted an option (the
"Option") under the current Incentive Stock Option Plan of Savvis Holdings
Corporation (the "Company"), per the terms of the standard Stock Option
Agreement under that Plan (a copy of the form of which is attached) and the
Stock Option Plan, as described below. The Option will be to purchase that
number of shares of the Company's common stock which constitute five percent
(5%) of the current fully diluted number of all shares of the Company's common
stock at the price of eighty cents (80(cent)) per shares, provided, however,
that if there is a closing of an equity financing involving the Company's
current investors prior to June 1, 1999, then with respect to the first such
equity financing, Executive's option to purchase shares shall not be diluted by
the amount of equity shares (including any convertible debentures) purchased (or
commuted to be purchased) by such current investors in such equity financing,
and the amount of shares which Executive will have an option to purchase under
this option shall be increases as calculated by Employer so as to provide
Executive the option to purchase five percent (5%) of the shares of the
Corporation after taking into account such equity investment. This Option shall
be granted immediately upon closing of the next equity financing or June 1,
1999, whichever first occurs. To the extent the Option is an incentive stock
option for federal income tax purposes, the Option shall not be convertible to a
non-qualified stock option without Executive's express consent. Notwithstanding
anything to the contrary in such Stock Option Plan: (1) one-third of the options
granted pursuant to said option agreement shall vest immediately when the option
is granted and Executive has executed and delivered this Agreement and the Stock
Option Agreement, with the balance to vest over a forty-two (42) month period
1/42 per month (subject to the terms of the Plan and the Stock Option
Agreement), and (2) all other of such options shall immediately vest upon the
sale of all or
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substantially all of the assets or stock of Employer, or in the event of a
"Change Of Control" involving Employer (as such term is defined below), provided
Executive then is employed by Employer. In the event of Executive's death, the
options granted to Executive may be exercised by his personal representative to
the extent otherwise exercisable by Executive under the terms of the applicable
plan and option agreement. Executive must be employed as of June 1, 1999, or the
date the equity financing occurs (whichever first occurs), in order to be
eligible for this Option; provided, however, that if Executive's employment is
terminated prior to such date, Executive nevertheless will be deemed to be
eligible for, and to have vested in, that portion of the Option which comprises
one-third (1/3) of the options to which Executive would have been entitled if
Executive had been employed as of June 1, 1999 based upon the amount of Company
common stock currently outstanding.
For the purpose of this Section 4(f), a "Change of Control" shall mean:
(A) the acquisition by any individual, entity or group [within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act")] (a "Person") of beneficial ownership (within
the meaning of Rule 13d-3 promulgated under the Exchange Act) of 50% or more of
either (i) the then outstanding shares of common stock of Savvis Holdings
Corporation (the "Company") (the "Outstanding Company Common Stock") or (ii) the
combined voting power of the then outstanding voting securities of the Company
entitled to vote generally in the election of directors (the "outstanding
Company Voting Securities"); provided, however, that for purposes of this
subsection (a), the following acquisition shall not constitute a Change of
Control; (i) any acquisitions directly from the Company (including but not
limited to an acquisition of shares from the Company), (ii) any acquisition by
the Company, (iii) any acquisition by any employee benefit plan (or related
trust) sponsored or maintained by the Company or any corporation controlled by
the Company, or (iv) any acquisition by any corporation pursuant to a
transaction which complies with clauses (i), (ii) and (iii) of subsection (c) of
this Section; or
(B) Individuals who, as of the date hereof, constitute the Board of the
Company (the "Incumbent Board") cease for any reason to constitute at least a
majority of the Board; provided, however, that any individual becoming a
director subsequent to the date hereof whose election, or nomination for
election by the Company's shareholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose initial assumption of
office occurs as a result of an actual or threatened election contest with
respect to the election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other than the
Board; or
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<PAGE>
(C) Consummation of a reorganization, merger or consolidation or sale
or other disposition of all or substantially all of the assets of the Company (a
"Business Combination"), in each case, unless, following such Business
Combination, (i) all or substantially all of the individuals and entities who
were the beneficial owners, respectively, of the Outstanding Company Common
Stock and Outstanding Company Voting Securities immediately prior to such
Business Combination beneficially own, directly or indirectly, more than 50% of,
respectively, the then outstanding shares of common stock and the combined
voting power of the then outstanding voting securities entitled to vote
generally in the election of directors, as the case may be, of the corporation
resulting from such Business Combination (including, without limitation, a
corporation which as a result of such transaction owns the Company or all or
substantially all of the Company's assets either directly or through one or more
subsidiaries) in substantially the same proportions as their ownership,
immediately prior to such Business Combination of the Outstanding Company Common
Stock and Outstanding Company Voting Securities, as the case may be, (ii) no
Person [excluding any corporation resulting from such Business Combination or
any employee benefit plan (or related trust) of the Company or such corporation
resulting from such Business Combination] beneficially owns, directly or
indirectly, 50% or more of, respectively, the then outstanding shares of common
stock of the corporation resulting from such Business Combination or the
combined voting power of the then outstanding voting securities of such
corporation except to the extent that such ownership existed prior to the
Business Combination, and (iii) at least a majority of the members of the board
of directors of the corporation resulting from such Business Combination were
members of the Incumbent Board at the time of the execution of the initial
agreement, or of the action of the Board, providing for such Business
Combination.
(h) Automobile Allowance. During his employment with Employer,
Executive shall receive an automobile allowance of $800 per month.
5. Office. During Executive's employment, unless otherwise agreed by
Executive, Executive shall be entitled to office at, and perform Executive's
duties principally out of, a corporate office maintained by Employer in Reston,
Virginia or the immediately surrounding area. Executive shall have the authority
to determine, after consultation and review with the Employer's Board of
Directors and/or the Chairman of the Board, what corporate functions should be
transferred to and/or handled out of the Reston corporate office.
6. Expenses. During Executive's employment, Employer shall reimburse
Executive for reasonable, ordinary and necessary business expenses incurred by
Executive in the performance of his duties for Employer subject to any budgetary
limitations established from time to time by Employer and provided Executive
provides such documentation and information as may then be required by
Employer's business expense reimbursement policy and as may be required to
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<PAGE>
satisfy the standards necessary to deduct such expenses for federal income tax
purposes.
7. Confidential Information.
(a) Executive acknowledges Employer is a developing company,
and that, in the course of developing its business, Employer has developed (and
will develop and/or acquire) and Executive will learn, valuable Confidential
Information (defined below), which was unknown to Executive prior to Executive's
employment, or which has been developed by Executive on behalf of Employer;
which Confidential Information only was and will be disclosed to Executive in
and under a relationship of trust and confidence under restrictions of
confidentiality. As used in this Agreement, Confidential Information means (i)
names, addresses, phone numbers, dates and any and all other information
regarding the clients or potential clients, customers and key contacts at
customers of Employer; and (ii) trade secrets, business, sales and financial
data, pricing, costs, financial statements, programs, property, lists, diagrams
and drawings, information concerning the design, components and manufacture of
Employer's products, market information, financial and marketing plans, manuals,
strategies, and projections of Employer. Executive agrees that the Confidential
Information is a trade secret for purposes of all applicable laws, and that
Confidential Information would not be disclosed to Executive but for Executive's
execution of this Agreement.
(b) Except as required by the duties of Executive's employment
with Employer, Executive shall never during his employment or for a period of
three (3) years after such employment terminates, directly or indirectly, use,
publish, or otherwise disclose any Confidential Information, without Employer's
prior written consent. This restriction shall not apply to information which is
known in the industry generally other than by reason of any actions of
Executive.
(c) During Executive's employment with Employer, Executive
shall exercise all due and diligent precautions to protect the integrity of the
Confidential Information, and upon termination of employment, or otherwise
before then upon request, Executive shall return to Employer all documents or
materials embodying such Confidential Information or any part thereof (including
any copies thereof) in Executive's possession or control.
8. Restrictive Covenants.
(a) Executive acknowledges and agrees that Employer will
suffer great loss and damage if, during Executive's employment or at any time
subsequent to such employment, Executive were to improperly use or disclose
Confidential Information or goodwill of Employer, or if Executive were to use
Executive's contracts and relationships with any client, potential client,
customer, or referral source of Employer, and therefore agrees that Executive
must comply
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<PAGE>
with the restrictive covenants hereinafter set forth; it being understood at the
execution of this Agreement that the parties acknowledge and agree such
restrictions protect legitimate protectable interests of Employer, with respect
to its trade secrets, customers, and referral sources, are reasonable and
necessary to protect such interests, are comparable with their respective
rights, and do not impair or prevent Executive from earning a living.
(b) During Executive's employment with Employer and for the
continuous period of one (1) year after such employment terminates (whether the
Term or any extension thereof expires, the employment term is non-renewed by
either party, or employment is terminated by Executive or Employer and
regardless of the reason for termination), Executive shall not directly or
indirectly, for any reason or purpose whatsoever (other than on Employer's own
behalf in performing Executive's required duties for Employer), whether for
Executive's own benefit, or for the benefit or on behalf of, or in conjunction
with, any other corporation, partnership, proprietorship, or other form of
business entity, and whether as an employee (in any executive, managerial,
officer, exempt or sales position), partner, principal, officer, director,
consultant, agent, stockholder or otherwise:
(i) contact, call on, solicit the business of, sell any
goods or services of a type then provided by Employer
to, or attempt to take away from Employer, any client
or customer of the Employer or any business of such
customer of a type then provided by Employer to such
customer;
(ii) engage in any manner (or own any interest) in any
part of a business then engaged in by Employer,
anywhere within any metropolitan area of the
continental United States or any other country where
Employer then is marketing and/or selling its goods
or services (the mere ownership of less than two
percent (2%) of the shares of any publicly traded
corporation shall not be considered a violation of
this provision); or
(iii) solicit or encourage any director, officer, or other
employee of Employer to discontinue that individual's
status or employment with Employer, or such
individual to engage or participate in any activity
or employment in competition with Employer.
(c) It is the intention of the parties to restrict Executive's
activities only to the extent necessary for the protection of Employer's
legitimate business interests. To the extent that any covenant set forth in this
Section 8, or in Section 7 of this Agreement, shall be determined to be invalid
or unenforceable in any respect or to any extent, the covenant shall not be
rendered invalid, but instead shall be automatically amended for such lesser
term or to such lesser extent, or in
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<PAGE>
such other degree, as may grant the Employer or other party seeking enforcement
the maximum protection and restrictions on Executive's activities permitted by
applicable law in such circumstances.
Executive acknowledges and agrees that (a) the separate and distinct
promises in this Agreement are reasonable and necessary in order to protect the
legitimate business interests described above, (b) any violation would result in
irreparable injury to Employer, and (c) the enforcement of a remedy by way of
injunction or otherwise would not prevent Executive from earning a living.
9. Non-Waiver of Covenants. Employer's failure to exercise any of its
rights to enforce the provisions of this Agreement shall not be affected by the
existence or non-existence of any other similar agreement for any other person
employed by Employer, or by Employer's failure to exercise any of its rights
under this agreement or any other similar agreement. Employer's failure to
exercise any of its rights in the event Executive breaches any promise in this
Agreement shall not be construed as a waiver of such breach or prevent Employer
from later enforcing strict compliance with any and all promises in this
Agreement.
10. Assignment, Entire Agreement, Amendments. This Agreement may be
assigned only by Employer, and is freely assignable by Employer. It constitutes
the entire agreement between the parties concerning the subject matter of this
Agreement and supersedes all prior understandings, communications and agreements
concerning such subject matter. Neither this Agreement, nor any of its terms,
can be changed, added to, waived or supplemented except in a written document
signed by Executive and Employer, except that Employer may adopt or change any
vacation, benefit, rules or other policy generally applicable to employees or a
group or class of employees in its discretion (excluding any change in the
incentive stock option plan which violates the terms of this Agreement).
11. Notification. In order to preserve Employer's rights under this
Agreement, Employer is authorized to advise any third party with whom Executive
may become employed or enter into any business or contractual relationship with,
or whom Executive may contact for any such purpose, of the existence of this
Agreement and its terms, and Employer shall not be liable for doing so.
Executive represents and agrees that Executive has not provided, and
will not, provide, to Employer (or utilize in connection with the performance of
his duties), any trade secrets of a prior employer.
12. Governing Law, Assignment, Miscellaneous. This Agreement shall be
governed by and construed and interpreted according to the internal laws of the
State of Missouri without reference to conflicts of law principles with respect
to the application, interpretation and enforceability of the covenants and
agreements set out in Sections 7 and 8 of the Agreement and any related
provisions which affect
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<PAGE>
their enforceability, application or interpretation; otherwise this Agreement
shall be governed by and construed and interpreted according to the internal
laws of the Commonwealth of Virginia without reference to conflicts of law
principles. The headings of the sections are inserted for convenience of
reference only and shall not be considered to constitute a part of this
Agreement nor to affect the meaning.
If any one or more provisions contained in this Agreement, or in the
application thereof, shall be held to be invalid, illegal, or unenforceable in
any respect, the validity, legality and enforceability of the remaining
provisions of this Agreement shall not in any way be affected or impaired.
Nothing in this Agreement shall be deemed to require Employer or Executive to
take any action or perform any obligation which would be contrary to or
inconsistent with a Court order.
Employer represents and agrees that the execution, delivery and
performance of this Agreement do not conflict with or violate Employer's
articles, by-laws or resolutions, or any judgment, order or agreement to which
Employer is a party or may be bound, and that all corporate action necessary to
authorize the Employer's execution and delivery of this Agreement has been
taken.
In any suit to enforce this Agreement, venue and jurisdiction is proper
in the County of Virginia in which Reston, Virginia (or Employer's corporate
offices, if in a different county) is located, and (if federal jurisdiction
exists) the federal district court for the district in which Reston, Virginia
(or Employer's corporate offices, if in a different county) is located, and the
parties waive any objection to jurisdiction and venue in any such forum and any
claim that such forum is not the most convenient forum.
13. Acknowledgment; Indemnification. By signing this Agreement,
Executive and Employer each acknowledge and agree that they each have read the
Agreement, understand and intend to fulfill each and every one of the promises
in this Agreement, understand this is a legally binding agreement, and
acknowledge receiving a copy of the Agreement.
Employer will indemnify, defend (at Employer's expense) and hold
harmless Executive from and against any claim asserted by Digex, Incorporated,
Digital Express Group or Intermedia Communications or any successor that
Executive's employment under this Agreement, or any solicitation of customers or
employees of any such company, violates any current or prior agreement between
Executive and any such company which has been provided to Employer; provided,
however, that Executive provides prompt notice to Employer of any such claim,
and cooperates fully in the defense thereof, and provided that Employer controls
the defense and settlement of the claim. This indemnification does not extend to
actions taken by Executive contrary to any specific instructions of Employer's
Board or its Chairman or to any use or disclosure by Executive of any legally
protectable trade secrets of
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another, it being understood that Executive is not authorized to use or disclose
to Employer any such trade secrets in connection with Executive's employment.
14. Notice. Every notice, demand or other communication required or
contemplated by this Agreement shall be in writing and deemed to have been made
either when personally delivered to the respective party or deposited in the
ordinary U.S. mail, first-class postage prepaid, to the address set forth below
under such party's signature, or to such changed address as either party may
have given by written notice to the other party.
IN WITNESS WHEREOF, the parties hereto have signed this Agreement
below, this 4th day of December, 1998.
EXECUTIVE SAVVIS COMMUNICATIONS
CORPORATION
/s/ C.A. Heintzelman By /s/ John S. McCarthy
- ------------------------------- ------------------------------
Its Chairman of the Board
Residing at 15105 Sunflower Ct.
Rockville, Md. 20853-1749
12
EXHIBIT 10.7
November 12, 1999
Clyde A. Heintzelman
15105 Sunflower Court
Rockville, MD 20853
Dear Clyde:
This will confirm our agreement regarding the terms and conditions of
your transition from employment by Savvis.
1. You have resigned your position as President and Chief Executive
Officer of Savvis, and terminated your employment by that company,
effective on the date of this letter.
2. You and Savvis, guaranteed by Bridge, will continue to fulfil our
respective obligations under those portions of your employment
agreement with Savvis, dated December 4, 1998, that remain in
effect after termination of your employment, as though you had
been terminated without cause. These include, without limitation,
Savvis' obligation to pay you twelve months of salary continuation
and a pro rata bonus for 1999 in an amount determined by Savvis in
its discretion but in any event not less than 25% of salary, and
your undertakings regarding confidential information and
restrictions on your post-employment activities. In addition,
Savvis will continue your salary through December 3, 2000, the
original expiration date of your employment agreement.
3. You will be elected to the board of directors of Savvis for a
one-year term that will expire in November of 2000. During this
one-year term you will not be separately compensated for board
service. You may be nominated to serve additional terms on that
board at the discretion of the Nominating Committee.
4. So long as you serve on the board of directors of Savvis you will
continue to be eligible to participate in Savvis' benefit plans as
though you remained an employee of the company.
5. You have exchanged the options to purchase Savvis stock granted
prior to Bridge's acquisition of Savvis into options to purchase
stock of Bridge, and have been granted additional options to
purchase stock of Bridge. You have elected to convert all your
Bridge options into options to purchase
<PAGE>
November 9, 1999
Clyde A. Heintzelman
Page 2 of 2
stock of Savvis. All of these options are fully vested and will
remain in effect in accordance with their terms.
6. You have also been granted fully vested options to purchase
100,000 shares of Savvis at $0.50 per share. Shares acquired
through the exercise of these options will be restricted from sale
for twelve months from the date of this letter, provided that you
may transfer such shares to family members, directly or in trust,
subject to acceptance of this restriction by the transferee.
7. You will assist in the transition of leadership of Savvis. You
will also, in your communications with employees, customers and
others, continue to express support for the company and its
business, help to ensure the company's ability to retain its key
employees, and avoid disparaging the company, its prospects or its
new leadership. To the extent requested by Savvis you will advise
the new management team on issues regarding development of the
business.
8. You hereby release Savvis, Bridge and their employees and
directors of all claims arising from your employment, including
claims arising under any applicable federal or state
anti-discrimination statutes. You agree to cooperate with Savvis
and its counsel with regard to any legal matters that relate to
business you conducted on behalf of Savvis.
9. You agree that the terms and conditions of this agreement
constitute Confidential Information under you employment
agreement.
If this letter correctly sets forth our agreement, please countersign and return
the enclosed copy.
Sincerely, Accepted and agreed
/s/: Robert A. McCormick
- -------------------------
Robert A. McCormick /s/: Clyde A. Heintzelman
Chief Executive Officer ---------------------------
Clyde A. Heintzelman
EXHIBIT 10.8
June 14, 1999
By Facsimile (301) 656-2025
Mr. David J. Frear
6805 Meadow Lane
Chevy Chase, MD 20815
Dear David:
I am authorized by Thomas Wendel to confirm an offer of employment as Chief
Financial Officer of SAVVIS Communications Corporation, a wholly owned
subsidiary of Bridge Information Systems, Inc. (Bridge). The terms of this
offer, which are not subject to approval by the Board of Directors of Bridge,
are outlined in the attached Term Sheet dated June 14, 1999. There are three
changes from the previous term sheet identified in bold letters. I believe you
will understand the need for these changes, but please call me if you have any
questions. I will be in my office until 5:00 p.m. CDT. You can reach me after
that time on my cell phone.
Should these terms and conditions be acceptable to you, please sign below and
return.
Sincerely,
/s/Daryl Rhodes
- ---------------
Daryl Rhodes
EVP and Chief Financial Officer
/s/: David J. Frear 15/6/99
- ------------------------------ -------
Accepted: David J. Frear Date
<PAGE>
DAVID J. FREAR
TERM SHEET
JUNE 14, 1999
POSITION Chief Financial Officer
SALARY $250,000 subject to periodic review and
adjustment.
BONUS 50% of salary. May be more or less based on
individual and corporate performance.
BENEFITS Medical, disability, life insurance, 401K and
other benefits in accordance with company policy.
VACATION 4 weeks/year
OPTIONS Options on .5% of the fully diluted shares of
Savvis (post-acquisition of the Bridge network
assets) at an exercise price per share based on a
$40 million equity valuation (subject to
validation of this valuation by the Company's
appraisers and accounting experts). Upon the
closing of an initial public offering of Savvis
additional options representing .25% of the fully
diluted shares of Savvis will be issued with an
exercise price per share equal to the IPO price.
All options will have a 10 year term, will be
incentive stock options to the extent permitted by
law, and the underlying shares will be registered
promptly following any public offering of the
Company's common stock.
VESTING One quarter on the earlier of an initial public
offering or the first anniversary of employment,
and one quarter on each of the second, third, and
fourth anniversaries of employment.
ACCELERATION All unvested options shall vest immediately prior
to the occurrence of a Change in Control. Change
of Control shall include (i) the acquisition by a
person, or persons acting as a group, of 35% or
more of the Company's outstanding voting stock
(EXCLUDING DISTRIBUTIONS OF SAVVIS STOCK TO BRIDGE
SHAREHOLDERS), (ii) the disposal of all or
substantially all of the Company's assets or
business through a sale, lease or otherwise, (iii)
the merger of the Company with or into another
person where the Company is not the surviving
person, (iv) any reverse merger in which the
Company's stockholders prior to the merger do not
own at least 50% of the post merger entity, (v) a
change in the board of directors in any two year
period
<PAGE>
DAVID J. FREAR
TERM SHEET
JUNE 14, 1999
PAGE 2
wherein a majority of the directors have been
elected without the approval of at least 2/3 of
the directors in office at the beginning of such
period, or (vi) a Change in Control of Bridge, in
the event Bridge owns more than 35% of the
Company's outstanding voting stock (EXCLUDING
DISTRIBUTIONS OF BRIDGE SHARES OWNED BY
PARTNERSHIPS CONTROLLED BY WELSH, CARSON, ANDERSON
& STOWE TO THE LIMITED PARTNERS OF SUCH
PARTNERSHIPS).
EXPIRY All vested options shall terminate as follows:
i) at the end of their ten year term
ii) 2 years following termination of employment
due to death or disability
Vesting shall cease as of the date of termination
of employment, except as otherwise provided
herein.
SEVERANCE If at any time the Company shall terminate the
employee's employment, other than for Cause
(felony conviction, moral turpitude), or if the
employee terminates his employment for Good Reason
(substantial reduction in pay or responsibilities,
change in principal location from DC metropolitan
area, failure of Savvis to acquire the Bridge
network assets by 12/31/00), the employee will be
entitled to continuation of salary and all
benefits (including continued vesting of options)
for one year following such termination, and will
be entitled to a pro rata payment of bonus through
the date of termination.
LOCATION Employee's principal office will be located in
Reston, VA.
PUT RIGHT If the Company's common stock is not traded on a
national securities market with a public float of
at least $75 million AND THE COMPANY IS NOT
ACTIVELY IN THE PROCESS OF REGISTERING ITS COMMON
STOCK ON A NATIONAL SECURITIES MARKET WITH A
PUBLIC FLOAT OF AT LEAST $75 MILLION within 2
years ("Publicly Traded") of commencement of
employment, employee will have the right to put
the shares underlying all vested options to the
Company in exchange for a cash payment equal to
the fair market value of such shares less the
exercise price of such shares. Fair market value
will be determined by an internationally
recognized investment bank of a fully distributed
public basis without regard to illiquidity
discounts, minority interest discounts, control
premiums or the existence
<PAGE>
DAVID J. FREAR
TERM SHEET
JUNE 14, 1999
PAGE 3
of control blocks. This right will expire when the
Company's stock is Publicly Traded.
BOARD The Company will use its best efforts to cause
REPRESENTATION employee to be elected to its Board of Directors.
Employee will continue in such position at the
discretion of the Board and the Company's
shareholders.
EXHIBIT 10.9
September 30, 1999
Mr. James Mori
Dear Jim:
This will confirm our agreement to employ you as Chief Operating
Officer of Savvis Communications. You will report directly to me and will be
based in St. Louis. As COO of Savvis, you will have full responsibility for all
sales, marketing, product management and operations. You will assume your
position as soon as possible, and in any event prior to 10/25/99 (the
"Employment Date").
Your compensation will consist of a base salary of $200,000 per annum,
plus a discretionary bonus which will be subjectively determined based on your
performance and that of Savvis, which you can expect will be no less than 50%
and up to 100% of base salary.
In addition to your cash compensation, you will be awarded options to
purchase 225,000 shares of stock in Savvis at a strike price of 50 cents per
share. This option will vest pro rata on each of the first four anniversaries of
the Employment Date.
You will be entitled to benefits commensurate with those available to
Bridge executives of comparable rank (the current package being described in the
benefits summary you have received), except that in the event of your
termination without cause the severance payment will be calculated on the basis
of two months per year of service rather than two weeks per year. Also, in the
event of termination without cause prior to 24 months after the Employment Date
you will receive a severance payment equal to $450,000 and your options will all
vest immediately. In the event of termination without cause 24 months or later
from the Employment Date, if either Savvis is not a public company or Savvis is
a public company and its shares on the date of termination trade at a price less
than $15 per share, you will receive a severance payment equal to $450,000 and
your options will all vest immediately. For this purpose "cause" shall mean
willful misconduct, dereliction of duties, or conviction of a felony or a crime
the nature of which would cause your continued employment to adversely affect
the reputation of Savvis or Bridge.
You may resign your employment with Savvis or Bridge, and be treated as
though you had been terminated without cause, in the event that (1) an entity
other than Bridge becomes the holder of more than 30% of the voting shares of
Savvis; (2) you are instructed to relocate from the St. Louis metropolitan area;
or (3) you are
<PAGE>
September 30, 1999
Mr. James Mori
Page 2 of 2
reassigned to a position entailing materially reduced responsibilities or
opportunities for compensation.
In the event that your current employer asserts a claim that your
employment by Savvis violates the non-compete provision of its agreement with
you, then Bridge will (1) indemnify for you for legal expenses arising from your
defense and (2) in the event that your current employer succeeds in preventing
your employment by Savvis, employ you in an executive position unrelated to
Savvis for 18 months on the same economic terms described above. Such
re-employment by Bridge shall not constitute a termination triggering any right
to severance payments.
If you agree that this letter correctly sets forth our agreement,
please sign and return the enclosed copy of this letter. With the formalities
concluded, I would like to take this opportunity to say again that I am
delighted you will be joining us and look forward to working with you.
Sincerely, Accepted and agreed to
/s/ Robert McCormick
- ----------------------
Robert McCormick By: /s/ James Mori
Executive Vice President --------------
James Mori
EXHIBIT 10.10
MASTER ESTABLISHMENT AND TRANSITION AGREEMENT
BETWEEN
SAVVIS COMMUNICATIONS CORPORATION
AND
BRIDGE INFORMATION SYSTEMS, INC.
________________, 2000
<PAGE>
TABLE OF CONTENTS
ARTICLE I......................................................................1
1.1 "Acquired Network Facilities"...........................................2
1.2 "Adverse Consequences"..................................................2
1.3 "Assumed Liabilities"...................................................2
1.4 "Buyer Subsidiaries"....................................................2
1.5 "Code"..................................................................2
1.6 "Contracts".............................................................2
1.7 "Employee Benefit Plan".................................................2
1.8 "ERISA".................................................................2
1.9 "Impermissible Security Interest".......................................2
1.10 "International Network Assets".........................................3
1.11 "IP Network"...........................................................3
1.12 "knowledge"............................................................3
1.13 "Lien".................................................................3
1.14 "Local Transfer Agreements"............................................3
1.15 "Retained Liabilities".................................................3
1.16 "Seller Subsidiaries"..................................................3
1.17 "US Network Assets"....................................................4
1.18 "WARN Act".............................................................4
1.19 "Terms"................................................................4
ARTICLE II.....................................................................6
2.1 Purchase and Sale of Purchased Assets; Effective Time...................6
2.2 Assumption of Liabilities...............................................6
2.3 Purchase Price..........................................................6
2.4 The Closing.............................................................7
2.5 Deliveries at the Closing...............................................7
2.6 Purchase Price Allocation and Adjustment................................7
ARTICLE III....................................................................8
3.1 Organization of Seller..................................................8
3.2 Authorization of Transaction............................................8
3.3 Noncontravention........................................................8
3.4 Brokers'Fees............................................................9
3.5 Purchased Assets........................................................9
3.6 Contracts..............................................................10
3.7 Employees..............................................................10
3.8 Disclaimer of Other Representations and Warranties.....................10
ARTICLE IV....................................................................10
4.1 Organization of the Buyer..............................................11
4.2 Authorization of Transaction...........................................11
4.3 Noncontravention.......................................................11
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4.4 Brokers'Fees...........................................................11
ARTICLE V.....................................................................11
5.1 Notices and Consents...................................................12
5.2 Call Right.............................................................12
5.3 Exercise of Call Right.................................................12
5.4 Seller's Obligation with Respect to Call Assets........................13
5.5 Buyer's Obligations with Respect to Call Assets........................14
5.6 Termination of Call Right..............................................14
5.7 Employee Services......................................................14
5.8 Offers of Employment...................................................14
5.9 Employee Benefits......................................................15
5.10 Access to Employee Information........................................16
5.11 WARN Act Indemnification..............................................16
5.12 Workers'Compensation Claims...........................................16
5.13 Employee Benefit Plans................................................16
5.14 Further Assurances....................................................16
ARTICLE VI....................................................................17
6.1 Survival of Representations and Warranties.............................17
6.2 Indemnification Provisions for Benefit of the Buyer....................17
6.3 Indemnification Provisions for Benefit of Seller.......................17
6.4 Matters Involving Third Parties........................................18
6.5 Call Right Remedies....................................................18
6.6 Exclusive Remedy.......................................................18
ARTICLE VII...................................................................19
7.1 No Third-party Beneficiaries...........................................19
7.2 Entire Agreement.......................................................19
7.3 Succession and Assignment..............................................19
7.4 Counterparts...........................................................19
7.5 Headings...............................................................19
7.6 Notices................................................................19
7.6 Governing Law..........................................................20
7.7 Arbitration............................................................20
7.8 Amendments and Waivers.................................................21
7.9 Severability...........................................................21
7.10 Expenses..............................................................21
7.11 Construction..........................................................21
7.12 Incorporation of Exhibits and Schedules...............................21
7.13 Bulk Transfer Laws....................................................21
Exhibit A.....................................................................23
Exhibit B.....................................................................24
Exhibit C.....................................................................38
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Exhibit D.....................................................................39
Exhibit E.....................................................................40
Exhibit F.....................................................................43
Exhibit G.....................................................................54
Exhibit H.....................................................................55
Exhibit I.....................................................................65
Exhibit J.....................................................................68
Exhibit K.....................................................................
Schedule 1.3..................................................................81
Schedule 1.10.................................................................82
Schedule 1.11.................................................................83
Schedule 1.12.................................................................84
Schedule 1.16.................................................................85
Schedule 1.17.................................................................
Schedule 2.3..................................................................86
Schedule 3.3..................................................................87
Schedule 3.5(a)...............................................................88
Schedule 3.6..................................................................89
Schedule 3.7..................................................................90
Schedule 5.1..................................................................91
Schedule 5.2(a)...............................................................92
Schedule 5.2(b)...............................................................93
Schedule 5.5..................................................................94
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<PAGE>
MASTER ESTABLISHMENT AND TRANSITION AGREEMENT
This Master Establishment and Transition Agreement
("Agreement"), made this ____ day of __________, 2000, by and between SAVVIS
Communications Corporation, a Delaware corporation ("Buyer"), and Bridge
Information Systems, Inc., a Missouri corporation ("Seller"). Buyer and Seller
are referred to collectively herein as the "parties."
RECITALS
WHEREAS, Seller is engaged in the business of collecting and
distributing various financial, news and other data;
WHEREAS, Buyer is engaged in the business of providing
Internet protocol backbone and other data transport services;
WHEREAS, Seller and its subsidiaries own certain assets
relating to the
provision of Internet protocol backbone and other data transport services, such
assets consisting of (i) all of the equity interest (the "Interest") in Seller's
wholly-owned subsidiary, Global Network Assets, LLC, a Delaware limited
liability company (the "LLC"), and (ii) the International Network Assets
(defined below);
WHEREAS, Seller does not own outright but instead leases a
substantial portion of the US based assets comprising its Internet protocol
backbone ("Leased Assets"); and
WHEREAS, Seller and certain of its subsidiaries desire to
sell, and Buyer and certain of its subsidiaries desire to purchase, (i) the
Interest, and (ii) the International Network Assets (collectively, such acquired
assets are referred to herein as the "Purchased Assets"; provided, however, that
Call Assets first shall be added to the Purchased Assets as they are acquired
under a Local Transfer Agreement).
NOW, THEREFORE, in consideration of the premises and the
mutual promises herein made, and in consideration of the representations,
warranties, and covenants herein contained, the parties agree as follows.
ARTICLE I
DEFINITIONS
Whenever used in this Agreement, the words and phrases listed
below shall have the meanings given below, and all defined terms shall include
the plural as well as the singular. Unless otherwise stated, the words "herein",
"hereunder" and other similar words refer to this Agreement as a whole and not
to a particular Section or other subdivision. The words "included" and
"including" shall not be construed as terms of limitation. The following terms
shall have the meanings set forth below:
<PAGE>
1.1 "Acquired Network Facilities" means the US Network Assets,
the International Network Assets, but the Call Assets are included only to the
extent acquired by Buyer and Buyer's subsidiaries pursuant to this Agreement and
the Local Transfer Agreements.
1.2 "Adverse Consequences" means all actions, suits,
proceedings, hearings, investigations, charges, complaints, claims, demands,
injunctions, judgments, orders, decrees, rulings, damages, dues, penalties,
fines, costs, reasonable amounts paid in settlement, liabilities, obligations,
taxes, liens, losses, expenses, and fees, including court costs and reasonable
attorneys' fees and expenses.
1.3 "Assumed Liabilities" means all liabilities and
obligations of Seller and the Seller Subsidiaries (whether known or unknown,
whether asserted or unasserted, whether absolute or contingent, whether accrued
or unaccrued, whether liquidated or unliquidated, and whether due or to become
due) fulfilling both of the following requirements:
(a) which are directly associated with (i) the Purchased
Assets, (ii) the use of the IP Network, (iii) the Contracts, or (iv) those
matters set forth on Schedule 1.3 attached hereto; and
(b) which are not Retained Liabilities.
1.4 "Buyer Subsidiaries" means the direct and indirect
subsidiaries of the Buyer which will be involved in the operation or ownership
of the Acquired Network Facilities, including those subsidiaries purchasing
certain of the International Network Assets pursuant to the Local Transfer
Agreements.
1.5 "Code" means the Internal Revenue Code of 1986, as
amended.
1.6 "Contracts" means any and all contracts, agreements,
arrangements, leases understandings, purchase orders, and offers, written or
oral, of the Seller and the Seller Subsidiaries relating to the provision of the
IP Network and related data transport services, including without limitation the
agreements set forth on Schedule 3.6 attached hereto; provided, however, such
obligations and other agreements concerning Call Jurisdictions or with respect
to the Satellite Rights shall first become "Contracts" upon exercise of the
respective Call Right.
1.7 "Employee Benefit Plan" means all "employee benefit plans"
as such term is defined in Section 3(3) of ERISA and all stock option,
restricted stock, stock appreciation or other equity plans and all bonus,
severance, change in control, retention, deferred compensation or other
compensatory plans maintained or contributed to by the Seller in which any
Employee participates, in addition to all documents describing Seller's
employment policies and procedures.
1.8 "ERISA" means the Employee Retirement Income Security Act
of 1974, as amended.
1.9 "Impermissible Security Interest" means any Lien, other
than (a)
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mechanic's, materialmen's, and similar liens, (b) liens for taxes not yet due
and payable or for taxes that the taxpayer is contesting in good faith through
appropriate proceedings, (c) purchase money liens and liens securing rental
payments under capital lease arrangements, and (d) other liens arising in the
ordinary course of business and not incurred in connection with the borrowing of
money.
1.10 "International Network Assets" means the IP Network
assets located outside the United States as set forth on Schedule 1.10 attached
hereto and all rights of the Seller and the Seller Subsidiaries under Contracts
relating thereto.
1.11 "IP Network" means, except as set forth on Schedule 1.11,
those assets that are used by Seller and its subsidiaries solely in providing
telecommunications utilizing the Internet protocol between Seller and its
subsidiaries, and their suppliers and customers, and shall include, as well, all
the contractual rights relating solely thereto.
1.12 "Knowledge" means actual knowledge (i.e., the conscious
awareness of facts or other information), or belief, without undertaking any
investigation, and not constructive knowledge. The words "know", "knowing" and
"known" shall be construed accordingly. In the case of the Seller, knowledge
means the knowledge of the persons listed on Schedule 1.12 attached hereto.
1.13 "Lien" means any lien, security interest, mortgage,
option, lease, tenancy, occupancy, covenant, condition, easement, agreement,
pledge, hypothecation, charge, claim, restriction, or other encumbrance of every
kind and nature.
1.14 "Local Transfer Agreements" means the various transfer
agreements, including local asset transfer agreements ("Local Asset Transfer
Agreements") and local contracts of assignment and assumption ("Local Contracts
of Assignment") executed by the direct and indirect subsidiaries of the Seller
and of the Buyer involved in this transaction to effectuate the transfer of the
International Network Assets. Each such agreement shall be substantially in the
form of Exhibit E or Exhibit F, attached hereto and incorporated herein by
reference.
1.15 "Retained Liabilities" means liabilities which result
from or arise out of the ownership or operation of the IP Network prior to the
Effective Time, including liabilities which exist with respect to (i)
obligations under the Contracts, other than an obligation to make payment, which
are required to be fulfilled by Seller wholly prior to Closing, or (ii)
obligations to make payment, to the extent such payment is for services rendered
under the Contracts prior to Closing. Provided, further, that the liabilities
resulting from or arising out of the ownership or operation of the IP Network in
the Call Jurisdictions shall be included in the definition of the Retained
Liabilities until the Call Right is exercised, and such liabilities shall remain
the responsibility of the Seller and/or the appropriate Seller Subsidiaries to
the extent they result from or arise out of the ownership or operation of the IP
Network in such countries prior to the effective date under each respective Call
Asset Transfer Agreement.
1.16 "Seller Subsidiaries" means the LLC and the direct and
indirect subsidiaries of the Seller involved in the operation or ownership of
the IP Network, including
3
<PAGE>
those subsidiaries selling certain of the International Network Assets pursuant
to (i) the Local Transfer Agreements, and (ii) at the time of any subsequent
Call Right exercise and related transfers, the "Call Asset Transfer Agreements"
in the form attached as Exhibit J.
1.17 "US Network Assets" means the assets owned by the LLC as
set forth on Schedule 1.17 attached hereto and all rights of the Seller and the
Seller Subsidiaries under Contracts relating thereto.
1.18 "WARN Act" means the Workers Adjustment and Retraining
Notification Act of 1988, as amended.
1.19 "Terms". The following terms shall have the meanings set
forth in the below referenced sections of this Agreement:
"Arbitration Costs" Section 7.7(g)
"Arbitration Demand" Section 7.7(b)
"Arbitrators" Section 7.7(c)
"Bridge Plan" Section 5.9(a)
"Buyer" Preface
"Call Asset Transfer Agreements" Section 1.15
"Call Assets" Section 5.2
"Call Jurisdictions" Section 5.2(a)
"Call Right" Section 5.2
"Closing" Section 2.4
"Dispute Notice" Section 7.7(b)
"Employees" Section 3.7
"Employment Date" Section 5.8(a)
"Expiration Date" Section 5.2
"Effective Time" Section 2.1
"Global Operative Agreements" Section 2.5(a)
4
<PAGE>
"Indemnified Party" Section 6.4
"Indemnifying Party" Section 6.4
"Interest" Recitals
"Leased Assets" Recitals
"LLC" Recitals
"Local Asset Transfer Agreements" Section 1.13
"Local Contracts of Assignment" Section 1.13
"Local Operative Agreements" Section 2.5(b)
"Note" Section 2.3
"Original Asset Value" Section 2.6(a)
"Public Offering Proceeds" Section 2.3
"Purchase Price" Section 2.3
"Purchased Assets" Recitals
"Revised Asset Value" Section 2.6(b)
"Rules" Section 7.7(a)
"Satellite Rights" Section 5.2(b)
"Savvis Plan" Section 5.9(a)
"Seller" Preface
"Short-Term Call Assets" Section 5.5
"Third Party Claim" Section 6.4
5
<PAGE>
ARTICLE II
PURCHASE & SALE
2.1 Purchase and Sale of Purchased Assets; Effective Time. On
and subject to the terms and conditions of this Agreement, the Buyer hereby
purchases from Seller (or shall cause the Buyer Subsidiaries to purchase from
the appropriate Seller Subsidiaries), and Seller hereby sells, transfers,
conveys, and delivers to the Buyer (or shall cause the Seller Subsidiaries to
sell, transfer, convey and deliver to the appropriate Buyer Subsidiaries), all
of the Purchased Assets at the Closing for the consideration specified in
Section 2.3 hereof. The Closing shall be effective as of
_____________________________, 2000 ("Effective Time"). The closing under any
transfer of Call Assets shall be effective as provided in the respective Local
Asset Transfer Agreement.
2.2 Assumption of Liabilities.
(a) On and subject to the terms and conditions of this
Agreement, the Buyer hereby assumes and becomes responsible for (or shall cause
the Buyer Subsidiaries to assume and become responsible for) all of the Assumed
Liabilities.
(b) To the extent that Seller or any of the Seller
Subsidiaries makes payment on any Assumed Liabilities which are comprised of
undisputed liabilities for payment of services received under the Contracts,
then Buyer or a Buyer Subsidiary shall reimburse Seller for such payment
promptly upon receipt of an appropriate invoice from Seller. Likewise, to the
extent that Buyer or any of the Buyer Subsidiaries makes payment on any Retained
Liabilities which are comprised of undisputed liabilities under the Contracts
for payment of services received under the Contracts, then Seller or a Seller
Subsidiary shall reimburse Buyer for such payment promptly upon receipt of an
appropriate invoice from Buyer.
2.3 Purchase Price. The Buyer agrees to pay to the Seller $
________, which shall be an amount equal to $150,000,000 less the book value of
all the Call Assets and less the net present value of the sublease payments to
be made by Buyer related to the Leased Assets, both of which amounts will be
determined by the parties at Closing (the "Purchase Price"). The Purchase Price
allocable to the Interest shall be paid partially with cash and partially with a
promissory note (the "Note") substantially in the form attached hereto as
Exhibit I. The cash portion of the Purchase Price is intended to be paid from
the net proceeds of the initial public offering by Buyer of its shares, after
payment of all costs and expenses of such offering including fees and expenses
of legal counsel, investment bankers, accountants and other professionals
directly engaged in connection with such public offering, which public offering
is being made simultaneously with the Closing ("Public Offering Proceeds"). The
cash portion of the Purchase Price shall be equal to an amount determined
according to the following formula: One Hundred Million Dollars ($100,000,000)
of the first Three Hundred Million Dollars ($300,000,000) of Public Offering
Proceeds and 50% of the remaining Public Offering Proceeds in excess of Three
Hundred Million ($300,000,000), up to the full payment of the Purchase Price in
cash. The principal amount of the Note shall be the Purchase Price less this
cash payment. The Purchase Price allocable to the International Network Assets
shall be allocated
6
<PAGE>
first from this cash amount. The cash portion of the Purchase Price shall be
paid by the legal entities set forth on Schedule 2.3, or as otherwise agreed by
the parties.
2.4 The Closing. The consummation of the transactions
contemplated by this Agreement (the "Closing") shall take place at the offices
of Bryan Cave LLP, 211 N. Broadway, St. Louis, Missouri, commencing at 10:00
a.m. local time on the date hereof.
2.5 Deliveries at the Closing. The Parties shall make the
following deliveries at Closing:
(a) The Seller shall execute and deliver to Buyer and the
Buyer shall cause Savvis Communications Corporation, a Missouri corporation and
Buyer's wholly-owned subsidiary, to execute and deliver to Seller each of the
following agreements: (i) the Network Services Agreement substantially in the
form of Exhibit A attached hereto, (ii) the Administrative Services Agreement
substantially in the form of Exhibit B attached hereto, (iii) the Technical
Services Agreement substantially in the form of Exhibit C attached hereto, and
(iv) the Bill of Sale substantially in the form of Exhibit D attached hereto
(collectively, the agreements listed in (a)(i) through (a)(iv) are sometimes
referred to herein as the "Global Operative Agreements").
(b) The Seller shall cause the appropriate Seller Subsidiaries
to execute and deliver, and Buyer shall cause the appropriate Buyer Subsidiaries
to execute and deliver each of the following agreements: (i) the Local Contracts
of Assignment substantially in the form of Exhibit E attached hereto, (ii) the
Local Asset Transfer Agreements substantially in the form of Exhibit F attached
hereto, (iii) the Local Network Services Agreements substantially in the form of
Exhibit G attached hereto, (iv) the Equipment Collocation Permits substantially
in the form of Exhibit H attached hereto, and (v) the Local Administrative
Services Agreements described in the Administrative Services Agreement
(collectively, the agreements listed in (b)(i) through (b)(v) are sometimes
referred to herein as the "Local Operative Agreements").
(c) Seller and the Seller Subsidiaries shall have delivered to
the Buyer satisfactory evidence of such consents to assignment of the Contracts
(as defined in Section 5.1 hereof) and attainment of governmental approvals as
Seller and the Seller Subsidiaries shall have received as of the date hereof. To
the extent Seller and the Seller Subsidiaries shall not have received such
consents or governmental approvals, the rights and obligations of the parties
with respect thereto shall be governed by Section 5.1 hereof.
(d) The Buyer will deliver to the Seller, or Buyer will cause
the Buyer Subsidiaries to deliver to the Seller Subsidiaries, the Purchase Price
as specified in Section 2.3 above.
2.6 Purchase Price Allocation and Adjustment.
(a) Subject to adjustment as provided in Section 2.6(b), the
Purchase Price shall be allocated among the Purchased Assets as follows: The
Purchase Price allocable to the International Network Assets shall be equal to
the sum of the agreed upon value of such assets,
7
<PAGE>
as set forth on Schedule 1.10 ("Original Asset Value"). The Purchase Price
allocable to the Interest shall be equal to the difference between the Purchase
Price and the Original Value. The Parties believe that the allocations in this
Section 2.6(a) reflect that most of the fair value of the Purchased Assets is
contained in the assets of the LLC because of the positive cash flows generated
by the US Network Assets.
(b) Within fifteen days after the Closing, Seller shall update
Schedule 1.10 and Schedule 1.17 attached hereto to include all US Network Assets
and all International Network Assets owned by Seller and the Seller Subsidiaries
as of the close of business on December 31, 1999. If the sum of the agreed upon
value of the International Network Assets shown on such revised Schedule 1.10
(the "Revised Asset Value") exceeds the Original Asset Value, then the amount of
the Purchase Price allocable to the International Network Assets pursuant to
Section 2.6(a) above shall be increased, dollar for dollar, by such excess and
the amount of the Purchase Price allocable to the Interest shall be decreased by
such excess. Likewise, if the Revised Asset Value is less than the Original
Asset Value, then the amount of the Purchase Price allocable to the
International Network Assets pursuant to Section 2.6(a) above shall be
decreased, dollar for dollar, by such amount and the amount of the Purchase
Price allocable to the Interest shall be increased by such amount. In either
event, Seller shall redistribute the cash portion of the Purchase Price paid by
the Buyer hereunder such that the Seller Subsidiaries are compensated for the
sale of International Network Assets entirely in cash. In the event sufficient
cash is not available in the Purchase Price for this purpose, then the deficit
shall be funded by means of an early prepayment under the Note.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to the Buyer that the
statements contained in this Article III are correct and complete as of the date
of this Agreement.
3.1 Organization of Seller. Seller is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
Missouri. Each of the Seller Subsidiaries is an entity duly organized, validly
existing and in good standing under the laws of the jurisdiction in which such
entity was organized.
3.2 Authorization of Transaction. Seller has full corporate
power and authority to execute and deliver this Agreement and the Global
Operative Agreements and to perform its obligations hereunder and thereunder.
Each of this Agreement and the Global Operative Agreements constitutes the valid
and legally binding obligation of the Seller, enforceable in accordance with its
terms and conditions. Each of the Seller Subsidiaries has full corporate power
and authority to execute and deliver the respective Local Operative Agreements
and to perform its obligations thereunder. The respective Local Operative
Agreements constitute the valid and legally binding obligation of each of the
Seller Subsidiaries, enforceable in accordance with their terms and conditions.
3.3 Noncontravention. Except as set forth on Schedule 3.3, and
except as would not result in the imposition of any Impermissible Security
Interest upon any of the
8
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Purchased Assets or US Network Assets, and except where the violation, conflict,
breach, default, acceleration, termination, modification, cancellation, failure
to give notice, or Impermissible Security Interest would not materially impair
the value or use of the International Network Assets or the US Network Assets or
have a material adverse effect on the ability of the parties to consummate the
transactions contemplated by this Agreement or the Global Operative Agreements,
or the ability of the parties' affiliates to consummate the transactions
contemplated by the Local Operative Agreements to the extent these are executed
and delivered at Closing, neither the execution and the delivery of this
Agreement and the consummation of the transactions contemplated hereby by the
Seller, nor the execution and delivery of the Global and Local Operative
Agreements and the consummation of the transactions contemplated thereby by the
Seller and by each of the Seller Subsidiaries will:
(a) violate any constitution, statute, regulation, rule,
injunction, judgment, order, decree, ruling, charge, or other restriction of any
government, governmental agency, or court to which the Seller or the Seller
Subsidiaries, as the case may be, is subject or any provision of the charter or
bylaws of the Seller or the Seller Subsidiaries, as the case may be,
(b) conflict with, result in a breach of, constitute a default
under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice under any
agreement, contract, lease, license, instrument, or other arrangement to which
the Seller or the Seller Subsidiaries, as the case may be, is a party or by
which they are bound or to which any of the Purchased Assets or US Network
Assets are subject; or
(c) to the knowledge of Seller, require Seller to give any
notice to, make any filing with, or obtain any authorization, consent, or
approval of any third party, government or governmental agency.
3.4 Brokers' Fees. Seller has no liability or obligation to
pay any fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement for which the Buyer could become
liable or obligated.
3.5 Purchased Assets.
(a) Except as set forth on Schedule 3.5(a), the International
Network Assets and the US Network Assets constitute all of the material assets
of the Seller and the Seller Subsidiaries used in the IP Network.
(b) Each of the Seller and the Seller Subsidiaries has good
title to, or a valid leasehold interest in, the Purchased Assets and the US
Network Assets, free and clear of all Impermissible Security Interests, and
there exists no restriction on the transfer of such property, other than
Impermissible Security Interests or restrictions which would not, in the
aggregate, have a material adverse affect on the ability of the parties to
consummate the transactions contemplated by this Agreement, the Global Operative
Agreements or the Local Operative Agreements or on the value or use of the
International Network Assets or the US Network Assets.
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(c) Other than (i) the Assumed Liabilities incurred by Seller
and Seller Subsidiaries in the ordinary course of business after November 15,
1999, (ii) the Contracts, and (iii) the Assumed Liabilities listed on Schedule
1.3, there are no Assumed Liabilities which are material to the business
comprised of the Acquired Network Facilities, taken as a whole.
3.6 Contracts. Each of the Contracts material to the operation
and use of the IP Network, taken as a whole, is set forth on Schedule 3.6 and is
a valid and binding obligation of the parties thereto, enforceable in accordance
with their terms and is in full force and effect. No party to any such contract
is in material breach or violation thereof or default thereunder. Except for
matters which would not, in the aggregate, have a material adverse effect on the
Purchased Assets or US Network Assets, taken as a whole, no event has occurred
which, through the passage of time or the giving of notice, or both, would
constitute, and neither the execution of this Agreement nor the consummation of
the transactions contemplated hereby do or will constitute or result in, a
breach or violation of or default under any contract, or would cause the
acceleration of any obligation of any party thereto or the creation of any
Impermissible Security Interest upon any Purchased Assets or US Network Assets.
3.7 Employees. Schedule 3.7 sets forth the names and current
compensation of all employees of the Seller who will be transferred to the Buyer
on or before thirty (30) days following the Closing (the "Employees").
3.8 Disclaimer of Other Representations and Warranties EXCEPT
AS EXPRESSLY SET FORTH IN THIS ARTICLE III, NEITHER THE SELLER NOR ANY OF THE
SELLER SUBSIDIARIES MAKES ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AT
LAW OR IN EQUITY, IN RESPECT OF ANY OF ITS ASSETS (INCLUDING, WITHOUT
LIMITATION, THE PURCHASED ASSETS), LIABILITIES OR OPERATIONS, INCLUDING, WITHOUT
LIMITATION, WITH RESPECT TO MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR
PURPOSE, AND ANY SUCH OTHER REPRESENTATIONS OR WARRANTIES ARE HEREBY EXPRESSLY
DISCLAIMED. BUYER HEREBY ACKNOWLEDGES AND AGREES THAT, EXCEPT TO THE EXTENT
SPECIFICALLY SET FORTH IN THIS ARTICLE III, THE BUYER AND EACH BUYER SUBSIDIARY
IS PURCHASING THE PURCHASED ASSETS ON AN "AS-IS, WHERE-IS" BASIS. WITHOUT
LIMITING THE GENERALITY OF THE FOREGOING, NEITHER THE SELLER NOR THE SELLER
SUBSIDIARIES MAKES ANY REPRESENTATION OR WARRANTY REGARDING ANY ASSETS OTHER
THAN THE ACQUIRED NETWORK FACILITIES AND THE INTEREST AND SELLER AND SELLER
SUBSIDIARIES EXPRESSLY HEREBY DISCLAIM ANY REPRESENTATIONS OR WARRANTIES
REGARDING THE CALL ASSETS PRIOR TO SUCH ASSETS BEING ACQUIRED BY BUYER OR BUYER
SUBSIDIARIES HEREUNDER OR REGARDING ANY LIABILITIES OTHER THAN THE ASSUMED
LIABILITIES, AND NONE SHALL BE IMPLIED AT LAW OR IN EQUITY.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE BUYER
The Buyer represents and warrants to the Seller that the
statements contained in this Article IV are correct and complete as of the date
of this Agreement.
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4.1 Organization of the Buyer. The Buyer is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
Missouri. Each of the Buyer Subsidiaries is an entity duly organized, validly
existing and in good standing under the laws of the jurisdiction in which such
entity was organized.
4.2 Authorization of Transaction. The Buyer has full corporate
power and authority to execute and deliver this Agreement and the Global
Operative Agreements and to perform its obligations hereunder and thereunder.
Each of this Agreement and the Global Operative Agreements constitutes the valid
and legally binding obligation of the Buyer, enforceable in accordance with its
terms and conditions. Each of the Buyer Subsidiaries has full corporate power
and authority to execute and deliver the respective Local Operative Agreements
and to perform its obligations thereunder. The respective Local Operative
Agreements constitute the valid and legally binding obligation of each of the
Buyer Subsidiaries, enforceable in accordance with their terms and conditions.
4.3 Noncontravention. Except as would not have a material
adverse effect on ability of the parties to consummate the transactions
contemplated by this Agreement or the Global Operative Agreements or the ability
of the parties' affiliates to consummate the transactions contemplated by the
Local Operative Agreements, neither the execution and the delivery of this
Agreement and the consummation of the transactions contemplated hereby by the
Buyer, nor the execution and delivery of the Global and Local Operative
Agreements and the consummation of the transactions contemplated thereby by the
Buyer and by each of the Buyer Subsidiaries will:
(a) violate any constitution, statute, regulation, rule,
injunction, judgment, order, decree, ruling, charge, or other restriction of any
government, governmental agency, or court to which the Buyer or the Buyer
Subsidiaries, as the case may be, is subject or any provision of the charter or
bylaws of the Buyer of the Buyer Subsidiaries, as the case may be;
(b) conflict with, result in a breach of, constitute a default
under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice under any
agreement, contract, lease, license, instrument, or other arrangement to which
the Buyer or the Buyer Subsidiaries, as the case may be, is a party or by which
they are bound; or
(c) require Buyer to give any notice to, make any filing with,
or obtain any authorization, consent, or approval of any government or
governmental agency.
4.4 Brokers' Fees. The Buyer has no liability or obligation to
pay any fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement for which the Seller could become
liable or obligated.
ARTICLE V
ADDITIONAL AGREEMENTS AND COVENANTS OF THE PARTIES
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5.1 Notices and Consents. Except as set forth on Schedule 5.1
attached hereto, the Seller has given and obtained (or caused the Seller
Subsidiaries to give or obtain) all third-party notices and consents and
governmental approvals necessary to effect the purchase of the Purchased Assets
and the assignment of the Contracts and the assumption of the Assumed
Liabilities hereunder. With respect to any third party notices or consents or
governmental approvals that have not been given or obtained as of the date
hereof, Seller covenants and agrees to use its reasonable best efforts to give
or obtain (or cause the Seller Subsidiaries to give or obtain) the same. The
Buyer agrees to fully cooperate with (and cause the Buyer Subsidiaries to fully
cooperate with) the Seller and the Seller Subsidiaries in such efforts. Until
such time as Seller or the Seller Subsidiaries shall have obtained all necessary
third party consents to assignment by Buyer or the Buyer Subsidiaries of the
Contracts and the assumption by the Buyer or the Buyer Subsidiaries of the
Assumed Liabilities, Seller shall continue (or shall cause the Seller
Subsidiaries to continue) to discharge and perform when due all obligations
associated therewith, and Buyer shall reimburse Seller for any expenses directly
attributable thereto.
5.2 Call Right. Seller, for itself and the Seller
Subsidiaries, hereby grants to Buyer and the Buyer Subsidiaries the right to
purchase (the "Call Right") the following assets ("Call Assets"):
(a) in each of the jurisdictions set forth on Schedule 5.2(a)
hereof and such other jurisdictions as Buyer and Seller may, from time to time,
mutually agree (the "Call Jurisdictions"), all of the IP Network assets owned by
the Seller and/or the Seller Subsidiaries in each Call Jurisdiction, including
all contract rights associated therewith; and
(b) all the rights and obligations with respect to the
satellite communications agreements and all rights and obligations in specific
countries with respect thereto, as described in Schedule 5.2(b) (the "Satellite
Rights").
Unless earlier terminated pursuant to Section 5.6 hereunder, the Call Right
granted hereunder shall expire on the tenth anniversary of the date hereof
("Expiration Date"); provided, however, that if the term of the Network Services
Agreement is extended beyond the Expiration Date, then the Expiration Date shall
be the date upon which the Network Services Agreement, attached as Exhibit A
hereto, is terminated. Upon the exercise of the Call Right in any Call
Jurisdiction or with respect to the Satellite Rights, Buyer shall assume all
liabilities and obligations of the Seller and/or the Seller Subsidiaries related
to the respective Call Assets to the extent that such liabilities arise on or
after the date of exercise.
5.3 Exercise of Call Right. Buyer shall use its reasonable
best efforts, from and after the Closing, to secure the consents, licenses, and
other authorizations, whether from governments or private parties, and to
establish such foreign legal presence and to fulfill such other conditions, as
are necessary in order to permit Buyer to acquire the Call Assets; provided,
however, that this obligation shall not require that Buyer permit third parties
to own a portion of any subsidiaries of Buyer unless Buyer otherwise agrees to
such ownership. Prior to the receipt of all such material consents, licenses,
and authorizations and the establishment of any necessary foreign presence,
Buyer shall not be obligated to exercise the Call Right with respect to any or
all of the Call Jurisdictions or with respect to the Satellite Rights, nor shall
Buyer be obligated to
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exercise all the Call Rights at one time; rather, Buyer may exercise the Call
Right in each Call Jurisdiction and with respect to the Satellite Rights
separately, from time to time, and at any time prior to the Expiration Date
subject to the immediately following provision. Upon the receipt of all material
consents, licenses and authorizations and the establishment of any necessary
foreign presence in any Call Jurisdiction or with respect to all the Satellite
Rights connected with a particular third-party satellite contract, Buyer shall
be obligated to proceed expeditiously with the exercise of the Call Right with
respect to such Call Jurisdiction or Satellite Rights. The exercise price of the
Call Right, other than with respect to Satellite Rights, in each Call
Jurisdiction shall be $1.00 plus the net book value of the Call Assets in the
applicable Call Jurisdiction(s) on the date of exercise of the Call Right for
such Call Jurisdiction. The exercise of the Call Right with respect to the
Satellite Rights shall only be permitted if made with respect to all Satellite
Rights under a particular global satellite contract as set forth on Schedule
5.2(b), and the exercise price shall be $1 plus the assumption of all
obligations of Seller with respect to such contract. The Call Assets shall be
transferred via a Call Asset Transfer Agreement in substantially the form
attached as Exhibit J hereto.
5.4 Seller's Obligation with Respect to Call Assets. Until the
earliest of (a) the Expiration Date, (b) the date upon which no Call Assets
remain subject to the Call Right, or (c) the Call Right is terminated pursuant
to Section 5.6, and subject at all times to the rights and obligations set forth
in the Network Services Agreement executed between the parties as of the same
date as the date of this Agreement:
(a) Seller shall maintain and operate (or cause the Seller
Subsidiaries to maintain and operate) the Call Assets in the same manner and to
the same extent as Seller and the Seller Subsidiaries, as the case may be, have
maintained such assets to date. Seller shall take (and shall cause the Seller
Subsidiaries to take) any and all actions reasonably necessary to fulfill its
obligations hereunder;
(b) Seller shall not (nor shall it permit the Seller
Subsidiaries to) dispose of, encumber or otherwise transfer any interest in, or
amend, waive or modify any provision of or terminate any Contract relating to,
the Call Assets without the prior written consent of Buyer which consent shall
not be unreasonably withheld;
(c) Seller shall provide (and shall cause the Seller
Subsidiaries to provide) Buyer with notice of any events that have, or may have,
a material adverse effect on the Call Assets or on Buyer's right or ability to
exercise the Call Right with respect to any of the Call Assets;
(d) If Buyer chooses to exercise any Call Right prior to the
receipt of all consents, licenses and other authorizations or establishment of
the appropriate foreign legal presence, it does so with the assumption of all
risk or other liability arising from such absence of necessary consents, license
or other authorizations or legal presence. Upon exercise of any Call Right,
Seller shall use its reasonable best efforts to obtain any required consent of
any other contracting parties to the assignment or novation of any agreement
pertaining to the applicable Call Assets, and Buyer shall use its reasonable
best efforts to assist Seller in all such endeavors. Unless and until such
consent shall be forthcoming and any relevant agreements shall have been
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assigned or novated, Buyer shall at its own cost and expense assume Seller's
obligations under such agreements and Seller shall account to Buyer for all sums
received therefrom. Seller will at Buyer's request and expense give to Buyer all
assistance in the power of Seller to enable Buyer to enforce any of the
agreements so assigned against the other contracting party or parties and,
without prejudice to the generality of the foregoing, will provide all such
relevant books, documents and other information as Buyer may require in relation
thereto; and
(e) Buyer shall have no rights to use the Call Assets prior to
exercise of the Call Rights, except as otherwise consented to by Seller, such
consent not to be unreasonably withheld.
5.5 Buyer's Obligations with Respect to Call Assets. With
respect to those Call Jurisdictions set forth on Schedule 5.5 ("Short-Term Call
Assets"), Buyer and Seller expect the exercise of the Call Right to occur within
the calendar year 2000. Regardless if such exercise actually occurs in 2000,
with respect to the Short-Term Call Assets, Buyer or the Buyer Subsidiaries
shall reimburse the Seller or the Seller Subsidiaries for all incremental costs
directly associated with the use, maintenance and operation of the Short-Term
Call Assets, including, but not limited to, maintenance of leased lines. Seller
shall invoice Buyer monthly for such costs. Likewise, Seller shall compensate
Buyer for the use of the Short-Term Call Assets pursuant to such Network
Services Agreement executed between the parties as of the same date as the date
of this Agreement. Such obligations of Buyer and Seller shall run concurrently
and shall continue until the Expiration Date, unless earlier terminated by
mutual agreement of Buyer and Seller. No similar obligations will exist for
Buyer or Seller with respect to the remaining Call Assets prior to the exercise
of the Call Rights with respect thereto.
5.6 Termination of Call Right. The Call Right shall terminate
automatically on the earlier of the Expiration Date or the date upon which Buyer
has exercised the Call Right in each of the Call Jurisdictions. Prior to the
Expiration Date, at any time and from time to time, the Call Right may be
terminated with respect to any or all of the Call Jurisdictions upon the mutual
agreement of the parties.
5.7 Employee Services. From and after the Closing until such
time as the Employees are transferred to the Buyer pursuant to Section 5.8,
Seller shall make all of the Employees available to Buyer on a full-time basis.
Buyer shall reimburse Seller, on a monthly basis, for all payroll costs directly
associated with such Employees.
5.8 Offers of Employment.
(a) Buyer shall, on or before January 1, 2000, offer
employment with the Buyer to the Employees. The Seller agrees to release from
their employment, on or before January 1, 2000, those Employees who are offered
and accept employment with the Buyer to enable them to commence their employment
with the Buyer. The date upon which such Employees commence employment with the
Buyer shall be referred to herein as the "Employment Date."
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(b) Seller shall furnish Buyer with all employee data files
related to the Employees. The Seller makes no representations or warranties
concerning such files, or the contents or sufficiency thereof.
5.9 Employee Benefits.
(a) Employees shall continue to participate in each Employee
Benefit Plan maintained by Seller until such time as Buyer establishes and
maintains a substantially similar Employee Benefit Plan; provided that, as of
the Employment Date, an Employee shall cease to be eligible to participate in
the Bridge Information Systems, Inc. 401(k) Salary Savings Plan ("Bridge Plan")
and shall be eligible to participate in the Savvis Communications Co. 401(k)
Plan ("Savvis Plan"), in accordance with the terms of Section 5.9(b) and subject
to the terms of the Savvis Plan. During the period in which Employees are
participating in Seller's Employee Benefit Plans, Buyer shall reimburse Seller
for any employer-paid amounts under such Employee Benefit Plans.
(b) As soon as practicable after the Employment Date, Seller
shall cause to be transferred from the Bridge Plan to the Savvis Plan all Bridge
Plan assets representing account balances of Employees under the Bridge Plan.
Buyer and Seller shall take all such actions as are necessary to ensure that
such transfer complies with all relevant provisions of Section 411(d)(6) of the
Code and the regulations thereunder. Buyer shall amend the Savvis Plan, to the
extent necessary, to provide that each Employee is credited, for all purposes
under the Savvis Plan and subject to the other provisions of such plan, with all
service completed prior to the Employment Date with Seller.
(c) Buyer shall assume the obligations in connection with
accrued but unused vacation and shall be responsible for vacation pay at and
after the Employment Date with respect to service (whether prior to or after the
Employment Date) of all Employees. Buyer shall afford Employees credit for their
period of employment with Seller for purposes of determining the amount of
vacation to which the Employees are entitled each year and for purposes of
determining all other seniority based benefits.
(d) Buyer and Seller acknowledge and agree that the
transactions contemplated by this Agreement shall not constitute a termination
of employment of any Employee.
(e) No provision of this Agreement, including without
limitation this Section 5.9, shall create any third-party beneficiary rights in
any person or organization, including without limitation employees or former
employees (including any beneficiary or dependent thereof) of Seller, unions or
other representatives of such employees or former employees, or trustees,
administrators, participants, or beneficiaries of any Employee Benefit Plan, and
no provision of this Agreement, including this Section 5.9, shall create such
third-party beneficiary rights in any such person or organization in respect of
any benefits that may be provided, directly or indirectly, under any Employee
Benefit Plan.
(f) Seller and Buyer shall cooperate as may reasonably be
required with respect to each of the filings, calculations, and other actions
necessary to effect the transactions
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contemplated by this Section 5.9 and in obtaining any government approvals as
may be required hereunder.
5.10 Access to Employee Information. From and after the
Closing, the parties hereto will cooperate with each other in the administration
of any applicable Employee Benefit Plans and programs. To the extent permitted
by law, at the Employment Date or within a reasonable time thereafter, the
Seller will provide the Buyer the necessary employee data or copies thereof,
including personnel and benefit information, maintained with respect to the
Employees by the Seller or by its independent contractors, such as insurance
companies and actuaries.
5.11 WARN Act Indemnification. The Buyer agrees to indemnify
the Seller and its directors, officers, employees, consultants and agents for,
and to hold the Seller and its directors, officers, employees, consultants and
agents harmless from and against, any and all losses arising or resulting, or
alleged to arise or result from the notification or other requirements of the
WARN Act.
5.12 Workers' Compensation Claims. The Seller will be
responsible for any workers' compensation claims by any Employee for injuries
incurred prior to such Employee's Employment Date. The Buyer will be responsible
for any workers' compensation claims for injuries incurred by any Employee on or
after such Employee's Employment Date.
5.13 Employee Benefit Plans. Except as expressly provided in
this Article V, the Buyer will not adopt, assume or otherwise become responsible
for, either primarily or as a successor employer, any assets or liabilities of
any Employee Benefit Plans, arrangements, commitments or policies currently
provided by the Seller or by any member of its controlled group of corporations.
In addition, the Buyer will not assume Seller's obligations under Code Section
4980B and ERISA Section 606 relating to individuals who are neither Employees
nor dependents of Employees. Buyer shall be responsible for satisfying
obligations under ERISA Section 606 and Code Section 4980 to provide
continuation coverage to or with respect to any Employees with respect to any
"qualifying event" which occurs on or following the Employment Date.
5.14 Further Assurances. From and after Closing, the parties
shall do such acts and execute such documents and instruments as may be
reasonably required to make effective the transactions contemplated hereby. In
the event that consents, approvals, other authorizations or other acts
contemplated by this Agreement have not been fully effected as of Closing, the
parties will continue after Closing, without further consideration, to use their
reasonable best efforts to carry out such transactions; provided, however, in
the event that certain approvals, consents or other necessary documentation
cannot be secured, then the party having legal responsibility, ownership or
control shall act on behalf of the other party, without further consideration,
to effect the essential intention of the parties with respect to the
transactions contemplated by this Agreement.
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ARTICLE VI
REMEDIES FOR BREACHES OF THIS AGREEMENT
6.1 Survival of Representations and Warranties. The
representations and warranties of the Seller contained in Article III of this
Agreement and of the Buyer contained in Article IV of this Agreement shall
survive for a period of one year following the Closing.
6.2 Indemnification Provisions for Benefit of the Buyer.
(a) Subject to the limitations set forth in Section 6.2(c)
below, in the event the Seller or any Seller Subsidiary breaches any of its
representations, warranties, and covenants contained in this Agreement, provided
that the Buyer makes a written claim for indemnification against the Seller with
respect to its representations and warranties within the survival period set
forth in Section 6.1, then the Seller agrees to indemnify the Buyer and the
Buyer Subsidiaries from and against the entirety of any Adverse Consequences the
Buyer and the Buyer Subsidiaries shall suffer through and after the date of the
claim for indemnification (but excluding any Adverse Consequences the Buyer or
the Buyer Subsidiaries shall suffer after the end of any applicable survival
period) caused proximately by the breach.
(b) Subject to the limitations set forth in Section 6.2(c)
below, Seller agrees to indemnify the Buyer and the Buyer Subsidiaries from and
against the entirety of any Adverse Consequences the Buyer and the Buyer
Subsidiaries shall suffer caused proximately by any liability of the Seller or
any Seller Subsidiary which is a Retained Liability (including any liability of
the Seller or any Seller Subsidiary that becomes a liability of the Buyer or any
Buyer Subsidiary under any bulk transfer law of any jurisdiction, under any
common law doctrine of de facto merger or successor liability, or otherwise by
operation of law).
(c) Notwithstanding anything to the contrary, (i) Seller shall
not have any liability under this Article VI in respect of any individual claim
(or group of related claims) unless such claim or group of related claims
exceeds $50,000, (ii) Seller shall not have any liability under this Article VI
except and only to the extent the aggregate of permitted claims exceeds a
deductible amount of $1,500,000, and (iii) Seller's aggregate liability under
this Article VI shall not exceed $______________ , which shall be an amount
equal to the sum of the present value of the sublease payments to be made by
Buyer related to the Leased Assets and the Purchase Price; provided, however,
that the foregoing limitations shall not apply to Seller's obligations under
Section 2.2(b) above.
6.3 Indemnification Provisions for Benefit of Seller.
(a) In the event the Buyer or any Buyer Subsidiary breaches
any of its representations, warranties, and covenants contained in this
Agreement, provided that the Seller makes a written claim for indemnification
against the Buyer within the survival period with respect to its representations
and warranties, then the Buyer agrees to indemnify the Seller and the Seller
Subsidiaries from and against the entirety of any Adverse Consequences the
Seller and the Seller Subsidiaries shall suffer through and after the date of
the claim for indemnification
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(but excluding any Adverse Consequences the Seller and the Seller Subsidiaries
shall suffer after the end of any applicable survival period) caused proximately
by the breach.
(b) Buyer agrees to indemnify the Seller and the Seller
Subsidiaries from and against the entirety of any Adverse Consequences the
Seller and the Seller Subsidiaries shall suffer caused proximately by any
liability of the Buyer or any Buyer Subsidiary which is an Assumed Liability.
6.4 Matters Involving Third Parties.
(a) If any third party shall notify any party (the
"Indemnified Party") with respect to any matter (a "Third Party Claim") which
may give rise to a claim for indemnification against the other party (the
"Indemnifying Party") under this Article VI, then the Indemnified Party shall
promptly (and in any event within five business days after receiving notice of
the Third Party Claim) notify the Indemnifying Party thereof in writing.
(b) The Indemnifying Party will have the right at any time to
assume and thereafter conduct the defense of the Third Party Claim with counsel
of its choice reasonably satisfactory to the Indemnified Party; provided,
however, that the Indemnifying Party will not consent to the entry of any
judgment or enter into any settlement with respect to the Third Party Claim
without the prior written consent of the Indemnified Party (not to be withheld
unreasonably) unless the judgment or proposed settlement involves only the
payment of money damages and does not impose an injunction or other equitable
relief upon the Indemnified Party.
(c) Unless and until the Indemnifying Party assumes the
defense of the Third Party Claim as provided in Section 6.4(b) above, however,
the Indemnified Party may defend against the Third Party Claim in any manner it
reasonably may deem appropriate, including, without limitation, consent to the
entry of any judgment or enter into any settlement with respect to the Third
Party Claim.
6.5 Call Right Remedies. The parties agree that the Call
Assets and the Call Right are unique interests and that, in the event of
Seller's breach of its obligations with respect to the Call Assets, monetary
damages will not fully compensate Buyer. Therefore, the parties agree that Buyer
shall have the remedies which are available to it for Seller's breach or
violation of any of the provisions of this Agreement relating to the Call
Assets, including, but not limited to, the equitable remedies for specific
performance and injunctive relief.
6.6 Exclusive Remedy. The Buyer and the Seller acknowledge and
agree that, subject to the other remedies granted to the Buyer in Section 6.5
hereof, the foregoing indemnification provisions in this Article VI shall be the
exclusive remedy of the Buyer and the Seller with respect to the transactions
contemplated by this Agreement.
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ARTICLE VII
MISCELLANEOUS
7.1 No Third-party Beneficiaries. This Agreement shall not
confer any rights or remedies upon any Person other than the parties and their
respective successors and permitted assigns.
7.2 Entire Agreement This Agreement (including the documents
referred to herein) constitutes the entire agreement between the parties and
supersedes any prior understandings, agreements, or representations by or
between the parties, written or oral, to the extent they related in any way to
the subject matter hereof.
7.3 Succession and Assignment. This Agreement shall be binding
upon and inure to the benefit of the parties named herein and their respective
successors and permitted assigns. No party may assign either this Agreement or
any of its rights, interests, or obligations hereunder without the prior written
approval of the other party, which consent shall not be unreasonably withheld.
7.4 Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
7.5 Headings. The Section headings contained in this Agreement
are inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
7.6 Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given if (and then two
business days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended recipient as set forth
below:
If to the Seller: Bridge Information Systems, Inc.
Three World Financial Center
New York, New York 10285
(212) 372-7195 (fax)
Attention: Zachary Snow,
Executive Vice President
and General Counsel
If to the Buyer: SAVVIS Communications Corporation
717 Office Parkway
St. Louis, Missouri 63141
(314) 468-7550 (fax)
Attention: Steven M. Gallant,
Vice President and General Counsel
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Any party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail, or electronic mail), but no such notice,
request, demand, claim, or other communication shall be deemed to have been duly
given unless and until it actually is received by the intended recipient. Any
party may change the address to which notices, requests, demands, claims, and
other communications hereunder are to be delivered by giving the other party
notice in the manner herein set forth.
7.6 Governing Law. This Agreement shall be governed by and
construed in accordance with the domestic laws of the State of Missouri without
giving effect to any choice or conflict of law provision or rule (whether of the
State of Missouri or any other jurisdiction) that would cause the application of
the laws of any jurisdiction other than the State of Missouri.
7.7 Arbitration.
(a) The parties hereby agree to submit all disputes to rules
of arbitration of the American Arbitration Association and the Missouri Uniform
Arbitration Act (the "Rules") under the following provisions, which shall be
final and binding upon the parties, their successors and assigns, and that the
following provisions constitute a binding arbitration clause under applicable
law. Either party may serve process or notice on the other in any arbitration or
litigation in accordance with the notice provisions hereof. The parties agree
not to disclose any information regarding any dispute or the conduct of any
arbitration hereunder, including the existence of such dispute or such
arbitration, to any person or entity other than such employees or
representatives of such party as have a need to know.
(b) Either party may commence proceedings hereunder by
delivery of written notice providing a reasonable description of the dispute to
the other, including a reference to this provision (the "Dispute Notice").
Either party may initiate arbitration of a dispute by delivery of a demand
therefor (the "Arbitration Demand") to the other party not sooner than 60
calendar days after the date of delivery of the Dispute Notice but at any time
thereafter. The arbitration shall be conducted in St. Louis, Missouri.
(c) The arbitration shall be conducted by three arbitrators
(the "Arbitrators"), one of whom shall be selected by Seller, one by Buyer, and
the third by agreement of the other two not later than 10 days after appointment
of the first two, or, failing such agreement, appointed pursuant to the Rules.
If an Arbitrator becomes unable to serve, a successor shall be selected or
appointed in the same manner in which the predecessor Arbitrator was appointed.
(d) The arbitration shall be conducted pursuant to such
procedures as the parties may agree or, in the absence of or failing such
agreement, pursuant to the Rules. Notwithstanding the foregoing, each party
shall have the right to inspect the books and records of the other party that
are reasonably related to the Dispute, and each party shall provide to the
other, reasonably in advance of any hearing, copies of all documents which such
party intends to present in such hearing and the names and addresses of all
witnesses whose testimony such party intends to present in such hearing.
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(e) All hearings shall be conducted on an expedited schedule,
and all proceedings shall be confidential. Either party may at its expense make
a stenographic record thereof.
(f) The Arbitrators shall complete all hearings not later than
90 calendar days after the Arbitrators' selection or appointment, and shall make
a final award not later than 30 calendar days thereafter. The Arbitrators shall
apportion all costs and expenses of the Arbitration, including the Arbitrators'
fees and expenses of experts ("Arbitration Costs") between the prevailing and
non-prevailing parties as the Arbitrators deem fair and reasonable. In
circumstances where a Dispute has been asserted or defended against on grounds
that the Arbitrators deem manifestly unreasonable, the Arbitrators may assess
all Arbitration Costs against the non-prevailing party and may include in the
award the prevailing party's attorneys' fees and expenses in connection with any
and all proceedings under this Section 7.7.
(g) Either party may assert appropriate statutes of limitation
as a defense in arbitration; provided, that upon delivery of a Dispute Notice
any such statute shall be tolled pending resolution hereunder.
7.8 Amendments and Waivers. No amendment of any provision of
this Agreement shall be valid unless the same shall be in writing and signed by
the Buyer and the Seller. No waiver by any party of any default,
misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation, or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent such
occurrence.
7.9 Severability. Any term or provision of this Agreement that
is invalid or unenforceable in any situation in any jurisdiction shall not
affect the validity or enforceability of the remaining terms and provisions
hereof or the validity or enforceability of the offending term or provision in
any other situation or in any other jurisdiction.
7.10 Expenses. Each of the Seller and the Buyer will bear its
own costs and expenses (including legal fees and expenses) incurred in
connection with this Agreement and the transactions contemplated hereby.
7.11 Construction. Any reference to any federal, state, local,
or foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
word "including" shall mean including without limitation.
7.12 Incorporation of Exhibits and Schedules. The Exhibits and
Schedules identified in this Agreement are incorporated herein by reference and
made a part hereof.
7.13 Bulk Transfer Laws. The Buyer acknowledges that the
Seller does not believe that the provisions of any bulk transfer laws of any
jurisdiction are applicable to this transaction and will not comply with any
such laws in connection with the transactions contemplated by this Agreement.
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IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above written.
SAVVIS COMMUNICATIONS CORPORATION
By: _____________________________
Name: ___________________________
Title: __________________________
BRIDGE INFORMATION SYSTEMS, INC.
By: _____________________________
Name: ___________________________
Title: __________________________
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EXHIBIT A
NETWORK SERVICES AGREEMENT
[This Exhibit A has been filed as a separate document]
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EXHIBIT B
ADMINISTRATIVE SERVICES AGREEMENT
ADMINISTRATIVE SERVICES AGREEMENT
This ADMINISTRATIVE SERVICES AGREEMENT (the "AGREEMENT") is effective
as of ______________, 2000 (the "EFFECTIVE DATE"), between SAVVIS Communications
Corporation, a Missouri corporation ("SAVVIS"), and Bridge Information Systems,
Inc., a Delaware corporation ("BRIDGE").
RECITALS
A. Bridge is engaged in the business of collecting and distributing
various financial, news and other data.
B. SAVVIS is engaged in the business of providing Internet backbone and
other data transport services.
C. SAVVIS and certain of its subsidiaries have acquired from Bridge and
certain of its subsidiaries certain assets relating to the provision of Internet
backbone and other data transport services, and may in the future acquire
additional such assets from Bridge and certain of its subsidiaries, all pursuant
to a Master Establishment and Transition Agreement between SAVVIS' corporate
parent, SAVVIS Communications Corporation, a Delaware Corporation, and Bridge,
of even date herewith (the "MASTER ESTABLISHMENT AND TRANSITION AGREEMENT").
D. It is an obligation of the parties under the Master Establishment
and Transition Agreement to cause this Administrative Services Agreement to be
entered into between SAVVIS and Bridge, pursuant to which Bridge shall provide
administrative services to SAVVIS relating to the assets acquired by SAVVIS
pursuant to the Master Establishment and Transition Agreement.
E. Together with this Agreement, the parties hereto are entering into a
Network Services Agreement of even date herewith (the "NETWORK SERVICES
AGREEMENT") providing for the provision of certain services to Bridge by SAVVIS
and a Technical Services Agreement of even date herewith (the "TECHNICAL
SERVICES AGREEMENT"), providing for the provision of certain services to SAVVIS
by Bridge. Certain subsidiaries of SAVVIS and certain subsidiaries of Bridge are
entering into, and may in the future enter into, Local Transfer Agreements (the
"LOCAL TRANSFER AGREEMENTS"), Local Network Services Agreements (the "LOCAL
NETWORK SERVICES AGREEMENTS"), Equipment Collocation Permits (the "EQUIPMENT
COLLOCATION PERMITS"), and Local Administrative Services Agreements (the "LOCAL
ADMINISTRATIVE SERVICES AGREEMENTS").
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NOW, THEREFORE, in consideration of the premises, and the mutual
covenants contained herein and of other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the parties agree as
follows:
1. CONTRACT DOCUMENTS AND DEFINITIONS
1.1. This Agreement shall consist of this Administrative Services
Agreement by and between SAVVIS and Bridge, including all addenda
to this Agreement entered into in the manner set forth herein
(each an "ADDENDUM" and collectively the "ADDENDA"). This
Agreement shall be interpreted wherever possible to avoid
conflicts between the Sections hereof and the Attachments,
provided that if such a conflict shall arise, the Attachments
shall control.
1.2. Whenever it is provided in this Agreement for a matter to be
mutually agreed upon by the parties and set forth in an Addendum
to this Agreement, either party may initiate the process of
determining such matter by submitting a proposed outline or
contents of such Addendum to the other party. Each party shall
appoint a primary contact and a secondary contact for the
completion of such Addendum, who shall be the contact points for
every issue concerning such Addendum and who shall be informed of
the progress of the project. The names of the contacts will be
exchanged in writing by the parties. Using the contacts, the
parties shall work together in good faith with such diligence as
shall be commercially reasonable under the circumstances to
complete such Addendum, provided, however, that neither party
shall be obligated to enter into such an Addendum. Upon the
completion of such Addendum, it shall be set forth in a written
document and executed by the parties and shall become a part of
this Agreement and shall be deemed to be incorporated herein by
reference.
1.3. Whenever used in this Agreement, the words and phrases listed
below shall have the meanings given below, and all defined terms
shall include the plural as well as the singular. Unless
otherwise stated, the words "herein", "hereunder" and other
similar words refer to this Agreement as a whole and not to a
particular Section or other subdivision. The words "included" and
"including" shall not be construed as terms of limitation.
"AFFILIATE" has the meaning set forth in Rule 12b-2 of the
regulations promulgated under the Securities Exchange Act of
1934, as amended.
"AGREEMENT YEAR" shall mean a period of 12 months beginning on
the Effective Date and each subsequent anniversary thereof.
"BRIDGE" means Bridge Information Systems, Inc., a Delaware
corporation.
"BRIDGE SUBSIDIARY" means any subsidiary of Bridge, including
each subsidiary of Bridge selling certain of the International
Network Assets pursuant to the Local Transfer Agreements.
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"CONFIDENTIAL INFORMATION" means all information concerning the
business of Bridge, SAVVIS or any third party doing business with
either of them that may be obtained from any source (i) by Bridge
by virtue of its performance under this Agreement or (ii) by
SAVVIS by virtue of its use of the Services. Such information
shall also include the terms of this Agreement (and negotiations
and proposals from one party to the other related directly
thereto), network designs and design recommendations, tools and
programs, pricing, methods, processes, financial data, software,
research, development, strategic plans or related information.
All such information disclosed prior to the execution of this
Agreement shall also be considered Confidential Information for
purposes of this Agreement. Confidential Information shall not
include information that:
(a) is already rightfully known to the receiving party at the
time it is obtained by such party, free from any obligation
to keep such information confidential; or
(b) is or becomes publicly known through no wrongful act of the
receiving party; or
(c) is rightfully received by the receiving party from a third
party without restriction and without breach of this
Agreement.
"EFFECTIVE DATE" means the date set forth in the Preamble of
this Agreement.
"INITIAL TERM" shall mean a period of three consecutive
Agreement Years beginning on the Effective Date.
"SAVVIS" means SAVVIS Communications Corporation, a Missouri
corporation.
"SAVVIS SUBSIDIARY" means any subsidiary of SAVVIS, including
each subsidiary of SAVVIS purchasing the International Network
Assets pursuant to the Local Transfer Agreements.
"SERVICES" means the services provided by Bridge to SAVVIS
hereunder.
2. THE SERVICES
2.1. Bridge agrees to provide to SAVVIS some or all of the
administrative services listed on Schedule 2.1 hereto which shall
be referred to in this Agreement collectively as the "SERVICES"
and individually as a "SERVICE."
2.2. From time to time during the term of this Agreement, SAVVIS may
terminate one or more Services being provided by Bridge hereunder
by giving Bridge written notice at least 30 days prior to the
effective date of such termination, with no liability to Bridge
other than for charges (less any applicable credits) for such
Service provided prior to the effective date of such termination.
Any other changes to the Services shall be provided for in an
Addendum mutually agreed upon by the parties in the manner set
forth in Section 1.2 hereof.
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2.3. SAVVIS grants to Bridge a general power of attorney to act on
behalf of SAVVIS in all matters relating to performance of the
Services.
2.4. In addition to the Services provided under this Agreement, it is
expected that additional administrative services will be provided
under the separate Local Administrative Services Agreements
between certain SAVVIS Subsidiaries and certain Bridge
Subsidiaries. Each such Local Administrative Services Agreement
shall conform to the terms of this Agreement unless otherwise
required by the laws applicable to such Local Administrative
Services Agreement. Services provided under each such Local
Administrative Services Agreement shall be billed locally, in
local currency.
3. RATES AND CHARGES
SAVVIS shall pay Bridge for the Services at rates to be mutually agreed
by the parties; provided, however, that such rates shall be based on
the cost to Bridge of providing the Services to SAVVIS, except to the
extent contrary to local law.
4. INVOICES
4.1. The amounts due to Bridge from SAVVIS for the Services shall be
billed monthly in arrears. All items on invoices not the subject
of a bona fide dispute shall be payable by SAVVIS in United
States currency within 30 days from the date of receipt of the
invoice. All amounts not in dispute are subject to interest
charges of 1-1/2 percent that will accrue daily on all amounts
not paid within 30 days of the date of receipt of the invoice.
4.2. SAVVIS shall pay any sales, use, value added, federal excise,
utility, gross receipts, state and local surcharges, and similar
taxes, charges or levies lawfully levied by a duly constituted
taxing authority against or upon the Services. In the
alternative, SAVVIS shall provide Bridge with a certificate
evidencing SAVVIS' exemption from payment of or liability for
such taxes. As part of the Services, Bridge will administer the
payment of SAVVIS' payroll taxes. SAVVIS will reimburse Bridge
for such payroll taxes as invoiced under this Agreement. All
other taxes, charges or levies related to the Services, including
any income, franchise, privilege, or occupation taxes of Bridge
shall be paid by Bridge. Except as otherwise specifically
addressed in this Agreement or Addenda hereto, each party shall
pay its own taxes.
4.3. Bona fide disputes concerning invoices shall be referred to the
parties' respective Contract Managers for resolution. Any amount
to which SAVVIS is entitled as a result of the resolution of a
billing dispute shall be credited promptly to SAVVIS' account.
Any amount to which Bridge is entitled as a result of the
resolution of a billing dispute shall be paid promptly to Bridge.
5. TERM AND EXTENSIONS
5.1. The initial term of this Agreement shall be three years,
commencing on the Effective Date, and shall continue in full
force and effect unless terminated in accord with the provisions
hereof.
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5.2. The term of this Agreement shall automatically extend for
consecutive one-year periods unless either party gives the other
party advance written notice of such party's intent not to extend
not less than 60 days before the scheduled expiration of the then
current term.
6. TERMINATION BY BRIDGE
Bridge shall have the right to terminate this Agreement if:
(a) SAVVIS has failed to pay any invoice that is not the
subject of a bona fide dispute within 30 days of the
date on which such payment is due and Bridge has
provided SAVVIS with written notice thereof, provided
that SAVVIS shall have 10 days from the time it
receives such notice from Bridge of nonpayment to
cure any such default;
(b) Bridge provides 10 days written notice of its intent
to terminate in the event that SAVVIS has failed to
perform or comply with or has violated any material
representation, warranty, term, condition or
obligation of SAVVIS under this Agreement, and SAVVIS
has failed to cure such failure or violation within
60 days after receiving notice thereof from Bridge;
or
(c) SAVVIS becomes the subject of a voluntary or
involuntary bankruptcy, insolvency, reorganization or
liquidation proceeding, makes an assignment for the
benefit of creditors, admits in writing its inability
to pay debts when due.
7. CONTRACT MANAGERS
7.1. CONTRACT MANAGER. SAVVIS shall assign a representative to serve
as Bridge's point-of-contact for all matters concerning its
performance under this Agreement.
7.2. CONTRACT MANAGER. Bridge shall assign a representative to serve
as SAVVIS' point-of-contact for all matters concerning its
performance under this Agreement.
8. RIGHTS AND OBLIGATIONS OF BRIDGE
8.1. PROVISION OF THE SERVICES. Bridge shall provide the Services at
Bridge facilities.
8.2. INSURANCE.
8.2.1. At all times during the term of this Agreement,
Bridge shall maintain for itself, its officers, employees,
agents and representatives insurance as shall be mutually
agreed upon by the parties and set forth in an Addendum to
this Agreement in the manner set forth herein.
8.2.2. Bridge shall furnish to SAVVIS, upon written request,
certificates of insurance or other appropriate documentation
(including evidence of renewal of insurance) evidencing the
insurance coverage referenced above, naming SAVVIS as an
additional insured. Such certificates or other documentation
shall include a proviso whereby 15 days prior written
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notice shall be provided to SAVVIS prior to coverage
cancellation or other material alteration by either Bridge
or the applicable insurer. Such cancellation or material
alteration shall not relieve Bridge of its continuing
obligation to maintain insurance coverage in accordance with
this Section.
8.2.3. In lieu of all or part of the insurance coverage specified
in this Section, Bridge may self-insure with respect to any
insurance coverage, except where expressly prohibited by
law.
8.3. REPRESENTATIONS AND WARRANTIES.
8.3.1. Bridge hereby warrants that the Services will be provided
in accordance with good business management practices and
that it will use the same care in rendering the Services to
SAVVIS as Bridge uses in rendering such services to itself.
8.3.2. THE FOREGOING WARRANTIES ARE IN LIEU OF ALL OTHER
WARRANTIES, EXPRESS OR IMPLIED, INCLUDING WITH RESPECT TO
ANY GOODS PROVIDED INCIDENT TO THE SERVICES, THE IMPLIED
WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR
PURPOSE.
9. LIMITATIONS OF LIABILITY
9.1. Neither party shall be liable to the other for indirect,
incidental, consequential, exemplary, reliance or special
damages, including damages for lost profits, regardless of
the form of action whether in contract, indemnity, warranty,
strict liability or tort, including negligence of any kind
with respect to the Services or other conduct under this
Agreement.
9.2. Nothing contained in this Section shall limit either party's
liability to the other for (a) willful or intentional
misconduct, or (b) injury or death, or damage to tangible
real or tangible personal property or the environment, when
proximately caused by SAVVIS' or Bridge's negligence or that
of their respective agents, subcontractors or employees.
10. PROPRIETARY RIGHTS; LICENSE
10.1. Bridge hereby grants to SAVVIS a non-exclusive and
non-transferable license to use all programming and software
necessary for SAVVIS to use the Services. Such license is
granted for the term of this Agreement for the sole purpose
of enabling SAVVIS to use the Services.
10.2. All title and property rights (including intellectual property
rights) to Services (including associated programming and
software) are and shall remain with Bridge. SAVVIS shall not
attempt to examine, copy, alter, reverse engineer, decompile,
disassemble, tamper with or otherwise misuse such Services,
programming and software.
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11. CONFIDENTIALITY
11.1. During the term of this Agreement and for a period of five
years from the date of its expiration or termination
(including all extensions thereof), each party agrees to
maintain in strict confidence all Confidential Information.
Neither party shall, without prior written consent of the
other party, use the other party's Confidential Information
for any purpose other than for the performance of its duties
and obligations, and the exercise of its rights, under this
Agreement. Each party shall use, and shall cause all
authorized recipients of the other party's Confidential
Information to use, the same degree of care to protect the
other party's Confidential Information as it uses to protect
its own Confidential Information, but in any event not less
than a reasonable degree of care.
11.2. Notwithstanding Section 12.1, either party may disclose the
Confidential Information of the other party to: (a) its
employees and the employees, directors and officers of its
Affiliates as necessary to implement this Agreement; (b)
employees, agents or representatives of the other party; or
(c) other persons (including counsel, consultants, lessors or
managers of facilities or equipment used by such party) in
need of access to such information for purposes specifically
related to either party's responsibilities under this
Agreement, provided that any disclosure of Confidential
Information under clause (c) shall be made only upon prior
written approval of the other party and subject to the
appropriate assurances that the recipient of such information
shall hold it in strict confidence.
11.3. Upon the request of the party having proprietary rights to
Confidential Information, the party in possession of such
information shall promptly return it (including any copies,
extracts and summaries thereof, in whatever form and medium
recorded) to the requesting party or, with the other party's
written consent, shall promptly destroy it and provide the
other party with written certification of such destruction.
11.4. Either party may request in writing that the other party waive
all or any portion of the requesting party's responsibilities
relative to the other party's Confidential Information. Such
waiver request shall identify the affected information and the
nature of the proposed waiver. The recipient of the request
shall respond within a reasonable time and, if it determines,
in its sole discretion, to grant the requested waiver, it will
do so in writing over the signature of an employee authorized
to grant such request.
11.5. Bridge and SAVVIS acknowledge that any disclosure or
misappropriation of Confidential Information in violation of
this Agreement could cause irreparable harm, the amount of
which may be difficult to determine, thus potentially making
any remedy at law or in damages inadequate. Each party,
therefore, agrees that the other party shall have the right to
apply to any court of competent jurisdiction for an order
restraining any breach or threatened breach of this Section
and for any other appropriate relief. This right shall be in
addition to any other remedy available in law or equity.
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11.6. A party requested or ordered by a court or other governmental
authority of competent jurisdiction to disclose another
party's Confidential Information shall notify the other party
in advance of any such disclosure and, absent the other
party's consent to Such disclosure, use its reasonable best
efforts to resist, and to assist the other party in resisting,
such disclosure. A party providing another party's
Confidential Information to a court or other governmental
authority shall use its reasonable best efforts to obtain a
protective order or comparable assurance that the Confidential
Information so provided will be held in confidence and not
further disclosed to any other person, absent the owner's
prior consent.
11.7. The provisions of Section 12.1 above shall not apply to
reasonably necessary disclosures in or in connection with
filings under any securities laws, regulatory filings or
proceedings, financial disclosures which in the good faith
judgment of the disclosing party are required by law,
disclosures required by court or tribunal or competent
jurisdiction, or disclosures that may be reasonably necessary
in connection with the performance or enforcement of this
Agreement or any of the obligations hereof; provided, however,
that if the receiving party would otherwise be required to
refer to or describe any aspect of this Agreement in any of
the preceding circumstances, the receiving party shall use its
reasonable efforts to take such steps as are available under
such circumstances (such as by providing a summary or
synopsis) to avoid disclosure of the financial terms and
conditions of this Agreement. Notwithstanding any provisions
of this Agreement to the contrary, either party may disclose
the terms and conditions of this Agreement in the course of a
due diligence review performed in connection with prospective
debt financing or equity investment by, or a sale to, a third
party, so long as the persons conducting such due diligence
review have agreed to maintain the confidentiality of such
disclosure and not to use such disclosure for any purpose
other such due diligence review.
12. INDEMNIFICATIONS
12.1. SAVVIS shall indemnify, defend, and hold Bridge (including any
of its directors, officers, employees, agents or assigns)
harmless from any claims, actions or suits to the extent that
such claim or action arises from Bridge's provision to SAVVIS
of the Services and to the extent that such claim, action or
suit does not arise from the gross negligence or intentional
misconduct of Bridge. SAVVIS may settle, or otherwise manage
at its own cost and expense any such claims, actions or suits.
Bridge shall notify SAVVIS promptly in writing of any such
claim, action or suit and shall cooperate with SAVVIS in a
reasonable way to facilitate the settlement or defense
thereof.
12.2 Bridge shall indemnify, defend, and hold SAVVIS (including any
of its directors, officers, employees, agents or assigns)
harmless from any claims, actions or suits to the extent that
such claim or action arises from Bridge's gross negligence or
intentional misconduct in the provision to SAVVIS of the
Services, unless such claim, action or suit also arises from
the gross negligence or intentional misconduct of SAVVIS.
Bridge may settle, or otherwise manage at its own cost
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and expense any such claims, actions or suits. SAVVIS shall
notify Bridge promptly in writing of any such claim, action
or suit and shall cooperate with Bridge in a reasonable way
to facilitate the settlement or defense thereof.
13. DISPUTES
13.1. Resolution of any and all disputes arising from or in
connection with this Agreement, whether based on contract,
tort, statute or otherwise, including disputes over
arbitrability and disputes in connection with claims by
third persons ("DISPUTES") shall be exclusively governed by
and settled in accordance with the provisions of this
Section 14. The foregoing shall not preclude recourse to
judicial proceedings to obtain injunctive, emergency or
other equitable relief to enforce the provisions of this
Agreement, including specific performance, and to decide
such issues as are required to be resolved in determining
whether to grant such relief. Resolution of Disputes with
respect to claims by third persons shall be deferred until
any judicial proceedings with respect thereto are concluded.
13.2. The parties hereby agree to submit all Disputes to rules of
arbitration of the American Arbitration Association and the
Missouri Uniform Arbitration Act (the "RULES") under the
following provisions, which shall be final and binding upon
the parties, their successors and assigns, and that the
following provisions constitute a binding arbitration clause
under applicable law. Either party may serve process or
notice on the other in any arbitration or litigation in
accordance with the notice provisions hereof. The parties
agree not to disclose any information regarding any Dispute
or the conduct of any arbitration hereunder, including the
existence of such Dispute or such arbitration, to any person
or entity other than such employees or representatives of
such party as have a need to know.
13.3. Either party may commence proceedings hereunder by delivery
of written notice providing a reasonable description of the
Dispute to the other, including a reference to this
provision (the "DISPUTE NOTICE"). Either party may initiate
arbitration of a Dispute by delivery of a demand therefor
(the "ARBITRATION DEMAND") to the other party not sooner
than 60 calendar days after the date of delivery of the
Dispute Notice but at any time thereafter. The arbitration
shall be conducted in St. Louis, Missouri.
13.4. The arbitration shall be conducted by three arbitrators (the
"ARBITRATORS"), one of whom shall be selected by Bridge, one
by SAVVIS, and the third by agreement of the other two not
later than 10 days after appointment of the first two, or,
failing such agreement, appointed pursuant to the Rules. If
an Arbitrator becomes unable to serve, a successor shall be
selected or appointed in the same manner in which the
predecessor Arbitrator was appointed.
13.5. The arbitration shall be conducted pursuant to such
procedures as the parties may agree or, in the absence of or
failing such agreement, pursuant to the Rules.
Notwithstanding the foregoing, each party shall have the
right to inspect the books and records of the other party
that are reasonably related to the Dispute, and each party
shall provide to the other, reasonably in advance of any
hearing, copies of all
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documents which such party intends to present in such
hearing and the names and addresses of all witnesses whose
testimony such party intends to present in such hearing.
13.6. All hearings shall be conducted on an expedited schedule,
and all proceedings shall be confidential. Either party may
at its expense make a stenographic record thereof.
13.7. The Arbitrators shall complete all hearings not later than
90 calendar days after the Arbitrators' selection or
appointment, and shall make a final award not later than 30
calendar days thereafter. The Arbitrators shall apportion
all costs and expenses of the Arbitration, including the
Arbitrators' fees and expenses of experts ("ARBITRATION
COSTS") between the prevailing and non-prevailing parties as
the Arbitrators deem fair and reasonable. In circumstances
where a Dispute has been asserted or defended against on
grounds that the Arbitrators deem manifestly unreasonable,
the Arbitrators may assess all Arbitration Costs against the
non-prevailing party and may include in the award the
prevailing party's attorneys' fees and expenses in
connection with any and all proceedings under this Section
14.
13.8. Either party may assert appropriate statutes of limitation
as a defense in arbitration; provided, that upon delivery of
a Dispute Notice any such statute shall be tolled pending
resolution hereunder.
13.9. Pending the resolution of any dispute or controversy arising
under this Agreement, the parties shall continue to perform
their respective obligations hereunder, and Bridge shall not
discontinue, disconnect or in any other fashion cease to
provide all or any substantial portion of the Services to
SAVVIS unless otherwise directed by SAVVIS. This Section
shall not apply where SAVVIS is in default under this
Agreement.
14. FORCE MAJEURE
14.1. In no event shall either party be liable to the other for
any failure to perform hereunder that is due to war, riots,
embargoes, strikes or other concerted acts of workers
(whether of a party hereto or of others), casualties,
accidents or other causes to the extent that such failure
and the consequences thereof are reasonably beyond the
control and without the fault or negligence of the party
claiming excuse. Each party shall, with the cooperation of
the other party, use reasonable efforts to mitigate the
extent of any failure to perform and the adverse
consequences thereof.
14.2. If Bridge cannot promptly provide a suitable temporary
Bridge alternative to a Service subject to an interruption
in connection with the existence or a force majeure
condition, SAVVIS may, at its option and at its own cost,
contract with one or more third parties for any or all
affected Services for the shortest commercially available
period likely to cover the reasonably expected duration of
the Interruption, and may suspend Bridge's provision of such
Services for such period. Bridge shall not charge SAVVIS for
any Services thus suspended during the period of suspension.
Bridge shall resume provision of the suspended
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Services upon the later of the termination or expiration of
SAVVIS' legally binding commitments under contracts with
third parties for alternative services or the cessation or
remedy of the force majeure condition.
14.3. In the event that a force majeure condition shall continue
for more than 60 days, SAVVIS may cancel the affected
Services with no further liability to Bridge other than for
Services received by SAVVIS prior to the occurrence of the
force majeure condition.
15. GENERAL PROVISIONS
15.1. NO THIRD-PARTY BENEFICIARIES. This Agreement shall not
confer any rights or remedies upon any person or entity
other than the parties and their respective successors and
permitted assigns.
15.2. ENTIRE AGREEMENT. This Agreement (including the documents
referred to herein) constitutes the entire agreement between
the parties and supersedes any prior understandings,
agreements, or representations by or between the parties,
written or oral, to the extent they related in any way to
the subject matter hereof.
15.3. SUCCESSION AND ASSIGNMENT. This Agreement shall be binding
upon and inure to the benefit of the parties named herein
and their respective successors and permitted assigns. No
party may assign either this Agreement or any of its rights,
interests, or obligations hereunder without the prior
written approval of the other party, which consent shall not
be unreasonably withheld.
15.4. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but
all of which together will constitute one and the same
instrument.
15.5. HEADINGS. The Section headings contained in this Agreement
are inserted for convenience only and shall not affect in
any way the meaning or interpretation of this Agreement.
15.6. NOTICES. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice,
request, demand, claim, or other communication hereunder
shall be deemed duly given if (and then two business days
after) it is sent by registered or certified mail, return
receipt requested, postage prepaid, and addressed to the
intended recipient as set forth below:
If to Bridge: Bridge Information Systems, Inc.
Three World Financial Center
New York, New York 10285
(212) 372-7195 (fax)
Attention: Zachary Snow,
Executive Vice President and
General Counsel
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If to SAVVIS: SAVVIS Communications Corporation
717 Office Parkway
St. Louis, Missouri 63141
(314) 468-7550 (fax)
Attention: Steven M. Gallant,
Vice President and General
Counsel
Any party may send any notice, request, demand, claim, or
other communication hereunder to the intended recipient at
the address set forth above using any other means (including
personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail, or electronic mail), but no
such notice, request, demand, claim, or other communication
shall be deemed to have been duly given unless and until it
actually is received by the intended recipient. Any party
may change the address to which notices, requests, demands,
claims, and other communications hereunder are to be
delivered by giving the other party notice in the manner
herein set forth.
15.7. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the domestic laws of the State
of Missouri without giving effect to any choice or conflict
of law provision or rule (whether of the State of Missouri
or any other jurisdiction) that would cause the application
of the laws of any jurisdiction other than the State of
Missouri.
15.8. AMENDMENTS AND WAIVERS. No amendment of any provision of
this Agreement shall be valid unless the same shall be in
writing and signed by SAVVIS and Bridge. No waiver by any
party of any default, misrepresentation, or breach of
warranty or covenant hereunder, whether intentional or not,
shall be deemed to extend to any prior or subsequent
default, misrepresentation, or breach of warranty or
covenant hereunder or affect in any way any rights arising
by virtue of any prior or subsequent such occurrence.
15.9. SEVERABILITY. Any term or provision of this Agreement that
is invalid or unenforceable in any situation in any
jurisdiction shall not affect the validity or enforceability
of the remaining terms and provisions hereof or the validity
or enforceability of the offending term or provision in any
other situation or in any other jurisdiction.
15.10. EXPENSES. Each party will bear its own costs and expenses
(including legal fees and expenses) incurred in connection
with this Agreement and the transactions contemplated
hereby.
15.11. CONSTRUCTION. Any reference to any federal, state, local, or
foreign statute or law shall be deemed also to refer to all
rules and regulations promulgated thereunder, unless the
context requires otherwise. The word "including" shall mean
including without limitation.
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15.12. ADDENDA AND SCHEDULES. The Addenda and Schedules identified
in this Agreement are incorporated herein by reference and
made a part hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Administrative
Services Agreement to be executed as of the date first above written.
SAVVIS COMMUNICATIONS CORPORATION
By ______________________________________
Name: ____________________________________
Title: ___________________________________
BRIDGE INFORMATION SYSTEMS, INC.
By ______________________________________
Name: ____________________________________
Title: ___________________________________
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SCHEDULE 2.1 TO ADMINISTRATIVE SERVICE AGREEMENT
ADMINISTRATIVE SERVICES TO BE
PROVIDED BY BRIDGE TO SAVVIS
Service to be provided
Facility rental & operation
Equipment maintenance
Risk management services
Tax planning administration
Tax compliance
Treasury management
Financial planning
Human resource services
Payroll administration
Accounting, bookkeeping, financial
statement preparation
Procurement
PC support
LAN and WAN support
IT planning, installation and support
Travel expenses (directly on behalf of
SAVVIS)
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EXHIBIT C
TECHNICAL SERVICES AGREEMENT
[This Exhibit C has been filed as a separate document]
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<PAGE>
EXHIBIT D
FORM OF BILL OF SALE
[To be provided at Closing]
39
<PAGE>
EXHIBIT E
FORM OF LOCAL CONTRACT OF ASSIGNMENT AND ASSUMPTION
CONTRACT OF ASSIGNMENT AND ASSUMPTION
This Contract is entered into as of this ____ day of
_________, 2000 by and between SAVVIS [______________], a [private limited
liability] company organized under the laws of [______________] ("SAVVIS"),
[having a non-registered __________ branch], and [______________], a
[______________] company organized under the laws of [______________]
("Assignor").
WHEREAS, SAVVIS is acquiring certain assets and liabilities
from various companies affiliated with Assignor, such assets and liabilities
comprising and relating to the IP Network that Assignor and its affiliated
companies currently own and operate; and
WHEREAS, Assignor desires to assign to SAVVIS and SAVVIS
desires to assume from Assignor certain contracts and liabilities as more
particularly set forth at Schedule I to this Contract (the "Contracts and
Liabilities").
NOW, THEREFORE, for good and valuable consideration, including
the provisions and covenants herein, the receipt and sufficiency of which is
hereby acknowledged, SAVVIS and Assignor agree as follows:
1. Assignor hereby assigns, transfers and delivers to SAVVIS the
Contracts and Liabilities and all of its right, title and interest therein and
delegates all of Assignor's duties and obligations attached to the Contract and
Liabilities.
2. SAVVIS hereby accepts the foregoing assignment and assumes and
agrees to keep, observe, perform, pay and discharge when due the terms,
covenants, conditions and obligations of Assignor related to the Contracts and
Liabilities, and hereby releases Assignor from its obligations thereunder.
3. Notwithstanding the foregoing, if the assignment and transfer of any
of the Contracts and Liabilities would cause a breach thereof and if no required
consent to such assignment and transfer has been obtained from the third parties
involved, then such Contracts and Liabilities shall not be assigned and
transferred, but, instead, Assignor shall continue to hold its interests in such
Contracts and Liabilities in trust for the benefit of SAVVIS, shall receive in
trust and remit as promptly as possible to SAVVIS any money paid thereunder to
Assignor and shall cooperate in any reasonable arrangement or action requested
by SAVVIS to secure for SAVVIS all benefits under such Contracts and
Liabilities.
4. From and after the date of this Contract, Assignor and SAVVIS shall
do such acts and execute such documents and instruments as may be reasonably
required to make effective the transactions contemplated thereby. In the event
acts contemplated by this Agreement have not been fully effected as of the date
of this Contract, SAVVIS and Assignor will continue after
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the date of this Contract, without further consideration, to use their best
efforts to carry out such transactions.
5. Assignor and SAVVIS hereby agree that to the extent any of the
Contracts and Liabilities are actually assigned to SAVVIS prior to the date of
this Contract, Assignor shall indemnify SAVVIS for any losses due to obligations
that arose under such Contracts and Liabilities prior to the date of this
Contract and to the extent any of the Contracts and Liabilities are not assigned
to SAVVIS until after the date of this Contract, SAVVIS shall indemnify Assignor
for any losses due to obligations that arise under such Contracts and
Liabilities following the date of this Contract.
6. Assignor hereby agrees, from time to time, at the reasonable request
of SAVVIS, to execute and deliver such other instruments of conveyance and
transfer and take such other actions as SAVVIS may reasonably request in order
to more effectively consummate the transactions contemplated by this Contract.
7. This agreement shall be governed by, and construed in accordance
with the law of [England] without regard to its conflict of laws principles.
IN WITNESS WHEREOF, the parties hereto have executed this
Contract as of the date first above written.
SAVVIS [______________]
By: ______________________
Name:_____________________
Title:____________________
[_____________________]
By: ______________________
Name:_____________________
Title:____________________
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<PAGE>
SCHEDULE I TO LOCAL CONTRACT OF ASSIGNMENT AND ASSUMPTION
CONTRACTS AND LIABILITIES TO BE
ASSIGNED AND ASSUMED
[To be used only where the contracts to be assigned are circuit leases:
The attached contracts and circuits as well as any contracts or
circuits not listed on the attached by for which Assignor has entered
into prior to the date of this Contract which relate to the IP Network
of Bridge Information Systems, the IP Network being those assets that
are used by the Bridge Information Systems group which consists of
providing telecommunications facilities utilizing internet protocols
between the Bridge Information Systems group and the customers of such
group.]
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EXHIBIT F
FORM OF LOCAL ASSET TRANSFER AGREEMENT
TRANSFER AGREEMENT
This Transfer Agreement ("Agreement") made this __ day of
_______, 2000, by and between Bridge _________________________________, a
corporation organized under the laws of __________________, having its principal
place of business at _________________ ("Seller"), and SAVVIS
____________________ [a ______________ company organized under the laws
of_________________][_____________ branch, the ____________ branch of a
______________ company organized under the laws of _______________] having its
[registered][principal] office at ______________________________ ("SAVVIS")
(Seller and SAVVIS each a "Party" and collectively the "Parties").
WITNESSETH
WHEREAS, pursuant to an agreement of even date herewith
between Bridge Information Systems, Inc. and SAVVIS Communications Corporation
(the "Master Establishment and Transition Agreement") the direct or indirect
parent entity of Seller, Bridge Information Systems Inc. ("BISI"), has agreed to
cause the transfer of certain assets, liabilities, rights and obligations
world-wide to its subsidiary SAVVIS Communications Corporation ("SCC"), which is
the direct or indirect parent of SAVVIS;
WHEREAS, pursuant to the Master Establishment and Transition
Agreement, transfers of assets, liabilities, rights and obligations will be
effected by subsidiaries of BISI and SCC pursuant to individual transfer
services agreements between such entities; and
WHEREAS, SAVVIS and Seller desire to effect a transfer of
certain assets, liabilities, rights and obligations on the terms and conditions
set forth herein;
NOW THEREFORE, in consideration of the premises and the mutual
covenants and obligations herein set forth and of other good and valuable
consideration, receipt of which is hereby acknowledged, the Parties agree as
follows:
1. DEFINITIONS
1.1 In this Agreement and the Schedules the following expressions
shall have the following meanings namely:
"Agreement" means the agreement between the Parties the terms of which
are set out herein;
"Assets" means the assets of the IP Network set forth in Clause 2.1 as
amended pursuant to Clause 2.2;
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<PAGE>
"Closing" has the meaning set forth in Clause 4.1;
"Effective Date" means ______________, 2000;
["Employees" means those employees of Seller listed on the attached
Schedule 4;]
"IP Network" means those assets that are used by Seller which
consists of providing telecommunications facilities utilizing
internet protocols between Seller, suppliers and group companies of
Seller and Seller's customers;
"Liabilities" means all of the liabilities specifically listed in
Schedule [5]; provided, however, that any contractual liabilities and
contractual obligations of the Seller for goods or services delivered
prior to the Effective Date shall be excluded from the definition of
Liabilities and shall remain the responsibility of the Seller; and
"Software" means any and all software and software applications,
including operating software and embedded software, owned or used by
Seller in relation to the maintenance, ownership or operations of the
Assets listed in Clause 2.1.1.
1.2 In this Agreement words importing the singular include the plural
and vice versa and words importing gender include any other gender.
1.3 The headings of Clauses are for ease of reference and shall not
affect the construction of this Agreement.
1.4 References in this Agreement to Clauses or Schedules are
references to clauses of or schedules to this Agreement.
1.5 Any undertaking hereunder not to do any act or thing shall be
deemed to include an undertaking not to permit or suffer the doing of
that act or thing.
1.6 The expression "person" used in this Agreement shall include
(without limitation) any individual, partnership, local authority,
company or unincorporated association.
2. SALE & PURCHASE
2.1 Seller shall sell and SAVVIS shall purchase with effect from the
Effective Date the Assets subject in all cases to the Liabilities,
which are the following:
2.1.1 the computer equipment listed in Schedule 1, including but
not limited to the Ascend Cascade Switch 9000s and the Baynet
Routers;
2.1.2 the full benefit of all agreements between Seller and any
other person, firm or corporation (other than SAVVIS) to which
Seller is entitled in connection with the
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<PAGE>
operations of the IP Network which are in force at the Effective
Date including, without limitation, the contracts listed in
Schedule 2 as well as any maintenance, support, supply or
licensing agreements, if any, relating to the Software;
2.1.3 the right of SAVVIS to represent itself as operating the IP
Network in succession to Seller;
2.1.4 all technical and contractual information relating to the
IP Network;
2.1.5 the Software.
2.2 SAVVIS and Seller shall take all reasonable efforts to jointly
prepare, within seventy-five days after the Effective Date, or as soon
as practical thereafter, a revised list of the Assets as set forth in
Schedules 1 and 2. This revised list shall supersede the attached
Schedules 1 and 2 and shall include any assets purchased or acquired
by Seller after July 31, 1999 but before the Effective Date which
comprise part of the IP Network. The parties shall negotiate in good
faith to finalize such revised Schedules and shall provide to each
other any information or records reasonably necessary to finalize such
revised Schedules.
3. CONSIDERATION
3.1 The purchase price for the Assets exclusive of any VAT, stamp
duty, and transfer taxes (the "Consideration") shall be the sum
specified in Schedule 3. To the extent the Assets are revised pursuant
to Clause 2.2, the Consideration set forth in Schedule 3 shall be
adjusted based on the net book value on the date of transfer (in the
books of Seller) of the Assets which are added to or removed from the
revised list. The Parties shall take all reasonable efforts to jointly
prepare any such revisions to Schedule 3 within seventy-five days
after the Effective Date, or as soon as practical thereafter. The
parties shall negotiate in good faith to finalize such revised
Schedule and shall provide to each other any information or records
reasonably necessary to finalize such Schedule.
3.2 The Consideration shall be due and payable as set forth in
Schedule 3.
3.3 The amount set forth in Schedule 3 is exclusive of VAT, and any
and all transfer or other taxes or duties applicable to the
transaction provided for in this Agreement, which SAVVIS hereby agrees
to pay.
4. CLOSING
4.1 Closing of the sale shall take place on the Effective Date when
Seller shall deliver to SAVVIS all physical Assets hereby agreed to be
sold, other than the Assets referred to in Clause 2.2 above. All
physical Assets referred to in Clause 2.2 above shall be delivered to
SAVVIS as soon as practicable following the finalization of any
adjustment to the Assets as set forth in Clause 2.2.
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<PAGE>
4.2 Property in and title to the Assets referred to in Clause 2.1
shall pass to SAVVIS on the Effective Date. Property in and title to
the Assets referred to in Clause 2.2 shall pass to SAVVIS on the date
that the revised schedules are finalized in accordance with on Clause
2.2 but such transfer shall be effective as of the Effective Date.
4.3 Subject to Clause 6 below, Seller shall on or as soon as
practicable after the Effective Date deliver to SAVVIS all transfers,
assignments and novations relating to the Assets (including the
property) together with the documents of title thereto, necessary to
give effect to this Agreement; provided, however, that any such
transfers shall as between the Parties be deemed to be effective as of
the Effective Date.
5. THE LIABILITIES
Subject to the consent where necessary of other contracting parties
(which the Parties hereto shall use their reasonable best efforts to
obtain) SAVVIS shall as from the Effective Date assume, perform and
discharge all Liabilities. If it proves impossible to obtain any such
consent in relation to any of the Liabilities, SAVVIS will assume,
perform and discharge such Liability as agent for and on behalf of
Seller and will indemnify Seller accordingly. Seller will indemnify
SAVVIS for contractual liabilities for goods or services delivered
prior to the Effective Date.
6. THIRD PARTY CONSENTS
6.1 Seller and SAVVIS shall use all reasonable endeavours to obtain
any required consent of any other contracting parties to the
assignment or novation of any agreement referred to in Clause 2.1.2.
Unless and until such consent shall be forthcoming and the relevant
agreement shall have been assigned or novated SAVVIS shall at its own
cost and expense assume Seller's obligations under such agreements and
Seller shall account to SAVVIS for all sums paid or received
therefrom.
6.2 Seller will at SAVVIS' request and expense give to SAVVIS all
assistance in the power of Seller to enable SAVVIS to enforce the
agreements referred to in Clause 2.1.2 against the other contracting
party or parties and, without prejudice to the generality of the
foregoing, will provide all such relevant books, documents and other
information as SAVVIS may require in relation thereto.
[7. PERSONNEL
SAVVIS and Seller hereby agree and acknowledge that the Transfer of
Undertakings (Protection of Employment) Regulations applies to this
transaction and, therefore, that the contracts of employment of all of
the Employees of Seller, as set forth at Schedule 4 to this Agreement,
shall not be terminated at Closing but shall continue to have effect
as if originally made between such Employee and SAVVIS in accordance
such Regulations.]
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[8. INDEMNIFICATION
(a) Seller will indemnify, defend and hold SAVVIS and its
shareholders, directors, officers, successors, assigns, and agents of
each of them, harmless from and against any and all claims, losses,
damages, liabilities, expenses or costs, plus reasonable attorneys'
fees and expenses, incurred by SAVVIS to the extent resulting from or
arising out of any claim or suit by any Employee of Seller, or by any
other employee of Seller that is not being transferred to SAVVIS,
asserting rights under the Transfer of Undertakings (Protection of
Employment) Regulations 1981 or any other similar law or regulation.]
9. FURTHER ASSURANCE
From and after Closing, the Parties shall do such acts and execute
such documents and instruments as may be reasonably required to make
effective the transactions contemplated hereby. In the event that
consents, approvals, other authorizations or other acts contemplated
by this Agreement have not been fully effected as of Closing, the
parties will continue after Closing, without further consideration, to
use their reasonable best efforts to carry out such transactions;
provided, however, in the event that certain approvals, consents or
other necessary documentation cannot be secured, then the Party having
legal responsibility, ownership or control shall act on behalf of the
other Party, without further consideration, to effect the essential
intention of the Parties with respect to the transactions contemplated
by this Agreement.
10. SURVIVAL OF CERTAIN PROVISIONS
To the extent that any provision of this Agreement shall not have been
performed at Closing it shall survive and remain in full force and
effect notwithstanding Closing.
11. GOVERNING LAW AND CHOICE OF FORUM
This Agreement shall be governed by and construed and interpreted in
accordance with the laws of [England][the state of Missouri, United
States of America] and the parties to this Agreement hereby agree that
all matters arising out of or in connection with this Agreement shall
be subject to the exclusive jurisdiction of the courts of
[England][the state of Missouri].
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<PAGE>
AS WITNESS the hands of duly authorized representatives of the parties the day
and year first above written
SIGNED by )
for and on behalf of )
BRIDGE INFORMATION )
SYSTEMS ______________ )
SIGNED by )
for and on behalf of )
SAVVIS _____________ )
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SCHEDULE 1 TO LOCAL ASSET TRANSFER AGREEMENT
THE COMPUTER EQUIPMENT
[To be provided at Closing]
49
<PAGE>
SCHEDULE 2 TO LOCAL ASSET TRANSFER AGREEMENT
THE CONTRACTS
[TO BE PROVIDED AT CLOSING]
50
<PAGE>
SCHEDULE 3 TO LOCAL ASSET TRANSFER AGREEMENT
THE CONSIDERATION
ALLOCATION OF CONSIDERATION
Consideration to be allocated as set forth in Schedule 1.
PAYMENT OF CONSIDERATION
The consideration shall be due and payable thirty days after receipt
by SAVVIS of a valid invoice, which may be submitted on or after the
Effective Date.
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<PAGE>
[SCHEDULE 4 TO LOCAL ASSET TRANSFER AGREEMENT
THE EMPLOYEES]
[To be provided at Closing]
52
<PAGE>
SCHEDULE 5 TO LOCAL ASSET TRANSFER AGREEMENT
THE LIABILITIES
[To be provided at Closing]
53
<PAGE>
EXHIBIT G
FORM OF LOCAL NETWORK SERVICES AGREEMENT
[This Exhibit G is filed as an Exhibit to the
Network Services Agreement which has been filed as a separate document]
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<PAGE>
EXHIBIT H
FORM OF EQUIPMENT COLLOCATION PERMIT
EQUIPMENT COLLOCATION PERMIT
This EQUIPMENT COLLOCATION PERMIT (the "Agreement") is made as
of the ____ day of _________, 2000, by and between [Bridge Subsidiary] (the
"Company") and [Savvis Subsidiary] (the "Customer").
WHEREAS, the Company occupies the premises identified on
Exhibit A attached hereto and incorporated herein by reference (the "Premises"),
which are leased by the Company under the lease described on Exhibit B attached
hereto, including the lease term and renewal options specified therein, and
incorporated herein by reference (the "Lease"); and
WHEREAS, the Customer and the Company desire to enter into an
arrangement permitting the Customer to locate certain of its equipment in
certain portions of the Premises, on and subject to the terms and conditions set
forth herein related to the Customer's collocation of the equipment;
NOW, THEREFORE, for and in consideration of the premises and
the mutual agreements herein, the parties hereby agree as follows:
1. SPACE.
(a) To the extent permitted by this Agreement, the Customer may place certain
telecommunications equipment (the "Equipment") within the Premises during the
Term (hereinafter defined) of this Agreement and may use the Equipment in
accordance with the terms and conditions of this Agreement and in accordance
with applicable laws and code. The precise locations (the "Space") within the
Premises where the Equipment may be placed and used by the Customer shall be as
designated by the Company in written notice(s) to the Customer. The Company
shall maintain exclusive control over the manner and method of the placement and
use of the Equipment within the Space. In connection with the permission
established under this Agreement, the Customer shall have no possessory or
occupancy rights with respect to the Space or control over the Space, but shall
have only permission to place and use the Equipment within the Space, together
with unrestricted access to the Equipment twenty-four hours a day, seven days a
week.
(b) The Customer shall use its reasonable best efforts to abide by applicable
terms and conditions of the Lease and any other agreements or indentures binding
on the Company with respect to the Premises, upon notice from the Company of
such terms and conditions from time to time throughout the Term; and this
Agreement and the rights of the Customer hereunder shall be subject and
subordinate to the terms and conditions of the Lease and other agreements and
indentures in all respects. The Company shall promptly give written notice to
the Customer of any notice of default they may receive pursuant to the Lease. If
the Customer shall not abide by any such terms or conditions, upon 15 days'
written notice to the Customer, the Company may
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<PAGE>
revoke the permission established under this Agreement with respect to the
applicable Space and Premises and the Company may terminate the rights of the
Customer under this Agreement with respect to such Space and Premises.
(c) The Equipment and its method of installation within the Space shall, in each
instance, be approved in writing by the Company in advance. The Customer shall
not place any additional equipment in the Space and shall not move or alter the
location of the Equipment within the Space without having received prior
approval in writing from the Company.
(d) Upon 30 days' prior written notice or, in the event of an emergency, within
such shorter time as may be reasonably determined appropriate by the Company,
the Company may require the Customer to relocate the Equipment within the
Premises and may redesignate the Space for the relocated Equipment; provided,
however, the site of relocation shall be prepared for installation prior to any
required relocation and shall afford substantially comparable environmental
conditions for the Equipment and substantially comparable accessibility to the
Equipment. All costs of relocating the Equipment shall be borne by the Customer,
excluding, however, the cost, if any, of improving the redesignated Space.
(e) Upon written request of the Customer and at the Customer's expense, the
Customer may require that fencing, caging, cabinets or other similar protective
covering for the Equipment be installed if (i) there is sufficient room in the
applicable Space and Premises for such installations, (ii) such installations
will not unreasonably interfere with the Company's use, occupancy or planning,
and will not unreasonably interfere with the Company's equipment or the
equipment of other collocators, and (iii) with respect to any Premises subject
to the Lease or other agreements or indentures, such installations are permitted
under the terms and conditions of the Lease or other agreements or indentures.
(f) If the placement or use of the Equipment in the Space results in any
violation or claim of violation of any of the Lease or other agreements or
indentures, then in the event the Company shall be unable, at a cost acceptable
to the Company, to cure such violation or secure a waiver of such claim of
violation, the Company may undertake to find other suitable space for the
Equipment within the applicable Space and Premises and relocate such Equipment
to other suitable location for the balance of the Term of this Agreement.
(g) The Company shall provide the services set forth on Exhibit C attached
hereto and incorporated herein by reference in connection with the placement and
use of the Equipment within the Space. The Company shall use its reasonable best
efforts to provide such additional services as are requested by Customer upon
terms and conditions agreed upon by Customer and the Company. The Company
represents and warrants that the services described on Exhibit C are provided by
the Company to Customer as of the date of this Agreement.
2. TERM.
(a) The initial term (the "Initial Term") of the permission established under
this Agreement pertaining to the placement and use of the Equipment within the
Space shall commence on the date hereof and shall continue thereafter until such
time as the applicable Lease expires. If the
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term of the applicable Lease is extended, then the Customer shall have the
option, upon prior written notice to the Company, to renew this Agreement for an
additional term (the "Renewal Term"), which Renewal Term shall be conterminous
with the term of the applicable extended term under the Lease, on the terms and
conditions otherwise set forth in this Agreement. The Initial Term and the
Renewal Term are sometimes collectively referred to as the "Term."
Notwithstanding anything herein or elsewhere to the contrary, however, the Term
shall be subject to earlier termination as may be provided herein.
(b) The option to renew this Agreement with respect to the Premises shall be
contingent on the Company's continued occupation and ownership or leasing of the
Premises and shall be contingent upon the Customer's compliance with the terms
and conditions of this Agreement. In the event the Company shall cease to occupy
any of the Premises or shall default under this Agreement, the option to renew
this Agreement shall expire with respect to the applicable Premises or the
entirety of the Premises, as the case may be.
(c) Following the expiration of the Term, this Agreement shall continue in
effect on a month-to-month basis upon the same terms and conditions otherwise
set forth herein, unless and until terminated by either the Customer or the
Company upon at least 30 days' prior written notice to the other.
(d) Notwithstanding anything herein or elsewhere to the contrary, the Company
reserves the right, in its discretion, to revoke the permission established
under this Agreement with respect to the applicable Space within any Premises
and to terminate the rights of Customer under this Agreement with respect to
such Space and Premises immediately upon written notice in the event that, for
whatever reason, the Company loses its right to occupy the applicable Premises
or its right to permit the collocation of Equipment within such Premises. In the
event the Company elects to exercise its right to terminate the Lease, the
Company shall give the Customer 6 months written notice of its termination of
the Lease and the intended resulting termination of this Agreement.
3. CONSIDERATION. The Customer agrees to pay the Company such amounts as may be
set forth on the Collocate Schedule for the permission established under this
Agreement with respect to the scheduled Space and Premises. Such amounts shall
be payable in equal monthly installments in advance on the first day of each
calendar month during the Term.
4. CONDITION OF THE PREMISES. The Customer approves the Premises in "as is"
condition as of the date of this Agreement, and acknowledges that the Company
has no obligation to make alterations, improvements or additions, decorations or
changes within the Premises or the Space. The Company acknowledges that the
Equipment is personal property of the Customer and not a fixture, and that the
Company shall not have any lienable interest in the Equipment.
5. ASSIGNMENT. The Agreement is personal to the parties, and may not be assigned
by either party without the prior written consent of the other.
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6. TERMINATION OR EXPIRATION. At the expiration of the Term (or earlier
termination of this Agreement), the Customer shall remove the Equipment from the
Premises at the Customer's expense, and the Space shall be restored by the
Company, at the Customer's expense (such expense to be defrayed by reimbursing
the Company for the same upon demand) to substantially the same as the condition
as of the date of this Agreement.
7. DEFAULT. If the Customer breaches any term or condition of this Agreement,
the Company, after providing the Customer with notice of such breach, may elect
by written notice to the Customer to terminate this Agreement. In addition to
such right of termination, the Company shall have any and all other rights and
remedies afforded to the Company at law or in equity.
8. INDEMNIFICATION.
(a) The Customer covenants and agrees to indemnify and hold the Company harmless
from and against any and all suits, actions, claims, damages, charges and
expenses, including reasonable attorney fees, for damages or injuries to the
Space or the Premises occurring or claimed to have occurred in, upon, or about
the Space or the Premises as a result of the Customer's conduct or omission in
placing, operating or removing the Equipment or using the Equipment within the
Space, unless arising from the negligence or willful misconduct of the Company.
(b) The Company covenants and agrees to indemnify and hold the Customer harmless
from and against any and all suits, actions, claims, damages, charges and
expenses, including reasonable attorney fees, for damages or injuries to the
Equipment occurring or claimed to have occurred in, upon, or about the Space or
the Premises as a result of the negligence or willful misconduct of the Company
in handling the Equipment or using the Space or the Premises, unless arising
from the negligence or willful misconduct of the Customer.
9. LIMITATION OF LIABILITY.
(a) Liability for Damages to Property. The Company shall not be liable for any
damages whatsoever to the Customer's property resulting from the installation,
maintenance, repair or removal of Equipment and associated wiring unless the
damage is caused by the Company's negligence or willful misconduct.
(b) Liability for Equipment not Provided by the Company. The Company shall not
be liable for any damages whatsoever associated with facilities or Equipment not
furnished by the Company or for any act or omission of the Customer or any other
entity furnishing facilities or Equipment.
(c) Liability for Force Majeure Events. The Company shall not be liable for any
failure of performance due to causes beyond its control, including but not
limited to acts of God, fire, flood or other catastrophes; any law, order
regulation, direction, action or request of the United States Government, or of
any other government, including state and local governments having or claiming
jurisdiction or of any department, agency, commission, bureau, corporation, or
other instrumentality of any federal, state, or local government, or of any
civil or military authority;
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national emergencies; unavailability of materials or rights-of-way;
insurrections; riots; wars; or strikes, lock-outs, work stoppages, labor
difficulties, or utilities/power outages.
(d) No Special Damages. In no event shall the Company be liable for special,
consequential, lost profit, exemplary, or punitive damages as a result of its
performance or nonperformance of this Agreement or as a result of any default
under or breach of this Agreement.
(e) No Claims against the Company's Landlords. The Customer acknowledges the
owners of any Premises subject to the Lease have no responsibilities or duties,
direct or indirect, to the Customer, and the Customer disclaims any rights
against or recourse to (i) the owners of any Premises subject to the Lease or
(ii) such Premises. In furtherance of this acknowledgment and disclaimer, the
Customer releases and waives any claim against such owners (such release and
waiver being for the benefit of, and enforceable by such owners as intended
third party beneficiaries).
10. CASUALTY OR EMINENT DOMAIN. In the event of any taking by eminent domain or
damage by fire or other casualty to the Premises and/or Space, the Customer
shall acquiesce and be bound by any action taken by or agreement entered into by
the Company with respect thereto, and in any event the Customer shall not have
(and hereby waives and releases) any claim with respect to any award, damages or
proceeds associated with any such taking or damage.
11. ENTIRE AGREEMENT. All prior agreements and understandings of the parties are
merged within this Agreement, which alone fully and completely sets forth the
understanding of the parties with respect to the subject matter of this
Agreement. This Agreement shall not be modified without the prior written
agreement of all the parties. Any handwritten modifications to this Agreement
shall be void ab initio.
12. NOTICES. Any and all notices or communications which either party may desire
or be required to give to the other shall be in writing and shall be sent to the
other party by certified or registered mail at the address designated below:
If to Company: Bridge Information Systems, Inc.
Three World Financial Center
New York, New York 10285
(212) 372-7195 (fax)
Attention: Zachary Snow,
Executive Vice President and
General Counsel
If to Customer: SAVVIS Communications Corporation
717 Office Parkway
St. Louis, Missouri 63141
(314) 468-7550 (fax)
Attention: Steven M. Gallant,
Vice President and General Counsel
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<PAGE>
13. GOVERNING LAW. This Agreement shall be governed by the laws of the State of
- -------------.
14. INSURANCE. The Customer agrees to provide the Company evidence (in the form
of certificates of insurance), on or before the date of the commencement of the
Term, and to keep in force and effect during the Term, with respect to the
Equipment, a policy of comprehensive liability insurance, naming the Company as
an additional insured, and a policy of property insurance containing waivers of
subrogation against the Company and against the owners and other parties in
interest of any Premises subject to the Lease. Such insurance shall be for an
- -----------------------------------------------------------------.
15. INTERPRETATION. In the event of any conflict between the terms of this
Agreement and the terms contained in any Exhibit hereto, the terms of the
Exhibit shall govern.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
BRIDGE ______________________________ SAVVIS _______________________________
By: ________________________________ By: __________________________________
Title:_______________________________ Title:________________________________
Date:________________________________ Date:_________________________________
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<PAGE>
EXHIBIT A TO EQUIPMENT COLLOCATION PERMIT
COLLOCATE SCHEDULE
[TO BE PROVIDED AT CLOSING]
1. Premises: __________________________________________________________
2. Price: __________________________________________________________
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<PAGE>
EXHIBIT B TO EQUIPMENT COLLOCATION PERMIT
LEASE
[TO BE COMPLETED AT CLOSING]
The term "Lease" shall include the leases listed below, as the
same may be amended from time to time by the Company.
Boston
Seattle
Minneapolis
New York
Miami
Houston
Chicago
Dallas
D.C.
Atlanta
Los Angeles
Denver
San Francisco
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<PAGE>
EXHIBIT C TO EQUIPMENT COLLOCATION PERMIT
SERVICES DESCRIPTION
[TO BE COMPLETED AT CLOSING]
The Company shall coordinate with the Customer to provide the following
services:
1. Cross Connects: If other carriers are in the same building as the Company,
the Company shall provide any necessary cross connects to the other carrier's
demarc for T-1s, DS-3s and OC-3s. Customer shall provide the Company with
customer facility access ("CFA").
2. Services: The Company, at its cost (except as otherwise provided), shall
provide Customer with the following:
A. DS-3 cross connect equipment, T-1 DSX cross connect cabling,
10' coaxial cable from the DS-3 cross connect to the RJ48
cross connect panel;
B. OC-3 cross connect equipment [specifications to be provided];
C. Access to 110 V AC power outlet for test equipment.
D. Transmission cabling to the collocation Space (terminated):
i. For ATM T-1 connections, the Company will wire to a
common DSX cross connect and will wire the Customer
portion of this common DSX to a 28 port, RJ48 cross
connect panel. The Company shall provide the RJ48
cross connect panel at Customer's cost and the
Company shall provide DSX equipment and the cross
connect from the DSX to Customer's RJ48 cross connect
panel at the Company's cost. The DSX panel shall be
the Company's demarc.
ii. For Frame Relay T-1 connections, the Company shall
provide a hubbed DS-3, channelized on the Company's
end and a standard DS-3 termination on Customer's
end. The Company shall bring each DS-3 to a common
DS-3 cross connects. The DS-3 is the Company's
demarcation point. The Company shall provide 10 feet
of coaxial cable slack with BNC connectors on each
end of the foregoing DS-3 to Customer's collocation
racks.
iii. [Specifications for OC-3 cross-connections]
In both above cases, all circuits must be clearly tagged and
labeled with circuit ID. Customer will provide the cross
connect cabling for the ATM T-1s from Customer's RJ48 panel,
to Customer's equipment. The Frame Relay and ATM T-1
connections shall be provided in the Space. During initial
installation Frame
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<PAGE>
Relay T-1s connectivity is required in the Space. Customer
will order ATM T-1 connections on a site by site basis based
upon Customer's requirements.
E. Grounding for relay racks.
F. Labor required to anchor relay rack to floor.
G. Labor required to run power feeds to relay rack
(non-terminated); and
H. Environmental conditions of approximately 70 degrees (F) and a
50% humidity level.
3. Electricity: The Company shall supply Customer with two (2), ten (10) amp
power feeds (one for main, one for standby). Power requirements in excess shall
be charged in ten (10) amp increments to Customer at a rate to be agreed upon by
the parties. Customer shall pay any electric or other utility charges
attributable to the equipment and related use of the Space as described on
Exhibit A. Upon thirty (30) days' prior written notice, the monthly rate may be
adjusted by the Company from time to time to reflect increases in the rate
charged for electricity by the utility provider. Unless otherwise provided for
in Exhibit A, if Customer requires 120 VAC power for their Equipment, the
Company shall provide the -48 VDC power feeds as indicated above and invert them
at Customer's expense. The Company shall provide uninterrupted power supply
(UPS) or generator access for the Customer's POPs, the details of such provision
to be agreed upon in writing by the Company and the Customer.
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<PAGE>
EXHIBIT I
FORM OF PROMISSORY NOTE
PROMISSORY NOTE
[amount] St. Louis, Missouri
___________, 2000
The undersigned, SAVVIS Communications Corporation (hereinafter referred to
as "Maker"), for value received, promises to pay to the order of Bridge
Information Systems, Inc. (the "Payee"), at its office located at 717 Office
Parkway, St. Louis, Missouri 63141, or at such other place as may be designated
in writing by the holder hereof, in lawful money of the United States of America
in immediately available funds, the principal sum of
_______________________________ United States Dollars (US$_________________),
together with interest thereon from the date hereof, at the rate or rates
hereinafter specified, as follows:
1. Interest. This Note shall bear interest on the aggregate unpaid
principal amount thereof from the date hereof at the fixed rate of interest
equal to ten percent (10%) per annum.
2. Interest and Principal Payments; Maturity. This Note shall be payable as
follows:
(a) Interest shall be payable semi-annually in cash on each _____ and
commencing on _______________, 2000.;
(b) On ________________, 2003, the Maker shall pay to the Payee a
final installment of principal and interest in an amount equal to the sum
of the principal balance of this Note together with the remaining accrued
and unpaid interest thereon.
3. Calculation of Interest. The interest rate payable hereunder shall be
calculated on the basis of twelve (12) thirty (30) day months over a year of 360
days.
4. Application of Payments. All installments paid hereunder shall be in
currently available funds.
5. Payments Due on Saturdays, Sundays or Legal Holidays. If any payment of
principal or interest due on this Note is payable on a day which is a
Saturday, Sunday or legal holiday in the state of Missouri, then such payment
shall be due on the next business day, the amount of such payment, in such case,
to include all interest accrued to the date of actual payment.
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<PAGE>
6. Voluntary Prepayment. The indebtedness evidenced by this Note may be
prepaid, in whole or in part, at any time without premium. All prepayments shall
be applied first to accrued interest and the balance to the reduction of the
principal. No prepayment shall obligate Payee to re-advance any sums prepaid.
7. Mandatory Prepayment. If the Maker receives an "Infusion of Capital" of
three hundred million United States dollars (U.S.$300,000,000.00) or more in the
aggregate, then it shall reduce the principal balance of this Note by an amount
equal to no less than fifty percent (50%) of the excess of such infusions above
$300 million; provided, however, if the Maker's board of directors reasonably
determine that Maker has insufficient funding to meet estimated cash
requirements for the ensuing 18 months, then no prepayment shall be required.
"Infusion of Capital" means any issuance of equity in exchange for cash, and
thus excluding acquisitions and stock options.
8. Default Rate of Interest. After maturity, by acceleration or otherwise,
this Note shall bear interest at a rate equal to fifteen percent (15%) per annum
("Default Rate"). Should Maker fail to make any payment hereon on the date on
which it shall fall due, or should any default be made in the performance by
Maker or any affiliated entity of Maker of any of the agreements, conditions,
covenants, provisions or stipulations contained in this Note or any material
agreements, conditions, covenants, provisions or stipulations contained in any
other documents securing or executed in connection with this Note, then the
holder of this Note, at its option and without notice or demand, may declare
immediately due and payable the entire unpaid balance of principal under this
Note, together with all accrued interest thereon and after the date of such
default this Note shall bear interest at the Default Rate. In such case the
holder of this Note may also recover all costs of suit and other expenses in
connection with efforts to collect any of the aforesaid amounts, together with
attorneys' fees (including attorneys' fees for representation in proceedings
under the Bankruptcy Code), regardless of whether litigation is commenced,
together with interest on any judgment obtained by the holder of this Note at
the Default Rate, including interest at the Default Rate from and after the date
of any foreclosure sale until actual payment is made to the holder of this Note
of the full amount due such holder.
9. Oral Agreements. Oral agreements or commitments to loan money, extend
credit or to forbear from enforcing repayment of a debt including promises to
extend or renew such debt are not enforceable. To protect you (Maker) and us
(Payee) from misunderstanding or disappointment, any agreements we reach
covering such matters are contained in this writing, which is the complete and
exclusive statement of the agreement between us, except as we may later agree in
writing to modify it.
10. Governing Law. This Agreement shall be construed according to and
governed by the laws of the State of Missouri.
IN WITNESS WHEREOF, Maker has executed and delivered this Note the day and
year first above written.
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<PAGE>
SAVVIS Communications Corporation
By:_______________________________
Name:_____________________________
Title:______________________________
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<PAGE>
EXHIBIT J
FORM OF CALL ASSET TRANSFER AGREEMENT
This Transfer Agreement ("Agreement") made as of 12:01 A.M. on
this ___ day of _____________, 2000 (the "Effective Date"), by and between
Bridge _________________________________, a corporation organized under the laws
of __________________, having its principal place of business at
_________________ ("Seller"), and SAVVIS ____________________ [a ______________
company organized under the laws of_________________][_____________ branch, the
____________ branch of a ______________ company organized under the laws of
_______________] having its [registered][principal] office at
______________________________ ("SAVVIS") (Seller and SAVVIS each a "Party" and
collectively the "Parties").
WITNESSETH
WHEREAS, pursuant to that certain Master Establishment and
Transition Agreement dated January ___, 2000 by and between Bridge Information
Systems, Inc. and SAVVIS Communications Corporation (the "Master Establishment
and Transition Agreement") the direct or indirect parent entity of Seller,
Bridge Information Systems Inc. ("BISI"), has granted to SAVVIS Communications
Corporation ("SCC"), which is the direct or indirect parent of SAVVIS and the
subsidiaries or other operations of SCC worldwide, the right to purchase the
Call Assets and to assume the Assumed Liabilities in the Call Jurisdictions.
Capitalized terms used but not defined herein shall have the meaning ascribed to
them in the Master Establishment and Transition Agreement;
WHEREAS, pursuant to the Master Establishment and Transition
Agreement, transfers of Call Assets and the Assumed Liabilities, rights and
obligations associated therewith will be effected by subsidiaries of BISI and
SCC pursuant to individual transfer services agreements between such entities;
and
WHEREAS, SAVVIS and Seller desire to effect a transfer of the
certain Call Assets and the liabilities, rights and obligations associated
therewith on the terms and conditions set forth herein;
NOW THEREFORE, in consideration of the premises and the mutual
covenants and obligations herein set forth and of other good and valuable
consideration, receipt of which is hereby acknowledged, the Parties agree as
follows:
1. DEFINITIONS
1.1 In this Agreement and the Schedules the following expressions
shall have the following meanings namely:
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<PAGE>
"Agreement" means the agreement between the Parties the terms of which
are set out herein;
"Assets" means the assets of the IP Network set forth in Clause 2.1 as
amended pursuant to Clause 2.2;
"Closing" has the meaning set forth in Clause 5.1;
"Effective Date" has the meaning set forth in the first paragraph;
["Employees" means those employees of Seller listed on the attached
Schedule 4;]
"Knowledge" means actual knowledge (i.e., the conscious awareness of
facts or other information), or belief, without undertaking any
investigation, and not constructive knowledge. The words "know",
"knowing" and "known" shall be construed accordingly. In the case of
the Seller, Knowledge means the Knowledge of ____________,
_____________, and ______________.
"IP Network" means those assets that are used by Seller which consists
of providing telecommunications facilities utilizing Internet
protocols between Seller, suppliers and group companies of Seller and
Seller's customers;
"Liabilities" means all of the liabilities specifically listed in
Schedule [5]; provided, however, that any contractual liabilities and
contractual obligations of the Seller for goods or services delivered
prior to the Effective Date shall be excluded from the definition of
Liabilities and shall remain the responsibility of the Seller; and
"Software" means any and all software and software applications,
including operating software and embedded software, owned or used by
Seller in relation to the maintenance, ownership or operations of the
Assets listed in Clause 2.1.1.
1.2 In this Agreement words importing the singular include the plural
and vice versa and words importing gender include any other gender.
1.3 The headings of Clauses are for ease of reference and shall not
affect the construction of this Agreement.
1.4 References in this Agreement to Clauses or Schedules are
references to clauses of or schedules to this Agreement.
1.5 Any undertaking hereunder not to do any act or thing shall be
deemed to include an undertaking not to permit or suffer the doing of
that act or thing.
1.6 The expression "person" used in this Agreement shall include
(without limitation) any individual, partnership, local authority,
company or unincorporated association.
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<PAGE>
2. SALE & PURCHASE
2.1 Seller shall sell and SAVVIS shall purchase with effect from the
Effective Date the Assets subject in all cases to the Liabilities,
which are the following:
2.1.1 the computer equipment listed in Schedule 1, including
but not limited to the Ascend Cascade Switch 9000s and the
Baynet Routers;
2.1.2 the full benefit of all agreements between Seller and
any other person, firm or corporation (other than SAVVIS) to
which Seller is entitled in connection with the operations
of the IP Network which are in force at the Effective Date
including, without limitation, the contracts listed in
Schedule 2 as well as any maintenance, support, supply or
licensing agreements, if any, relating to the Software;
2.1.3 the right of SAVVIS to represent itself as operating
the IP Network in succession to Seller;
2.1.4 all technical and contractual information relating to
the IP Network;
2.1.5 the Software.
2.2 SAVVIS and Seller shall take all reasonable efforts to jointly
prepare, within fifteen days after the Effective Date, or as soon as
practical thereafter, a revised list of the Assets as set forth in
Schedules 1 and 2. This revised list shall supersede the attached
Schedules 1 and 2 and shall include any assets purchased or acquired
by Seller after October 31, 1999 but before the Effective Date which
comprise part of the IP Network. The parties shall negotiate in good
faith to finalize such revised Schedules and shall provide to each
other any information or records reasonably necessary to finalize
such revised Schedules.
3. CONSIDERATION
3.1 The purchase price for the Assets exclusive of any VAT, stamp
duty, and transfer taxes (the "Consideration") shall be the sum
specified in Schedule 3. To the extent the Assets are revised pursuant
to Clause 2.2, the Consideration set forth in Schedule 3 shall be
adjusted based on the net book value on the Effective Date (in the
books of Seller) of the Assets which are added to or removed from the
revised list. The Parties shall take all reasonable efforts to jointly
prepare any such revisions to Schedule 3 within fifteen days after the
Effective Date, or as soon as practical thereafter. The parties shall
negotiate in good faith to finalize such revised Schedule and shall
provide to each other any information or records reasonably necessary
to finalize such Schedule.
3.2 The Consideration shall be due and payable as set forth in
Schedule 3.
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<PAGE>
3.3 The amount set forth in Schedule 3 is exclusive of VAT, and any
and all transfer or other taxes or duties applicable to the
transaction provided for in this Agreement, which SAVVIS hereby agrees
to pay.
4. REPRESENTATIONS AND WARRANTIES.
Seller represents and warrants to the Buyer that the statements
contained in this Clause 4 are correct and complete as of the date of
this Agreement.
4.1 Seller is a corporation duly organized, validly existing, and in
good standing under the laws of the jurisdiction in which Seller is
organized.
4.2 Seller has full corporate power and authority to execute and
deliver this Agreement and to perform its obligations hereunder. This
Agreement constitutes the valid and legally binding obligation of the
Seller, enforceable in accordance with its terms and conditions.
4.3 Except as would not result in the imposition of any Impermissible
Security Interest upon any of the Assets and except where the
violation, conflict, breach, default, acceleration, termination,
modification, cancellation, failure to give notice, or a lien would
not impair the value of use of the Assets or have a material adverse
effect on ability of the parties to consummate the transactions
contemplated by this Agreement, neither the execution and the delivery
of this Agreement nor the consummation of the transactions
contemplated hereby by the Seller will:
(a) violate any constitution, statute, regulation, rule,
injunction, judgment, order, decree, ruling, charge, or other
restriction of any government, governmental agency, or court to which
the Seller is subject or any provision of the charter or bylaws of the
Seller,
(b) conflict with, result in a breach of, constitute a default
under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice under
any agreement, contract, lease, license, instrument, or other
arrangement to which the Seller is a party or by which they are bound
or to which any of the Assets are subject; or
(c) require Seller to give any notice to, make any filing with,
or obtain any authorization, consent, or approval of any third party,
government or governmental agency.
4.4 Seller has no liability or obligation to pay any fees or
commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement for which the Buyer could
become liable or obligated.
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4.5 The Seller has good title to, or a valid leasehold interest in
the Assets, free and clear of all Impermissible Security Interest,
and there exists no material restriction on the transfer of such
property.
4.6 Each of the Contracts with respect to the Assets is a valid and
binding obligation of the parties thereto, enforceable in accordance
with terms, in full force and effect. No party to any such contract
is in material breach or violation thereof or default thereunder.
Except for matters which would not, in the aggregate, have a material
adverse effect on the Assets, no event has occurred which, through
the passage of time or the giving of notice, or both, would
constitute, and neither the execution of this Agreement nor the
consummation of the transactions contemplated hereby do or will
constitute or result in, a breach or violation of or default under
any contract, or would cause the acceleration of any obligation of
any party thereto or the creation of any Impermissible Security
Interest upon the Assets.
4.7 EXCEPT AS EXPRESSLY SET FORTH IN THIS CLAUSE 4, THE SELLER MAKES
NO REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AT LAW OR IN
EQUITY, IN RESPECT OF ANY OF ITS ASSETS, LIABILITIES OR OPERATIONS,
INCLUDING, WITHOUT LIMITATION, WITH RESPECT TO MERCHANTABILITY OR
FITNESS FOR ANY PARTICULAR PURPOSE, AND ANY SUCH OTHER
REPRESENTATIONS OR WARRANTIES ARE HEREBY EXPRESSLY DISCLAIMED. BUYER
HEREBY ACKNOWLEDGES AND AGREES THAT, EXCEPT TO THE EXTENT
SPECIFICALLY SET FORTH IN THIS CLAUSE 4, THE BUYER IS PURCHASING THE
ASSETS ON AN "AS-IS, WHERE-IS" BASIS. WITHOUT LIMITING THE GENERALITY
OF THE FOREGOING, THE SELLER MAKES NO REPRESENTATION OR WARRANTY
REGARDING ANY ASSETS OTHER THAN THE ASSETS BEING PURCHASED HEREUNDER
OR ANY LIABILITIES OTHER THAN THE LIABILITIES ASSUMED HEREUNDER, AND
NONE SHALL BE IMPLIED AT LAW OR IN EQUITY.
5. CLOSING
5.1 Closing of the sale shall take place on the Effective Date when
Seller shall deliver to SAVVIS all physical Assets hereby agreed to
be sold, other than the Assets referred to in Clause 2.2 above. All
physical Assets referred to in Clause 2.2 above shall be delivered to
SAVVIS as soon as practicable following the finalization of any
adjustment to the Assets as set forth in Clause 2.2.
5.2 Property in and title to the Assets referred to in Clause 2.1
shall pass to SAVVIS on the Effective Date. Property in and title to
the Assets referred to in Clause 2.2 shall pass to SAVVIS on the date
that the revised schedules are finalized in accordance with on Clause
2.2 but such transfer shall be effective as of the Effective Date.
5.3 Subject to Clause 7 below, Seller shall on or as soon as
practicable after the Effective Date deliver to SAVVIS all transfers,
assignments and novations relating to the Assets (including the
property) together with the documents of title thereto, necessary to
give
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effect to this Agreement; provided, however, that any such transfers
shall as between the Parties be deemed to be effective as of the
Effective Date.
6. THE LIABILITIES
Subject to the consent where necessary of other contracting parties
(which the Parties hereto shall use their reasonable best efforts to
obtain) SAVVIS shall as from the Effective Date assume, perform and
discharge all Liabilities. If it proves impossible to obtain any such
consent in relation to any of the Liabilities, SAVVIS will assume,
perform and discharge such Liability as agent for and on behalf of
Seller and will indemnify Seller accordingly. Seller will indemnify
SAVVIS for contractual liabilities for goods or services delivered
prior to the Effective Date.
7. THIRD PARTY CONSENTS
7.1 Seller and SAVVIS shall use their reasonable best efforts to
obtain any required consent of any other contracting parties to the
assignment or novation of any agreement referred to in Clause 2.1.3.
Unless and until such consent shall be forthcoming and the relevant
agreement shall have been assigned or novated, SAVVIS shall at its
own cost and expense assume Seller's obligations under such
agreements and Seller shall account to SAVVIS for all sums paid or
received therefrom.
7.2 Seller will at SAVVIS' request and expense give to SAVVIS all
assistance in the power of Seller to enable SAVVIS to enforce the
agreements referred to in Clause 2.1.3 against the other contracting
party or parties and, without prejudice to the generality of the
foregoing, will provide all such relevant books, documents and other
information as SAVVIS may require in relation thereto.
[8. PERSONNEL
SAVVIS and Seller hereby agree and acknowledge that the Transfer of
Undertakings (Protection of Employment) Regulations applies to this
transaction and, therefore, that the contracts of employment of all
of the Employees of Seller, as set forth at Schedule 4 to this
Agreement, shall not be terminated at Closing but shall continue to
have effect as if originally made between such Employee and SAVVIS in
accordance such Regulations.]
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[9. INDEMNIFICATION
Seller will indemnify, defend and hold SAVVIS and its shareholders,
directors, officers, successors, assigns, and agents of each of them,
harmless from and against any and all claims, losses, damages,
liabilities, expenses or costs, plus reasonable attorneys' fees and
expenses, incurred by SAVVIS to the extent resulting from or arising
out of any claim or suit by any Employee of Seller, or by any other
employee of Seller that is not being transferred to SAVVIS, asserting
rights under the Transfer of Undertakings (Protection of Employment)
Regulations 1981 or any other similar law or regulation.]
10. FURTHER ASSURANCE
From and after Closing, the Parties shall do such acts and execute
such documents and instruments as may be reasonably required to make
effective the transactions contemplated hereby. In the event that
consents, approvals, other authorizations or other acts contemplated
by this Agreement have not been fully effected as of Closing, the
parties will continue after Closing, without further consideration,
to use their reasonable best efforts to carry out such transactions;
provided, however, in the event that certain approvals, consents or
other necessary documentation cannot be secured, then the Party
having legal responsibility, ownership or control shall act on behalf
of the other Party, without further consideration, to effect the
essential intention of the Parties with respect to the transactions
contemplated by this Agreement.
11. SURVIVAL OF CERTAIN PROVISIONS
To the extent that any provision of this Agreement shall not have
been performed at Closing it shall survive and remain in full force
and effect notwithstanding Closing.
12. GOVERNING LAW AND CHOICE OF FORUM
This Agreement shall be governed by and construed and interpreted in
accordance with the laws of [England][the state of Missouri, United
States of America] and the parties to this Agreement hereby agree
that all matters arising out of or in connection with this Agreement
shall be subject to the exclusive jurisdiction of the courts of
[England][the state of Missouri].
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AS WITNESS the hands of duly authorized representatives of the parties the day
and year first above written
SIGNED by )
for and on behalf of )
BRIDGE INFORMATION )
SYSTEMS ______________ )
SIGNED by )
for and on behalf of )
SAVVIS _____________ )
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SCHEDULE 1 TO CALL ASSET TRANSFER AGREEMENT
THE COMPUTER EQUIPMENT
[To be Completed at Call Right Exercise Closing]
76
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SCHEDULE 2 TO CALL ASSET TRANSFER AGREEMENT
THE CONTRACTS
[To be Completed at Call Right Exercise Closing]
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SCHEDULE 3 TO CALL ASSET TRANSFER AGREEMENT
THE CONSIDERATION
[To be Completed at Call Right Exercise Closing]
ALLOCATION OF CONSIDERATION
PAYMENT OF CONSIDERATION
The consideration shall be due and payable thirty days after receipt
by SAVVIS of a valid invoice, which may be submitted on or after the
Effective Date.
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[SCHEDULE 4 TO CALL ASSET TRANSFER AGREEMENT
THE EMPLOYEES]
[To be Completed at Call Right Exercise Closing]
79
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SCHEDULE 5 TO CALL ASSET TRANSFER AGREEMENT
THE LIABILITIES
[To be Completed at Call Right Exercise Closing]
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SCHEDULE 1.3
OTHER ASSUMED LIABILITIES
[To be Completed at Closing]
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SCHEDULE 1.10
INTERNATIONAL NETWORK ASSETS
[To be Completed at Closing]
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SCHEDULE 1.11
ASSETS NOT INCLUDED IN THE IP NETWORK
[To be Completed at Closing]
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SCHEDULE 1.12
KNOWLEDGE
[To be Completed at Closing]
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SCHEDULE 1.16
US NETWORK ASSETS
[To be Completed at Closing]
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SCHEDULE 2.3
PAYMENT OF PURCHASE PRICE
[To be Completed at Closing]
Payment of Purchase Price for International Network Assets: Buyer shall pay to
the Seller, for the International Network Assets an amount cash equal to
$________________, which is the sum of the Net Book Value of such assets, as set
forth in each Local Transfer Agreement. This amount shall be paid by the
following entities in the following described manner:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Payor Payee Amount Manner of Payment
</TABLE>
Payment of Purchase Price for LLC Interest:
<TABLE>
<CAPTION>
<S> <C> <C>
============================================== ===================================== ==================================
TOTAL PURCHASE PRICE FOR CASH PRINCIPAL BALANCE OF PROMISSORY
LLC INTEREST PAYMENT NOTE
============================================== ===================================== ==================================
============================================== ===================================== ==================================
$ $ $
============================================== ===================================== ==================================
</TABLE>
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SCHEDULE 3.3
CONSENTS
[To be Completed at Closing]
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SCHEDULE 3.5(A)
IP NETWORK EXCEPTIONS
[To be Completed at Closing]
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SCHEDULE 3.6
CONTRACTS
[To be Completed at Closing]
89
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SCHEDULE 3.7
EMPLOYEES
[To be Completed at Closing]
90
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SCHEDULE 5.1
NOTICES AND CONSENTS
[To be Completed at Closing]
91
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SCHEDULE 5.2(A)
CALL RIGHT JURISDICTIONS AND CALL ASSETS
[To be Completed at Closing]
Jurisdiction: Assets:
92
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SCHEDULE 5.2(B)
SATELLITE RIGHTS
[To be Completed at Closing]
93
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SCHEDULE 5.5
SHORT-TERM CALL ASSETS
[To be Completed at Closing]
94
EXHIBIT 10.11
CONFIDENTIAL MATERIALS HAVE BEEN OMMITTED FROM THIS AGREEMENT PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT AND HAVE BEEN FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION. ASTERISKS DENOTE OMISSIONS.
NETWORK SERVICES AGREEMENT
This NETWORK SERVICES AGREEMENT (the "AGREEMENT") is effective as of
12:01 A.M. _________, 2000 (the "EFFECTIVE DATE"), between SAVVIS Communications
Corporation, a Missouri corporation ("SAVVIS"), and Bridge Information Systems,
Inc., a Missouri corporation ("BRIDGE").
RECITALS
A. Bridge is engaged in the business of collecting and distributing various
financial, news and other data.
B. SAVVIS is engaged in the business of providing Internet Protocol
backbone and other data transport services.
C. SAVVIS and certain of its subsidiaries have acquired from Bridge and
certain of its subsidiaries certain assets relating to the provision of Internet
Protocol backbone and other data transport services, and may in the future
acquire additional such assets from Bridge and certain of its subsidiaries, all
pursuant to a Master Establishment and Transition Agreement between SAVVIS'
corporate parent, SAVVIS Communications Corporation, a Delaware corporation, and
Bridge, of even date herewith (the "MASTER ESTABLISHMENT AND TRANSITION
AGREEMENT").
D. It is an obligation of the parties under the Master Establishment and
Transition Agreement to cause this Network Services Agreement to be entered into
between SAVVIS and Bridge, pursuant to which SAVVIS shall provide Internet
Protocol backbone and other data transport services to Bridge.
E. Together with this Agreement, the parties hereto are entering into a
Technical Services Agreement of even date herewith (the "TECHNICAL SERVICES
AGREEMENT") and an Administrative Services Agreement of even date herewith (the
"Administrative Services Agreement"), providing for the provision of certain
services to SAVVIS by Bridge. Certain subsidiaries of SAVVIS and certain
subsidiaries of Bridge are entering into, and may in the future enter into,
Local Transfer Agreements, Local Network Services Agreements (the "Local Network
Services Agreements"), Equipment Collocation Permits (the "Equipment Collocation
Permits"), and Local Administrative Services Agreements.
NOW, THEREFORE, in consideration of the premises, and the mutual
covenants contained herein and of other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the parties agree as
follows:
1. CONTRACT DOCUMENTS AND DEFINITIONS
1.1. This Agreement shall consist of this Network Services
Agreement by and between SAVVIS and Bridge, including all
addenda to this Agreement entered into in the manner set forth
herein (each an "ADDENDUM" and collectively the "ADDENDA").
This Agreement shall be interpreted wherever possible to avoid
conflicts between the Sections hereof and the Attachments,
provided that if such a conflict shall arise, the Attachments
shall control.
1.2. Whenever it is provided in this Agreement for a matter to
be mutually agreed upon by the parties and set forth in an
Addendum to this Agreement, either party may initiate the
process of determining such matter by submitting a proposed
outline or contents of such Addendum to the other party. Each
party shall appoint a primary contact and a secondary contact
for the completion of such Addendum, who shall be the contact
points for every issue concerning such Addendum and who shall
be informed of the progress of the project. The names of the
contacts will be exchanged in writing by the parties. Using
the contacts, the parties shall work together in good faith
with such diligence as shall be commercially reasonable under
the circumstances to complete such Addendum, provided,
however, that neither party shall be obligated to enter into
such an Addendum. Upon the completion of such Addendum, it
shall be set forth in a written document and executed by the
parties and shall become a part of this Agreement and shall be
deemed to be incorporated herein by reference.
1.3. Whenever used in this Agreement, the words and phrases listed
below shall have the meanings given below, and all defined
terms shall include the plural as well as the singular. Unless
otherwise stated, the words "herein", "hereunder" and other
similar words refer to this Agreement as a whole and not to a
particular Section or other subdivision. The words "included"
and "including" shall not be construed as terms of limitation.
Additional definitions are provided in Schedule 3.1 of this
Agreement. Capitalized terms not otherwise defined have the
meanings assigned to such terms in the Master Establishment
and Transition Agreement.
"ADDITIONAL NETWORK FACILITIES" means any assets and contracts
of SAVVIS for the provision of Internet Protocol backbone and
other data transport services other than the Acquired Network
Facilities.
"AFFILIATE" has the meaning set forth in Rule 12b-2 of the
regulations promulgated under the Securities Exchange Act of
1934, as amended.
"AGREEMENT YEAR" means a period of 12 months beginning on the
Effective Date and each subsequent anniversary thereof.
"AMERICAS" means North America, Central America and South
America, including the Caribbean, but excluding the United
States.
"ASIA" means Australia, China, Hong Kong, India, Indonesia,
Japan, Korea, Macau, Malaysia, New Zealand, Philippines,
Singapore, Taiwan, and Thailand.
"BRIDGE" means Bridge Information Systems, Inc., a Missouri
corporation, and its successors and assigns.
"BRIDGE SUBSIDIARIES" has the meaning assigned to the term
"Seller Subsidiaries" in the Master Establishment and
Transition Agreement.
"CONFIDENTIAL INFORMATION" means all information concerning
the business of Bridge, SAVVIS or any third party doing
business with either of them that may be obtained from any
source (i) by SAVVIS by virtue of its performance under this
Agreement or (ii) by Bridge by virtue of its use of the
Networks. Such information shall also include the terms of
this Agreement (and negotiations and proposals from one party
to the other related directly thereto), network designs and
design recommendations, tools and programs, pricing, methods,
processes, financial data, software, research, development,
strategic plans or related information. All such information
disclosed prior to the execution of this Agreement shall also
be considered Confidential Information for purposes of this
Agreement.
Confidential Information shall not include information that:
(a) is already rightfully known to the receiving
party at the time it is obtained by such party,
free from any obligation to keep such
information confidential; or
(b) is or becomes publicly known through no wrongful
act of the receiving party; or
(c) is rightfully received by the receiving
party from a third party without restriction
and without breach of this Agreement.
"DISTRIBUTOR COUNTRY" means any country in which the products
and services of Bridge and Bridge Subsidiaries are provided
through third-party distributors.
"EFFECTIVE DATE" means the date set forth in the Preamble of
this Agreement.
"EUROPE" means Austria, Belgium, Denmark, Finland, France,
Germany, Greece, Hungary, Ireland, Italy, Luxembourg,
Netherlands, Norway, Poland, Spain, Sweden, Switzerland,
Turkey and the United Kingdom.
"EVENT OF DEFAULT BY SAVVIS" has the meaning assigned to such
term in Section 7.1 of this Agreement.
"INITIAL TERM" means a period of ten consecutive Agreement
Years beginning on the Effective Date.
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"INSTALLATION SITE" means any facility of Bridge or a Bridge
Subsidiary or of vendors or customers of Bridge or a
BridgeSubsidiary at which one or more of the Networks is
installed. "MARKET HOURS" means, with respect to any
Installation Site, the period of time beginning two hours
before the time at which trading opens on the principal
securities exchange or automated quotation system designated
by Bridge in writing from time to time as being used by the
purchasers and sellers of securities at such Installation
Site, and ending two hours after the time at which such
trading ceases to be conducted.
"MINIMUM ANNUAL COMMITMENT" has the meaning assigned to such
term in Schedule 3.1 of this Agreement.
"NETWORK" and "NETWORKS" have the meaning assigned to such
terms in Section 2.1 of this Agreement.
"REPLACED ROUTERS" has the meaning assigned to such term in
Section 2.7 of this Agreement.
"QUALITY OF SERVICE STANDARDS" means the standards for the
performance of the Networks contained in Schedule 2.2 hereto
or an Addendum to this Agreement.
"SAVVIS" means SAVVIS Communications Corporation, a Missouri
corporation, and its successors and assigns.
"SAVVIS BACKBONE" means those facilities that are owned by, or
leased to, SAVVIS providing telecommunications utilizing the
Internet Protocol.
"SAVVIS PARENT" means SAVVIS Communications Corporation, a
Delaware corporation.
"SAVVIS SUBSIDIARIES" has the meaning assigned to the term
"Buyer Subsidiaries" in the Master Establishment and
Transition Agreement.
"Securities EXCHANGE ACT" means the Securities Exchange Act of
1934, as amended.
"TELERATE" means Telerate Holdings, Inc., a Delaware
corporation.
"TELERATE NETWORK SERVICES AGREEMENT" means the network
services agreement pursuant to which SAVVIS shall provide
Internet Protocol backbone and other data transport services
to Telerate.
"TRANSITION PERIOD" has the meaning assigned to such term in
Section 6.3 of this Agreement.
2. THE NETWORKS AND QUALITY OF SERVICE STANDARDS
2.1. SAVVIS agrees to use the Acquired Network Facilities to
provide (or to cause the SAVVIS Subsidiaries to provide) to
Bridge and the Bridge Subsidiaries the following managed
packet-data transport networks, including the operation,
management and maintenance thereof:
(a) a global office-automation network, providing
connectivity between the offices of Bridge (the "OA
NETWORK"),
(b) a global data collection network (the "COLLECTION
NETWORK") and
(c) a global data distribution network (the "DISTRIBUTION
NETWORK"),
which shall be referred to in this Agreement collectively as
the "NETWORKS" and individually as a "NETWORK."
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2.2. Each Network shall be operated, managed and maintained by
SAVVIS. SAVVIS may, but shall not be obligated to, use
facilities of SAVVIS other than the Acquired Network
Facilities to provide all or any part of any Network.
Beginning on the first anniversary of the Effective Date and
thereafter, each Network shall be operated, managed and
maintained by SAVVIS according to the Quality of Service
Standards set forth in Schedule 2.2 hereof, and SAVVIS shall
be responsible for monitoring the performance of the Networks
with respect to the Quality of Service Standards and shall
provide Bridge with monthly reports of such performance. If
the Quality of Service Standards are not met with respect to a
particular Installation Site in any month, Bridge shall be
entitled to receive, upon written request by Bridge within 30
days of its receipt of the performance report for such
Installation Site for such month, a credit in the amount set
forth on Schedule 2.2 attached hereto, which amount shall be
deemed to be one month's charges applicable to such
Installation Site under this Agreement with respect to such
month; provided, however, that Bridge shall not be entitled to
such credit to the extent that the failure to meet the Quality
of Service Standards with respect to such Installation Site is
due to (i) an act or omission of Bridge or a Bridge Subsidiary
or a vendor or customer of Bridge or a Bridge Subsidiary or
(ii) equipment or software used by Bridge and not provided by
SAVVIS. Not more than one credit of one month's charges shall
be given for a particular Installation Site for a particular
month. The Quality of Service Standards shall not apply to the
provision of Local Access Facilities in countries in which the
products and services of Bridge and Bridge Subsidiaries are
provided through third-party distributors. For all purposes of
this Agreement, including without limitation the determination
of an Event of Default by SAVVIS, the Quality of Service
Standards applicable to a particular Installation Site in any
month shall be deemed to have been met unless Bridge, within
30 days of its receipt of the performance report for such
Installation Site for such month, requests in writing a credit
as set forth above with respect to such Installation Site for
such month.
2.3. SAVVIS agrees that, for the term of this Agreement, the
network operations centers for the Networks shall be managed
by Bridge under the Technical Services Agreement; provided,
however, that SAVVIS shall not be restricted from building,
managing and operating one or more network operations for such
portions of the SAVVIS Backbone or other operations of SAVVIS
that are not used to provide the Networks to Bridge.
2.4. [Intentionally omitted.]
2.5. In providing Additional Network Facilities, SAVVIS agrees to
use its best efforts to expedite the provisioning of the
circuits for such Additional Network Facilities in those
instances in which SAVVIS is responsible for provisioning such
circuits, and to use its best efforts to avoid single points
of failure in the engineering design of such Additional
Network Facilities, consistent with the level of redundancy
specified in the applicable Addendum.
2.6. Throughout the term of this Agreement, SAVVIS shall use its
reasonable best efforts to continue to meet the requests of
Bridge to enhance the total capacity, geographic extension and
performance quality of the Networks, and to maintain its
research and development effort at a level appropriate to
sustain the ability of Bridge to compete on the basis of the
quality of the Networks.
2.7. The parties acknowledge that SAVVIS intends to replace certain
existing routers among the Acquired Network Facilities (the
"REPLACED ROUTERS") with new equipment promptly after the
Effective Date. It is the intention of the parties that the
Replaced Routers will be re-deployed at Installation Sites at
which one or more 56 Kbps ports or 64 Kbps ports will be
provided by SAVVIS using Additional Network Facilities as set
forth in Section 3.1 hereof. SAVVIS agrees to manage the use
of its inventory of routers in order to re-deploy the maximum
number of Replaced Routers as is commercially reasonable. So
long as Replaced Routers are available for re-deployment
during the 18 months following the Effective Date, SAVVIS
agrees not to make any bulk purchases of additional routers
without the prior written consent of Bridge, which will not be
unreasonably withheld. Upon the expiration of 18 months
following the Effective Date, the parties shall determine the
number of Replaced Routers that the parties mutually agree are
likely to be so re-deployed within the succeeding 12 months.
All Replaced Routers that are not reasonably likely to be so
re-deployed within such 12-month period shall be purchased
from SAVVIS by Bridge at a price per Replaced Router equal to
the average net book value as of the Effective Date of all
routers included in the Acquired Network Facilities.
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3. RATES AND CHARGES
3.1. Bridge shall pay SAVVIS for the Networks using the Acquired
Network Facilities and Additional Network Facilities according
to the rates and charges set forth in Schedule 3.1 hereof.
3.2. The parties recognize that certain savings might be obtained
by consolidating the multiple Local Access Facilities that are
provided at such building locations on the Effective Date. In
the event that SAVVIS consolidates the multiple Local Access
Facilities at one or more of such building locations and
obtains cost savings as a result thereof, the parties will
mutually agree within 30 days following such consolidation on
the manner in which such savings shall be shared between
SAVVIS and Bridge. Any reduction pursuant to this Section
shall not affect the Minimum Annual Commitment.
3.3. For any Installation Site to which SAVVIS is providing
services both under this Agreement and the Telerate Network
Services Agreement, the rates and charges applicable to such
Installation Site under this Agreement shall be one-half of
the rates and charges that would otherwise be applicable to
such Installation Site under this Agreement.
4. STRATEGIC ADVISORY COMMITTEE
4.1. Within 30 days after the Effective Date, SAVVIS and Bridge
shall each appoint three senior executives to the "STRATEGIC
ADVISORY COMMITTEE," and one outside consultant shall be
jointly appointed by both parties. Any fees and expenses of
such outside consultant incurred in connection with service on
the Strategic Advisory Committee shall be shared equally by
SAVVIS and Bridge. Each party shall have the right to change
any or all of its representatives on the Strategic Advisory
Committee upon written notice to the other party. A quorum of
the Strategic Advisory Committee shall consist of four
members, provided that at least two members appointed by each
party are present. The Chair of the Strategic Advisory
Committee shall be designated by Bridge from among the seven
members of the Committee.
4.2. The mission of the Strategic Advisory Committee shall be to
review the performance of the Networks, to serve as forum for
the consideration and discussion of issues raised by either
SAVVIS or Bridge with respect to the Networks, and to discuss
issues related to the future development of the data transport
and Internet Protocol backbone operations of SAVVIS in the
context of the relationship of SAVVIS and Bridge.
4.3. The Strategic Advisory Committee shall meet with reasonable
frequency, at the call of the Chair.
4.4. The Strategic Advisory Committee shall have reasonable access
to the Chief Executive Officer and the Board of Directors of
SAVVIS to raise areas of concern to the Committee under this
Agreement.
4.5. SAVVIS agrees to use its commercially reasonable best efforts
to comply with the recommendations of the Strategic Advisory
Committee regarding performance issues arising under this
Agreement.
5. INVOICES
5.1. The amounts due to SAVVIS from Bridge for the installation,
operation, management and maintenance of the Networks shall be
billed monthly in advance. All items on invoices not the
subject of a bona fide dispute shall be payable by Bridge in
United States currency within 30 days from the date of receipt
of the invoice. All amounts not in dispute are subject to
interest charges of 1-1/2 percent that will accrue daily on
all amounts not paid within 30 days of the date of receipt of
the invoice.
5.2. At any time and from time to time, Bridge may, by written
notice to SAVVIS, have one or more Installation Sites removed
from the Networks. Each monthly invoice from SAVVIS to Bridge
shall reflect a reduction in the amount charged to Bridge for
the Networks resulting from any such removal of Installation
Sites. In the case of any Installation Site removed from the
Acquired Network Facilities, such reduction shall be the sum
of:
(a) the actual cost of the Local Access Facilities
connecting the Acquired Network Facilities to such
Installation Site, effective as of such time as
SAVVIS is no longer required to pay such costs, and
(b) the amounts set forth on Schedule 5.2 attached
hereto, which are deemed to be one month's charges
applicable to such Installation Site under this
Agreement with respect to such month during the first
Agreement Year, according to connection speed at such
Installation Site, effective as of such time as such
Installation Site is disconnected from the Networks.
5.3. Bridge shall pay any sales, use, federal excise, utility,
gross receipts, state and local surcharges, value added and
similar taxes, charges or levies lawfully levied by a duly
constituted taxing authority against or upon the Networks. In
the alternative, Bridge shall provide SAVVIS with a
certificate evidencing Bridge's exemption from payment of or
liability for such taxes. All other taxes, charges or levies,
including any ad valorem, income, franchise, privilege or
occupation taxes of SAVVIS shall be paid by SAVVIS.
5.4. Bona fide disputes concerning invoices shall be referred to
the parties' respective representatives who are authorized to
resolve such matters. Any amount to which Bridge is entitled
as a result of the resolution of a billing dispute shall be
credited promptly to Bridge's account. Any amount to which
SAVVIS is entitled as a result of the resolution of a billing
dispute shall be paid promptly to SAVVIS.
5.5. Against the amounts owed by Bridge to SAVVIS under this
Agreement, Bridge shall have the right to offset any amounts
owed by SAVVIS to Bridge under this Agreement, the Technical
Services Agreement, or otherwise, including without limitation
any amounts paid by Bridge on behalf of SAVVIS under
guarantees by Bridge of obligations of SAVVIS.
6. TERM AND EXTENSIONS
6.1. This Agreement shall commence on the Effective Date and shall
continue in full force and effect for the Initial Term unless
terminated or extended in accordance with the provisions
hereof.
6.2. The term of this Agreement may be extended by Bridge for one
additional five-year period by giving SAVVIS written notice
not less than one year before the scheduled expiration of the
Initial Term.
6.3. Upon the termination of this Agreement in accordance with its
scheduled expiration or by Bridge pursuant to Section 7,
SAVVIS will continue to provide the Networks in accordance
with the terms and conditions herein (excluding the Minimum
Annual Commitment) for a period of up to five years after the
effective date of termination (the "TRANSITION PERIOD").
During the Transition Period, Bridge shall pay SAVVIS for the
use of the Networks at the rates in effect at the effective
date of termination. If Bridge has not completely transitioned
from its use of the Networks after the Transition Period,
SAVVIS will provide the Networks at SAVVIS' then current list
rates. SAVVIS and its successor will cooperate with Bridge
until Bridge has completely migrated to another provider.
7. TERMINATION BY BRIDGE
7.1. An "EVENT OF DEFAULT BY SAVVIS" shall be deemed to occur if:
(a) SAVVIS has failed to a material degree to perform or
comply with or has violated to a material degree any
material representation, warranty, term, condition or
obligation of SAVVIS under this Agreement, and SAVVIS
has failed to cure such failure or violation within
60 days after receiving notice thereof from Bridge;
or
(b) SAVVIS becomes the subject of a voluntary or
involuntary bankruptcy, insolvency, reorganization or
liquidation proceeding, makes an assignment for the
benefit of creditors, or admits in writing its
inability to pay debts when due; or
(c) an Event of Default by SAVVIS occurs under the
Telerate Network Services Agreement.
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7.2. Bridge shall have the right to terminate this Agreement, with
no liability to SAVVIS other than for charges (less any
applicable credits) for the Networks provided prior to such
termination, if:
(a) Bridge provides written notice to SAVVIS, at any time
after the ninth anniversary of the Effective Date, of
Bridge's intent to terminate, such termination to be
effective not less than one year following the date
of such notice; or
(b) Bridge provides 10 days written notice of its intent
to terminate in the event that an Event of Default by
SAVVIS occurs.
7.3. For purposes of Section 7.1(a), if the Quality of Service
Standards are not met with respect to a particular
Installation Site in any month, SAVVIS shall be deemed to have
cured such failure within 60 days if the Quality of Service
Standards are met with respect to such Installation Site in
the following month. The parties acknowledge and agree that
the failure of the Quality of Service Standards to be met with
respect to one or more Installation Sites in one or more
months may, but does not necessarily, constitute a failure by
SAVVIS to a material degree to perform or comply with, or a
violation to a material degree of, any material
representation, warranty, term, condition or obligation of
SAVVIS under this Agreement.
7.4. As provided in Section 2.2, for all purposes of this
Agreement, including without limitation the determination of
an Event of Default by SAVVIS under this Section, the Quality
of Service Standards applicable to a particular Installation
Site in any month shall be deemed to have been met unless
Bridge, within 30 days of its receipt of the performance
report for such Installation Site for such month, requests in
writing a credit as set forth in Section 2.2 with respect to
such Installation Site for such month.
8. TERMINATION BY SAVVIS
8.1. SAVVIS shall have the right to terminate this Agreement if:
(a) Bridge has failed to pay any invoice that is not the
subject of a bona fide dispute within 60 days of the
date on which such payment is due and SAVVIS has
provided Bridge with written notice thereof, provided
that Bridge shall have a further 30 days from the
time it receives such notice from SAVVIS of
nonpayment to cure any such default;
(b) SAVVIS provides 10 days written notice of its intent
to terminate in the event that Bridge has failed to
perform or comply with or has violated any material
representation, warranty, term, condition or
obligation of Bridge under this Agreement, and Bridge
has failed to cure such failure or violation within
60 days after receiving notice thereof from SAVVIS;
(c) Bridge becomes the subject of a voluntary or
involuntary bankruptcy, insolvency, reorganization or
liquidation proceeding, makes an assignment for the
benefit of creditors, or admits in writing its
inability to pay debts when due; or
(d) SAVVIS becomes entitled to terminate the Telerate
Network Services Agreement pursuant to the terms
thereof.
8.2. Notwithstanding the provisions of Section 8.1(b) above, SAVVIS
shall not have the right to terminate this Agreement under
Section 8.1(b) solely for a failure by Bridge to perform or
comply with, a violation by Bridge of, the obligations of
Bridge under Section 15 (Confidentiality) of this Agreement,
without prejudice, however, to such rights as SAVVIS may have
pursuant to such Section and to such rights and remedies to
which SAVVIS may be entitled, at law or in equity, as the
result of an actual or threatened breach by Bridge of such
Section.
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9. ACCEPTANCE OF ADDITIONAL NETWORK FACILITIES
9.1. Upon the installation of Additional Network Facilities at any
Installation Site, SAVVIS shall conduct appropriate tests to
establish that such Additional Network Facilities perform in
accordance with mutually agreed upon acceptance criteria
("ACCEPTANCE CRITERIA") set forth in the applicable Addendum
entered into pursuant to Section 2.4, and shall promptly
inform Bridge of such test results. If test results show that
the Additional Network Facilities are performing in accordance
with the Acceptance Criteria, Bridge shall be deemed to accept
the Additional Network Facilities at the Installation Site
immediately.
9.2. If SAVVIS' tests establish that newly installed Additional
Network Facilities at the Installation Site do not perform in
accordance with the mutually agreed upon Acceptance Criteria,
then SAVVIS shall immediately and diligently exert its best
efforts to bring the Additional Network Facilities at such
Installation Site into compliance. SAVVIS shall not bill
Bridge for the Additional Network Facilities at such
Installation Site until the test results show that the
Additional Network Facilities are performing in accordance
with the Acceptance Criteria.
9.3. Upon repair or restoration of any part of the Networks, SAVVIS
shall conduct appropriate tests to establish that the Networks
perform in accordance with mutually agreed upon Acceptance
Criteria and shall promptly inform Bridge of such test
results.
10. RIGHTS AND OBLIGATIONS OF BRIDGE
10.1. SITE PREPARATION. For the installation of Additional Network
Facilities, Bridge shall, at its own expense, provide all
necessary preparations of each Installation Site in accordance
with the requirements to be mutually agreed upon by the
parties and set forth in an Addendum hereto, including inside
wiring, demarcation extension and rack mount accessories.
Bridge shall ensure that Bridge-provided equipment is on-site
by the scheduled installation date. If SAVVIS is required to
reschedule the installation of Bridge-provided equipment
because it is not on-site by the scheduled installation date,
Bridge shall pay SAVVIS to redispatch installation personnel.
10.2. PROPER USE OF NETWORKS.
10.2.1. Bridge shall use any equipment provided by SAVVIS in
connection with the Networks in accordance with its
documentation, which documentation shall be provided
by SAVVIS at no additional charge. Unless otherwise
provided herein, upon the termination of this
Agreement Bridge shall surrender to SAVVIS the
equipment provided by SAVVIS, in good working order,
ordinary wear and tear excepted.
10.2.2. Bridge shall be liable for damages to the Networks
caused by the negligence or willful acts or omissions
of Bridge's officers, employees, agents or
contractors, for loss through theft or vandalism of
the Networks at the Installation Site, and for
damages to the Networks caused by the use of
equipment or supplies not provided hereunder or not
otherwise authorized by SAVVIS.
10.2.3. Bridge shall neither permit nor assist others to use
the Networks for any purpose other than that for
which they are intended, nor fail to maintain a
suitable environment specified by SAVVIS in the
applicable schedule, nor alter, tamper with, adjust
or repair the Networks. Any such alteration,
tampering, adjustment or repair by Bridge shall
relieve SAVVIS from any liability or obligation
hereunder (including any warranty or indemnity
obligation) relating to the affected Network, and
Bridge shall be liable to SAVVIS for any documented
direct costs incurred by SAVVIS as a result of such
actions.
10.3. ABUSE OR FRAUDULENT USE OF NETWORKS. Bridge shall neither
permit nor assist others to abuse or fraudulently use the
Networks, or to use the Networks for any unauthorized or
illegal purposes, including:
(a) obtaining or attempting to obtain service by any
fraudulent means or device to avoid payment; or
(b) accessing, altering or destroying any information of
another party by any fraudulent means or device, or
attempting to do so; or
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(c) using the Networks so as to interfere with the use of
the SAVVIS network by other SAVVIS customers or
authorized users or in violation of law or in support
of any unlawful act; or
(d) using the Networks for voice communications over a
private network in jurisdictions where such use is
not allowed.
Notwithstanding the provisions of Section 8, upon the breach
of this Section 10.3 by Bridge, SAVVIS shall have the right to
terminate this Agreement immediately upon written notice to
Bridge.
10.4. COVENANT NOT TO COMPETE.
10.4.1. As an inducement to SAVVIS to enter into this
Agreement, which Bridge acknowledges is of benefit to
it, and in consideration of the promises and
representations of SAVVIS under this Agreement,
Bridge covenants and agrees that during the term of
this Agreement and for a period of five years
thereafter, neither Bridge nor any of its successors
or assigns will, directly or indirectly, engage in,
or have any interest in any other person, firm,
corporation or other entity engaged in, any business
activities anywhere in the world competitive with or
similar or related to the packet-data transport
network services provided by SAVVIS under this
Agreement; provided, however, that (i) Bridge and the
Bridge Subsidiaries shall be free to continue to use
the Call Assets and the satellite networks currently
used by Bridge, until such Call Assets or satellite
networks have been acquired by SAVVIS or the SAVVIS
Subsidiaries pursuant to the Master Establishment and
Transition Agreement, and (ii) Bridge shall be free
to make passive investments in securities of
companies that provide network services in
competition with SAVVIS which, in the case of any
such security, does not constitute more than ten
percent (10%) of the total outstanding amount of such
security.
10.4.2. If any court or tribunal of competent jurisdiction
shall refuse to enforce one or more of the covenants
in this Section 10.4 because the time limit
applicable thereto is deemed unreasonable, it is
expressly understood and agreed that such covenant or
covenants shall not be void but that for the purpose
of such proceedings such time limitation shall be
deemed to be reduced to the extent necessary to
permit the enforcement of such covenant or covenants.
10.4.3. If any court or tribunal of competent jurisdiction
shall refuse to enforce any or all of the covenants
in this Section 10.4 because, taken together, they
are more extensive (whether as to geographic area,
scope of business or otherwise) than is deemed to be
reasonable, it is expressly understood and agreed
between the parties hereto that such covenant or
covenants shall not be void but that for the purpose
of such proceedings the restrictions contained
therein (whether as to geographic area, scope of
business or otherwise) shall be deemed to be reduced
to the extent necessary to permit the enforcement of
such covenant or covenants.
10.4.4. Bridge specifically acknowledges and agrees that the
foregoing covenants are commercially reasonable and
reasonably necessary to protect the interests of
SAVVIS hereunder. Bridge hereby acknowledges that
SAVVIS and its successors and assigns will suffer
irreparable and continuing harm to the extent that
any of the foregoing covenants is breached and that
legal remedies would be inadequate in the event of
any such breach.
11. RIGHTS AND OBLIGATIONS OF SAVVIS
11.1. PROVISION OF THE NETWORKS. SAVVIS shall operate, maintain and
manage the Networks at the Installation Sites using the
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Acquired Network Facilities in accordance with the Quality of
Service Standards and other terms of this Agreement, including
all Addenda hereto.
11.2. REPRESENTATIONS AND WARRANTIES.
11.2.1. [Intentionally omitted.]
11.2.2. SAVVIS hereby represents and warrants that the terms
hereof do not conflict in any respect whatsoever
with any SAVVIS tariff on file with the Federal
Communications Commission or other regulatory body.
If, during the term of this Agreement, SAVVIS shall
file a contract specific tariff governing the
Networks or any portion thereof, such tariff filing
shall be consistent in all respects with the terms
of this Agreement, and SAVVIS shall give Bridge 10
days advance written notice of making such a tariff
filing and of filing any subsequent modifications
thereto.
11.2.3. THE FOREGOING WARRANTIES ARE IN LIEU OF ALL OTHER
WARRANTIES, EXPRESS OR IMPLIED, INCLUDING THE
IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS
FOR A PARTICULAR PURPOSE.
11.3. So long as Bridge is the beneficial owner of 20% of the
outstanding voting securities of SAVVIS Parent, SAVVIS Parent
shall not, without the prior written consent of Bridge, take
any action or otherwise enter into any agreement, arrangement
or understanding, including without limitation the creation or
issuance of any class of stock or other security, or any
agreement with any shareholder of SAVVIS Parent, the effect of
which would be to provide any shareholder of SAVVIS Parent
with any voting or registration rights superior to the voting
or registration rights of Bridge, other than as required by
law.
11.4. SAVVIS acknowledges that the occurrence of Event of Default by
SAVVIS, arising from either (i) a failure of the Networks to
meet Quality of Service Standards or (ii) a total loss to
Bridge of the use of the Networks, could cause irreparable
harm to Bridge, the amount of which may be difficult to
determine, thus potentially making any remedy at law or in
damages inadequate. SAVVIS, therefore, agrees that Bridge
shall have the right to apply to any court of competent
jurisdiction for injunctive relief upon the occurrence of an
Event of Default by SAVVIS or the occurrence of an event
which, with the passage of time or the giving of notice, could
become an Event of Default by SAVVIS and for any other
appropriate relief. This right shall be in addition to any
other remedy available to Bridge in law or equity. SAVVIS
further agrees that, upon the occurrence of an Event of
Default by SAVVIS, SAVVIS shall pay to Bridge, as liquidated
damages and not as a penalty, an amount equal to the lesser of
(a) the aggregate amounts paid by Bridge to SAVVIS under this
Agreement during the six months preceding such Event of
Default by SAVVIS or (b) $50,000,000; provided, however, that
Bridge may recover liquidated damages under this Section only
for an Event of Default by SAVVIS that occurs (i) prior to any
Event of Default by SAVVIS for which Bridge has claimed
liquidated damages under this Section or under any Local
Network Services, or (ii) more than 36 months following the
most recent Event of Default by SAVVIS for which Bridge has
claimed liquidated damages under this Section or under any
Local Network Services Agreement.
12. LIMITATIONS OF LIABILITY
12.1. Neither party shall be liable to the other for indirect,
incidental, consequential, exemplary, reliance or special
damages, including damages for lost profits, regardless of the
form of action whether in contract, indemnity, warranty,
strict liability or tort, including negligence of any kind
with respect to the Networks or other conduct under this
Agreement.
12.2. Nothing contained in this Section shall limit either party's
liability to the other for (a) willful or intentional
misconduct, including fraud, or (b) injury or death, or damage
to tangible real or tangible personal property or the
environment, when proximately caused by SAVVIS' or Bridge's
negligence or that of their respective agents, subcontractors
or employees. Nothing contained in this Section shall limit
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SAVVIS' intellectual property indemnification obligations
under Section 16.1 or Bridge's indemnification obligations
with respect to a breach of Section 10.3.
13. EQUIPMENT AND SOFTWARE NOT PROVIDED BY SAVVIS
13.1. SAVVIS shall not be responsible for the installation,
operation or maintenance of equipment or software not provided
by it under this Agreement, nor shall SAVVIS be responsible
for the transmission or reception of information by equipment
or software not provided by SAVVIS hereunder. In the event
that Bridge uses equipment or software not provided by SAVVIS
hereunder in a manner that impairs Bridge's use of the
Networks, Bridge shall not be excused from payment for such
use and SAVVIS shall not be responsible for any failure of the
Networks to meet the Quality of Service Standards resulting
from the use of such equipment or software by Bridge. Upon
notice from SAVVIS that the equipment or software not provided
by SAVVIS under this Agreement is causing or is likely to
cause hazard, interference or service obstruction, Bridge
shall eliminate the likelihood of such hazard, interference or
service obstruction.
13.2. Notwithstanding the foregoing, SAVVIS shall, at no additional
charge, provide all interface specifications for the Networks
reasonably requested by Bridge. SAVVIS shall, upon the receipt
of appropriate specifications from Bridge, inform Bridge of
the compatibility with the Networks of any equipment or
software that Bridge proposes to use in connection therewith,
the effects, if any, of the use of such equipment or software
on the quality, operating characteristics and efficiency of
the Networks, and the effects, if any, of the Networks on the
operating characteristics and efficiency of any such equipment
or software.
14. PROPRIETARY RIGHTS; LICENSE
14.1. SAVVIS hereby grants to Bridge a non-exclusive and
non-transferable license to use all programming and software
necessary for Bridge to use the Networks. Such license is
granted for the term of this Agreement for the sole purpose of
enabling Bridge to use the Networks.
14.2. All title and property rights (including intellectual property
rights) to the Networks (including associated programming and
software) are and shall remain with SAVVIS or the third-party
providers thereof to SAVVIS. Bridge shall not attempt to
examine, copy, alter, reverse engineer, decompile,
disassemble, tamper with or otherwise misuse the Networks,
programming and software.
15. CONFIDENTIALITY
15.1. During the term of this Agreement and for a period of five
years from the date of its expiration or termination
(including all extensions thereof), each party agrees to
maintain in strict confidence all Confidential Information.
Neither party shall, without prior written consent of the
other party, use the other party's Confidential Information
for any purpose other than for the performance of its duties
and obligations, and the exercise of its rights, under this
Agreement. Each party shall use, and shall cause all
authorized recipients of the other party's Confidential
Information to use, the same degree of care to protect the
other party's Confidential Information as it uses to protect
its own Confidential Information, but in any event not less
than a reasonable degree of care.
15.2. Notwithstanding Section 15.1, either party may disclose the
Confidential Information of the other party to: (a) its
employees and the employees, directors and officers of its
Affiliates as necessary to implement this Agreement; (b)
employees, agents or representatives of the other party; or
(c) other persons (including counsel, consultants, lessors or
managers of facilities or equipment used by such party) in
need of access to such information for purposes specifically
related to either party's responsibilities under this
Agreement, provided that any disclosure of Confidential
Information under clause (c) shall be made only upon prior
written approval of the other party and subject to the
appropriate assurances that the recipient of such information
shall hold it in strict confidence.
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15.3. Upon the request of the party having proprietary rights to
Confidential Information, the party in possession of such
information shall promptly return it (including any copies,
extracts and summaries thereof, in whatever form and medium
recorded) to the requesting party or, with the other party's
written consent, shall promptly destroy it and provide the
other party with written certification of such destruction.
15.4. Either party may request in writing that the other party waive
all or any portion of the requesting party's responsibilities
relative to the other party's Confidential Information. Such
waiver request shall identify the affected information and the
nature of the proposed waiver. The recipient of the request
shall respond within a reasonable time and, if it determines,
in its sole discretion, to grant the requested waiver, it will
do so in writing over the signature of an employee authorized
to grant such request.
15.5. Bridge and SAVVIS acknowledge that any disclosure or
misappropriation of Confidential Information in violation of
this Agreement could cause irreparable harm, the amount of
which may be difficult to determine, thus potentially making
any remedy at law or in damages inadequate. Each party,
therefore, agrees that the other party shall have the right to
apply to any court of competent jurisdiction for an order
restraining any breach or threatened breach of this Section
and for any other appropriate relief. This right shall be in
addition to any other remedy available in law or equity.
15.6. A party requested or ordered by a court or other governmental
authority of competent jurisdiction to disclose another
party's Confidential Information shall notify the other party
in advance of any such disclosure and, absent the other
party's consent to such disclosure, use its best efforts to
resist, and to assist the other party in resisting, such
disclosure. A party providing another party's Confidential
Information to a court or other governmental authority shall
use its best efforts to obtain a protective order or
comparable assurance that the Confidential Information so
provided will be held in confidence and not further disclosed
to any other person, absent the owner's prior consent.
15.7. The provisions of Section 15.1 above shall not apply to
reasonably necessary disclosures in or in connection with
filings under any securities laws, regulatory filings or
proceedings, financial disclosures which in the good faith
judgment of the disclosing party are required by law,
disclosures required by court or tribunal or competent
jurisdiction, or disclosures that may be reasonably necessary
in connection with the sale of securities or the performance
or enforcement of this Agreement or any of the obligations
hereof; provided, however, that if the receiving party would
otherwise be required to refer to or describe any aspect of
this Agreement in any of the preceding circumstances, the
receiving party shall use its reasonable efforts to take such
steps as are available under such circumstances (such as by
providing a summary or synopsis) to avoid disclosure of the
financial terms and conditions of this Agreement.
Notwithstanding any provisions of this Agreement to the
contrary, either party may disclose the terms and conditions
of this Agreement in the course of a due diligence review
performed in connection with prospective debt financing or
equity investment by, or a sale to, a third party, so long as
the persons conducting such due diligence review have agreed
to maintain the confidentiality of such disclosure and not to
use such disclosure for any purpose other such due diligence
review.
16. INDEMNIFICATIONS
16.1. SAVVIS shall defend, settle, or otherwise manage at its own
cost and expense any claim or action against Bridge or any of
its directors, officers, employees or assigns for actual or
alleged infringement by the Networks of any patent, copyright,
trademark, trade secret or similar proprietary right of any
third party, except to the extent that such actual or alleged
infringement arises from (i) such actual or alleged
infringement by the Acquired Network Facilities on the
Effective Date or (ii) an act or omission of Bridge or a
Bridge Subsidiary or a vendor or customer of Bridge or a
Bridge Subsidiary or (iii) equipment or software used by
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Bridge and not provided by SAVVIS. Bridge shall notify SAVVIS
promptly in writing of any such claim or suit and shall
cooperate with SAVVIS in a reasonable way to facilitate the
settlement or defense thereof. SAVVIS further agrees to
indemnify and hold Bridge harmless from and against any and
all liabilities and damages (whether incurred as the result of
a judicial decree or a settlement), and the costs and expenses
associated with any claim or action of the type identified in
this Section (including reasonable attorneys' fees).
16.2. If, as a consequence of a claim or action of the kind
described in Section 16.1, SAVVIS' or Bridge's use of all or
part of any Network is enjoined, SAVVIS shall, at its option
and expense, either: (a) procure for Bridge the right to
continue using the affected Network; (b) modify such Network
so that they are non-infringing, provided that such
modification does not affect the intended use of the Network
as contemplated hereunder. If SAVVIS does not take any of the
actions described in clauses (a) or (b), then Bridge may
terminate the affected portion of such Network, and SAVVIS
shall refund to Bridge any prepaid charges therefor.
16.3. Subject to Section 12, Bridge will defend, indemnify and hold
harmless SAVVIS or any of its directors, officers, employees
or assigns from and against all loss, liability, damage and
expense, including reasonable attorneys' fees, caused by:
(a) claims for libel, slander, invasion of privacy or
infringement of copyright, and invasion and/or
alteration of private records or data arising from
any information, data or messages transmitted over
the Networks by Bridge; and
(b) claims for infringement of patents arising from the
use by Bridge of equipment and software, apparatus
and systems not provided hereunder in connection with
the Networks; and
(c) the violation of any representations, warranties
and covenants made by Bridge in this Agreement.
16.4. Subject to Section 12, SAVVIS will defend, indemnify and hold
harmless Bridge or any of its directors, officers, employees
or assigns from and against all loss, liability, damage and
expense, including reasonable attorneys' fees, caused by:
(a) claims for infringement of patents arising from the
use by SAVVIS of equipment and software, apparatus
and systems not provided by SAVVIS hereunder in
connection with the Networks (other than any Acquired
Network Facilities); and
(b) the violation of any representations, warranties
and covenants made by SAVVIS in this Agreement.
17. DISPUTES
17.1. Except as expressly provided in Schedule 4.1 of this
Agreement, the resolution of any and all disputes arising from
or in connection with this Agreement, whether based on
contract, tort, statute or otherwise, including disputes over
arbitrability and disputes in connection with claims by third
persons ("DISPUTES") shall be exclusively governed by and
settled in accordance with the provisions of this Section 17.
The foregoing shall not preclude recourse to judicial
proceedings to obtain injunctive, emergency or other equitable
relief to enforce the provisions of this Agreement, including
specific performance, and to decide such issues as are
required to be resolved in determining whether to grant such
relief. Resolution of Disputes with respect to claims by third
persons shall be deferred until any judicial proceedings with
respect thereto are concluded.
17.2. The parties hereby agree to submit all Disputes to rules of
arbitration of the American Arbitration Association and the
Missouri Uniform Arbitration Act (the "RULES") under the
following provisions, which shall be final and binding upon
the parties, their successors and assigns, and that the
following provisions constitute a binding arbitration clause
under applicable law. Either party may serve process or notice
on the other in any arbitration or litigation in accordance
with the notice provisions hereof. The parties agree not to
disclose any information regarding any Dispute or the conduct
of any arbitration hereunder, including the existence of such
Dispute or such arbitration, to any person or entity other
than such employees or representatives of such party as have a
need to know.
17.3. Either party may commence proceedings hereunder by delivery of
written notice providing a reasonable description of the
Dispute to the other, including a reference to this provision
(the "DISPUTE NOTICE"). Either party may initiate arbitration
of a Dispute by delivery of a demand therefor (the
"ARBITRATION DEMAND") to the other party not sooner than 60
calendar days after the date of delivery of the Dispute Notice
but at any time thereafter. The arbitration shall be conducted
in St. Louis, Missouri.
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17.4. The arbitration shall be conducted by three arbitrators (the
"ARBITRATORS"), one of whom shall be selected by Bridge, one
by SAVVIS, and the third by agreement of the other two not
later than 10 days after appointment of the first two, or,
failing such agreement, appointed pursuant to the Rules. If an
Arbitrator becomes unable to serve, a successor shall be
selected or appointed in the same manner in which the
predecessor Arbitrator was appointed.
17.5. The arbitration shall be conducted pursuant to such procedures
as the parties may agree or, in the absence of or failing such
agreement, pursuant to the Rules. Notwithstanding the
foregoing, each party shall have the right to inspect the
books and records of the other party that are reasonably
related to the Dispute, and each party shall provide to the
other, reasonably in advance of any hearing, copies of all
documents which such party intends to present in such hearing
and the names and addresses of all witnesses whose testimony
such party intends to present in such hearing.
17.6. All hearings shall be conducted on an expedited schedule, and
all proceedings shall be confidential. Either party may at its
expense make a stenographic record thereof.
17.7. The Arbitrators shall complete all hearings not later than 90
calendar days after the Arbitrators' selection or appointment,
and shall make a final award not later than 30 calendar days
thereafter. The Arbitrators shall apportion all costs and
expenses of the Arbitration, including the Arbitrators' fees
and expenses of experts ("ARBITRATION COSTS") between the
prevailing and non-prevailing parties as the Arbitrators deem
fair and reasonable. In circumstances where a Dispute has been
asserted or defended against on grounds that the Arbitrators
deem manifestly unreasonable, the Arbitrators may assess all
Arbitration Costs against the non-prevailing party and may
include in the award the prevailing party's attorneys' fees
and expenses in connection with any and all proceedings under
this Section 17.
17.8. Either party may assert appropriate statutes of limitation as
a defense in arbitration; provided, that upon delivery of a
Dispute Notice any such statute shall be tolled pending
resolution hereunder.
17.9. Pending the resolution of any dispute or controversy arising
under this Agreement, the parties shall continue to perform
their respective obligations hereunder, and SAVVIS shall not
discontinue, disconnect or in any other fashion cease to
provide all or any substantial portion of the Networks to
Bridge unless otherwise directed by Bridge. This Section shall
not apply where (a) Bridge is in default under this Agreement
or (b) the dispute or controversy between the parties relates
to harm to the Networks allegedly caused by Bridge and Bridge
does not immediately cease and desist from the activity giving
rise to the dispute or controversy.
18. FORCE MAJEURE
18.1. In no event shall either party be liable to the other for any
failure to perform hereunder that is due to war, riots,
embargoes, strikes or other concerted acts of workers (whether
of a party hereto or of others), casualties, accidents or
other causes to the extent that such failure and the
consequences thereof are reasonably beyond the control and
without the fault or negligence of the party claiming excuse.
Each party shall, with the cooperation of the other party, use
reasonable efforts to mitigate the extent of any failure to
perform and the adverse consequences thereof.
18.2. If SAVVIS cannot promptly provide a suitable temporary SAVVIS
alternative to all or part of a Network subject to an
interruption in connection with the existence of a force
majeure condition, Bridge may, at its option and at its own
cost, contract with one or more third parties for the affected
portion of the Network for the shortest commercially available
period likely to cover the reasonably expected duration of the
interruption, and may suspend SAVVIS' provision of such
affected portion for such period. SAVVIS shall not charge
Bridge for the affected portion thus suspended during the
period of suspension. SAVVIS shall resume provision of the
suspended portion of the Network upon the later of the
termination or expiration of Bridge's legally binding
commitments under contracts with third parties for alternative
services or the cessation or remedy of the force majeure
condition.
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18.3. In the event that a force majeure condition shall continue for
more than 60 days, Bridge may cancel the affected portion of
the Network with no further liability to SAVVIS other than for
obligations incurred with respect to such affected portion
prior to the occurrence of the force majeure condition.
18.4. The consequences arising from existence and continuation of a
force majeure condition, including without limitation any
interruption of the Networks and the exercise by Bridge of its
rights under this Section 18, shall be deemed not to
constitute a breach by either party hereto of any
representations, warranties or covenants hereunder and shall
not be grounds for the exercise of any remedies under this
Agreement, including without limitation remedies under Section
2.2 or Section 7, other than those specified in this Section
18.
19. GENERAL PROVISIONS
19.1. NO THIRD-PARTY BENEFICIARIES. This Agreement shall not confer
any rights or remedies upon any person or entity other than
the parties and their respective successors and permitted
assigns.
19.2. ENTIRE AGREEMENT. This Agreement (including the documents
referred to herein) constitutes the entire agreement between
the parties and supersedes any prior understandings,
agreements, or representations by or between the parties,
written or oral, to the extent they related in any way to the
subject matter hereof.
19.3. SUCCESSION AND ASSIGNMENT. This Agreement shall be binding
upon and inure to the benefit of the parties named herein and
their respective successors and permitted assigns. No party
may assign either this Agreement or any of its rights,
interests, or obligations hereunder without the prior written
approval of the other party, which consent shall not be
unreasonably withheld.
19.4. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but
all of which together will constitute one and the same
instrument.
19.5. HEADINGS. The Section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way
the meaning or interpretation of this Agreement.
19.6. NOTICES. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice,
request, demand, claim, or other communication hereunder shall
be deemed duly given if (and then two business days after) it
is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended
recipient as set forth below:
If to Bridge: Bridge Information Systems, Inc.
Three World Financial Center
New York, New York 10285
(212) 372-7195 (fax)
Attention: Zachary Snow,
Executive Vice President
and General Counsel
If to SAVVIS: SAVVIS Communications Corporation
717 Office Parkway
St. Louis, Missouri 63141
(314) 468-7550 (fax)
Attention: Steven M. Gallant,
Vice President
and General Counsel
Any party may send any notice, request, demand, claim, or
other communication hereunder to the intended recipient at the
address set forth above using any other means (including
personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail, or electronic mail), but no
such notice, request, demand, claim, or other communication
shall be deemed to have been duly given unless and until it
actually is received by the intended recipient. Any party may
change the address to which notices, requests, demands,
claims, and other communications hereunder are to be delivered
by giving the other party notice in the manner herein set
forth.
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19.7. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the domestic laws of the State of
Missouri without giving effect to any choice or conflict of
law provision or rule (whether of the State of Missouri or any
other jurisdiction) that would cause the application of the
laws of any jurisdiction other than the State of Missouri.
19.8. AMENDMENTS AND WAIVERS. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing
and signed by SAVVIS and Bridge. No waiver by any party of any
default, misrepresentation, or breach of warranty or covenant
hereunder, whether intentional or not, shall be deemed to
extend to any prior or subsequent default, misrepresentation,
or breach of warranty or covenant hereunder or affect in any
way any rights arising by virtue of any prior or subsequent
such occurrence.
19.9. SEVERABILITY. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction
shall not affect the validity or enforceability of the
remaining terms and provisions hereof or the validity or
enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
19.10. EXPENSES. Each party will bear its own costs and expenses
(including legal fees and expenses) incurred in connection
with this Agreement and the transactions contemplated hereby.
19.11. CONSTRUCTION. Any reference to any federal, state, local, or
foreign statute or law shall be deemed also to refer to all
rules and regulations promulgated thereunder, unless the
context requires otherwise. The word "including" shall mean
including without limitation.
19.12. Addenda and Schedules. The Addenda and Schedules identified in
this Agreement are incorporated herein by reference and made a
part hereof.
IN WITNESS WHEREOF,the parties hereto have caused this Network Services
Agreement to be executed as of the date first above written.
SAVVIS COMMUNICATIONS CORPORATION
By_________________________
Name:______________________
Title:_____________________
BRIDGE INFORMATION SYSTEMS, INC.
By_________________________
Name:______________________
Title:_____________________
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SCHEDULE 2.2
QUALITY OF SERVICE STANDARDS
1. FOR THE COLLECTION NETWORK AND DISTRIBUTION NETWORK:
(a) Between any two Installation Sites on the Collection Network
and the Distribution Network that are connected by fully
redundant circuits provided with the Acquired Network
Facilities there shall be not less than 99.99% end-to-end
availability during each one-month period between such
Installation Sites during the Market Hours at such
Installation Sites.
(b) There shall be delivered not less than 99.99% of all data
packets offered to such Network during each one-month period.
(c) The average round-trip latency period for the Collection
Network and the Distribution Network using the Acquired
Network Facilities during each one-month period shall not
exceed:
(i) 150 milliseconds within each of the following geographic
regions: (i) the United States, (ii) the Americas, (iii)
Europe, and (iv) Asia; and
(ii) 250 millisecond between any two of such geographic
regions.
2. FOR THE OA NETWORK:
(a) Between any two Installation Sites on the OA Network that are
connected by circuits provided with the Acquired Network
Facilities there shall be not less than 99.90% end-to-end
availability during each one-month period between such
Installation Sites during the Market Hours at such
Installation Sites.
(b) There shall be delivered not less than 99.90% of all data
packets offered to the OA Network during each one-month
period.
(c) The average round-trip latency period for the OA Network using
the Acquired Network Facilities for each one-month period
shall not exceed:
(i) 150 milliseconds within each of the following geographic
regions: (i) the United States, (ii) the Americas,
(iii) Europe, and (iv) Asia; and
(ii) 250 millisecond between any two of such geographic
regions.
3. CREDIT AMOUNTS
Amounts to be credited if the Quality of Service Standards are not met
with respect to a particular Installation Site in any month shall be as
follows during the first Agreement Year, according to the connection
speed at such Installation Site:
CONNECTION SPEED MONTHLY CREDIT
T1 *
256 KBS *
128 KBS *
56 KBS *
ISDN *
E1 *
CONFIDENTIAL MATERIALS HAVE BEEN OMMITTED FROM THIS SCHEDULE PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT AND HAVE BEEN FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION. ASTERISKS DENOTE OMISSIONS.
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SCHEDULE 3.1
PRICING
1. DEFINITIONS.
1.1. "BACKBONE LOCAL ACCESS FACILITIES" means the local access line
or other local communications circuit provided by a local
exchange carrier connecting long-haul circuits to a SAVVIS
POP.
1.2. "INITIAL POP THRESHOLD REVENUE" with respect to any
metropolitan area means an amount equal to 2.5 times the sum
of:
(a) (i) * if the POP is built by SAVVIS,
(ii) * if the POP is leased to SAVVIS, plus
(b) the actual cost to SAVVIS of extending two redundant
circuits of the SAVVIS long-haul circuits to a SAVVIS
POP in such metropolitan area, plus
(c) the actual cost to SAVVIS for Backbone Local Access
Facilities connecting the two redundant long-haul
circuits to such SAVVIS POP, plus
(d) the actual cost to SAVVIS of obtaining collocation
and power for such SAVVIS POP.
1.3. "INSTALLATION SITE" means any facility of Bridge or a Bridge
Subsidiary or of vendors or customers of Bridge or a Bridge
Subsidiary at which one or more of the Networks is installed.
1.4. "INSTALLATION SITE LOCAL ACCESS FACILITIES" means the local
access line or other local communications circuit provided by
a local exchange carrier connecting an Installation Site to a
SAVVIS POP.
1.5. "LOCAL ACCESS FACILITIES" means the local access line or other
local communications circuit provided by a local exchange
carrier.
1.6. "POP" means point-of-presence.
1.7. "SUBSEQUENT POP THRESHOLD REVENUE" with respect to any
metropolitan area means an amount equal to 2.5 times the sum
of:
(a) (i) * if the POP is built by SAVVIS, or
(ii) * if the POP is leased by SAVVIS, plus
(b) the actual cost to SAVVIS of connecting a second
switch to an existing switch in such metropolitan
area by means of a DS3 circuit, plus
(c) the actual cost to SAVVIS of obtaining collocation
and power for such second switch.
1.8. "POP SITE" means any Installation Site that accesses a SAVVIS
POP by means of Local Access Facilities.
1.9. "NON-POP SITE" means any Installation Site other than a POP
Site.
17
<PAGE>
2. FIRST-YEAR PRICE FOR NETWORKS USING ACQUIRED NETWORK FACILITIES
2.1. For the first Agreement Year in the Initial Term of this
Agreement, Bridge and the Bridge Subsidiaries shall pay SAVVIS
and the SAVVIS Subsidiaries for the Networks using the
Acquired Network Facilities plus the Short-Term Call Assets in
the aggregate amount determined as follows, allocated between
this Agreement and the Local Network Services Agreements
substantially in the form attached as Exhibit A hereto:
(a) The sum of:
(i) the actual cost to Bridge of operating the
Networks as of October 31, 1999; plus
(ii) the actual cost to Bridge of the employees
transferred from Bridge to SAVVIS for the
operation of the Networks, determined on the
basis of the actual salaries of such
employees plus a benefits loading factor to
be mutually agreed upon;
(b) less the actual cost to Bridge of backbone circuits
removed or replaced subsequent to October 31, 1999;
(c) plus, (i) with respect to the Distribution Network, the
actual cost to SAVVIS as of the Effective Date of
backbone circuits added or substituted or used in part
by any party other than Bridge, subsequent to October
31, 1999, multiplied by the proportionate megabit usage
of such circuits by Bridge under this Agreement as of
the Effective Date, and further multiplied by 130%; or
(ii) with respect to the Collection Network and
the OA Network, the actual cost to SAVVIS as of
the Effective Date of backbone circuits added or
substituted subsequent to October 31, 1999,
multiplied by 130%;
(d) plus the actual cost to Bridge of the additional Local
Access Facilities associated with backbone circuits
added subsequent to October 31, 1999.
The pricing under the Local Network Services Agreement shall
be as set forth in this Schedule 3.1, according to the
geographic territory applicable to such Local Network Services
Agreement; provided that the pricing for Installation Sites in
Latin America shall be mutually agreed upon following an
analysis to be conducted by the parties of the costs
pertaining to such Installation Sites. Charges under each such
Local Network Services Agreement shall be billed locally, in
local currency.
3. FIRST-YEAR PRICES AT ADDITIONAL POP SITES
3.1. 3.1A. For the first Agreement Year in the Initial Term of this
Agreement, Bridge shall pay SAVVIS for the Networks using
Additional Network Facilities in the United States, as
follows:
(a) * per month for each T1 port, reflecting the cost
of equipment, hardware maintenance, the provision of
a diagnostic dial-up line, and the use of the SAVVIS
Backbone, plus
(b) the actual charges for Installation Site Local Access
Facilities, permanent virtual circuits or other means
for connecting such Installation Site to the SAVVIS
POP, including equipment installation, plus
(c) the actual cost to SAVVIS of installing at such
Installation Site the equipment referred to in clause
(a) and the connection referred to in clause (b).
3.2. 3.1B. For the first Agreement Year in the Initial Term of this
Agreement, Bridge shall pay SAVVIS for the Networks using
Additional Network Facilities in Europe, as follows:
(a) an amount per month to be determined on an individual
case basis for each T1 port, reflecting the cost of
equipment, hardware maintenance and the provision of
a diagnostic dial-up line, plus
(b) the actual charges for Installation Site Local Access
Facilities, permanent virtual circuits or other means
for connecting such Installation Site to the SAVVIS
POP, including equipment installation, plus
18
<PAGE>
(c) the actual cost to SAVVIS of installing at such
Installation Site the equipment referred to in clause
(a) and the connection referred to in clause (b).
3.3. 3.1C. For the first Agreement Year in the Initial Term of this
Agreement, Bridge shall pay SAVVIS for the Networks using
Additional Network Facilities in Asia, as follows:
(a) an amount per month to be determined on an individual
case basis for each T1 port, reflecting the cost of
equipment, hardware maintenance and the provision of
a diagnostic dial-up line, plus
(b) the actual charges for Installation Site Local Access
Facilities, permanent virtual circuits or other means
for connecting such Installation Site to the SAVVIS
POP, including equipment installation, plus
(c) the actual cost to SAVVIS of installing at such
Installation Site the equipment referred to in clause
(a) and the connection referred to in clause (b).
3.4. In the event that Bridge wishes to attach any additional
servers to a router having a single T1 port, or any fraction
thereof, at any POP Site, SAVVIS will provide such service at
the rate of * per month for each such additional server for
the first Agreement Year in the Initial Term of this
Agreement.
3.5. Following the first Agreement Year in the Initial Term of this
Agreement, the rates and charges for the Networks using
Additional Network Facilities at any new POP Site shall be
mutually agreed upon by the parties from time to time and set
forth in an Addendum to this Agreement in the manner set forth
in Section 1.2 of this Agreement and Section 7.1 of this
Schedule. If the parties fail to reach agreement on any such
Addendum prior to the expiration of the Addendum then in
effect, the rates and charges shall be determined by binding
arbitration as provided below.
4. 4A. FIRST-YEAR PRICES FOR ADDITIONAL NON-POP SITES IN THE UNITED
STATES
4.1. 4A.1. 56 KBPS SITES. For the first Agreement Year in the
Initial Term of this Agreement, Bridge shall pay SAVVIS for
the Networks using Additional Network Facilities at any new
Non-POP Site in the United States at which one or more 56 Kbps
ports are provided, as follows:
(a) * per month for each 56 Kbps port, reflecting the
cost of equipment, hardware maintenance, the
provision of a diagnostic dial-up line, and the use
of the SAVVIS Backbone, plus
(b) the actual charges for Installation Site Local Access
Facilities, permanent virtual circuits or other means
for connecting such Installation Site to the SAVVIS
POP, including equipment installation, plus
(c) the actual cost to SAVVIS of installing at such
Installation Site the equipment referred to in clause
(a) and the connection referred to in clause (b).
4.2. 4A.2. 128 KBPS SITES. For the first Agreement Year in the
Initial Term of this Agreement, Bridge shall pay SAVVIS for
the Networks using Additional Network Facilities at any new
Non-POP Site at which one or more 128 Kbps ports are provided,
as follows:
(a) * per month for each 128 Kbps port, reflecting the
cost of equipment, hardware maintenance, the
provision of a diagnostic dial-up line, and the use
of the SAVVIS Backbone, plus
(b) the actual charges for Installation Site Local Access
Facilities, permanent virtual circuits or other means
for connecting such Installation Site to the SAVVIS
POP, including equipment installation, plus
(c) the actual cost to SAVVIS of installing at such
Installation Site the equipment referred to in clause
(a) and the connection referred to in clause (b).
19
<PAGE>
4.3. 4A.3. 256 KBPS SITES. For the first Agreement Year in the
Initial Term of this Agreement, Bridge shall pay SAVVIS for
the Networks using Additional Network Facilities at any new
Non-POP Site at which one or more 256 Kbps ports are provided,
as follows:
(a) * per month for each 256 Kbps port, reflecting the
cost of equipment, hardware maintenance, the
provision of a diagnostic dial-up line, and the use
of the SAVVIS Backbone, plus
(b) the actual charges for Installation Site Local Access
Facilities, permanent virtual circuits or other means
for connecting such Installation Site to the SAVVIS
POP, including equipment installation, plus
(c) the actual cost to SAVVIS of installing at such
Installation Site the equipment referred to in clause
(a) and the connection referred to in clause (b).
4.4. 4A.4 ISDN BACK-UP LINE. In the event that Bridge wishes to use
an ISDN back-up line in lieu of full redundancy at any Non-POP
Site at which one or more 56 Kbps ports or 128 Kbps ports are
provided as Additional Network Facilities, SAVVIS will provide
such service at the following rate for the first Agreement
Year in the Initial Term of this Agreement:
(a) * per month for each ISDN line, reflecting the cost
of equipment and the use of the SAVVIS Backbone, plus
(b) the actual charges for Installation Site Local Access
Facilities, permanent virtual circuits, basic rate
interface or other means for connecting such
Installation Site to the SAVVIS POP, including
equipment installation, plus
(c) the actual cost to SAVVIS of installing at such
Installation Site the equipment referred to in clause
(a) and the connection referred to in clause (b).
5. 4B. FIRST-YEAR PRICES FOR ADDITIONAL NON-POP SITES IN EUROPE
5.1. 4B.1. 64 KBPS SITES. For the first Agreement Year in the
Initial Term of this Agreement, Bridge shall pay SAVVIS for
the Networks using Additional Network Facilities at any new
Non-POP Site in Europe at which one or more 64 Kbps ports are
provided, as follows:
(a) * per month (* per month in a Distributor
Country) for each 64 Kbps port, reflecting the cost
of equipment, hardware maintenance and the provision
of a diagnostic dial-up line, plus
(b) the actual charges for Installation Site Local Access
Facilities, permanent virtual circuits or other means
for connecting such Installation Site to the SAVVIS
POP, including equipment installation, plus
(c) the actual cost to SAVVIS of installing at such
Installation Site the equipment referred to in clause
(a) and the connection referred to in clause (b).
5.2. 4B.2. 128 KBPS SITES. For the first Agreement Year in the
Initial Term of this Agreement, Bridge shall pay SAVVIS for
the Networks using Additional Network Facilities at any new
Non-POP Site at which one or more 128 Kbps ports are provided,
as follows:
(a) * per month (* per month in a Distributor
Country) for each 128 Kbps port, reflecting the cost
of equipment, hardware maintenance and the provision
of a diagnostic dial-up line, plus
(b) the actual charges for Installation Site Local Access
Facilities, permanent virtual circuits or other means
for connecting such Installation Site to the SAVVIS
POP, including equipment installation, plus
(c) the actual cost to SAVVIS of installing at such
Installation Site the equipment referred to in clause
(a) and the connection referred to in clause (b).
20
<PAGE>
5.3. 4B.3. 256 KBPS SITES. For the first Agreement Year in the
Initial Term of this Agreement, Bridge shall pay SAVVIS for
the Networks using Additional Network Facilities at any new
Non-POP Site at which one or more 256 Kbps ports are provided,
as follows:
(a) an amount per month to be determined on an individual
case basis for each 256 Kbps port, reflecting the
cost of equipment, hardware maintenance and the
provision of a diagnostic dial-up line, plus
(b) the actual charges for Installation Site Local Access
Facilities, permanent virtual circuits or other means
for connecting such Installation Site to the SAVVIS
POP, including equipment installation, plus
(c) the actual cost to SAVVIS of installing at such
Installation Site the equipment referred to in clause
(a) and the connection referred to in clause (b).
5.4. 4B.4. E1 SITES. For the first Agreement Year in the Initial
Term of this Agreement, Bridge shall pay SAVVIS for the
Networks using Additional Network Facilities at any new
Non-POP Site at which one or more E1 ports are provided, as
follows:
(a) * per month (* per month in a Distributor
Country) for each E1 port, reflecting the cost of
equipment, hardware maintenance and the provision of
a diagnostic dial-up line, plus
(b) the actual charges for Installation Site Local Access
Facilities, permanent virtual circuits or other means
for connecting such Installation Site to the SAVVIS
POP, including equipment installation, plus
(c) the actual cost to SAVVIS of installing at such
Installation Site the equipment referred to in clause
(a) and the connection referred to in clause (b).
5.5. 4B.5. ISDN BACK-UP LINE. In the event that Bridge wishes to
use an ISDN back-up line in lieu of full redundancy at any
Non-POP Site at which one or more 64 Kbps ports or 128 Kbps
ports are provided as Additional Network Facilities, SAVVIS
will provide such service at the following rate for the first
Agreement Year in the Initial Term of this Agreement:
(a) * per month (* per month in a Distributor
Country) for each ISDN line, reflecting the cost
of equipment, plus
(b) the actual charges for Installation Site Local Access
Facilities, permanent virtual circuits, basic rate
interface or other means for connecting such
Installation Site to the SAVVIS POP, including
equipment installation, plus
(c) the actual cost to SAVVIS of installing at such
Installation Site the equipment referred to in clause
(a) and the connection referred to in clause (b).
6. 4C. FIRST-YEAR PRICES FOR ADDITIONAL NON-POP SITES IN ASIA
6.1. 4C.1. 64 KBPS SITES. For the first Agreement Year in the
Initial Term of this Agreement, Bridge shall pay SAVVIS for
the Networks using Additional Network Facilities at any new
Non-POP Site in the United States at which one or more 64 Kbps
ports are provided, as follows:
(a) * per month ( * per month in a Distributor
Country) for each 64 Kbps port, reflecting the cost
of equipment, hardware maintenance and the provision
of a diagnostic dial-up line, plus
(b) the actual charges for Installation Site Local Access
Facilities, permanent virtual circuits or other means
for connecting such Installation Site to the SAVVIS
POP, including equipment installation, plus
(c) the actual cost to SAVVIS of installing at such
Installation Site the equipment referred to in clause
(a) and the connection referred to in clause (b).
21
<PAGE>
6.2. 4C.2. 128 KBPS SITES. For the first Agreement Year in the
Initial Term of this Agreement, Bridge shall pay SAVVIS for
the Networks using Additional Network Facilities at any new
Non-POP Site at which one or more 128 Kbps ports are provided,
as follows:
(a) * per month ( * per month in a Distributor
Country) for each 128 Kbps port, reflecting the cost
of equipment, hardware maintenance and the provision
of a diagnostic dial-up line, plus
(b) the actual charges for Installation Site Local Access
Facilities, permanent virtual circuits or other means
for connecting such Installation Site to the SAVVIS
POP, including equipment installation, plus
(c) the actual cost to SAVVIS of installing at such
Installation Site the equipment referred to in clause
(a) and the connection referred to in clause (b).
6.3. 4C.3. 256 KBPS SITES. For the first Agreement Year in the
Initial Term of this Agreement, Bridge shall pay SAVVIS for
the Networks using Additional Network Facilities at any new
Non-POP Site at which one or more 256 Kbps ports are provided,
as follows:
(a) an amount per month to be determined on an individual
case basis for each 256 Kbps port, reflecting the
cost of equipment, hardware maintenance and the
provision of a diagnostic dial-up line, plus
(b) the actual charges for Installation Site Local Access
Facilities, permanent virtual circuits or other means
for connecting such Installation Site to the SAVVIS
POP, including equipment installation, plus
(c) the actual cost to SAVVIS of installing at such
Installation Site the equipment referred to in clause
(a) and the connection referred to in clause (b).
6.4. 4C.4 ISDN BACK-UP LINE. In the event that Bridge wishes to use
an ISDN back-up line in lieu of full redundancy at any Non-POP
Site at which one or more 56 Kbps ports or 128 Kbps ports are
provided as Additional Network Facilities, SAVVIS will provide
such service at the following rate for the first Agreement
Year in the Initial Term of this Agreement:
(a) * per month for each ISDN line, reflecting the cost
of equipment and the use of the SAVVIS Backbone, plus
(b) the actual charges for Installation Site Local Access
Facilities, permanent virtual circuits, basic rate
interface or other means for connecting such
Installation Site to the SAVVIS POP, including
equipment installation, plus
(c) the actual cost to SAVVIS of installing at such
Installation Site the equipment referred to in clause
(a) and the connection referred to in clause (b).
7. REDUNDANCY AND BANDWIDTH USAGE
7.1. The amount due to SAVVIS from Bridge for providing the
Networks using Additional Network Facilities at any new
Installation Site having full redundancy will be two times the
amount due under Sections 3.1, 4A, 4B or 4C above with respect
to a single port.
7.2. Bandwidth usage of any port provided to Bridge by SAVVIS under
this Agreement, including both the Acquired Network Facilities
and any Additional Network Facilities, shall not exceed 128
Kbps. In the event that Bridge wishes to obtain Bandwidth
usage in excess of 128 Kbps on any such port, such usage shall
be provided for in an Addendum hereto mutually agreed upon by
the parties in the manner set forth in Section 1.2 of the
Agreement.
8. CONVERSION TO POP SITES AND INSTALLATION OF SECOND SWITCH
8.1. In the event that the aggregate amount that would be paid by
Bridge to SAVVIS with respect to Non-POP Sites specified by
Bridge in a metropolitan area if such sites were converted to
POP Sites equals or exceeds the Initial POP Threshold Revenue
per month applicable to such metropolitan area, then, upon
written request from Bridge, SAVVIS shall (i) install a switch
in a SAVVIS POP in such metropolitan area capable of being
accessed by means of a connection using only Installation Site
Local Access Facilities, (ii) extend the SAVVIS Backbone to
such SAVVIS POP with two redundant circuits, and (iii) convert
such Non-POP Sites to POP Sites.
22
<PAGE>
8.2. In the event that, following the installation by SAVVIS of a
switch and the conversion of Non-POP Sites to POP Sites
pursuant to Section 6.1 above, the aggregate amount that would
be paid by Bridge to SAVVIS with respect to additional Non-POP
Sites in a specified metropolitan area if such sites were
converted to POP Sites equals or exceeds the Subsequent POP
Threshold Revenue per month applicable to such metropolitan
area, then, upon written request from Bridge, SAVVIS shall (i)
install a second switch in a SAVVIS POP in such metropolitan
area capable of being accessed by means of a connection using
only Installation Site Local Access Facilities, (ii) connect
the two switches by means of a circuit having appropriate
transmission capacity, and (iii) convert such additional
Non-POP Sites to POP Sites.
9. DETERMINATION OF RATES AND CHARGES AFTER FIRST AGREEMENT YEAR
9.1. Following the first Agreement Year in the Initial Term of this
Agreement, the rates and charges for the Networks and any
Additional Network Facilities as shall be mutually agreed upon
by the parties from time to time in an Addendum to this
Agreement in the manner set forth in Section 1.2 of this
Agreement; provided that the charge for any backbone circuit
in the Distribution Network that is not used exclusively for
the carriage of Bridge traffic under this Agreement shall be
charged to Bridge according to the actual cost to SAVVIS of
such backbone circuit multiplied by the proportionate megabit
usage of such circuits by Bridge under this Agreement as of
the Effective Date, and further multiplied by *. If the
parties fail to reach agreement on any such Addendum prior to
the expiration of the Addendum then in effect, the rates and
charges shall be determined by binding arbitration, as
follows:
9.2. The arbitration shall be conducted by a single arbitrator
jointly selected by the parties, who shall be an attorney
experienced and knowledgeable in the tariffs and pricing of
telecommunications services (the "Arbitrator"). If the parties
are unable to agree on the selection of the Arbitrator within
30 days, either party may apply to the United States District
Court for the Eastern District of Missouri or to the Circuit
Court of St. Louis County for the appointment of the
Arbitrator.
(b) Within 10 days following the appointment of the
Arbitrator, each party shall submit to the Arbitrator
such party's best and final offer for the rates and
charges to be set forth in such Addendum.
(c) The Arbitrator must select the offer of one party or
the other as being closer to the Arbitrator's own
assessment of what an independent vendor would charge
for services similar in nature and volume to those to
be covered by such Addendum (the "INDEPENDENT VENDOR
PRICE").
(d) The decision of the Arbitrator shall be final and
binding on the parties and shall be incorporated in
this Agreement as an Addendum hereto.
(e) Each party shall bear its own costs in conducting the
arbitration, and the non-prevailing party shall pay
the fees and expenses of the Arbitrator.
9.3. At the time any Addendum is entered into with respect to the
rates and charges for any POP Site, the amount charged to
Bridge for the T-1 ports at such Installation Site shall be
not more than the Independent Vendor Price for providing such
ports at such Installation Site, as mutually agreed by the
parties or as determined by the Arbitrator under Section 8.1,
reduced by 75% of the excess, if any, of the Independent
Vendor Price for providing such ports over the actual cost to
SAVVIS of providing such ports at such Installation Site.
10. MINIMUM ANNUAL COMMITMENT
10.1. If the aggregate amounts paid by Bridge to SAVVIS for the
Networks hereunder for any Agreement Year during the Initial
Term of this Agreement, using not only the Acquired Network
Facilities but also any Additional Network Facilities, is less
than the Minimum Annual Commitment (as defined below), then
the amount of such deficiency shall be payable by Bridge to
SAVVIS upon the receipt by Bridge of an invoice therefor, in
accordance with Section 5 of the Agreement.
23
<PAGE>
10.2. THE "MINIMUM ANNUAL COMMITMENT" shall mean:
(a) With respect to the first Agreement Year during the
Initial Term, the amount set forth in Section 2.1
of this Schedule 3.1;
(b) With respect to the second Agreement Year during the
Initial Term, 110% of the amount set forth in Section
2.1 of this Schedule 3.1;
(c) With respect to the third Agreement Year during the
Initial Term, 120% of the amount set forth in Section
2.1 of this Schedule 3.1;
(d) With respect to the fourth, fifth and sixth Agreement
Years during the Initial Term, an amount equal to 80%
of the total amount paid by Bridge and all Bridge
Subsidiaries during such Agreement Year to SAVVIS,
SAVVIS Subsidiaries and third parties for Internet
Protocol backbone and other data transport services;
(e) With respect to the seventh, eighth, ninth and tenth
Agreement Years during the Initial Term, an amount
equal to 60% of the total amount paid by Bridge and
all Bridge Subsidiaries during such Agreement Year to
SAVVIS, SAVVIS Subsidiaries and third parties for
Internet Protocol backbone and other data transport
services.
10.3. With respect to the fourth Agreement Year and each Agreement
Year thereafter, SAVVIS shall have the right, at reasonable
times and on reasonable notice, but not more often than once
during any Agreement Year, to audit the books and records of
Bridge and the Bridge Subsidiaries in order to determine the
total amount paid by Bridge and the Bridge Subsidiaries during
an Agreement Year to SAVVIS, SAVVIS Subsidiaries and third
parties for Internet Protocol backbone and other data
transport services. Such audits may be conducted either by
SAVVIS personnel or by outside auditors retained by SAVVIS for
such purpose, subject to the consent of Bridge to such outside
auditors, such consent not to be unreasonably withheld or
delayed. Such audits shall be conducted at the expense of
SAVVIS, including any additional cost to Bridge in obtaining
the cooperation of Bridge's outside auditors that may be
required; provided, that if the actual total amount paid by
Bridge and the Bridge Subsidiaries during an Agreement Year to
SAVVIS, SAVVIS Subsidiaries and third parties for Internet
Protocol backbone and other data transport services is
determined by such audit to be 105% or more of the amount
initially claimed by Bridge with respect to such Agreement
Year, then the cost of such audit shall be borne by Bridge.
CONFIDENTIAL MATERIALS HAVE BEEN OMITTED FROM THIS SCHEDULE PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT AND HAVE BEEN FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION. ASTERISKS DENOTE OMISSIONS.
<PAGE>
SCHEDULE 5.2
INSTALLATION SITE REMOVAL AMOUNTS
Amounts by which each monthly invoice from SAVVIS to Bridge shall be
reduced resulting from the removal of a particular Installation Site
shall be as follows during the first Agreement Year, according to the
connection speed at such Installation Site:
<TABLE>
<CAPTION>
UNITED STATES:
INSTALLATION SITES INSTALLATION SITES
EXISTING ADDED AFTER
CONNECTION SPEED AS OF OCTOBER 31, 1999 OCTOBER 31, 1999
<S> <C> <C> <C>
T1 * *
256 KBS * *
128 KBS * *
56 KBS * *
ISDN * *
</TABLE>
<TABLE>
<CAPTION>
EUROPE:
INSTALLATION SITES INSTALLATION SITES
AS OF OCTOBER 31, 1999 ADDED AFTER DISTRIBUTOR COUNTRY
CONNECTION SPEED OCTOBER 31, 1999
<S> <C> <C> <C> <C>
T1 * * *
256 KBS * * *
128 KBS * * *
64 KBS * * *
ISDN * * *
E1 * * *
</TABLE>
24
<PAGE>
<TABLE>
<CAPTION>
ASIA:
INSTALLATION SITES INSTALLATION SITES
AS OF OCTOBER 31, 1999 ADDED AFTER DISTRIBUTOR COUNTRY
CONNECTION SPEED OCTOBER 31, 1999
<S> <C> <C> <C> <C>
T1 * * *
256 Kbs * * *
128 Kbs * * *
56 Kbs * * *
ISDN * * *
</TABLE>
CONFIDENTIAL MATERIALS HAVE BEEN OMITTED FROM THIS SCHEDULE PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT AND HAVE BEEN FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION. ASTERISKS DENOTE OMISSIONS.
25
<PAGE>
EXHIBIT A
FORM OF LOCAL
NETWORK SERVICES AGREEMENT
This LOCAL NETWORK SERVICES AGREEMENT (the "Agreement") is effective as
of ___________, 2000 (the "Effective Date") between [local SAVVIS entity], a
[limited liability company] incorporated under the laws of [country ] ("SAVVIS")
and [local Bridge/Telerate entity], a [limited liability company] incorporated
under the laws of [country] ("Customer").
RECITALS
A. Customer is engaged in the business of collecting and distributing
various financial, news and other data in [country] (the "JURISDICTION").
B. SAVVIS is engaged in the business of providing Internet Protocol
backbone and other data transport services in the Jurisdiction.
C. SAVVIS Parent and [Bridge Parent]/[Telerate Parent] have entered
into the Network Services Agreement for the provision and receipt of similar
services on a world-wide basis at the parent level as are being provided and
received by the parties to this Agreement within the Jurisdiction.
D. Together with this Agreement, the SAVVIS is entering into certain
other agreements with Customer, or Affiliates of the Customer, related to their
operations in the Jurisdiction, including Local Transfer Agreements, Equipment
Collocation Permits, and Local Administrative Services Agreements.
NOW, THEREFORE, in consideration of the premises, and the mutual
covenants contained herein and of other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the parties agree as
follows:
1. CONTRACT DOCUMENTS AND DEFINITIONS
1.1. This Agreement shall consist of this Local Network Services
Agreement by and between SAVVIS and Customer, including all
addenda to this Agreement entered into in the manner set forth
herein (each an "ADDENDUM" and collectively the "ADDENDA").
This Agreement shall be interpreted wherever possible to avoid
conflicts between the Sections hereof and the Attachments,
provided that if such a conflict shall arise, the Attachments
shall control.
1.2. Whenever it is provided in this Agreement for a matter to be
mutually agreed upon by the parties and set forth in an
Addendum to this Agreement, either party may initiate the
process of determining such matter by submitting a proposed
outline or contents of such Addendum to the other party. Each
party shall appoint a primary contact and a secondary contact
for the completion of such Addendum, who shall be the contact
points for every issue concerning such Addendum and who shall
be informed of the progress of the project. The names of the
contacts will be exchanged in writing by the parties. Using
the contacts, the parties shall work together in good faith
with such diligence as shall be commercially reasonable under
the circumstances to complete such Addendum, provided,
however, that neither party shall be obligated to enter into
such an Addendum. Upon the completion of such Addendum, it
shall be set forth in a written document and executed by the
parties and shall become a part of this Agreement and shall be
deemed to be incorporated herein by reference.
1.3. Whenever used in this Agreement, the words and phrases listed
below shall have the meanings given below, and all defined
terms shall include the plural as well as the singular. Unless
otherwise stated, the words "herein", "hereunder" and other
similar words refer to this Agreement as a whole and not to a
particular Section or other subdivision. The words "included"
and "including" shall not be construed as terms of limitation.
Capitalized terms not otherwise defined herein have the
meanings assigned to such terms in the Network Services
Agreement.
"ACQUIRED NETWORK FACILITIEs" means the assets and contracts
for the provision of Internet Protocol backbone and other data
transport services within the Jurisdiction to the extent
acquired by SAVVIS pursuant to the Local Transfer Agreement
between Customer, or Affiliates of the Customer, and SAVVIS.
"ADDITIONAL NETWORK FACILITIES" means any assets and contracts
of SAVVIS for the provision of Internet Protocol backbone and
other data transport services other than the Acquired Network
Facilities.
"AFFILIATE" has the meaning set forth in Rule 12b-2 of the
regulations promulgated under the Securities Exchange Act of
1934, as amended.
"AGREEMENT YEAR" means a period of 12 months beginning on the
Effective Date and each subsequent anniversary thereof.
["BRIDGE PARENT" means Bridge Information Systems, Inc.,
a Missouri corporation, and its successors and assigns.]
"CONFIDENTIAL INFORMATION" means all information concerning
the business of Customer, SAVVIS or any third party doing
business with either of them that may be obtained from any
source (i) by SAVVIS by virtue of its performance under this
Agreement or (ii) by Customer by virtue of its use of the
Networks. Such information shall also include the terms of
this Agreement (and negotiations and proposals from one party
to the other related directly thereto), network designs and
design recommendations, tools and programs, pricing, methods,
processes, financial data, software, research, development,
strategic plans or related information. All such information
disclosed prior to the execution of this Agreement shall also
be considered Confidential Information for purposes of this
Agreement.
Confidential Information shall not include information that:
(a) is already rightfully known to the receiving
party at the time it is obtained by such
party, free from any obligation to keep such
information confidential; or
(b) is or becomes publicly known through no
wrongful act of the receiving party; or
(c) is rightfully received by the receiving
party from a third party without restriction
and without breach of this Agreement.
"CUSTOMER" means [local Bridge/Telerate entity], a [limited
liability company] incorporated under the laws of [country],
and its successors and assigns.
"EFFECTIVE DATE" means the date set forth in the Preamble of
this Agreement.
"EVENT OF DEFAULT BY SAVVIS" has the meaning assigned to such
term in Section 7.1 of this Agreement.
"INITIAL TERM" means a period of ten consecutive Agreement
Years beginning on the Effective Date.
"INSTALLATION SITE" means any facility of Customer or of
vendors or customers of Customer at which one or more of the
Networks is installed.
"LOCAL EXCHANGE CARRIER" means the local telecommunications
provider(s) from which SAVVIS leases the lines it makes
available to Customer.
"LOCAL [TELERATE]/[Bridge] Network Services Agreement" means a
local network services agreement pursuant to which SAVVIS
shall provide Internet Protocol backbone and other data
transport services to an Affiliate of [Telerate
Parent]/[Bridge Parent] operating in the Jurisdiction.
"MARKET HOURS" means, with respect to any Installation Site,
the period of time beginning two hours before the time at
which trading opens on the principal securities exchange or
automated quotation system designated by Customer in writing
from time to time as being used by the purchasers and sellers
of securities at such Installation Site, and ending two hours
after the time at which such trading ceases to be conducted.
"NETWORK" and "NETWORKS" have the meaning assigned to such
terms in Section 2.1 of this Agreement.
"NETWORK SERVICES AGREEMENT" means the Network Services
Agreement between SAVVIS Parent and [Bridge Parent]/[Telerate
Parent], effective as of _________, 2000.
"POP" means point-of-presence.
"QUALITY OF SERVICE STANDARDS" means the standards for the
performance of the Networks contained in Schedule 2.2 hereto
or an Addendum to this Agreement.
"SAVVIS" means [local SAVVIS entity], a [limited liability
company] incorporated under the laws of [country ], and its
successors and assigns.
"SAVVIS PARENT" means SAVVIS Communications Corporation, a
Missouri corporation, its successors and assigns.
"SECURITIES EXCHANGE ACT" means the United States Securities
Exchange Act of 1934, as amended.
"TAIL CIRCUIT" means the access line or other communications
circuit from the SAVVIS POP to an Installation Site.
["TELERATE PARENT" means Telerate Holdings, Inc., a Delaware
corporation, and its successors and assigns.]
"TRANSITION PERIOD" has the meaning assigned to such term in
Section 6.3 of this Agreement.
2. THE NETWORKS AND QUALITY OF SERVICE STANDARDS
2.1. SAVVIS agrees to use the Acquired Network Facilities to
provide to Customer the following managed packet-data
transport networks, including the operation, management and
maintenance thereof:
(a) that portion of a global office-automation network
located in the Jurisdiction, providing connectivity
between the offices of Customer, Bridge Parent and
Affiliates of Bridge Parent (the "OA NETWORK"),
(b) that portion of a global data collection network
located in the Jurisdiction (the "COLLECTION
NETWORK") and
(c) that portion of a global data distribution network
located in the Jurisdiction (the "DISTRIBUTION
NETWORK"),
which shall be referred to in this Agreement
collectively as the "Networks" and individually as a
"Network."
2.2. Each Network shall be operated, managed and maintained by
SAVVIS. SAVVIS may, but shall not be obligated to, use
facilities of SAVVIS other than the Acquired Network
Facilities to provide all or any part of any Network.
Beginning on the first anniversary of the Effective Date and
thereafter, each Network shall be operated, managed and
maintained by SAVVIS according to the Quality of Service
Standards set forth in Schedule 2.2 hereof, and SAVVIS shall
be responsible for monitoring the performance of the Networks
with respect to the Quality of Service Standards and shall
provide Customer with monthly reports of such performance. If
the Quality of Service Standards are not met with respect to a
particular Installation Site in any month, Customer shall be
entitled to receive, upon written request by Customer within
30 days of its receipt of the performance report for such
Installation Site for such month, a credit in the amount set
forth on Schedule 2.2 attached hereto, which amount shall be
deemed to be one month's charges applicable to such
Installation Site under this Agreement with respect to such
month; provided, however, that Customer shall not be entitled
to such credit to the extent that the failure to meet the
Quality of Service Standards with respect to such Installation
Site is due to (i) an act or omission of Customer or a vendor
or customer of Customer or (ii) equipment or software used by
Customer and not provided by SAVVIS. Not more than one credit
of one month's charges shall be given for a particular
Installation Site for a particular month. For all purposes of
this Agreement, including without limitation the determination
of an Event of Default by SAVVIS, the Quality of Service
Standards applicable to a particular Installation Site in any
month shall be deemed to have been met unless Customer, within
30 days of its receipt of the performance report for such
Installation Site for such month, requests in writing a credit
as set forth above with respect to such Installation Site for
such month.
2.3. [Intentionally omitted.]
2.4. In providing Additional Network Facilities, SAVVIS agrees to
use its best efforts to expedite the provisioning of the
circuits for such Additional Network Facilities in those
instances in which SAVVIS is responsible for provisioning such
circuits, and to use its best efforts to avoid single points
of failure in the engineering design of such Additional
Network Facilities, consistent with the level of redundancy
specified in the applicable Addendum.
2.5. Throughout the term of this Agreement, SAVVIS shall use its
reasonable best efforts to continue to meet the requests of
Customer to enhance the total capacity, geographic extension
and performance quality of the Networks, and to maintain its
research and development effort at a level appropriate to
sustain the ability of Customer to compete on the basis of the
quality of the Networks.
3. RATES AND CHARGES
3.1. Customer shall pay SAVVIS for the Networks using the Acquired
Network Facilities and Additional Network Facilities according
to the rates and charges set forth in Schedule 3.1 of the
Network Services Agreement.
3.2. The parties recognize that certain savings might be obtained
by consolidating the multiple Local Access Facilities that are
provided at such building locations on the Effective Date. In
the event that SAVVIS consolidates the multiple Local Access
Facilities at one or more of such building locations and
obtains cost savings as a result thereof, the parties will
mutually agree within 30 days following such consolidation on
the manner in which such savings shall be shared as follows:
(a) between SAVVIS and Customer, if only
Customer uses those consolidated Local
Access Facilities; or
(b) between SAVVIS, Customer and the Affiliate
of [Telerate Parent]/[Bridge Parent] that is
a party to the Local [Telerate]/[Bridge]
Network Services Agreement, if both Customer
and such Affiliate use those consolidated
Local Access Facilities.
3.3. For any Installation Site to which SAVVIS is providing
services both under this Agreement and a Local
[Telerate]/[Bridge] Network Services Agreement, the rates and
charges applicable to such Installation Site under this
Agreement shall be one-half of the rates and charges that
would otherwise be applicable to such Installation Site under
this Agreement.
4. PROVISION OF TAIL CIRCUITS
4.1. SAVVIS shall use its reasonable efforts to provide a Tail
Circuit to Customer by contracting with the Local Exchange
Carrier for access to the Tail Circuit and causing the Tail
Circuit to be operated, managed, and maintained as necessary
to provide access thereto to Customer. SAVVIS does not
guarantee or warrant the performance of the Tail Circuit or
the performance by the Local Exchange Carrier of its
obligations under any contract between SAVVIS and the Local
Exchange Carrier, applicable laws and regulations, or
standards of the industry.
4.2. Customer shall not use the Tail Circuit in any way that might
cause SAVVIS to violate the terms and conditions under which
access to the Tail Circuit is provided by the Local Exchange
Carrier, whether such terms and conditions be contractual,
regulatory, or other.
4.3. Customer shall be responsible for only that portion of SAVVIS'
costs attributable to Customer's own access to and use of the
Tail Circuit. In the event that SAVVIS provides access to any
third party or parties, Customer and SAVVIS will follow the
procedure set forth in Section 1.2 above in order to establish
a mutually agreed upon method or formula for determining the
amount to be charged to Customer, generally based on a pro
rata allocation of SAVVIS' total costs among all its customers
and other relevant considerations and/or fair and reasonable
adjustments in light of the circumstances at that time.
5. INVOICES
5.1. The amounts due to SAVVIS from Customer for the installation,
operation, management and maintenance of the Networks shall be
billed monthly in advance. All items on invoices not the
subject of a bona fide dispute shall be payable by Customer in
[local currency] within 30 days from the date of receipt of
the invoice. All amounts not in dispute are subject to
interest charges of 1-1/2 percent that will accrue daily on
all amounts not paid within 30 days of the date of receipt of
the invoice.
5.2. At any time and from time to time, Customer may, by written
notice to SAVVIS, have one or more Installation Sites removed
from the Networks. Each monthly invoice from SAVVIS to
Customer shall reflect a reduction in the amount charged to
Customer for the Networks resulting from any such removal of
Installation Sites. In the case of any Installation Site
removed from the Acquired Network Facilities, such reduction
shall be the sum of:
(a) the actual cost of the Local Access Facilities
connecting the Acquired Network Facilities to such
Installation Site, effective as of such time as
SAVVIS is no longer required to pay such costs, and
(b) the amounts set forth on Schedule 5.2 of the Network
Services Agreement, which are deemed to be one
month's charges applicable to such Installation Site
under this Agreement with respect to such month
during the first Agreement Year, according to the
geographic location and connection speed at such
Installation Site, effective as of such time as such
Installation Site is disconnected from the Networks.
5.3. Customer shall pay any sales, use, federal excise, utility,
gross receipts, state and local surcharges, value added and
similar taxes, charges or levies lawfully levied by a duly
constituted taxing authority against or upon the Networks. In
the alternative, Customer shall provide SAVVIS with a
certificate evidencing Customer's exemption from payment of or
liability for such taxes. All other taxes, charges or levies,
including any ad valorem, income, franchise, privilege or
occupation taxes of SAVVIS shall be paid by SAVVIS.
5.4. Bona fide disputes concerning invoices shall be referred to
the parties' respective representatives who are authorized to
resolve such matters. Any amount to which Customer is entitled
as a result of the resolution of a billing dispute shall be
credited promptly to Customer's account. Any amount to which
SAVVIS is entitled as a result of the resolution of a billing
dispute shall be paid promptly to SAVVIS.
5.5. Against the amounts owed by Customer to SAVVIS under this
Agreement, Customer shall have the right to offset any amounts
owed by SAVVIS to Customer under this Agreement, or otherwise,
including without limitation any amounts paid by Bridge Parent
on behalf of SAVVIS under guarantees by Bridge Parent of
obligations of SAVVIS.
6. TERM AND EXTENSIONS
6.1. This Agreement shall commence on the Effective Date and shall
continue in full force and effect for the Initial Term unless
terminated or extended in accordance with the provisions
hereof.
6.2. The term of this Agreement may be extended by Customer for one
additional five-year period by giving SAVVIS written notice
not less than one year before the scheduled expiration of the
Initial Term.
6.3. Upon the termination of this Agreement in accordance with its
scheduled expiration or by Customer pursuant to Section 7,
SAVVIS will continue to provide the Networks in accordance
with the terms and conditions herein (excluding the Minimum
Annual Commitment) for a period of up to five years after the
effective date of termination (the "TRANSITION PERIOD").
During the Transition Period, Customer shall pay SAVVIS for
the use of the Networks at the rates in effect at the
effective date of termination. If Customer has not completely
transitioned from its use of the Networks after the Transition
Period, SAVVIS will provide the Networks at SAVVIS' then
current list rates. SAVVIS and its successor will cooperate
with Customer until Customer has completely migrated to
another provider.
6.4. The above provisions of this Section 6 notwithstanding, the
term of this Agreement, including the Initial Term and any
extension provided under Section 6.2, and the Transition
Period shall not extend beyond the term or the transition
period of the Network Services Agreement.
7. TERMINATION BY CUSTOMER
7.1. An "EVENT OF DEFAULT BY SAVVIS" shall be deemed to occur if:
(a) SAVVIS has failed to a material degree to perform or
comply with or has violated any material
representation, warranty, term, condition or
obligation of SAVVIS under this Agreement, and SAVVIS
has failed to cure such failure or violation within
60 days after receiving notice thereof from Customer;
or
(b) SAVVIS becomes the subject of a voluntary or
involuntary bankruptcy, insolvency, reorganization or
liquidation proceeding, makes an assignment for the
benefit of creditors, or admits in writing its
inability to pay debts when due; or
(c) an Event of Default by SAVVIS occurs under the Local
[Telerate]/[Bridge] Network Services Agreement or
SAVVIS Parent defaults under the terms of the Network
Services Agreement.
7.2. Customer shall have the right to terminate this Agreement,
with no liability to SAVVIS other than for charges (less any
applicable credits) for the Networks provided prior to such
termination, if:
(a) Customer provides written notice to SAVVIS, at any
time after the ninth anniversary of the Effective
Date, of Customer's intent to terminate, such
termination to be effective not less than one year
following the date of such notice; or
(b) Customer provides 10 days written notice of its
intent to terminate in the event that an Event
of Default by SAVVIS occurs.
7.3. For purposes of Section 7.1(a), if the Quality of Service
Standards are not met with respect to a particular
Installation Site in any month, SAVVIS shall be deemed to have
cured such failure within 60 days if the Quality of Service
Standards are met with respect to such Installation Site in
the following month. The parties acknowledge and agree that
the failure of the Quality of Service Standards to be met with
respect to one or more Installation Sites in one or more
months may, but does not necessarily, constitute a failure by
SAVVIS to a material degree to perform or comply with or a
violation to a material degree of any material representation,
warranty, term, condition or obligation of SAVVIS under this
Agreement.
7.4. As provided in Section 2.2, for all purposes of this
Agreement, including without limitation the determination of
an Event of Default by SAVVIS under this Section, the Quality
of Service Standards applicable to a particular Installation
Site in any month shall be deemed to have been met unless
Bridge, within 30 days of its receipt of the performance
report for such Installation Site for such month, requests in
writing a credit as set forth in Section 2.2 with respect to
such Installation Site for such month.
8. TERMINATION BY SAVVIS
8.1. SAVVIS shall have the right to terminate this Agreement if:
(a) Customer has failed to pay any invoice that is not
the subject of a bona fide dispute within 60 days of
the date on which such payment is due and SAVVIS has
provided Customer with written notice thereof,
provided that Customer shall have a further 30 days
from the time it receives such notice from SAVVIS of
nonpayment to cure any such default;
(b) SAVVIS provides 10 days written notice of its intent
to terminate in the event that Customer has failed to
perform or comply with or has violated any material
representation, warranty, term, condition or
obligation of Customer under this Agreement, and
Customer has failed to cure such failure or violation
within 60 days after receiving notice thereof from
SAVVIS; or
(c) Customer becomes the subject of a voluntary or
involuntary bankruptcy, insolvency, reorganization or
liquidation proceeding, makes an assignment for the
benefit of creditors, or admits in writing its
inability to pay debts when due; or
(d) SAVVIS becomes entitled to terminate the Local
[Telerate]/[Bridge] Network Services Agreement or
SAVVIS Parent becomes entitled to terminate the
Network Services Agreement.
8.2. Notwithstanding the provisions of Section 8.1(b) above, SAVVIS
shall not have the right to terminate this Agreement under
Section 8.1(b) solely for a failure by Customer to perform or
comply with, a violation by Customer of, the obligations of
Customer under Section 15 (Confidentiality) of this Agreement,
without prejudice, however, to such rights as SAVVIS may have
pursuant to such Section and to such rights and remedies to
which SAVVIS may be entitled, at law or in equity, as the
result of an actual or threatened breach by Customer of such
Section.
9. ACCEPTANCE OF ADDITIONAL NETWORK FACILITIES
9.1. Upon the installation of Additional Network Facilities at any
Installation Site, SAVVIS shall conduct appropriate tests to
establish that such Additional Network Facilities perform in
accordance with mutually agreed upon acceptance criteria
("ACCEPTANCE CRITERIA") set forth in the applicable Addendum
entered into pursuant to Section 2.4, and shall promptly
inform Customer of such test results. If test results show
that the Additional Network Facilities are performing in
accordance with the Acceptance Criteria, Customer shall be
deemed to accept the Additional Network Facilities at the
Installation Site immediately.
9.2. If SAVVIS' tests establish that newly installed Additional
Network Facilities at the Installation Site do not perform in
accordance with the mutually agreed upon Acceptance Criteria,
then SAVVIS shall immediately and diligently exert its best
efforts to bring the Additional Network Facilities at such
Installation Site into compliance. SAVVIS shall not bill
Customer for the Additional Network Facilities at such
Installation Site until the test results show that the
Additional Network Facilities are performing in accordance
with the Acceptance Criteria.
9.3. Upon repair or restoration of any part of the Networks, SAVVIS
shall conduct appropriate tests to establish that the Networks
perform in accordance with mutually agreed upon Acceptance
Criteria and shall promptly inform Customer of such test
results.
10. RIGHTS AND OBLIGATIONS OF CUSTOMER
10.1. SITE PREPARATION. For the installation of Additional Network
Facilities, Customer shall, at its own expense, provide all
necessary preparations of each Installation Site in accordance
with the requirements to be mutually agreed upon by the
parties and set forth in an Addendum hereto, including inside
wiring, demarcation extension and rack mount accessories.
Customer shall ensure that Customer-provided equipment is
on-site by the scheduled installation date. If SAVVIS is
required to reschedule the installation of Customer-provided
equipment because it is not on-site by the scheduled
installation date, Customer shall pay SAVVIS to redispatch
installation personnel.
10.2. PROPER USE OF NETWORKS.
10.2.1. Customer shall use any equipment provided by SAVVIS
in connection with the Networks in accordance with
its documentation, which documentation shall be
provided by SAVVIS at no additional charge. Unless
otherwise provided herein, upon the termination of
this Agreement Customer shall surrender to SAVVIS
the equipment provided by SAVVIS, in good working
order, ordinary wear and tear excepted.
10.2.2. Customer shall be liable for damages to the Networks
caused by the negligence or willful acts or
omissions of Customer's officers, employees, agents
or contractors, for loss through theft or vandalism
of the Networks at the Installation Site, and for
damages to the Networks caused by the use of
equipment or supplies not provided hereunder or not
otherwise authorized by SAVVIS.
10.2.3. Customer shall neither permit nor assist others to
use the Networks for any purpose other than that for
which they are intended, nor fail to maintain a
suitable environment specified by SAVVIS in the
applicable schedule, nor alter, tamper with, adjust
or repair the Networks. Any such alteration,
tampering, adjustment or repair by Customer shall
relieve SAVVIS from any liability or obligation
hereunder (including any warranty or indemnity
obligation) relating to the affected Network, and
Customer shall be liable to SAVVIS for any
documented direct costs incurred by SAVVIS as a
result of such actions.
10.3. ABUSE OR FRAUDULENT USE OF NETWORKS. Customer shall neither
permit nor assist others to abuse or fraudulently use the
Networks, or to use the Networks for any unauthorized or
illegal purposes, including:
(a) obtaining or attempting to obtain service by any
fraudulent means or device to avoid payment; or
(b) accessing, altering or destroying any information of
another party by any fraudulent means or device, or
attempting to do so; or
(c) using the Networks so as to interfere with the use of
the SAVVIS network by other SAVVIS customers or
authorized users or in violation of law or in support
of any unlawful act; or
(d) using the Networks for voice communications over a
private network in jurisdictions where such use is
not allowed.
Notwithstanding the provisions of Section 8, upon the breach
of this Section 10.3 by Customer, SAVVIS shall have the right
to terminate this Agreement immediately upon written notice to
Customer.
10.4. COVENANT NOT TO COMPETE.
10.4.1. As an inducement to SAVVIS to enter into this
Agreement, which Customer acknowledges is of benefit
to it, and in consideration of the promises and
representations of SAVVIS under this Agreement,
Customer covenants and agrees that during the term
of this Agreement and for a period of five years
thereafter, neither Customer nor any of its
successors or assigns will, directly or indirectly,
engage in, or have any interest in any other person,
firm, corporation or other entity engaged in, any
business activities anywhere in the world
competitive with or similar or related to the
packet-data transport network services provided by
SAVVIS under this Agreement; provided, however, that
(i) Customer shall be free to continue to use the
Call Assets and the satellite networks currently
used by Customer, until such Call Assets or
satellite networks have been acquired by SAVVIS,
SAVVIS Parent or Affiliates of SAVVIS Parent, and
(ii) Customer shall be free to make passive
investments in securities of companies that provide
network services in competition with SAVVIS which,
in the case of any such security, does not
constitute more than ten percent (10%) of the total
outstanding amount of such security.
10.4.2. If any court or tribunal of competent jurisdiction
shall refuse to enforce one or more of the covenants
in this Section 10.4 because the time limit
applicable thereto is deemed unreasonable, it is
expressly understood and agreed that such covenant
or covenants shall not be void but that for the
purpose of such proceedings such time limitation
shall be deemed to be reduced to the extent
necessary to permit the enforcement of such covenant
or covenants.
10.4.3. If any court or tribunal of competent jurisdiction
shall refuse to enforce any or all of the covenants
in this Section 10.4 because, taken together, they
are more extensive (whether as to geographic area,
scope of business or otherwise) than is deemed to be
reasonable, it is expressly understood and agreed
between the parties hereto that such covenant or
covenants shall not be void but that for the purpose
of such proceedings the restrictions contained
therein (whether as to geographic area, scope of
business or otherwise) shall be deemed to be reduced
to the extent necessary to permit the enforcement of
such covenant or covenants.
10.4.4. Customer specifically acknowledges and agrees that
the foregoing covenants are commercially reasonable
and reasonably necessary to protect the interests of
SAVVIS hereunder. Customer hereby acknowledges that
SAVVIS and its successors and assigns will suffer
irreparable and continuing harm to the extent that
any of the foregoing covenants is breached and that
legal remedies would be inadequate in the event of
any such breach.
11. RIGHTS AND OBLIGATIONS OF SAVVIS
11.1. PROVISION OF THE NETWORKS. SAVVIS shall operate, maintain and
manage the Networks at the Installation Sites using the
Acquired Network Facilities in accordance with the Quality of
Service Standards and other terms of this Agreement, including
all Addenda hereto.
11.2. REPRESENTATIONS AND WARRANTIES.
11.2.1. [Intentionally omitted.]
11.2.2. SAVVIS hereby represents and warrants that the terms
hereof do not conflict in any respect whatsoever
with any SAVVIS tariff on file with the Federal
Communications Commission or other regulatory body.
If, during the term of this Agreement, SAVVIS shall
file a contract specific tariff governing the
Networks or any portion thereof, such tariff filing
shall be consistent in all respects with the terms
of this Agreement, and SAVVIS shall give Customer 10
days advance written notice of making such a tariff
filing and of filing any subsequent modifications
thereto.
11.2.3. THE FOREGOING WARRANTIES ARE IN LIEU OF ALL OTHER
WARRANTIES, EXPRESS OR IMPLIED, INCLUDING THE
IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS
FOR A PARTICULAR PURPOSE.
11.3. SAVVIS acknowledges that the occurrence of Event of Default by
SAVVIS, arising from either (i) a failure of the Networks to
meet Quality of Service Standards or (ii) a total loss to
Bridge of the use of the Networks, could cause irreparable
harm to Customer, the amount of which may be difficult to
determine, thus potentially making any remedy at law or in
damages inadequate. SAVVIS, therefore, agrees that Customer
shall have the right to apply to any court of competent
jurisdiction for injunctive relief upon the occurrence of an
Event of Default by SAVVIS or the occurrence of an event
which, with the passage of time or the giving of notice, could
become an Event of Default by SAVVIS and for any other
appropriate relief. This right shall be in addition to any
other remedy available to Customer in law or equity. SAVVIS
further agrees that, upon the occurrence of an Event of
Default by SAVVIS, SAVVIS shall pay to Customer, as liquidated
damages and not as a penalty, an amount equal to the lesser of
(a) the aggregate amounts paid by Customer to SAVVIS under
this Agreement during the six months preceding such Event of
Default by SAVVIS or (b) $50,000,000; provided, however, that
Customer may recover liquidated damages under this Section
only for an Event of Default by SAVVIS that occurs (i) prior
to any Event of Default by SAVVIS for which Customer has
claimed liquidated damages under this Section, or (ii) more
than 36 months following the most recent Event of Default by
SAVVIS for which Customer has claimed liquidated damages under
this Section.
12. LIMITATIONS OF LIABILITY
12.1. Neither party shall be liable to the other for indirect,
incidental, consequential, exemplary, reliance or special
damages, including damages for lost profits, regardless of the
form of action whether in contract, indemnity, warranty,
strict liability or tort, including negligence of any kind
with respect to the Networks or other conduct under this
Agreement.
12.2. Nothing contained in this Section shall limit either party's
liability to the other for (a) willful or intentional
misconduct, including fraud, or (b) injury or death, or damage
to tangible real or tangible personal property or the
environment, when proximately caused by SAVVIS' or Customer's
negligence or that of their respective agents, subcontractors
or employees. Nothing contained in this Section shall limit
SAVVIS' intellectual property indemnification obligations
under Section 16.1 or Customer's indemnification obligations
with respect to a breach of Section 10.3.
13. EQUIPMENT AND SOFTWARE NOT PROVIDED BY SAVVIS
13.1. SAVVIS shall not be responsible for the installation,
operation or maintenance of equipment or software not provided
by it under this Agreement, nor shall SAVVIS be responsible
for the transmission or reception of information by equipment
or software not provided by SAVVIS hereunder. In the event
that Customer uses equipment or software not provided by
SAVVIS hereunder in a manner that impairs Customer's use of
the Networks, Customer shall not be excused from payment for
such use and SAVVIS shall not be responsible for any failure
of the Networks to meet the Quality of Service Standards
resulting from the use of such equipment or software by
Customer. Upon notice from SAVVIS that the equipment or
software not provided by SAVVIS under this Agreement is
causing or is likely to cause hazard, interference or service
obstruction, Customer shall eliminate the likelihood of such
hazard, interference or service obstruction.
13.2. Notwithstanding the foregoing, SAVVIS shall, at no additional
charge, provide all interface specifications for the Networks
reasonably requested by Customer. SAVVIS shall, upon the
receipt of appropriate specifications from Customer, inform
Customer of the compatibility with the Networks of any
equipment or software that Customer proposes to use in
connection therewith, the effects, if any, of the use of such
equipment or software on the quality, operating
characteristics and efficiency of the Networks, and the
effects, if any, of the Networks on the operating
characteristics and efficiency of any such equipment or
software.
14. PROPRIETARY RIGHTS; LICENSE
14.1. SAVVIS hereby grants to Customer a non-exclusive and
non-transferable license to use all programming and software
necessary for Customer to use the Networks. Such license is
granted for the term of this Agreement for the sole purpose of
enabling Customer to use the Networks.
14.2. All title and property rights (including intellectual property
rights) to the Networks (including associated programming and
software) are and shall remain with SAVVIS or the third-party
providers thereof to SAVVIS. Customer shall not attempt to
examine, copy, alter, reverse engineer, decompile,
disassemble, tamper with or otherwise misuse the Networks,
programming and software.
15. CONFIDENTIALITY
15.1. During the term of this Agreement and for a period of five
years from the date of its expiration or termination
(including all extensions thereof), each party agrees to
maintain in strict confidence all Confidential Information.
Neither party shall, without prior written consent of the
other party, use the other party's Confidential Information
for any purpose other than for the performance of its duties
and obligations, and the exercise of its rights, under this
Agreement. Each party shall use, and shall cause all
authorized recipients of the other party's Confidential
Information to use, the same degree of care to protect the
other party's Confidential Information as it uses to protect
its own Confidential Information, but in any event not less
than a reasonable degree of care.
15.2. Notwithstanding Section 15.1, either party may disclose the
Confidential Information of the other party to: (a) its
employees and the employees, directors and officers of its
Affiliates as necessary to implement this Agreement; (b)
employees, agents or representatives of the other party; or
(c) other persons (including counsel, consultants, lessors or
managers of facilities or equipment used by such party) in
need of access to such information for purposes specifically
related to either party's responsibilities under this
Agreement, provided that any disclosure of Confidential
Information under clause (c) shall be made only upon prior
written approval of the other party and subject to the
appropriate assurances that the recipient of such information
shall hold it in strict confidence.
15.3. Upon the request of the party having proprietary rights to
Confidential Information, the party in possession of such
information shall promptly return it (including any copies,
extracts and summaries thereof, in whatever form and medium
recorded) to the requesting party or, with the other party's
written consent, shall promptly destroy it and provide the
other party with written certification of such destruction.
15.4. Either party may request in writing that the other party waive
all or any portion of the requesting party's responsibilities
relative to the other party's Confidential Information. Such
waiver request shall identify the affected information and the
nature of the proposed waiver. The recipient of the request
shall respond within a reasonable time and, if it determines,
in its sole discretion, to grant the requested waiver, it will
do so in writing over the signature of an employee authorized
to grant such request.
15.5. Customer and SAVVIS acknowledge that any disclosure or
misappropriation of Confidential Information in violation of
this Agreement could cause irreparable harm, the amount of
which may be difficult to determine, thus potentially making
any remedy at law or in damages inadequate. Each party,
therefore, agrees that the other party shall have the right to
apply to any court of competent jurisdiction for an order
restraining any breach or threatened breach of this Section
and for any other appropriate relief. This right shall be in
addition to any other remedy available in law or equity.
15.6. A party requested or ordered by a court or other governmental
authority of competent jurisdiction to disclose another
party's Confidential Information shall notify the other party
in advance of any such disclosure and, absent the other
party's consent to such disclosure, use its best efforts to
resist, and to assist the other party in resisting, such
disclosure. A party providing another party's Confidential
Information to a court or other governmental authority shall
use its best efforts to obtain a protective order or
comparable assurance that the Confidential Information so
provided will be held in confidence and not further disclosed
to any other person, absent the owner's prior consent.
15.7. The provisions of Section 15.1 above shall not apply to
reasonably necessary disclosures in or in connection with
filings under any securities laws, regulatory filings or
proceedings, financial disclosures which in the good faith
judgment of the disclosing party are required by law,
disclosures required by court or tribunal or competent
jurisdiction, or disclosures that may be reasonably necessary
in connection with the sale of securities or the performance
or enforcement of this Agreement or any of the obligations
hereof; provided, however, that if the receiving party would
otherwise be required to refer to or describe any aspect of
this Agreement in any of the preceding circumstances, the
receiving party shall use its reasonable efforts to take such
steps as are available under such circumstances (such as by
providing a summary or synopsis) to avoid disclosure of the
financial terms and conditions of this Agreement.
Notwithstanding any provisions of this Agreement to the
contrary, either party may disclose the terms and conditions
of this Agreement in the course of a due diligence review
performed in connection with prospective debt financing or
equity investment by, or a sale to, a third party, so long as
the persons conducting such due diligence review have agreed
to maintain the confidentiality of such disclosure and not to
use such disclosure for any purpose other such due diligence
review.
16. INDEMNIFICATIONS
16.1. SAVVIS shall defend, settle, or otherwise manage at its own
cost and expense any claim or action against Customer or any
of its directors, officers, employees or assigns for actual or
alleged infringement by the Networks of any patent, copyright,
trademark, trade secret or similar proprietary right of any
third party, except to the extent that such actual or alleged
infringement arises from (i) such actual or alleged
infringement by the Acquired Network Facilities on the
Effective Date or (ii) an act or omission of Customer or a
vendor or customer of Customer or (iii) equipment or software
used by Customer and not provided by SAVVIS. Customer shall
notify SAVVIS promptly in writing of any such claim or suit
and shall cooperate with SAVVIS in a reasonable way to
facilitate the settlement or defense thereof. SAVVIS further
agrees to indemnify and hold Customer harmless from and
against any and all liabilities and damages (whether incurred
as the result of a judicial decree or a settlement), and the
costs and expenses associated with any claim or action of the
type identified in this Section (including reasonable
attorneys' fees).
16.2. If, as a consequence of a claim or action of the kind
described in Section 16.1, SAVVIS' or Customer's use of all or
part of any Network is enjoined, SAVVIS shall, at its option
and expense, either: (a) procure for Customer the right to
continue using the affected Network; (b) modify such Network
so that they are non-infringing, provided that such
modification does not affect the intended use of the Network
as contemplated hereunder. If SAVVIS does not take any of the
actions described in clauses (a) or (b), then Customer may
terminate the affected portion of such Network, and SAVVIS
shall refund to Customer any prepaid charges therefor.
16.3. Subject to Section 12, Customer will defend, indemnify and
hold harmless SAVVIS or any of its directors, officers,
employees or assigns from and against all loss, liability,
damage and expense, including reasonable attorneys' fees,
caused by:
(a) claims for libel, slander, invasion of privacy or
infringement of copyright, and invasion and/or
alteration of private records or data arising from
any information, data or messages transmitted over
the Networks by Customer;
(b) claims for infringement of patents arising from the
use by Customer of equipment and software, apparatus
and systems not provided hereunder in connection with
the Networks; and
(c) the violation of any representations, warranties and
covenants made by Customer in this Agreement.
16.4. Subject to Section 12, SAVVIS will defend, indemnify and hold
harmless Customer or any of its directors, officers, employees
or assigns from and against all loss, liability, damage and
expense, including reasonable attorneys' fees, caused by:
(a) claims for infringement of patents arising from the
use by SAVVIS of equipment and software, apparatus
and systems not provided by SAVVIS hereunder in
connection with the Networks (other than any Acquired
Network Facilities); and
(b) the violation of any representations, warranties and
covenants made by SAVVIS in this Agreement.
17. DISPUTES
17.1. Except as expressly provided in Schedule 4.1 of this
Agreement, the resolution of any and all disputes arising from
or in connection with this Agreement, whether based on
contract, tort, statute or otherwise, including disputes over
arbitrability and disputes in connection with claims by third
persons ("DISPUTES") shall be exclusively governed by and
settled in accordance with the provisions of this Section 17.
The foregoing shall not preclude recourse to judicial
proceedings to obtain injunctive, emergency or other equitable
relief to enforce the provisions of this Agreement, including
specific performance, and to decide such issues as are
required to be resolved in determining whether to grant such
relief. Resolution of Disputes with respect to claims by third
persons shall be deferred until any judicial proceedings with
respect thereto are concluded.
17.2. The parties hereby agree to submit all Disputes to rules of
arbitration of the American Arbitration Association and the
Missouri Uniform Arbitration Act (the "RULES") under the
following provisions, which shall be final and binding upon
the parties, their successors and assigns, and that the
following provisions constitute a binding arbitration clause
under applicable law. Either party may serve process or notice
on the other in any arbitration or litigation in accordance
with the notice provisions hereof. The parties agree not to
disclose any information regarding any Dispute or the conduct
of any arbitration hereunder, including the existence of such
Dispute or such arbitration, to any person or entity other
than such employees or representatives of such party as have a
need to know.
17.3. Either party may commence proceedings hereunder by delivery of
written notice providing a reasonable description of the
Dispute to the other, including a reference to this provision
(the "DISPUTE NOTICE"). Either party may initiate arbitration
of a Dispute by delivery of a demand therefor (the
"ARBITRATION DEMAND") to the other party not sooner than 60
calendar days after the date of delivery of the Dispute Notice
but at any time thereafter. The arbitration shall be conducted
in St. Louis, Missouri.
17.4. The arbitration shall be conducted by three arbitrators (the
"ARBITRATORS"), one of whom shall be selected by Customer, one
by SAVVIS, and the third by agreement of the other two not
later than 10 days after appointment of the first two, or,
failing such agreement, appointed pursuant to the Rules. If an
Arbitrator becomes unable to serve, a successor shall be
selected or appointed in the same manner in which the
predecessor Arbitrator was appointed.
17.5. The arbitration shall be conducted pursuant to such procedures
as the parties may agree or, in the absence of or failing such
agreement, pursuant to the Rules. Notwithstanding the
foregoing, each party shall have the right to inspect the
books and records of the other party that are reasonably
related to the Dispute, and each party shall provide to the
other, reasonably in advance of any hearing, copies of all
documents which such party intends to present in such hearing
and the names and addresses of all witnesses whose testimony
such party intends to present in such hearing.
17.6. All hearings shall be conducted on an expedited schedule, and
all proceedings shall be confidential. Either party may at its
expense make a stenographic record thereof.
17.7. The Arbitrators shall complete all hearings not later than 90
calendar days after the Arbitrators' selection or appointment,
and shall make a final award not later than 30 calendar days
thereafter. The Arbitrators shall apportion all costs and
expenses of the Arbitration, including the Arbitrators' fees
and expenses of experts ("ARBITRATION COSTS") between the
prevailing and non-prevailing parties as the Arbitrators deem
fair and reasonable. In circumstances where a Dispute has been
asserted or defended against on grounds that the Arbitrators
deem manifestly unreasonable, the Arbitrators may assess all
Arbitration Costs against the non-prevailing party and may
include in the award the prevailing party's attorneys' fees
and expenses in connection with any and all proceedings under
this Section 17.
17.8. Either party may assert appropriate statutes of limitation as
a defense in arbitration; provided, that upon delivery of a
Dispute Notice any such statute shall be tolled pending
resolution hereunder.
17.9. Pending the resolution of any dispute or controversy arising
under this Agreement, the parties shall continue to perform
their respective obligations hereunder, and SAVVIS shall not
discontinue, disconnect or in any other fashion cease to
provide all or any substantial portion of the Networks to
Customer unless otherwise directed by Customer. This Section
shall not apply where (a) Customer is in default under this
Agreement or (b) the dispute or controversy between the
parties relates to harm to the Networks allegedly caused by
Customer and Customer does not immediately cease and desist
from the activity giving rise to the dispute or controversy.
18. FORCE MAJEURE
18.1. In no event shall either party be liable to the other for any
failure to perform hereunder that is due to war, riots,
embargoes, strikes or other concerted acts of workers (whether
of a party hereto or of others), casualties, accidents or
other causes to the extent that such failure and the
consequences thereof are reasonably beyond the control and
without the fault or negligence of the party claiming excuse.
Each party shall, with the cooperation of the other party, use
reasonable efforts to mitigate the extent of any failure to
perform and the adverse consequences thereof.
18.2. If SAVVIS cannot promptly provide a suitable temporary SAVVIS
alternative to all or part of a Network subject to an
interruption in connection with the existence of a force
majeure condition, Customer may, at its option and at its own
cost, contract with one or more third parties for the affected
portion of the Network for the shortest commercially available
period likely to cover the reasonably expected duration of the
interruption, and may suspend SAVVIS' provision of such
affected portion for such period. SAVVIS shall not charge
Customer for the affected portion thus suspended during the
period of suspension. SAVVIS shall resume provision of the
suspended portion of the Network upon the later of the
termination or expiration of Customer's legally binding
commitments under contracts with third parties for alternative
services or the cessation or remedy of the force majeure
condition.
18.3. In the event that a force majeure condition shall continue for
more than 60 days, Customer may cancel the affected portion of
the Network with no further liability to SAVVIS other than for
obligations incurred with respect to such affected portion
prior to the occurrence of the force majeure condition.
18.4. The consequences arising from existence and continuation of a
force majeure condition, including without limitation any
interruption of the Networks and the exercise by Customer of
its rights under this Section 18, shall be deemed not to
constitute a breach by either party hereto of any
representations, warranties or covenants hereunder and shall
not be grounds for the exercise of any remedies under this
Agreement, including without limitation remedies under Section
2.2 or Section 7, other than those specified in this Section
18.
19. GENERAL PROVISIONS
19.1. NO THIRD-PARTY BENEFICIARIES. This Agreement shall not confer
any rights or remedies upon any person or entity other than
the parties and their respective successors and permitted
assigns.
19.2. ENTIRE AGREEMENT. This Agreement (including the documents
referred to herein) constitutes the entire agreement between
the parties and supersedes any prior understandings,
agreements, or representations by or between the parties,
written or oral, to the extent they related in any way to the
subject matter hereof.
19.3. SUCCESSION AND ASSIGNMENT. This Agreement shall be binding
upon and inure to the benefit of the parties named herein and
their respective successors and permitted assigns. No party
may assign either this Agreement or any of its rights,
interests, or obligations hereunder without the prior written
approval of the other party, which consent shall not be
unreasonably withheld.
19.4. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but
all of which together will constitute one and the same
instrument.
19.5. HEADINGS. The Section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way
the meaning or interpretation of this Agreement.
19.6. NOTICES. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice,
request, demand, claim, or other communication hereunder shall
be deemed duly given if (and then two business days after) it
is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended
recipient as set forth below:
If to Customer: [Bridge Information Systems, Inc.
Three World Financial Center
New York, New York 10285
(212) 372-7195 (fax)
Attention: Zachary Snow,
Executive Vice President
and General Counsel]
[Use same address for
Telerate entities?]
If to SAVVIS: SAVVIS Communications Corporation
717 Office Parkway
St. Louis, Missouri 63141
(314) 468-7550 (fax)
Attention: Steven M. Gallant,
Vice President and
General Counsel
Any party may send any notice, request, demand, claim, or
other communication hereunder to the intended recipient at the
address set forth above using any other means (including
personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail, or electronic mail), but no
such notice, request, demand, claim, or other communication
shall be deemed to have been duly given unless and until it
actually is received by the intended recipient. Any party may
change the address to which notices, requests, demands,
claims, and other communications hereunder are to be delivered
by giving the other party notice in the manner herein set
forth.
19.7. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the domestic laws of the State of
Missouri in the United States of America, without giving
effect to any choice or conflict of law provision or rule
(whether of the State of Missouri or any other jurisdiction)
that would cause the application of the laws of any
jurisdiction other than the State of Missouri.
19.8. AMENDMENTS AND WAIVERS. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing
and signed by SAVVIS and Customer. No waiver by any party of
any default, misrepresentation, or breach of warranty or
covenant hereunder, whether intentional or not, shall be
deemed to extend to any prior or subsequent default,
misrepresentation, or breach of warranty or covenant hereunder
or affect in any way any rights arising by virtue of any prior
or subsequent such occurrence.
19.9. SEVERABILITY. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction
shall not affect the validity or enforceability of the
remaining terms and provisions hereof or the validity or
enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
19.10. EXPENSES. Each party will bear its own costs and expenses
(including legal fees and expenses) incurred in connection
with this Agreement and the transactions contemplated hereby.
19.11. CONSTRUCTION. Any reference to any federal, state, local, or
foreign statute or law shall be deemed also to refer to all
rules and regulations promulgated thereunder, unless the
context requires otherwise. The word "including" shall mean
including without limitation.
19.12. ADDENDA AND SCHEDULES. The Addenda and Schedules identified in
this Agreement are incorporated herein by reference and made a
part hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Network
Services Agreement to be executed as of the date first above written.
[local SAVVIS entity]
By_________________________
Name:______________________
Title:_____________________
[local Bridge/Telerate entity].
By_________________________
Name:______________________
Title:_____________________
<PAGE>
SCHEDULE 2.2
QUALITY OF SERVICE STANDARDS
1. FOR THE COLLECTION NETWORK AND DISTRIBUTION NETWORK:
(a) Between any two Installation Sites on the Collection Network
and the Distribution Network that are connected by fully
redundant circuits provided with the Acquired Network
Facilities there shall be not less than 99.99% end-to-end
availability during each one-month period between such
Installation Sites during the Market Hours at such
Installation Sites.
(b) There shall be delivered not less than 99.99% of all
data packets offered to such Network during each one-month
period.
(c) The average round-trip latency period for the Collection
Network and the Distribution Network using the Acquired
Network Facilities during each one-month period shall not
exceed:
(i) 150 milliseconds within each of the following geographic
regions: (i) the United States, (ii) the Americas, (iii)
Europe, and (iv) Asia; and
(ii) 250 millisecond between any two of such geographic
regions.
2. FOR THE OA NETWORK:
(a) Between any two Installation Sites on the OA Network that are
connected by circuits provided with the Acquired Network
Facilities there shall be not less than 99.90% end-to-end
availability during each one-month period between such
Installation Sites during the Market Hours at such
Installation Sites.
(b) There shall be delivered not less than 99.90% of all
data packets offered to the OA Network during each one-month
period.
(c) The average round-trip latency period for the OA Network using
the Acquired Network Facilities for each one-month period
shall not exceed:
(i) 150 milliseconds within each of the following geographic
regions: (i) the United States, (ii) the Americas, (iii)
Europe, and (iv) Asia; and
(ii) 250 millisecond between any two of such geographic
regions.
3. Credit Amounts
Amounts to be credited if the Quality of Service Standards are not met
with respect to a particular Installation Site in any month shall be as
follows during the first Agreement Year, according to the connection
speed at such Installation Site:
<PAGE>
<TABLE>
<CAPTION>
CONNECTION SPEED MONTHLY CREDIT MONTHLY CREDIT MONTHLY CREDIT
[EUROPE] [ASIA] [AMERICAS]
<S> <C> <C> <C> <C>
T1 * * *
256 KBS * * *
128 KBS * * *
64 KBS * * *
ISDN * * *
E1 * * *
</TABLE>
CONFIDENTIAL MATERIALS HAVE BEEN OMMITTED FROM THIS SCHEDULE PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT AND HAVE BEEN FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION. ASTERISKS DENOTE OMISSIONS.
EXHIBIT 16.1
December 27, 1999
Securities and Exchange Commission
Mail Stop 9-5
450 5th Street, N.W.
Washington, D.C. 20549
Gentlemen:
We have read the disclosure under the caption "Change in Certifying
Accountants" included in the SAVVIS Communications Corporation Registration
Statement on Form S-1 (No. 333-90881) and are in agreement with the statements
contained in the paragraphs therein.
/s/ Ernst & Young LLP
St. Louis, Missouri
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the use in this Amendment No. 3 to Registration Statement No.
333-90881 of SAVVIS Communications Corporation, formerly SAVVIS Holdings
Corporation, of our report dated August 12, 1999, appearing in the Prospectus,
which is part of this Registration Statement, and to the reference to us under
the headings "Selected Financial Data" and "Experts" in such Prospectus.
/s/ Deloitte & Touche LLP
St. Louis, Missouri
December 29, 1999
EXHIBIT 23.2
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Experts" and
"Selected Consolidated Financial Data" and to the use of our report dated April
23, 1998, with respect to the financial statements of SAVVIS Communications
Corporation, a Missouri Corporation and a wholly owned subsidiary of SAVVIS
Communications Corporation, a Delaware Corporation, formerly known as Savvis
Holdings Corporation included in the Registration Statement (Amendment No. 3 to
Form S-1 No. 333-90881) and related Prospectus of SAVVIS Communications
Corporation for the registration of 12,765,957 shares of its common stock.
/s/ Ernst & Young LLP
St. Louis, Missouri
December 27, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 9-MOS YEAR
<FISCAL-YEAR-END> DEC-31-1999 DEC-31-1998
<PERIOD-START> JAN-01-1999 JAN-01-1998
<PERIOD-END> SEP-30-1999 DEC-31-1998
<CASH> 1983 2521
<SECURITIES> 0 0
<RECEIVABLES> 2461 2798
<ALLOWANCES> (355) (149)
<INVENTORY> 0 0
<CURRENT-ASSETS> 4578 5311
<PP&E> 7555 6943
<DEPRECIATION> (1560) (2190)
<TOTAL-ASSETS> 41422 11454
<CURRENT-LIABILITIES> 27825 7025
<BONDS> 0 0
0 37937
0 0
<COMMON> 720 2
<OTHER-SE> 8452 (35159)
<TOTAL-LIABILITY-AND-EQUITY> 41422 11454
<SALES> 17632 13674
<TOTAL-REVENUES> 17632 13674
<CGS> 19524 20889
<TOTAL-COSTS> 19524 20889
<OTHER-EXPENSES> 26433 14453
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 917 75
<INCOME-PRETAX> (29242) (21743)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (29242) (21743)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (29242) (21743)
<EPS-BASIC> (0.31) (16.28)
<EPS-DILUTED> (0.31) (16.28)
</TABLE>
