AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 9, 2000
REGISTRATION NO. 333-90881
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------
AMENDMENT NO. 8
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. [ ]
------------------
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>
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED FEBRUARY 9, 2000
P R O S P E C T U S
- -------------------
17,000,000 SHARES
[GRAPHIC OMITTED]
SAVVIS COMMUNICATIONS CORPORATION
COMMON STOCK
---------------
This is SAVVIS Communications Corporation's initial public offering of
common stock. SAVVIS Communications Corporation is selling 14,875,000 shares and
Bridge Information Systems, Inc., currently a 69% stockholder of SAVVIS, is
selling 2,125,000 shares. Approximately $125 million of the net proceeds to
SAVVIS will be paid by SAVVIS to Bridge.
We expect the public offering price to be between $22.00 and $25.00 per
share. Currently, no public market exists for the shares. The shares have been
approved for quotation on the Nasdaq National Market, subject to notice of
issuance, 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 .......................... $ $
Proceeds, before expenses, to the selling stockholder ......... $ $
</TABLE>
The underwriters may also purchase up to an additional 2,550,000 shares
from the selling stockholder at the public offering price, less the underwriting
discount, within 30 days from the date of this prospectus to cover
over-allotments.
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.
---------------
BANC OF AMERICA SECURITIES LLC
CIBC WORLD MARKETS
---------------
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' PRIVATENAPSSM, PLANNED
PRIVATENAPSSM, ATM SWITCHES, FRAME RELAY SWITCHES AND TRANSMISSION CAPACITY)
[GRAPHIC OMITTED]
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
Prospectus Summary ....................................................................... 3
Risk Factors ............................................................................. 10
Forward-Looking Statements ............................................................... 22
Use of Proceeds .......................................................................... 24
Dividend Policy .......................................................................... 24
Capitalization ........................................................................... 25
Dilution ................................................................................. 26
Unaudited Pro Forma Consolidated Financial Statements .................................... 27
Selected Historical Consolidated Financial Data .......................................... 32
Management's Discussion and Analysis of Financial Condition and Results of Operations .... 34
Business ................................................................................. 42
Relationship with Bridge ................................................................. 61
Management ............................................................................... 65
Transactions with Affiliates ............................................................. 75
Principal Stockholders and Selling Stockholder ........................................... 76
Description of Capital Stock ............................................................. 79
Shares Available for Future Sale ......................................................... 82
United States Tax Consequences to Non-U.S. Holders of Common Stock ....................... 83
Underwriting ............................................................................. 86
Validity of the Shares ................................................................... 91
Experts .................................................................................. 91
Change in Certifying Accountants ......................................................... 91
Where You May Find Additional Information ................................................ 91
Index to Consolidated 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.
<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.
SAVVIS is a subsidiary of Bridge Information Systems, Inc., or Bridge, which
owns approximately 69% of SAVVIS' outstanding common stock.
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 high
speeds.
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 pay us for the use of 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. Following the network transfer,
these entities will remain customers of Bridge. We currently provide Internet
access services directly to approximately 850 customers.
THE SAVVIS PROACTIVESM 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 cities in 43 countries. Our network architecture is
based on the following technologies:
o asynchronous transfer mode, commonly known as ATM, which supports the
transmission of all kinds of content and allows data to be prioritized;
o frame relay, which is a shared network technology commonly used in
communications networks; and
o Internet protocol, a communications protocol that is a core element of the
Internet and is used on computers, but that cannot currently reliably
deliver real-time data, unless operated over an ATM network, such as the
SAVVIS ProActiveSM Network.
Additionally, our 83 city global system connects to eight private Internet
access points, which we call PrivateNAPsSM, where our network connects to a
number of Internet service providers, including Sprint Corporation, Cable &
Wireless plc and UUNET, an 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,
commonly known as latency, measurements. The high performance of our Internet
access services has been verified by our analysis of data collected by Keynote
Systems, Inc., an independent research firm, which showed that we had the second
best mean download time in 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 delivered
to an estimated 235,000 trading terminals around the globe as of December 31,
1999. On September 10, 1999, Bridge sold in a private placement approximately
25% of its equity ownership in SAVVIS to existing stockholders of Bridge. Bridge
currently owns approximately 69% of our outstanding common stock and, after
completion of this offering, will own approximately 56% of our outstanding
common stock. Investment partnerships sponsored by Welsh, Carson, Anderson &
Stowe, or Welsh Carson, a sponsor of private equity funds with extensive
experience in the communications and information services industries, currently
owns approximately 38% of Bridge's outstanding voting stock and approximately
11% of our outstanding common stock and, after completion of this offering, will
own approximately 10% of our outstanding common stock.
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 31, 1999, of Bridge's estimated 235,000 terminals, an
estimated 135,000 terminals were connected to the SAVVIS ProActiveSM Network.
Bridge has advised us that it intends to convert the remaining 100,000 terminals
on its other networks to the SAVVIS ProActiveSM Network over the next three
years. As Bridge converts terminals, we expect it to order additional
connections from us under the network services agreement. As of December 31,
1999, Bridge's proprietary network
4
<PAGE>
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 its 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 a minimum of approximately $105 million, $132
million and $145 million of network services from us in 2000, 2001 and 2002,
respectively. 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 will incur losses from the operation of the network
under the network services agreement, and had the network services agreement
been in effect in 1999, Bridge would have represented approximately 83% of our
1999 revenues. 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.
Preferential Distribution. We will also pay to Bridge a $58 million
preferential distribution with a portion of the proceeds of this offering.
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 providing a single source for managed data network services and high
quality Internet services;
o capitalizing on Bridge's relationships to penetrate its customer base;
o targeting potential customers in buildings already connected to our
network;
o expanding our network and PrivateNAPSM infrastructure;
o growing domestic and international distribution channels;
o providing enabling infrastructure for e-commerce services; and
o developing and marketing new services.
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 network engineered for real-time performance;
o global network presence;
o single source service offering; and
o world-class service through proprietary systems.
5
<PAGE>
WE HAVE INCURRED SIGNIFICANT LOSSES AND NEGATIVE CASH FLOW IN THE PAST AND
EXPECT TO INCUR SIGNIFICANT LOSSES AND NEGATIVE CASH FLOW AT LEAST THROUGH
2002.
We incurred losses of approximately $2.2 million, $14.0 million and $20.0
million in 1996, 1997 and 1998 and had negative cash flow from operating
activities of $1.3 million, $10.5 million and $20.6 million in these years. We
also had losses of $8.1 million and negative cash flow from operating activities
of $6.2 million for the period from January 1, 1999 to April 6, 1999 and losses
of approximately $22.6 million, and negative cash flows from operating
activities of approximately $9.9 million, from April 7, 1999 to September 30,
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
only since Bridge acquired our company on April 7, 1999.
OTHER 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
materially 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; and
o our historical financial information will not be comparable to our future
financial performance.
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 by us........ 14,875,000 shares
Common stock offered by the
selling stockholder........... 2,125,000 shares
Total.......................... 17,000,000 shares
Shares outstanding after
this offering.................... 92,610,933 shares
Over-allotment option............. 2,550,000 shares
Use of proceeds.................. We will receive net proceeds from this
offering of approximately $326 million,
assuming a per share price of $23.50. We
intend to use these net proceeds to pay the
$63 million cash portion of the purchase
price for the Bridge network assets, for
capital expenditures relating to our
network expansion, and for other general
corporate purposes. In addition, a portion
of the net proceeds of this offering will
be used to pay a $58 million preferential
distribution to Bridge and repay
approximately $4 million of indebtedness
owed to Bridge.
We will not receive any proceeds from the
sale of shares by the selling stockholder.
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 January 25, 2000.
This information excludes 3,518,419 shares of common stock underlying options
granted under our stock option plans outstanding as of December 31, 1999 at an
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. As a result of the application of fair value accounting,
intangibles, goodwill, other liabilities and stockholders' equity were increased
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, including
Welsh Carson which purchased from Bridge a 12% interest in SAVVIS at that time.
Pro forma data for the year ended December 31, 1998 and the nine months
ended September 30, 1999 give effect to, 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, the acquisition of our company by Bridge, our
purchase of the network assets from Bridge for $88 million, including the
incurrence of capital lease obligations to Bridge of $25 million, the payment of
a $58 million preferential distribution to Bridge and the sale in this offering
of the shares required to generate the $125 million of cash to be paid to Bridge
in respect of these items. For more detailed information on the pro forma
financial data, see "Unaudited Pro Forma Consolidated Financial Statements."
We calculate EBITDA as 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
in our industry such information is a relevant measurement of a company's
financial 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 2,288 45,876
Impairment of assets ........ -- -- -- --
------------ ------------ ------------ ------------
Total direct costs and
operating expenses.......... 2,401 16,833 35,422 79,010
------------ ------------ ------------ ------------
Loss from operations ......... (2,111) (14,075) (21,748) (65,336)
Interest expense, net ........ (60) (482) (100) (1,739)
------------ ------------ ------------ ------------
Net loss before minority
interest and
extraordinary item .......... (2,171) (14,557) (21,848) $ (67,075)
============
Minority interest in losses,
net of accretion ............ -- 547 (147)
Extraordinary gain on
debt extinguishment,
net of tax .................. -- -- 1,954
------------ ------------ ------------
Net loss ..................... $ (2,171) $ (14,010) $ (20,091)
============ ============ ============
Basic and diluted net loss
per common share ............ $ (.06) $ (.38) $ (.39) $ (.87)
============ ============ ============ ============
Weighted average shares
outstanding ................. 35,396,287 36,904,108 58,567,482 77,309,840
============ ============ ============ ============
OTHER FINANCIAL DATA:
EBITDA ....................... $ (1,958) $ (12,897) $ (17,653)
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 ............... 1,556 817 9,747 30,185
Impairment of assets ........ -- 1,383 -- 1,383
------------ ------------ ------------ ------------
Total direct costs and
operating expenses.......... 23,518 13,380 33,984 66,985
------------ ------------ ------------ ------------
Loss from operations ......... (14,604) (7,940) (21,792) (49,353)
Interest expense, net ........ (138) (135) (782) (1,682)
------------ ------------ ------------ ------------
Net loss before minority
interest and
extraordinary item .......... (14,742) (8,075) (22,574) $ (51,035)
============
Minority interest in losses,
net of accretion ............ (147) -- --
Extraordinary gain on
debt extinguishment,
net of tax .................. 1,954 -- --
------------ ------------ ------------
Net loss ..................... $ (12,935) $ (8,075) $ (22,574)
============ ============ ============
Basic and diluted net loss
per common share ............ $ (.26) $ (.14) $ (.31) $ (.66)
============ ============ ============ ============
Weighted average shares
outstanding ................. 56,735,597 66,018,388 72,000,000 77,309,840
============ ============ ============ ============
OTHER FINANCIAL DATA:
EBITDA ....................... $ (11,241) $ (7,123) $ (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
AS OF DECEMBER 31,
---------------------------------- 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 $203,541
Goodwill and intangibles, net ................ -- -- 1,406 30,322 30,322
Total assets ................................. 1,888 4,313 11,663 41,422 330,980
Debt and capital lease obligations ........... 1,126 8,814 2,759 23,237 44,456
Redeemable stock, net of discount and deferred
financing costs ............................. 500 5,261 36,186 -- --
Stockholders' equity (deficit) ............... (693) (14,903) (33,197) 9,172 277,511
</TABLE>
* As discussed in Note 14 to our Consolidated Financial Statements, 1997, 1998
and predecessor 1999 amounts have been restated.
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.
Upon the closing of this offering, we will enter into a network services
agreement with Bridge whereby Bridge will become our largest customer. Under the
network services agreement, Bridge will commit to purchase at least of $105
million of network services from us in 2000. Assuming we had received these
minimum revenues for the first year of the agreement in 1999, Bridge would have
represented approximately 83% of our 1999 revenues. The network services
agreement with Bridge could be terminated prior to its term if we default in our
performance under this agreement, including if we fail to meet our service level
commitments, or Bridge is 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.
BRIDGE IS HIGHLY LEVERAGED, HAS HAD SIGNIFICANT NET LOSSES AND NEGATIVE CASH
FLOW TO DATE AND IS REQUIRED TO MAKE A SIGNIFICANT DEBT REPAYMENT BY JUNE 30,
2000. IF BRIDGE IS UNABLE TO MEET ITS FINANCIAL COMMITMENTS TO US, WE MAY BE
ADVERSELY AFFECTED.
We will rely on Bridge to meet its financial commitments to us. For the
fiscal years ended December 31, 1996, 1997 and 1998, Bridge has informed us that
it had net losses of approximately $61 million, $69 million and $143 million.
For the nine months ended September 30, 1999, Bridge had net losses of
approximately $134 million and had negative cash flows from operating activities
of approximately $76 million. Bridge has also informed us it continued to use
cash in its operating activities and generate losses for the three months ended
December 31, 1999.
As of September 30, 1999, Bridge had $1,240 million of indebtedness, $470
million of redeemable preferred stock and a stockholders' deficit of $414
million. In the three months ended December 31, 1999, Bridge incurred an
additional $100 million of indebtedness under a bridge loan agreement. In
February 2000, Bridge incurred an additional $25 million of indebtedness.
Under the terms of its indebtedness, following the completion of this
offering, Bridge is required to repay approximately $350 million of its
indebtedness on or before June 30, 2000. Bridge will receive aggregate proceeds
from this offering of approximately $175 million from its sale of our shares,
our purchase of the network assets, the payment of the preferential distribution
and the repayment of a portion of our indebtedness to Bridge. In addition,
pursuant to a stock purchase agreement dated February 7, 2000, Bridge has agreed
to sell to Welsh Carson for $150 million in cash shares of our common stock held
by Bridge. The purchase price per share is equal to the initial public offering
price per share. The consummation of the sale is expected to occur after the
closing of this offering and is subject to limited conditions, including
termination of the waiting period under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976. We cannot assure you that this sale will be
consummated.
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We cannot assure you that Bridge will have sufficient sources of capital
to:
o meet its capital expenditure, debt service and working capital
requirements, including its obligations to us under the network services
agreement; or
o satisfy its remaining requirement to repay $175 million of its
indebtedness by June 30, 2000.
The failure by Bridge to meet these requirements could have a material
adverse effect on our operations and the price of our common stock.
THE AUDIT REPORT ACCOMPANYING BRIDGE'S 1998 FINANCIAL STATEMENTS WILL CONTAIN
AN EXPLANATORY PARAGRAPH REGARDING BRIDGE'S ABILITY TO CONTINUE AS A GOING
CONCERN.
As a result of losses, working capital deficiencies and other liquidity
issues, including the fact that this offering has not yet occurred, Bridge's
independent auditors' report on its 1998 financial statements will include an
explanatory paragraph regarding its ability to continue as a going concern.
IF THE AMORTIZATION PERIODS FOR BRIDGE'S INTANGIBLES WOULD HAVE BEEN SHORTER,
BRIDGE'S LOSSES WOULD HAVE INCREASED.
At September 30, 1999, Bridge's unamortized goodwill and intangibles
resulting from acquisitions was approximately $863.9 million, or approximately
54% of total assets. Goodwill is the excess of cost over the fair value of the
net assets of businesses acquired. We cannot assure you that Bridge will ever
realize the value of such goodwill. This goodwill is being amortized on a
straight-line basis over 3 to 40 years. Bridge will continue to evaluate on a
regular basis whether events or circumstances have occurred that indicate all or
a portion of the carrying amount of goodwill may no longer be recoverable, in
which case an additional charge to earnings would become necessary. Any such
future determination requiring the write-off of a significant portion of
unamortized goodwill could have a material adverse effect on Bridge's financial
condition or results of operations. If Bridge had used amortization periods of
no longer than ten years, the net loss would have been $68.7 million, $86
million, $180.7 million and $180 million for the periods ended December 31,
1996, 1997, 1998 and September 30, 1999, respectively.
OUR PRIOR OPERATIONS WERE FUNDED BY BRIDGE. HOWEVER, BRIDGE IS NOT PERMITTED TO
FUND OUR OPERATIONS IN THE FUTURE.
We have experienced recurring losses from operations and cash flow
deficiencies which, since April of 1999, have been funded by Bridge. While
Bridge has funded our operations through 1999, Bridge is not permitted under the
terms of its indebtedness to fund our operations in the future.
BRIDGE MAY BE ENTITLED TO TERMINATE THE NETWORK SERVICES AGREEMENT OR COLLECT
LIQUIDATED DAMAGES IF WE ARE NOT ABLE TO MEET QUALITY OF SERVICE LEVELS.
Pursuant to the network services agreement with Bridge, we have agreed that
the network will perform in accordance with specific quality of service
standards within 12 months from the date we acquire the network. In the event we
do not meet the required quality of service levels, Bridge will be entitled to
credits and, in the event of a material breach of such quality of services
levels, Bridge will be entitled to terminate the network services agreement and,
whether or not the network service agreement is terminated, collect up to $50
million as liquidated damages once during any 36-month period.
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
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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 be comparable to 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, $14.0 million and $20.0
million in 1996, 1997 and 1998 and had negative cash flows from operating
activities of $1.3 million, $10.5 million and $20.6 million in these years. We
expect to incur significant net losses, negative cash flow from operating
activities and negative EBITDA at least through 2002.
THE AUDIT REPORTS ACCOMPANYING OUR 1996, 1997 AND 1998 FINANCIAL STATEMENTS
CONTAINED AN EXPLANATORY PARAGRAPH REGARDING OUR ABILITY TO CONTINUE AS A GOING
CONCERN.
As a result of losses and working capital deficiencies, our independent
auditors' report on our 1996, 1997 and 1998 financial statements included an
explanatory paragraph regarding our ability to continue as a going concern. The
independent auditors' report on our 1998 financial statements when originally
issued did not contain such an explanatory paragraph due to Bridge's commitment
and ability to finance our operations. Because of current limitations in
Bridge's financing arrangements, such financial support cannot be relied upon in
the future. As a result, such explanatory paragraph was added to the independent
auditors' report upon its reissuance in January 2000.
WE EXPECT OUR OPERATING EXPENSES TO INCREASE SIGNIFICANTLY.
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, which reflects
only our losses since Bridge acquired our company on April 7, 1999. 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.
WE WILL INCUR LOSSES FROM THE OPERATION OF THE NETWORK TO PROVIDE SERVICES TO
BRIDGE UNDER THE NETWORK SERVICES AGREEMENT UNTIL WE USE THE NETWORK EITHER TO
PROVIDE ADDITIONAL SERVICES TO BRIDGE OR NEW CUSTOMERS.
Under the network services agreement that we will enter into with Bridge,
the amount we charge Bridge for the use of the network as configured on the date
of the transfer is based on the 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 either to provide additional
services to Bridge not currently covered by the network services agreement, such
as connecting new customers of Bridge or adding additional connections to
existing customers or to provide services to new customers. We cannot guarantee
that we will sell enough additional services to become profitable.
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WE ARE OBLIGATED TO PROVIDE NETWORK SERVICES TO BRIDGE FOR A PERIOD OF FIVE
YEARS AFTER THE TERMINATION OF THE NETWORK SERVICES AGREEMENT AT THE RATES IN
EFFECT AT THE DATE OF THE AGREEMENT'S TERMINATION.
We are required to provide network services to Bridge under the network
services agreement for a period of up to five years subsequent to the
termination of the agreement. These services must be provided to Bridge at the
rates in effect for our third party customers at the date of the agreement's
termination. If the price to be paid by Bridge is less than the cost incurred by
us to provide the service, such services will be provided at a loss to us.
THE PURCHASE OF THE NETWORK ASSETS FROM BRIDGE WILL RESULT IN A PREFERENTIAL
DISTRIBUTION TO BRIDGE.
Because we will record the network assets to be purchased from Bridge at
Bridge's historical net book value, the excess of the payments to Bridge over
the net book value, currently estimated at $58 million, will be treated for
accounting purposes as a preferential distribution to Bridge. As a result our
stockholders' equity will be reduced and you will experience a dilution in
tangible book value per share.
IF WE ARE NOT ABLE TO RAISE ADDITIONAL CAPITAL, WE MAY HAVE TO DELAY SOME OR ALL
OF OUR EXPANSION PLANS.
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 $149 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 net losses, 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 its 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 bank holding company subsidiary 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.
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In the event State Street does not comply with its agreement to cooperate
with us to ensure that, by the close of business on April 30, 2000, we will no
longer be subject to the activity and investment restrictions of Regulation Y,
our revenues from Bridge and/or revenues from the transmission of other
qualifying data will need to represent at least 70% of our total 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 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.
In addition, we will sublease from Bridge some of the network assets that
Bridge currently leases from General Electric Capital Corporation, or GECC. The
aggregate amount of our capitalized lease obligations to Bridge will be
approximately $25 million. We will not have a direct relationship with GECC. If
Bridge fails to perform its obligations under its agreement with GECC, our
rights to such network assets may be impaired.
WE ARE CONTROLLED BY PARTIES WHOSE INTERESTS MAY NOT BE ALIGNED WITH YOURS.
Bridge and investment partnerships sponsored by Welsh Carson owned
approximately 69% and 11% of our outstanding common stock, respectively, prior
to this offering. In addition, Welsh Carson partnerships own approximately 38%
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. Pursuant to a stock purchase agreement dated February 7, 2000, Bridge
has agreed to sell to Welsh Carson for $150 million in cash shares of our common
stock held by Bridge. The purchase price per share is equal to the initial
public offering price per share. The consummation of the sale is expected to
occur after the closing of this offering and is subject to limited conditions,
including termination of the waiting period under the Hart-Scott-Rodino Act.
Assuming an initial offering price of $23.50, the midpoint of the range shown on
the cover of this prospectus, upon consummation of such sale Bridge and Welsh
Carson would own approximately 49% and 16% of our outstanding common stock,
respectively.
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 to us
any investment or business opportunities of which they are aware, even if these
opportunities are within our scope and objectives.
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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
arm's-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 and
Chief Executive Officer. Mr. McCormick was appointed Chief Executive Officer 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.
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 communications transmission, or 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.
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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 data transmission services. We
generally lease data transmission capacity before we have secured customers and
our leased capacity costs are typically fixed monthly payments based on the
capacity made available to us. Our failure to correctly estimate transmission
capacity could increase the cost or 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.
WE HAVE EXPERIENCED CUSTOMER TURNOVER IN THE PAST AND MAY CONTINUE TO DO SO IN
THE FUTURE. IF WE CONTINUE TO EXPERIENCE CUSTOMER TURNOVER WITHOUT A
CORRESPONDING GROWTH IN NEW CUSTOMERS, OUR BUSINESS MAY BE ADVERSELY AFFECTED.
Customer turnover in the Internet access business is high. Customer loss
results in loss of future revenue from subscribers who discontinue or reduce
their services. Customer loss occurs for several reasons, such as voluntary
disconnection by subscribers who choose to switch to a competing service and
termination by Internet access providers for nonpayment of bills or abuse of the
network. We have experienced customer turnover in the past and as our subscriber
base grows and the industry matures, our customer loss may continue or even
increase. If, in the future, we were to lose a large number of customers without
signing contracts with new customers, there could be an adverse impact on our
business.
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.
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, security measures
employed by others have 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
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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 the following 16 countries are expected to
prevent us from acquiring, as part of the Bridge network asset transfer which
will occur simultaneously with the completion of the offering, the Bridge
network assets located in these 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, Ireland, Hungary 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 and Venezuela.
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 allow us to acquire these assets. 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.
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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 approximately 75% of our costs;
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 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 our 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.
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.
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 International Data Corporation, an independent research firm,
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.
18
<PAGE>
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.
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;
19
<PAGE>
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, an 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.
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
20
<PAGE>
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.
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 several
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 foreign
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. 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 a number of 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, trademark, 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.
21
<PAGE>
RISKS RELATED TO THIS OFFERING
A SIGNIFICANT NUMBER OF OUR SHARES ARE ELIGIBLE FOR RESALE AND BRIDGE INTENDS TO
SELL ADDITIONAL SHARES OF OUR COMMON STOCK IN THE FUTURE. THIS 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 92,610,933
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 which may
include sales in the open market or in private placements or sales to strategic
investors.
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 $201 million, after deducting the payments
to Bridge, the underwriting discounts and commissions and estimated offering
expenses. Our management will have broad discretion to allocate these proceeds
to uses they deem appropriate. We may be unable to yield a significant return on
any investment of the proceeds.
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
$20.65 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 $3.14.
WE HAVE GRANTED STOCK OPTIONS AT A PRICE SIGNIFICANTLY LOWER THAN THE PUBLIC
OFFERING PRICE.
Between July and December 31, 1999, we granted options to purchase
approximately 8.5 million shares of our common stock at an exercise price of
$.50 per share. As of December 31, 1999, options to purchase approximately 3.5
million shares of our common stock remained outstanding. The holders of these
options have the right to acquire shares of our common stock at a price
significantly lower than the initial public offering price.
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.
22
<PAGE>
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," "Relationship with
Bridge" 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.
23
<PAGE>
USE OF PROCEEDS
We estimate that the net proceeds from this offering will be approximately
$326 million. 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.
Of the net proceeds of this offering we expect to pay an aggregate of
approximately $125 million to Bridge. Of this amount, approximately $63 million
will represent the portion of the purchase price of Bridge's Internet protocol
network assets not subject to capital leases, approximately $4 million will be
used to reduce existing outstanding debt to Bridge and approximately $58 million
will be paid to Bridge as a preferential distribution. In the event we receive
gross proceeds of more than $350 million from the sale of common stock in this
offering, 50% of the excess will be applied to any remaining outstanding debt to
Bridge. As of December 31, 1999, we had approximately $25 million of outstanding
debt to Bridge consisting of term notes maturing one year after the completion
of this offering, bearing interest at 8% per annum, the proceeds of which were
used for working capital purposes. The remaining net proceeds will be used for
operating expenses, capital expenditures and 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.
We will not receive any proceeds from the sale of shares by the selling
stockholder.
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.
24
<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 $326 million in this offering, net of discounts, commissions and
expenses payable by us, and the use of an aggregate of $125 million of the
proceeds to pay to Bridge a portion of the purchase price for the
acquisition of network assets, to reduce existing outstanding debt to
Bridge, and to pay a $58 million preferential distribution to Bridge.
<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 $ 203,541
========= =========
Capitalized lease obligations, including current maturities $ 5,967 $ 30,967
Due to Bridge under notes .................................. 17,270 13,489
--------- ---------
Subtotal ............................................... 23,237 44,456
--------- ---------
Stockholders' equity:
Common stock $.01 par value per share; 125,000,000
shares authorized, 72,000,000 issued and outstanding
(actual), and 86,875,000 issued and oustanding
(pro forma as
adjusted) .............................................. 720 869
Additional paid-in capital .............................. 31,026 357,216
Preferential distribution ............................... -- (58,000)
--------- ---------
Total additional paid-in capital ....................... 31,026 299,216
Accumulated deficit ..................................... (22,574) (22,574)
--------- ---------
Total stockholders' equity ............................. 9,172 277,511
--------- ---------
Total capitalization .................................... $ 32,409 $ 321,967
========= =========
</TABLE>
25
<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, the
purchase of the network assets from Bridge and the preferential distribution to
Bridge. After giving effect to our sale of the 14,875,000 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 $247 million, or $2.85 per share. This represents an immediate
increase in pro forma net tangible book value to existing stockholders of $3.14
per share and an immediate dilution to new investors of $20.65 per share. The
following table illustrates this per share dilution:
<TABLE>
<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 ................ 3.14
------
Pro forma, as adjusted, net tangible book value per share
after this offering ..................................... 2.85
--------
Dilution in pro forma net tangible book value per share to
new investors ........................................... $ 20.65
========
</TABLE>
The following table summarizes, as of September 30, 1999, assuming the sale
of 14,875,000 shares of common stock offered by us 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 (2) ................................ 53,870,279 62% $ -- 0% $ --
Other stockholders ........................ 18,129,721 21% 9,064,861 2% 0.50
---------- --- ------------ --- ------
Existing stockholders ..................... 72,000,000 9,064,861
New investors in this offering(3) ......... 14,875,000 17% 349,562,500 98% $ 23.50
---------- --- ------------ --- -------
Total .................................... 86,875,000 100% $358,627,361 100%
========== === ============ ===
</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.
(2) Includes 2,125,000 shares to be sold in this offering by Bridge, at the
offering price of $23.50.
(3) Represents only the shares sold in this offering by SAVVIS.
The discussion and table above assumes that 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 an exercise price of $.50 per share. To the
extent that any of these options are exercised, you will be diluted further.
26
<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 sale in the offering of the shares required to generate the $125
million to be paid to Bridge for the $63 million cash component of the
purchase price for Bridge's network assets, the $58 million preferential
distribution and to reduce approximately $4 million of existing
outstanding debt to Bridge, estimated at 5,309,840 shares; and
o our purchase and sublease of the network assets from Bridge.
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 $326 million in this offering, net of
estimated discounts, commissions and expenses payable by us;
o our purchase and sublease of the network assets from Bridge;
o our use of proceeds of this offering to pay a portion of the purchase
price of the network assets; and
o the payment of $58 million as a preferential distribution and to repay
approximately $4 million of indebtedness to Bridge.
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. As a result of regulatory restrictions, we will not
be able to acquire, as part of the initial network transfer, network assets in
approximately 16 countries. We have the right to purchase the assets in these
countries at their net book value, once we have received the regulatory
approvals. Only the assets in jurisdictions where all requisite consents and
approvals from third parties to transfer the assets from Bridge have been
obtained are included in these unaudited pro forma consolidated financial
statements. Additionally, we will pay to Bridge a preferential distribution of
$58 million, which 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.
27
<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 ................ 817 9,747 $ (879) (1) $ 20,500 (3) 30,185
Impairment of assets .......... 1,383 -- -- -- 1,383
---------- ---------- -------- ---------- -------------
Total direct costs and operating
expenses ...................... 13,380 33,984 (879) 20,500 66,985
---------- ---------- -------- ---------- -------------
Loss from operations ........... (7,940) (21,792) 879 (20,500) (49,353)
Interest expense, net .......... (135) (782) (765) (4) (1,682)
---------- ---------- ---------- -------------
Net loss ....................... $ (8,075) $ (22,574) $ 879 $ (21,265) $ (51,035)
========== ========== ======== ========== =============
Basic and diluted net loss per
common share .................. $ (0.12) $ (0.31) $ (0.66) (7)
========== ========== =============
Weighted average shares
outstanding ................... 66,018,388 72,000,000 77,309,840 (7)
========== ========== =============
</TABLE>
See notes to the unaudited pro forma consolidated financial statements.
28
<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 .................... 2,288 $ 16,255 (2) $ 27,333 (3) 45,876
----------- --------- -------- -------------
Total direct costs and operating expenses ......... 35,422 16,255 27,333 79,010
----------- ----------- ---------- -------------
Loss from operations .............................. (21,748) (16,255) (27,333) (65,336)
Interest expense, net ............................. (100) (1,639) (4) (1,739)
----------- ---------- -------------
Net loss .......................................... $ (21,848) $ (16,255) $ (28,972) $ (67,075)
=========== =========== ========== =============
Basic and diluted loss per common share ........... $ (.37) $ (.87)
=========== =============
Weighted average shares outstanding ............... 58,567,482 77,309,840 (7)
=========== =============
</TABLE>
See notes to the unaudited pro forma consolidated financial statements.
29
<PAGE>
SAVVIS COMMUNICATIONS CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 1999
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
ADJUSTMENTS
----------------------------------------
PURCHASE OF
NETWORK ASSETS,
PREFERENTIAL
DISTRIBUTION
SALE OF COMMON AND REPAYMENT PRO FORMA
HISTORICAL STOCK OF DEBT AS ADJUSTED
------------ ------------------- -------------------- ------------
<S> <C> <C> <C> <C>
ASSETS:
CURRENT ASSETS:
Cash and cash equivalents ............................ $ 1,983 $ 326,339 (6) $ (124,781)(5) $ 203,541
Accounts receivable, net ............................. 2,106 2,106
Other current assets ................................. 489 489
--------- ---------
Total current assets ............................. 4,578 326,339 (124,781) 206,136
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 $ 326,339 $ (36,781) $ 330,980
========= =========== ============ =========
LIABILITIES AND STOCKHOLDERS' EQUITY:
CURRENT LIABILITIES:
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 (3,781)(5) 13,489
Other accrued liabilities ............................ 2,385 2,385
--------- ----------- ---------
Total current liabilities ........................ 27,825 4,219 32,044
Long-term portion of capital lease obligations 3,981 17,000 (5) 20,981
Other liabilities .................................... 444 444
--------- ----------- ---------
Total liabilities ................................ 32,250 21,219 53,469
STOCKHOLDERS' EQUITY:
Common Stock ......................................... 720 $ 149 (6) 869
Additional paid-in capital ........................... 31,026 326,190 (6) (58,000)(5) 299,216
Accumulated deficit .................................. (22,574) (22,574)
--------- ---------
Total stockholders' equity ....................... 9,172 326,339 (58,000) 277,511
--------- ----------- ------------ ---------
Total ......................................... $ 41,422 $ 326,339 $ (36,781) $ 330,980
========= =========== ============ =========
</TABLE>
See notes to the unaudited pro forma consolidated financial statements.
30
<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 $10,564. Since a significant portion of these assets acquired had an
estimated useful life of one year, the pro forma entry to give effect to the
acquisition of SAVVIS by Bridge as of January 1, 1998 resulted in a net
reduction of pro forma depreciation and amortization in the nine months
ended September 30, 1999.
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 $2,288.
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 capitalized leases assuming that network
assets with an $82,000 net book value, plus $6,000 in equipment awaiting
installation, are purchased or leased from Bridge at net book value.
5) To reflect the purchase of network assets together with the capitalized
leases from Bridge, assuming a purchase price of approximately $88,000 with
the payment of $63,000 of the purchase price in cash from the proceeds of
this offering, and $25,000 in the form of capital lease obligations. 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.
Additionally, to reflect payment of $58,000 as a preferential distribution
to Bridge, which has been reflected as a reduction of stockholders' equity,
and the payment of $3,781 to Bridge to reduce existing outstanding debt.
6) To reflect the proceeds, net of issuance costs, from the sale of 14,875,000
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 assuming the sale of the number of
shares of common stock that will generate an amount of proceeds to pay a
total of $125,000 to Bridge, consisting of $63,000 for the network assets
not subject to capital leases, $58,000 as a preferential distribution and
$3,781 to reduce existing outstanding debt.
31
<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. As a result of the application of fair value accounting,
intangibles, goodwill, other liabilities and stockholders' equity were increased
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 at that time.
We calculate EBITDA as 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
in our industry such information is a relevant measurement of a company's
financial 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.
32
<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 2,288 1,556 817
Impairment of assets ......................... -- -- -- -- 1,383
------------ ----------- ----------- ----------- ------------
Total direct costs and operating
expenses .................................. 2,401 16,833 35,422 23,518 13,380
------------ ----------- ----------- ----------- ------------
Loss from operations .......................... (2,111) (14,075) (21,748) (14,604) (7,940)
Interest expense, net ......................... (60) (482) (100) (138) (135)
------------ ----------- ----------- ----------- ------------
Net loss before minority interest and
extraordinary item ........................... (2,171) (14,557) (21,848) (14,742) (8,075)
Minority interest in losses, net of
accretion .................................... -- 547 (147) (147) --
Extraordinary gain on debt
extinguishment, net of tax ................... -- -- 1,954 1,954 --
------------ ----------- ----------- ----------- ------------
Net loss ...................................... $ (2,171) $ (14,010) $ (20,041) $ (12,935) $ (8,075)
============ =========== =========== =========== ============
Net loss attributable to common
stockholders ................................. $ (2,171) $ (14,161) $ (22,666) $ (14,674) $ (9,025)
============ =========== =========== =========== ============
Basic and diluted net loss per share
before extraordinary item .................... $ (.06) $ (.38) $ (.42) $ (.29) $ (.14)
Extraordinary gain on debt
extinguishment, net of tax ................... -- -- .03 .03 --
------------ ----------- ----------- ----------- ------------
Basic and diluted loss per common
share ........................................ $ (.06) $ (.38) $ (.39) $ (.26) $ (.14)
============ =========== =========== =========== ============
Weighted average shares outstanding ........... 35,396,287 36,904,108 58,567,482 56,735,597 66,018,388
============ =========== =========== =========== ============
OTHER FINANCIAL DATA:
EBITDA ........................................ $ (1,958) $ (12,897) $ (17,653) $ (11,241) $ (7,123)
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
Impairment of assets ......................... --
-----------
Total direct costs and operating
expenses .................................. 33,984
-----------
Loss from operations .......................... (21,792)
Interest expense, net ......................... (782)
-----------
Net loss before minority interest and
extraordinary item ........................... (22,574)
Minority interest in losses, net of
accretion .................................... --
Extraordinary gain on debt
extinguishment, net of tax ................... --
-----------
Net loss ...................................... $ (22,574)
===========
Net loss attributable to common
stockholders ................................. $ (22,574)
===========
Basic and diluted net loss per share
before extraordinary item .................... $ (.31)
Extraordinary gain on debt
extinguishment, net of tax ................... --
-----------
Basic and diluted loss per common
share ........................................ $ (.31)
===========
Weighted average shares outstanding ........... 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 .............. -- -- 1,406 30,322
Total assets ............................... 1,888 4,313 11,663 41,422
Debt and capital lease obligations ......... 1,126 8,814 2,759 23,237
Redeemable stock, net of discount and
deferred financing costs .................. 500 5,261 36,186 --
Stockholders' equity (deficit) ............. (693) (14,903) (33,197) 9,172
</TABLE>
* As discussed in Note 14 to our Consolidated Financial Statements, information
regarding 1997, 1998 and predecessor 1999 have been restated.
33
<PAGE>
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 approximately 850.
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, as
a result of the application of fair value accounting, was to increase
intangibles, goodwill, other liabilities and stockholders' equity. 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 at that
time.
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 $88
million and we will pay a preferential distribution to Bridge of $58 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 cash cost to Bridge of operating the network as
configured on October 31, 1999, as adjusted for changes to the network and
associated personnel related to Bridge's network requirements through the date
of transfer. Our fees for additional services provided following the date of
transfer will be set for a three-year term based on an agreed price schedule
reflecting the estimated cost to provide the services. The price schedule for
additional services will be subject to annual review and negotiation between
Bridge and SAVVIS and will be mutually agreed upon by Bridge and SAVVIS or
determined by binding arbitration. Bridge has agreed to pay us a minimum of
approximately $105 million, $132 million and $145 million for network services
in 2000, 2001 and 2002, respectively.
34
<PAGE>
In addition, Bridge has agreed that 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 in each of the fourth, fifth and sixth years; and 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 in each of those years.
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 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.
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 December 31,
1999, approximately 6% of our customer agreements, representing approximately 6%
of our revenues for the month of December 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. Assuming we had received the minimum
revenues under the network services agreement for the first year of the
agreement in 1999, Bridge would have represented approximately 83% of our 1999
revenues. As of December 31, 1999, Bridge had an estimated 135,000 trading
terminals connected to the SAVVIS ProActiveSM Network and an estimated 100,000
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.
35
<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 million per year. We expect noncash compensation expense
will materially increase as a result of stock options granted to employees of
SAVVIS and Bridge. During the period from October through December 1999, we
granted 2,843,258 stock options with an exercise price of $.50 per share.
Noncash compensation cost based upon the difference between the exercise price
and the imputed fair value of our common stock as of the respective option grant
dates totalling approximately $53 million will be recorded over the vesting
periods of such options, which periods range from immediate up to four years.
Approximately $2 million of noncash compensation expense will be recorded in the
fourth quarter of 1999.
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.
36
<PAGE>
Interest expense. Historical interest expense is related to indebtedness 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 capitalized leases with Bridge relating to their capitalized
leases for network equipment that Bridge could not directly assign to us. 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 may 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.
Subsequent to the issuance of our financial statements for the years ended
December 31, 1997 and 1998, we determined that the Class A shares of our
subsidiary represented a minority interest to which losses should be allocated
and for which accretion on the Class A shares and related convertible notes
should be recorded at an effective rate of 20%. We also concluded that the
exchange of these instruments for Class B preferred stock in March of 1998
should be treated as a debt extinguishment, with recognition of an extraordinary
item, and as the purchase of minority interest .
Period from January 1, 1999 to April 6, 1999 (Predecessor)
For the period from January 1, 1999 to April 6, 1999, which is the day
before the acquisition by Bridge of our company, revenue was approximately $5.4
million. Data communications and operations expenses for the period were
approximately $6.4 million, and selling, general and administrative expenses
were approximately $4.8 million. Depreciation and amortization expenses for the
period January 1, 1999 to April 6, 1999 were approximately $.8 million. An asset
impairment charge of approximately $1.4 million was also recorded during this
period. Interest expense, net, was $.1 million and the net loss for the period
was approximately $8.1 million.
Period from April 7, 1999 to September 30, 1999 (Successor)
For the period from April 7, 1999, which is the date of the acquisition by
Bridge of our company, to September 30, 1999, revenue increased to approximately
$12.2 million. Data communications and operations expenses for the period were
approximately $13.1 million, and selling, general and administrative expenses
increased to approximately $11.1 million. Depreciation and amortization expenses
for the period January 1, 1999 to April 6, 1999, increased to approximately $9.7
million, due to the amortization of goodwill and other intangible assets
associated with the acquisition by Bridge. Interest expense, net, was $.8
million and the net loss for the period was approximately $22.6 million.
Nine Months Ended September 30, 1999 Compared to Nine Months Ended September
30, 1998
The following discussion compares combined information 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
information consists of the sum of the financial data from
37
<PAGE>
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 705 from 422, 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.
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 increase in the number
of customers from 102 to 476.
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
$2.3 million in 1998, compared to $.6 million in 1997, an increase of 283%.
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 $.5 million in 1997, a decrease of 80%. This $.4 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 $20.0 million in 1998, which included a $1.9
million extraordinary gain on debt extinguishment, compared to $14.0 million in
1997, a 43% 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 from 15 to 102.
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.
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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.
Interest Expense, Net. Interest expense, net was $.5 million in 1997,
compared to $.1 million in 1996. This $.4 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 $14.0 million in 1997, compared to $2.2 million in
1996. In 1997, $.5 million of our losses were allocated to our minority
interest, net of accretion.
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 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. As of September 30, 1999, we had outstanding 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 $149 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 $88 million. Of
this amount, $25 million will be paid by entering into a capital lease
obligation with Bridge. The remaining purchase price of $63 million will be paid
with a portion of the net proceeds of this offering. In the event we receive
more than $350 million gross proceeds from the sale of common stock in this
offering, 50% of the excess will be applied to the balance of the remaining
outstanding debt to Bridge. We will also pay to Bridge, out of the offering
proceeds, a $58 million preferential distribution.
In connection with our purchase of the network assets, we will also enter
into a network services agreement with Bridge under which we will provide Bridge
with managed data networking 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 provision of services under the network services
agreement will not directly impact cash flow from operations. However, due to
amortization and depreciation relating to the network, we will incur losses as a
result of providing services under the network services agreement until we can
sell additional services over the network to Bridge or other customers.
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In connection with our acquisition of Bridge's network assets, Bridge will
assign to us numerous agreements for the purchase of communications services. We
are currently discussing with several of these suppliers the placement of
deposits or stand-by letters of credit by us. We estimate that we may be
required to deposit approximately $5 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.
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, will allow us to continue in business as a
going concern and will be sufficient to fund our operating and capital needs for
a year following this offering. 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, our cash and cash equivalents would
not be sufficient and we would be required to seek capital from external sources
and curtail expansion plans. 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 commonly referred to as the "Year 2000 problem."
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.
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.
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.
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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 term notes mature one year after the completion of this
offering and bear interest at a fixed rate of 8%. In addition, in connection
with our purchase of Bridge's network assets, 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.
Changes in foreign exchange rates do not currently impact our results of
operations. Upon our purchase of Bridge's Internet protocol network assets and
our entry into the network service agreement at the completion of this offering,
we expect approximately 18% of our revenue from Bridge to be derived from
operations outside the United States, and approximately 17% of our direct costs
to be incurred outside the United States. Because our foreign revenue will
closely match our foreign costs, we do not anticipate that changes in foreign
exchange rates will have a material impact on our 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. Upon transfer of the
Bridge network to us and pursuant to a network services agreement between Bridge
and us, Bridge, one of the leading content providers to the financial services
industry, will pay us for the use of 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. Following the network transfer, these entities will
remain customers of Bridge. 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 demanding customers of the financial services
industry. 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 31, 1999 Bridge had an
estimated 235,000 network terminals installed worldwide of which an estimated
135,000 terminals were connected to the SAVVIS ProActiveSM Network. Bridge
expects to connect the remaining 100,000 terminals to our network over the next
three years. Bridge is a privately held company whose principal shareholder is
Welsh Carson, a sponsor of private equity funds with extensive experience in the
communication and information services industries. The high performance of our
Internet access services has been verified by our analysis of data collected by
Keynote Systems, Inc., which showed that we had the second best mean download
time in 1999. We currently provide Internet access services directly to
approximately 850 customers.
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 December 31,
1999, approximately 6% of our customer agreements, representing approximately 6%
of our revenues for the month of December 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.
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
$88 million. As a result, the SAVVIS ProActiveSM Network will interconnect over
6,000 buildings in 83 of the world's major commercial cities 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 a minimum
of approximately $105 million, $132 million and $145 million of network services
from us in 2000, 2001 and 2002, respectively. 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. While the over 4,500 financial services
companies will remain customers of Bridge and we will only derive revenue from
Bridge for delivering Bridge content and applications to these companies, 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
United States 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 United States 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
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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.
Convergence between the Internet and corporate data networking. Today, many
businesses are utilizing Internet-related services as lower-cost alternatives to
several traditional telecommunications services. The near ubiquity and
relatively low cost of the Internet have resulted in its widespread use for
specific 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
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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. 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 ProActiveSM Network 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 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 major financial institutions will significantly advance
our brand building efforts and enhance our prospects for winning new business.
Network engineered for real-time performance. Our network architecture
allows us to deliver data services to the 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 our analysis of data collected by Keynote
Systems, Inc., which showed that we had the second best mean download time in
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.
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Global network presence. Our network will reach 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 can contact us 24 hours a day, 365 days a year, with
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 combination of ATM
technology and our PrivateNAPsSM, also enables us to provide our customers with
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.
Expand our network and PrivateNAPsSM 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
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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 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 our
analysis of data collected by Keynote Systems, Inc., which showed that we had
the second best mean download time in 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 31, 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 31, 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 its 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 companies 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 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 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
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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 prospective customers, 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 850 customers. Upon
completion of the Bridge asset transfer, Bridge will enter into a network
services agreement with us and will be our largest customer. Assuming we had
received the minimum revenues under the network services agreement for the first
year of the agreement in 1999, Bridge would have represented approximately 83%
of our 1999 revenues. We expect that Bridge will account for a significant
percentage of our revenues during 2000. No individual customer accounted for
more than 5% of our revenues during the nine months ended September 30, 1999. We
also provide services to many Internet service providers and Internet-centric
businesses.
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.
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.
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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 languages. These personnel are organized in client teams and are 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 PROACTIVE(SM) 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.
The SAVVIS ProActiveSM Network reaches 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 in early 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,
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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 through 155 Mbps in the U.S. and 45 Mbps internationally.
To enhance our redundancy, we lease 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, an 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.
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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
Our global network operations center, which is owned and managed by Bridge
and located in St. Louis, Missouri, operates 24 hours a day, 365 days a year,
and is staffed by over 20 of our skilled technicians. We also have regional
network operations centers in London and Singapore. These regional centers
operate for ensuring 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.
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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.
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:
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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, an 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.
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, except
for France where no 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, that
in France we are authorized to provide such services without any license and
that in Germany we have notified the necessary authorities to allow us to
provide such services. In Italy, the provision of such services to only Bridge
does not require any license, and we have filed the application for the
appropriate licenses to offer such services to the general public as well. 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.
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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, Ireland, Hungary,
Malaysia, Taiwan, Thailand, Mexico and Venezuela. Although we expect the asset
transfer to occur in Greece, Ireland, Hungary, Poland, Taiwan, Mexico, and
Venezuela within one year after the completion of this offering we cannot assure
you that we will obtain any of these approvals. We do not believe that the
failure to obtain these licenses will have a material impact on our revenues as
we do not expect revenues from non-U.S. customers to be substantial in the near
term.
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.
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, 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 established 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 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, in some cases,
without the need for any formality.
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.
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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. We believe that 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 any of these planned or future services require 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
various 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 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 be subject to 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, ten European Union member countries were required to
adopt a fully liberalized telecommunications regime. These countries are
Austria, Belgium, Denmark, Finland, France, Germany, Italy, The Netherlands,
Sweden and the United Kingdom. The five remaining European Union countries,
Luxembourg, Ireland, Spain, Portugal and Greece, were allowed a derogation
allowing them to delay the full liberalization of their telecommunications
regime until a later date. As a result, Luxembourg liberalized its
telecommunications regime on July 1, 1998; Spain and Ireland liberalized on
December 1, 1998; and Portugal liberalized on January 1, 2000. Currently, only
Greece is not required to have a fully liberalized telecommunications regime.
Greece is required to liberalize on December 31, 2000.
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
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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 under the Telecommunications Services License, which is a
class license. This license authorizes the provision of fixed telecommunications
services of any description, other than international voice services,
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 telecommunications services, subject
to a licensing regime that is in conformity with European Community law in all
material respects. 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 to the general public 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 Law would not
apply, even if all the information were transmitted directly to the database
from an overseas parent company or subsidiary.
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Under the Telecommunications Business Law, 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, in
general. 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.
INTELLECTUAL PROPERTY
We do not own any patents or registered trademarks, except for our business
name and several product names for which we are in the process of applying, nor
do we 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 December 31, 1999, we employed 212 full-time persons, 67 of whom were
engaged in engineering, operations and customer service, 117 in sales and
marketing, and 28 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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RELATIONSHIP WITH BRIDGE
This is an offering of shares of common stock of SAVVIS and not Bridge. The
following information has been provided because a significant portion of
revenues of SAVVIS is expected to come from Bridge. Purchasers of our common
stock will not acquire an interest in Bridge.
You should read Bridge's financial statements and the notes thereto, as
well as the Management's Discussion and Analysis of Financial Condition and
Results of Operations of Bridge that are included in the back of this
prospectus.
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 ...................................... $ 269,312 $ 409,926 $ 892,141 $ 958,435
Loss from operations (1) ...................... (40,543) (33,647) (69,046) (66,140)
Net loss (1) .................................. (60,796) (68,610) (142,861) (134,377)
OTHER FINANCIAL DATA:
- ---------------------
EBITDA before acquisition related
writeoffs .................................... 25,113 50,902 160,260 153,712
Acquisition related write-offs ................ 6,500 5,396 28,709 --
Cash (used in) provided by operating
activities ................................... (19,484) 10,404 46,304 (76,025)
Cash used in investing activities ............. (292,449) (56,948) (498,936) (123,847)
Cash provided by financing activities ......... 322,679 43,384 473,812 203,542
</TABLE>
- ----------
(1) Bridge has used amortization periods ranging from three years to 40 years
for goodwill and other intangibles. If they had used amortization periods of
no longer than ten years, the loss from operations would have been $48.6
million, $51.0 million, $106.9 million and $111.8 million and the net loss
would have been $68.7 million, $86 million, $180.7 million and $180 million
for the periods ended December 31, 1996, 1997, 1998 and September 30, 1999,
respectively.
Bridge has informed us it continued to use cash in its operating activities
for the fiscal quarter 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 primarily resulting from higher than expected
cancellations of subscriptions of products of acquired companies due to non-Year
2000 compliant products, client rationalization of market data services costs
and reductions in users due to mergers among Bridge clients.
The increases in working capital are attributable to
o Accounts receivable increases of $75.8 million resulting from (1) billing
delays resulting from conversions from the non-Year 2000 compliant billing
systems of acquired companies to the Bridge billing system and (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; and
o Accounts payable decreases of $46.6 million resulting from the payment of
one-time accruals related to companies acquired in 1998.
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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 some of Bridge's counterparties or regulatory approvals in several
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 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. We expect the asset transfer to occur in Greece, Ireland, Hungary,
Poland, Taiwan, Mexico and Venezuela within one year from the closing date of
the Bridge transfer. 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 breaches of our representations and warranties
and with respect to our responsibility for our assumed liabilities.
Network Services Agreement. Under the network services agreement, we will
agree to provide Bridge with networks 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 for our
third party customers at the termination date.
The purchase will substantially increase our depreciation and amortization,
and as a result we will incur significant losses. For the first year of the
agreement, our fees will be based upon the cash cost to Bridge of operating the
network as configured on the date we acquired the orginal network. Our fees for
additional services, following the closing of the transfer, will be set for a
three-year term based on an agreed payment schedule reflecting the estimated
cost to provide the services. The price schedule for additional services will be
subject to annual review and will be mutually agreed upon or determined by
binding arbitration. Bridge has agreed to pay us a minimum of approximately $105
million, $132 million and $145 million for network services in 2000, 2001 and
2002, respectively.
In addition, Bridge has agreed that 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 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.
In addition we will charge Bridge for additional bandwidth and additional
connections at a rate established on an annual basis. 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
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any additional charges to be paid to us by Bridge to defray the cost of such
expansion. If we cannot reach agreement with Bridge on the annual rate or on the
additional charges, 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 have also agreed that, beginning twelve months after the date of the
transfer of the network, the network will perform in accordance with specific
quality of service standards. 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 network, 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.
So long as Bridge is the beneficial owner of 20% of our outstanding voting
securities, we have agreed not to provide any of our stockholders with voting or
registration rights superior to the voting or registration rights of Bridge
other than as required by law.
Local Network Services 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 Permits. Some network assets to be purchased are
located in premises currently leased by Bridge. The permits provide us, subject
to the receipt of required landlord consents, with the ability to keep the
equipment that is being purchased from Bridge in the facilities in which they
are currently located. We will have no interest in or rights to the real estate
other than the right to enter the facilities for the purpose of maintaining the
equipment and to place a rack with equipment in the premises. According to this
arrangement, we will occupy a minimal amount of space, generally less than 100
square feet, in each of the premises. The permits, approximately thirty in
total, are for a term that is coterminous with the underlying rights which
Bridge has to such facilities, which range from one to ten years. Our costs for
these colocation permits, which are fixed costs, are estimated to be less than
$75,000 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 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. We expect the aggregate amount of payments to Bridge under the technical
services, agreement in 2000 will be approximately $1.1 million. After the first
year, we will negotiate new rates, and if we and Bridge cannot agree on new
rates, then we
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will submit prices to an independent arbitrator who will assign the price quoted
by the party that in the arbitrator's opinion comes closest to quoting a fair
market price. 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.
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. To the extent we do not pay for the purchase price for the
Bridge network assets in cash we will issue to Bridge 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.
GECC Sublease. In connection with the acquisition of the network assets, we
will sublease from Bridge some of the network assets that Bridge leases from
GECC. The aggregate amount of these capital leases is estimated to be $25
million. The terms of the GECC sublease are meant to mirror the GECC master
lease. At the end of the lease term, Bridge will have the right to acquire these
assets from GECC for $1, and we will have the right to acquire these assets from
Bridge for $1.
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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 Chief Executive Officer and
Chairman of the Board
Jack M. Finlayson ............. 45 President, Chief Operating Officer and
Director
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 General
Manager -- Americas
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 the Chairman of our board of directors
since April 1999 and as our 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.
JACK M. FINLAYSON has served as our President and Chief Operating Officer
since December, 1999 and as a director of our company since January 2000. From
June 1998 to December, 1999, Mr. Finlayson served as Senior Vice President of
Global Crossing Holdings, Ltd. and President of Global Crossing International,
Ltd., a provider of Internet and long distance communications facilities and
services. Prior to joining Global Crossing, Mr. Finlayson was employed by
Motorola, Inc., a provider of integrated communications solutions and embedded
electronic solutions, as Corporate Vice President and General Manager of the
Americas Cellular Infrastructure Group from March 1994 to February 1998, and as
Corporate Vice President and General Manager of the Asia Pacific Cellular
Infrastructure Group from March 1998 to May 1998. Prior to joining Motorola,
Mr. Finlayson was employed by AT&T as Sales Vice President of Business Network
Sales for the Southeastern United States. Mr. Finlayson received a B.S. degree
in Marketing from LaSalle University, an M.B.A. degree in Marketing from St.
Joseph University and a post M.B.A. certification in Information Management
from St. Joseph's University.
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
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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 General
Manager--Americas since October 1999. Prior to joining us, Mr. Mori was
employed by Sprint Corporation as National Account Manager from April 1987 to
December 1989, as Branch Manager from January 1990 to December 1991, as
Regional Sales Director from January 1992 to March 1996, as Vice President --
Sales from March 1996 to February 1997 and as 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.
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
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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 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 comply with the requirements of
the Nasdaq National Market regarding independent directors. 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.
COMMITTEES OF THE BOARD OF DIRECTORS
Our board of directors has established an audit committee and a
compensation committee. The audit committee and the compensation committee
consist 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 is responsible for determining the salaries and
incentive compensation of our management and key employees and administering
our stock option plan.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Wendel, a director of our company, is also President, Chief Executive
Officer and Chairman of the Board of Bridge. 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, which
sponsors investment partnerships, two of which are among our principal
stockholders and are also principal stockholders of Bridge.
In 1999, none of our executive officers served as a director or member of
the compensation committee of another entity whose executive officers had served
on our board of directors or on our compensation committee.
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DIRECTOR COMPENSATION
Directors who are also employees of our company will not receive additional
compensation for serving as a director. Each director who is not an employee of
our company will receive an annual retainer of $15,000, together with a grant of
options to purchase shares of our common stock under our stock option plan at an
exercise price equal to fair market value on the date of grant. On January 3,
2000. Messrs. Welsh, Wendel and McInerney each received 15,000 options to
purchase shares of our common stock under our stock option plan at an exercise
price of $.50 per share. The options will vest immediately on the date of grant,
but if a director ceases to serve on our board of directors, we will have the
right to repurchase these shares at the lower of the exercise price or the fair
market value of the shares. Our right to repurchase these shares will be
terminated with respect to one fourth of the shares on each of the first,
second, third and fourth anniversaries of the date of the option grant.
EXECUTIVE COMPENSATION
The following table provides you with information about compensation earned
during fiscal 1999 by our Chief Executive Officers and the other two 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.
SUMMARY COMPENSATION TABLE(1)
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
-----------------
ANNUAL COMPENSATION SECURITIES ALL
-------------------- UNDERLYING STOCK OTHER
NAME AND PRINCIPAL POSITION SALARY OPTIONS COMPENSATION
- ------------------------------------ -------------------- ----------------- -----------------
<S> <C> <C> <C>
Robert A. McCormick(2) ............. $ 45,139 750,000 --
Chief Executive Officer and
Chairman of the Board
Clyde A. Heintzelman(3) ............ 218,146 218,224 $ 330,400(6)
David J. Frear(4) .................. 122,276 400,000 2,400(7)
Executive Vice President and
Chief Financial Officer
Richard Bubenik(5) ................. 159,258 306,732 2,400(7)
Executive Vice President and
Chief Technical Officer .........
</TABLE>
- ---------------------
(1) In accordance with the rules of the SEC, the compensation described in this
table does not include medical, group life insurance or other benefits
received by the named executive officers that are available generally to all
salaried employees and various perquisites and other personal benefits
received by the named executive officers, which do not exceed the lesser of
$50,000 or 10% of any officer's salary and bonus disclosed in this table.
(2) Mr. McCormick became our Chief Executive Officer in November 1999, but
continued serving as the Executive Vice President and Chief Technology
Officer of Bridge through December 1999. He was compensated for all of his
services by Bridge.
(3) Mr. Heintzelman became our President and Chief Executive Officer in December
1998 and resigned from these positions in November 1999.
(4) Mr. Frear became our Executive Vice President and Chief Financial Officer in
July 1999.
(5) Mr. Bubenik joined us in December 1996 and became our Executive Vice
President and Chief Technical Officer in July 1999.
(6) Consists of $328,000 payable to Mr. Heintzelman in connection with his
resignation and $2,400 of matching contributions made under our 401(k) plan.
(7) Consists of matching contributions made under our 401(k) plan.
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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 5,159,508 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.
OPTION GRANTS IN 1999
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
---------------------------------------------------------------
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL
RATES OF STOCK
NUMBER OF PRICE APPRECIATION
SECURITIES FOR OPTION TERM
UNDERLYING PERCENT OF TOTAL EXERCISE
OPTIONS OPTIONS GRANTED TO PRICE PER EXPIRATION ------------------------
NAME GRANTED EMPLOYEES IN 1999 SHARE DATE 5% 10%
- ---------------------------------- ------------ -------------------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Robert A. McCormick (1) .......... 750,000 14.5% $ 0.50 7/22/09 $610,836 $972,653
Clyde A. Heintzelman (2) ......... 218,224 4.2% 0.50 7/22/09 177,732 283,008
David J. Frear (3) ............... 400,000 7.8% 0.50 7/22/09 325,779 518,749
Richard Bubenik (4) .............. 306,732 5.9% 0.50 7/22/09 249,817 397,792
</TABLE>
- ---------------------
(1) All these options vested on the date of grant. If Mr. McCormick were to
resign, we would have the right to repurchase up to 454,500 of the 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 terminated 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 the 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 terminated 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. Our right to repurchase these shares will
be terminated in the event of a change in control of our company.
(4) Currently, these options are exercisable at the rate of 4,167 each month. On
June 30, 2000, a total of 12,500 options will become exercisable, and
beginning on June 30, 2000, 6,250 options will become exercisable each
month.
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;
and
o the value of such options which were in-the-money at December 31, 1999.
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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.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY
DECEMBER 31, 1999 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 .......... 750,000 $17,250,000 -- -- -- --
Clyde A. Heintzelman ......... 218,224 5,019,152 -- -- -- --
David J. Frear ............... 400,000 9,200,000 -- -- -- --
Richard Bubenik .............. 40,065 921,495 0 266,667 0 $6,133,341
</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. On December 7, 1999, the board adopted an
amendment to the stock option plan approving an increase in the number of shares
of common stock available for issuance under the plan, and our stockholders
approved the amendment on that 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 December 31, 1999,
options to purchase 3,518,419 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 12,000,000 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,
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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, as well as
remove any restrictions on such 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 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
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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.
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, 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 specified executive officers,
then,
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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.
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.
401(K) PLAN
In January, 1998, we adopted a tax-qualified employee savings and
retirement plan covering all of our employees. Under this 401(k) plan, employees
may elect to reduce their current compensation by a maximum pre-tax amount equal
to the lesser of 15% of eligible compensation or the statutorily prescribed
annual limit, which was $10,000 in 1998, and have the amount of this reduction
contributed to the 401(k) plan. The trustee under the 401(k) plan, at the
direction of each participant, invests the assets of the 401(k) plan in any of
four investment options. The 401(k) plan is intended to qualify under Section
401 of the Internal Revenue Code so that contributions by employees to the
401(k) plan, and income earned on plan contributions, are not taxable to
employees until withdrawn, and so that the contributions by employees will be
deductible by us when made. We may make matching or additional contributions to
the 401(k) plan, in amounts to be determined annually by the board of directors.
Employees are immediately 100% vested in their individual contributions and vest
25% per year in our contributions beginning with their second year of service,
becoming 100% vested in their fifth year of service. Vesting in our
contributions also occurs upon attainment of retirement age, death or
disability. The 401(k) plan provides for hardship withdrawals and employee
loans.
ARRANGEMENTS WITH EXECUTIVE OFFICERS
Arrangement with Mr. Heintzelman. 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
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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. Finlayson. On December 28, 1999, we entered into an
agreement with Mr. Finlayson pursuant to which he agreed to serve as our
President and Chief Operating Officer effective December 31, 1999. Under his
agreement, Mr. Finlayson is entitled to a base salary of $400,000 per year. In
addition, he will be eligible to receive an annual incentive bonus of up to
$600,000 based on the achievement of mutually agreed to objectives. Mr.
Finlayson will be entitled to a minimum annual incentive bonus of $400,000 for
the year ended 2000. Mr. Finlayson will be entitled to benefits commensurate
with those available to other senior executives.
In connection with his employment, Mr. Finlayson received options to
purchase 650,000 shares of our common stock at an exercise price of $.50 per
share, 200,000 of which vested on December 31, 1999. Mr. Finlayson has the right
to sell 50,000 shares underlying these options immediately, and the remaining
150,000 shares on a monthly pro rata basis over the calendar year 2000. The
remaining 450,000 shares will vest on January 3, 2000, and become saleable on a
monthly pro rata basis over calendar years 2001, 2002 and 2003. Mr. Finlayson
may sell all of his shares in the event of a change in control of our company,
the sale of substantially all of our assets, if we terminate his employment
without cause, or if he resigns for good reason. However, if we terminate Mr.
Finlayson's employment for good cause, we will have the right to buy all shares
not yet saleable at the price he paid for the shares. Mr. Finlayson will have
the right to exercise all vested options for one year after the termination of
his employment unless his employment was terminated for cause.
In the event we terminate Mr. Finlayson's employment without cause or if he
terminates his employment for good reason, he will be entitled to receive a lump
sum severance payment equal to his then current base annual salary, which shall
not be less than his highest annual salary paid by us. In the event of a change
in control of our company, Mr. Finlayson has agreed to remain with our company
for a period of up to twelve months if the new management requests him to do so.
We will reimburse Mr. Finlayson for any parachute taxes he would incur under the
Internal Revenue Code as a result of such a change in control. We may terminate
Mr. Finlayson's employment for cause at any time without notice, in which case
he will not be entitled to any severance benefits.
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, 401(k), 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 the 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 will be terminated with respect to a
total of 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. Our right to repurchase these shares will be terminated in
the event of a change in control of our company. 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.
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 repurchase his shares
would be terminated.
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Arrangement with Mr. Mori. On September 30, 1999, we entered into an
agreement with Mr. Mori pursuant to which he became our Executive Vice President
and General Manager -- Americas effective October 1, 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 terminated at a rate of 4,687
shares per month and will terminate on the fourth anniversary 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 would 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.
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 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,
which sponsors investment partnerships, two of which are among our principal
stockholders and are also principal stockholders of Bridge.
As of December 31, 1999, we had outstanding term notes to Bridge of
approximately $25 million. These loans mature one year after the completion of
this offering and 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, the GECC Sublease 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 "Relationship with Bridge."
We have agreed to grant to Welsh Carson customary registration rights with
respect to the shares of our common stock to be purchased by Welsh Carson from
Bridge following this offering, including demand registration rights and
piggy-back registration rights.
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PRINCIPAL STOCKHOLDERS AND SELLING STOCKHOLDER
OWNERSHIP OF OUR COMMON STOCK
The following table provides you with information about the beneficial
ownership of shares of our common stock as of January 25, 2000, 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;
o all our directors and executive officers as a group; and
o the selling stockholder.
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
January 25, 2000, but excludes shares of common stock underlying options held by
all other persons. Percentage of beneficial ownership is based on 77,735,933
shares of common stock outstanding as of January 25, 2000, and 92,610,933 shares
of common stock outstanding after completion of this offering.
<TABLE>
<CAPTION>
SHARE BENEFICIALLY SHARES BENEFICIALLY
OWNED BEFORE OFFERING OWNED AFTER OFFERING
-------------------------- -----------------------------
SHARES
NAME NUMBER PERCENTAGE BEING SOLD NUMBER PERCENTAGE
- ---- ------------ ------------ ------------ ------------ ---------------
<S> <C> <C> <C> <C> <C>
Bridge Information Systems, Inc. (1) ........ 53,870,279 69.3% 2,125,000 51,745,279 55.9%(6)
Welsh, Carson, Anderson & Stowe (2) ......... 8,844,642 11.4% -- 8,844,642 9.6%(6)
Clyde A. Heintzelman ........................ 218,224 * -- 218,224 *
Robert A. McCormick ......................... 750,000 * -- 750,000 *
David J. Frear .............................. 400,000 * -- 400,000 *
Richard Bubenik (3) ......................... 48,390 * -- 48,390 --
Thomas M. Wendel ............................ 500,000 * -- 500,000 *
Patrick J. Welsh (4) ........................ 8,843,413 11.4% -- 8,843,413 9.6%
Thomas E. McInerney (5) ..................... 8,883,118 11.4% -- 8,883,118 9.6%
All executive officers and directors as a
group (7 persons) .......................... 10,863,868 14.0% 10,863,868 11.7%
</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 3 World Financial Center, New York, New York 10281.
(2) Includes 4,635,958 shares of common stock held by Welsh, Carson, Anderson &
Stowe VI, L.P., or WCAS VI, 3,475,566 shares held by Welsh, Carson, Anderson
& Stowe VII, L.P., or WCAS VII, 65,357 shares held by WCAS Information
Partners, L.P., or WCAS IP and 667,761 shares held by WCAS Capital Partners
II, L.P., or 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. Queally, Rudolph E. Rupert, Jonathan M. Rather, Lawrence B.
Sorrel, Richard H.
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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.
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% of the outstanding equity
securities of Bridge. The address of Welsh, Carson, Anderson & Stowe is 320
Park Avenue, New York, NY 10022.
(3) Includes 8,333 shares of common stock subject to options that are
exercisable within 60 days of January 25, 2000.
(4) Includes 8,779,285 shares held by Welsh, Carson, Anderson & Stowe, as
described in note 2 above.
(5) Includes 8,844,642 shares held by Welsh, Carson, Anderson & Stowe, as
described in note 2 above.
(6) Pursuant to a stock purchase agreement dated February 7, 2000, Bridge has
agreed to sell to Welsh Carson for $150 million in cash shares of our common
stock held by Bridge. The purchase price per share is equal to the initial
public offering price per share. Assuming an initial offering price of
$23.50, the midpoint of the range shown on the cover of this prospectus,
upon consummation of such sale Bridge and Welsh Carson would own
approximately 49% and 16% of our outstanding common stock, respectively.
For a description of material relationships between us and the selling
stockholder, see "Transactions with Affiliates."
OWNERSHIP OF BRIDGE CLASS 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 Class A common stock and Bridge's Series D
preferred stock as of December 31, 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 Class 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 Class A common stock outstanding used in calculating the
percentage for each person named in the table includes the shares of Class A
common stock underlying options held by that person that are exercisable within
60 days of December 31, 1999, but excludes shares of Class A common stock
underlying options held by all other persons. Percentage of beneficial ownership
is based on 37,018,168 shares of Bridge Class A common stock and 1,950,000
shares of Bridge Series D preferred stock outstanding as of December 31, 1999.
As of December 31, 1999, none of our executive officers or directors owned any
shares of Bridge's Series E preferred stock or Series F preferred stock.
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<TABLE>
<CAPTION>
NUMBER OF SHARES OF NUMBER OF SHARES OF PERCENT OF
CLASS A COMMON PERCENT OF SERIES D PREFERRED SERIES D PREFERRED
STOCK BENEFICIALLY CLASS A COMMON STOCK STOCK BENEFICIALLY STOCK BENEFICIALLY
NAME AND ADDRESS OWNED BENEFICIALLY OWNED OWNED OWNED
- --------------------------------- -------------------- ---------------------- --------------------- -------------------
<S> <C> <C> <C> <C>
Robert A. McCormick (1) ......... 118,000 * -- --
Clyde A. Heintzelman ............ -- -- -- --
David J. Frear .................. -- -- -- --
Richard Bubenik ................. -- -- -- --
Thomas M. Wendel (2) ............ 680,050 1.8% -- --
Patrick J. Welsh ................ 21,449,846(3) 57% (5) 438,400(6) 22% (5)
Thomas E. McInerney ............. 21,543,540(4) 58% (5) 440,598(7) 23% (5)
All named executive officers and
directors as a group (7 persons) 22,496,666 60% (5) 443,848 23% (5)
</TABLE>
- ----------------
(1) Includes 118,000 shares of Class A common stock subject to options that are
exercisable within 60 days of December 31, 1999.
(2) Includes 680,050 shares of Class A common stock subject to options that are
exercisable within 60 days of December 31, 1999.
(3) Includes 12,989,080 shares of Bridge's Class A common stock held by WCAS VI,
6,324,767 shares of Class A common stock held by WCAS VII, and 1,980,923
shares of Class A common stock held by WCAS CP II.
(4) Includes 12,989,080 shares of Bridge's Class A common stock held by WCAS VI,
6,324,767 shares of Class A common stock held by WCAS VII, 155,728 shares of
Class A common stock held by WCAS IP and 1,980,923 shares held by WCAS CP
II.
(5) Bridge's 1,950,000 shares of Series D preferred stock and 1,500,000 shares
of Series E preferred stock are presently convertible into 24,750,000 shares
and 7,146,260 shares, respectively, of Bridge's Class A common stock. Both
series of preferred stock are presently entitled to vote with the Class A
common stock on all matters and have voting power equal to the number of
shares of Class A common stock into which they are convertible. None of the
persons or Welsh Carson entities referred to in the table or any notes
thereto own any shares of Bridge Series E preferred stock or Series F
preferred stock. Accordingly, the percentage of total ordinary voting power
represented by the combined ownership of Class A common stock and Series D
preferred stock shown for Messrs. Welsh and McInerney and all named
executive officers and directors as a group would be 38%, 38% and 39%,
respectively.
(6) Includes 92,679 shares of Bridge's Series D preferred stock held by WCAS VI
and 342,471 shares of Series D preferred stock held by WCAS VII.
(7) Includes 92,679 shares of Bridge's Series D preferred stock held by WCAS VI,
342,471 shares of Series D preferred stock held by WCAS VII and 3,498 shares
of Series D preferred stock held by WCAS IP.
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DESCRIPTION OF CAPITAL STOCK
Our authorized capital stock consists of 250,000,000 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 January 25, 2000,
77,735,933 shares of our common stock were outstanding and no shares of our
preferred stock were outstanding. As of January 25, 2000, we had 357
stockholders.
COMMON STOCK
Each holder of record of common stock 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 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
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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 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 meeting 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 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 92,610,933 shares of our common stock
outstanding. All of the shares 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 77,735,933 shares of common stock outstanding following this
offering are restricted securities under the terms of the Securities Act. Sales
of a large portion of the restricted shares to be outstanding upon completion of
this offering will be limited by lock-up agreements.
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
926,109 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
Following 180 days after this offering, we intend to file a registration
statement under the Securities Act covering 12,000,000 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 December 31, 1999,
options to purchase approximately 3.5 million 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, you are a non-U.S. holder if you are 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 foreign estate or trust; or
o a foreign partnership.
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
We have not paid any dividends on our common stock and do not intend to pay
dividends in the foreseeable future. See "Dividend Policy." However, if
dividends 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. To the extent these distributions
exceed those earnings and profits, the distributions will constitute a return of
capital that is applied against, and will reduce, your basis in the common
stock, but not below zero, and then will be treated as gain from the sale of
stock. 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
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-8BCI 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 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 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 U.S. capital losses.
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, the non-U.S.
holder may be taxable in the U.S. on gain from the sale of common stock
pursuant to the effectively connected rules above. 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 of
our common stock are considered to be "regularly
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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 through 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
Merrill Lynch, Pierce, Fenner & Smith Incorporated, Morgan Stanley & Co.
Incorporated, Bear, Stearns & Co. Inc., Banc of America Securities LLC and CIBC
World Markets Corp. are acting as representatives of the underwriters named
below. Subject to the terms and conditions set forth in a purchase agreement
among us, the selling stockholder and the underwriters, we and the selling
stockholder have agreed to sell to the underwriters, and the underwriters
severally have agreed to purchase from us and the selling stockholder, the
number of shares listed opposite their names below.
<TABLE>
<CAPTION>
NUMBER
UNDERWRITER OF SHARES
- ------------------------------------------------ -----------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated ................. .......
Morgan Stanley & Co. Incorporated .........
Bear, Stearns & Co. Inc. ..................
Banc of America Securities LLC ............
CIBC World Markets Corp. ..................
----------
Total ..................................... 17,000,000
==========
</TABLE>
The underwriters have agreed to purchase all of the shares sold under the
purchase agreement if any of the shares are purchased. If an underwriter
defaults, the purchase agreement provides the purchase commitments of the
nondefaulting underwriters may be increased or the purchase agreement may be
terminated.
We and the selling stockholder have agreed to indemnify the underwriters
against liabilities specified in the purchase agreement, including liabilities
under the Securities Act, or to contribute to payments the 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 agreement, 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 representatives have advised us and the selling stockholder that the
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,
proceeds before expenses to SAVVIS and the selling stockholder and other
compensation. The information assumes either no exercise or full exercise by the
underwriters of their over-allotment option.
<TABLE>
<CAPTION>
PER SHARE WITHOUT OPTION WITH OPTION
--------------- ------------------ ------------
<S> <C> <C> <C>
Public offering price ......................... $ $ $
Underwriting discount ......................... $ $ $
Proceeds, before expenses, to SAVVIS .......... $ $ $
Proceeds, before expenses, to the selling
stockholder .................................. $ $ $
Other compensation(1) ......................... N/A N/A N/A
</TABLE>
- ------------------
(1) An affiliate of Morgan Stanley & Co. Incorporated has received 457,507
shares of our common stock which is deemed compensation under the National
Association of Securities Dealers' Rules of Fair Practice. For additional
information, see " -- Other Relationships."
The underwriting discount is currently expected to be approximately % of
the public offering price. The expenses of the offering, not including the
underwriting discount, are estimated at $2,250,000 and are payable pro rata by
us and the selling stockholder based upon the number of shares offered in this
offering. These expenses consist of the following:
o a registration fee of $130,081;
o an NASD filing fee of $30,500;
o Nasdaq National Market listing fee of $95,000;
o estimated blue sky fees and expenses of $10,000;
o estimated printing and engraving expenses of $500,000;
o estimated legal fees and expenses of $600,000;
o estimated accounting fees and expenses of $575,000;
o estimated transfer agent fees and expenses of $3,500; and
o estimated miscellaneous fees and expenses of $305,919.
OVER-ALLOTMENT OPTION
The selling stockholder has granted an option to the underwriters to
purchase up to 2,550,000 additional shares at the public offering price less the
underwriting discount. The underwriters may exercise this option for 30 days
from the date of this prospectus solely to cover any over-allotments. If the
underwriters exercise this option, each will be obligated, subject to conditions
contained in the purchase agreements, to purchase a number of additional shares
proportionate to that underwriter's initial amount reflected in the above table.
RESERVED SHARES
At our request, the underwriters have reserved for sale, at the initial
public offering price, up to 7.5% of the shares offered by this prospectus for
sale to some of our and Bridge's directors, officers, employees and their
immediate family and business associates. Our senior management will determine
whether or not a business associate will be included in this program. 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 may
be offered by the underwriters to the general public on the same terms as the
other shares offered by this prospectus.
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NO SALES OF SIMILAR SECURITIES
We, the selling stockholder, our executive officers and directors and other
stockholders 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 and Morgan Stanley. Specifically, we and these
other individuals have agreed not to directly or indirectly:
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. The shares of our common stock held by the selling
stockholder, other than the shares to be sold in the offering, have been pledged
to secure indebtedness of the selling stockholder. The lenders of such
indebtedness have not agreed to the provisions mentioned above.
QUOTATION ON THE NASDAQ NATIONAL MARKET
The shares have been 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 among
us, the selling stockholder and the representatives. 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
representatives 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.
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NASD REGULATIONS
The representatives and their affiliates may, from time to time, engage in
transactions with, and perform services for, us and our affiliates in the
ordinary course of their business. In particular, affiliates of Merrill Lynch,
Morgan Stanley and CIBC World Markets Corp. are lenders under Bridge's senior
secured credit facility and an affiliate of Merrill Lynch is a lender under
Bridge's bridge loan, and they will receive in excess of ten percent of the net
proceeds of this offering. Because more than ten percent of the net proceeds of
the offering may be paid to members or affiliates of members of the National
Association of Securities Dealers, Inc. participating in the offering, the
offering will be conducted in accordance with NASD Conduct Rule 2710(c)(8). This
rule requires that the public offering price of an equity security be no higher
than the price recommended by a qualified independent underwriter which has
participated in the preparation of the registration statement and performed its
usual standard of due diligence with respect to that registration statement.
Bear, Stearns & Co. Inc. has agreed to act as qualified independent underwriter
for the offering. The price of the shares will be no higher than that
recommended by Bear, Stearns & Co. Inc.
UK SELLING RESTRICTIONS
Each underwriter has agreed that
o it has not offered or sold and, prior to the expiration of the period six
months from the closing of the offering, will not offer or sell any shares
of common stock of SAVVIS 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 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.
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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 representatives may reduce that short
position by purchasing common stock in the open market. The representatives 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 representatives may also impose a penalty bid on underwriters and
selling group members. This means that if the 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 representatives
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 some 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. On
December 31, 1999, the bridge loan agreement was amended to add two additional
lenders and Bridge borrowed another $50 million under the amended bridge loan
agreement, $15 million of which came from Merrill Lynch Capital. 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.
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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 and
Steven M. Gallant, General Counsel of SAVVIS. 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,
as of December 31, 1998, and for the year then ended, as restated, included in
this prospectus have been audited by Deloitte & Touche LLP, independent
auditors, as stated in their report appearing in this prospectus, which report
contains an explanatory paragraph describing conditions that raise substantial
doubt as to our company's ability to continue as a going concern and an
explanatory paragraph relating to the restatement, 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,
as of December 31, 1997, as restated, and for the years ended December 31, 1997,
as restated, and 1996, included in this prospectus, have been audited by Ernst &
Young, LLP, independent auditors, as set forth in their report dated April 23,
1998, except for Note 14 as to which the date is January 25, 2000, which
contains an explanatory paragraph describing conditions that raise substantial
doubt about the company's ability to continue as a going concern. This report
appears in this prospectus, and is included in reliance on such report given
upon the authority of such firm as experts in accounting and auditing.
The consolidated financial statements of Bridge Information Systems, Inc.
and Subsidiaries, as of December 31, 1997 and 1998, and for each of the three
years in the period 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, which report contains an explanatory
paragraph describing conditions that raise substantial doubt as to Bridge's
ability to continue as a going concern, and are included in reliance upon the
report of such firm given upon their authority 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
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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.
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<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
(As
Restated), the period January 1 to April 6, 1999 (As Restated) 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 (As Restated) (unaudited) ............................................ F-4
Consolidated Statements of Cash Flows for the nine month period ended September
30, 1998 (As
Restated), the period January 1 to April 6, 1999 (As Restated) 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-11
Independent Auditors' Report - Ernst & Young LLP ......................................... F-12
Consolidated Balance Sheets as of December 31, 1997 (As Restated) and 1998 (As Restated) . F-13
Consolidated Statements of Operations for the years ended December 31, 1996, 1997 (As
Restated)
and 1998 (As Restated) .................................................................. F-14
Consolidated Statements of Changes in Stockholders' Equity (Deficit) for the years ended
December
31, 1996, 1997 (As Restated) and 1998 (As Restated) ..................................... F-15
Consolidated Statements of Cash Flows for the years ended December 31, 1996, 1997 (As
Restated)
and 1998 (As Restated) .................................................................. F-16
Notes to Consolidated Financial Statements ............................................... F-17
</TABLE>
BRIDGE INFORMATION SYSTEMS, INC.
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Management's Discussion and Analysis of Financial Condition and Results of Operations .... F-31
Independent Auditors' Report ............................................................. F-41
Consolidated Balance Sheets as of December 31, 1997 and 1998 ............................. F-42
Consolidated Statements of Operations and Comprehensive Loss for the years ended
December 31, 1996, 1997 and 1998 ........................................................ F-43
Consolidated Statements of Deficiency in Net Assets for the years ended December 31, 1996,
1997 and 1998 ........................................................................... F-44
Consolidated Statements of Cash Flows for the years ended December 31, 1996, 1997 and F-45
1998.
Notes to Consolidated Financial Statements ............................................... F-46
Condensed Consolidated Balance Sheet as of September 30, 1999 (unaudited) ................ F-63
Condensed Consolidated Statements of Operations and Comprehensive Loss for the nine-month
period ended September 30, 1998 and 1999 (unaudited) .................................... F-64
Condensed Consolidated Statements of Cash Flows for the nine month period ended
September 30, 1998 and 1999 (unaudited) ................................................. F-65
Notes to Unaudited Condensed Consolidated Financial Statements ........................... F-66
</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
--------------- --------------- --------------
(AS RESTATED) (AS RESTATED)
<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 ................................ 1,556 817 9,747
Impairment of assets ......................................... -- 1,383 --
----------- ----------- -----------
Total direct costs and operating expenses .................. 23,518 13,380 33,984
----------- ----------- -----------
LOSS FROM OPERATIONS .......................................... (14,604) (7,940) (21,792)
INTEREST EXPENSE, NET ......................................... (138) (135) (782)
----------- ----------- -----------
LOSS BEFORE INCOME TAXES, MINORITY INTEREST, AND
EXTRAORDINARY ITEM ........................................... (14,742) (8,075) (22,574)
Income Taxes .................................................. -- -- --
Minority Interest in Losses, net of accretion ................. (147)
-----------
LOSS BEFORE EXTRAORDINARY ITEM ................................ (14,889) (8,075) (22,574)
Extraordinary gain on debt extinguishment, net of tax ......... 1,954 -- --
----------- ----------- -----------
NET LOSS ...................................................... (12,935) (8,075) (22,574)
PREFERRED STOCK DIVIDENDS ..................................... (1,370) (706) --
AMORTIZATION OF DEFERRED FINANCING COSTS AND DISCOUNT
ON SERIES B AND C PREFERRED STOCK ............................ (369) (244) --
----------- ----------- -----------
NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS .................. $ (14,674) $ (9,025) $ (22,574)
=========== =========== ===========
BASIC AND DILUTED LOSS PER COMMON SHARE BEFORE
EXTRAORDINARY ITEM ........................................... $ (.29) $ (.14) $ (0.31)
EXTRAORDINARY GAIN ON DEBT EXTINGUISHMENT ..................... .03 -- --
----------- ----------- -----------
BASIC AND DILUTED LOSS PER COMMON SHARE ....................... $ (.26) $ (.14) $ (.31)
=========== =========== ===========
WEIGHTED AVERAGE SHARES OUTSTANDING ........................... 56,735,597 66,018,388 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
---------------------------- ----------------------------------------------------------
ADDITIONAL DEFERRED ACCUMULATED
COMMON TREASURY COMMON PAID-IN COMPEN- DEFICIT TREASURY
STOCK STOCK STOCK CAPITAL SATION (AS RESTATED) STOCK
------------ --------------- -------- ------------ ---------- --------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1999 .............. 69,299,809 5,051,543 $693 $ 5,263 $ (78) $ (38,638) $ (64)
Issuance of common stock upon
exercise of stock options ........... 2,700,191 -- 27 1 -- -- --
Recognition of deferred
compensation ........................ -- -- -- -- 78 -- --
Net loss for the period prior to
acquisition ......................... -- -- -- -- -- (9,025) --
Acquisition of the Company by
Bridge Information Systems .......... -- (5,051,543) -- 25,762 -- 47,663 64
Net loss for the period subsequent
to acquisition ...................... -- -- -- -- -- (22,574) --
---------- ---------- ---- ------- ----- --------- -----
BALANCE, SEPTEMBER 30, 1999 ........... 72,000,000 -- $720 $31,026 $ -- $ (22,574) $ --
========== ========== ==== ======= ===== ========= =====
<CAPTION>
TOTAL
-------------
<S> <C>
BALANCE, JANUARY 1, 1999 .............. $ (32,824)
Issuance of common stock upon
exercise of stock options ........... 28
Recognition of deferred
compensation ........................ 78
Net loss for the period prior to
acquisition ......................... (9,025)
Acquisition of the Company by
Bridge Information Systems .......... 73,489
Net loss for the period subsequent
to acquisition ...................... (22,574)
---------
BALANCE, SEPTEMBER 30, 1999 ........... $ 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
----------------- --------------------- -------------------
(AS RESTATED) (AS RESTATED)
<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 ..................... 1,370 706 --
Amortization of deferred financing costs and
accretion of preferred stock discount ............... 369 244 --
Senior convertible notes exchanged for preferred
stock ............................................... 7,617 -- --
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. As a result of the application of fair value
accounting, intangibles, goodwill, other liabilities and additional paid-in
capital were increased, 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, which are of a normal
recurring nature, 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.
The unaudited financial statements for the predecessor periods have been
restated to reflect the recording of minority interest related to redeemable
Class A shares of the Company's subsidiary and to record accretion on Class A
shares and related convertible notes at an effective rate of 20%. The exchange
of these instruments for Class B preferred stock in March of 1998 has been
restated to be treated as a debt extinguishment and the purchase of a minority
interest.
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 LIFE
ASSETS PURCHASE PRICE (IN MONTHS)
- -------------------------------- ---------------- ------------
<S> <C> <C>
Property and equipment ......... $5,600 36-60
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 notes 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 at September 30, 1999 are as follows:
<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 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 have been adjusted retroactively for the stock split.
6. STOCK OPTION ACTIVITY
As discussed in Note 1, 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 based upon the fair
value of Bridge options issued. 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 3,639,000 shares of its common stock to
certain employees of Bridge. In that same period, the Company granted options to
purchase up to 2,300,008 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 funded the Company's operations during 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
Public Offering -- 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 and to pay Bridge a preferential distribution of $58
million as discussed below. The remaining proceeds will be used to finance
growth.
Asset Purchase and Preferential Distribution -- Simultaneous with the
completion of the public offering, the Company will purchase or sublease
Bridge's global Internet protocol network assets for approximately $92,000 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 with offering proceeds. For accounting purposes, the
assets are to be transferred from Bridge to Savvis at their historical net book
value of approximately $88,000. The Company will also pay a $58 million
preferential distribution to Bridge. 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. For the first year of the
agreement, the Company's fees will be based upon the cash cost to Bridge of
operating the network as configured on the date the Company acquire it, fees for
additional services provided following the closing of the transfer will be set
for a three-year term based on an agreed payment schedule reflecting the
estimated cost to provide the services. Bridge has agreed to pay us a minimum of
approximately $105 million, $132 million and $145 million for network services
in 2000, 2001 and 2002, respectively.
In addition, Bridge has agreed that the amount to be paid 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 the amount to be paid 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.
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.
Some network assets to be purchased are located in premises currently
leased by Bridge. The permits provide the Company, subject to the receipt of
required landlord consents, with licenses to keep the equipment that is being
purchased from Bridge in the facilities in which they are currently located.
According to this arrangement, the Company will occupy a minimal amount of
space, generally less than 100 square feet, in each of the premises. The permits
are for a term that is coterminous with the underlying rights which Bridge has
to such facilities, which range from one to ten years. Costs for this space are
estimated to be less than $75 per year.
F-9
<PAGE>
SAVVIS COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- UNAUDITED (DOLLARS IN
THOUSANDS EXCEPT SHARE AMOUNTS) - (CONTINUED )
Stock Options -- During the period from October through December 1999, the
Company granted 2,843,258 stock options to employees of SAVVIS and Bridge with
an exercise price of $.50 per share. Noncash compensation cost based upon the
difference between the exercise price and the imputed fair value of the
Company's stock as of the respective option grant dates totalling approximately
$53,000 will be recorded over the vesting periods of such options, which periods
range from immediate up to four years. Approximately $2,000 of noncash
compensation expense will be recorded in the fourth quarter.
Severance -- In November 1999, in connection with the resignation of its
President, the Company agreed to provide severance benefits, to include
approximately one year's base salary, a 1999 performance bonus of not less than
25% of base salary, and other miscellaneous benefits. Approximately $360 will be
accrued in the fourth quarter related to this severance arrangement.
* * * * * *
F-10
<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.
We have not audited any financial statements of the Company for any period
subsequent to December 31, 1998. However, as discussed in Note 13 to the
financial statements, the Company has experienced recurring losses from
operations and cash flow deficiencies which have been funded by Bridge
Information Systems, Inc. ("Bridge"), of which the Company is a majority-owned
subsidiary. As further discussed in Note 13, Bridge has not committed to fund
the Company's operations in the future. These matters raise substantial doubt
about the Company's ability to continue as a going concern. Management's plans
in regard to these matters are also described in Note 13. The 1998 financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
As discussed in Note 14, the consolidated financial statements for the year
ended December 31, 1998 have been restated.
/s/ DELOITTE & TOUCHE LLP
St. Louis, Missouri
August 12, 1999, except for Note 13 as to which the date is January 14, 2000,
and Note 14 as to which the date in January 25, 2000.
F-11
<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"), 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.
As discussed in Note 14, the consolidated financial statements for the year
ended December 31, 1997 have been restated.
/s/ ERNST & YOUNG, LLP
St. Louis, Missouri
April 23, 1998, except for Note 14 as to which the date is January 25, 2000
F-12
<PAGE>
SAVVIS COMMUNICATIONS CORPORATION
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1997 AND 1998
(DOLLARS IN THOUSANDS EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
1997 1998
------------ ------------
(AS RESTATED, SEE NOTE 14)
<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
$503........................................................................ -- 1,406
OTHER LONG-TERM ASSETS ...................................................... 53 193
--------- ---------
TOTAL ....................................................................... $ 4,313 $ 11,663
========= =========
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable ........................................................... $ 3,812 $ 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 ............................................... 5,309 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) ........................................... 4,719 --
SENIOR CONVERTIBLE BRIDGE NOTES (NOTE 7) .................................... 3,053 --
COMMITMENTS AND CONTINGENCIES (NOTE 11) .....................................
MINORITY INTEREST ........................................................... 370 --
REDEEMABLE STOCKS (NOTES 1 AND 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......................... -- 3,898
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, 125,000,000 authorized, 39,550,519 issued
and outstanding in 1997, 69,299,809 issued and outstanding in 1998 ....... 396 693
Additional paid-in capital ................................................. 1,095 5,263
Accumulated deficit ........................................................ (16,345) (39,011)
Deferred compensation ...................................................... -- (78)
Treasury stock ............................................................. (49) (64)
--------- ---------
Total stockholders' deficit ................................................ (14,903) (33,197)
--------- ---------
TOTAL ....................................................................... $ 4,313 $ 11,663
========= =========
</TABLE>
See notes to consolidated financial statements.
F-13
<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
-------------- -------------- --------------
(AS RESTATED, SEE NOTE 14)
<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 2,288
----------- ----------- -----------
Total direct costs and operating expenses ................. 2,401 16,833 35,422
----------- ----------- -----------
LOSS FROM OPERATIONS .......................................... (2,111) (14,075) (21,748)
NONOPERATING INCOME (EXPENSE):
Interest income .............................................. -- -- 383
Interest expense ............................................. (60) (482) (483)
----------- ----------- -----------
Total nonoperating income (expense) ....................... (60) (482) (100)
----------- ----------- -----------
LOSS BEFORE INCOME TAXES, MINORITY INTEREST AND EXTRAORDINARY
ITEM ......................................................... (2,171) (14,557) (21,848)
INCOME TAXES (NOTE 10) ........................................ -- -- --
Minority Interest in Losses, net of accretion ................. -- 547 (147)
----------- ----------- -----------
LOSS BEFORE EXTRAORDINARY ITEM ................................ (2,171) (14,010) (21,995)
Extraordinary gain on debt extinguishment, net of tax ......... -- -- 1,954
----------- ----------- -----------
NET LOSS ...................................................... (2,171) (14,010) (20,041)
PREFERRED STOCK DIVIDENDS ..................................... -- (151) (2,054)
AMORTIZATION OF DEFERRED FINANCING COSTS AND DISCOUNT ON
SERIES B AND C PREFERRED STOCK ............................... -- -- (571)
----------- ----------- -----------
NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS .................. $ (2,171) $ (14,161) $ (22,666)
=========== =========== ===========
BASIC AND DILUTED LOSS PER COMMON SHARE BEFORE EXTRAORDINARY
ITEM ......................................................... $ (.06) $ (.38) $ (.42)
EXTRAORDINARY GAIN ON DEBT EXTINGUISHMENT ..................... -- -- .03
----------- ----------- -----------
BASIC AND DILUTED LOSS PER COMMON SHARE ....................... $ (.06) $ (.38) $ (.39)
=========== =========== ===========
WEIGHTED AVERAGE SHARES OUTSTANDING ........................... 35,396,287 36,904,108 58,567,482
=========== =========== ===========
</TABLE>
See notes to consolidated financial statements.
F-14
<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 ............. 30,665,765 --
Issuance of common stock ............ 8,884,754 --
Issuance of common stock upon
Exercise of stock options .......... -- --
Net loss ............................ -- --
---------- --
BALANCE, DECEMBER 31, 1996 ........... 39,550,519 --
Purchase of shares for treasury ..... -- 4,853,967
Dividends declared on Series A
Preferred Stock .................... -- --
Net loss ............................ -- --
---------- ---------
BALANCE, DECEMBER 31, 1997 ........... 39,550,519 4,853,967
Issuance of common stock ............. 1,976 --
Issuance of in-the-money options ..... -- --
Issuance of common stock for
acquisition of IXA .................. 28,789,781 --
Issuance of common stock upon
exercise of stock options ........... 957,533 --
Dividends declared on Series C
Preferred Stock ..................... -- --
Amortization of deferred financing
costs and discount on Series C
Preferred Stock ..................... -- --
Purchase of shares for treasury ...... -- 197,576
Issuance of Series C warrants
(Note 3) ............................ -- --
Net loss ............................. -- --
---------- ---------
BALANCE, DECEMBER 31, 1998 ........... 69,299,809 5,051,543
========== =========
<CAPTION>
AMOUNTS
---------------------------------------------------------------------------
(AS RESTATED,
ADDITIONAL SEE NOTE 14)
COMMON PAID-IN DEFERRED ACCUMULATED TREASURY
STOCK CAPITAL COMPENSATION DEFICIT STOCK TOTAL
-------- ------------ -------------- -------------- --------- -------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1996 ............. $ 307 $ (206) $ -- $ (13) $ -- $ 88
Issuance of common stock ............ 89 1,279 -- -- -- 1,368
Issuance of common stock upon
Exercise of stock options .......... -- 22 -- -- -- 22
Net loss ............................ -- -- -- (2,171) -- (2,171)
----- ------ ----- --------- ----- ---------
BALANCE, DECEMBER 31, 1996 ........... 396 1,095 -- (2,184) -- (693)
Purchase of shares for treasury ..... -- -- -- -- (49) (49)
Dividends declared on Series A
Preferred Stock .................... -- -- -- (151) -- (151)
Net loss ............................ -- -- -- (14,010) -- (14,010)
----- ------ ----- --------- ----- ---------
BALANCE, DECEMBER 31, 1997 ........... 396 1,095 -- (16,345) (49) (14,903)
Issuance of common stock ............. -- 1 -- -- -- 1
Issuance of in-the-money options ..... -- 171 (78) -- -- 93
Issuance of common stock for
acquisition of IXA .................. 287 296 -- -- -- 583
Issuance of common stock upon
exercise of stock options ........... 10 -- -- -- -- 10
Dividends declared on Series C
Preferred Stock ..................... -- -- -- (2,054) -- (2,054)
Amortization of deferred financing
costs and discount on Series C
Preferred Stock ..................... -- -- -- (571) -- (571)
Purchase of shares for treasury ...... -- -- -- -- (15) (15)
Issuance of Series C warrants
(Note 3) ............................ -- 3,700 -- -- -- 3,700
Net loss ............................. -- -- -- (20,041) -- (20,041)
----- ------ ----- --------- ----- ---------
BALANCE, DECEMBER 31, 1998 ........... $ 693 $5,263 $ (78) $ (39,011) $ (64) $ (33,197)
===== ====== ===== ========= ===== =========
</TABLE>
See notes to consolidated financial statements
F-15
<PAGE>
SAVVIS COMMUNICATIONS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
1996 1997 1998
------------ ------------- -------------
(AS RESTATED, SEE NOTE 14)
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net loss ........................................................... $ (2,171) $ (14,010) $ (20,041)
Reconciliation of net loss to net cash used in Operating ..........
Depreciation and amortization ................................... 153 631 2,288
Extraordinary gain on early extinguishment of debt .............. -- -- (1,954)
Minority interest in losses, net of accretion ................... -- (547) 147
Discount Accretion .............................................. 55 25
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 ...................................... 166 585 889
-------- --------- ---------
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 ................ -- 4,483 --
Proceeds from issuance of Class A shares of subsidiary ............ 917
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 2,054
Amortization of financing costs ................................. -- -- 234
Accretion of preferred stock discount ........................... -- -- 569
Senior convertible notes exchanged for preferred stock .......... -- -- 7,617
Issuance of common stock in acquisition of IXA .................. -- -- 583
Cash paid for interest .......................................... 24 227 262
</TABLE>
See notes to consolidated financial statements.
F-16
<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.
A portion of the 1997 net loss of the LLC was allocated to the Class A
minority interest in the LLC. 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. The
exchange of the senior notes and Class A stock for the Series B convertible
preferred has been accounted for as the extinguishment of debt and the purchase
of minority interest. At the date of issuance the Series B convertible preferred
was deemed to have a fair value of $3,700 which resulted in the recognition of
an extraordinary gain on extinguishment of the notes of approximately $1,954 and
the establishment of $290 of goodwill.
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.
F-17
<PAGE>
SAVVIS COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -
(CONTINUED)
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.
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 is
estimated by discounting the future cash flows using borrowing rates for similar
arrangements with similar maturities.
STOCK SPLIT -- On July 22, 1999, the Board of Directors of the 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 and 72 million shares
issued and outstanding with a $.01 par value for each share of common stock. All
references to shares, options and warrants outstanding have been adjusted
retroactively for the 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 8).
F-18
<PAGE>
SAVVIS COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -
(CONTINUED)
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
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
F-19
<PAGE>
SAVVIS COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
2. SUBSEQUENT EVENTS - (CONTINUED)
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
outstanding equity interests of the Company. To 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 plan. Between July and October 1999, the
Company granted options to purchase 3,639,000 shares of its common stock to
selected employees of Bridge Information Systems, Inc. In that same period, the
Company granted options to purchase up to 2,300,008 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 payment of a
preferential distribution to Bridge, 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-20
<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 13,799,812 five-year detachable warrants in conjunction with the
issuance of the senior bridge notes. (See discussion below regarding
subsequent exchange.)
oIssuance 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 63,488,349 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 299,466,125
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 13,799,812 warrants to purchase common stock at a strike price of
$.10 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 and 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 108,896,798 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-21
<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 142.0413 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
142.0413 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
13.3497 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 13.3497 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 13.6122
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-22
<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 13,799,812 warrants to purchase common
stock at a strike price of $.10 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 408,362,922 of detachable
warrants to purchase common stock of the Company for a price below $.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 28,789,781 shares
of the Company's common stock.
F-23
<PAGE>
SAVVIS COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
5. BUSINESS COMBINATION - (CONTINUED)
IXA, 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 .......... (14,002) (20,318)
</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-24
<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 ...................... $ 4,538 $ --
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, 1998.................... 148 --
------- -----
7,824 13
Less current portion ............................................... (220) (13)
------- -----
Long-term portion .................................................. $ 7,604 $ --
======= =====
</TABLE>
The carrying value of the notes approximated 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 19,757,596 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 8,087,100 options under this plan during 1997.
Additionally, on July 8, 1997, the Company granted an employee 790,304
options to purchase the Company's common stock at $.07 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 15,072,319
options to be granted under the plan. As part of this amendment, the Board of
Directors authorized the existing option holders to exchange
F-25
<PAGE>
SAVVIS COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
8. EMPLOYEE STOCK OPTIONS - (CONTINUED)
their options for incentive stock options priced at $.01 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 9,228,655 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 $.01 per share, the
existing estimated fair market value of the Company's common stock at the time.
An additional 21,389,890 options were also granted during 1997 under the same
terms as the incentive options. Two option holders, representing 238,356
options, elected not to exchange, and accordingly, these options remained
outstanding under their original terms at the end of 1997. Of these options,
214,647 were forfeited during 1998.
In 1998, the Company's Board of Directors established the 1998 stock option
plan, under which it authorized 111,149,677 and granted 91,926,998 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 below $.01 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 as follows:
<TABLE>
<CAPTION>
1996 1997 1998
------------ ------------- -------------
<S> <C> <C> <C>
Net loss attributable to common
stockholders:
As reported ........................ $ (2,171) $ (14,161) $ (22,666)
Pro forma .......................... (2,171) (14,175) (22,696)
Basic and diluted net loss per share:
As reported ........................ $ (.06) $ (.38) $ (.39)
Pro forma .......................... (.06) (.38) (.39)
</TABLE>
F-26
<PAGE>
SAVVIS COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
8. EMPLOYEE STOCK OPTIONS - (CONTINUED)
The following table summarizes stock option activity for the three years
ended December 31, 1998:
<TABLE>
<CAPTION>
NUMBER OF
SHARES WEIGHTED
OF COMMON PRICE AVERAGE
STOCK OPTIONS PER EXERCISE
(IN THOUSANDS) SHARE PRICE
---------------- ---------------- ---------
<S> <C> <C> <C>
Balance, December 31, 1995 ....................... -- $ -- $ --
Granted ......................................... 1,625 .01 0.01
-----
Balance, December 31, 1996 ....................... 1,625 .01 0.01
Granted ......................................... 39,496 .01 - .07 0.02
Forfeited ....................................... (245) .03 0.03
Cancelled ....................................... (9,229) .01 - .04 0.03
------
Balance, December 31, 1997 ....................... 31,647 .01 - .07 0.01
Granted ......................................... 91,927 .01 - .02 0.02
Exercised ....................................... (958) .01 0.01
Forfeited ....................................... (7,416) .01 - .02 0.01
------
Balance, December 31, 1998 ....................... 115,200 $.01 - $ .07 $ 0.02
=======
Options exercisable at December 31, 1996 ......... --
=======
Options exercisable at December 31, 1997 ......... 7,271 $.01 - $ .07 $ 0.02
=======
Options exercisable at December 31, 1998 ......... 28,051 $.01 - $ .07 $ 0.01
=======
</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
SHARES REMAINING EXERCISE SHARES EXERCISE
(IN THOUSANDS) LIFE PRICE (IN THOUSANDS) PRICE
- ---------------- ----------- ---------- ---------------- ---------
<S> <C> <C> <C> <C>
13,542 9.93 $ .01 12,267 $ .01
25,995 8.81 .01 10,325 .01
74,849 9.59 .02 4,658 .02
24 8.08 .04 10 .04
790 8.50 .07 790 .07
---------- ------
115,200 9.51 $ .02 28,051 $ .02
========== ======
</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-27
<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 may affect the Company's ability to utilize
the net operating losses over the 20-year carryforward period.
At December 31, 1998, the Company had 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 ...................................... -- -- (1)
--- --- ------
Effective income tax rate ........................ 0% 0% 0%
=== === =====
</TABLE>
F-28
<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>
13. GOING CONCERN MATTERS
The Company has experienced recurring losses from operations and cash flow
deficiencies which, since April of 1999, have been funded by Bridge, of which
the Company is a majority-owned consolidated subsidiary. While Bridge has funded
the Company's operations through 1999, Bridge has not committed to fund the
Company's operations in the future. These matters raise substantial doubt as to
the Company's ability to continue as a going concern. Management intends to fund
operations and other cash flow needs with the proceeds of an initial public
offering in the first quarter of 2000. There can be no assurances that such an
offering will be consummated. If an offering is not consummated, management
intends to seek other financing and otherwise alter its business plans.
F-29
<PAGE>
SAVVIS COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED )
14. RESTATEMENT
Subsequent to the issuance of its financial statements for the years ended
December 31, 1997 and 1998, the Company determined that the Class A shares of
its subsidiary represented a minority interest to which losses should be
allocated and for which accretion on the Class A shares and related convertible
notes should be recorded at an effective rate of 20%. The Company also concluded
that the exchange of these instruments for Class B preferred stock in March of
1998 should be treated as a debt extinguishment, with recognition of an
extraordinary gain, and as the purchase of a minority interest. The Company's
financial statements have been restated to correct the accounting for the above.
A summary of the significant effects of the restatement are as follows.
<TABLE>
<CAPTION>
1997 1998
----- ------
AS AS
PREVIOUSLY PREVIOUSLY
FOR THE YEAR ENDED DECEMBER 31: REPORTED AS RESTATED REPORTED AS RESTATED
- ------------------------------------------ ------------ ------------- ----------- ------------
<S> <C> <C> <C> <C>
Depreciation and amortization ............ $ 631 $ 631 $ 2,208 $ 2,288
Interest expense ......................... 427 482 458 483
Loss before income taxes, minority
interest and extraordinary item ......... (14,502) (14,557) (21,743) (21,848)
Minority interest in losses, net of
accretion ............................... -- 547 -- (147)
Extraordinary item, net of tax ........... -- -- -- (1,954)
Net loss ................................. (14,502) (14,010) (21,743) (20,041)
Preferred stock accretion ................ 151 151 1,821 2,054
Net Loss attributable to common
stockholders ............................ (14,653) (14,161) (24,134) (22,666)
Basic and diluted loss per common share
before extraordinary item ............... (.40) (.38) (.41) (.42)
Extraordinary gain on debt
extinguishment .......................... -- -- -- .03
Basic and diluted loss per common share. (.40) (.38) (.41) (.39)
At December 31:
Goodwill and intangibles, net ........... -- -- 1,197 1,406
Accounts payable ........................ 3,993 3,812 4,498 4,498
Minority interest ....................... -- 370 -- --
Accumulated deficit ..................... (16,837) (16,345) (40,971) (39,011)
Senior convertible notes ................ 5,400 4,719 -- --
Stockholders' deficit ................... (15,395) (14,903) (35,157) (33,197)
</TABLE>
******
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<PAGE>
BRIDGE MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF BRIDGE
The following discussion should be read together with the more detailed
information in Bridge's historical consolidated financial statements, including
the related notes thereto, appearing elsewhere in this prospectus. The results
shown herein are not necessarily indicative of the results to be expected in any
future periods. This discussion contains forward-looking statements based on
current expectations which involve risks and uncertainties. Actual results and
the timing of events could differ materially from the forward-looking statements
as a result of a number of factors.
OVERVIEW
Bridge is a global provider of high-quality, real time and historical
financial information, including market data, news and analytical tools.
Bridge's customers are investment and commercial banks, money managers,
investment advisors, broker/dealers, traders, exchanges, corporations and
governmental agencies. Bridge's products include a wide range of computer
workstations, market data feeds and web-browser-based applications that provide
comprehensive market data, in-depth news, powerful analytical tools and trading
room integration systems.
During the period 1996 through September 30, 1999, Bridge made several
acquisitions as outlined below which resulted in significant increases in
Bridge's revenues, expenses, intangible assets, debt and redeemable preferred
stock.
On July 26, 1996, Bridge acquired all of the outstanding shares of
Knight-Ridder Financial, Inc. ("KRF") for approximately $272.8 million in a
business combination accounted for as a purchase. The purchase was financed
through the sale of approximately $155.5 million of Series D redeemable
preferred stock of Bridge and through a portion of the proceeds obtained from a
$160 million term loan. The total cost of the acquisition was approximately
$273.5 million, which exceeded the fair value of the net assets of KRF by $203.2
million. This excess is being amortized over 40 years. In addition,
approximately $6.5 million of the purchase price was allocated to purchased
research and development, which was expensed to acquisition related expense in
1996. In 1997, Bridge recognized non-recurring costs of approximately $5.4
million comprised of customer credits for downtime and other conversion costs
related to the closure of KRF's data center which are included in restructuring
and acquisition related expense.
On July 15, 1997, Bridge acquired all of the outstanding shares of
Telesphere Corporation ("Telesphere") for approximately $34.5 million in a
business combination accounted for as a purchase. Bridge acquired Telesphere for
450,000 shares of Series A common stock of Bridge (valued at approximately $3.3
million), approximately $3 million in an 11% senior subordinated note of Bridge
and approximately $28.6 million in cash. The total cost of the acquisition was
approximately $34.8 million, which exceeded the fair market value of the net
assets of Telesphere by approximately $27.5 million. This excess is being
amortized over 20 years.
On May 29, 1998, Bridge acquired all the outstanding shares of Dow Jones
Markets Holdings, Inc., ("Telerate") for approximately $510 million in a
business combination accounted for as a purchase. Bridge acquired Telerate for
1,500,000 shares of Series E preferred stock of Bridge (valued at approximately
$150 million) and approximately $360 million in cash, which was financed through
the proceeds obtained from a loan under Bridge's senior secured credit
agreement. The total cost of the acquisition was approximately $511.6 million,
which exceeded the fair market value of the net assets of Telerate by
approximately $184.1 million. This excess is being amortized over 30 years. In
addition approximately $22 million of the purchase price was allocated to
purchased research and development, which was expensed to acquisition related
expenses in 1998. In 1998, Bridge also recognized non-recurring costs of
approximately $6.7 million, comprised of other conversion costs related to the
closure of redundant offices, which are included in acquisition related
expenses.
On November 10, 1998, Bridge acquired the financial information business
assets of ADP Financial Information Services ("ADP") for approximately $154.2
million in a business combination accounted for as a purchase. Bridge acquired
the assets in exchange for 900,000 shares of Series F preferred stock of Bridge
(valued at approximately $90 million) and approximately $64.2 million in cash
which was financed
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through proceeds obtained from a loan under Bridge's senior secured credit
agreement. The total cost of the acquisition was approximately $154.5 million,
which exceeded the fair market value of the net assets of ADP Financial
Information Services by approximately $99.8 million. This excess is being
amortized over 20 years.
On April 7, 1999, Bridge acquired SAVVIS Communications Corporation, f/k/a
SAVVIS Holdings Corporation, ("SAVVIS"), in an all stock transaction that was
accounted for as a purchase. Pursuant to the terms of the transaction, Bridge
issued approximately 3,011,000 shares of common stock, together with
approximately 239,000 options and warrants to purchase common stock in exchange
for all the outstanding equity interest of SAVVIS. This transaction was valued
at approximately $31.7 million based on the fair value of the securities
exchanged, as determined by an independent valuation specialist, and the direct
cost of the acquisition. 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. The total cost of the acquisition exceeded the
fair value of SAVVIS' net assets by approximately $23.8 million, which is being
amortized over 3 years. In addition, approximately $20.3 million of the purchase
price was allocated to property and equipment, trademarks, non-compete
agreements and other intangibles, which are being amortized over 1 to 5 years.
Also, in connection with the acquisition, Bridge assumed net liabilities of
SAVVIS in the amount of approximately $12.3 million. Subsequent to the
acquisition, on September 10, 1999, Bridge sold in a private placement
approximately 25% of its ownership to Bridge shareholders for approximately $9.0
million.
The net value of goodwill and other intangible assets arising from past
acquisitions was $863.9 million on September 30, 1999. Bridge's determination of
the amortization period for these assets was based on management's estimates of
their useful lives which they believe were consistent with accounting precedent
and practice on the dates of the acquisitions. Had management assumed shorter
useful lives, amortization charges would have been higher, increasing Bridge's
operating losses. Since the completion of these acquisitions, there has been
considerable debate, both within the accounting profession and among government
agencies, about the appropriateness of useful life assumptions beyond 5 to 10
years. Were Bridge to amortize all goodwill over 10 years and other intangibles
over no more than 5 years, net losses would have been $68.7 million, $86.0
million and $180.7 million for 1996, 1997 and 1998, respectively, and $115.3
million and $180.0 million for the nine months ended September 30, 1998 and
1999, respectively.
Revenues.
Bridge's revenues include fees for information services, transaction
services, equipment sales, customer data fees and other revenues.
Information services. Information services revenues are derived from
subscription charges to clients for the use of Bridge's real time and historical
information and news on equities, fixed income, foreign exchange, derivatives
and commodities. Information services revenues are billed 1 to 12 months in
advance and are recognized in the period the related services are provided.
Transaction services. Bridge's wholly owned subsidiaries, Bridge Trading
Company ("Bridge Trading"), Bridge International Broking Ltd.-Hong Kong ("Bridge
Broking-Hong Kong") and Bridge International Broking (U.K.) Limited ("Bridge
Broking-U.K.") provide securities order routing and execution services , or
transaction services, to many of Bridge's institutional clients. Bridge Trading,
Bridge Broking-Hong Kong and Bridge Broking-U.K. are registered broker-dealers
under securities laws of the United States, Hong Kong and the United Kingdom,
respectively. Transaction services revenues represent the net commissions and
fees earned from providing the transactions services in excess of the value of
the subscription charges recorded as information services revenues. Transaction
services are recorded on the trade date of the relevant security transaction.
Equipment sales. Bridge is a value added reseller for Sun Microsystems,
Inc. Equipment sales revenues are derived from the sale of computer equipment to
clients. Equipment sales are recorded upon delivery of the equipment.
Customer data fees. Customer data fees revenues represent fees and
royalties charged by Bridge to clients for the right for clients to use the data
of third party data suppliers subscribed for through Bridge's
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information system. Pursuant to contracts with the third party data suppliers,
Bridge remits a portion of such fees and royalties to the data suppliers.
Other revenues. Other revenues primarily consist of sales of computer
software and printed information products and charges for systems installation
and maintenance.
Operating Expenses.
Operating expenses include employee related expenses, depreciation and
amortization, technology related expenses, equipment cost of sales, customer
data fees, transaction services related expenses, data acquisition related
expenses, facilities related expenses and general and administrative expenses.
Employee related. Employee related expenses include, in addition to
employee salaries and bonuses, payroll taxes, Bridge's 401(k) and pension
contributions, health insurance costs, travel and entertainment and other
miscellaneous employee costs.
Depreciation and amortization. Depreciation and amortization expenses
consist of (1) depreciation of buildings, leasehold improvements, furniture and
fixtures and equipment used in Bridge's data centers, sales and administrative
offices, the global data network and client's offices; and (2) amortization of
goodwill and other intangible assets principally resulting from Bridge's
acquisitions. Generally, depreciation is calculated using the straight-line
method over the useful life of the associated asset, which ranges from 3 to 5
years for equipment and software and 5 to 32 years for buildings, improvements,
furniture and fixtures. Goodwill is being amortized over 3 to 40 years and other
intangible assets over 1 to 20 years, all using the straight-line method.
Technology related. Technology related expenses consist of communication
and equipment charges incurred to operate Bridge's global data network. The
network serves to both collect data from Bridge's data suppliers and to
distribute data to Bridge's clients. Following SAVVIS' initial public offering
and the transfer of Bridge Internet Protocol network to SAVVIS, Bridge's
payments under the Network Services Agreement will be reflected here.
Equipment cost of sales. Equipment cost of sales is directly related to
equipment sales revenues and represents the cost of equipment acquired for
resale to clients.
Customer data fees. Customer data fees expenses represent fees and
royalties paid by Bridge to data suppliers for the right for clients to use the
suppliers' data obtained through Bridge's information system.
Transaction services related. Transaction services related expenses,
primarily clearing, floor brokerage and specialist fees, are directly related to
transaction services revenue. All fees for executed transactions are recorded on
the trade date of the relevant securities transaction.
Data acquisition related. Data acquisition related expenses consist of fees
and royalties paid by Bridge to data suppliers for Bridge's right to obtain and
redistribute the suppliers' data.
Facilities related. Facilities related expenses include costs related to
Bridge's leased facilities in approximately 90 cities throughout the world.
General and administrative. General and administrative expenses include
voice communications costs, professional services fees, insurance, property and
other general taxes, marketing and advertising expenses, shipping and freight
expenses and other miscellaneous expenses.
Acquisition related. Acquisition related expenses, primarily purchased
research and development expenses, are one-time costs directly related to
acquisitions made in the respective years.
Interest expense. Interest expense is related to debt to banks,
subordinated debt and capital leases.
Income taxes. Income tax expense primarily consists of taxes paid in the
local jurisdictions of Bridge's foreign subsidiaries. Bridge incurred operating
losses in the United States and, therefore, has not recorded a provision for
income taxes in its historical financial statements. Bridge has recorded a
valuation allowance for the full amount of its net deferred tax assets because
it believes that the future realization of the tax benefit is uncertain.
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<PAGE>
Loss on early extinguishment of debt. Losses on early extinguishment of
debt represent the write-off of deferred financing costs upon prepayment of
debt.
RESULTS OF OPERATIONS
Nine Months Ended September 30, 1999 Compared to Nine Months Ended
September 30, 1998
Telerate was acquired on May 29, 1998; therefore, only four months of
Telerate's results are included in the results of operations for the nine months
ended September 30, 1998. ADP was acquired on November 10, 1998; therefore, none
of its results are included in the results of operations for the nine months
ended September 30, 1998. The results of operations for the nine months ended
September 30, 1999 include the results of Telerate and ADP for the full nine
months. SAVVIS was acquired on April 7, 1999; therefore, its results of
operations are included from the date of acquisition through September 30, 1999.
Revenues.
Information services. Information services revenues were $651.2 million for
the first nine months of 1999 compared to $398.8 million for the first nine
months of 1998, an increase of 63%. This $252.4 million increase primarily
resulted from the acquisitions of Telerate and ADP. The net revenue increase
resulting from the acquisitions was $251.6 million. The remaining growth in
revenue was due to increased marketing and sales efforts for the new technology
products, offset by losses of old technology products due to some products not
being Year 2000 compliant, client rationalization of market data services costs
and reductions in users due to mergers among clients. The affect of these
pressures on Bridge's revenues increased in the fourth quarter of 1999 primarily
as a result of Year 2000 issues.
Transaction services. Transaction services revenues were $55.6 million for
the first nine months of 1999 compared to $40.0 million for the first nine
months of 1998, an increase of 39%. This $15.6 million increase was primarily
due to increased marketing and sales efforts and the resulting increase in
transaction volume.
Equipment sales. Equipment sales revenues were $73.9 million for the first
nine months of 1999 compared to $52.1 million for the first nine months of 1998,
an increase of 42%. This $21.8 million increase was primarily due to increased
marketing and sales efforts and the resulting increase in sales volume.
Customer data fees. Customer data fees were $149.6 million for the first
nine months of 1999 compared to $74.5 million for the first nine months of 1998,
an increase of 101%. This $75.1 million increase primarily resulted from the
acquisitions of Telerate and ADP. The net revenue increase resulting from the
acquisitions was $69.6 million. The balance of the increase is directly related
to the growth in the installed subscription base of information services
revenues excluding acquisitions.
Other revenues. Other revenues were $16.0 million for the first nine months
of 1999 compared to $12.5 million for the first nine months of 1998, an increase
of 28%. This increase primarily resulted from the acquisitions of Telerate and
ADP.
Operating Costs and Expenses.
Employee related. Employee related expenses were $297.9 million for the
first nine months of 1999 compared to $182.4 million for the first nine months
of 1998, an increase of 63%. This $115.5 million increase primarily resulted
from the acquisitions of Telerate, ADP and SAVVIS. The net expense increase
resulting from the acquisitions was $97.6 million. The balance of the increase
primarily related to the increases in employees in the news and customer
services functions and annual wage increases.
Depreciation and amortization. Depreciation and amortization was $211.9
million for the first nine months of 1999 compared to $133.4 million for the
first nine months of 1998, an increase of 59%. This $78.5 million increase
primarily resulted from the acquisitions of Telerate and ADP. The net expense
increase resulting from the acquisitions was $72.6 million. The balance of the
increase primarily resulted from increased equipment purchases related expansion
of the global data network and client conversion to new technology products.
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<PAGE>
Technology related. Technology related expenses were $142.5 million for the
first nine months of 1999 compared to $58.8 million for the first nine months of
1998, an increase of 142%. Of this $83.7 million increase, the net expense
increase resulting from the acquisitions of Telerate, ADP and SAVVIS was $55.3
million, and the remainder primarily resulted from overlapping network costs
incurred as Bridge converted clients from the legacy networks of KRF and
Telerate to the Bridge Internet Protocol network.
Equipment cost of sales. Equipment cost of sales was $68.0 million for the
first nine months of 1999 compared to $48.1 million for the first nine months of
1998, an increase of 41%. This $19.9 million increase is directly related to the
increase in equipment sales revenues.
Customer data fees. Customer data fees were $122.2 million for the first
nine months of 1999 compared to $69.2 million for the first nine months of 1998,
an increase of 77%. This $53.0 million increase is directly related to the
increase in customer data fees revenues, and primarily resulted from the
acquisitions of Telerate and ADP. The net expense increase resulting from the
acquisitions was $56.7 million. The balance of the increase is directly related
to the growth in the installed subscription base of information services
revenues excluding acquisitions.
Transaction services related. Transaction services related expenses were
$21.5 million for the first nine months of 1999 compared to $18.5 million for
the first nine months of 1998, an increase of 16%. This $3.0 million increase is
directly related to the increase in transaction services revenues.
Data acquisition related. Data acquisition related expenses were $62.3
million for the first nine months of 1999 compared to $27.4 million for the
first nine months of 1998, an increase of 127%. This $34.9 million increase
primarily resulted from the acquisitions of Telerate and ADP. The net expense
increase resulting from the acquisitions was $28.0 million. The balance
primarily resulted from purchases of additional fixed income and foreign
exchange data suppliers.
Facilities related. Facilities related expenses were $45.2 million for the
first nine months of 1999 compared to $20.8 million for the first nine months of
1998, an increase of 117%. This $24.4 million increase primarily resulted from
the acquisitions of Telerate and ADP. The expense increase resulting from the
acquisitions was $21.3 million.
General and administrative. General and administrative expenses were $53.1
million for the first nine months of 1999 compared to $36.4 million for the
first nine months of 1998, an increase of 46%. This $16.7 million increase
primarily resulted from the acquisitions of Telerate, ADP and SAVVIS. The net
expense increase resulting from the acquisitions was $12.5 million. The balance
of the increase primarily resulted from increased expenditures for marketing and
advertising.
Acquisition related. Acquisition related expenses, primarily purchased
research and development expenses, were $28.7 million for the first nine months
of 1998 resulting from the Telerate acquisition.
Other Income and Expense.
Interest income. Interest income was $2.2 million for the first nine months
of 1999 compared to $1.3 million for the first nine months of 1998, an increase
of 69%. This $.9 million increase was primarily due to larger cash balances
available for short-term investment subsequent to the Telerate acquisition.
Interest expense. Interest expense was $68.1 million for the first nine
months of 1999 compared to $41.3 million for the first nine months of 1998, an
increase of 65%. This $26.8 million increase is attributable to the bank debt
incurred to finance portions of the Telerate and ADP acquisitions and to provide
additional working capital.
Provision for income taxes. The provision for income taxes was $10.3
million for the first nine months of 1999 compared to $6.7 million for the first
nine months of 1998, an increase of 54%. This $3.6 million net expense increase
resulted from the acquisition of Telerate.
Loss on extinguishment of debt. The loss on extinguishment of debt was $3.0
million for the first nine months of 1998 and resulted from the refinancing of
bank debt in connection with the acquisition of Telerate.
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Net loss. Net loss was $134.4 million for the first nine months of 1999
compared to $90.8 million for the first nine months of 1998.
Year Ended December 31, 1998 Compared to Year Ended December 31, 1997
Revenues.
Information services. Information services revenues were $621.6 million in
1998 compared to $280.4 million in 1997, an increase of 122%. This $341.2
million increase primarily resulted from the acquisition of Telerate whose
revenues for 1998 were $307.8 million. The remaining growth in revenues was due
to increased marketing and sales efforts for the new technology products.
Transaction services. Transaction services revenues were $55.7 million in
1998 compared to $41.5 million in 1997, an increase of 34%. This $14.2 million
increase was primarily due to increased marketing and sales efforts and the
resulting increase in transaction volume.
Equipment sales. Equipment sales revenues were $68.1 million in 1998
compared to $43.3 million in 1997, an increase of 57%. This $24.8 million
increase was primarily due to increased marketing and sales efforts and the
resulting increase in sales volume.
Customer data fees. Customer data fees were $127.2 million in 1998 compared
to $36.4 million in 1997, an increase of 249%. This $90.8 million increase
primarily resulted from the acquisition of Telerate whose revenues for 1998 were
$73.0 million. The remaining growth in revenues primarily resulted from Bridge
becoming responsible for invoicing Nasdaq fees to clients and from the increase
in information services revenues.
Other revenues. Other revenues were $19.5 million in 1998 compared to $8.4
million in 1997, an increase of 132%. This $11.1 million increase primarily
resulted from the acquisition of Telerate whose revenues for 1998 were $10.0
million.
Operating Costs and Expenses.
Employee related. Employee related expenses were $285.7 million in 1998
compared to $143.0 million in 1997, an increase of 100%. This $142.7 million
increase primarily resulted from the acquisition of Telerate whose expenses for
1998 were $115.1 million. The balance of the increase primarily resulted from
the increases in employees in the news, customer service and accounting
functions and from annual wage increases.
Depreciation and amortization. Depreciation and amortization was $203.9
million in 1998 compared to $83.7 million in 1997, an increase of 144%. This
$120.2 million increase primarily resulted from the acquisition of Telerate
whose expenses for 1998 were $93.9 million. The balance of the increase
primarily resulted from increased equipment purchases related expansion of the
global data network and increases in data center computer capacity for the
development of new Telerate products.
Technology related. Technology related expenses were $98.3 million in 1998
compared to $44.0 million in 1997, an increase of 123%. This $54.3 million
increase primarily resulted from the acquisition of Telerate whose expenses for
1998 were $37.0 million. The balance of the increase primarily resulted from
expansion of the Internet Protocol network and increases in the number of
information services clients.
Equipment cost of sales. Equipment cost of sales was $62.5 million in 1998
compared to $39.2 million in 1997, an increase of 59%. This $23.3 million
increase is directly related to the increase in equipment sales revenues.
Customer data fees. Customer data fees were $109.7 million in 1998 compared
to $31.5 million in 1997, an increase of 248%. This $78.2 million increase is
directly related to the increase in customer data fees revenues, and primarily
resulted from the acquisition of Telerate whose expenses for 1998 were $57.6
million. The remaining growth in revenues primarily resulted from Bridge
becoming responsible for invoicing Nasdaq fees to clients and from the increase
in information services revenues.
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<PAGE>
Transaction services related. Transaction services related expenses were
$26.2 million in 1998 compared to $20.7 million in 1997, an increase of 27%.
This $5.5 million increase is directly related to the increase in transaction
services revenues.
Data acquisition related. Data acquisition related expenses were $40.9
million in 1998 compared to $21.0 million in 1997, an increase of 95%. This
$19.9 million increase primarily resulted from the acquisition of Telerate whose
revenues for 1998 were $24.1 million, offset by reductions in costs due to
termination of redundant feeds from third party data suppliers.
Facilities related. Facilities related expenses were $45.6 million in 1998
compared to $18.9 million in 1997, an increase of 141%. This $26.7 million
increase primarily resulted from the acquisition of Telerate whose expenses for
1998 were $34.8 million, offset by the closure of redundant office facilities.
General and administrative. General and administrative expenses were $59.7
million in 1998 compared to $36.1 million in 1997, an increase of 65%. This
$23.6 million increase primarily resulted from the acquisition of Telerate whose
expenses for 1998 were $22.9 million.
Acquisition related. Acquisition related expenses, primarily purchased
research and development expenses, were $28.7 million in 1998 compared to $5.4
million in 1997, an increase of 431%. The 1998 and 1997 expenses were directly
related to the acquisitions of Telerate and Telesphere, respectively.
Other Income and Expense.
Interest income. Interest income was $2.8 million in 1998 compared to $.7
million in 1997, an increase of 300%. This $2.1 million increase is primarily
due to larger cash balances available for short-term investment subsequent to
the Telerate acquisition.
Interest expense. Interest expense was $62.9 million in 1998 compared to
$30.5 million in 1997, an increase of 106%. This $32.4 million increase is
attributable to the bank debt incurred to finance portions of the Telerate and
ADP acquisitions.
Provision for income taxes. The provision for income taxes was $10.4
million in 1998 compared to $.6 million in 1997, an increase of 1,633%. This
$9.8 million increase resulted from the acquisition of Telerate.
Loss on early extinguishment of debt. The loss on early extinquishment of
debt was $3.0 million in 1998 compared to $4.2 million in 1997, a decrease of
$1.2 million. The loss in 1998 resulted from the refinancing of bank debt in
connection with the acquisition of Telerate. The loss in 1997 also resulted from
the refinancing of bank debt, the purpose of which was to provide additional
working capital.
Net loss. Net loss was $142.9 million in 1998 compared to $68.6 million in
1997.
Year Ended December 31, 1997 Compared to Year Ended December 31, 1996
KRF was acquired on July 26, 1996, therefore, only five months of KRF's
results are included in the results of operations for the year ended December
31, 1996. A full year of KRF's results is included in the results of operations
for the year ended December 31, 1997.
Revenues.
Information services. Information services revenues were $280.4 million in
1997 compared to $173.4 million in 1996, an increase of 62%. This $107.0 million
increase primarily resulted from the acquisition of KRF and from growth in
revenue due to increased marketing and sales efforts for the new technology
products.
Transaction services. Transaction services revenues were $41.5 million in
1997 compared to $38.0 million in 1996, an increase of 9%. This $3.5 million
increase was primarily due to increased marketing and sales efforts and the
resulting increase in transaction volume.
Equipment sales. Equipment sales revenues were $43.3 million in 1997
compared to $29.1 million in 1996, an increase of 49%. This $14.2 million
increase was primarily due to increased marketing and sales efforts and the
resulting increase in sales volume.
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Customer data fees. Customer data fees were $36.4 million in 1997 compared
to $24.2 million in 1996, an increase of 50%. This $12.2 million increase
primarily resulted from the acquisition of KRF and from growth in other
information services revenues.
Other revenues. Other revenues were $8.4 million in 1997 compared to $4.5
million in 1996, an increase of 87%. This $3.9 million increase primarily
resulted from the acquisition of KRF.
Operating Costs and Expenses.
Employee related. Employee related expenses were $143.0 million in 1997
compared to $107.7 million in 1996, an increase of 33%. This $35.3 million
increase primarily resulted from the acquisition of KRF and annual wage
increases, offset by reductions in KRF personnel as functions were integrated
during the course of 1997.
Depreciation and amortization. Depreciation and amortization were $83.7
million in 1997 compared to $59.1 million in 1996, an increase of 42%. This
$24.6 million increase primarily resulted from the acquisition of KRF.
Technology related. Technology related expenses were $44.0 million in 1997
compared to $29.5 million in 1997, an increase of 49%. This $14.5 million
increase primarily resulted from the acquisition of KRF and expansion of the
Internet Protocol network, offset by elimination of redundant backbone networks.
Equipment cost of sales. Equipment cost of sales was $39.2 million in 1997
compared to $26.1 million in 1996, an increase of 50%. This $13.1 million
increase is directly related to the increase in equipment sales revenues.
Customer data fees. Customer data fees were $31.5 million in 1997 compared
to $22.1 million in 1996, an increase of 43%. This $9.4 million increase is
directly related to the increase in customer data fees revenues, and primarily
resulted from the acquisition of KRF and from growth in other information
services revenues.
Transaction services related. Transaction services related expenses were
$20.7 million in 1997 compared to $17.0 million in 1996, an increase of 22%.
This $3.7 million increase is directly related to the increase in transaction
services revenues.
Data acquisition related. Data acquisition related expenses were $21.0
million in 1997 compared to $14.1 million in 1996, an increase of 49%. This $6.9
million increase primarily resulted from the acquisition of KRF.
Facilities related. Facilities related expenses were $18.9 million in 1997
compared to $13.4 million in 1996, an increase of 41%. This $5.5 million
increase primarily resulted from the acquisition of KRF and the addition of the
world headquarters office in New York, offset by the closure of redundant office
facilities in New York and other cities in the United States.
General and administrative. General and administrative expenses were $36.1
million in 1997 compared to $14.3 million in 1996, an increase of 152%. This
$21.8 million increase primarily resulted from the acquisition of KRF.
Acquisition related. Acquisition related expenses, primarily purchased
research and development expenses, were $5.4 million in 1997 compared to $6.5
million in 1996, a decrease of 17%. The 1997 and 1996 expenses were directly
related to the acquisitions of KRF and Telesphere, respectively.
Other Income and Expense.
Interest income. Interest income was $.7 million in 1997 compared to $.7
million in 1996. The average cash balances available for short-term investment
during 1997 and 1996 were approximately the same.
Interest expense. Interest expense was $30.5 million in 1997 compared to
$20.9 million in 1996, an increase of 46%. This $9.6 million increase is
attributable to the bank debt incurred to finance a portion of the KRF
acquisition.
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Provision for income taxes. The provision for income taxes was $.6 million
in 1997 compared to $.2 million in 1996, an increase of 200%. This $.4 million
increase resulted from the acquisition of KRF.
Loss on early extinguishment of debt. The loss on early extinquishment of
debt was $4.2 million in 1997 resulting from the refinancing of bank debt to
provide additional working capital.
Net loss. Net loss was $68.6 million in 1997 compared to $61.0 million in
1996.
LIQUIDITY AND CAPITAL RESOURCES
Bridge's business has required significant cash to fund acquisitions,
capital expenditures, debt service costs and ongoing operations. Bridge has
historically funded and expects to fund future operating and capital
requirements through cash flows from operations, borrowings under its credit
facilities, debt financings, equity financings and sales of assets, including
future sales of SAVVIS stock.
Bridge's net cash provided by (used in) operating activities was $(19.5)
million, $10.4 million and $46.3 million in fiscal 1996, 1997 and 1998,
respectively. The positive net cash generated from operations in fiscal 1997 and
1998 was due to increasing cash flows from operations as costs were reduced
through the integration of acquired companies. For the nine months ended
September 30, 1999, net cash provided by (used in) operating activities was
$(76.0) million compared to $(6.3) million for the comparable period in 1998.
Bridge continued to use cash in its operating activities for the fourth quarter
of 1999. The increase in use in 1999 was primarily due to working capital
pressures experienced in the course of integrating Bridge's recent acquisitions,
as well as declines in revenues primarily resulting from higher than expected
cancellations of subscriptions for products of acquired companies due to (1)
non-Year 2000 compliant products, (2) client rationalization of market data
services cost and (3) reduction in users due to mergers among clients. The
increases in working capital are attributable to:
o Accounts receivable increases of $75.8 million resulting from (1) billing
delays resulting from conversions from the non-Year 2000 compliant billing
systems of acquired companies to the Bridge billing system and (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;
o Accounts payable decreases of $46.6 million resulting from the payment of
one-time accruals related to companies acquired in 1998.
Bridge's net cash used in investing activities was $292.4 million, $56.9
million and $498.9 million in fiscal 1996, 1997 and 1998, respectively, and
$386.8 million and $123.8 million for the nine months ended September 30, 1999
and 1998, respectively. The principal uses have been for acquisitions and
capital expenditures, primarily computer and communications network equipment
and general working capital.
Bridge's cash provided by financing activities was $322.7 million, $43.4
million and $473.8 million in fiscal 1996, 1997 and 1998, respectively, and
$411.7 million and $203.5 million for the nine months ended September 30, 1998
and 1999, respectively. The funds raised through financing activities have
primarily been from sales of redeemable preferred stock and issuances of
long-term debt.
As of September 30, 1999, Bridge had $1,240 million of indebtedness, $470
million of redeemable preferred stock and a stockholders' deficit of $414
million. In the three months ended December 31, 1999, Bridge incurred an
additional $100 million of indebtedness under a bridge loan agreement. In
February 2000, Bridge incurred an additional $25 million of indebtedness.
Under the terms of Bridge's indebtedness, following the completion of this
offering, Bridge is required to repay approximately $350 million of its
indebtedness on or before June 30, 2000. Bridge will receive aggregate proceeds
of approximately $175 million from the sale of a portion of its SAVVIS shares
held by Bridge, the sale of the network assets to SAVVIS, the payment by SAVVIS
of a $58 million preferential distribution and the repayment of a portion of
SAVVIS' indebtedness to Bridge. In addition, pursuant to a stock purchase
agreement dated February 7, 2000, Bridge has agreed to sell to Welsh Carson for
$150 million in cash shares of our common stock held by Bridge. The purchase
price per share is equal to the initial public offering price per share. The
consummation of the sale is expected to occur
F-39
<PAGE>
after the closing of this offering and is subject to limited conditions,
including termination of the waiting period under the Hart-Scott-Rodino Act. We
cannot assure you that this sale will be consummated. Bridge plans to pay the
remaining indebtedness due on or before June 30, 2000, through proceeds from the
sale of shares of our common stock held by Bridge to cover the underwriters'
over-allotment option as part of this offering or cash provided from operations.
There can be no assurances that Bridge will have sufficient sources of
capital to:
o meet its capital expenditure, debt service and working capital
requirements, and
o satisfy its remaining requirement to repay approximately $175 million of
its indebtedness by June 30, 2000.
Bridge's capital expenditures in 1999 were approximately $164 million.
Bridge expects to have capital expenditures of $70 million in 2000 for the
expansion and upgrade of its data center and customer site equipment for new
customers and client conversions to new technology products.
Under the network services agreement, Bridge is required to purchase from
SAVVIS a minimum of approximately $105 million, $132 million and $145 million
for network services in 2000, 2001 and 2002, respectively. In addition, Bridge
has agreed that the amount paid to SAVVIS 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
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.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activities" was issued. This statement establishes accounting and
reporting standards for derivative instruments, and for hedging activities. SFAS
No. 133 was amended by SFAS No. 137 that delays the effective date of SFAS No.
133 to fiscal years and quarters beginning after June 15, 2000. SFAS No. 133
will require Bridge to record all derivatives on the balance sheet at fair
value. Changes in derivative fair value will either be recognized in earnings as
offsets to the changes in fair value of related hedged assets, liabilities and
firm commitments or, for forecasted transactions, deferred and recorded as a
component of other stockholders' equity until the hedged transactions occur and
are recognized in earnings. Bridge is currently evaluating the impact of the
standard on Bridge. The impact of SFAS No. 133 will depend on a variety of
factors, including future interpretive guidance, the future level of hedging
activity, the types of hedging instruments used and the effectiveness of such
instruments.
QUALITATIVE AND QUANTITATIVE MARKET RISKS
Bridge's primary market risk exposures relate to changes in interest rates
and foreign currency Exchange rates.
Bridge's financial instruments that are sensitive to changes in interest
rates are Bridge's borrowings under senior secured credit facilities,
subordinated debt and capital leases, all of which were entered into for other
than trading purposes. The senior secured credit loans and capital leases have
floating interest rates, thus changes in rates will directly impact Bridge's
cash flows. Approximately one-half of the outstanding senior secured credit loan
balances are hedged through interest rate swaps to lessen the impact of changes
in interest rates. The subordinated debt has a fixed interest rate, thus changes
in interest rates will not directly impact Bridge's cash flows.
Approximately 36% of Bridge's revenue is derived from operations outside
the United States, and approximately 34% of Bridge's costs are incurred outside
the United States. Currently, the only material foreign currency exchange risk
relates to monthly fees received from Bridge's Japanese distributor, which are
denominated in Japanese yen. Bridge has hedged that exposure for 2000 through
the purchase of forward exchange contracts.
F-40
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of
Bridge Information Systems, Inc. and Subsidiaries:
We have audited the accompanying consolidated balance sheets of Bridge
Information Systems, Inc. and Subsidiaries ("Bridge") as of December 31, 1997
and 1998, and the related consolidated statements of operations and
comprehensive loss, deficiency in net assets, and cash flows for each of the
three years in the period ended December 31, 1998. These consolidated financial
statements are the responsibility of Bridge'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 Bridge Information Systems, Inc.
and Subsidiaries as of December 31, 1997 and 1998, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1998, in conformity with generally accepted accounting principles.
We have not audited any financial statements of Bridge for any period subsequent
to December 31, 1998. However, as discussed in Note 21 to the consolidated
financial statements, at December 31, 1999, Bridge did not comply with certain
of the restrictive covenants contained in its Secured Credit Agreement (the
"Agreement"). As a result, Bridge agreed, among other things, to modify the
principal payments due under the Agreement and to cause one of its subsidiaries,
SAVVIS, to complete a public offering of its equity securities by February 29,
2000. These matters raise substantial doubt about Bridge's ability to continue
as a going concern. Bridge's plans in regard to these matters are also described
in Note 21. The financial statements do not include any adjustments that might
result from any outcome of this uncertainty.
/s/ Deloitte & Touche LLP
St. Louis, Missouri
April 30, 1999, except for Note 21 as to which the date is February 9, 2000
F-41
<PAGE>
BRIDGE INFORMATION SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS EXCEPT PAR VALUE AND SHARE AMOUNTS)
<TABLE>
<CAPTION>
DECEMBER 31
-----------------------------
1997 1998
------------- -------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents .............................................. $ 12,949 $ 33,318
Restricted cash equivalents ............................................ -- 3,387
Accounts receivable, net of allowance for doubtful accounts of $12,090
(1997) and $32,671 (1998) ............................................ 53,494 157,443
Inventory .............................................................. 1,195 8,405
Other current assets (Note 5) .......................................... 10,548 60,292
---------- ----------
Total current assets ................................................ 78,186 262,845
PROPERTY AND EQUIPMENT, Net ............................................. 103,243 238,690
GOODWILL AND INTANGIBLE ASSETS, Net ..................................... 274,552 935,445
OTHER LONG-TERM ASSETS (Note 5) ......................................... 21,037 83,822
---------- ----------
TOTAL .................................................................. $ 477,018 $1,520,802
========== ==========
LIABILITIES AND DEFICIENCY IN NET ASSETS
CURRENT LIABILITIES:
Accounts payable ....................................................... $ 17,809 $ 38,572
Accrued employee compensation and benefits ............................. 9,546 42,170
Accrued exchange fees .................................................. 4,799 19,067
Other liabilities and accrued expenses ................................. 26,787 137,579
Deferred revenue ....................................................... 8,714 16,060
Current portion of loss contract accruals (Note 8) ..................... -- 21,918
Current maturities of loss lease accruals (Note 9) ..................... 6,067 14,007
Current maturities of long-term debt and capital lease obligations
(Note 10) ............................................................ 17,820 51,022
---------- ----------
Total current liabilities ........................................... 91,542 340,395
LOSS CONTRACT ACCRUALS, Net (Note 8) .................................... -- 104,967
LOSS LEASE ACCRUALS EXCLUDING CURRENT MATURITIES (Note 9) ............... 17,718 24,381
LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS EXCLUDING CURRENT
MATURITIES (Note 10) ................................................... 306,166 833,271
OTHER LONG-TERM LIABILITIES ............................................. 2,923 56,569
---------- ----------
Total liabilities ................................................... 418,349 1,359,583
---------- ----------
MINORITY INTEREST (Note 3) .............................................. 1,297 1,494
---------- ----------
REDEEMABLE PREFERRED STOCK (Note 14) .................................... 204,811 456,785
---------- ----------
COMMITMENT AND CONTINGENCIES (Note 19)
DEFICIENCY IN NET ASSETS:
Class A common stock, $.01 par value, 85 million shares authorized,
33,403,631 (1997) and 33,934,475 (1998) shares issued (Notes 3 and 13) 334 339
Class B common stock, $.01 par value, 15 million shares authorized, none
issued (Note 13) .....................................................
Additional paid-in capital (common) .................................... 181,512 187,934
Accumulated deficit .................................................... (326,076) (480,910)
Cumulative translation adjustments ..................................... (2,959) (4,173)
Treasury stock at cost, 20,000 shares .................................. (250) (250)
---------- ----------
Total deficiency in net assets ...................................... (147,439) (297,060)
---------- ----------
TOTAL .................................................................. $ 477,018 $1,520,802
========== ==========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
F- 42
<PAGE>
BRIDGE INFORMATION SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31
--------------------------------------------
1996 1997 1998
<S> <C> <C> <C>
REVENUES:
Information services ............................. $ 173,420 $ 280,384 $ 621,602
Transaction services ............................. 37,982 41,533 55,683
Equipment sales .................................. 29,134 43,262 68,146
Customer data fees ............................... 24,247 36,379 127,175
Other revenues ................................... 4,529 8,368 19,535
--------- --------- ----------
269,312 409,926 892,141
OPERATING COSTS AND EXPENSES:
Employee related ................................. 107,749 142,975 285,664
Depreciation and amortization .................... 59,115 83,719 203,885
Technology related ............................... 29,505 43,954 98,335
Equipment cost of sales .......................... 26,102 39,243 62,485
Customer data fees ............................... 22,147 31,547 109,709
Transaction services related ..................... 16,978 20,670 26,208
Data acquisition related ......................... 14,051 21,046 40,869
Facilities related ............................... 13,402 18,937 45,616
General and administrative ....................... 14,306 36,086 59,707
Acquisition related (Note 3) ..................... 6,500 5,396 28,709
--------- --------- ----------
309,855 443,573 961,187
--------- --------- ----------
OPERATING LOSS .................................... (40,543) (33,647) (69,046)
OTHER INCOME (EXPENSE):
Interest income .................................. 747 739 2,818
Interest expense ................................. (20,864) (30,502) (62,865)
Minority interest in net income of consolidated
subsidiary ..................................... -- (78) (381)
Other, net ....................................... 41 (312) 119
--------- --------- ----------
(20,076) (30,153) (60,309)
--------- --------- ----------
LOSS BEFORE INCOME TAXES .......................... (60,619) (63,800) (129,355)
PROVISION FOR INCOME TAXES (Note 11) .............. (177) (634) (10,480)
LOSS BEFORE EXTRAORDINARY ITEM .................... (60,796) (64,434) (139,835)
Extraordinary Item-loss on early extinguishment of
debt, net (Note 10) ............................ -- (4,176) (3,026)
--------- --------- ----------
NET LOSS .......................................... (60,796) (68,610) (142,861)
OTHER COMPREHENSIVE LOSS:
Foreign currency translation adjustment .......... 598 (2,361) (1,214)
--------- --------- ----------
COMPREHENSIVE LOSS ................................ $ (61,394) $ (70,971) $ (144,075)
========= ========= ==========
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.
F- 43
<PAGE>
BRIDGE INFORMATION SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF DEFICIENCY IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
(DOLLARS IN THOUSANDS EXCEPT PAR VALUE AND SHARE AMOUNTS)
<TABLE>
<CAPTION>
CLASS A COMMON STOCK
----------------------------------------
$.01 PAR VALUE,
85,000,000 SHARES
AUTHORIZED
----------------------------------------
ADDITIONAL
SHARES AMOUNT PAID-IN CAPITAL
------------- -------- -----------------
<S> <C> <C> <C>
BALANCE -- JANUARY 1, 1996 ..... 24,398,232 $ 244 $ 123,196
Equity offering ................ 8,347,263 83 53,914
Employee stock transactions 5,000 83
Accrued dividends on
redeemable preferred
stock .........................
Foreign currency translation
adjustments ...................
Net Loss .......................
BALANCE -- DECEMBER 31,
1996 .......................... 32,750,495 $ 327 $ 177,193
Issuance of common stock ....... 500,000 5 3,620
Employee stock transactions
(Note 15) ..................... 153,136 2 699
Accrued dividends on
redeemable preferred
stock (Note 14) ...............
Accretion of redeemable
preferred stock to
redemption value
(Note 14) .....................
Foreign currency
translation adjustments .......
Net loss .......................
BALANCE -- DECEMBER 31,
1997 .......................... 33,403,631 $ 334 $ 181,512
Common stock issued as
part of the acquisition of
Wall Street on Demand
(Note 3) ...................... 388,644 4 6,020
Employee stock
transactions (Note 15) ........ 142,200 1 402
Accrued dividends on
redeemable preferred
stock (Note 14) ...............
Accretion of redeemable
preferred stock to
redemption value (Note
14) ...........................
Foreign currency
translation adjustments .......
Net loss .......................
BALANCE -- DECEMBER 31,
1998 .......................... 33,934,475 $ 339 $ 187,934
========== ===== =========
<CAPTION>
TREASURY STOCK
--------------------
AT COST
--------------------
ACCUMULATED
OTHER
ACCUMULATED COMPREHENSIVE
DEFICIT LOSS SHARES AMOUNT TOTAL
--------------- -------------- -------- ----------- --------------
<S> <C> <C> <C> <C> <C>
BALANCE -- JANUARY 1, 1996 ..... $ (186,003) 20,000 $ (250) $ (62,813)
Equity offering ................ 53,997
Employee stock transactions 83
Accrued dividends on
redeemable preferred
stock ......................... (3,031) (3,031)
Foreign currency translation
adjustments ................... (598) (598)
Net Loss ....................... (60,796) (60,796)
----------- -----------
BALANCE -- DECEMBER 31,
1996 .......................... $ (249,830) $ (598) 20,000 $ (250) $ (73,158)
Issuance of common stock ....... 3,625
Employee stock transactions
(Note 15) ..................... 701
Accrued dividends on
redeemable preferred
stock (Note 14) ............... (7,496) (7,496)
Accretion of redeemable
preferred stock to
redemption value
(Note 14) ..................... (140) (140)
Foreign currency
translation adjustments ....... (2,361) (2,361)
Net loss ....................... (68,610) (68,610)
----------- -----------
BALANCE -- DECEMBER 31,
1997 .......................... $ (326,076) $ (2,959) 20,000 $ (250) $ (147,439)
Common stock issued as
part of the acquisition of
Wall Street on Demand
(Note 3) ...................... 6,024
Employee stock
transactions (Note 15) ........ 403
Accrued dividends on
redeemable preferred
stock (Note 14) ............... (11,880) (11,880)
Accretion of redeemable
preferred stock to
redemption value (Note
14) ........................... (93) (93)
Foreign currency
translation adjustments ....... (1,214) (1,214)
Net loss ....................... (142,861) (142,861)
----------- -----------
BALANCE -- DECEMBER 31,
1998 .......................... $ (480,910) $ (4,173) 20,000 $ (250) $ (297,060)
=========== ========= ====== ======= ===========
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.
F-44
<PAGE>
BRIDGE INFORMATION SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE YEARS
ENDED DECEMBER
31
--------------
1996
--------------
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ................................................................................. $ (60,796)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization .......................................................... 59,115
Purchased research and development ..................................................... 6,500
Amortization of discount on subordinated debt and deferred financing costs ............. 2,056
Extraordinary loss on early extinguishment of debt ..................................... --
Gain on sale of investments in companies ............................................... (154)
Deferred revenue ....................................................................... (870)
Minority interest in loss of consolidated subsidiary ................................... --
Changes in assets and liabilities net of effects of acquisitions:
Restricted cash ........................................................................ (20,000)
Accounts receivable, net ............................................................... (5,876)
Inventory .............................................................................. --
Other assets ........................................................................... (1,680)
Loss contracts accrual, net ............................................................ --
Loss lease accruals, net ............................................................... (1,212)
Accounts payable and other accrued expenses ............................................ 3,433
Other long-term liabilities ............................................................ --
----------
Net cash provided by (used in) operating activities ................................... (19,484)
----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions, net of cash acquired (Note 3) ............................................ (264,663)
Investment in unconsolidated subsidiaries .............................................. --
Capital expenditures, net .............................................................. (27,381)
Software development costs ............................................................. (2,218)
Sale of investments in companies ....................................................... 1,813
----------
Net cash used in investing activities ................................................. (292,449)
----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sale of redeemable preferred stock ....................................... 184,355
Proceeds from sale of common stock ..................................................... 13,900
Proceeds from issuance of long-term debt ............................................... 183,500
Redemption of redeemable preferred stock ............................................... (1,973)
Payments on long-term debt ............................................................. (41,055)
Payments on capital lease obligations .................................................. (11,596)
Fees incurred in financing activities .................................................. (4,535)
Dividends paid by subsidiary ........................................................... --
Employee stock transactions ............................................................ 83
----------
Net cash provided by financing activities ............................................. 322,679
----------
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS .......................... (56)
----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ..................................... 10,690
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR ............................................. 7,023
----------
CASH AND CASH EQUIVALENTS, END OF YEAR ................................................... $ 17,713
==========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during year for:
Interest ............................................................................... $ 19,762
Income taxes ........................................................................... 109
Debt incurred under capital lease obligations ........................................... 5,799
Accrued dividends on redeemable preferred stock ......................................... 3,031
Accretion of redeemable preferred stock to redemption value ............................. --
Conversion of redeemable preferred stock and accrued dividends to common stock .......... 9,056
Conversion of subordinated debt and accrued interest to common stock .................... 31,301
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31
-------------------------------
1997 1998
-------------- ---------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ................................................................................. $ (68,610) $ (142,861)
Adjustments to reconcile net loss to net cash provided by (used in) operating
activities:
Depreciation and amortization .......................................................... 83,719 203,885
Purchased research and development ..................................................... -- 22,000
Amortization of discount on subordinated debt and deferred financing costs ............. 2,161 3,421
Extraordinary loss on early extinguishment of debt ..................................... 4,176 3,026
Gain on sale of investments in companies ............................................... -- --
Deferred revenue ....................................................................... (1,423) (45,699)
Minority interest in loss of consolidated subsidiary ................................... 78 381
Changes in assets and liabilities net of effects of acquisitions:
Restricted cash ........................................................................ 20,000 (3,387)
Accounts receivable, net ............................................................... (13,480) 25,469
Inventory .............................................................................. -- (2,179)
Other assets ........................................................................... 623 (4,850)
Loss contracts accrual, net ............................................................ -- (13,350)
Loss lease accruals, net ............................................................... (4,574) (1,347)
Accounts payable and other accrued expenses ............................................ (12,266) (7,313)
Other long-term liabilities ............................................................ -- 9,108
---------- -----------
Net cash provided by (used in) operating activities ................................... 10,404 46,304
---------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions, net of cash acquired (Note 3) ............................................ (32,767) (426,620)
Investment in unconsolidated subsidiaries .............................................. -- (1,700)
Capital expenditures, net .............................................................. (11,004) (58,428)
Software development costs ............................................................. (13,177) (12,188)
Sale of investments in companies ....................................................... -- --
---------- -----------
Net cash used in investing activities ................................................. (56,948) (498,936)
---------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sale of redeemable preferred stock ....................................... 10,000 --
Proceeds from sale of common stock ..................................................... 362 --
Proceeds from issuance of long-term debt ............................................... 267,000 803,000
Redemption of redeemable preferred stock ............................................... -- --
Payments on long-term debt ............................................................. (218,197) (288,532)
Payments on capital lease obligations .................................................. (11,950) (23,028)
Fees incurred in financing activities .................................................. (4,532) (17,847)
Dividends paid by subsidiary ........................................................... -- (184)
Employee stock transactions ............................................................ 701 403
---------- -----------
Net cash provided by financing activities ............................................. 43,384 473,812
---------- -----------
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS .......................... (1,604) (811)
---------- -----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ..................................... (4,764) 20,369
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR ............................................. 17,713 12,949
---------- -----------
CASH AND CASH EQUIVALENTS, END OF YEAR ................................................... $ 12,949 $ 33,318
========== ===========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during year for:
Interest ............................................................................... $ 28,323 $ 46,567
Income taxes ........................................................................... 306 10,303
Debt incurred under capital lease obligations ........................................... 39,556 46,341
Accrued dividends on redeemable preferred stock ......................................... 7,496 11,880
Accretion of redeemable preferred stock to redemption value ............................. 140 93
Conversion of redeemable preferred stock and accrued dividends to common stock .......... -- --
Conversion of subordinated debt and accrued interest to common stock .................... -- --
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.
F-45
<PAGE>
BRIDGE INFORMATION SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1997 AND 1998
(DOLLARS IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)
1. DESCRIPTION OF BRIDGE
Bridge Information Systems, Inc., together with its wholly-owned
subsidiaries ("Bridge"), is an international financial information company that
provides a comprehensive resource of financial data and interpretive
applications for investment professionals around the world. Bridge offers
real-time and historical information and news on equities, fixed income, foreign
exchange, derivatives and commodities and provides a wide array of flexible
analytic applications to aid in the interpretation of such data. Bridge also
provides transaction services, through its wholly-owned subsidiaries, Bridge
Trading Company ("Trading"), Bridge International Broking Ltd. - Hong Kong
("BBH") and Bridge International Broking (U.K.) Limited ("BBU"), comprehensive
valuations on fixed income securities, computer equipment sales and systems
integration and information delivery technology, including private network
services, for the financial community.
Bridge's clients include institutional investors, brokerage firms, research
analysts, exchanges and other enterprises throughout the world. No individual
customer comprises a significant portion of Bridge's revenues. Bridge receives
data from more than 1,000 exchanges and contributing sources in 100 countries
with no single supplier comprising a significant percentage.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
PRINCIPLES OF CONSOLIDATION-- The consolidated financial statements of
Bridge include the accounts of Bridge Information Systems, Inc. and its
subsidiaries after elimination of intercompany accounts and transactions.
REVENUE RECOGNITION-- Information services and other revenues are billed
one to twelve months in advance in certain markets and are recognized in the
period the related services are provided. Prepayments are included in deferred
revenue. Equipment sales are recognized upon delivery of the equipment.
CASH AND CASH EQUIVALENTS-- Bridge considers highly liquid investment
instruments with remaining terms of three months or less at time of acquisition
to be cash equivalents.
RESTRICTED CASH EQUIVALENTS-- Regulations require the Japanese trading
branch and India subsidiary to maintain restricted cash.
NEW ACCOUNTING STANDARDS-- In 1998, Bridge adopted Statement of Financial
Accounting Standards ("SFAS") 130, "Reporting Comprehensive Income."
Comprehensive income is defined as net income (loss) plus certain items that are
recorded directly to shareholders' equity. Bridge's only component of
comprehensive income (loss) in addition to net loss is the cumulative foreign
translation adjustments which are $176, $(2,361) and $(1,214), net of tax
effects for the years ended December 31, 1996, 1997, and 1998, respectively.
In June 1998, SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activities," was issued. This statement establishes accounting and
reporting standards for derivative instruments, and for 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
will require Bridge to record all derivatives on the balance sheet at fair
value. Changes in derivative fair value will either be recognized in earnings as
offsets to the changes in fair value of related hedged assets, liabilities, and
firm commitments or, for forecasted transactions, deferred and recorded as a
component of other stockholders' equity until the hedged transactions occur and
are recognized in earnings. Bridge is currently evaluating the impact of the
standard on Bridge. The impact of SFAS No. 133 will depend on a variety of
factors, including future interpretive guidance, the future level of hedging
activity, the types of hedging instruments used, and the effectiveness of such
instruments.
F-46
<PAGE>
BRIDGE INFORMATION SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: - (CONTINUED)
SECURITIES TRANSACTIONS-- Securities transactions and the related
commission revenue and expense are recorded on a trade date basis. In the normal
course of business, the trading companies' activities involve the execution,
settlement and financing of various securities transactions through their
clearing brokers. The resulting receivables from the clearing brokers are
available to the trading companies on a settlement date basis. These activities
may expose the trading companies to off-balance-sheet risk in the event the
customer or other party is unable to fulfill its contractual obligations. The
trading companies, through their clearing brokers, continually monitor their
customers' activities. At December 31, 1997 and 1998, receivables from clearing
brokers totaled $2,034 and $3,398, respectively, and are included in accounts
receivable.
Securities owned and securities sold, but not yet purchased, are carried at
market value and unrealized gains and losses are reflected in transaction
services revenue. Securities owned totaled $520 and $43 at December 31, 1997 and
1998, respectively, and are included in other current assets (see Note 5).
Securities sold, but not yet purchased ("short positions"), totaled $186 and $9
at December 31, 1997 and 1998, respectively, and are included in other
liabilities and accrued expenses. In the normal course of business, the trading
companies assume short positions in their inventory. The establishment of short
positions exposes the trading companies to off-balance sheet risk in the event
of price increases. The trading companies attempt to control such risk by
monitoring the market value on a daily basis.
INVENTORIES-- Inventories which consist of computer equipment to be
installed at customer sites are stated at the lower of cost (generally on an
average cost basis) or market.
PROPERTY AND EQUIPMENT-- Property and equipment is recorded at cost less
accumulated depreciation and amortization. Property additions and improvements
are capitalized while maintenance and repairs are expensed as incurred. Upon
retirement or disposition, the cost and related accumulated depreciation and
amortization are removed from the accounts and any gain or loss is included in
the results of operations. Depreciation and amortization is computed using the
straight-line method based on estimated useful lives as follows:
<TABLE>
<S> <C>
Building, improvements and furniture and fixtures ......... 5 - 32 years
Computer, communications equipment and software ........... 3 - 5 years
</TABLE>
GOODWILL AND OTHER IDENTIFIABLE INTANGIBLE ASSETS-- Goodwill is being
amortized over 20 to 40 years and other intangible assets are being amortized
over 1 to 20 years, all using the straight-line method. Bridge periodically
assesses the recoverability of the cost of its goodwill and identifiable
intangible assets based on a review of projected undiscounted cash flows. As of
December 31, 1997 and 1998, no impairment had been identified.
DEFERRED FINANCING COSTS-- Deferred financing costs are amortized to
interest expense over the life of the related debt based on a method that
approximates the effective interest method.
SOFTWARE DEVELOPMENT COSTS-- In April 1998, the Accounting Standards
Executive Committee of AICPA issued Statement of Position 98-1 (SOP),
"Accounting for the Cost of Computer Software Developed or Obtained for Internal
Use." The SOP is effective for financial statements for fiscal years beginning
after December 15, 1998. As permitted by the SOP, Bridge adopted the provisions
of the SOP effective January 1, 1997.
All costs, primarily employee compensation and benefits related to
conceptual formulation, design and testing of possible software projects
(preliminary project stage), are expensed as incurred. Upon completion of
preliminary project stage, costs incurred in the development of software are
capitalized until the software is released to production. Software development
costs of $12,015 and
F-47
<PAGE>
BRIDGE INFORMATION SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: - (CONTINUED)
$16,896 (net of accumulated amortization of $5,488 and $10,604) are included in
other assets at December 31, 1997 and 1998, respectively, and research and
development expense totaled $8,443, $2,620, and $6,575 for the years ended
December 31, 1996, 1997, and 1998, respectively. Unamortized capitalized costs
determined to be in excess of the net realizable value of the products are
expensed to depreciation and amortization expense at the date of such
determination. As of December 31, 1997 and 1998, no impairment had been
identified.
Amortization is provided over an estimated economic life of the software
(generally 1 to 3 years) using the straight-line method and commences when the
software is released into production. Amortization expense totaled $1,767,
$3,673, and $7,307 for the years ended December 31, 1996, 1997, and 1998,
respectively. The accumulated amortization and related software development
costs are removed from their respective accounts effective in the year following
full amortization.
PREPAID COMMISSION EXPENSE-- Commissions paid at the beginning of the
subscription to sales representatives and managers for successful customer
referrals and renewals are deferred and expensed over the length of the
subscription. This policy is consistent with others in the financial information
business and matches commissions more closely with the revenue earned from the
related subscriptions.
INCOME TAXES-- Bridge files consolidated federal and state income tax
returns and its foreign subsidiaries file various income tax returns in the
respective foreign jurisdictions. Deferred tax assets and liabilities are
determined based on the differences between the financial statement and tax
bases of assets and liabilities using enacted tax rates in effect for the year
in which the differences are expected to reverse. In addition, the amount of any
future tax benefits is reduced by a valuation allowance to the extent such
benefits are not expected to be realized.
Except for selective dividends, Bridge intends to reinvest the unremitted
earnings of its non-U.S. subsidiaries and postpone their remittance
indefinitely. Accordingly, no provision for U.S. income taxes was required on
such earnings during the three years ended December 31, 1996, 1997, and 1998.
FOREIGN CURRENCY TRANSLATION-- The financial position and results of
operations of Bridge's foreign subsidiaries are measured using local currency as
the functional currency. Revenues and expenses of such subsidiaries have been
translated into U.S. dollars at average exchange rates prevailing during the
period. Assets and liabilities have been translated at the rates of exchange at
the balance sheet date. Translation adjustments are recorded as a component of
other comprehensive income.
STOCK-BASED COMPENSATION ARRANGEMENTS-- Bridge accounts for employee stock
options in accordance with Accounting Principles Board (APB) Opinion No. 25,
"Accounting for Stock Issued to Employees" and related interpretations. Under
APB No. 25, Bridge recognizes compensation cost based on the intrinsic value of
the equity instrument awarded as determined at grant date.
Bridge is also subject to disclosure requirements under Statement of
Financial Accounting Standards (SFAS) No. 123, "Accounting for Stock-Based
Compensation". SFAS No. 123 prescribes the recognition of compensation expense
based on the fair value of options as determined on the grant date. However,
SFAS No. 123 allows companies to continue applying APB No. 25 if certain pro
forma disclosures are made assuming hypothetical fair value method application
(see Note 15).
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS-- The
preparation of financial statements in conformity with generally accepted
accounting principles requires Bridge management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
F-48
<PAGE>
BRIDGE INFORMATION SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: - (CONTINUED)
RECLASSIFICATIONS-- Certain reclassifications have been made in the 1996
and 1997 financial statements to conform to the 1998 presentation.
3. BUSINESS COMBINATIONS
On July 26, 1996, Bridge acquired all of the outstanding shares of
Knight-Ridder Financial, Inc. ("KRF") for $272,827 in a business combination
accounted for as a purchase. The purchase was financed through the sale of
$155,500 of Series D redeemable preferred stock (see Note 14) and through a
portion of the proceeds obtained from a $160,000 term loan from a bank. The
total cost of the acquisition was $273,461, which exceeded the fair value of the
net assets of KRF by $203,162 which is being amortized over 40 years (see Notes
2 and 7). In addition, $6,500 of the purchase price was allocated to purchased
research and development, which was expensed to acquisition related expense in
1996. In 1997, Bridge recognized non-recurring costs of $5,396 comprised of
customer credits for downtime and other conversion costs related to the closure
of KRF's data center which are included in acquisition related expense.
On January 1, 1997, Bridge acquired an 80% common stock interest in Dunai
Financial Systems Pty Limited ("DFS") in exchange for $1,491 in cash and a 100%
interest in one of Bridge's subsidiaries, Equinet Pty Limited, with a carrying
value of $2,621 plus additional acquisition costs of $264. Bridge also deposited
$500 into an escrow account under the terms of a Shareholders Agreement which
will be released to the minority shareholders upon its termination and the sale
of the remainder interest to Bridge. The total cost of the acquisition exceeded
the fair value of the net assets acquired by $3,433 which is amortized over 20
years. The minimum purchase price for the minority interest shares is $1,650 and
may be greater if DFS exceeds targeted revenues and earnings. If certain annual
performance targets are met over a four-year period, the minority shareholders
can increase their profit share by 1.875% annually or receive a bonus. The
minority shareholders can also obtain an additional profit share of 2.5% if the
performance targets are achieved in the fourth year of the management agreement.
Bridge is obligated to purchase the shares owned by the minority shareholders
upon termination of the Shareholders Agreement. The agreement may be terminated
by Bridge or the minority shareholders at the end of the initial four-year term
or by Bridge prior to the end of the initial term if certain financial
performance targets are not met.
On January 7, 1997, Bridge entered into an Asset Purchase Agreement to
purchase all of the assets, primarily software, of Ease Technologies, Inc. for
$1,415 in cash.
On July 15, 1997, Bridge acquired all of the outstanding shares of
Telesphere Corporation for $34,486 in a business combination accounted for as a
purchase. Bridge received 100% of Telesphere for 450,000 shares of Series A
common stock (valued at $3,263), a $2,975 11% Senior Subordinated Note and
$28,550 in cash. The total cost of the acquisition was $34,788, which exceeded
the fair value of the net assets of Telesphere by $27,540 which is being
amortized over 20 years (see Notes 2 and 7).
On May 29, 1998, Bridge acquired all the outstanding shares of Dow Jones
Markets Holdings, Inc., (DJM) for $510,000 in a business combination accounted
for as a purchase. Bridge received 100% of DJM for 1,500,000 shares of Series E
preferred stock (valued at $150,000) and $360,000 in cash which was financed
through the proceeds obtained from a loan under Bridge's Secured Credit
Agreement (see Note 10). The total cost of the acquisition was $511,648, which
exceeded the fair market value of the net assets of DJM by $184,116, which is
being amortized over 30 years (see Notes 2 and 7). In addition $22,000 of the
purchase price was allocated to purchased research and development, which was
expensed to acquisition related expenses in 1998. In 1998, Bridge also
recognized non-recurring costs of $6,709, comprised of other conversion costs
related to the closure of redundant offices, which are included in acquisition
related expenses.
F-49
<PAGE>
BRIDGE INFORMATION SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
3. BUSINESS COMBINATIONS - (CONTINUED)
On October 20, 1998, Bridge acquired all the outstanding shares of Wall
Street on Demand (WSOD) for $21,000 in a business combination accounted for as a
purchase. Bridge received 100% of WSOD for 388,644 shares of Series A common
stock (valued at $6,024) and $14,976 in cash which was financed through the
proceeds obtained from a loan under Bridge's Secured Credit Agreement (see Note
10). The total cost of the acquisition was $21,090, which exceeded the fair
market value of the net assets of WSOD by $19,683, which is being amortized over
20 years (see Notes 2 and 7).
On November 10, 1998, Bridge acquired the financial information business
assets of ADP Financial Information Services (ADP) for $154,177 in a business
combination accounted for as a purchase. Bridge received the assets for 900,000
shares of Series F preferred stock (valued at $90,000) and $64,177 in cash which
was financed through the proceeds obtained from a loan under Bridge's Secured
Credit Agreement (see Note 10). The total cost of the acquisition was $154,496,
which exceeded the fair market value of the net assets of ADP by $99,783, which
is being amortized over 20 years (see Notes 2 and 7).
Goodwill lives are determined at the acquisition date based on such factors
as market penetration, name recognition, geographic coverage and infrastructure
of the acquired entities. Market, industry and other factors at the date of
acquisition are also considered.
A summary of the cash and non-cash components of the acquisitions is as
follows:
<TABLE>
<CAPTION>
1996 1997 1998
----------- ----------- -------------
<S> <C> <C> <C>
Fair value of assets acquired, including goodwill .......... $333,958 $ 48,247 $1,138,412
Liabilities assumed ........................................ 61,131 8,589 453,235
Minority interest .......................................... -- 1,219 --
-------- -------- ----------
Total purchase price ....................................... 272,827 38,439 685,177
Acquisition fees ........................................... 634 566 2,057
-------- -------- ----------
Total cost of the acquisitions ............................. 273,461 39,005 687,234
Common stock issued ........................................ -- 3,263 6,024
Preferred stock issued ..................................... -- -- 240,000
Subordinated debt issued ................................... -- 2,975 --
-------- -------- ----------
Total cash paid ............................................ 273,461 32,767 441,210
Acquired cash .............................................. 8,798 -- 14,590
-------- -------- ----------
Total cash paid, net of acquired cash ...................... $264,663 $ 32,767 $ 426,620
======== ======== ==========
</TABLE>
The results of operations of all acquired companies are included in the
accompanying financial statements since their respective dates of acquisition.
The following summarized unaudited pro forma financial information presents
a summary of consolidated results of operations as if the above transactions had
occurred as of the beginning of the period in which the acquisitions were
completed and the beginning of the immediately preceeding period:
<TABLE>
<CAPTION>
1997 AND 1998
ACQUISITIONS
---------------------------
1997 1998
------------- -------------
<S> <C> <C>
Net revenue $1,371,652 $1,341,113
========== ==========
Net loss before extraordinary item $ (259,871) $ (224,817)
========== ==========
Net loss $ (257,847) $ (227,643)
========== ==========
</TABLE>
Pro forma results of operations for 1997 exclude a restructuring charge of
$296,739 that was recorded by one of the acquired entities prior to the
acquisition.
F-50
<PAGE>
BRIDGE INFORMATION SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
3. BUSINESS COMBINATIONS - (CONTINUED)
In Bridge's management's opinion, the pro forma combined results of
operations may not be indicative of the actual results that would have occurred
had the acquisitions been consummated as of that time or of future operations of
the combined companies under the ownership and operation of Bridge.
4. INVESTMENT IN UNCONSOLIDATED SUBSIDIARIES
On September 1, 1998 Bridge entered into a joint venture (I-NET Bridge)
with 3 partners, of which Bridge owns 25%. I-NET Bridge is engaged in the
business of producing and delivering an electronic on-line business information
service within South Africa. Bridge contributed $200 in cash and a Bridge
licensing agreement in return for 200 shares of the joint venture and a note
receivable of $6,045 which is to be repaid over the next 5 years. The licensing
agreement is being recognized as revenue over a five-year period and the
remaining balance at December 31, 1998 is $6,583. The investment in the joint
venture is accounted for using the equity method and was valued at $1,900 as of
December 31, 1998.
During 1998, Bridge made a $1,500 capital contribution for a 10% ownership
interest in Strike Technologies, LLC, which operates an Electronic
Communications Network, as defined in the Securities and Exchange Commission's
Order Handling Rules.
5. OTHER CURRENT AND NONCURRENT ASSETS
Other current and noncurrent assets consisted of the following at December
31:
<TABLE>
<CAPTION>
1997 1998
--------- ----------
<S> <C> <C>
Other Current Assets:
Prepaid expenses ...................................................... $ 4,428 $15,916
Prepaid commissions (see Note 2) ...................................... 2,391 4,574
Current portion of prepaid data acquisition costs ..................... 355 340
Securities owned (see Note 2) ......................................... 520 43
Current portion of deferred financing costs (see Notes 2 and 10) ...... 684 3,101
Property held for sale, net ........................................... -- 7,967
Receivable due from transitional service agreement .................... -- 14,544
Other receivables ..................................................... -- 7,948
Other current assets .................................................. 2,170 5,859
------- -------
$10,548 $60,292
======= =======
Other Noncurrent Assets:
Deferred financing costs (see Notes 2 and 10) ......................... $ 3,731 $13,884
Software development costs, net (see Note 2) .......................... 12,015 16,896
Long-term investments ................................................. -- 31,036
Prepaid data acquisition costs ........................................ 2,840 2,489
Other noncurrent assets ............................................... 2,451 19,517
------- -------
$21,037 $83,822
======= =======
</TABLE>
6. PROPERTY AND EQUIPMENT
Property and equipment consists of the following at December 31:
<TABLE>
<CAPTION>
1997 1998
------------- -------------
<S> <C> <C>
Land, building, improvements and furniture and fixtures .......... $ 49,349 $ 111,885
Computer and communications equipment ............................ 157,417 312,845
---------- ----------
206,766 424,730
Less: accumulated depreciation ................................... (103,523) (186,040)
---------- ----------
Property and equipment, net ...................................... $ 103,243 $ 238,690
========== ==========
</TABLE>
F-51
<PAGE>
BRIDGE INFORMATION SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED )
7. GOODWILL AND OTHER INTANGIBLE ASSETS
Components of intangible assets, which primarily relate to business
acquisitions, were as follows at December 31:
<TABLE>
<CAPTION>
1997 1998
----------- -------------
<S> <C> <C>
Goodwill ......................................... $ 259,909 $ 561,000
Software/technology .............................. 30,215 28,415
Noncompete agreements ............................ 20,000 126,000
Trademarks ....................................... 10,647 148,943
Customer base .................................... 4,000 177,786
Product distribution and service rights .......... 4,400 4,400
--------- ----------
329,171 1,046,544
Less: accumulated amortization ................... (54,619) (111,099)
--------- ----------
$ 274,552 $ 935,445
========= ==========
</TABLE>
8. LOSS CONTRACT ACCRUALS
Bridge, in connection with acquisitions, assumes various equipment,
software and data contracts. If Bridge determines that such contracts are above
market, or are redundant and will not be utilized in the ordinary course of
business, a loss is accrued. The loss accrual represents the above market
portion of the contract or the total payments remaining in those cases where the
contract is effectively abandoned. Such accruals are generally recorded on a
gross basis except for those with lengthy remaining terms which are discounted.
Loss contract accruals of acquired entities are accrued as part of the purchase
price allocation. Other loss contract accruals are charged to expenses at the
time they are identified.
The loss portion of the contractual payments consisted of the following at
December 31, 1998:
<TABLE>
<CAPTION>
CONTRACTUAL
PAYMENTS
------------
<S> <C>
1999 ............................ $ 21,918
2000 ............................ 17,808
2001 ............................ 15,701
2002 ............................ 15,444
2003 ............................ 15,344
Thereafter ...................... 40,670
--------
Future minimum payments ......... $126,885
========
</TABLE>
9. LOSS LEASE ACCRUALS
Bridge enters into or assumes, in connection with acquisitions, various
operating lease agreements for office space. Bridge may determine that it will
no longer utilize certain office space under a lease because it is redundant or
due to a change in Bridge's objectives. At the date of acquisition or other time
of such determination, Bridge fully reserves the gross amount of remaining lease
payments, net of expected future sublease rentals. The net reserve includes both
noncancellable future sublease income and Bridge management's best estimate of
future sublease rentals based on analyses of the facilities involved and the
local sublease markets. Loss lease accruals of acquired entities are accrued as
part of the purchase price allocation. Other loss lease accruals are charged to
expense.
Required lease payments (net of estimated future sublease rentals) and
noncancellable future sublease income consisted of the following at December 31,
1998:
F-52
<PAGE>
BRIDGE INFORMATION SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
9. LOSS LEASE ACCRUALS - (CONTINUED)
<TABLE>
<CAPTION>
REQUIRED EXPECTED
PAYMENTS, SUBLEASE NET
NET INCOME ACCRUAL
----------- ---------- -----------
<S> <C> <C> <C>
1999 ............................ $ 17,235 $ 3,228 $ 14,007
2000 ............................ 9,486 4,614 4,872
2001 ............................ 5,824 3,441 2,383
2002 ............................ 7,776 2,468 5,308
2003 ............................ 5,687 2,582 3,105
Thereafter ...................... 27,507 18,794 8,713
-------- -------- --------
Future minimum payments ......... $ 73,515 $ 35,127 $ 38,388
======== ======== ========
</TABLE>
10. LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS
Long-term debt and capital lease obligations consisted of the following at
December 31:
<TABLE>
<CAPTION>
1997 1998
----------- -----------
<S> <C> <C>
12% subordinated debt ....................................... $ 59,926 $ 61,090
11% subordinated debt ....................................... 2,975 2,975
Secured credit agreement with bank .......................... 215,000 735,000
7.75% note payable .......................................... -- 15,954
Mortgage note ............................................... 3,826 3,612
Capitalized equipment lease obligations, payments
extend through 2003, at various rates of interest
averaging 9.4% ............................................ 42,259 65,662
--------- ---------
Total long-term debt and capital lease obligations .......... 323,986 884,293
Less: current maturities .................................... (17,820) (51,022)
--------- ---------
$ 306,166 $ 833,271
========= =========
</TABLE>
At December 31, 1998, the 12% subordinated debt consisted of the original
issue of senior subordinated notes payable to Welsh, Carson, Anderson & Stowe.
This issue, as amended, ($65,500 less unamortized discount of $4,410 and $5,574
at December 31, 1997 and 1998, respectively -- effective rate of 16%) is due on
August 15, 2002, and bears interest at 12% per annum, payable quarterly in
arrears.
As part of the Telesphere acquisition (see Note 3), Bridge issued $2,975 of
subordinated notes payable to the former owners. The notes bear interest of 11%
payable monthly in arrears. The principal is due on August 15, 2002.
Bridge has a Secured Credit Agreement (the "Agreement") originally dated
May 29, 1998 and amended and restated on July 7, 1998 with a bank syndicate the
proceeds from which were used to finance the DJM acquisition (see Note 3) and to
repay the amounts outstanding under the then existing Credit Agreement dated
November 17, 1997. The Agreement contains four tranches with a total credit
facility of $800,000. The first tranche consists of a $125,000 revolving credit
line of which $60,000 was outstanding at December 31, 1998. The second tranche
consists of a multi-draw term loan of $75,000 all of which is outstanding at
December 31, 1998. The revolving credit line and the multi-draw term loan mature
May 29, 2003. Bridge pays letter of credit fees and a commitment fee on the
unused portion of the revolving credit line and multi-draw term loan which are
both tied to Bridge's Leverage Ratio. The third tranche consists of a $100,000
term loan payable in quarterly installments of $3,750 beginning September 30,
1999 and through June 30, 2001 and $8,750 through the maturity date of May 29,
2003. The fourth tranche consists of a $500,000 term loan payable in quarterly
installments of $1,250 beginning September 30, 1999 and through June 30, 2004,
quarterly installments of $118,750 through March 31, 2005 with a final payment
of $118,750 due at maturity on May 29, 2005. Interest accrues on all borrowings
at the Eurodollar rate (5.25% at December 31, 1998) plus a defined margin tied
to Bridge's Leverage Ratio. The Agreement is collateralized by a pledge of
F-53
<PAGE>
BRIDGE INFORMATION SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
10. LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS - (CONTINUED)
capital stock of the Bridge's U.S. entities, excluding Trading. The Agreement
contains various restrictive covenants including the maintenance of a minimum
rolling four-quarter earnings before interest, taxes, depreciation and
amortization (EBITDA), a minimum interest coverage ratio, a maximum leverage
ratio, a maximum amount of capital leases incurred and a maximum amount of total
capital expenditures. Bridge incurred transaction costs of $17,375 which were
capitalized to deferred financing costs related to obtaining the credit
facility. Due to the repayment of the previous credit agreement, $3,026 of
deferred financing costs were recognized in 1998 as an extraordinary loss, net
of related income taxes of $0. (See Note 21 regarding subsequent amendment to
the Agreement.)
In connection with the Agreement, Bridge has also entered into three swap
transactions pursuant to which it has exchanged its floating rate interest
obligations for a fixed rate payment obligation. These swap agreements hedge the
third and fourth tranches of the credit agreement. The first swap has a notional
principal amount of $137,375 at December 31, 1998 and a fixed rate of 6.035% per
annum for the period ending December 31, 2002. The second swap has a notional
principal amount of $100,000 at December 31, 1998 and a fixed rate of 5.8125%
per annum ending June 29, 2001. The third swap has a notional principal amount
of $100,000 at December 31, 1998 and a fixed rate of 5.94% per annum ending June
29, 2002. The fixing of the interest rates for this period minimizes in part
Bridge's exposure to the uncertainty of floating interest rates.
The weighted average interest rate on Bridge's debt with a bank was 8.5%
and 8.6% for the years ended December 31, 1997 and 1998, respectively. Letters
of credit outstanding at December 31, 1997 and 1998 totaled $19,910 and $8,641,
respectively.
Bridge's mortgage note is collateralized by the technology center building,
bears interest at 8.5% and is payable in equal monthly installments of $44
through February 1, 2009.
As part of the acquisition of DJM, Bridge assumed a 7.75% note payable to a
third party. The note is payable over three years. Bridge also obtained a
guaranteed investment contract in the same amount and earning a similar rate
which was designated by DJM to fund this note. This investment is included in
other assets.
Required debt payments (net of discount), future minimum lease payments
(including interest under capital leases) and noncancellable operating leases,
consist of the following at December 31, 1998:
<TABLE>
<CAPTION>
OPERATING LEASES
-----------------------
CAPITALIZED
EQUIPMENT OFFICE
DEBT LEASES EQUIPMENT FACILITIES
----------- ------------ ----------- -----------
<S> <C> <C> <C> <C>
1999 ........................................... $ 14,366 $ 41,168 $ 514 $ 28,909
2000 ........................................... 24,363 28,815 205 24,250
2001 ........................................... 34,362 1,009 48 20,535
2002 ........................................... 107,994 486 10 17,859
2003 ........................................... 157,828 121 3 27,570
Thereafter ..................................... 479,718 -- 3 70,426
--------- -------- ----- ---------
Future minimum payments ........................ $ 818,631 71,599 $ 783 $ 189,549
========= ===== =========
Amount representing interest ................... (5,937)
--------
Present value of net minimum lease payments .... $ 65,662
========
</TABLE>
Total rent expense for all operating leases was $10,313, $14,448, and
$32,002 for the years ended December 31, 1996, 1997, and 1998, respectively.
Bridge is the lessee of certain computer, communications equipment and
software under capital leases. The assets and liabilities under capital leases
are recorded at the lower of the present value of the minimum lease payments or
the fair value of the assets. The assets are depreciated and amortized over the
lower of
F-54
<PAGE>
BRIDGE INFORMATION SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
10. LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS - (CONTINUED)
their related lease terms or their estimated useful lives. Assets recorded under
capital leases are included in property and equipment at a cost of $32,703 and
$47,561, net of accumulated depreciation and amortization of $40,613 and $59,881
at December 31, 1997 and 1998, respectively.
11. INCOME TAXES
The income tax provision consists of the following for the years ended
December 31:
<TABLE>
<CAPTION>
1996 1997 1998
-------- -------- ---------
<S> <C> <C> <C>
Current tax provision:
United States .......................... $ -- $ -- $ --
Foreign ................................ 177 634 7,480
State and local ........................ -- -- --
----- ----- --------
177 634 7,480
Deferred tax provision - foreign ......... -- -- 3,000
----- ----- --------
Total provision for income taxes ......... $ 177 $ 634 $ 10,480
===== ===== ========
</TABLE>
The total income tax provision differed from that which would be computed
by applying the statutory federal income tax rate to income before income taxes.
The reasons for this difference are as follows:
<TABLE>
<CAPTION>
1996 1997 1998
------------- ------------- -------------
<S> <C> <C> <C>
Federal income tax benefit computed at statutory
federal income tax rate ................................. $ (21,217) $ (23,791) $ (46,333)
Federal income tax portion of change in valuation
allowance ............................................... 19,972 22,686 52,912
Foreign income without federal income tax expense ......... 1,112 (162) (9,585)
Nondeductible expenses .................................... 635 1,267 3,006
Foreign taxes ............................................. 177 634 10,480
Other ..................................................... (502) -- --
--------- --------- ---------
$ 177 $ 634 $ 10,480
========= ========= =========
</TABLE>
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 ......... $ 56,460 $ 79,370
Tax credit carryforwards ................. 1,059 1,059
Accounts receivable ...................... 4,051 7,103
Property and equipment ................... -- 77,042
Intangible assets ........................ 5,292 --
Accrual for loss lease ................... 8,395 11,278
Accrual for loss contracts ............... -- 51,872
Other accrued liabilities ................ -- 19,316
Other .................................... 886 667
--------- ----------
76,143 247,707
--------- ----------
Deferred tax liabilities:
Software capitalization .................. 4,792 6,682
Property and equipment ................... 1,215 --
Intangible assets ........................ -- 84,693
Prepaid commissions ...................... -- 1,784
Limited partnerships' losses ............. 420 420
--------- ----------
6,427 93,579
--------- ----------
Net deferred tax asset ..................... 69,716 154,128
Valuation allowance ........................ (69,716) (153,535)
--------- ----------
$ 0 $ 593
========= ==========
</TABLE>
At December 31, 1997 and 1998, Bridge recorded a valuation allowance of
$69,716 and $153,535, respectively, against the net deferred tax asset due to
the uncertainty of its ultimate realization. The valuation allowance increased
by $32,090 from December 31, 1996 to December 31, 1997 and by
F-55
<PAGE>
BRIDGE INFORMATION SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
11. INCOME TAXES - (CONTINUED)
$83,819 from December 31, 1997 to December 31, 1998. Amounts fully reserved
include $26,491 in deferred tax assets acquired by Bridge in a purchase business
combination. If it is determined in the future that such deferred tax assets are
recoverable, the valuation allowances will be reversed and credited against the
original purchase price allocated to goodwill.
Certain states do not allow for the filing of a consolidated state income
tax return; therefore, the taxable income of certain of Bridge's subsidiaries
cannot be offset with losses sustained by other of Bridge's subsidiaries in
those states. At December 31, 1998, Bridge has the following approximate income
tax carryforwards available:
<TABLE>
<CAPTION>
TAX EXPIRATION
PURPOSES DATES
------------ -----------
<S> <C> <C>
U.S. federal regular tax carryforwards other than from
purchase business combinations:
Net operating loss carryforwards ................... $ 199,512 2004-2018
Business tax credit carryforwards .................. $ 599 1999-2002
U.S. federal minimum tax credit carryforwards against
regular tax ........................................ $ 298 --
Foreign regular tax carryforwards other than from
purchase business combinations:
Net operating loss carryforwards ..................... $ 4,132 2002-2009
</TABLE>
12. REGULATORY REQUIREMENT
Trading is subject to the Uniform Net Capital Rule under the Securities
Exchange Act of 1934, which requires the maintenance of minimum net capital of
$1,000 and requires that the ratio of aggregate indebtedness to net capital,
both as currently defined, shall not exceed 15 to 1. At December 31, 1998,
Trading had net capital of $3,490, which was $2,490 in excess of the minimum
required, and the ratio of aggregate indebtedness to net capital was 1.69 to 1.
Substantially all customer transactions are cleared through third parties on a
fully disclosed basis and, therefore, Trading does not hold securities or funds
for the accounts of its customers. Accordingly, Trading is exempt from the
requirements of Rule 15c3-3 under the Securities Exchange Act of 1934.
BBH is subject to regulatory requirements of the Securities and Futures
Commission and BBU is subject to the regulatory requirements of The Securities
and Futures Authority Resource Requirement. At December 31, 1998, management is
not aware of any matters which would have a materially adverse effect on BBH or
BBU.
13. CAPITAL STOCK
During 1996, Bridge increased its number of authorized shares of capital
stock to 102 million shares, consisting of 85 million shares of Class A common
stock, 15 million shares of Class B common stock, and 2 million shares of
preferred stock ($1 par value). In addition, Bridge increased the total number
of shares of common stock for which options may be granted from 2,360,250 shares
to 4 million shares. In October 1997, Bridge increased the total number of
shares for which options may be granted from 4 million to 6 million shares.
Class A common shareholders are entitled to one vote per share while Class B
common shareholders have no voting rights. Both Class A and Class B common
shareholders have the same dividend and liquidation rights. In addition, both
classes of common stock contain provisions which allow certain shareholders of
both classes to convert their shares into shares of the other class on a
one-for-one basis.
In May 1996, Bridge completed an equity offering totaling $53,997, net of
transaction costs of $260 which were charged to additional paid-in capital
(common) as costs incurred to raise capital. The offering was accomplished in
three pieces. First, subordinated debt issues two through five totaling
F-56
<PAGE>
BRIDGE INFORMATION SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
13. CAPITAL STOCK - (CONTINUED)
$29,500, plus accrued interest of $1,801, were converted into 4,815,543 shares
of Class A common stock. Secondly, all shares of Series A and C redeemable
preferred stock totaling $8,700, plus accrued dividends of $356, were converted
into 1,393,305 shares of Class A common stock. The third piece consisted of the
sale of 2,138,415 shares of Class A common stock for $13,900 to existing
shareholders and a strategic investor. In addition, as part of the offering, all
shares of Series B redeemable preferred stock totaling $1,900, plus accrued
dividends of $73, were redeemed from the proceeds of the offering.
14. REDEEMABLE PREFERRED STOCK
In connection with the acquisition of KRF (see Note 3) in 1996, Bridge
designated 1,950,000 shares of Series D redeemable preferred stock. At the time
of the KRF acquisition, 1,550,000 shares were issued for $154,355, with a
redemption value of $155,000. The carrying value of the redeemable preferred
stock is accreted to the redemption value through its mandatory redemption
dates. In connection with the DJM acquisition (see Note 3) Bridge designated and
issued 1,500,000 shares of Series E redeemable preferred stock at a redemption
value of $150,000. Bridge also designated and issued 900,000 shares of Series F
redeemable preferred stock at a redemption value of $90,000 in connection with
the ADP acquisition (see Note 3). The following shares have been issued and are
outstanding as of December 31, 1998:
<TABLE>
<CAPTION>
PREFERRED STOCK
-----------------------
ADDITIONAL ACCRETION
SHARES $1 PAR PAID-IN TO TOTAL
ISSUED AND VALUE CAPITAL ACCRUED REDEMPTION CARRYING
SERIES DESIGNATED AMOUNT (PREFERRED) DIVIDENDS VALUE VALUE
- -------------- ------------ ---------- ------------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
D .......... 1,950,000 $ 1,950 $ 192,405 $ 18,116 $ 234 $ 212,705
E .......... 1,500,000 1,500 148,500 3,567 -- 153,567
F .......... 900,000 900 89,100 513 -- 90,513
------- --------- -------- ----- ---------
$ 4,350 $ 430,005 $ 22,196 $ 234 $ 456,785
======= ========= ======== ===== =========
</TABLE>
Series D and E preferred shareholders are entitled to one common vote for
each share of Class A common stock that would be issuable upon conversion of
preferred stock. Series F preferred shareholders do not have any voting rights.
At December 31, 1998, one share of Series D preferred stock was convertible into
12.5 shares of common stock and one share of Series E or F preferred stock was
convertible into 4.62 shares of common stock. All preferred shareholders rank
senior to common shareholders in the event of any voluntary or involuntary
liquidation, dissolution or winding up of Bridge. All preferred stocks pay
dividends at the rate of $4.00 per share per annum. All preferred dividends are
cumulative and non-participating.
On June 30 in each of 2002, 2003, 2004, Bridge is required to redeem the
lesser of 1) 33-1/3% of the aggregate number of shares of Series D preferred
stock thereto issued or 2) the number of shares of Series D preferred stock then
outstanding. Preferred stock has a redemption price of $100 per share plus all
accrued but unpaid dividends, which is equivalent to the carrying value. Bridge
may elect to redeem preferred shares, in whole or in part, at any time
subsequent to January 1, 2001, but prior to the mandatory redemption dates as
well.
On May 29, 2003 and November 10, 2003, Bridge is required to redeem all
shares of Series E and Series F preferred stock, respectively, then issued and
outstanding at the redemption price of $100 per share plus all accrued but
unpaid dividends, which is equivalent to the carrying value.
F-57
<PAGE>
BRIDGE INFORMATION SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED )
15. STOCK OPTIONS
Bridge has a Stock Option and Restricted Stock Purchase Plan, which
provides for stock option and other awards to selected employees and officers of
Bridge. Bridge's Board of Directors determines the option price (not to be less
than 100% of fair market value for incentive stock options) at the date of
grant. Options granted during 1997 and 1998 vest ratably over five years and
expire ten years from the date of grant.
Bridge applies APB Opinion No. 25 and related interpretations in accounting
for its plan. Accordingly, compensation cost has been recognized for its stock
option plan only to the extent the fair market value of Bridge's common stock
exceeded the exercise price of nonqualified stock option grants at the grant
date. Had compensation cost for Bridge's stock option plan been determined based
on the fair value at the grant dates for awards under the plan consistent with
the method of SFAS No. 123, Bridge's 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 ......... $ (60,796) $ (68,610) $ (142,861)
Pro Forma ........... $ (61,339) $ (69,755) $ (144,452)
</TABLE>
Changes in outstanding options are as follows:
<TABLE>
<CAPTION>
1996
--------------------------------------------
WEIGHTED-
AVERAGE
SHARES EXERCISE PRICE SHARES
------------- ---------------- -------------
<S> <C> <C> <C>
Outstanding, beginning of year .......... 2,363,250 $ 4.73 2,209,117
Granted ................................. 567,112 6.50 2,738,000
Exercised ............................... (5,000) 4.73 (153,136)
Forfeited ............................... (713,245) 6.05 (345,800)
Expired ................................. (3,000) 250.00 --
--------- ------- ---------
Outstanding, end of year ................ 2,209,117 $ 4.80 4,448,181
========= ======= =========
Options exercisable at year-end ......... 444,050 660,350
========= =========
Weighted-average fair value of options
granted during the year ................ $ 2.04 $ 2.04
=========== ===========
<CAPTION>
1997 1998
------------------------------ ----------------
WEIGHTED- WEIGHTED-
AVERAGE AVERAGE
EXERCISE PRICE SHARES EXERCISE PRICE
---------------- ------------- ---------------
<S> <C> <C> <C>
Outstanding, beginning of year .......... $ 4.80 4,448,181 $ 6.22
Granted ................................. 7.25 1,474,319 10.21
Exercised ............................... 4.67 (142,200) 2.83
Forfeited ............................... 6.05 (243,300) 6.77
Expired ................................. -- -- --
-------- --------- -------
Outstanding, end of year ................ $ 6.22 5,537,000 $ 7.36
======== ========= =======
Options exercisable at year-end ......... $ 4.57 1,396,886 $ 5.67
======== ========= =======
Weighted-average fair value of options
granted during the year ................ $ 2.73
===========
</TABLE>
The fair value of each option grant is estimated on the date of grant using
the minimum value option-pricing model with the following weighted-average
assumptions used for grants in 1996, 1997, and 1998, respectively: dividend
yield of 0 percent for all three years; risk-free interest rates of 5.4, 6.7,
and 5.5 percent; and expected lives of 6 years for all three years.
The following table summarizes the characteristics of stock options
outstanding at December 31, 1998:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------------------------------- -------------------------
WEIGHTED- WEIGHTED- WEIGHTED-
AVERAGE AVERAGE AVERAGE
REMAINING EXERCISE EXERCISE
EXERCISE PRICE SHARES LIFE PRICE SHARES PRICE
- ---------------- ------------ -------------- ----------- ------------ ----------
<S> <C> <C> <C> <C> <C>
$ 1.00 80,000 6.71 years $ 1.00 48,000 $ 1.00
$ 4.73 1,176,569 7.36 4.73 705,941 4.73
$ 6.50 429,612 7.42 6.50 171,845 6.50
$ 7.25 2,355,500 8.50 7.25 471,100 7.25
$ 8.00 317,819 9.00 8.00 -- --
$ 10.80 1,177,500 9.42 10.80 -- --
--------- ---- -------- ------- --------
5,537,000 7.16 years $ 7.36 1,396,886 $ 5.67
========= ==== ======== ========= ========
</TABLE>
F-58
<PAGE>
BRIDGE INFORMATION SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED )
16. EMPLOYEE SAVINGS PROGRAMS
DOMESTIC SAVINGS PLANS -- In the United States, Bridge sponsors an employee
savings plan that qualifies as a defined salary arrangement under Section 401(k)
of the Internal Revenue Code. Participating U.S. employees may contribute a
percentage of their base salary, subject to certain limitations, and Bridge
matches a portion of the employees' contributions. Bridge contributed $723,
$1,388, and $2,463 to these plans during the years ended December 31, 1996,
1997, and 1998, respectively. Also under Bridge's plan, profit sharing
contributions may be made at the discretion of Bridge. No such contributions
were made during the years ended December 31, 1996, 1997, and 1998. No
post-retirement benefits are provided.
FOREIGN SAVINGS PLANS -- Bridge maintains certain retirement plans for
employees outside of the United States that provide retirement benefits based on
service and salary. The funding policy for these plans is to contribute the
amounts required by the plan provisions or applicable regulations, although
additional amounts may be made at the discretion of Bridge. Bridge contributed
$987, $1,923, and $5,430, to these plans during the years ended December 31,
1996, 1997, and 1998 respectively.
Bridge has a defined benefit plan covering certain employees of Bridge in
Japan. The benefits for this plan are based on years of service and current
salaries. Payments are made on a monthly basis and the net pension expense for
1996, 1997 and 1998 was immaterial.
17. RELATED PARTY TRANSACTIONS
Bridge provides services to certain shareholders at terms and prices
approximating market. Sales to existing shareholders totaled $34,549, $28,260,
and $56,205 for the years ended December 31, 1996, 1997, and 1998, respectively.
Accounts receivable from existing shareholders totaled $6,795 and $30,957 at
December 31, 1997 and 1998, respectively.
18. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following disclosure of the estimated fair value of financial
instruments is made in accordance with the requirements of SFAS No. 107,
"Disclosures about Fair Value of Financial Instruments". The estimated fair
value amounts have been determined by Bridge using available market information
and appropriate valuation methodologies. However, considerable judgment is
necessarily required in interpreting market data to develop the estimates of
fair value. Accordingly, the estimates presented herein are not necessarily
indicative of the amounts that Bridge could realize in a current market
exchange.
The use of different market assumptions and/or estimation methodologies may
have a material effect on the estimated fair value amounts.
<TABLE>
<CAPTION>
1997 1998
--------------------- ---------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Financial assets:
Treasury bills ..................... $ 1,314 $ 1,331 $ -- $ --
Securities owned ................... 520 520 43 43
Guaranteed investment contract ..... -- -- 15,955 15,955
Financial liabilities:
Term loan with Bank ................ 200,000 200,000 600,000 600,000
Mulit-draw loan .................... -- -- 75,000 75,000
Revolving credit agreement ......... 15,000 15,000 60,000 60,000
Mortgage note ...................... 3,826 4,063 3,612 3,861
11% subordinated debt .............. 2,975 2,975 2,975 2,975
</TABLE>
F-59
<PAGE>
BRIDGE INFORMATION SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
18. FAIR VALUE OF FINANCIAL INSTRUMENTS - (CONTINUED)
<TABLE>
<CAPTION>
1997 1998
------------------- --------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
---------- -------- ---------- ---------
<S> <C> <C> <C> <C>
12% subordinated debt ..................... 59,926 59,926 61,090 61,090
7.75% note payable ........................ -- -- 15,955 15,955
Loss lease accruals ....................... 23,785 14,633 38,388 27,256
Loss contract accruals .................... -- -- 126,885 125,401
Securities sold but not yet purchased ..... 186 186 9 9
Unrecognized financial instruments:
Swap Agreements ............................. -- 1,446 -- 8,790
Standby letters of credit ................... -- 164 -- 319
</TABLE>
SECURITIES OWNED AND SECURITIES SOLD BUT NOT YET PURCHASED -- For those
instruments held for trading purposes, fair values are based on quoted market
prices or dealer quotes.
LONG-TERM DEBT -- Term loan with Bank, multi-draw loan and revolving credit
agreement, are variable rate in nature and reprice quarterly. Bridge believes
the carrying value of this debt approximates fair value. The fair value of the
subordinated debt, notes payable and other fixed rate debt is estimated by
discounting cash flows based on the rates Bridge could obtain today for similar
borrowings.
LOSS LEASE ACCRUALS -- The fair value of Bridge's loss lease accruals is
estimated based on the remaining required lease payments (net of estimated
future sublease rentals) and noncancellable future sublease income discounted at
current rates offered to Bridge for debt of similar remaining maturities.
LOSS CONTRACT ACCRUALS -- The fair value of Bridge's loss contract accruals
is estimated based on the contractual payments discounted at current rates
offered to Bridge for debt of similar maturities.
SWAP AGREEMENT -- The fair value of Bridge's swap agreement represents the
estimated amount Bridge would receive to terminate the agreement, considering
current interest and currency rates.
STANDBY LETTERS OF CREDIT -- The fair value of letters of credit is based
on fees currently charged for similar agreements.
The fair value estimates presented herein are based on pertinent
information available to management as of December 31, 1997 and 1998,
respectively. Although Bridge's management is not aware of any factors that
would significantly affect the estimated fair value amounts, such amounts have
not been comprehensively revalued for purposes of these financial statements
since that date, and current estimates of fair value may differ significantly
from the amounts presented herein.
19. OTHER COMMITMENTS AND CONTINGENCIES
At the time of the DJM acquistion, DJM was party to certain agreements
between DJM and Cantor Fitzgerald Securities Corp. ("Cantor"), a primary
supplier of market data to DJM, and Market Data Corporation ("MDC"). As of the
date of the acquisition, certain provisions of these agreements were in dispute
between DJM and Cantor. In addition, Cantor has taken the position that as a
result of the acquisition, by virtue of certain provisions in the agreements
with Cantor and MDC, Bridge has incurred certain obligations separate from DJM's
obligations under those agreements to make payments to MDC and Cantor with
respect to terminals other than those to which DJM was providing information
prior to the acquisition.
F-60
<PAGE>
BRIDGE INFORMATION SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
19. OTHER COMMITMENTS AND CONTINGENCIES - (CONTINUED)
Bridge has been in discussions with Cantor regarding settlement of this
dispute. Any such settlement would also require approval of Dow Jones. It is
uncertain at this time whether Bridge will be able to settle this matter. If
settlement is not feasible, and litigation were to ensue, Bridge believes that
it has meritorious defense to Cantor claims.
Bridge, in the normal course of business, enters into service agreements
with telecommunication companies, whereby Bridge has guaranteed annual usage
levels of data communications. Remaining minimum commitments are $10,000 for the
year ending December 31, 1999.
Bridge also enters into agreements for the licensing of software and
information databases to be used in connection with Bridge's products. Certain
of these agreements provide for royalty payments based on Bridge's revenues or
the number of workstations installed, as defined. Bridge has no material
commitments with respect to these licenses.
Bridge is subject to various other legal proceedings and claims which arise
in the ordinary course of its business.
Loss accruals for matters that have not been indemnified by the sellers and
relate directly to acquisitions have been established as part of the purchase
price (goodwill). When and if it is determined that such accruals are
unnecessary, they will be reversed and credited back to the purchase price
(goodwill). The ultimate resolution of these matters cannot be predicted with
certainty. However, based on the information currently available, Bridge's
management does not believe they will have a material adverse effect on Bridge's
financial condition.
20. SUBSEQUENT EVENTS
ACQUISITION AND INVESTMENTS -- On February 8, 1999, Bridge entered into a
Formation Agreement with FutureSource Information Systems, Inc. (FSIS) and its
shareholders to form a new business enterprise named FutureSource/Bridge L.L.C.
(FS/B). The transaction closed on March 5, 1999. The purpose of FS/B is to
better develop and market financial information products in the commodities
field. Bridge contributed $4,500 of cash and customer contracts totaling
approximately $16,500 of annualized revenue to FS/B for a 45% ownership
interest. FSIS contributed all of its assets, subject to assumed liabilities, to
FS/B for a 55% ownership interest. Bridge also made a $2,000 subordinated loan
to FS/B.
On February 17, 1999, Bridge entered into a Merger Agreement with SAVVIS
Holdings Corporation (SAVVIS) to acquire all of the equity of SAVVIS in exchange
for 3,250,000 shares of Bridge's common stock. The transaction closed on April
7, 1999.
DEBT EXTENSION -- On March 5, 1999, Bridge increased the fourth tranche of
the term loan under its Secured Credit Agreement (see Note 10) by $50,000 to a
total of $550,000. The proceeds were used to reduce the outstanding balances
under the revolving credit facility, to provide funds for working capital and
for other corporate purposes. The covenants relating to the maximum leverage
ratio and the minimum interest coverage were adjusted accordingly.
PUBLIC OFFERING (UNAUDITED) -- The Board of Directors of Bridge has
authorized management of SAVVIS to file a registration statement with the
Securities and Exchange Commission for the initial public offering of SAVVIS'
common stock. SAVVIS intends to use a portion of the proceeds to finance a
portion of its purchase of Bridge's Internet protocol network assets and to pay
a preferential dividend to Bridge.
STOCK OPTIONS (UNAUDITED) -- During the period from October through
December 1999, SAVVIS granted 2,843,758 stock options to employees of SAVVIS and
Bridge with an exercise price of $.50 per share. Noncash compensation cost based
upon the difference between the exercise price and the
F-61
<PAGE>
BRIDGE INFORMATION SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
20. SUBSEQUENT EVENTS - (CONTINUED)
imputed fair value of SAVVIS' stock as of the respective option grant dates
totaling approximately $53 million will be recorded over the vesting periods of
such options, which periods range from immediate up to four years. Approximately
$2,000 of noncash compensation expense will be recorded in the fourth quarter of
1999.
21. GOING CONCERN
The consolidated financial statements do not include any adjustments
relating to the recoverability and classification of recorded asset amounts or
the amounts and classification of liabilities that might be necessary should
Bridge be unable to continue as a going concern. Bridge has experienced
recurring losses from operations and operating cash flow deficiencies, which
have been funded by additional borrowings. At December 31, 1999, Bridge did not
comply with certain of the restrictive covenants contained in its Secured Credit
Agreement (the "Agreement") (see Note 11).
The Agreeement was amended on January 7, 2000 (the "Amendment") to 1)
permit the sale of Bridge's network assets to SAVVIS, 2) allow for the
subsequent public offering of SAVVIS shares, and 3) waive and modify certain
covenants in the Agreement related to EBITDA, interest coverage ratio, leverage
ratio and capital expenditure limitations. The Agreement was also modified to
require Bridge to repay approximately $250,000 of its indebtedness under the
Agreement on or before June 30, 2000. However, Bridge must repay a separate loan
in the amount of $100,000 before it can repay the full amounts required under
the amended Agreement.
In addition, the Amendment requires the public offering of SAVVIS shares to
be completed by February 29, 2000. Failure to comply with this provision could
result in acceleration of the maturity of the outstanding balance due under the
Agreement.
The Amendment also requires that all of the proceeds from the sale of
assets to SAVVIS and the preferential distribution be applied to the
indebtedness under the Agreement.
In 2000, Bridge expects to complete the integration of past acquisitions,
to the extent possible, and plans to reduce both employee and technology related
expenses. Further, with the sale of its network assets to SAVVIS, Bridge expects
its capital spending requirements to be reduced significantly. Therefore, Bridge
expects operating results and cash flow to improve in 2000 as compared to 1999.
Also as part of Bridge's ongoing strategy, management has for some time
been pursuing plans to expand the pool of capital available to fund business
growth. These plans include, but are not limited to, the sale or spin-off or
assets, including the sale of additional SAVVIS shares, and other public and
private debt financing alternatives. Management believes these plans will be
sufficient to satisfy its fiscal 2000 financing requirements. However, there can
be no assurance that sufficient proceeds through these activities will be
available to meet Bridge's debt obligations.
* * * * * *
F-62
<PAGE>
BRIDGE INFORMATION SYSTEMS, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SEPTEMBER 30,
1999
--------------
<S> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ......................................................... $ 34,577
Restricted cash equivalents ....................................................... 1,935
Accounts receivable, net of allowance for doubtful accounts of $55,573 ............ 235,409
Inventory ......................................................................... 22,058
Other current assets .............................................................. 55,999
----------
Total current assets .............................................................. 349,978
PROPERTY AND EQUIPMENT, net of depreciation of $237,534 ............................ 269,078
GOODWILL AND INTANGIBLE ASSETS, net of amortization of $202,873 .................... 863,864
OTHER LONG-TERM ASSETS ............................................................. 112,479
----------
TOTAL ............................................................................. $1,595,399
==========
LIABILITIES AND DEFICIENCY IN NET ASSETS
CURRENT LIABILITIES:
Accounts payable .................................................................. $ 75,242
Accrued employee compensation and benefits ........................................ 33,270
Accrued exchange fees ............................................................. 16,118
Other liabilities and accrued expenses ............................................ 107,167
Deferred revenue .................................................................. 23,742
Current portion of loss contract accruals ......................................... 20,731
Current maturities of loss lease accruals ......................................... 8,918
Current maturities of long-term debt and capital lease obligation ................. 60,999
----------
Total current liabilities ......................................................... 346,187
LOSS CONTRACT ACCRUALS, NET ........................................................ 90,915
LOSS LEASE ACCRUALS EXCLUDING CURRENT MATURITIES ................................... 28,340
LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS EXCLUDING CURRENT MATURITIES .......... 1,030,130
OTHER LONG-TERM LIABILITIES ........................................................ 35,076
----------
Total liabilities ................................................................. 1,530,648
----------
MINORITY INTEREST .................................................................. 11,288
----------
REDEEMABLE PREFERRED STOCK ......................................................... 469,869
----------
COMMITMENT AND CONTINGENCIES .......................................................
DEFICIENCY IN NET ASSETS:
Class A common stock, $.01 par value, 85 million shares authorized,
36,984,524 shares issued ........................................................ 370
Class B common stock, $.01 par value, 15 million shares authorized, none issued
Additional paid-in capital (common) ............................................... 219,180
Accumulated deficit ............................................................... (628,371)
Cumulative translation adjustments ................................................ (7,335)
Treasury stock at cost, 20,000 shares ............................................. (250)
----------
Total deficiency in net assets .................................................... (414,406)
----------
TOTAL ............................................................................. $1,595,399
==========
</TABLE>
The accompanying notes are an integral part of these
condensed consolidated financial statements.
F-63
<PAGE>
BRIDGE INFORMATION SYSTEMS, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE LOSS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE NINE-MONTH PERIOD
ENDED SEPTEMBER 30
-----------------------------
1998 1999
------------- -------------
<S> <C> <C>
REVENUES:
Information services .................................................... $ 398,773 $ 651,150
Transaction services .................................................... 40,015 55,639
Network services ........................................................ -- 12,193
Equipment sales ......................................................... 52,114 73,937
Customer data fees ...................................................... 74,456 149,551
Other revenues .......................................................... 12,533 15,965
--------- ----------
577,891 958,435
OPERATING COSTS AND EXPENSES:
Employee related ........................................................ 182,403 297,922
Depreciation and amortization ........................................... 133,447 211,893
Technology related ...................................................... 58,818 142,472
Equipment cost of sales ................................................. 48,093 67,997
Customer data fees ...................................................... 69,151 122,222
Transaction services related ............................................ 18,545 21,487
Data acquisition related ................................................ 27,431 62,281
Facilities related ...................................................... 20,817 45,194
General and administrative .............................................. 36,353 53,107
Acquisition related ..................................................... 28,709 --
--------- ----------
623,767 1,024,575
--------- ----------
OPERATING LOSS ........................................................... (45,876) (66,140)
OTHER INCOME (EXPENSE):
Interest income ......................................................... 1,289 2,246
Interest expense ........................................................ (41,279) (68,126)
Minority interest in net income of consolidated subsidiary .............. (482) (804)
Other, net .............................................................. 5,282 8,763
--------- ----------
(35,190) (57,921)
--------- ----------
LOSS BEFORE INCOME TAXES ................................................. (81,066) (124,061)
PROVISION FOR INCOME TAXES ............................................... (6,688) (10,316)
--------- ----------
LOSS BEFORE EXTRAORDINARY ITEM ........................................... (87,754) (134,377)
Extraordinary item -- loss on early extinguishment of debt, net ......... (3,026) --
--------- ----------
NET LOSS ................................................................. (90,780) (134,377)
OTHER COMPREHENSIVE LOSS:
Foreign currency translation adjustment ................................. (1,056) (3,162)
--------- ----------
COMPREHENSIVE LOSS ....................................................... $ (91,837) $ (137,539)
========= ==========
</TABLE>
The accompanying notes are an integral part of these
condensed consolidated financial statements.
F-64
<PAGE>
BRIDGE INFORMATION SYSTEMS, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE NINE-MONTH PERIOD
ENDED SEPTEMBER 30
----------------------------
1998 1999
------------- --------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
NET LOSS ...................................................................... $ (90,780) $ (134,377)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization ................................................ 133,447 211,892
Acquisition related costs .................................................... 22,000 --
Amortization of discount on subordinated debt and deferred financing costs ... 2,207 4,392
Gain on joint venture investment ............................................. -- (10,000)
Extraordinary loss on early extinguishment of debt ........................... 3,026 --
Deferred revenue ............................................................. (30,460) 7,682
Minority interest in loss of consolidated subsidiary ......................... 481 804
Changes in assets and liabilities net of effects of acquisitions:
Restricted cash .............................................................. (2,225) 1,452
Accounts receivable, net ..................................................... 6,031 (75,836)
Inventory .................................................................... (2,687) (13,653)
Other assets ................................................................. (17,225) (1,287)
Loss contracts accrual, net .................................................. (7,312) (17,936)
Loss lease accruals, net ..................................................... (5,130) (10,441)
Accounts payable and other accrued expenses .................................. (14,319) (20,292)
Other long-term liabilities .................................................. (3,324) (18,425)
---------- ----------
NET CASH USED IN OPERATING ACTIVITIES ...................................... (6,270) (76,025)
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions, net of cash acquired ........................................... (348,112) (106)
Equity investment in minority subsidiary ..................................... (1,673) (6,650)
Capital expenditures, net .................................................... (27,779) (99,150)
Software development costs ................................................... (9,239) (17,941)
---------- ----------
NET CASH USED IN INVESTING ACTIVITIES ...................................... (386,803) (123,847)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt ..................................... 680,000 377,051
Payments on long-term debt ................................................... (240,159) (149,576)
Principal payments on capital lease obligations .............................. (11,236) (28,129)
Fees incurred in financing activities ........................................ (16,863) (5,025)
Proceeds from partial sale of subsidiary ..................................... -- 8,990
Dividends paid by subsidiary ................................................. (187) --
Employee stock transactions .................................................. 178 231
---------- ----------
NET CASH PROVIDED BY FINANCING ACTIVITIES .................................. 411,733 203,542
---------- ----------
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS .................. (776) (2,411)
---------- ----------
NET INCREASE IN CASH AND CASH EQUIVALENTS ..................................... 17,884 1,259
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD ................................ 12,949 33,318
---------- ----------
CASH AND CASH EQUIVALENTS, END OF PERIOD ...................................... $ 30,833 $ 34,577
========== ==========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during period year for:
Interest ................................................................... $ 25,760 $ 61,154
Income taxes ............................................................... 6,688 6,794
Debt incurred under capital lease obligations .............................. 14,294 1,405
Accrued dividends on redeemable preferred stock ............................ 7,889 13,014
Accretion of redeemable preferred stock to redemption value ................ 70 70
</TABLE>
The accompanying notes are an integral part of these
condensed consolidated financial statements.
F-65
<PAGE>
BRIDGE INFORMATION SYSTEMS, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1998 AND 1999
(DOLLARS IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)
1. DESCRIPTION OF BRIDGE
Bridge Information Systems, Inc., together with its wholly-owned
subsidiaries ("Bridge"), is an international financial information company that
provides a comprehensive resource of financial data and interpretive
applications for investment professionals around the world. Bridge offers
real-time and historical information and news on equities, fixed income, foreign
exchange, derivatives and commodities and provides a wide array of flexible
analytic applications to aid in the interpretation of such data. Bridge also
provides transaction services, through its wholly-owned subsidiaries, Bridge
Trading Company ("Trading"), Bridge International Broking Ltd. - Hong Kong and
Bridge International Broking (U.K.) Limited, comprehensive valuations on fixed
income securities, computer equipment sales and systems integration and
information delivery technology, including private network services, for the
financial community.
Bridge's clients include institutional investors, brokerage firms, research
analysts, exchanges and other enterprises throughout the world. No individual
customer composed a significant portion of Bridge's revenues. Bridge receives
data from more than 1,000 exchanges and contributing sources in 100 countries
with no single supplier composing a significant percentage.
2. UNAUDITED INTERIM FINANCIAL STATEMENTS
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles. In
the opinion of Bridge's management, all adjustments, consisting only of normal
recurring adjustments considered necessary for a fair presentation, have been
included. Operating results for any period are not necessarily indicative of the
results for any other period or for the full year. These statements should be
read in conjunction with Bridge's financial statements and notes thereto for the
year ended December 31, 1998.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION -- The consolidated financial statements of
Bridge's include the accounts of Bridge Information Systems, Inc. and its
subsidiaries after elimination of intercompany accounts and transactions.
REVENUE RECOGNITION -- Information services and other revenues are billed
one to twelve months in advance in certain markets and are recognized in the
period the related services are provided. Prepayments are included in deferred
revenue. Equipment sales are recognized upon delivery of the equipment.
CASH AND CASH EQUIVALENTS -- Bridge considers highly liquid investment
instruments with remaining terms of three months or less at time of acquisition
to be cash equivalents.
RESTRICTED CASH EQUIVALENTS -- Regulations require the Japanese trading
branch and India subsidiary to maintain restricted cash.
NEW ACCOUNTING STANDARDS -- In June 1998, SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities" was issued. This statement
establishes accounting and reporting standards for derivative instruments and
for hedging activities. SFAS No. 133 was amended by SFAS 137, which delays the
effective date of SFAS 133 to fiscal years and quarters beginning after June 15,
2000. SFAS No. 133 will require Bridge to record all derivatives on the balance
sheet at fair value. Changes in derivative fair value will either be recognized
in earnings as offsets to the changes in fair value of related hedged assets,
liabilities, and firm commitments or, for forecasted transactions, deferred and
recorded as a component of other stockholders' equity until the hedged
transactions occur and are recognized in earnings. Bridge is
F-66
<PAGE>
BRIDGE INFORMATION SYSTEMS, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (CONTINUED)
currently evaluating the impact of the standard on Bridge. The impact of SFAS
No. 133 will depend on a variety of factors, including future interpretive
guidance, the future level of hedging activity, the types of hedging instruments
used, and the effectiveness of such instruments.
SECURITIES TRANSACTIONS -- Securities transactions and the related
commission revenue and expense are recorded on a trade date basis. In the normal
course of business, the trading companies' activities involve the execution,
settlement and financing of various securities transactions through its clearing
brokers. The resulting receivables from the clearing brokers are available to
the trading companies on a settlement date basis. These activities may expose
the trading companies to off-balance-sheet risk in the event the customer or
other party is unable to fulfill their contractual obligations. The trading
companies, through their clearing brokers, continually monitor its customers'
activities. At September 30, 1999 receivables from clearing brokers totaled
$2,236 and are included in accounts receivable.
Securities owned and securities sold, but not yet purchased, are carried at
market value and unrealized gains and losses are reflected in transaction
services revenue. Securities owned totaled $108 at September 30, 1999, and are
included in other current assets. Securities sold, but not yet purchased ("short
positions"), totaled $191 at September 30, 1999 and are included in other
liabilities and accrued expenses. In the normal course of business, the trading
companies assume short positions in their inventory. The establishment of short
positions exposes the trading companies to off-balance sheet risk in the event
of price increases. The trading companies attempt to control such risk by
monitoring the market value on a daily basis.
INVENTORIES -- Inventories which consist of computer equipment are stated
at the lower of cost (generally on an average cost basis) or market.
PROPERTY AND EQUIPMENT -- Property and equipment is recorded at cost less
accumulated depreciation and amortization. Property additions and improvements
are capitalized while maintenance and repairs are expensed as incurred. Upon
retirement or disposition, the cost and related accumulated depreciation and
amortization are removed from the accounts and any gain or loss is included in
the results of operations. As of September 30, 1999, no impairment had been
identified.
Depreciation and amortization is computed using the straight-line method
based on estimated useful lives as follows:
<TABLE>
<S> <C>
Building, improvements and furniture and fixtures ......... 5-32 years
Computer, communications equipment and software ........... 3-5 years
</TABLE>
GOODWILL AND OTHER IDENTIFIABLE INTANGIBLE ASSETS -- Goodwill is being
amortized over 3 to 40 years and other intangible assets over 1 to 20 years, all
using the straight-line method. Bridge periodically assesses the recoverability
of the cost of its goodwill and identifiable intangible assets based on a review
of projected undiscounted cash flows. As of September 30, 1999 no impairment had
been identified.
DEFERRED FINANCING COSTS -- Deferred financing costs are amortized to
interest expense over the life of the related debt based on a method that
approximates the interest method.
SOFTWARE DEVELOPMENT COSTS -- In April 1998, the Accounting Standards
Executive Committee issued Statement of Position 98-1 (SOP), "Accounting for the
Cost of Computer Software Developed or Obtained for Internal Use." The SOP is
effective for financial statements for fiscal years beginning after December 15,
1998. As permitted by the SOP, Bridge adopted the provisions of the SOP
effective January 1, 1997.
F-67
<PAGE>
BRIDGE INFORMATION SYSTEMS, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (CONTINUED)
All costs, primarily employee compensation and benefits related to
conceptual formulation, design and testing of possible software projects
(preliminary project stage), are expensed as incurred. Upon completion of
preliminary project stage, costs incurred in the development of software are
capitalized until the software is released to production. Software development
costs of $26,017 (net of accumulated amortization of $19,182) are included in
other assets at September 30, 1999. Unamortized capitalized costs determined to
be in excess of the net realizable value of the products are expensed to
depreciation and amortization expense at the date of such determination. As of
September 30, 1999, no impairment had been identified.
Amortization is provided over an estimated economic life of the software
(generally 1 to 3 years) using the straight-line method and commences when the
software is released into production. Amortization expense totaled $5,294 and
$8,820 for the nine-month periods ended September 30, 1998 and 1999,
respectively. The accumulated amortization and related software development
costs are removed from their respective accounts effective in the year following
full amortization.
PREPAID COMMISSION EXPENSE -- Commissions paid at the beginning of the
subscription to sales representatives and managers for successful customer
referrals and renewals are deferred and expensed over the length of the
subscription. This policy is consistent with others in the financial information
business and matches commissions more closely with the revenue earned from the
related subscriptions.
INCOME TAXES -- Bridge files consolidated federal and state income tax
returns and its foreign subsidiaries file various income tax returns in the
respective foreign jurisdictions. Deferred tax assets and liabilities are
determined based on the differences between the financial statement and tax
bases of assets and liabilities using enacted tax rates in effect for the year
in which the differences are expected to be reversed. In addition, the amount of
any future tax benefits is reduced by a valuation allowance to the extent such
benefits are not expected to be realized.
Except for selective dividends, Bridge intends to reinvest the unremitted
earnings of its non-U.S. subsidiaries and postpone their remittance
indefinitely. Accordingly, no provision for U.S. income taxes was required on
such earnings during the nine-month periods ended September 30, 1998 and 1999.
FOREIGN CURRENCY TRANSLATION -- The financial position and results of
operations of Bridge's foreign subsidiaries are measured using local currency as
the functional currency. Revenues and expenses of such subsidiaries have been
translated into U.S. dollars at average exchange rates prevailing during the
period. Assets and liabilities have been translated at the rates of exchange at
the balance sheet date. Translation adjustments are recorded as a component of
other comprehensive income.
STOCK-BASED COMPENSATION ARRANGEMENTS -- Bridge 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". SFAS No. 123 prescribes the recognition of compensation expense
based on the fair value of options as determined on the grant date. However,
SFAS No. 123 allows companies to continue applying APB No. 25 if certain pro
forma disclosures are made assuming hypothetical fair value method application.
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS -- The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
F-68
<PAGE>
BRIDGE INFORMATION SYSTEMS, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
4. BUSINESS COMBINATIONS:
On April 7, 1999, Bridge acquired SAVVIS Holdings Corporation ("SAVVIS") in
an all stock transaction that was accounted for as a "purchase transaction"
under Accounting Principles Board No. 16. Pursuant to the terms of the
transaction, Bridge issued 3,011,000 shares of common stock, together with
239,000 options and warrants to purchase common stock in exchange for all of the
outstanding equity interest of SAVVIS. 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. The total cost of the acquisition
exceeded the fair value of SAVVIS' net assets by $23,767, which is being
amortized over three years. In addition, $20,300 of the purchase price was
allocated to property and equipment, trademarks, noncompete agreements and other
intangibles, which are being amortized over one to five years. Also, in
connection with the acquisition, Bridge assumed net liabilities of SAVVIS in the
amount of $12,321. Subsequent to the acquisition, on September 10, 1999, Bridge
sold in a private placement (Note 5) approximately 25% of its ownership to
Bridge shareholders for $9,000.
The following summarized pro forma (unaudited) information assumes the
SAVVIS acquisition had occurred at the beginning of each period:
<TABLE>
<CAPTION>
NINE MONTHS
ENDED SEPTEMBER 30,
-------------------------------
1998 1999
-------------- --------------
<S> <C> <C>
Net revenues ......... $ 586,805 $ 963,875
========== ==========
Net loss ............. $ (103,246) $ (142,428)
========== ==========
</TABLE>
In Bridge management's opinion, the pro forma combined results of
operations may not be indicative of the actual results that would have occurred
had the acquisitions been consummated as of that time or of future operations of
the combined companies under the ownership and operation of Bridge.
5. LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS
Long-term debt and capital lease obligations consist of the following at
September 30:
<TABLE>
<CAPTION>
1999
------------
<S> <C>
12% subordinated debt ................................................... $ 61,977
11% subordinated debt ................................................... 2,975
Secured credit agreement with bank ...................................... 934,624
Junior subordinated variable rate notes ................................. 26,970
7.75% note payable ...................................................... 15,954
Mortgage notes .......................................................... 4,492
Capitalized equipment lease obligations, payments extend through 2003, at
various rates of interest averaging 9.4% ............................... 44,137
----------
Total long-term debt and capital lease obligations ...................... 1,091,129
Less: current maturities ................................................ 60,999
----------
$1,030,130
==========
</TABLE>
At September 30, 1999, the 12% subordinated debt consisted of the original
issue of senior subordinated notes payable to Welsh, Carson, Anderson & Stowe.
This issue, as amended, ($65,500 less unamortized discount of $3,523 at
September 30, 1999 -- effective rate of 16%) is due on August 15, 2002, and
bears interest at 12% per annum, payable quarterly in arrears.
F-69
<PAGE>
BRIDGE INFORMATION SYSTEMS, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
5. LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS - (CONTINUED)
As part of the Telesphere acquisition in 1997, Bridge issued $2,975 of
subordinated notes payable to the former owners. The notes bear interest of 11%
payable monthly in arrears. The principal is due on August 15, 2002.
Bridge has a Secured Credit Agreement (the "Agreement") originally dated
May 29, 1998 and amended and restated on July 7, 1998 with a bank syndicate from
which the proceeds were used to finance the Dow Jones Markets, Inc. ("DJM")
acquisition and to repay the amounts outstanding from the existing Credit
Agreement dated November 17, 1997. The Agreement contains four tranches with a
total credit facility of $944,625 as of September 30, 1999. The first tranche
consists of a $125,000 revolving credit line of which $115,000 was outstanding
at September 30, 1999. The second tranche consists of a multi-draw term loan of
$75,000 all of which is outstanding at September 30, 1999. The revolving credit
line and the multi-draw term loan mature May 29, 2003. Bridge pays letter of
credit fees and a commitment fee on the unused portion of the revolving credit
line and multi-draw term loan which are both tied to Bridge's Leverage Ratio.
The third tranche consists of a $96,250 term loan payable in quarterly
installments of $3,750 through June 30, 2001 and $8,750 through the maturity
date of May 29, 2003. The fourth tranche consists of a $648,375 term loan
payable in quarterly installments of $1,625 through June 30, 2004, quarterly
installments of $154,375 through March 31, 2005 with a final payment of $154,375
due at maturity on May 29, 2005. Interest accrues on all borrowings at the
Eurodollar rate (5.4375% at September 30, 1999) plus a defined margin tied to
Bridge's Leverage Ratio. The Agreement is collateralized by a pledge of capital
stock of the company's U.S. entities, excluding Trading. The Agreement contains
various restrictive covenants including the maintenance of a minimum rolling
four-quarter earnings before interest, taxes, depreciation and amortization
(EBITDA), a minimum interest coverage ratio, a maximum leverage ratio, a maximum
amount of capital leases incurred and a maximum amount of total capital
expenditures. Bridge incurred transaction costs of $19,952 which were
capitalized to deferred financing costs related to obtaining the credit
facility. (See Note 8 regarding subsequent amendment to the Agreement)
In connection with the Agreement, Bridge has also entered into three swap
transactions pursuant to which it has exchanged its floating rate interest
obligations for a fixed rate payment obligation. These swap agreements hedge the
third and fourth tranches of the credit agreement. The first swap has a notional
principal amount of $136,625 at September 30, 1999 and a fixed rate of 6.035%
per annum for the period ending December 31, 2002. The second swap has a
notional principal amount of $100,000 at September 30, 1999 and a fixed rate of
5.8125% per annum ending June 29, 2001. The third swap has a notional principal
amount of $100,000 at September 30, 1999 and a fixed rate of 5.94% per annum
ending June 29, 2002. The fixing of the interest rates for this period minimizes
in part Bridge's exposure to the uncertainty of floating interest rates during
this period.
In connection with the private placement of SAVVIS' stock (Note 4), Bridge
received proceeds and issued junior subordinated variable rate notes. The notes
bear interest of 2% plus the otherwise applicable variable rate on any overdue
principal amount. The principal is due December 31, 2005.
6. STOCK OPTIONS
BRIDGE INFORMATION SYSTEMS -- Bridge has a Stock Option and Restricted
Stock Purchase Plan, which provides for stock option and other awards to
selected employees and officers of Bridge. The Board of Directors determines the
option price (not to be less than 100% of fair market value for incentive stock
options) at the date of grant. During the nine-month period ended September 30,
1999, 2,236,500 options to purchase common stock were granted with ratable
vesting over five years and expiring ten years from the date of grant.
F-70
<PAGE>
BRIDGE INFORMATION SYSTEMS, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
6. STOCK OPTIONS - (CONTINUED)
Bridge applies APB Opinion No. 25, Accounting for Stock Issue to Employees
("APB 25") and related interpretations in accounting for its plan. Accordingly,
compensation cost has been recognized for its stock option plan only to the
extent the fair market value of Bridge's common stock exceeded the exercise
price of nonqualified stock option grants at the grant date. Had compensation
cost for Bridge's stock option plan been determined based on the fair value at
the grant dates for awards under the plan consistent with the method of SFAS No.
123, Bridge's net loss would not have been significantly different than the net
loss reported.
SAVVIS COMMUNICATION CORPORATION -- Upon Bridge's acquisition of SAVVIS on
April 7, 1999, all outstanding SAVVIS stock options were exchanged for Bridge's
stock options and included as part of the purchase consideration based upon the
fair value of Bridge's options issued. Subsequently, on July 22, 1999, SAVVIS'
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,
SAVVIS granted options to purchase 3,639,000 shares of its common stock to
certain employees of Bridge. In that same period, SAVVIS granted options to
purchase up to 2,300,008 shares of its common stock to certain of its employees.
SAVVIS has elected to follow APB 25, and related interpretations in
accounting for its employee stock option plan. Had compensation cost for SAVVIS'
stock option plan been determined consistent with the provisions of SFAS No. 123
based on the fair value at the grant date, SAVVIS' pro forma net loss would not
have been significantly different than the net loss reported.
7. OTHER COMMITMENTS AND CONTINGENCIES
At the time of the DJM acquisition in 1998, DJM was party to certain
agreements between DJM and Cantor Fitzgerald Securities Corp. ("Cantor"), a
primary supplier of market data to DJM, and Market Data Corporation ("MDC"). As
of the date of the acquisition, certain provisions of these agreements were in
dispute between DJM and Cantor. In addition, Cantor has taken the position that
as a result of the acquisition, by virtue of certain provisions in the
agreements with Cantor and MDC, Bridge has incurred certain obligations separate
from DJM's obligations under those agreements to make payments to MDC and Cantor
with respect to terminals other than those to which DJM was providing
information prior to the acquisition.
Bridge has been in discussions with Cantor regarding settlement of this
dispute. Any such settlement would also require approval of Dow Jones. It is
uncertain at this time whether the Company will be able to settle this matter.
If settlement is not feasible, and litigation were to ensue, Bridge believes
that it has meritorious defense to Cantor claims.
Bridge also enters into agreements for the licensing of software and
information data bases to be used in connection with the Bridge's products.
Certain of these agreements provide for royalty payments based on the Company's
revenues or the number of workstations installed, as defined. Bridge has no
material commitments with respect to these licenses.
Bridge is subject to various other legal proceedings and claims which arise
in the ordinary course of its business.
Loss accruals for matters that have not been indemnified by the sellers and
relate directly to acquisitions have been established as part of the purchase
price (goodwill). When and if it is determined that such accruals are
unnecessary, they will be reversed and credited back to the purchase price
(goodwill). The ultimate resolution of these matters cannot be predicted with
certainty. However, based on the information currently available, management
does not believe they will have a material adverse effect on Bridge's financial
condition.
F-71
<PAGE>
BRIDGE INFORMATION SYSTEMS, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED )
8. SUBSEQUENT EVENTS:
PUBLIC OFFERING: The Board of Directors of the Company has authorized
management of SAVVIS to file a registration statement with the Securities and
Exchange Commission for the initial public offering of SAVVIS' common stock.
SAVVIS intends to use a portion of the proceeds to finance a portion of its
purchase of the Company's Internet protocol network assets and to pay a
preferential dividend to the Company.
STOCK OPTIONS: During the period from October through December 1999, SAVVIS
granted 2,543,258 stock options to employees of SAVVIS and the Company with an
exercise price of $.50 per share. Noncash compensation cost based upon the
difference between the exercise price and the imputed fair value of SAVVIS'
stock as if the respective option grant dates totaling approximately $53 million
will be recorded over the vesting periods of such options, which periods range
from immediate up to four years. Approximately $2,000 of noncash compensation
expense will be recorded in the fourth quarter of 1999.
DEBT RESTRUCTURING: At December 31, 1999, Bridge did not comply with
certain of the restrictive covenants contained in its Secured Credit Agreement
(the "Agreement"). The Agreement was amended on January 7, 2000 (the
"Amendment") to 1) permit the sale of Bridge's network assets to SAVVIS, 2)
allow for the subsequent public offering of SAVVIS shares, and 3) waive and
modify certain covenants in the Agreement related to EBITDA, interest coverage
ratio, leverage ratio and capital expenditure limitations. The Amendment was
also modified to require Bridge to repay approximately $250,000 of its
indebtedness under the Agreement on or before June 30, 2000. However, Bridge
must repay a separate loan in the amount of $100,000 before it can repay the
full amounts required under the amended Agreement. In addition, the Amendment
requires the public offering of SAVVIS shares to be completed by February 29,
2000. Failure to comply with this provision could result in acceleration of the
maturity of the outstanding balance due under the Agreement. The Amendment also
requires that all of the proceeds from the sale of assets to SAVVIS and the
preferential dividend, be applied to the indebtedness under the Agreement.
* * * * * *
F-72
<PAGE>
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<PAGE>
[This page intentionally left blank]
<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.
17,000,000 SHARES
[GRAPHIC OMITTED]
SAVVIS COMMUNICATIONS CORPORATION
COMMON STOCK
----------------
P R O S P E C T U S
----------------
Joint Book-Running Managers
MERRILL LYNCH & CO. MORGAN STANLEY DEAN WITTER
----------------
BEAR, STEARNS & CO. INC.
----------------
BANC OF AMERICA SECURITIES LLC
CIBC WORLD MARKETS
, 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 ........................ $ 130,081
NASD filing fee ............................. 30,500
Nasdaq National Market listing fee .......... 95,000
Blue sky fees and expenses .................. 10,000
Accounting fees and expenses ................ 575,000
Legal fees and expenses ..................... 600,000
Printing and engraving expenses ............. 500,000
Transfer agent fees and expenses ............ 3,500
Miscellaneous expenses ...................... 305,919
----------
Total .................................... $2,250,000
==========
</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 that a claim, issue or matter
has been successfully defended.
The Registrant's Amended and Restated Certificate of Incorporation, as
amended (the "Certificate") contains provisions that no director of the
Registrant shall be liable for breach of fiduciary duty as a director, except
for (1) any breach of the director's 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 Certificate 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 63,488,349 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 408,362,922 shares of its common stock, at an exercise price
below $.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 13,799,812 shares of its common stock at an exercise
price of $.10 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 28,789,781 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 61,681,951 shares of its common stock to a total
of 177 employees, at exercise prices ranging from $.01 to $.03 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 December 1999, the Registrant granted options to
purchase 3,639,000 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 2,300,008 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 1999, the Registrant granted to 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
II-2
<PAGE>
Registrant at 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 Purchase Agreement
3.1* Amended and Restated Certificate of Incorporation of the Registrant
3.2* Certificate of Amendment to Amended and Restated Certificate of Incorporation of the
Registrant
3.3* 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
5.2 Opinion of Steven M. Gallant, the Registrant's General Counsel, 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* Employment Agreement, dated December 20, 1999, between the Registrant
and Jack M. Finlayson
10.9* Letter Agreement, dated June 14, 1999, between the Registrant and David J. Frear
10.10* Letter Agreement, dated September 30, 1999, between the Registrant and James D. Mori
10.11* 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, as
Exhibit J a Form of Call Asset Transfer Agreement and as Exhibit K
the Sublease Agreement.
10.12 + Form of Network Services Agreement between SAVVIS Communications Corporation and
Bridge Information Systems, Inc.
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
NUMBER EXHIBIT DESCRIPTION
- ------------- --------------------
<S> <C>
10.13 + Form of Technical Services Agreement between SAVVIS Communications Corporation and
Bridge Information Systems, Inc.
10.14* Managed Network Agreement, dated January 31, 1995, between Sprint Communications
Company L.P. and Bridge Data Company
10.15* Amendment One to the Managed Network Agreement, dated August 23, 1995, between
Sprint Communications Company L.P. and Bridge Data Company
10.16* Amendment Two to the Managed Network Agreement, dated August 16, 1995, between
Sprint Communications Company L.P. and Bridge Data Company
10.17 +* Amendment Three to the Managed Network Agreement, dated March 1, 1996, between
Sprint Communications Company L.P. and Bridge Data Company
10.18 +* Amendment Four to the Managed Network Agreement, dated July 29, 1996, between Sprint
Communications Company L.P. and Bridge Data Company
10.19 +* Amendment Five to the Managed Network Agreement, dated December 5, 1996, between
Sprint Communications Company L.P. and Bridge Data Company
10.20 +* Amendment Six to the Managed Network Agreement, dated May 23, 1997, between Sprint
Communications Company L.P. and Bridge Data Company
10.21 +* Amendment Seven to the Managed Network Agreement, dated August 28, 1998, between
Sprint Communications Company L.P. and Bridge Data Company
10.22 +* Service Agreement, dated August 15, 1996, between the Registrant and IXC Carrier, Inc.
10.23 +* Amendment No. 1 to the Service Agreement, dated October 22, 1996, between the Registrant
and IXC Carrier, Inc.
10.24 +* Master Internet Services Agreement, effective June 4, 1999,
between the Registrant and UUNET Technologies, Inc.
10.25 +* InternetMCI Dedicated Access Agreement, dated April 16, 1998,
between the Registrant and networkMCI, Inc.
10.26 Registration Rights Agreement, dated February 27, 2000, among the Registrant, Welsh
Carson Anderson & Stowe VIII, L.P. and Bridge Information Systems, Inc.
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 Deloitte & Touche LLP
23.4 Consent of Hogan & Hartson L.L.P. (included in Exhibit 5.1)
23.5 Consent of Steven M. Gallant (included in Exhibit 5.2)
24.1* Power of attorney (included in the signature page to this registration
statement)
27.1* Financial Data Schedule
</TABLE>
- ------------------
* Previously filed.
+ Request for Confidential Treatment
II-4
<PAGE>
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.
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. 8 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 February 9, 2000.
SAVVIS COMMUNICATIONS CORPORATION
By: /s/ Robert McCormick
------------------------------------
Robert McCormick
Chief Executive Officer and
Chairman of the Board
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 8 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 Chief Executive Officer and February 9, 2000
- --------------------------- Chairman of the Board
Robert McCormick (principal executive officer)
* Executive Vice President, Chief February 9, 2000
- --------------------------- Financial Officer and Director
David J. Frear (principal financial officer and
principal accounting officer)
* Director February 9, 2000
- ---------------------------
Clyde A. Heintzelman
* Director February 9, 2000
- ---------------------------
Thomas McInerney
* Director February 9, 2000
- ---------------------------
Patrick Welsh
* Director February 9, 2000
- ---------------------------
Thomas M. Wendel
Director
- ---------------------------
Jack M. Finlayson
</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 Purchase Agreement
3.1* Amended and Restated Certificate of Incorporation of the Registrant
3.2* Certificate of Amendment to Amended and Restated Certificate of Incorporation of the
Registrant
3.3* 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
5.2 Opinion of Steven M. Gallant, the Registrant's General Counsel, 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* Employment Agreement, dated December 20, 1999, between the Registrant
and Jack M. Finlayson
10.9* Letter Agreement, dated June 14, 1999, between the Registrant and David J. Frear
10.10* Letter Agreement, dated September 30, 1999, between the Registrant and James D. Mori
10.11* 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, as
Exhibit J a Form of Call Asset Transfer Agreement and as Exhibit K
the Sublease Agreement.
10.12 + Form of Network Services Agreement between SAVVIS Communications Corporation and
Bridge Information Systems, Inc.
10.13 + Form of Technical Services Agreement between SAVVIS Communications Corporation and
Bridge Information Systems, Inc.
10.14* Managed Network Agreement, dated January 31, 1995, between Sprint Communications
Company L.P. and Bridge Data Company
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NUMBER EXHIBIT DESCRIPTION
- ------------- -----------------------------------------------------------------------------------------
<S> <C>
10.15* Amendment One to the Managed Network Agreement, dated August 23, 1995, between
Sprint Communications Company L.P. and Bridge Data Company
10.16* Amendment Two to the Managed Network Agreement, dated August 16, 1995, between
Sprint Communications Company L.P. and Bridge Data Company
10.17 +* Amendment Three to the Managed Network Agreement, dated March 1, 1996, between
Sprint Communications Company L.P. and Bridge Data Company
10.18 +* Amendment Four to the Managed Network Agreement, dated July 29, 1996, between Sprint
Communications Company L.P. and Bridge Data Company
10.19 +* Amendment Five to the Managed Network Agreement, dated December 5, 1996, between
Sprint Communications Company L.P. and Bridge Data Company
10.20 +* Amendment Six to the Managed Network Agreement, dated May 23, 1997, between Sprint
Communications Company L.P. and Bridge Data Company
10.21 +* Amendment Seven to the Managed Network Agreement, dated August 28, 1998, between
Sprint Communications Company L.P. and Bridge Data Company
10.22 +* Service Agreement, dated August 15, 1996, between the Registrant and IXC Carrier, Inc.
10.23 +* Amendment No. 1 to the Service Agreement, dated October 22, 1996, between the Registrant
and IXC Carrier, Inc.
10.24 +* Master Internet Services Agreement, effective June 4, 1999,
between the Registrant and UUNET Technologies, Inc.
10.25 +* InternetMCI Dedicated Access Agreement, dated April 16, 1998,
between the Registrant and networkMCI, Inc.
10.26 Registration Rights Agreement, dated February 27, 2000, among the Registrant, Welsh
Carson Anderson & Stowe VIII, L.P. and Bridge Information Systems, Inc.
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 Deloitte & Touche LLP
23.4 Consent of Hogan & Hartson L.L.P. (included in Exhibit 5.1)
23.5 Consent of Steven M. Gallant (included in Exhibit 5.2)
24.1* Power of attorney (included in the signature page to this registration
statement)
27.1* Financial Data Schedule
</TABLE>
- ------------------
* Previously filed.
+ Request for Confidential Treatment
================================================================================
SAVVIS COMMUNICATIONS CORPORATION
(A Delaware corporation)
17,000,000 Shares of Common Stock
PURCHASE AGREEMENT
Dated: February __, 2000
================================================================================
<PAGE>
SAVVIS COMMUNICATIONS CORPORATION
(A Delaware corporation)
17,000,000 Shares of Common Stock
(Par Value $.01 Per Share)
PURCHASE AGREEMENT
February __, 2000
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
MORGAN STANLEY & CO. INCORPORATED
BANC OF AMERICA SECURITIES LLC
BEAR, STEARNS & CO. INC
CIBC WORLD MARKETS CORP.
as Representatives of the several Underwriters
c/o Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
North Tower
World Financial Center
New York, New York 10281
and
c/o Morgan Stanley & Co. Incorporated
1585 Broadway
New York, New York 10036-8293
Ladies and Gentlemen:
SAVVIS Communications Corporation, a Delaware corporation (the
"Company"), and Bridge Information Systems, Inc., a Missouri corporation (the
"Selling Shareholder" or "Bridge") confirm their respective agreements with
Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated
("Merrill Lynch"), Morgan Stanley & Co. Incorporated ("Morgan Stanley") and each
of the other Underwriters named in Schedule A hereto (collectively, the
"Underwriters," which term shall also include any underwriter substituted as
hereinafter provided in Section 10 hereof), for whom Merrill Lynch, Morgan
Stanley, Banc of America Securities LLC, Bear, Stearns & Co. Inc. and CIBC World
Markets Corp. are acting as representatives (in such capacity, the
"Representatives"), with respect to (i) the issue and sale by the Company and
the Selling
1
<PAGE>
Shareholder, acting severally and not jointly, and the purchase by the
Underwriters, acting severally and not jointly, of the respective numbers of
shares of Common Stock, par value $.01 per share, of the Company ("Common
Stock") set forth in said Schedule A and B hereto and (ii) the grant by the
Selling Shareholder to the Underwriters, acting severally and not jointly, of
the option described in Section 2(b) hereof to purchase all or any part of
2,550,000 additional shares of Common Stock to cover over-allotments, if any.
The aforesaid 17,000,000 shares of Common Stock (the "Initial Securities") to be
purchased by the Underwriters and all or any part of the 2,550,000 shares of
Common Stock subject to the option described in Section 2(b) hereof (the "Option
Securities") are hereinafter called, collectively, the "Securities."
The Company and Bridge understand that the Underwriters propose to make
a public offering of the Securities as soon as the Representatives deem
advisable after this Agreement has been executed and delivered.
The Company, Bridge and the Underwriters agree that up to 1,275,000
shares of the Initial Securities to be purchased by the Underwriters (the
"Reserved Securities") shall be reserved for sale by the Underwriters to certain
eligible employees of the Company and its affiliates, immediate family members
of such eligible employees and persons having business relationships with the
Company (the "Reserved Share Participants"), as part of the distribution of the
Securities by the Underwriters, subject to the terms of this Agreement, the
applicable rules, regulations and interpretations of the National Association of
Securities Dealers, Inc. (the "NASD") and all other applicable laws, rules and
regulations. The Company intends to use First Union Securities, Inc. to
administer the sale of the Reserved Shares. To the extent that such Reserved
Securities are not orally confirmed for purchase by the Reserved Share
Participants by the end of the first business day after the date of this
Agreement, such Reserved Securities may be offered to the public as part of the
public offering contemplated hereby.
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-1 (No. 333-90881) covering the
registration of the Securities under the Securities Act of 1933, as amended (the
"1933 Act"), including the related preliminary prospectus or prospectus.
Promptly after execution and delivery of this Agreement, the Company will either
(i) prepare and file a prospectus in accordance with the provisions of Rule 430A
("Rule 430A") of the rules and regulations of the Commission under the 1933 Act
(the "1933 Act Regulations") and paragraph (b) of Rule 424 ("Rule 424(b)") of
the 1933 Act Regulations or (ii) if the Company has elected to rely upon Rule
434 ("Rule 434") of the 1933 Act Regulations, prepare and file a term sheet (a
"Term Sheet") in accordance with the provisions of Rule 434 and Rule 424(b). The
information included in such prospectus or in such Term Sheet, as the case may
be, that was omitted from such registration statement at the time it became
effective but that is deemed to be part of such registration statement at the
time it became effective (a) pursuant to paragraph (b) of Rule 430A is referred
to as "Rule 430A Information" or (b) pursuant to paragraph (d) of Rule 434 is
referred to as "Rule 434 Information." Each prospectus used before such
registration statement became effective, and any prospectus that omitted, as
applicable, the Rule 430A Information or the Rule 434 Information, that was used
after such effectiveness and prior
2
<PAGE>
to the execution and delivery of this Agreement, is herein called a "preliminary
prospectus." Such registration statement, including the exhibits thereto and
schedules thereto at the time it became effective and including the Rule 430A
Information and the Rule 434 Information, as applicable, is herein called the
"Registration Statement." Any registration statement filed pursuant to Rule
462(b) of the 1933 Act Regulations is herein referred to as the "Rule 462(b)
Registration Statement," and after such filing the term "Registration Statement"
shall include the Rule 462(b) Registration Statement. The final prospectus in
the form first furnished to the Underwriters for use in connection with the
offering of the Securities is herein called the "Prospectus." If Rule 434 is
relied on, the term "Prospectus" shall refer to the preliminary prospectus dated
January 31, 2000 together with the Term Sheet and all references in this
Agreement to the date of such Prospectus shall mean the date of the Term Sheet.
For purposes of this Agreement, all references to the Registration Statement,
any preliminary prospectus, the Prospectus or any Term Sheet or any amendment or
supplement to any of the foregoing shall be deemed to include the copy filed
with the Commission pursuant to its Electronic Data Gathering, Analysis and
Retrieval system ("EDGAR").
The Company intends to use a portion of the net proceeds of the
offering and sale of the Securities to finance the cash portion of the
consideration for its purchase (the "Network Transfer") of the Internet protocol
network assets (the "Network Assets") of Bridge. In connection with the Network
Transfer, the Company or certain of the Company's subsidiaries will enter into
with Bridge or certain of Bridge's subsidiaries the Master Establishment and
Transition Agreement, the Equipment Collocation Permit, the Network Services
Agreement, the Technical Services Agreement, the Administrative Services
Agreement, the Promissory Note and the Local Network Services Agreement, each
dated February __, 2000 (the "Network Transfer Agreements"). The execution and
delivery of the Network Transfer Agreements and the consummation of the Network
Transfer shall occur at or prior to Closing Time referred to in Section 2(c)
hereof.
SECTION 1. Representations and Warranties.
(a) Representations and Warranties by the Company and Bridge. Each of
the Company and Bridge represents and warrants to each Underwriter as of the
date hereof, as of Closing Time referred to in Section 2(c) hereof, and as of
each Date of Delivery (if any) referred to in Section 2(b) hereof, and agrees
with each Underwriter, as follows:
(i) Compliance with Registration Requirements. Each of the
Registration Statement and any Rule 462(b) Registration Statement has
become effective under the 1933 Act and no stop order suspending the
effectiveness of the Registration Statement or any Rule 462(b)
Registration Statement has been issued under the 1933 Act and no
proceedings for that purpose have been instituted or are pending or, to
the knowledge of the Company, are contemplated by the Commission, and
any request on the part of the Commission for additional information
has been complied with.
At the respective times the Registration Statement, any Rule
462(b) Registration Statement and any post-effective amendments thereto
became effective and at Closing Time
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(and, if any Option Securities are purchased, at the Date of Delivery),
the Registration Statement, the Rule 462(b) Registration Statement and
any amendments and supplements thereto complied and will comply in all
material respects with the requirements of the 1933 Act and the 1933
Act Regulations and did not and will not contain an untrue statement of
a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading, and
the Prospectus, any preliminary prospectus and any supplement thereto
or prospectus wrapper prepared in connection therewith, at their
respective times of issuance and at Closing Time, complied and will
comply in all material respects with any applicable laws or regulations
of foreign jurisdictions in which the Prospectus and such preliminary
prospectus, as amended or supplemented, if applicable, are distributed
in connection with the offer and sale of Reserved Securities. Neither
of the Prospectus nor any amendment or supplement thereto (including
any prospectus wrapper), at the time the Prospectus or any amendment or
supplement thereto were issued and at Closing Time (and, if any Option
Securities are purchased, at the Date of Delivery), included or will
include an untrue statement of a material fact or omitted or will omit
to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made,
not misleading. If Rule 434 is used, the Company will comply with the
requirements of Rule 434 and the Prospectus shall not be "materially
different," as such term is used in Rule 434, from the prospectus
included in the Registration Statement at the time it became effective.
The representations and warranties in this subsection shall not apply
to statements in or omissions from the Registration Statement or the
Prospectus made in reliance upon and in conformity with information
furnished to the Company in writing by any Underwriter through Merrill
Lynch and Morgan Stanley expressly for use in the Registration
Statement or the Prospectus.
Each preliminary prospectus and the prospectus filed as part
of the Registration Statement as originally filed or as part of any
amendment thereto, or filed pursuant to Rule 424 under the 1933 Act,
complied when so filed in all material respects with the 1933 Act
Regulations and each preliminary prospectus and the Prospectus
delivered to the Underwriters for use in connection with this offering
was identical to the electronically transmitted copies thereof filed
with the Commission pursuant to EDGAR, except to the extent permitted
by Regulation S-T.
(ii) Independent Accountants. The accountants who certified
the financial statements and supporting schedules included in the
Registration Statement are independent public accountants as required
by the 1933 Act and the 1933 Act Regulations.
(iii) Financial Statements. The financial statements of the
Company and its consolidated subsidiaries included in the Registration
Statement and the Prospectus, together with the related schedules and
notes, present fairly the financial position of the Company and its
consolidated subsidiaries at the dates indicated and the statement of
operations, changes in stockholders' equity (deficit) and cash flows of
the Company and its consolidated subsidiaries for the periods
specified; said financial statements have been prepared in
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conformity with generally accepted accounting principles ("GAAP")
applied on a consistent basis throughout the periods involved. The
supporting schedules included in the Registration Statement present
fairly in accordance with GAAP the information required to be stated
therein. The selected financial data and the summary financial
information included in the Prospectus present fairly the information
shown therein and have been compiled on a basis consistent with that of
the audited financial statements included in the Registration
Statement. The pro forma financial statements and the related notes
thereto included in the Registration Statement and the Prospectus
present fairly the information shown therein, have been prepared in
accordance with the Commission's rules and guidelines with respect to
pro forma financial statements and have been properly compiled on the
bases described therein, and the assumptions used in the preparation
thereof are reasonable and the adjustments used therein are appropriate
to give effect to the transactions and circumstances referred to
therein.
(iv) No Material Adverse Change in Business. Since the
respective dates as of which information is given in the Registration
Statement and the Prospectus, except as otherwise disclosed therein,
(1) there has been no material adverse change in the condition,
financial or otherwise, or in the earnings, business affairs or
business prospects of the Company and its subsidiaries considered as
one enterprise, whether or not arising in the ordinary course of
business (a "Material Adverse Effect"), (2) there have been no
transactions entered into by the Company or any of its subsidiaries,
other than those in the ordinary course of business, which are material
with respect to the Company and its subsidiaries considered as one
enterprise, and (3) there has been no dividend or distribution of any
kind declared, paid or made by the Company on any class of its capital
stock.
(v) Good Standing of the Company. The Company has been duly
organized and is validly existing as a corporation in good standing
under the laws of the State of Delaware and has corporate power and
authority to own, lease and operate its properties and to conduct its
business as described in the Prospectus and to enter into and perform
its obligations under this Agreement; and the Company is duly qualified
as a foreign corporation to transact business and is in good standing
in each other jurisdiction in which such qualification is required,
whether by reason of the ownership or leasing of property or the
conduct of business, except where the failure so to qualify or to be in
good standing would not result in a Material Adverse Effect.
(vi) Good Standing of Subsidiaries. Each "significant
subsidiary" of the Company (as such term is defined in Rule 1-02 of
Regulation S-X) (each, a "Subsidiary" and, collectively, the
"Subsidiaries") has been duly organized and is validly existing as a
corporation in good standing under the laws of the jurisdiction of its
incorporation, has corporate power and authority to own, lease and
operate its properties and to conduct its business as described in the
Prospectus and is duly qualified as a foreign corporation to transact
business and is in good standing in each jurisdiction in which such
qualification is required, whether by reason of the ownership or
leasing of property or the conduct of business, except where the
failure so to qualify or to be in good standing would not result in
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a Material Adverse Effect; except as otherwise disclosed in the
Registration Statement, all of the issued and outstanding capital stock
of each such Subsidiary has been duly authorized and validly issued, is
fully paid and non-assessable and is owned by the Company, directly or
through subsidiaries, free and clear of any security interest,
mortgage, pledge, lien, encumbrance, claim or equity; none of the
outstanding shares of capital stock of any Subsidiary was issued in
violation of the preemptive or similar rights of any securityholder of
such Subsidiary. The only subsidiaries of the Company are the
subsidiaries listed on Exhibit 21.1 to the Registration Statement.
(vii) Capitalization. The authorized, issued and outstanding
capital stock of the Company is as set forth in the Prospectus in the
column entitled "Actual" under the caption "Capitalization" (except for
subsequent issuances, if any, pursuant to this Agreement, pursuant to
reservations, agreements or employee benefit plans referred to in the
Prospectus or pursuant to the exercise of convertible securities or
options referred to in the Prospectus). The shares of issued and
outstanding capital stock of the Company, including the Securities to
be purchased by the Underwriters from the Selling Shareholder, have
been duly authorized and validly issued and are fully paid and
non-assessable; none of the outstanding shares of capital stock of the
Company, including the Securities to be purchased by the Underwriters
from the Selling Shareholder, was issued in violation of the preemptive
or other similar rights of any securityholder of the Company.
(viii) Authorization of Agreement. This Agreement has been
duly authorized, executed and delivered by the Company.
(ix) Authorization and Description of Securities. The
Securities have been duly authorized for issuance and sale to the
Underwriters pursuant to this Agreement and, when issued and delivered
by the Company pursuant to this Agreement, against payment of the
consideration set forth herein, will be validly issued, fully paid and
non-assessable; the Common Stock conforms to all statements relating
thereto contained in the Prospectus and such description conforms to
the rights set forth in the instruments defining the same; no holder of
the Securities will be subject to personal liability by reason of being
such a holder; and the issuance of the Securities is not subject to the
preemptive or other similar rights of any securityholder of the
Company.
(x) Absence of Defaults and Conflicts. Neither the Company nor
any of its subsidiaries is in violation of its charter or by-laws or in
default in the performance or observance of any obligation, agreement,
covenant or condition contained in any contract, indenture, mortgage,
deed of trust, loan or credit agreement, note, lease or other agreement
or instrument to which the Company or any of its subsidiaries is a
party or by which it or any of them may be bound, or to which any of
the property or assets of the Company or any subsidiary is subject
(collectively, "Agreements and Instruments") except for such defaults
that would not result in a Material Adverse Effect; and the execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated
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herein and in the Registration Statement (including the issuance and
sale of the Securities and the use of the proceeds from the sale of the
Securities as described in the Prospectus under the caption "Use of
Proceeds") and compliance by the Company with its obligations hereunder
have been duly authorized by all necessary corporate action and do not
and will not, whether with or without the giving of notice or passage
of time or both, conflict with or constitute a breach of, or default or
Repayment Event (as defined below) under, or result in the creation or
imposition of any lien, charge or encumbrance upon any property or
assets of the Company or any subsidiary pursuant to, the Agreements and
Instruments (except for such conflicts, breaches or defaults or liens,
charges or encumbrances that would not result in a Material Adverse
Effect), nor will such action result in any violation of the provisions
of the charter or by-laws of the Company or any subsidiary or any
applicable law, statute, rule, regulation, judgment, order, writ or
decree of any government, government instrumentality or court, domestic
or foreign, having jurisdiction over the Company or any subsidiary or
any of their assets, properties or operations. As used herein, a
"Repayment Event" means any event or condition which gives the holder
of any note, debenture or other evidence of indebtedness (or any person
acting on such holder's behalf) the right to require the repurchase,
redemption or repayment of all or a portion of such indebtedness by the
Company or any of its subsidiaries.
(xi) Absence of Labor Dispute. No labor dispute with the
employees of the Company or any subsidiary exists or, to the knowledge
of the Company, is imminent, and the Company is not aware of any
existing or imminent labor disturbance by the employees of any of its
or any subsidiary's principal suppliers, manufacturers, customers or
contractors, which, in either case, may reasonably be expected to
result in a Material Adverse Effect.
(xii) Absence of Proceedings. There is no action, suit,
proceeding, inquiry or investigation before or brought by any court or
governmental agency or body, domestic or foreign, now pending, or, to
the knowledge of the Company, threatened, against or affecting the
Company or any subsidiary, which is required to be disclosed in the
Registration Statement (other than as disclosed therein), or which
might reasonably be expected to result in a Material Adverse Effect, or
which might reasonably be expected to materially and adversely affect
the properties or assets thereof or the consummation of the
transactions contemplated in this Agreement or the consummation of the
Network Transfer or the performance by the Company of its obligations
hereunder; the aggregate of all pending legal or governmental
proceedings to which the Company or any subsidiary is a party or of
which any of their respective property or assets is the subject which
are not described in the Registration Statement, including ordinary
routine litigation incidental to the business, could not reasonably be
expected to result in a Material Adverse Effect.
(xiii) Accuracy of Exhibits. There are no contracts or
documents which are required to be described in the Registration
Statement or the Prospectus or to be filed as exhibits thereto which
have not been so described and filed as required.
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(xiv) Possession of Intellectual Property. The Company and its
subsidiaries own or possess, or can acquire on reasonable terms,
adequate patents, patent rights, licenses, inventions, copyrights,
know-how (including trade secrets and other unpatented and/or
unpatentable proprietary or confidential information, systems or
procedures), trademarks, service marks, trade names or other
intellectual property (collectively, "Intellectual Property") necessary
to carry on the business now operated by them, and neither the Company
nor any of its subsidiaries has received any notice or is otherwise
aware of any infringement of or conflict with asserted rights of others
with respect to any Intellectual Property or of any facts or
circumstances which would render any Intellectual Property invalid or
inadequate to protect the interest of the Company or any of its
subsidiaries therein, and which infringement or conflict (if the
subject of any unfavorable decision, ruling or finding) or invalidity
or inadequacy, singly or in the aggregate, would result in a Material
Adverse Effect.
(xv) Absence of Further Requirements. No filing with, or
authorization, approval, consent, license, order, registration,
qualification or decree of, any court or governmental authority or
agency is necessary or required for the performance by the Company of
its obligations hereunder, in connection with the offering, issuance or
sale of the Securities hereunder or the consummation of the
transactions contemplated by this Agreement, except (i) such as have
been already obtained or as may be required under the 1933 Act or the
1933 Act Regulations, the Securities Exchange Act of 1934, as amended,
or the rules and regulations promulgated thereunder, foreign, with
respect to the Reserved Securities, or state securities or blue sky
laws or by the Nasdaq National Market and (ii) such as have been
obtained under the laws and regulations of jurisdictions outside the
United States in which the Reserved Securities are offered.
(xvi) Possession of Licenses and Permits. Except as disclosed
in the Registration Statement, the Company and its subsidiaries possess
or will possess at Closing Time such permits, licenses, approvals,
consents and other authorizations (collectively, "Governmental
Licenses") issued by the appropriate federal, state, local or foreign
regulatory agencies or bodies necessary to conduct the business now
operated by them and to conduct their business as described in the
Prospectus, except where the failure to possess such Governmental
Licenses would not, singly or in the aggregate, have a Material Adverse
Effect; the Company and its subsidiaries are in compliance with the
terms and conditions of all such Governmental Licenses, except where
the failure so to comply would not, singly or in the aggregate, have a
Material Adverse Effect; all of the Governmental Licenses are valid and
in full force and effect, except when the invalidity of such
Governmental Licenses or the failure of such Governmental Licenses to
be in full force and effect would not have a Material Adverse Effect;
and neither the Company nor any of its subsidiaries has received any
notice of proceedings relating to the revocation or modification of any
such Governmental Licenses which, singly or in the aggregate, if the
subject of an unfavorable decision, ruling or finding, would result in
a Material Adverse Effect.
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(xvii) Title to Property. (A) The Company and its subsidiaries
have good and marketable title to all real property owned by the
Company and its subsidiaries and good title to all other properties
owned by them (except where the failure to have such good title would
not singly or in the aggregate have a Material Adverse Effect); in each
case, free and clear of all mortgages, pledges, liens, security
interests, claims, restrictions or encumbrances of any kind except such
as (x) are described in the Prospectus or (y) do not, singly or in the
aggregate, materially affect the value of such property and do not
interfere with the use made and proposed to be made of such property by
the Company or any of its subsidiaries; and (B) all of the leases and
subleases material to the business of the Company and its subsidiaries,
considered as one enterprise, and under which the Company or any of its
subsidiaries holds properties described in the Prospectus, are in full
force and effect, and neither the Company nor any subsidiary has any
notice of any material claim of any sort that has been asserted by
anyone adverse to the rights of the Company or any subsidiary under any
of the leases or subleases mentioned above, or affecting or questioning
the rights of the Company or such subsidiary to the continued
possession of the leased or subleased premises under any such lease or
sublease.
(xviii) Investment Company Act. The Company is not, and upon
the issuance and sale of the Securities as herein contemplated and the
application of the net proceeds therefrom as described in the
Prospectus will not be, an "investment company" or an entity
"controlled" by an "investment company" as such terms are defined in
the Investment Company Act of 1940, as amended (the "1940 Act").
(xix) Environmental Laws. Except as described in the
Registration Statement and except as would not, singly or in the
aggregate, result in a Material Adverse Effect, (A) neither the Company
nor any of its subsidiaries is in violation of any federal, state,
local or foreign statute, law, rule, regulation, ordinance, code,
policy or rule of common law or any judicial or administrative
interpretation thereof, including any judicial or administrative order,
consent, decree or judgment, relating to pollution or protection of
human health, the environment (including, without limitation, ambient
air, surface water, groundwater, land surface or subsurface strata) or
wildlife, including, without limitation, laws and regulations relating
to the release or threatened release of chemicals, pollutants,
contaminants, wastes, toxic substances, hazardous substances, petroleum
or petroleum products (collectively, "Hazardous Materials") or to the
manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous Materials (collectively,
"Environmental Laws"), (B) the Company and its subsidiaries have all
permits, authorizations and approvals required under any applicable
Environmental Laws and are each in compliance with their requirements,
(C) there are no pending or threatened administrative, regulatory or
judicial actions, suits, demands, demand letters, claims, liens,
notices of noncompliance or violation, investigation or proceedings
relating to any Environmental Law against the Company or any of its
subsidiaries and (D) there are no events or circumstances that might
reasonably be expected to form the basis of an order for clean-up or
remediation, or an action, suit or proceeding by any private party or
governmental body or agency, against or affecting the
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Company or any of its subsidiaries relating to Hazardous Materials or
any Environmental Laws.
(xx) Registration Rights. Except as disclosed in the
Registration Statement, there are no persons with registration rights
or other similar rights to have any securities registered pursuant to
the Registration Statement or otherwise registered by the Company under
the 1933 Act.
(xxi) Authorization of Network Transfer Agreements. Each of
the Network Transfer Agreements has been duly authorized by each of the
Company and its subsidiaries as a party thereto and, at Closing Time,
will be duly executed and delivered by such persons and will constitute
the legal, valid and binding obligations of each of such persons
enforceable against each of such persons in accordance with its terms,
except as the enforcement thereof may be limited by bankruptcy,
insolvency (including, without limitation, all laws relating to
fraudulent transfers), reorganization, moratorium or similar laws
affecting enforcement of creditors' rights generally and except as
enforcement thereof is subject to general principles of equity
(regardless of whether enforcement is considered in a proceeding in
equity or at law). The Network Transfer Agreements conform in all
material respects with the description thereof in the Prospectus.
(xxii) Network Transfer. The execution, delivery and
performance by the Company or its subsidiaries of the Network Transfer
Agreements and the consummation of the Network Transfer and compliance
by each of the Company, and its subsidiaries with their obligations
under the Network Transfer Agreements have been duly authorized by all
necessary corporate action and do not or will not, whether with or
without the giving of notice or passage of time or both, conflict with
or constitute a breach of, or default or Repayment Event under, or
result in the creation or imposition of any lien, charge or encumbrance
upon any property or assets of the Company or any of the Company's
subsidiaries or an acceleration of any indebtedness of the Company or
any of the Company's subsidiaries pursuant to any Agreement or
Instrument (except for such defaults that would not result in a
Material Adverse Effect), nor will such action result in any violation
of the provisions of the charter or by-laws of the Company or any of
the Company's subsidiaries or any applicable law, statute, rule or
regulation, judgment, order, writ or decree of any government,
government instrumentality or court, domestic or foreign, having
jurisdiction over the Company or any of the Company's subsidiaries or
their respective assets, properties or operations. Except as described
in the Prospectus, no filing with, or authorization, approval, consent,
license, order, registration, qualification or decree of, any court or
governmental authority or agency, domestic or foreign, is necessary or
required to be obtained or made by the Company for (1) the execution,
delivery and performance by the Company or its respective subsidiaries
of the Network Transfer Agreements or (2) the consummation of the
Network Transfer or any of the transactions contemplated thereby. No
consents or waivers from any other person or entity are required for
the execution, delivery and performance of the Network Transfer
Agreements or the consummation of the Network
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Transfer or any of the transactions contemplated thereby, other than
such consents and waivers as have been obtained or will be obtained
prior to Closing Time or such consents or waivers the failure to obtain
which would not have a Material Adverse Effect.
(xxiii) Reserved Share Program. (A) The Registration Statement
and the Prospectus comply in all material respects with any applicable
laws or regulations of foreign jurisdictions in which the Prospectus
are distributed in connection with the sale of the Reserved Securities,
and (B) no orders, permits, licenses, authorizations, consents,
approvals, registration or qualification of or with any government,
governmental instrumentality or court, other than such as have been
obtained, is necessary under the securities laws and regulations of
foreign jurisdictions in which the Reserved Securities are offered
outside the United States.
(xxiii) Year 2000 Compliance. The Company has reviewed its
operations and those of its subsidiaries to evaluate the extent to
which the business or operations of the Company or any of its
subsidiaries will be affected by the Year 2000 Problem (as defined
below); (A) as a result of such review, the Company has identified and
resolved all Year 2000 problems, except where the failure to do so
would not have a Material Adverse Effect; and (B) the Company believes
that the suppliers, vendors, customers or other material third parties
used or served by the Company and its subsidiaries have addressed the
Year 2000 Problem, except to the extent that a failure to address the
Year 2000 Problem by any supplier, vendor, customer or material third
party would not have a Material Adverse Effect. "Year 2000 Problem"
means any significant risk that the Company's computer hardware or
software applications and those of its subsidiaries (or of any
suppliers, vendors, customers or other material third parties) will
not, in the case of dates or time periods occurring after December 31,
1999, function at least effectively as in the case of dates or time
periods occurring prior to January 1, 2000.
(b) Representations and Warranties by Bridge. (i) Representations and
Warranties of Parent Company. Bridge represents and warrants to each Underwriter
as of the date hereof, as of Closing Time referred to in Section 2(c) hereof,
and as of each Date of Delivery (if any) referred to in Section 2(b) hereof, and
agrees with each Underwriter, as follows:
(A) No Material Adverse Change in Business. Since the
respective dates as of which information is given in the Registration
Statement and the Prospectus, except as otherwise disclosed therein,
there has been no material adverse change in the condition, financial
or otherwise, or in the earnings, business affairs or business
prospects of Bridge or its subsidiaries considered as one enterprise,
whether or not arising in the ordinary course of business (a "Bridge
Material Adverse Effect").
(B) Financial Statements. The financial statements of Bridge
and its consolidated subsidiaries included in the Registration
Statement and the Prospectus, together with the related schedules and
notes, present fairly the financial position of Bridge and its
consolidated subsidiaries at the dates indicated and the statement of
operations, changes in stockholders' equity (deficit) and cash flows of
Bridge and its
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consolidated subsidiaries for the periods specified; said financial
statements have been prepared in conformity with GAAP applied on a
consistent basis throughout the periods involved. The supporting
schedules included in the Registration Statement present fairly in
accordance with GAAP the information required to be stated therein. The
selected financial data of Bridge included in the Prospectus present
fairly the information shown therein and have been compiled on a basis
consistent with that of the audited and unaudited financial statements
of Bridge.
(C) Authorization of Agreement. This Agreement has been duly
authorized, executed and delivered by Bridge.
(D) Authorization of Network Transfer Agreements. Each of the
Network Transfer Agreements has been duly authorized by the parties
thereto and, at Closing Time, will be duly executed and delivered by
the parties thereto and will constitute the legal, valid and binding
obligations of each of the parties thereto enforceable against each of
such parties in accordance with its terms, except as the enforcement
thereof may be limited by bankruptcy, insolvency (including, without
limitation, all laws relating to fraudulent transfers), reorganization,
moratorium or similar laws affecting enforcement of creditors' rights
generally and except as enforcement thereof is subject to general
principles of equity (regardless of whether enforcement is considered
in a proceeding in equity or at law). The Network Transfer Agreements
conform in all material respects with the description thereof in the
Prospectus.
(E) Network Transfer. The execution, delivery and performance
by the Company or Bridge or their respective subsidiaries of the
Network Transfer Agreements and the consummation of the Network
Transfer and compliance by each of the Company, Bridge, and their
respective subsidiaries with their obligations under the Network
Transfer Agreements have been duly authorized by all necessary
corporate action and do not or will not, whether with or without the
giving of notice or passage of time or both, conflict with or
constitute a breach of, or default, Repayment Event or Bridge Repayment
Event (as described below) under, or result in the creation or
imposition of any lien, charge or encumbrance upon any property or
assets of Bridge, the Company or any of the Company's subsidiaries or
an acceleration of any indebtedness of Bridge, the Company or any of
the Company's subsidiaries pursuant to, (1) any Agreement or Instrument
or (2) any contract, indenture, mortgage, deed of trust, loan or credit
agreement, note, lease or other agreement or instrument to which Bridge
or any of its subsidiaries is a party or by which it or any of them may
be bound, or to which any of the property or assets of Bridge or any of
its subsidiaries is subject (collectively, "Bridge Agreements and
Instruments") (except in the case of clauses (1) and (2) for such
defaults that would not result in a Material Adverse Effect), nor will
such action result in any violation of the provisions of the charter or
by-laws of Bridge, the Company or any of the Company's subsidiaries or
any applicable law, statute, rule or regulation, judgment, order, writ
or decree of any government, government instrumentality
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or court, domestic or foreign, having jurisdiction over Bridge, the
Company or any of the Company's subsidiaries or their respective
assets, properties or operations. Except as disclosed in the
Prospectus, no filing with, or authorization, approval, consent,
license, order, registration, qualification or decree of, any court or
governmental authority or agency, domestic or foreign, is necessary or
required to be obtained or made by Bridge or the Company for (1) the
execution, delivery and performance by Bridge, the Company or their
respective subsidiaries of the Network Transfer Agreements or (2) the
consummation of the Network Transfer or any of the transactions
contemplated thereby. No consents or waivers from any other person or
entity are required for the execution, delivery and performance of the
Network Transfer Agreements or the consummation of the Network Transfer
or any of the transactions contemplated thereby, other than such
consents and waivers as have been obtained or will be obtained prior to
Closing Time or such consents or waivers the failure to obtain which
would not have a Material Adverse Effect. As used herein, a "Bridge
Repayment Event" means any event or condition which gives the holder of
any note, debenture or other evidence of indebtedness (or any person
acting on such holder's behalf) the right to require the repurchase,
redemption or repayment of all or a portion of such indebtedness by
Bridge or any of its subsidiaries.
(ii) Representations and Warranties of Selling Stockholder. The Selling
Shareholder represents and warrants to each Underwriter as of the date hereof,
as of Closing Time, and, if the Selling Shareholder is selling Option Securities
on a Date of Delivery, as of each such Date of Delivery, and agrees with each
Underwriter, as follows:
(A) Accurate Disclosure. To the best knowledge of the Selling
Shareholder, the representations and warranties of the Company
contained in Section 1(a) hereof are true and correct; the Selling
Shareholder has reviewed and is familiar with the Registration
Statement and the Prospectus and neither the Prospectus nor any
amendments or supplements thereto, including any prospectus wrapper,
includes any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading;
the Selling Shareholder is not prompted to sell the Securities to be
sold by the Selling Shareholder hereunder by any information concerning
the Company or any subsidiary of the Company which is not set forth in
the Prospectus.
(B) Authorization of Agreements. The Selling Shareholder has
the full right, power and authority to enter into this Agreement and a
Custody Agreement (the "Custody Agreement") and to sell, transfer and
deliver the Securities to be sold by the Selling Shareholder hereunder.
The execution and delivery of this Agreement and the Custody Agreement
and the sale and delivery of the Securities to be sold by the Selling
Shareholder and the consummation of the transactions contemplated
herein and compliance by the Selling Shareholder with its obligations
hereunder have been duly authorized by the Selling Shareholder and do
not and will not, whether with or without the giving of notice or
passage of time or both, conflict with or constitute a breach of, or
default under, or result in the
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creation or imposition of any tax, lien, charge or encumbrance upon the
Securities to be sold by the Selling Shareholder or any property or
assets of the Selling Shareholder pursuant to any contract, indenture,
mortgage, deed of trust, loan or credit agreement, note license, lease
or other agreement or instrument to which the Selling Shareholder is a
party or by which the Selling Shareholder may be bound, or to which any
of the property or assets of the Selling Shareholder, is subject, nor
will such action result in any violation of the provisions of the
charter or by-laws or other organizational instrument of the Selling
Shareholder, if applicable, or any applicable treaty, law, statute,
rule, regulation, judgment, order, writ or decree of any government,
government instrumentality or court, domestic or foreign, having
jurisdiction over the Selling Shareholder or any of its properties.
(C) Direct Holder of Securities; Title to Securities. The
Initial Securities to be sold by the Selling Shareholder pursuant to
this Agreement are certificated securities in registered form and are
not held by or through any securities intermediary within the meaning
of the New York Uniform Commercial Code ("NYUCC"). The Selling
Shareholder has, and, at Closing Time and, if any Option Securities are
purchased, on the Date of Delivery, will have, full right, power and
authority to hold, sell, transfer and deliver the Securities to be sold
by the Selling Shareholder hereunder. Upon the delivery to DTC or its
agent of the Securities registered in the name of Cede & Co., as
nominee for DTC, and the crediting by DTC of the Securities to the
securities accounts of the several Underwriters with DTC, DTC will be a
"protected purchaser" of the Securities (as defined in Section 8-303 of
the NYUCC) and will acquire its interest in the Securities (including,
without limitation, all rights that the Selling Shareholder had or has
the power to transfer in such Securities) free of any adverse claim.
Upon the payment of the purchase price for the Securities and the
crediting by DTC of the Securities to the securities accounts of the
several Underwriters with DTC, each of the Underwriters will acquire a
valid security entitlement (within the meaning of Section 8-501 of the
NYUCC) in respect of the Securities to be purchased by it, and no
action (whether framed in conversion, replevin, constructive trust,
equitable lien, or other theory) based on an adverse claim to such
Securities may be asserted against the Underwriters.
(D) Due Execution of Custody Agreement. The Selling
Shareholder has duly executed and delivered, in the form heretofore
furnished to the Representatives, the Custody Agreement with the
Company, as custodian (the "Custodian"); the Custodian is authorized to
deliver the Securities to be sold by the Selling Shareholder hereunder
and to accept payment therefor.
(E) Absence of Manipulation. The Selling Shareholder has not
taken, and will not take, directly or indirectly, any action which is
designed to or which has constituted or which might reasonably be
expected to cause or result in stabilization or manipulation of the
price of any security of the Company to facilitate the sale or resale
of the Securities.
(F) Absence of Further Requirements. No filing with, or
consent, approval, authorization, order, registration, qualification or
decree of, any court or governmental
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authority or agency, domestic or foreign, is necessary or required for
the performance by the Selling Shareholder of its obligations hereunder
or in the Custody Agreement, or in connection with the sale and
delivery of the Securities hereunder or the consummation of the
transactions contemplated by this Agreement, except (i) such as may
have previously been made or obtained or as may be required under the
1933 Act or the 1933 Act Regulations or state securities laws and (ii)
such as have been obtained under the laws and regulations of
jurisdictions outside the United States in which the Reserved
Securities are offered.
(G) Certificates Suitable for Transfer. Certificates for all
of the Securities to be sold by the Selling Shareholder pursuant to
this Agreement, in suitable form for transfer by delivery or
accompanied by duly executed instruments of transfer or assignment in
blank with signatures guaranteed, have been placed in custody with the
Custodian with irrevocable conditional instructions to deliver such
Securities to the Underwriters pursuant to this Agreement.
(H) No Association with NASD. Neither the Selling Stockholder
nor any of its affiliates directly, or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common
control with, or has any other association with (within the meaning of
Article I, Section 1(m) of the By-laws of the National Association of
Securities Dealers, Inc.), any member firm of the National Association
of Securities Dealers, Inc., except for Welsh, Carson, Anderson & Stowe
and Bridge Trading Company.
(c) Officer's Certificates. Any certificate signed by any officer of
the Company, any of its subsidiaries or Bridge delivered to the Representatives
or to counsel for the Underwriters shall be deemed a representation and warranty
by the Company or Bridge, as the case may be, to each Underwriter as to the
matters covered thereby; and any certificate signed by or on behalf of the
Selling Shareholder as such and delivered to the Representatives or to counsel
for the Underwriters pursuant to the terms of this Agreement shall be deemed a
representation and warranty by the Selling Shareholder to the Underwriters as to
the matter covered thereby.
SECTION 2. Sale and Delivery to Underwriters; Closing.
(a) Initial Securities. On the basis of the representations and
warranties herein contained and subject to the terms and conditions herein set
forth, the Company and the Selling Shareholder, severally and not jointly, agree
to sell to each Underwriter, severally and not jointly, and each Underwriter,
severally and not jointly, agrees to purchase from the Company and the Selling
Shareholder, at the price per share set forth in Schedule C, that proportion of
the number of Initial Securities set forth in Schedule B opposite the name of
the Company or the Selling Shareholder, as the case may be, which the number of
Initial Securities set forth in Schedule A opposite the name of such
Underwriter, plus any additional number of Initial Securities which such
Underwriter may become obligated to purchase pursuant to the provisions of
Section 10 hereof, bears to the total number of Initial Securities, subject, in
each case, to such adjustments among the Underwriters as
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the Representatives in their sole discretion shall make to eliminate any sales
or purchases of fractional securities.
(b) Option Securities. In addition, on the basis of the representations
and warranties herein contained and subject to the terms and conditions herein
set forth, the Selling Shareholder, acting severally and not jointly, hereby
grants an option to the Underwriters, severally and not jointly, to purchase up
to an additional 2,550,000 shares of Common Stock, as set forth in Schedule B,
at the price per share set forth in Schedule C, less an amount per share equal
to any dividends or distributions declared by the Company and payable on the
Initial Securities but not payable on the Option Securities. The option hereby
granted will expire 30 days after the date hereof and may be exercised in whole
or in part from time to time only for the purpose of covering over-allotments
which may be made in connection with the offering and distribution of the
Initial Securities upon notice by the Representatives to the Selling Shareholder
setting forth the number of Option Securities as to which the several
Underwriters are then exercising the option and the time and date of payment and
delivery for such Option Securities. Any such time and date of delivery (a "Date
of Delivery") shall be determined by the Representatives, but shall not be later
than seven full business days after the exercise of said option, nor in any
event prior to Closing Time, as hereinafter defined. If the option is exercised
as to all or any portion of the Option Securities, each of the Underwriters,
acting severally and not jointly, will purchase that proportion of the total
number of Option Securities then being purchased which the number of Initial
Securities set forth in Schedule A opposite the name of such Underwriter bears
to the total number of Initial Securities, subject in each case to such
adjustments as the Representatives in their discretion shall make to eliminate
any sales or purchases of fractional shares.
(c) Payment. Payment of the purchase price for, and delivery of
certificates for, the Initial Securities shall be made at the offices of
Shearman & Sterling, 599 Lexington Avenue, New York, New York 10022, or at such
other place as shall be agreed upon by the Representatives, the Company and
Bridge, at 9:00 A.M. (Eastern time) on the third (fourth, if the pricing occurs
after 4:30 P.M. (Eastern time) on any given day) business day after the date
hereof (unless postponed in accordance with the provisions of Section 10), or
such other time not later than ten business days after such date as shall be
agreed upon by the Representatives, the Company and Bridge (such time and date
of payment and delivery being herein called "Closing Time").
In addition, in the event that any or all of the Option Securities are
purchased by the Underwriters, payment of the purchase price for, and delivery
of certificates for, such Option Securities shall be made at the above-mentioned
offices, or at such other place as shall be agreed upon by the Representatives
and the Selling Shareholder, on each Date of Delivery as specified in the notice
from the Representatives to the Selling Shareholder.
Payment shall be made to the Company and the Selling Shareholder by
wire transfer of immediately available funds to a bank account designated by the
Company and the Custodian pursuant to Bridge's Custody Agreement, as the case
may be, against delivery to the Representatives for the respective accounts of
the Underwriters of certificates for the Securities to be purchased by
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them. It is understood that each Underwriter has authorized the Representatives,
for its account, to accept delivery of, receipt for, and make payment of the
purchase price for, the Initial Securities and the Option Securities, if any,
which it has agreed to purchase. Each of Merrill Lynch or Morgan Stanley,
individually and not as a representative of the Underwriters, may (but shall not
be obligated to) make payment of the purchase price for the Initial Securities
or the Option Securities, if any, to be purchased by any Underwriter whose funds
have not been received by Closing Time or the relevant Date of Delivery, as the
case may be, but such payment shall not relieve such Underwriter from its
obligations hereunder.
(d) Denominations; Registration. Certificates for the Initial
Securities and the Option Securities, if any, shall be in such denominations and
registered in such names as the Representatives may request in writing at least
one full business day before Closing Time or the relevant Date of Delivery, as
the case may be. The certificates for the Initial Securities and the Option
Securities, if any, will be made available for examination and packaging by the
Representatives in The City of New York not later than 10:00 A.M. (Eastern time)
on the business day prior to Closing Time or the relevant Date of Delivery, as
the case may be.
(e) Appointment of Qualified Independent Underwriter. The Company and
Bridge hereby confirm their engagement of Bear, Stearns & Co. Inc. as, and Bear,
Stearns & Co. Inc. hereby confirms its agreement with the Company and Bridge to
render services as, a "qualified independent underwriter" within the meaning of
Rule 2720 of the Conduct Rules of the National Association of Securities
Dealers, Inc. with respect to the offering and sale of the Securities. Bear,
Stearns & Co. Inc., solely in its capacity as qualified independent underwriter
and not otherwise, is referred to herein as the "Independent Underwriter."
SECTION 3. Covenants of the Company. The Company covenants with each
Underwriter as follows:
(a) Compliance with Securities Regulations and Commission
Requests. The Company, subject to Section 3(b) hereof, will comply with
the requirements of Rule 430A or Rule 434, as applicable, and will
notify the Representatives immediately, and confirm the notice in
writing, (i) when any post-effective amendment to the Registration
Statement shall become effective, or any supplement to the Prospectus
or any amended Prospectus shall have been filed, (ii) of the receipt of
any comments from the Commission, (iii) of any request by the
Commission for any amendment to the Registration Statement or any
amendment or supplement to the Prospectus or for additional
information, and (iv) of the issuance by the Commission of any stop
order suspending the effectiveness of the Registration Statement or of
any order preventing or suspending the use of any preliminary
prospectus, or of the initiation or threatening of any proceedings for
any of such purposes. The Company will promptly effect the filings
necessary pursuant to Rule 424(b) and will take such steps as it deems
necessary to ascertain promptly whether the form of prospectus
transmitted for filing under Rule 424(b) was received for filing by the
Commission and, in the event that it was not, it will promptly file
such prospectus. The Company will make every reasonable effort
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to prevent the issuance of any stop order and, if any stop order is
issued, to obtain the lifting thereof at the earliest possible moment.
(b) Filing of Amendments. The Company will give the
Representatives notice of its intention to file or prepare any
amendment to the Registration Statement (including any filing under
Rule 462(b)), any Term Sheet or any amendment, supplement or revision
to either the prospectus included in the Registration Statement at the
time it became effective or to the Prospectus, will furnish the
Representatives with copies of any such documents a reasonable amount
of time prior to such proposed filing or use, as the case may be, and
will not file or use any such document to which the Representatives or
counsel for the Underwriters shall object.
(c) Delivery of Registration Statements. The Company has
furnished or will deliver to the Representatives and counsel for the
Underwriters, without charge, signed copies of the Registration
Statement as originally filed and of each amendment thereto (including
exhibits filed therewith or incorporated by reference therein) and
signed copies of all consents and certificates of experts, and will
also deliver to the Representatives, without charge, a conformed copy
of the Registration Statement as originally filed and of each amendment
thereto (without exhibits) for each of the Underwriters. The copies of
the Registration Statement and each amendment thereto furnished to the
Underwriters will be identical to the electronically transmitted copies
thereof filed with the Commission pursuant to EDGAR, except to the
extent permitted by Regulation S-T.
(d) Delivery of Prospectus. The Company has delivered to each
Underwriter, without charge, as many copies of each preliminary
prospectus as such Underwriter reasonably requested, and the Company
hereby consents to the use of such copies for purposes permitted by the
1933 Act. The Company will furnish to each Underwriter, without charge,
during the period when the Prospectus is required to be delivered under
the 1933 Act or the Securities Exchange Act of 1934 (the "1934 Act"),
such number of copies of the Prospectus (as amended or supplemented) as
such Underwriter may reasonably request. The Prospectus and any
amendments or supplements thereto furnished to the Underwriters will be
identical to the electronically transmitted copies thereof filed with
the Commission pursuant to EDGAR, except to the extent permitted by
Regulation S-T.
(e) Continued Compliance with Securities Laws. The Company
will comply with the 1933 Act and the 1933 Act Regulations so as to
permit the completion of the distribution of the Securities as
contemplated in this Agreement and in the Prospectus. If at any time
when a prospectus is required by the 1933 Act to be delivered in
connection with sales of the Securities, any event shall occur or
condition shall exist as a result of which it is necessary, in the
opinion of counsel for the Underwriters or for the Company, to amend
the Registration Statement or amend or supplement the Prospectus in
order that the Prospectus will not include any untrue statements of a
material fact or omit to state a material fact necessary in order to
make the statements therein not misleading in the light of the
circumstances existing
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<PAGE>
at the time it is delivered to a purchaser, or if it shall be
necessary, in the opinion of such counsel, at any such time to amend
the Registration Statement or amend or supplement the Prospectus in
order to comply with the requirements of the 1933 Act or the 1933 Act
Regulations, the Company will promptly prepare and file with the
Commission, subject to Section 3(b), such amendment or supplement as
may be necessary to correct such statement or omission or to make the
Registration Statement or the Prospectus comply with such requirements,
and the Company will furnish to the Underwriters such number of copies
of such amendment or supplement as the Underwriters may reasonably
request.
(f) Blue Sky Qualifications. The Company will use its best
efforts, in cooperation with the Underwriters, to qualify the
Securities for offering and sale under the applicable securities laws
of such states and other jurisdictions (domestic or foreign) as the
Representatives may designate and to maintain such qualifications in
effect for a period of not less than one year from the later of the
effective date of the Registration Statement and any Rule 462(b)
Registration Statement; provided, however, that the Company shall not
be obligated to file any general consent to service of process or to
qualify as a foreign corporation or as a dealer in securities in any
jurisdiction in which it is not so qualified or to subject itself to
taxation in respect of doing business in any jurisdiction in which it
is not otherwise so subject. In each jurisdiction in which the
Securities have been so qualified, the Company will file such
statements and reports as may be required by the laws of such
jurisdiction to continue such qualification in effect for a period of
not less than one year from the effective date of the Registration
Statement and any Rule 462(b) Registration Statement.
(g) Rule 158. The Company will timely file such reports
pursuant to the 1934 Act as are necessary in order to make generally
available to its securityholders as soon as practicable an earnings
statement for the purposes of, and to provide the benefits contemplated
by, the last paragraph of Section 11(a) of the 1933 Act.
(h) Use of Proceeds. The Company will use the net proceeds
received by it from the sale of the Securities in the manner specified
in the Prospectus under "Use of Proceeds."
(i) Listing. The Company will use its best efforts to effect
and maintain the quotation of the Securities on the Nasdaq National
Market and will file with the Nasdaq National Market all documents and
notices required by the Nasdaq National Market of companies that have
securities that are traded in the over-the-counter market and
quotations for which are reported by the Nasdaq National Market.
(j) Restriction on Sale of Securities. During a period of 180
days from the date of the Prospectus, the Company will not, without the
prior written consent of Merrill Lynch and Morgan Stanley, (i) directly
or indirectly, offer, pledge, sell, contract to sell, sell any option
or contract to purchase, purchase any option or contract to sell, grant
any option, right or warrant to purchase or otherwise transfer or
dispose of any share of Common Stock or any securities convertible into
or exercisable or exchangeable for Common Stock or file any
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registration statement under the 1933 Act with respect to any of the
foregoing, (ii) enter into any swap or any other agreement or any
transaction that transfers, in whole or in part, directly or
indirectly, the economic consequence of ownership of the Common Stock;
(iii) waive the lock-ups relating to any options granted under the
Incentive Stock Option Agreement in place as of January 14, 2000 or
(iv) waive the provisions of any "lock-up" agreement between the
Company and a stockholder existing on the date hereof, whether any such
swap or transaction described in clause (i) or (ii) above is to be
settled by delivery of Common Stock or such other securities, in cash
or otherwise. The foregoing sentence shall not apply to (A) the
Securities to be sold hereunder, (B) any shares of Common Stock issued
by the Company upon the exercise of an option or warrant or the
conversion of a security outstanding on the date hereof and referred to
in the Prospectus, (C) any shares of Common Stock issued or options to
purchase Common Stock granted pursuant to existing employee benefit
plans of the Company referred to in the Prospectus or (D) any shares of
Common Stock issued pursuant to any non-employee director stock plan.
(k) Reporting Requirements. The Company, during the period
when the Prospectus is required to be delivered under the 1933 Act or
the 1934 Act, will file all documents required to be filed with the
Commission pursuant to the 1934 Act within the time periods required by
the 1934 Act and the rules and regulations of the Commission
thereunder.
(l) Compliance with NASD Rules. The Company hereby agrees that
it will ensure that the Reserved Securities will be restricted as
required by the NASD rules from sale, transfer, assignment, pledge or
hypothecation for a period of three months following the date of this
Agreement. The Underwriters will notify the Company as to which persons
will need to be so restricted. At the request of the Underwriters, the
Company will direct the transfer agent to place a stop transfer
restriction upon such securities for such period of time. Should the
Company release, or seek to release, from such restrictions any of the
Reserved Securities, the Company agrees to reimburse the Underwriters
for any reasonable expenses (including, without limitation, legal
expenses) they incur in connection with such release.
(m) Compliance with Rule 463. The Company will comply with
Rule 463 of the 1933 Act Regulations.
SECTION 4. Payment of Expenses. (a) Expenses. The Company and Bridge
will pay or cause to be paid all expenses incident to the performance of their
obligations under this Agreement, including (i) the preparation, printing and
filing of the Registration Statement (including financial statements and
exhibits) as originally filed and of each amendment thereto, (ii) the
preparation, issuance and delivery of the certificates for the Securities to the
Underwriters, including any stock or other transfer taxes and any stamp or other
duties payable upon the sale, issuance or delivery of the Securities to the
Underwriters, (iii) the fees and disbursements of the Company's counsel,
accountants and other advisors, (iv) the filing fees incident to any necessary
filings and qualification of the Securities, under securities laws in accordance
with the provisions of Section 3(f)
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hereof and the reasonable fees and disbursements of counsel for the Underwriters
in connection therewith and in connection with the preparation of the Blue Sky
Survey and any supplement thereto, (v) the printing and delivery to the
Underwriters of copies of each preliminary prospectus, any Term Sheets and of
the Prospectus and any amendments or supplements thereto, (vi) the preparation,
printing and delivery to the Underwriters of copies of the Blue Sky Survey and
any supplement thereto, (vii) the fees and expenses of any transfer agent or
registrar for the Securities, (viii) the filing fees incident to, and the
reasonable fees and disbursements of counsel to the Underwriters in connection
with, the review by the National Association of Securities Dealers, Inc. (the
"NASD") of the terms of the sale of the Securities, (ix) the fees and expenses
incurred in connection with the inclusion of the Securities in the Nasdaq
National Market, (x) all costs and expenses of the Underwriters, including the
fees and disbursements of counsel for the Underwriters, in connection with
matters related to the Reserved Securities which are designated by the Company
for sale to Reserved Share Participants, (xi) the fees and expenses of the
Independent Underwriter and (xii) half of the roadshow expenses, except for the
expenses relating to lodging and meals (which will be covered by the respective
parties).
(b) Expenses of the Selling Shareholder. The Selling Shareholder will
pay all expenses incident to the performance of its obligation under, and the
consummation of the transactions contemplated by, this Agreement, including (i)
any stamp duties, capital duties and stock transfer taxes, if any, payable upon
the sale of the Securities to the Underwriters, and their transfer between the
Underwriters pursuant to an agreement between such Underwriters, and (ii) the
fees and disbursements of its counsel and accountants.
(c) Termination of Agreement. If this Agreement is terminated by the
Representatives in accordance with the provisions of Section 5, Section 9(a)(i)
or Section 11 hereof, the Company and Bridge shall reimburse the Underwriters
for all of their out-of-pocket expenses, including the reasonable fees and
disbursements of counsel for the Underwriters.
(d) Allocation of Expenses. The provisions of this Section shall not
affect any agreement that the Company and Bridge may make for the sharing of
such costs and expenses.
SECTION 5. Conditions of Underwriters' Obligations. The obligations of
the several Underwriters hereunder are subject to the accuracy of the
representations and warranties of the Company and Bridge contained in Section 1
hereof or in certificates of any officer of the Company, Bridge or any
subsidiary of the Company delivered pursuant to the provisions hereof, to the
performance by the Company and Bridge of their respective covenants and other
obligations hereunder, and to the following further conditions:
(a) Effectiveness of Registration Statement. The Registration
Statement, including any Rule 462(b) Registration Statement, has become
effective and at Closing Time no stop order suspending the
effectiveness of the Registration Statement shall have been issued
under the 1933 Act or proceedings therefor initiated or threatened by
the Commission, and any request on the part of the Commission for
additional information shall have been
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complied with to the reasonable satisfaction of counsel to the
Underwriters. A prospectus containing the Rule 430A Information shall
have been filed with the Commission in accordance with Rule 424(b) (or
a post-effective amendment providing such information shall have been
filed and declared effective in accordance with the requirements of
Rule 430A) or, if the Company has elected to rely upon Rule 434, a Term
Sheet shall have been filed with the Commission in accordance with Rule
424(b).
(b) Opinion of Counsel for Company. At Closing Time, the
Representatives shall have received the favorable opinion, dated as of
Closing Time, of Hogan & Hartson, L.L.P., counsel for the Company, in
form and substance satisfactory to counsel for the Underwriters,
together with signed or reproduced copies of such letter for each of
the other Underwriters to the effect set forth in Exhibit A hereto and
to such further effect as counsel to the Underwriters may reasonably
request.
(c) Opinion of General Counsel of Company. At Closing Time,
the Representatives shall have received the favorable opinion, dated as
of Closing Time, of Steven Gallant, Vice President, Secretary and
General Counsel of the Company, in form and substance satisfactory to
counsel for the Underwriters, together with signed or reproduced copies
of such letter for each of the other Underwriters to the effect set
forth in Exhibit B hereto and to such further effect as counsel to the
Underwriters may reasonably request.
(d) Opinions of French and United Kingdom Regulatory Counsel
for Company. At Closing Time, the Representatives shall have received
the favorable opinions, dated as of Closing Time, of Bird & Bird,
French and United Kingdom regulatory counsel for the Company, in form
and substance satisfactory to counsel for the Underwriters, together
with signed or reproduced copies of such letter for each of the other
Underwriters to the effect set forth in Exhibit C and Exhibit D hereto
and to such further effect as counsel to the Underwriters may
reasonably request.
(e) Opinion of French Corporate Counsel for Company. At
Closing Time, the Representatives shall have received the favorable
opinion, dated as of Closing Time, of Salans, Hertfeld & Heilbronn,
French corporate counsel for the Company, in form and substance
satisfactory to counsel for the Underwriters, together with signed or
reproduced copies of such letter for each of the other Underwriters to
the effect set forth in Exhibit E hereto and to such further effect as
counsel to the Underwriters may reasonably request.
(f) Opinion of Special United Kingdom Corporate Counsel for
Company. At Closing Time, the Representatives shall have received the
favorable opinion, dated as of Closing Time, of Bryan Cave, special
United Kingdom corporate counsel for the Company, in form and substance
satisfactory to counsel for the Underwriters, together with signed or
reproduced copies of such letter for each of the other Underwriters to
the effect set forth in Exhibit F hereto and to such further effect as
counsel to the Underwriters may reasonably request.
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(g) Opinion of German Regulatory Counsel for Company. At
Closing Time, the Representatives shall have received the favorable
opinion, dated as of Closing Time, of Schuermann & Partner, German
regulatory counsel for the Company, in form and substance satisfactory
to counsel for the Underwriters, together with signed or reproduced
copies of such letter for each of the other Underwriters to the effect
set forth in Exhibit G hereto and to such further effect as counsel to
the Underwriters may reasonably request.
(h) Opinion of Italian Regulatory Counsel for Company. At
Closing Time, the Representatives shall have received the favorable
opinion, dated as of Closing Time, of Piergrossi Villa Manca Graziadci,
Italian regulatory counsel for the Company, in form and substance
satisfactory to counsel for the Underwriters, together with signed or
reproduced copies of such letter for each of the other Underwriters to
the effect set forth in Exhibit H hereto and to such further effect as
counsel to the Underwriters may reasonably request.
(i) Opinion of Japanese Regulatory Counsel for Company. At
Closing Time, the Representatives shall have received the favorable
opinion, dated as of Closing Time, of Anderson Mori, Japanese
regulatory counsel for the Company, in form and substance satisfactory
to counsel for the Underwriters, together with signed or reproduced
copies of such letter for each of the other Underwriters to the effect
set forth in Exhibit I hereto and to such further effect as counsel to
the Underwriters may reasonably request.
(j) Opinion of General Counsel of Bridge. At Closing Time, the
Representatives shall have received the favorable opinion, dated as of
Closing Time, of Zachary Snow, counsel for Bridge, in form and
substance satisfactory to counsel for the Underwriters, together with
original or reproduced copies of such letter for each of the other
Underwriters to the effect set forth in Exhibit J hereto and to such
further effect as counsel to the Underwriters may reasonably request.
(k) Opinion of Counsel for Bridge. At Closing Time, the
Representatives shall have received the favorable opinion, dated as of
Closing Time, of Bryan Cave LLP, counsel for the Bridge, in form and
substance satisfactory to counsel for the Underwriters, together with
signed or reproduced copies of such letter for each of the other
Underwriters to the effect set forth in Exhibit K hereto and to such
further effect as counsel to the Underwriters may reasonably request.
(l) Opinion of Counsel for Underwriters. At Closing Time, the
Representatives shall have received the favorable opinion, dated as of
Closing Time, of Shearman & Sterling, counsel for the Underwriters,
together with signed or reproduced copies of such letter for each of
the other Underwriters with respect to the matters set forth in clauses
(C), (D) (solely at to due authorization and valid issuance of the
Shares and as to preemptive or other similar rights arising by
operation of law or under the charter or by-laws of the Company), (G)
(solely as to the information in the Prospectus under "Description of
Capital Stock-Common Stock") and the last paragraph of Exhibit A
hereto. In giving such opinion
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such counsel may rely, as to all matters governed by the laws of
jurisdictions other than the law of the State of New York, the federal
law of the United States and the General Corporation Law of the State
of Delaware, upon the opinions of counsel satisfactory to the
Representatives. Such counsel may also state that, insofar as such
opinion involves factual matters, they have relied, to the extent they
deem proper, upon certificates of officers of the Company and its
subsidiaries and certificates of public officials.
(m) Officers' Certificates. (A) At Closing Time, there shall
not have been, since the date hereof or since the respective dates as
of which information is given in the Prospectus, any material adverse
change in the condition, financial or otherwise, or in the earnings,
business affairs or business prospects of the Company and its
subsidiaries considered as one enterprise, whether or not arising in
the ordinary course of business, and the Representatives shall have
received a certificate of the Chief Executive Officer, President or a
Vice President of the Company and of the chief financial or chief
accounting officer of the Company, dated as of Closing Time, to the
effect that (i) there has been no such material adverse change, (ii)
the representations and warranties in Section 1(a) hereof are true and
correct with the same force and effect as though expressly made at and
as of Closing Time, (iii) the Company has complied with all agreements
and satisfied all conditions on its part to be performed or satisfied
at or prior to Closing Time, and (iv) no stop order suspending the
effectiveness of the Registration Statement has been issued and, to the
knowledge of our officers after due inquiry, no proceedings for that
purpose have been instituted or are pending or are contemplated by the
Commission. (B) At Closing Time, there shall not have been, since the
date hereof or since the respective dates as of which information is
given in the Prospectus, any material adverse change in the condition,
financial or otherwise, or in the earnings, business affairs or
business prospects of Bridge and its subsidiaries considered as one
enterprise, whether or not arising in the ordinary course of business,
and the Representatives shall have received a certificate of the
President or a Vice President of Bridge and of the chief financial or
chief accounting officer of Bridge, dated as of Closing Time to the
effect that (i) there has been no such material advance change and (ii)
the representations and warranties in Section 1(a) and 1(b)(i) hereof
are true and correct with the same force and effect as though expressly
made at and as of Closing Time.
(n) Certificate of Selling Shareholder. At Closing Time, the
Representatives shall have received a certificate of the Selling
Shareholder, dated as of Closing Time, to the effect that (i) the
representations and warranties of the Selling Shareholder contained in
Section 1(b)(ii) hereof are true and correct in all respects with the
same force and effect as though expressly made at and as of Closing
Time and (ii) the Selling Shareholder has complied in all material
respects with all agreements and all conditions on its part to be
performed under this Agreement at or prior to Closing Time.
(o) Accountants' Comfort Letter. At the time of the execution
of this Agreement, the Representatives shall have received from each of
Deloitte & Touche LLP and Ernst & Young LLP a letter dated such date,
in form and substance satisfactory to the
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Representatives, together with signed or reproduced copies of such
letter for each of the other Underwriters containing statements and
information of the type ordinarily included in accountants' "comfort
letters" to underwriters with respect to the financial statements and
certain financial information contained in the Registration Statement
and the Prospectus.
(p) Bring-down Comfort Letter. At Closing Time, the
Representatives shall have received from each of Deloitte & Touche LLP
and Ernst & Young LLP a letter, dated as of Closing Time, to the effect
that they reaffirm the statements made in the letter furnished pursuant
to subsection (o) of this Section, except that the specified date
referred to shall be a date not more than three business days prior to
Closing Time.
(q) Approval of Listing. At Closing Time, the Securities shall
have been approved for inclusion in the Nasdaq National Market, subject
only to official notice of issuance.
(r) No Objection. The NASD has confirmed that it has not
raised any objection with respect to the fairness and reasonableness of
the underwriting terms and arrangements.
(s) Lock-up Agreements. At the date of this Agreement, the
Representatives shall have received an agreement substantially in the
form of Exhibit L hereto signed by the persons listed on Schedule D
hereto.
(t) Network Transfer Agreements. At or prior to Closing Time,
each of Bridge, the Company and their respective subsidiaries shall
have executed and delivered the Network Transfer Agreements and the
Network Transfer shall have been consummated.
(u) GECC Sublease. Prior to Closing, Bridge shall have
received from General Electric Capital Corporation ("GECC") its consent
to a sublease by Bridge to the Company of the network assets that
Bridge leases from GECC and shall have received all necessary
approvals, consents, licenses and alike from GECC.
(v) Conditions to Purchase of Option Securities. In the event
that the Underwriters exercise their option provided in Section 2(b)
hereof to purchase all or any portion of the Option Securities, the
representations and warranties of the Company and Bridge contained
herein and the statements in any certificates furnished by Bridge, the
Company or any subsidiary of the Company hereunder shall be true and
correct as of each Date of Delivery and, at the relevant Date of
Delivery, the Representatives shall have received:
(i) Officers' Certificates. (A) A certificate, dated
such Date of Delivery, of the Chief Executive Officer,
President or a Vice President of the Company and of the chief
financial or chief accounting officer of the Company
confirming that the certificate delivered at Closing Time
pursuant to Section 5(m)(A) hereof remains true
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and correct as of such Date of Delivery. (B) A certificate,
dated such Date of Delivery, of the President or a Vice
President of Bridge confirming that the certificate delivered
at Closing Time pursuant to Section 5(m)(B) hereof remains
true and correct as of such Date of Delivery.
(ii) Certificate of Selling Shareholder. A
certificate, dated such Date of Delivery, of the Selling
Shareholder confirming that the certificate delivered at
Closing Time pursuant to Section 5(n) hereof remains true and
correct as of such Date of Delivery.
(iii) Opinion of Counsel of the Company. The
favorable opinion of Hogan & Hartson L.L.P., counsel for the
Company, in form and substance satisfactory to counsel for the
Underwriters, dated such Date of Delivery, relating to the
Option Securities to be purchased on such Date of Delivery and
otherwise to the same effect as the opinion required by
Section 5(b) hereof.
(iv) Opinion of the General Counsel of the Company.
The favorable opinion of Steven Gallant, general counsel of
the Company, in form and substance satisfactory to counsel for
the Underwriters, dated such Date of Delivery, relating to the
Option Securities to be purchased on such Date of Delivery and
otherwise to the same effect as the opinion required by
Section 5(c) hereof.
(v) Opinions of French and United Kingdom Regulatory
Counsel for Company. The favorable opinions of Bird & Bird,
French and United Kingdom regulatory counsel for the Company,
in form and substance satisfactory to counsel for the
Underwriters, dated such Date of Delivery, relating to the
Option Securities to be purchased on such Date of Delivery and
otherwise to the same effect as the opinion required by
Section 5(d) hereof.
(vi) Opinion of French Regulatory Counsel for
Company. The favorable opinion of Salans, Hertfeld &
Heilbronn, French regulatory counsel for the Company, in form
and substance satisfactory to counsel for the Underwriters,
dated such Date of Delivery, relating to the Option Securities
to be purchased on such Date of Delivery and otherwise to the
same effect as the opinion required by Section 5(e) hereof.
(vii) Opinion of Special United Kingdom Corporate
Counsel for Company. The favorable opinion of Bryan Cave,
special United Kingdom corporate counsel for the Company, in
form and substance satisfactory to counsel for the
Underwriters, dated such Date of Delivery, relating to the
Option Securities to be purchased on such Date of Delivery and
otherwise to the same effect as the opinion required by
Section 5(f) hereof.
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(viii) Opinion of German Regulatory Counsel for
Company. The favorable opinion of Schuermann & Partner, German
regulatory counsel for the Company, in form and substance
satisfactory to counsel for the Underwriters, dated such Date
of Delivery, relating to the Option Securities to be purchased
on such Date of Delivery and otherwise to the same effect as
the opinion required by Section 5(g) hereof.
(ix) Opinion of Italian Regulatory Counsel for
Company. The favorable opinion of Piergrossi Villa Manca
Graziadci, Italian regulatory counsel for the Company, in form
and substance satisfactory to counsel for the Underwriters,
dated such Date of Delivery, relating to the Option Securities
to be purchased on such Date of Delivery and otherwise to the
same effect as the opinion required by Section 5(h) hereof.
(x) Opinion of Japanese Regulatory Counsel for
Company. The favorable opinion of Anderson Mori, Japanese
regulatory counsel for the Company, in form and substance
satisfactory to counsel for the Underwriters, dated such Date
of Delivery, relating to the Option Securities to be purchased
on such Date of Delivery and otherwise to the same effect as
the opinion required by Section 5(i) hereof.
(xi) Opinion of General Counsel for Bridge. The
favorable opinion of Zachary Snow, counsel for Bridge, in form
and substance satisfactory to counsel for the Underwriters,
dated such Date of Delivery, relating to the Option Securities
to be purchased on such Date of Delivery and otherwise to the
same effect as the opinion required by Section 5(j) hereof.
(xii) Opinion of Counsel for Bridge. The favorable
opinion of Bryan Cave LLP, counsel for Bridge, in form and
substance satisfactory to counsel for the Underwriters, dated
such Date of Delivery and otherwise to the same effect as the
opinion required by Section 5(k) hereof.
(xiii) Opinion of Counsel for Underwriters. The
favorable opinion of Shearman & Sterling, counsel for the
Underwriters, dated such Date of Delivery, relating to the
Option Securities to be purchased on such Date of Delivery and
otherwise to the same effect as the opinion required by
Section 5(l) hereof.
(xiv) Bring-down Comfort Letter. A letter from each
of Deloitte & Touche LLP and Ernst & Young, LLP, in form and
substance satisfactory to the Representatives and dated such
Date of Delivery, substantially in the same form and substance
as the letter furnished to the Representatives pursuant to
Section 5(p) hereof, except that the "specified date" in the
letter furnished pursuant to this paragraph shall be a date
not more than five days prior to such Date of Delivery.
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(w) Additional Documents. At Closing Time and at each Date of
Delivery, counsel for the Underwriters shall have been furnished with
such documents and opinions as they may require for the purpose of
enabling them to pass upon the issuance and sale of the Securities as
herein contemplated, or in order to evidence the accuracy of any of the
representations or warranties, or the fulfillment of any of the
conditions, herein contained; and all proceedings taken by the Company
and Bridge in connection with the issuance and sale of the Securities
as herein contemplated shall be satisfactory in form and substance to
the Representatives and counsel for the Underwriters.
(x) Termination of Agreement. If any condition specified in
this Section shall not have been fulfilled when and as required to be
fulfilled, this Agreement, or, in the case of any condition to the
purchase of Option Securities, on a Date of Delivery which is after
Closing Time, the obligations of the several Underwriters to purchase
the relevant Option Securities, may be terminated by the
Representatives by notice to the Company at any time at or prior to
Closing Time or such Date of Delivery, as the case may be, and such
termination shall be without liability of any party to any other party
except as provided in Section 4 and except that Sections 1, 6, 7 and 8
shall survive any such termination and remain in full force and effect.
SECTION 6. Indemnification.
(a) Indemnification of Underwriters. (1) The Company and Bridge,
jointly and severally, agree to indemnify and hold harmless each Underwriter and
each person, if any, who controls any Underwriter within the meaning of Section
15 of the 1933 Act or Section 20 of the 1934 Act to the extent and in the manner
set forth in clauses (i), (ii), (iii) and (iv) below.
(i) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, arising out of any untrue statement or
alleged untrue statement of a material fact contained in the
Registration Statement (or any amendment thereto), including the Rule
430A Information and the Rule 434 Information, if applicable, or the
omission or alleged omission therefrom of a material fact required to
be stated therein or necessary to make the statements therein not
misleading or arising out of any untrue statement or alleged untrue
statement of a material fact included in any preliminary prospectus or
the Prospectus (or any amendment or supplement thereto), or the
omission or alleged omission therefrom of a material fact necessary in
order to make the statements therein, in the light of the circumstances
under which they were made, not misleading;
(ii) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, arising out of (A) the violation of
any applicable laws or regulations of foreign jurisdictions where
Reserved Securities have been offered in connection with the
reservation and sale of Reserved Securities to Reserved Securities
Participants and (B) any untrue statement or alleged untrue statement
of a material fact included in the supplement or prospectus wrapper
material distributed in Australia, Canada, Germany, Hong Kong,
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Indonesia, Italy, Japan, Singapore, Spain, Switzerland, and the United
Kingdom in connection with the reservation and sale of the Reserved
Securities to Reserved Securities Participants or the omission or
alleged omission therefrom of a material fact necessary to make the
statements therein, when considered in conjunction with the Prospectus
or preliminary Prospectus, not misleading;
(iii) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, to the extent of the aggregate amount
paid in settlement of any litigation, or any investigation or
proceeding by any governmental agency or body, commenced or threatened,
or of any claim whatsoever based upon any such untrue statement or
omission, or any such alleged untrue statement or omission or in
connection with any violation of the nature referred to in Section
6(a)(1)(ii)(A) hereof; provided that (subject to Section 6(d) below)
any such settlement is effected with the written consent of the Company
and Bridge; and
(iv) against any and all expense whatsoever, as incurred
(including the fees and disbursements of counsel chosen by Merrill
Lynch and Morgan Stanley), reasonably incurred in investigating,
preparing or defending against any litigation, or any investigation or
proceeding by any governmental agency or body, commenced or threatened,
or any claim whatsoever based upon any such untrue statement or
omission, or any such alleged untrue statement or omission or in
connection with any violation of the nature referred to in Section
6(a)(1)(ii)(A) hereof, to the extent that any such expense is not paid
under (i), (ii) or (iii) above;
provided, however, that this indemnity agreement shall not apply to any loss,
liability, claim, damage or expense to the extent arising out of any untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with written information furnished to the Company by any
Underwriter through Merrill Lynch and Morgan Stanley expressly for use in the
Registration Statement (or any amendment thereto), including the Rule 430A
Information and the Rule 434 Information, if applicable, or any preliminary
prospectus or the Prospectus (or any amendment or supplement thereto); and
provided further that the Company will not be liable to any Underwriter or any
person who controls such Underwriter within the meaning of Section 15 of the
1933 Act or Section 20 of the 1934 Act with respect to the Prospectus to the
extent that the Company shall sustain the burden of proving that any such loss,
liability, claim, damage or expense resulted from the fact that such
Underwriter, in contravention of a requirement of this Agreement or applicable
law, sold Securities to a person to whom such Underwriter failed to send or
give, at or prior to the Closing Date, a copy of the Final Prospectus, as then
amended or supplemented if: (i) the Company has previously furnished copies
thereof (sufficiently in advance of the Closing Date to allow for distribution
by the Closing Date) to the Underwriter and the loss, liability, claim, damage
or expense of such Underwriter resulted from an untrue statement or omission of
a material fact contained in or omitted from the Preliminary Prospectus which
was corrected in the Final Prospectus as, if applicable, amended or supplemented
prior to the Closing Date and such Final Prospectus was required by law to be
delivered at or prior to the written confirmation of sale to such person and
(ii) such failure to give or send such Final Prospectus by the Closing Date to
the party
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or parties asserting such loss, liability, claim, damage or expense would have
constituted the sole defense to the claim asserted by such person.
(2) In addition to and without limitation of the Company's and Bridge's
obligation to indemnify Bear, Stearns & Co. Inc. as an Underwriter, the Company
and, Bridge also, jointly and severally, agree to indemnify and hold harmless
the Independent Underwriter and each person, if any, who controls the
Independent Underwriter within the meaning of Section 15 of the 1933 Act or
Section 20 of the 1934 Act, from and against any and all loss, liability, claim,
damage and expense whatsoever, as incurred, incurred as a result of the
Independent Underwriter's participation as a "qualified independent underwriter"
within the meaning of Rule 2720 of the Conduct Rules of the National Association
of Securities Dealers, Inc. in connection with the offering of the Securities.
(b) Indemnification of Company, Directors and Officers and Bridge. Each
Underwriter severally agrees to indemnify and hold harmless the Company, its
directors, each of its officers who signed the Registration Statement, and each
person, if any, who controls the Company within the meaning of Section 15 of the
1933 Act or Section 20 of the 1934 Act, Bridge and each person, if any, who
controls Bridge within the meaning of Section 15 of the 1933 Act or Section 20
of the 1934 Act against any and all loss, liability, claim, damage and expense
described in the indemnity contained in subsection (a)(1) of this Section, as
incurred, but only with respect to untrue statements or omissions, or alleged
untrue statements or omissions, made in the Registration Statement (or any
amendment thereto), including the Rule 430A Information and the Rule 434
Information, if applicable, or any preliminary prospectus or the Prospectus (or
any amendment or supplement thereto) in reliance upon and in conformity with
written information furnished to the Company by such Underwriter through Merrill
Lynch and Morgan Stanley expressly for use in the Registration Statement (or any
amendment thereto) or such preliminary prospectus or the Prospectus (or any
amendment or supplement thereto).
(c) Actions against Parties; Notification. Each indemnified party shall
give notice as promptly as reasonably practicable to each indemnifying party of
any action commenced against it in respect of which indemnity may be sought
hereunder, but failure to so notify an indemnifying party shall not relieve such
indemnifying party from any liability hereunder to the extent it is not
materially prejudiced as a result thereof and in any event shall not relieve it
from any liability which it may have otherwise than on account of this indemnity
agreement. In the case of parties indemnified pursuant to Section 6(a)(1) above,
counsel to the indemnified parties shall be selected by Merrill Lynch and Morgan
Stanley, and, in the case of parties indemnified pursuant to Section 6(b) above,
counsel to the indemnified parties shall be selected by the Company and Bridge.
An indemnifying party may participate at its own expense in the defense of any
such action; provided, however, that counsel to the indemnifying party shall not
(except with the consent of the indemnified party) also be counsel to the
indemnified party. In no event shall the indemnifying parties be liable for fees
and expenses of more than one counsel (in addition to any local counsel)
separate from their own counsel for all indemnified parties in connection with
any one action or separate but similar or related actions in the same
jurisdiction arising out of the same general allegations or circumstances,
provided that, if indemnity is sought pursuant to Section 6(a)(2), then,
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in addition to the fees and expenses of such counsel for the indemnified
parties, the indemnifying party shall be liable for the reasonable fees and
expenses of not more than one counsel (in addition to any local counsel)
separate from its own counsel and that of the other indemnified parties from the
Independent Underwriter in its capacity as a "qualified independent underwriter"
and all persons, if any, who control the Independent Underwriter within the
meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act in
connection with any one action or separate but similar or related actions in the
same jurisdiction arising out of the same general allegations or circumstances
if, in the reasonable judgment of the Independent Underwriter, there may exist a
conflict of interest between the Independent Underwriter and the other
indemnified parties. Any such separate counsel for the Independent Underwriter
and such control persons of the Independent Underwriter shall be designated in
writing by the Independent Underwriter. No indemnifying party shall, without the
prior written consent of the indemnified parties, settle or compromise or
consent to the entry of any judgment with respect to any litigation, or any
investigation or proceeding by any governmental agency or body, commenced or
threatened, or any claim whatsoever in respect of which indemnification or
contribution could be sought under this Section 6 or Section 7 hereof (whether
or not the indemnified parties are actual or potential parties thereto), unless
such settlement, compromise or consent (i) includes an unconditional release of
each indemnified party from all liability arising out of such litigation,
investigation, proceeding or claim and (ii) does not include a statement as to
or an admission of fault, culpability or a failure to act by or on behalf of any
indemnified party.
(d) Settlement without Consent if Failure to Reimburse. If at any time
an indemnified party shall have requested an indemnifying party to reimburse the
indemnified party for fees and expenses of counsel, such indemnifying party
agrees that it shall be liable for any settlement of the nature contemplated by
Section 6(a)(1)(iii) effected without its written consent if (i) such settlement
is entered into more than 45 days after receipt by such indemnifying party of
the aforesaid request, (ii) such indemnifying party shall have received notice
of the terms of such settlement at least 30 days prior to such settlement being
entered into and (iii) such indemnifying party shall not have reimbursed such
indemnified party in accordance with such request prior to the date of such
settlement.
(e) Indemnification for Reserved Securities. In connection with the
offer and sale of the Reserved Securities, the Company agrees, promptly upon a
request in writing, to indemnify and hold harmless the Underwriters from and
against any and all losses, liabilities, claims, damages and expenses incurred
by them as a result of the failure of Reserved Securities Participants to pay
for and accept delivery of Reserved Securities which, by the end of the first
business day following the date of this Agreement, were subject to a properly
confirmed agreement to purchase.
(f) Other Agreements with Respect to Indemnification. The provisions of
this Section shall not affect any agreement among the Company and Bridge with
respect to indemnification.
SECTION 7. Contribution. If the indemnification provided for in Section
6 hereof is for any reason unavailable to or insufficient to hold harmless an
indemnified party in respect of any
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losses, liabilities, claims, damages or expenses referred to therein, then each
indemnifying party shall contribute to the aggregate amount of such losses,
liabilities, claims, damages and expenses incurred by such indemnified party, as
incurred, (i) in such proportion as is appropriate to reflect the relative
benefits received by the Company and Bridge on the one hand and the Underwriters
on the other hand from the offering of the Securities pursuant to this Agreement
or (ii) if the allocation provided by clause (i) is not permitted by applicable
law, in such proportion as is appropriate to reflect not only the relative
benefits referred to in clause (i) above but also the relative fault of the
Company and Bridge on the one hand and of the Underwriters on the other hand in
connection with the statements or omissions, or in connection with any violation
of the nature referred to in Section 6(a)(1)(ii)(A) hereof, which resulted in
such losses, liabilities, claims, damages or expenses, as well as any other
relevant equitable considerations.
The relative benefits received by the Company and Bridge on the one
hand and the Underwriters on the other hand in connection with the offering of
the Securities pursuant to this Agreement shall be deemed to be in the same
respective proportions as the total net proceeds from the offering of the
Securities pursuant to this Agreement (before deducting expenses) received by
the Company and Bridge and the total underwriting discount received by the
Underwriters, in each case as set forth on the cover of the Prospectus, or, if
Rule 434 is used, the corresponding location on the Term Sheet, bear to the
aggregate initial public offering price of the Securities as set forth on such
cover.
The relative fault of the Company and Bridge on the one hand and the
Underwriters on the other hand shall be determined by reference to, among other
things, whether any such untrue or alleged untrue statement of a material fact
or omission or alleged omission to state a material fact relates to information
supplied by the Company or Bridge or by the Underwriters and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission or any violation of the nature referred to in
Section 6(a)(1)(ii)(A) hereof.
The Company, Bridge and the Underwriters agree that Bear, Stearns & Co.
Inc. will not receive any additional benefits hereunder for serving as the
Independent Underwriter in connection with the offering and sale of the
Securities.
The Company, Bridge and the Underwriters agree that it would not be
just and equitable if contribution pursuant to this Section were determined by
pro rata allocation (even if the Underwriters were treated as one entity for
such purpose) or by any other method of allocation which does not take account
of the equitable considerations referred to above in this Section. The aggregate
amount of losses, liabilities, claims, damages and expenses incurred by an
indemnified party and referred to above in this Section shall be deemed to
include any legal or other expenses reasonably incurred by such indemnified
party in investigating, preparing or defending against any litigation, or any
investigation or proceeding by any governmental agency or body, commenced or
threatened, or any claim whatsoever based upon any such untrue or alleged untrue
statement or omission or alleged omission.
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Notwithstanding the provisions of this Section, no Underwriter shall be
required to contribute any amount in excess of the amount by which the total
price at which the Securities underwritten by it and distributed to the public
were offered to the public exceeds the amount of any damages which such
Underwriter has otherwise been required to pay by reason of any such untrue or
alleged untrue statement or omission or alleged omission.
No person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the 1933 Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
For purposes of this Section, each person, if any, who controls an
Underwriter within the meaning of Section 15 of the 1933 Act or Section 20 of
the 1934 Act shall have the same rights to contribution as such Underwriter, and
each director of the Company, each officer of the Company who signed the
Registration Statement, and each person, if any, who controls the Company or
Bridge within the meaning of Section 15 of the 1933 Act or Section 20 of the
1934 Act shall have the same rights to contribution as the Company or Bridge, as
the case may be. The Underwriters' respective obligations to contribute pursuant
to this Section are several in proportion to the number of Initial Securities
set forth opposite their respective names in Schedule A hereto and not joint.
The provisions of this Section shall not affect any agreement among the
Company and Bridge with respect to contribution.
SECTION 8. Representations, Warranties and Agreements to Survive
Delivery. All representations, warranties and agreements contained in this
Agreement or in certificates of officers of the Company, any of its subsidiaries
or Bridge submitted pursuant hereto shall remain operative and in full force and
effect, regardless of any investigation made by or on behalf of any Underwriter
or controlling person, or by or on behalf of the Company or Bridge, and shall
survive delivery of the Securities to the Underwriters.
SECTION 9. Termination of Agreement.
(a) Termination; General. Merrill Lynch and Morgan Stanley may
terminate this Agreement, by notice to the Company and Bridge, at any time at or
prior to Closing Time (i) if there has been, since the time of execution of this
Agreement or since the respective dates as of which information is given in the
Prospectus, any material adverse change in the condition, financial or
otherwise, or in the earnings, business affairs or business prospects of the
Company and its subsidiaries considered as one enterprise, whether or not
arising in the ordinary course of business, or (ii) if there has been, since the
time of execution of this Agreement or since the respective dates as of which
information is given in the Prospectus, any material adverse change in the
condition, financial or otherwise, or in the earnings, business affairs or
business prospects of Bridge and its subsidiaries considered as one enterprise,
whether or not arising in the ordinary course of business, or (iii) if there has
occurred any material adverse change in the financial markets in the United
States, any outbreak of hostilities or escalation thereof or other calamity or
crisis or any change or
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development involving a prospective change in national or international
political, financial or economic conditions, in each case the effect of which is
such as to make it, in the judgment of the Representatives, impracticable to
market the Securities or to enforce contracts for the sale of the Securities, or
(iv) if trading in any securities of the Company has been suspended or
materially limited by the Commission or the Nasdaq National Market, or if
trading generally on the American Stock Exchange or the New York Stock Exchange
or in the Nasdaq National Market has been suspended or materially limited, or
minimum or maximum prices for trading have been fixed, or maximum ranges for
prices have been required, by any of said exchanges or by such system or by
order of the Commission, the National Association of Securities Dealers, Inc. or
any other governmental authority, or (v) if a banking moratorium has been
declared by either Federal or New York authorities.
(b) Liabilities. If this Agreement is terminated pursuant to this
Section, such termination shall be without liability of any party to any other
party except as provided in Section 4 hereof, and provided further that Sections
1, 6, 7 and 8 shall survive such termination and remain in full force and
effect.
SECTION 10. Default by One or More of the Underwriters. If one or more
of the Underwriters shall fail at Closing Time or a Date of Delivery to purchase
the Securities which it or they are obligated to purchase under this Agreement
(the "Defaulted Securities"), the Representatives shall have the right, within
24 hours thereafter, to make arrangements for one or more of the non-defaulting
Underwriters, or any other underwriters, to purchase all, but not less than all,
of the Defaulted Securities in such amounts as may be agreed upon and upon the
terms herein set forth; if, however, the Representatives shall not have
completed such arrangements within such 24-hour period, then:
(a) if the number of Defaulted Securities does not exceed 10%
of the number of Securities to be purchased on such date, the
non-defaulting Underwriters shall be obligated, each severally and not
jointly, to purchase the full amount thereof in the proportions that
their respective underwriting obligations hereunder bear to the
underwriting obligations of all non-defaulting Underwriters, or
(b) if the number of Defaulted Securities exceeds 10% of the
number of Securities to be purchased on such date, this Agreement or,
with respect to any Date of Delivery which occurs after Closing Time,
the obligation of the Underwriters to purchase and of the Company to
sell the Option Securities to be purchased and sold on such Date of
Delivery shall terminate without liability on the part of any
non-defaulting Underwriter.
No action taken pursuant to this Section shall relieve any defaulting
Underwriter from liability in respect of its default.
In the event of any such default which does not result in a termination
of this Agreement or, in the case of a Date of Delivery which is after Closing
Time, which does not result in a termination
34
<PAGE>
of the obligation of the Underwriters to purchase and the Company to sell the
relevant Option Securities, as the case may be, either (i) the Representatives
or (ii) the Company and Bridge shall have the right to postpone Closing Time or
the relevant Date of Delivery, as the case may be, for a period not exceeding
seven days in order to effect any required changes in the Registration Statement
or Prospectus or in any other documents or arrangements. As used herein, the
term "Underwriter" includes any person substituted for a Underwriter under this
Section.
SECTION 11. Default by the Selling Shareholder or the Company. (a) If
the Selling Shareholder shall fail at Closing Time or at a Date of Delivery to
sell and deliver the number of Securities which the Selling Shareholder is
obligated to sell hereunder, then the Underwriters may, at the option of the
Representatives, by notice from the Representatives to the Company, either (i)
terminate this Agreement without any liability on the part of any non-defaulting
party except that the provisions of Sections 1, 4, 6, 7 and 8 shall remain in
full force and effect or (ii) elect to purchase the Securities which the Company
has agreed to sell hereunder. No action taken pursuant to this Section shall
relieve the Selling Shareholder so defaulting from liability in respect of such
default.
In the event of a default by the Selling Shareholder as referred to in
this Section, each of the Representatives and the Company shall have the right
to postpone Closing Time or the relevant Date of Delivery for a period not
exceeding seven days in order to effect any required change in the Registration
Statement or Prospectus or in any other documents or arrangements.
(b) If the Company shall fail at Closing Time to sell the number of
Securities that it is obligated to sell hereunder, then this Agreement shall
terminate without any liability on the part of any non-defaulting party;
provided, however, that the provisions of Sections 1, 4, 6, 7 and 8 shall remain
in full force and effect. No action taken pursuant to this Section shall relieve
the Company from liability in respect of such default.
SECTION 12. Notices. All notices and other communications hereunder
shall be in writing and shall be deemed to have been duly given if mailed or
transmitted by any standard form of telecommunication. Notices to the
Underwriters shall be directed to the Representatives at North Tower, World
Financial Center, New York, New York 10281, attention of Robert Kramer and at
1585 Broadway, New York, New York 10036, attention of John Crompton; notices to
the Company shall be directed to it at SAVVIS Communications Corporation, 12007
Sunrise Valley Drive, Reston, Virginia 20191, attention of Steve M. Gallant,
Esq., Vice President, General Counsel and Secretary; and notices to Bridge shall
be directed to it at Bridge Information Systems, Inc., 717 Office Parkway, St.
Louis, Missouri 63141-7115, attention of Zachary Snow, Esq., Executive Vice
President and General Counsel.
SECTION 13. Parties. This Agreement shall inure to the benefit of and
be binding upon the Underwriters, the Company and Bridge and their respective
successors. Nothing expressed or mentioned in this Agreement is intended or
shall be construed to give any person, firm or corporation, other than the
Underwriters, the Company and Bridge and their respective successors and the
controlling persons and officers and directors referred to in Sections 6 and 7
and their heirs
35
<PAGE>
and legal representatives, any legal or equitable right, remedy or claim under
or in respect of this Agreement or any provision herein contained. This
Agreement and all conditions and provisions hereof are intended to be for the
sole and exclusive benefit of the Underwriters, the Company and Bridge and their
respective successors, and said controlling persons and officers and directors
and their heirs and legal representatives, and for the benefit of no other
person, firm or corporation. No purchaser of Securities from any Underwriter
shall be deemed to be a successor by reason merely of such purchase.
SECTION 14. GOVERNING LAW AND TIME. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. SPECIFIED
TIMES OF DAY REFER TO NEW YORK CITY TIME.
SECTION 15. Effect of Headings. The Article and Section headings herein
and the Table of Contents are for convenience only and shall not affect the
construction hereof.
36
<PAGE>
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to the Company and the Bridge, a counterpart
hereof, whereupon this instrument, along with all counterparts, will become a
binding agreement among the Underwriters, the Company and Bridge in accordance
with its terms.
Very truly yours,
SAVVIS COMMUNICATIONS CORPORATION
By
-----------------------------------------
Title:
BRIDGE INFORMATION SYSTEMS, INC.
By
-----------------------------------------
Title:
37
<PAGE>
CONFIRMED AND ACCEPTED,
as of the date first above written:
MERRILL LYNCH & CO.
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
MORGAN STANLEY & CO. INCORPORATED
BANC OF AMERICA SECURITIES LLC
BEAR, STEARNS & CO. INC.
CIBC WORLDMARKETS CORP.
By: MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By
------------------------------------
Authorized Signatory
By: MORGAN STANLEY & CO. INCORPORATED
By
-------------------------------------
Authorized Signatory
For themselves and as Representatives of the other Underwriters named in
Schedule A hereto.
38
<PAGE>
SCHEDULE A
Number of
Initial
Name of Underwriter Securities
------------------- ----------
Merrill Lynch, Pierce, Fenner & Smith
Morgan Stanley & Co. Incorporated..............................
Banc of America Securities LLC ................................
Bear, Stearns & Co. Inc........................................
CIBC World Markets Corp........................................ ----------
Total.......................................................... 17,000,000
==========
Sch A - 1
<PAGE>
SCHEDULE B
Number of Initial Maximum Number of Option
Securities to be Sold Securities to be sold
--------------------- ---------------------
SAVVIS 14,875,000 0
COMMUNICATIONS
CORPORATION
BRIDGE INFORMATION 2,125,000 2,550,000
SYSTEMS, INC.
-------------------- -------------------
Total.................. 17,000,000 2,550,000
==================== ===================
Sch B - 1
<PAGE>
SCHEDULE C
SAVVIS COMMUNICATIONS CORPORATION
17,000,000 Shares of Common Stock
(Par Value $.01 Per Share)
1. The initial public offering price per share for the
Securities, determined as provided in said Section 2, shall be $ .
2. The purchase price per share for the Securities to be paid
by the several Underwriters shall be $ , being an amount equal to the
initial public offering price set forth above less $ per share;
provided that the purchase price per share for any Option Securities
purchased upon the exercise of the over-allotment option described in
Section 2(b) shall be reduced by an amount per share equal to any
dividends or distributions declared by the Company and payable on the
Initial Securities but not payable on the Option Securities.
Sch C - 1
<PAGE>
Exhibit A
FORM OF OPINION OF COMPANY'S COUNSEL
TO BE DELIVERED PURSUANT TO
SECTION 5(b)
(A) The Company was incorporated, and is validly existing and in good
standing as of [the date of the certificate of good standing from the Secretary
of State of the State of Delaware] under the laws of the State of Delaware. The
Company has the corporate power and corporate authority under its Certificate of
Incorporation, Bylaws and the Delaware General Corporation Law ("DGCL") to own,
lease and operate its current properties and to conduct its business as
described in the Prospectus and to enter into and perform its obligations under
the Purchase Agreement.
(B) The Company is authorized to transact business as a foreign
corporation in the State of Missouri as of [the date of the certificate of good
standing from the Secretary of State of the State of Missouri].
(C) The Purchase Agreement has been duly authorized and executed and
delivered on behalf of the Company.
(D) The Shares have been duly authorized and, when issued and delivered
in accordance with the provisions of the Purchase Agreement, the Shares will be
validly issued, fully paid and non-assessable. The form of certificate
evidencing the Shares complies with the requirements of Section 158 of the DGCL
and with any applicable requirements of the Certificate of Incorporation and
Bylaws of the Company. No holder of outstanding shares of Common Stock of the
Company has any statutory preemptive rights under the DGCL or, to our knowledge,
any contractual right to subscribe for any Shares.
(E) The Registration Statement has become effective under the
Securities Act, any required filings of the Prospectus pursuant to Rule 424(b)
promulgated pursuant to the Securities Act have been made in the manner and
within the time period required by Rule 424(b) and, to our knowledge, no stop
order suspending the effectiveness of the Registration Statement or suspending
or preventing the use of the Prospectus has been issued and no proceedings for
that purpose have been instituted or are threatened by the Commission.
(F) The Registration Statement and the Prospectus (except for the
financial statements and supporting schedules included therein, as to which we
express no opinion) comply as to form in all material respects with the
requirements of the Securities Act and the applicable rules and regulations
thereunder.
A-1
<PAGE>
(G) The information in the Prospectus under the captions "Risk Factors
- - Adoption or modification of government regulations relating to the Internet
could harm our business," "Business - Regulatory Matters" (insofar as it relates
to U.S. activities of the Company), "Description of Capital Stock" and "Shares
Eligible for Future Sale" to the extent that such information constitutes
matters of law or legal conclusions, has been reviewed by us, and is correct in
all material respects. We express no opinion with respect to whether the Company
has the authorizations and licenses required for its activities in foreign
jurisdictions or with respect to the description of those foreign activities in
the "Business - Regulatory Matters" section of the Prospectus. The authorized
Common Stock conforms in all material respects to the description thereof set
forth in the Prospectus under the caption "Description of Capital Stock - Common
Stock."
(H) The execution, delivery and performance as of the date hereof by
the Company of the Purchase Agreement do not (i) violate the DGCL or the
Certificate of Incorporation or bylaws of the Company, or (ii) breach of
constitute a default under any agreement or contract filed as an exhibit to the
Registration Statement.
(I) The Company is not an "investment company" or an entity "controlled
by an "investment company,"" as such terms are defined in the 1940 Act.
(L) No filing with, or authorization, approval, consent, license,
order, registration, qualification or decree of, any court or governmental
authority or agency, of the United States or the State of New York, (other than
under the 1933 Act and the 1933 Act Regulations, the 1934 Act and the 1934 Act
Regulations which have been obtained, or as may be required under the securities
or blue sky laws of the various states, as to which we need express no opinion)
is necessary or required in connection with the due authorization, execution and
delivery of the Purchase Agreement or for the offering, issuance, sale or
delivery of the Securities.
During the course of the preparation of the Registration Statement, we
participated in conferences with officers and other representatives of the
Company, with representatives of the independent public accountants of the
Company and with you and your representatives. While we have not undertaken to
determine independently, and we do not assume any responsibility for, the
accuracy, completeness or fairness of the statements in the Registration
Statement or Prospectus, we may state on the basis of these conferences and our
activities as counsel to the Company in connection with the Registration
Statement that no facts have come to our attention which cause us to believe
that (i) the Registration Statement, at the time it became effective, contained
an untrue statement of material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements there in not
misleading, or that the Prospectus, as of their date or the date hereof,
contains an untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements therein, in light of the
circumstances under which they were made not misleading, (ii) there are any
legal or governmental proceedings pending or threatened against the Company that
are required to be disclosed in the Registration Statement or the Prospectus,
other than those disclosed therein, or (iii) there are any contracts or
A-2
<PAGE>
documents of a character required to be described in the Registration Statement
or the Prospectus or to be filed as exhibits to the Registration Statement that
are not described or referred to therein or so filed; provided that in making
the foregoing statements (which shall not constitute an opinion) we are not
expressing any views as to the financial statements and supporting schedules and
other financial information and data included in or omitted from the
Registration Statement of the Prospectus.
A-3
<PAGE>
Exhibit B
FORM OF OPINION OF GENERAL COUNSEL OF THE COMPANY
TO BE DELIVERED PURSUANT TO
SECTION 5(c)
(A) The Company was duly incorporated, and is validly existing and in
good standing under the laws of the State of Delaware. The Company has corporate
power and authority to enter into and perform its obligations under the Purchase
Agreement.
(B) The Company is duly qualified as a foreign corporation to transact
business and is in good standing in each jurisdiction in which such
qualification is required, whether by reason of the ownership or leasing of
property or the conduct of business, except where the failure so to qualify or
to be in good standing would not result in a Material Adverse Effect.
(C) The authorized, issued and outstanding capital stock of the Company
is as set forth in the Prospectus in the column entitled "Actual" under the
caption "Capitalization" (except for subsequent issuances, if any, pursuant to
the Purchase Agreement or pursuant to reservations, agreements or employee
benefit plans referred to in the Prospectus or pursuant to the exercise of
convertible securities or options referred to in the Prospectus); the shares of
issued and outstanding capital stock of the Company, including the Securities
purchased by the Underwriters from the Selling Shareholder, have been duly
authorized and validly issued and are fully paid and non-assessable; and none of
the outstanding shares of capital stock of the Company was issued in violation
of the preemptive or other similar rights of any securityholder of the Company.
(D) Each of Savvis Communications Corporation, a Missouri Corporation
("Communications") and Savvis Communications International, Inc., a Delaware
corporation ("International") has been duly incorporated and is validly existing
as a corporation in good standing under the laws of the jurisdiction of its
incorporation, has corporate power and authority to own, lease and operate its
properties and to conduct its business as described in the Prospectus and is
duly qualified as a foreign corporation to transact business and is in good
standing in each jurisdiction in which such qualification is required, whether
by reason of the ownership or leasing of property or the conduct of business,
except where the failure so to qualify or to be in good standing would not
result in a Material Adverse Effect; except as otherwise disclosed in the
Registration Statement, all of the issued and outstanding capital stock of each
of Communications and International has been duly authorized and validly issued,
is fully paid and non-assessable and, to the best of my knowledge, is owned by
the Company, directly or through subsidiaries, free and clear of any security
interest, mortgage, pledge, lien, encumbrance, claim or equity; none of the
outstanding shares of capital stock of any Subsidiary was issued in violation
B-1
<PAGE>
of the preemptive or similar rights of any securityholder of such Subsidiary.
Communications and International are the only U.S. subsidiaries of the Company.
(E) To the best of my knowledge, there is not pending or threatened any
action, suit, proceeding, inquiry or investigation, to which the Company or any
subsidiary is a party, or to which the property of the Company or any subsidiary
is subject, before or brought by any court or governmental agency or body,
domestic or foreign, which might reasonably be expected to result in a Material
Adverse Effect, or which might reasonably be expected to materially and
adversely affect the properties or assets thereof or the consummation of the
transactions contemplated in the Purchase Agreement or the consummation of the
Network Transfer or the performance by the Company of its obligations
thereunder.
(F) The information in the Prospectuses under "Business--Facilities"
and "Business--Legal Proceedings"" and in the Registration Statement under Items
14 and 15, to the extent that it constitutes matters of law, summaries of legal
matters, the Company's Certificate of Incorporation and Bylaws or legal
proceedings, or legal conclusions, has been reviewed by me and is correct in all
material respects.
(G) (1) Neither the Company nor any subsidiary is in violation of its
charter or by-laws; and (2) no default by the Company or any subsidiary exists
in the due performance or observance of any obligation, agreement, covenant or
condition contained in any contract, indenture, mortgage, loan agreement, note,
lease or other agreement or instrument that is described or referred to in the
Registration Statement or the Prospectus or filed or incorporated by reference
as an exhibit to the Registration Statement (which, individually or in the
aggregate, would have a Material Adverse Effect).
(H) The execution, delivery and performance of the Purchase Agreement
and the consummation of the transactions contemplated in the Purchase Agreement
and in the Registration Statement (including the issuance and sale of the
Securities and the use of the proceeds from the sale of the Securities, as
described in the Prospectus under the caption "Use Of Proceeds") and compliance
by the Company with its obligations under the Purchase Agreement do not and will
not, whether with or without the giving of notice or lapse of time or both,
conflict with or constitute a breach of, or default or Repayment Event (as
defined in Section 1(a)(x) of the Purchase Agreement) under, or result in the
creation or imposition of any lien, charge or encumbrance upon any property or
assets of the Company or any subsidiary pursuant to, any contract, indenture,
mortgage, deed of trust, loan or credit agreement, note, lease or any other
agreement or instrument, known to me, to which the Company or any subsidiary is
a party or by which it or any of them may be bound, or to which any of the
property or assets of the Company or any subsidiary is subject (except for such
conflicts, breaches or defaults or liens, charges or encumbrances that would not
have a Material Adverse Effect), nor will such action result in any violation of
the provisions of the Certificate of Incorporation or Bylaws of the Company or
any subsidiary, or, to the best of my knowledge, any applicable law, statute,
rule, regulation, judgment, order, writ or decree of any government, government
instrumentality or court,
B-2
<PAGE>
domestic or foreign, having jurisdiction over the Company or any subsidiary or
any of their respective properties, assets or operations.
(I) Except as described in the Registration Statement, to the best of
my knowledge, there are no persons with registration rights or other similar
rights to have any securities registered pursuant to the Registration Statement
or otherwise registered by the Company under the 1933 Act.
(J) Each of the Network Transfer Agreements has been duly authorized,
executed and delivered by, and is a valid and binding agreement of, the Company
or its subsidiaries, as the case may be, enforceable in accordance with its
terms except as the enforcement thereof may be limited by bankruptcy, insolvency
(including, without limitation, all laws relating to fraudulent transfers),
reorganization, moratorium or similar laws affecting enforcement of creditors'
rights generally and except as enforcement thereof is subject to general
principles of equity (regardless of whether enforcement is considered in a
proceeding in equity or at law).
(K) The execution, delivery and performance of the Network Transfer
Agreements and the consummation of the Network Transfer and compliance by the
Company with its obligations under the Network Transfer Agreements do not and
will not, whether with or without the giving of notice or lapse of time or both,
conflict with or constitute a breach of, or default or Repayment Event (as
defined in Section 1(a)(x) of the Purchase Agreement) under, or result in the
creation or imposition of any lien, charge or encumbrance upon any property or
assets of the Company or any subsidiary or an acceleration of any indebtedness
of the Company or any subsidiary pursuant to, any contract, indenture, mortgage,
deed of trust, loan or credit agreement, note, lease or any other agreement or
instrument, known to me, to which the Company or any subsidiary is a party or by
which it or any of them may be bound, or to which any of the property or assets
of the Company or any subsidiary is subject (except for such conflicts, breaches
or defaults or liens, charges or encumbrances that would not have a Material
Adverse Effect), nor will such action result in any violation of the provisions
of the charter or by-laws of the Company or any subsidiary, or, to the best of
my knowledge, any applicable law, statute, rule, regulation, judgment, order,
writ or decree of any government, government instrumentality or court, domestic
or foreign, having jurisdiction over the Company or any subsidiary or any of
their respective properties, assets or operations.
(L) Except as disclosed in the Prospectus, the Company and its
subsidiaries (1)(a) have all permits, licenses, approvals, consents and other
authorizations (collectively the AGovernmental Licenses@) issued by the
appropriate federal, state or local regulatory agencies or bodies (the
AGovernmental Authorities@) necessary to conduct the business now operated by
them and to conduct their business as described in the Prospectus, except where
the failure to possess such Governmental Licenses would not, singly or in the
aggregate, have a Material Adverse Effect; and (b) to the best of such counsel's
knowledge, neither the Company nor any of its subsidiaries has received any
notice of proceedings relating to the revocation, modification or non-renewal of
any such Governmental Licenses, the effect of which, singly or in the aggregate,
B-3
<PAGE>
would have a Material Adverse Effect; and (2) have paid all fees required by the
Governmental Authorities, except where the failure to pay such fees would not,
singly or in the aggregate, have a Material Adverse Effect.
In rendering such opinion, such counsel may rely as to matters of fact
(but not as to legal conclusions), to the extent they deem proper, on
certificates of responsible officers of the Company and public officials. Such
opinion shall not state that it is to be governed or qualified by, or that it is
otherwise subject to, any treatise, written policy or other document relating to
legal opinions, including, without limitation, the Legal Opinion Accord of the
ABA Section of Business Law (1991).
B-4
<PAGE>
Exhibit C
FORM OF OPINION OF COMPANY'S
FRENCH REGULATORY COUNSEL
TO BE DELIVERED PURSUANT TO
SECTION 5(d)
(A)(1) the Operating Company (a) is not required by telecommunications
law or telecommunications regulation to pay any fees in order to carry out the
telecommunications activities, and provide the telecommunications services in
France described in the Prospectus since those activities and services do not
require a telecommunications license in France and (b) is not required by the
telecommunications law or telecommunications regulation of France to have any
further certificates, orders, permits, licenses, authorizations, consents or
approvals of and from, or to make any reports, filings and registrations with,
the French Governmental Authorities necessary to own, lease, license and use its
properties and assets and to conduct its business in the manner described in the
Prospectus and to conduct its business in accordance with the Prospectus; and
(2) to the best of our knowledge, the Operating Company has not received any
notice pursuant to French telecommunications law or telecommunications
regulation preventing it from offering the relevant telecommunications services,
the effect of which, singly or in the aggregate, would have a material adverse
effect on the Company and its subsidiaries, taken as a whole;
(B) to our knowledge the Operating Company is not in violation of, or
in default under, any national, regional or local telecommunications law,
telecommunications regulation or telecommunications rule applicable to the
Operating Company in France (the "Laws") the effect of which, singly or in the
aggregate, would have a material adverse effect on the Company and its
subsidiaries, taken as a whole;
(C) to the best of our knowledge (1) no judgment, decree or order of
any Governmental Authority in France has been issued against the Operating
Company under the Laws and (2) no litigation, proceeding, inquiry or
investigation has been commenced or threatened, and no notice of violation has
been issued, against the Operating Company before or by any Governmental
Authority under the Laws. To the best of our knowledge, there are no
administrative proceedings pending before any French Governmental Authority
under the Laws which (i) are generally applicable to telecommunications services
or the resale thereof and (ii) if decided adversely to the Company, would have a
material adverse effect on the Company and its subsidiaries, taken as a whole;
(D) statements in the Prospectus in the sections on
"Business--Regulatory Matters" referring to France, namely in the Section
entitled "Regulatory Matters", on page 54, the first two paragraphs in this
Section, and in the Section entitled "Regulatory Analysis by Service Type" on
page 55, the paragraph entitled "Data Networking Services", and the paragraph
entitled "Internet
C-1
<PAGE>
Access Services" and the Section entitled "France" on page 57, in each case
insofar as such statements constitute summaries of the relevant
telecommunications law, telecommunications regulation or telecommunications rule
applicable in France to the Operating Company fairly summarize all matters
referred to therein and there are no material omissions with respect to such
descriptions that would make the statements therein misleading;
(E) (1) the execution and delivery by the Operating Company of, and
performance of the Operating Company's obligations under the Transfer Agreement,
the Equipment Collocation Permit Agreement and the Local Network Services
Agreement , and the execution and delivery by the Company of, and the
performance of the Company's obligations under the Equipment Collocation Permit
Agreement and the Local Network Services Agreement do not violate any French
Telecommunications law or telecommunications regulation of to the best of our
knowledge any judgment, order or decree of any French governmental body, agency,
court or tribunal having jurisdiction over the Operating Company under the Laws
in France, and (2) no authorization or order of, or filing with, Governmental
Authorities is necessary under French telecommunications law or French
telecommunications regulation for the execution and delivery by either the
Operating Company or the Company of, or the performance of their respective
obligations under, the Transfer Agreement, the Local Network Services Agreement
and the Equipment Collocation Permit Agreement.
C-2
<PAGE>
Exhibit D
FORM OF OPINION OF
COMPANY'S UNITED KINGDOM REGULATORY COUNSEL
TO BE DELIVERED PURSUANT TO
SECTION 5(d)
(A) (1) the Operating Company (a) is not required by telecommunications
law or telecommunications regulation to pay any fees in order to operate the
telecommunications system, and provide the telecommunications services described
in the Prospectus in the United Kingdom since it may operate under the
Telecommunications Services Class Licence which does not require the payment of
any fees and (b) is not required by the telecommunications law or
telecommunications regulation of the United Kingdom to have any further
certificates, orders, permits, licenses, authorizations, consents or approvals
of and from, or to make any reports, filings and registrations with, the
Governmental Authorities necessary to own, lease, license and use its properties
and assets and to conduct its business in the manner described in the
Prospectus; and (2) to the best of our knowledge, the Operating Company has not
received any notice of modification or revocation of the Telecommunications
Services Class License in respect of the Operating Company, the effect of which,
singly or in the aggregate, would have a material adverse effect on the Company
and its subsidiaries, taken as a whole;
(B) to our knowledge, the Operating Company is not in violation of, or
in default under, any national, regional or local telecommunications law,
telecommunications regulation or telecommunications rule applicable to the
Operating Company in the United Kingdom (the "Laws") the effect of which, singly
or in the aggregate, would have a material adverse effect on the Company and its
subsidiaries, taken as a whole;
(C) to the best of our knowledge, (1) no judgment, decree or order of
any Governmental Authority in the United Kingdom has been issued against the
Operating Company under the Laws and (2) no litigation, proceeding, inquiry or
investigation has been commenced or threatened, and no notice of violation or
order to show cause has been issued, against the Operating Company before or by
any Governmental Authority. To the best of our knowledge, there are no
administrative proceedings pending before any Governmental Authority which (i)
are generally applicable to telecommunications services or the resale thereof
and (ii) if decided adversely to the Company, would have a material adverse
effect on the Company and its subsidiaries, taken as a whole;
(D) statements in the Prospectus under the captions
"BusinessCRegulatory Matters" referring to the United Kingdom namely in the
Section entitled "Regulatory Matters" on page 54, the first two paragraphs in
this Section, and in the Section entitled "Regulatory Analysis by Service Type"
on page 55, the paragraphs entitled "Data Networking Services" and "Internet
Access Services" and the Section entitled "United Kingdom" on page 57 and in
each case as such
D-1
<PAGE>
statements constitute summaries of the relevant telecommunications law,
telecommunications regulation or telecommunications rule applicable in the
United Kingdom to the Operating Company fairly summarize all matters referred to
therein and there are no material omissions with respect to such descriptions
that would make the statements therein misleading; and
(E) (1) neither the execution and delivery by the Operating Company of,
and performance of the Operating Company's obligations under, the Transfer
Agreement, the Equipment Collocation Permit agreement and the Local Network
Services Agreement nor the execution and delivery by the Company of, and the
performance of the Company's obligations under the Equipment Collocation Permit
Agreement and the Local Network Services Agreement violate any UK
Telecommunications law or telecommunications regulation or to the best of our
knowledge any judgment, order or decree of any United Kingdom governmental body,
agency, court or tribunal having jurisdiction over the Operating Company under
the Laws in the United Kingdom, and (2) no authorization or order of, or filing
with, Governmental Authorities is necessary under UK telecommunications law or
UK telecommunications regulation for the execution and delivery by either the
Operating Company or the Company of, or the performance of their respective
obligations under, the Transfer Agreement, the Local Network Services Agreement
and the Equipment Collocation Permit agreement.
D-2
<PAGE>
Exhibit E
FORM OF OPINION OF
COMPANY'S FRENCH CORPORATE COUNSEL
TO BE DELIVERED PURSUANT TO
SECTION 5(e)
(A) SAVVIS France SAS, a wholly owned subsidiary of SAVVIS Holdings
Corporation, incorporated in France as a societe par actions simplifiee with a
capital of FF 700,000, divided into 7,000 shares of FF 100 par value, with head
office at Paris (75002), 5 boulevard Montmartre (the "Subsidiary"), has been
duly incorporated, is validly existing as a corporation under the laws of
France, has the corporate power and authority to own its property and to conduct
its business as described in the Prospectus contained in the registration
statement on Form S-1 filed by the Company with the Securities and Exchange
Commission on , 2000 (the "Prospectus") and is duly qualified to transact
business in France, except to the extent that the failure to be so qualified
would not result in a material adverse effect on the Company and its
subsidiaries, taken as a whole; all of the issued shares of capital stock of the
Operating Company have been duly and validly authorized and issued and are fully
paid and non-assessable.
(B) The foregoing is subject to the Operating Company holding
certificates, orders, permits, licenses, authorizations, consents and approvals
of and from, and having made all reports, filings and registrations with,
national, regional and local governmental authorities, self-regulatory
organizations and courts and tribunals (collectively, the "Governmental
Authorities") to own, lease, license and use its properties and assets and to
conduct its business in the manner described in the Prospectus and is conducting
business in accordance therewith.
(C) There are no restrictions (legal or otherwise) on the ability of
the Operating Company to declare and pay any dividends or make any payment or
transfer of property or assets to its stockholders other than such restrictions
as would not have a material adverse effect on the Company and its subsidiaries,
taken as a whole.
(D) Each of the Local Transfer Agreement, Local Network Service
Agreement and Equipment Collocation Permit Agreement (the "Asset Transfer
Documents") has been duly authorized, executed and delivered by the Operating
Company, and constitutes a valid and binding obligation of the Operating
Company, enforceable in accordance with its terms, except as (i) the
enforceability thereof may be limited by bankruptcy, insolvency or similar laws
affecting creditors' rights generally, (ii) rights of acceleration and the
availability of equitable remedies may be limited by equitable principles of
general applicability; and (iii) provisions excluding liability for lost profits
under the Section denominated "Limited of Liability" in the Asset Transfer
Documents may not be enforceable.
E-1
<PAGE>
(E) The execution and delivery by the Operating Company of, and
performance of the Operating Company's obligations under, the Asset Transfer
Documents and the execution and delivery by the Company of, and the performance
of the Company's obligations under, the Purchase Agreement and Asset Transfer
Agreements do not violate any Laws or the organizational documents of the
Operating Company or, to the best of our knowledge, any judgment, order or
decree of any governmental body, agency, court or tribunal having jurisdiction
over the Operating Company in France.
(F) There are no restrictions (legal, contractual or otherwise) on the
ability of the Operating Company to declare and pay any dividends or make any
payment or transfer of property or assets to its stockholders other than such
restrictions as would not have a material adverse effect on the Company and its
subsidiaries, taken as a whole.
(G) Each of the Equipment Collocation Permit, Transfer Agreement and
Local Network Services Agreement (the "Asset Transfer Documents") has been duly
authorized, executed and delivered by the Operating Company, and constitutes a
valid and binding obligation of the Operating Company, enforceable in accordance
with its terms except as (i) the enforceability thereof may be limited by
bankruptcy, insolvency or similar laws affecting creditors' rights generally and
(ii) rights of acceleration and the availability of equitable remedies may be
limited by equitable principles of general applicability.
(H) (1) The execution and delivery by the Operating Company of, and
performance of the Operating Company's obligations under, the Asset Transfer
Documents do not violate any Laws, the organizational documents of the Operating
Company, any agreement or other instrument that is binding upon the Operating
Company or, to the best of such counsel's knowledge, any judgment, order or
decree of any governmental body, agency, court or tribunal having jurisdiction
over the Operating Company in France, and (2) no authorization or order of, or
filing with, Governmental Authorities is necessary for the execution and
delivery by either the Operating Company or the Company of, or the performance
of their respective obligations under, the Asset Transfer Documents.
E-2
<PAGE>
Exhibit F
FORM OF OPINION OF
COMPANY'S UNITED KINGDOM CORPORATE COUNSEL
TO BE DELIVERED PURSUANT TO
SECTION 5(f)
(A) the Operating Company has been duly incorporated, is validly
existing as a corporation under the laws of England, has the corporate power and
authority to own its property and to conduct its business as described in the
Prospectus; all of the issued shares of capital stock of the Operating Company
have been duly and validly authorized and issued and are fully paid. To our
knowledge, and relying solely on a director's and officer's certificate, there
are no liens by the Operating Company against the shares of the Operating
Company. Section 3.1 of the Operating Company's Articles of Association and
Regulation 8 in Table A of the Companies Act, 1985 would impose a lien on such
shares in the event a member was indebted to the Operating Company; however,
relying solely on a director's and officer's certificate, no such lien exists.
According to the Certificate, as of the date of the Certificate the Operating
Company has been in continuous and unbroken existence since its date of
incorporation, no action is currently being taken by the Registrar of Companies
for striking the Operating Company off its register, the Operating Company is
not in liquidation or subject to an administrative order and no receiver or
manager of the Company's property has been appointed;
(B) the Operating Company has paid all fees required by all applicable
English national, regional and local governmental authorities, self-regulatory
organizations and courts and tribunals (collectively, the "Governmental
Authorities") in connection with the corporate organization and corporate
existence of the Operating Company. For the avoidance of doubt, we express no
opinion in respect of any fees related to any tax (including, but not limited
to, property or real estate taxes and property rates), value-added tax, stamp
duty or any telecommunications or related regulatory matters;
(C) to our knowledge and based solely on an oral inquiry on February ,
2000 with the English High Court Division of the Central Index of Winding Up
Petitions in the Companies Court, no winding up petition has been filed with the
Companies Court of the English High Court as of such date. To our knowledge, and
based solely on a director's and officer's certificate, (1) no judgment, decree
or order of any Governmental Authority has been issued against the Operating
Company and (2) no litigation, proceeding, inquiry or investigation has been
commenced or threatened, and no notice of violation or order to show cause has
been issued, against the Operating Company before or by any Governmental
Authority;
(D) there are no legal restrictions on the ability of a private limited
company incorporated under the laws of England and Wales such as the Operating
Company to declare and pay any dividends to its members than other those set
forth in Section 263 of the Companies
F-1
<PAGE>
Act, 1995 which permits distributions out of profits available for the purpose
of distributions, namely accumulated, realized profits, so far as not previously
utilized by distribution or capitalization, less accumulated realized losses, so
far as not previously written off in a reduction or reorganization of capital
duly made. English companies laws generally may also impose limits of general
applicability to all companies with respect to certain restrictions on the
ability of the Operating Company to make non-dividend payments or transfer of
property or assets. To our knowledge, and based solely on a director's and
officer's certificate, there are no restrictions, contractual or in any
corporate document of the Operating Company (other than those discussed above),
on the ability of the Operating Company to declare and pay any dividends or make
any payment or transfer of property or assets to its members;
(E) except as set forth below, each of the Transfer Agreements has been
duly authorized, executed and delivered by the Operating Company, and
constitutes a valid and binding obligation of the Operating Company, enforceable
in accordance with its terms, except to the extent that enforceability may be
limited by applicable bankruptcy, insolvency or similar laws relating to or
affecting the rights and remedies of creditors generally and by general
principles of equity including, without limitation, concepts of materiality,
reasonableness, good faith and fair dealing and the possible unavailability of
specific performance, injunctive relief or other equitable remedies regardless
of whether enforceability is considered in a proceeding in equity or at law. To
our knowledge, no stamp duty has been payable on the transfer of the IP Network,
as defined in the Asset Transfer Agreement (the "IP Network"). While under a
strict interpretation of English law, stamp duty may be payable, we believe,
based on the allocation of the consideration set forth in the Asset Transfer
Agreement and assuming the reasonableness and genuineness of such allocation, it
would not be payable on the transfer of the IP Network pursuant to the Asset
Transfer Agreement. In the event stamp duty were deemed to be payable, the
failure to pay stamp duty would not invalidate the transfer of the IP Network
itself as between Bridge Information Systems (UK) Limited, the transferor, or
the Operating Company, the transferee. The maximum amount payable in the event
stamp duty were deemed to be payable would be the amount of stamp duty payable,
plus interest, plus a penalty of the greater of ,300 or the amount of stamp duty
payable. Stamp duty rates with respect to the transfer of assets range generally
from 0.5% to 3.5% of the amount or value of consideration paid for such assets.
Certain restrictions on reverse engineering contained in the Transfer Agreements
may not be enforceable; and
(F) the execution and delivery by the Operating Company of, and
performance of the Operating Company's obligations in accordance with the terms
of, the Transfer Agreements do not violate any national, regional or local laws,
regulations or rules of England applicable to the Operating Company and
customarily viewed as applicable to transactions of this kind ("Laws") or the
organizational documents of the Operating Company or to our knowledge, and based
solely on a director's and officer's certificate, any agreement or other
instrument that is binding upon the Operating Company or any judgment, order or
decree of any governmental Authority.
F-2
<PAGE>
Exhibit G
FORM OF OPINION OF
COMPANY'S GERMAN REGULATORY COUNSEL
TO BE DELIVERED PURSUANT TO
SECTION 5(g)
(A) SAVVIS Germany GmbH (the "Operating Company") has been duly
incorporated, is validly existing as a corporation under the laws of the Federal
Republic of Germany, is as such entered in the commercial register, has the
corporate power and authority to own its property and to conduct its business as
described in the Prospectus; all of the issued shares of capital of the
Operating Company have been duly and validly authorized and issued and are fully
paid and non-assessable;
(B) (1) the Operating Company (a) has to the best of such counsel's
knowledge paid all fees required by all applicable German national, regional and
local governmental authorities, self-regulatory organizations and courts and
tribunals (collectively, the "Governmental Authorities"), and (b) has all
certificates, orders, permits, licenses, authorizations, consents and approvals
of and from, and has made all reports, filings and registrations with, the
Governmental Authorities necessary to own, lease, license and use its properties
and assets and to conduct its business in the manner described in the
Prospectus; and (2) to the best of such counsel's knowledge, the Operating
Company has not received any notice of proceedings relating to revocation,
modification or non-renewal of any such certificates, orders, permits, licenses,
authorizations, consents or approvals, or the qualification or rejection of any
such report, filing or registration, the effect of which, singly or in the
aggregate, would have a material adverse effect on the Company and its
subsidiaries, taken as a whole;
(C) to the best of such counsel's knowledge, the Operating Company is
not in violation of, or in default under, any national, regional or local law,
regulation or rule applicable to the Operating Company (the "Laws") the effect
of which, singly or in the aggregate, would have a material adverse effect on
the Company and its subsidiaries, taken as a whole;
(D) to the best of such counsel's knowledge, (1) no judgment, decree or
order of any Governmental Authority has been issued against the Operating
Company and (2) no litigation, proceeding, inquiry or investigation has been
commenced or threatened, and no notice of violation or order to show cause has
been issued, against the Operating Company before or by any Governmental
Authority. To the best of such counsel's knowledge, there are no rulemakings or
other administrative proceedings pending before any Governmental Authority which
(i) are generally applicable to telecommunications services or the resale
thereof and (ii) if decided adversely to the Company or any of its subsidiaries,
would have a material adverse effect on the Company and its subsidiaries, taken
as a whole;
G-1
<PAGE>
(E) the statements in the Prospectus under the captions
"Business-Regulatory Matters" and, in each case insofar as such statements
constitute summaries of the Federal Republic of Germany legal matters,
including, without limitation, any telecommunications law, regulation or rule
applicable to the Operating Company, documents or proceedings referred to
therein, fairly summarize all matters referred to therein and there are no
material omissions with respect to such descriptions that would make the
statements therein misleading;
(F) to the best of such counsel's knowledge there are no restrictions
(legal, contractual or otherwise) on the ability of the Operating Company to
declare and pay any dividends or make any payment or transfer of property or
assets to its stockholders other than such restrictions as would not have a
material adverse effect on the Company and its subsidiaries, taken as a whole;
(G) each of the Equipment Collocation Permit, Transfer Agreement, and
Local Network Services Agreement (the "Asset Transfer Documents") will, when
duly authorized, executed and delivered by the Operating Company, constitute a
valid and binding obligation of the Operating Company, enforceable in accordance
with its terms as (i) the enforceability thereof may be limited by bankruptcy,
insolvency or similar laws affecting creditors' rights generally and (ii) rights
of acceleration and the availability of equitable remedies may be limited by
equitable principles of general applicability; and
(H) (1) the execution and delivery by the Operating Company of, and
performance of the Operating Company's obligations under, the Asset Transfer
Documents and the execution and delivery by the Company of, and the performance
of the Company's obligations under, the Purchase Agreement and the Asset
Transfer Agreements do not violate any Laws or the organizational documents of
the Operating Company; and, to the best of such counsel's knowledge, any
agreement or other instrument that is binding upon the Operating Company or any
judgment, order or decree of any governmental body, agency, court or tribunal
having jurisdiction over the Operating Company in the Federal Republic of
Germany, and (2) no authorization or order of, or filing with, Governmental
Authorities is necessary for the execution and delivery by either the Operating
Company or the Company of, or the performance of their respective obligations
under, the Asset Transfer Documents or the Purchase Agreement.
G-2
<PAGE>
Exhibit H
FORM OF OPINION OF
COMPANY'S ITALIAN REGULATORY COUNSEL
TO BE DELIVERED PURSUANT TO
SECTION 5(h)
(A) SAVVIS Italia s.r.l. (the "Operating Company") has been duly
incorporated, is validly existing as a corporation in good standing under the
laws of Italy, has the corporate power and authority to own its property and to
conduct its business as described in the Prospectus (as defined in the Purchase
Agreement). The authorizations required under Italian law for the Operating
Company to be duly qualified to transact its business in Italy vis-a-vis the
general public have been filed with the Ministry of Telecommunications on 26
November 1999 and the Ministry has 90 days to accept or to reject the requests;
failing rejection within such term, the authorizations will be deemed as given.
All of the issued shares of capital stock of the Operating Company have been
duly and validly authorized and issued and are fully paid and non-assessable;
(B) the Operating Company (a) has paid all fees required by all
applicable Italian national, regional and local governmental authorities,
self-regulatory organizations and courts and tribunals (collectively, the
"Governmental Authorities"), and (b) except for the authorizations mentioned in
paragraph (A) above, has all certificates, orders, permits, licenses,
authorizations, consents and approvals of and from, and has made all reports,
filings and registrations with, the Governmental Authorities necessary to own,
lease, license and use its properties and assets and to conduct its business in
Italy in the manner described in the Prospectus and is conducting business in
accordance therewith; and (2) to the best of such counsel's knowledge, the
Operating Company has not received any notice of proceedings relating to
revocation, modification or non-renewal of any such certificates, orders,
permits, licenses, authorizations, consents or approvals, or the qualification
or rejection of any such report, filing or registration, the effect of which,
singly or in the aggregate, would have a material adverse effect on the
Operating Company;
(C) to the best of our knowledge, the Operating Company is not in
violation of, or in default under, any Italian national, regional or local law,
regulation or rule applicable to the Operating Company (the "Laws") the effect
of which, singly or in the aggregate, would have a material adverse effect on
the Operating Company;
(D) to the best of our knowledge, (1) no judgment, decree or order of
any Governmental Authority has been issued against the Operating Company and (2)
no litigation, proceeding, inquiry or investigation has been commenced or
threatened, and no notice of violation or order to show cause has been issued,
against the Operating Company before or by any Governmental Authority. To the
best of our knowledge, there are no rulemakings or other administrative
proceedings pending before any Governmental Authority which (i) are generally
H-1
<PAGE>
applicable to telecommunications services or the resale thereof and (ii) if
decided adversely to the Company would have a material effect on the Operating
Company.
(E) the statements in the Prospectus under the caption
"Business-Regulatory Matters" and, in each case insofar as such statements
constitute summaries of the Italian legal matters, including, without
limitation, any Italian telecommunications law, regulation or rule applicable to
the Operating Company, documents or proceedings referred to therein, fairly
summarize all matters referred to therein and there are no material omissions
with respect to such descriptions that would make the statements therein
misleading;
(F) there are no restrictions (legal, contractual or otherwise) on the
ability of the Operating Company to declare and pay any dividends or make any
payment or transfer of property or assets to its stockholders other than those
described in the Prospectus and such restrictions would not have a material
adverse effect on the Operating Company;
(G) each of the Equipment Collocation Permit, Transfer Agreement and
Local Network Services Agreement (the "Asset Transfer Documents") has been duly
authorized, executed and delivered by the Operating Company, and constitutes a
valid and binding obligation of the Operating Company, enforceable in accordance
with its terms, except as (i) the enforceability thereof may be limited by
bankruptcy, insolvency or similar laws affecting creditors' rights generally and
(ii) rights of acceleration and the availability of equitable remedies may be
limited by equitable principles of general applicability; and
(H) the execution and delivery by the Operating Company of, and
performance of the Operating Company's obligations under the Asset Transfer
Documents and the execution and delivery by the Company (as defined in the
Purchase Agreement) of, and the performance of the Company's obligations under,
the Purchase Agreement and the Asset Transfer Documents do not violate any Laws
or the organizational documents of the Operating Company or, to the best of our
knowledge, any agreement or other instrument that is binding upon the Operating
Company, judgment, order or decree of any governmental body, agency, court or
tribunal having jurisdiction over the Operating Company in Italy, and (2) no
authorization or order of, or filing with, Governmental Authorities is necessary
for the execution and delivery by either the Operating Company or the Company
of, or the performance of their respective obligations under, the Asset Transfer
Documents or the Purchase Agreement.
H-2
<PAGE>
Exhibit I
FORM OF OPINION OF
COMPANY'S JAPANESE REGULATORY COUNSEL
TO BE DELIVERED PURSUANT TO
SECTION 5(i)
(A) The Operating Company has been duly incorporated, is validly
existing as a corporation under the laws of Japan, has the corporate power and
authority to own its property and to conduct its business as described in the
"Business-Regulatory Matters" section of the Prospectus; all of the issued
shares of capital stock of the Operating Company have been duly and validly
authorized and issued and are fully paid and non-assessable;
(B) (1) to the best of our knowledge, the Operating Company (a) has
paid all fees required by all applicable Japanese national, regional and local
governmental authorities, self-regulatory organizations, and courts and
tribunals (collectively, "Governmental Authorities") and (b) has all
certificates, orders, permits, licenses, authorizations, consents, and approvals
of and form, and has made all reports, filings, and registrations with, the
Governmental Authorities necessary to own, lease, license and use its properties
and assets as described in the "Business-Regulatory Matters" section of the
Prospectus and is conducting business in accordance therewith; and (2) to the
best of our knowledge, the Operating Company has not received any notice of
proceedings relating to revocation, modification or non-renewal of any such
certificates, orders, permits, licenses, authorizations, consents, or approvals,
or the qualification or rejection of any such report, filing or registration,
the effect of which, singularly or in the aggregate, would have a material
adverse effect on the Company and the Subsidiaries, taken as a whole;
(C) to the best of our knowledge, the Operating Company is not in
violation of, or in default under, any Japanese national, regional, or local
law, regulation, or rule applicable to the Operating Company ("Laws"), the
effect of which, singularly or in the aggregate, would have a material adverse
effect on the Company and the Subsidiaries, taken as a whole;
(D) to the best of our knowledge, (1) no judgment, decree or order of
any Governmental Authority has been issued against the Operating Company and (2)
no litigation, proceeding, inquiry, or investigation has been commenced or
threatened, and no notice of violation or order to show cause has been issued,
against the Operating Company before or by any Governmental Authority. To the
best of our knowledge, there are no rulemakings or other administrative
proceedings pending before any Governmental Authority which (i) are generally
applicable to telecommunications services or the resale thereof and (ii) if
decided adversely to the Company or any of the Subsidiaries, would have a
material adverse effect on the Company and the Subsidiaries, taken as a whole;
I-1
<PAGE>
(E) the statements in the Prospectus under the caption
"Business-Regulatory Matters", insofar as such statements constitute summaries
of Japanese legal matters, including without limitation any telecommunications
law, regulation or rule applicable to the Operating Company, or any documents,
or proceedings referred to therein, fairly summarize all matters referred to
therein and there are no material omissions with respect to such descriptions
that would make the statements therein misleading;
(F) to the best of our knowledge, there are no restrictions (legal,
contractual or otherwise) on the ability of the Operating Company to declare and
pay any dividends or make any payment or transfer of property or assets to its
stockholders other than such restrictions as would not have a material adverse
effect on the Company and its subsidiaries, taken as a whole;
(G) each of the Agreements (the "Transfer Documents") have been duly
authorized, executed and delivered by the Operating Company and constitute valid
and binding obligations of the Operating Company, enforceable in accordance with
their terms, except that (i) the enforceability thereof may be limited by
bankruptcy, insolvency, or similar laws affecting creditors' rights or generally
(including restrictions on the amount of damages to the actual amount of
damage), and (ii) rights of acceleration and the availability of equitable
remedies may be limited by equitable principles of general applicability; and
(H) (1) the execution and delivery by the Operating Company of, and
performance of the Operating Company's obligations under, the Transfer Documents
and the execution and delivery by the Company of, and the performance of the
Company's obligations under, the Purchase Agreement and Transfer Documents do
not violate any Laws, the organizational documents of the Operating Company, any
agreement or other instrument that is binding upon the Operating Company or, to
the best of our knowledge, any judgment, order or decree of any governmental
body, agency, court or tribunal having jurisdiction over the Operating Company
in Japan, and (2) no authorization or order of, or filing with, Governmental
Authorities is necessary for the execution and delivery by either the Operating
Company or the Company of, or the performance of their respective obligations
under, the Purchase Agreement and Transfer Documents.
I-2
<PAGE>
Exhibit J
FORM OF OPINION OF GENERAL COUNSEL OF BRIDGE
TO BE DELIVERED PURSUANT TO
SECTION 5(j)
(i) No filing with, or consent, approval, authorization, license,
order, registration, qualification or decree of, any court or governmental
authority or agency, domestic or foreign, (other than the issuance of the order
of the Commission declaring the Registration Statement effective and such
authorizations, approvals or consents as may be necessary under state securities
laws, as to which we need express no opinion) is necessary or required to be
obtained by Bridge for the performance by Bridge of its obligations under the
Purchase Agreement or in the Custody Agreement, or in connection with the offer,
sale or delivery of the Securities.
(ii) The Custody Agreement has been duly executed and delivered by
Bridge and constitutes the legal, valid and binding agreement of Bridge.
(iii) The Purchase Agreement has been duly authorized, executed and
delivered by or on behalf of Bridge.
(iv) The execution, delivery and performance of the Purchase Agreement,
the Custody Agreement, the sale and delivery of the Securities, the Network
Transfer Agreements and the consummation of the transactions contemplated
thereby and the consummation of the transactions contemplated in the Purchase
Agreement and in the Registration Statement and compliance by the Bridge with
its obligations under the Purchase Agreement and the Network Transfer Agreements
has been duly authorized by all necessary action on the part of Bridge and do
not and will not, whether with or without the giving of notice or passage of
time or both, conflict with or constitute a breach of, or default or Bridge
Repayment Event (as defined in Section 1(b)(i)(E) of the Purchase Agreement)
under or result in the creation or imposition of any tax, lien, charge or
encumbrance upon the Securities or any property or assets of Bridge or any
subsidiary pursuant to, any contract, indenture, mortgage, deed of trust, loan
or credit agreement, note, license, lease or other instrument or agreement to
which Bridge or any subsidiary is a party or by which it may be bound, or to
which any of the property or assets of Bridge or any subsidiary may be subject,
nor will such action result in any violation of the provisions of the charter or
by-laws of Bridge or any subsidiary, if applicable, or any law, administrative
regulation, judgment or order of any governmental agency or body or any
administrative or court decree having jurisdiction over Bridge or any subsidiary
or any of their respective properties, assets or operations.
(v) The information in the Prospectus under "Risk Factors - 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,@ to the extent that it constitutes
matters of law, summaries of legal
J-1
<PAGE>
matters, the Company's charter and by-laws or legal proceedings, or legal
conclusions, has been reviewed by me and is correct in all material respects.
(vi) Bridge has full right, power and authority to hold, sell, transfer
and deliver the Securities to be sold by Bridge pursuant to the Purchase
Agreement. Upon the delivery to DTC or its agent of the Securities registered in
the name of Cede & Co., as nominee for DTC, and the crediting by DTC of the
Securities to the securities accounts of the several Underwriters with DTC, DTC
will be a "protected purchaser" of the Securities (as defined in Section 8-303
of the NYUCC) and will acquire its interest in the Securities (including,
without limitation, all rights that Bridge had or has the power to transfer in
such Securities) free of any adverse claim (assuming that DTC is without notice
of any adverse claim to the Securities). Upon the payment of the purchase price
for the Securities and the crediting by DTC of the Securities to the securities
accounts of the several Underwriters with DTC, each of the Underwriters will
acquire a valid security entitlement (within the meaning of Section 8-501 of the
NYUCC) in respect of the Securities to be purchased by it, and no action
(whether framed in conversion, replevin, constructive trust, equitable lien, or
other theory) based on an adverse claim to such Securities may be asserted
against the Underwriters (assuming that the Underwriters are without notice of
the adverse claim).
J-2
<PAGE>
Exhibit K
FORM OF OPINION OF COUNSEL FOR BRIDGE
TO BE DELIVERED PURSUANT TO SECTION 5(K)
(i) The Selling Stockholder is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Missouri.
(ii) Each of the Purchase Agreement, the Custody Agreement and each of
the Network Transfer Agreements to which the Selling Stockholder is a party have
been duly authorized, executed and delivered by the Selling Stockholder or its
U.S. subsidiaries, as the case may be. Each of the Network Transfer Agreements
to which the Selling Stockholder is a party are valid and binding agreements of
the Selling Stockholder or its U.S. subsidiaries, as the case may be,
enforceable in accordance with their respective terms (except to the extent they
may be limited by applicable bankruptcy, insolvency, reorganization,
receivership, moratorium, fraudulent conveyance and other similar laws relating
to or affecting the rights and remedies of creditors generally and by general
principles of equity including, without limitation, concepts of materiality,
reasonableness, good faith and fair dealing and the possible unavailability of
specific performance, injunctive relief or other equitable remedies, regardless
of whether enforceability is considered in a proceeding in equity or at law.
(iii) No filing with, or consent, approval, authorization, license,
order, registration, qualification or decree of, any court or governmental
authority or agency (other than such authorizations, approvals or consents as
may be necessary under securities and Ablue sky@ laws, as to which we express no
opinion), is necessary or required to be obtained by the Selling Stockholder for
the performance by the Selling Stockholder of its obligations under the Purchase
Agreement or in the Custody Agreement, or in connection with the offer, sale or
delivery of the Stockholder Shares.
(iv) The execution, delivery and performance of the Purchase Agreement
and the Custody Agreement and the sale and delivery of Stockholder Shares being
sold by the Selling Stockholder, the Network Transfer Agreements and the
consummation of the transactions contemplated thereby and the consummation of
the transactions contemplated in the Purchase Agreement, do not and will not,
whether with or without the giving of notice or passage of time or both,
conflict with or result in a breach or violation of, or constitute a default or
Bridge Repayment Event (as defined in Section 1(b)(i)(E) of the Purchase
Agreement) under (A) any statute, order, rule, regulation, judgment or order of
any governmental agency or body or any administrative or court decree having
jurisdiction over the Selling Stockholder or any U.S. subsidiary or any of their
respective properties, assets or operations (except that we express no opinion
with respect to the compliance with securities and "blue sky" laws), or (B) the
Selling Stockholder=s articles of incorporation or by-laws, each in effect as of
the date hereof, or result in
K-1
<PAGE>
the creation or imposition of any tax, lien, charge or encumbrance upon the
Stockholder Shares or any property or assets of the Selling Stockholder or any
U.S. subsidiary pursuant to, any contract, indenture, mortgage, deed of trust,
loan or credit agreement, note, license, lease or other instrument or agreement
to which the Selling Stockholder or any U.S. subsidiary is a party or by which
it may be bound, or to which any of the property or assets of the Selling
Stockholder or any U.S. subsidiary may be subject.
(v) The descriptions of the contracts and other documents in the
Registration Statement under the caption "Relationship with Bridge - Bridge
Relationship" are accurate in all material respects, and the descriptions
thereof or references thereto are correct in all material respects.
K-2
<PAGE>
Exhibit L
FORM OF LOCK-UP FROM DIRECTORS, OFFICERS OR
OTHER STOCKHOLDERS PURSUANT TO
SECTION 5(q)
, 2000
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated,
MORGAN STANLEY & CO. INCORPORATED
BEAR, STEARNS & CO. INC.
BANC OF AMERICA SECURITIES LLC
CIBC WORLD MARKETS CORP.
as Representatives of the several
Underwriters to be named in the
within-mentioned Purchase Agreement
c/o Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
North Tower
World Financial Center
New York, New York 10281
and
c/o Morgan Stanley & Co. Incorporated
1585 Broadway
New York, New York 10036-8293
Re: Proposed Public Offering by SAVVIS Communications Corporation
Dear Ladies and Gentlemen:
The undersigned, a stockholder and/or an officer and/or director of
SAVVIS Communications Corporation (the "Company"), understands that Merrill
Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill
(NY)"), Morgan Stanley & Co. Incorporated ("Morgan Stanley"), Banc of America
Securities LLC, Bear, Stearns Co. Inc. and CIBC World Markets Corp. propose to
enter into a Purchase Agreement (the "Purchase Agreement") with the Company and
the Selling Shareholder providing for the public offering of shares (the
"Securities") of the Company's common stock, par value $.01 per share (the
"Common Stock"). In recognition of the benefit that such an offering will confer
upon the undersigned as a stockholder and/or an officer and/or director of the
Company, and for other
L-1
<PAGE>
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the undersigned agrees with each Underwriter to be named in the
Purchase Agreement that, during a period of 180 days from the date of the
Purchase Agreement, the undersigned will not, without the prior written consent
of Merrill (NY) and Morgan Stanley, directly or indirectly, (i) offer, pledge,
sell, contract to sell, sell any option or contract to purchase, purchase any
option or contract to sell, grant any option, right or warrant for the sale of,
or otherwise dispose of or transfer any shares of the Company's Common Stock or
any securities convertible into or exchangeable or exercisable for Common Stock,
whether now owned or hereafter acquired by the undersigned or with respect to
which the undersigned has or hereafter acquires the power of disposition, or
file any registration statement under the Securities Act of 1933, as amended,
with respect to any of the foregoing or (ii) enter into any swap or any other
agreement or any transaction that transfers, in whole or in part, directly or
indirectly, the economic consequence of ownership of the Common Stock, whether
any such swap or transaction is to be settled by delivery of Common Stock or
other securities, in cash or otherwise.
[Notwithstanding the foregoing, Bridge Information Systems, Inc.
("Bridge") and its subsidiaries, with prior written notification Merrill (NY)
and Morgan Stanley, may sell Common Stock held by Bridge to one or more
investors (each an "Investor"), and may make public announcements with respect
to transactions permitted by this paragraph, so long as such Investor agrees
prior to the consummation of any such transaction pursuant to an instrument in
form and substance reasonably satisfactory to Merrill (NY) and Morgan Stanley
(which instrument will be deemed satisfactory if it is substantially similar to
the provisions of this letter agreement) to be bound by the provisions of this
letter agreement insofar as they relate to the shares of Common Stock or other
securities acquired.]*
Very truly yours,
Signature:
-----------------------
Print Name:
-----------------------
- ------------------------------------
* Included in Bridge letter only.
L-2
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
PURCHASE AGREEMENT................................................................................................1
SECTION 1. Representations and Warranties......................................................3
(a) Representations and Warranties by the Company and Bridge............................3
(i) Compliance with Registration Requirements.................................3
(ii) Independent Accountants...................................................4
(iii) Financial Statements......................................................4
(iv) No Material Adverse Change in Business....................................5
(v) Good Standing of the Company..............................................5
(vi) Good Standing of Subsidiaries.............................................5
(vii) Capitalization............................................................6
(viii) Authorization of Agreement................................................6
(ix) Authorization and Description of Securities...............................6
(x) Absence of Defaults and Conflicts.........................................6
(xi) Absence of Labor Dispute..................................................7
(xii) Absence of Proceedings....................................................7
(xiii) Accuracy of Exhibits......................................................7
(xiv) Possession of Intellectual Property.......................................8
(xv) Absence of Further Requirements...........................................8
(xvi) Possession of Licenses and Permits........................................8
(xvii) Title to Property.........................................................9
(xviii) Investment Company Act....................................................9
(xix) Environmental Laws........................................................9
(xx) Registration Rights......................................................10
(xxi) Authorization of Network Transfer Agreements.............................10
(xxii) Network Transfer.........................................................10
(xxiii) Reserved Share Program...................................................11
(xxiii) Year 2000 Compliance.....................................................11
(b) Representations and Warranties by Bridge...........................................11
(i) Representations and Warranties of Parent Company..............................11
(ii) Representations and Warranties of Selling Stockholder....................13
(c) Officer's Certificates.............................................................15
SECTION 2. Sale and Delivery to Underwriters; Closing.........................................16
(a) Initial Securities.................................................................16
(b) Option Securities..................................................................16
(c) Payment............................................................................16
(d) Denominations; Registration........................................................17
(e) Appointment of Qualified Independent Underwriter...................................17
SECTION 3. Covenants of the Company...........................................................17
(a) Compliance with Securities Regulations and Commission Requests.....................17
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
(b) Filing of Amendments...............................................................18
(c) Delivery of Registration Statements................................................18
(d) Delivery of Prospectus.............................................................18
(e) Continued Compliance with Securities Laws..........................................19
(f) Blue Sky Qualifications............................................................19
(g) Rule 158...........................................................................19
(h) Use of Proceeds....................................................................19
(i) Listing............................................................................20
(j) Restriction on Sale of Securities..................................................20
(k) Reporting Requirements.............................................................20
(l) Compliance with NASD Rules.........................................................20
(m) Compliance with Rule 463...........................................................21
SECTION 4. Payment of Expenses................................................................21
(a) Expenses...........................................................................21
(b) Expenses of the Selling Shareholder................................................21
(c) Termination of Agreement...........................................................21
(d) Allocation of Expenses.............................................................21
SECTION 5. Conditions of Underwriters' Obligations............................................22
(a) Effectiveness of Registration Statement............................................22
(b) Opinion of Counsel for Company.....................................................22
(c) Opinion of General Counsel of Company..............................................22
(d) Opinions of French and United Kingdom Regulatory Counsel for Company...............22
(e) Opinion of French Corporate Counsel for Company....................................22
(f) Opinion of Special United Kingdom Corporate Counsel for Company....................23
(g) Opinion of German Regulatory Counsel for Company...................................23
(h) Opinion of Italian Regulatory Counsel for Company..................................23
(i) Opinion of Japanese Regulatory Counsel for Company.................................23
(j) Opinion of General Counsel of Bridge...............................................23
(k) Opinion of Counsel for Bridge......................................................23
(l) Opinion of Counsel for Underwriters................................................24
(m) Officers' Certificates.............................................................24
(n) Certificate of Selling Shareholder.................................................25
(o) Accountants' Comfort Letter........................................................25
(p) Bring-down Comfort Letter..........................................................25
(q) Approval of Listing................................................................25
(r) No Objection.......................................................................25
(s) Lock-up Agreements.................................................................25
(t) Network Transfer Agreements........................................................25
(u) GECC Sublease......................................................................25
(v) Conditions to Purchase of Option Securities........................................26
(i) Officers' Certificates...................................................26
(ii) Certificate of Selling Shareholder.......................................26
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
(iii) Opinion of Counsel of the Company........................................26
(iv) Opinion of the General Counsel of the Company............................26
(v) Opinions of French and United Kingdom Regulatory Counsel for Company.....26
(vi) Opinion of French Regulatory Counsel for Company.........................27
(vii) Opinion of Special United Kingdom Corporate Counsel for Company..........27
(viii) Opinion of German Regulatory Counsel for Company.........................27
(ix) Opinion of Italian Regulatory Counsel for Company........................27
(x) Opinion of Japanese Regulatory Counsel for Company.......................27
(xi) Opinion of General Counsel for Bridge....................................27
(xii) Opinion of Counsel for Bridge............................................27
(xiii) Opinion of Counsel for Underwriters......................................28
(xiv) Bring-down Comfort Letter................................................28
(w) Additional Documents...............................................................28
(x) Termination of Agreement...........................................................28
SECTION 6. Indemnification....................................................................28
(a) Indemnification of Underwriters....................................................28
(b) Indemnification of Company, Directors and Officers and Bridge......................30
(c) Actions against Parties; Notification..............................................30
(d) Settlement without Consent if Failure to Reimburse.................................31
(e) Indemnification for Reserved Securities............................................32
(f) Other Agreements with Respect to Indemnification...................................32
SECTION 7. Contribution.......................................................................32
SECTION 8. Representations, Warranties and Agreements to Survive Delivery.....................33
SECTION 9. Termination of Agreement...........................................................33
(a) Termination; General...............................................................34
(b) Liabilities........................................................................34
SECTION 10. Default by One or More of the Underwriters.................................................34
SECTION 11. Default by the Selling Shareholder or the Company..........................................35
SECTION 12. Notices....................................................................................35
SECTION 13. Parties....................................................................................36
SECTION 14. GOVERNING LAW AND TIME.....................................................................36
SECTION 15. Effect of Headings.........................................................................36
SCHEDULE A.........................................................................................Sch A-1
SCHEDULE B.........................................................................................Sch B-1
SCHEDULE C.........................................................................................Sch C-1
SCHEDULE D.........................................................................................Sch D-1
Exhibit A Form of Opinion of Company's Counsel...................................................A-1
Exhibit B Form of Opinion of General Counsel of the Company......................................B-1
</TABLE>
iii
<PAGE>
<TABLE>
<S> <C>
Exhibit C Form of Opinion of Company's French Regulatory Counsel.................................C-1
Exhibit D Form of Opinion of Company's United Kingdom Regulatory Counsel.......................D-1
Exhibit E Form of Opinion of Company's French Corporate Counsel................................E-1
Exhibit F Form of Opinion of Company's United Kingdom Corporate Counsel........................F-1
Exhibit G Form of Opinion of Company's German Regulatory Counsel...............................G-1
Exhibit H Form of Opinion of Company's Italian Regulatory Counsel..............................H-1
Exhibit I Form of Opinion of Company's Japanese Regulatory Counsel.............................I-1
Exhibit J Form of Opinion of Counsel to Bridge.................................................J-1
Exhibit K Form of Opinion of Counsel for the Selling Shareholder...............................K-1
Exhibit L Form of Lock-up from Directors, Officers or Other Stockholders.......................L-1
iv
</TABLE>
EXHIBIT 5.1
HOGAN & HARTSON
L.L.P.
885 THIRD AVENUE
26TH FLOOR
NEW YORK, NY 10022
TEL: (212) 409-9800
FAX: (212) 409-9801
February 9, 2000
Board of Directors
SAVVIS Communications Corporation
12007 Sunrise Valley Drive
Reston, VA 20191
Gentlemen:
We are acting as special counsel to SAVVIS Communications Corporation,
a Delaware corporation (the "COMPANY"), in connection with its registration
statement on Form S-1, as amended (the "REGISTRATION STATEMENT"), filed with the
Securities and Exchange Commission relating to the proposed public offering of
up to 14,875,000 shares of the Company's common stock, par value $.01 per share
(the "SHARES") by the Company. This opinion letter is furnished to you at your
request to enable you to fulfill the requirements of Item 601(b)(5) of
Regulation S-K, 17 C.F.R. Section 229.601(b)(5), in connection with the
Registration Statement.
For purposes of this opinion letter, we have examined copies of the
following documents:
1. An executed copy of the Registration Statement.
2. The Amended and Restated Certificate of Incorporation of the
Company, as amended to date, as on file as of the date hereof
in the office of the Secretary of State of the State of
Delaware and as certified by the Secretary of the Company on
the date hereof as being complete, accurate, and in effect.
3. The Amended and Restated Bylaws of the Company, as certified
by the Secretary of the Company on the date hereof as being
complete, accurate, and in effect.
<PAGE>
Page 2 of 3
Board of Directors
SAVVIS Communications Corporation
4. The proposed form of Purchase Agreement among the Company and
the several Underwriters to be named therein, for whom Merrill
Lynch, Pierce, Fenner & Smith Incorporated, Morgan Stanley &
Co. Incorporated, Banc of America Securities LLC, Bear Stearns
& Co. Inc. and CIBC World Markets Corp. will act as
representatives (the "UNDERWRITING AGREEMENT"), filed as
Exhibit 1.1. to the Registration Statement.
5. Resolutions of the Board of Directors of the Company adopted
by unanimous written consent on October 29, 1999, and
resolutions of the Board of Directors adopted at meetings held
on December 7, 1999 and January 26, 2000, respectively, as
certified by the Secretary of the Company on the date hereof
as being complete, accurate, and in effect, relating to the
issuance and sale of the Shares and arrangements in connection
therewith.
In our examination of the aforesaid documents, we have assumed the
genuineness of all signatures, the legal capacity of all natural persons, the
accuracy and completeness of all documents submitted to us, the authenticity of
all original documents, and the conformity to authentic original documents of
all documents submitted to us as copies (including telecopies). This opinion
letter is given, and all statements herein are made, in the context of the
foregoing.
This opinion letter is based as to matters of law solely on the
Delaware General Corporation Law, as amended. We express no opinion herein as to
any other laws, statutes, ordinances, rules, or regulations. As used herein, the
term "Delaware General Corporation Law, as amended" includes the statutory
provisions contained therein, all applicable provisions of the Delaware
Constitution and reported judicial decisions interpreting these laws.
Based upon, subject to and limited by the foregoing, we are of the
opinion that following (i) final action of the Pricing Committee of the Board of
Directors of the Company approving the price of the Shares, (ii) execution and
delivery by the Company of the Underwriting Agreement, (iii) effectiveness of
the
<PAGE>
Page 3 of 3
Board of Directors
SAVVIS Communications Corporation
Registration Statement, (iv) issuance of the Shares pursuant to the terms of the
Underwriting Agreement, and (v) receipt by the Company of the consideration for
the Shares specified in the resolutions of the Board of Directors and the
Pricing Committee referred to above, the Shares will be validly issued, fully
paid, and nonassessable.
This opinion letter has been prepared for your use in connection with
the Registration Statement and speaks as of the date hereof. We assume no
obligation to advise you of any changes in the foregoing subsequent to the
delivery of this opinion letter.
We hereby consent to the filing of this opinion letter as Exhibit 5.1
to the Registration Statement and to the reference to this firm under the
caption "Validity of the Shares" in the prospectus constituting a part of the
Registration Statement. In giving this consent, we do not thereby admit that we
are an "expert" within the meaning of the Securities Act of 1933, as amended.
Very truly yours,
/s/ HOGAN & HARTSON L.L.P.
---------------------------
HOGAN & HARTSON L.L.P.
[SAVVIS letterhead]
February 9, 2000
Board of Directors
SAVVIS Communications Corporation
12007 Sunrise Valley Drive
Reston, VA 20191
Gentlemen:
The undersigned is Vice President and General Counsel of
SAVVIS Communications Corporation, a Delaware corporation (the "Company"). This
opinion letter is furnished to you at your request to enable you to fulfill the
requirements of Item 601(b)(5) of Regulation S-K, 17 C.F.R. ss. 229.601(b)(5) in
connection with the proposed public sale by Bridge Information Systems, Inc., a
Missouri corporation (the "Selling Stockholder"), of (i) up to 2,125,000 shares
of the Company's common stock, par value $.01 per share (the "Common Stock"),
and (ii) up to an additional 2,550,000 shares of Common Stock to cover
overallotments (collectively, the "Shares"), pursuant to the Company's
registration statement on Form S-1, as amended (the "Registration Statement").
For the purpose of rendering this opinion, I have examined
originals, or photostatic or certified copies, of such records of the Company,
and such corporate records, certificates of public officials and other
documents, as I have deemed relevant to render this opinion. In my examination
of the aforesaid documents, I have assumed the genuineness of all signatures,
the legal capacity of all natural persons, the accuracy and completeness of all
documents submitted to me, the authenticity of all original documents, and the
conformity to authentic original documents of all documents submitted to me as
copies (including telecopies). This opinion letter is given, and all statements
herein are made, in the context of the foregoing.
This opinion letter is based as to matters of law solely on
the Delaware General Corporation Law, as amended. I express no opinion herein as
to any other laws, statutes, ordinances, rules, or regulations. As used herein,
the term "Delaware General Corporation Law, as amended" includes the statutory
provisions contained therein, all applicable provisions of the Delaware
Constitution and reported judicial decisions interpreting these laws.
<PAGE>
Based upon, subject to and limited by the foregoing, I am of
the opinion that the Shares have been duly authorized and validly issued and are
fully paid and nonassessable.
This opinion letter has been prepared for your use in
connection with the Registration Statement and speaks as of the date hereof. I
assume no obligation to advise you of any changes in the foregoing subsequent to
the delivery of this opinion letter.
I hereby consent to the filing of this opinion letter as
Exhibit 5.2 to the Registration Statement and to the reference to me under the
caption "Validity of the Shares" in the prospectus constituting a part of the
Registration Statement. In giving this consent, I do not thereby admit that I am
an "expert" within the meaning of the Securities Act of 1933, as amended.
Very truly yours,
/s/ Steven M. Gallant
---------------------
Steven M. Gallant
CONFIDENTIAL MATERIALS HAVE BEEN OMITTED FROM THE SCHEDULES TO
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. February _____, 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 SAVVIS Subsidiaries and certain Bridge
Subsidiaries are entering into, and may in the future enter into, Local Transfer
Agreements, Local Network Services Agreements substantially in the
<PAGE>
form of Exhibit A hereto (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 Addenda, provided that if such a conflict
shall arise, the Addenda 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"0, "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.
2
<PAGE>
"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.
3
<PAGE>
"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.
"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.
"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" has the meaning set forth in Schedule 3.1
hereto.
"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.
4
<PAGE>
"TELERATE" means Telerate Holdings, Inc., a Delaware corporation.
"TELERATE LOCAL NETWORK SERVICES AGREEMENTS" means the local
network services agreements between certain SAVVIS Subsidiaries
and certain Telerate Subsidiaries, substantially in the form of
Exhibit A to the Telerate Network Services Agreement.
"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,
substantially in the form of Exhibit B hereto.
"TELERATE SUBSIDIARIES" means the direct and indirect
subsidiaries of Telerate which will be involved in the operation
or ownership of the Acquired Network Facilities.
"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."
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
5
<PAGE>
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 centers 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. Unless otherwise mutually agreed by the parties, each Addendum
providing for the provision of Additional Network Facilities shall
have a term of three years. Such Addendum may also include provisions
with respect to the level of redundancy to be provided and the Quality
of Service Standards to apply to such Additional Network Facilities.
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.
2.6. Throughout the term of this Agreement, SAVVIS shall use its
commercially 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
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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.
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
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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
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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 for
third party customers of SAVVIS 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.
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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.
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. A failure of the Quality of
Service Standards to be met shall not constitute an Event of Default
or give Bridge the right to terminate this Agreement to the extent
that such failure 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. 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.
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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.
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
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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, contractors or
customers, 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.
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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 not abuse or
fraudulently use the Networks or use the Networks for any
unauthorized or illegal purposes, and shall neither permit nor
assist others to do so, including but not limited to:
(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;
(d) using the Networks for voice communications over a private
network in jurisdictions where such use is not allowed; or
(e) using the Networks in a manner contrary to or inconsistent
with such acceptable use policies as SAVVIS may adopt and
publish from time to time consistent with industry standards.
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 with respect to all or part of the Networks
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;
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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 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.]
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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 or Telerate or any Bridge Subsidiary or any Telerate
Subsidiary has claimed liquidated damages under this Section or
under the Telerate Network Services Agreement or under any Local
Network Services Agreement or under any Telerate Local Network
Services Agreement, or (ii) more than 36 months following the most
recent Event of Default by SAVVIS
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for which Bridge or Telerate or any Bridge Subsidiary or any
Telerate Subsidiary has claimed liquidated damages under this
Section or under the Telerate Network Services Agreement or under
any Local Network Services Agreement or under any Telerate Local
Network Services Agreement.
12. LIMITATIONS OF LIABILITY
12.1. Subject to Section 11.4, 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 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.
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14. PROPRIETARY RIGHTS; LICENSE
14.1. SAVVIS hereby grants to Bridge and the Bridge Subsidiaries a
non-exclusive and non-transferable license to use all programming
and software necessary for Bridge and the Bridge Subsidiaries to
use the Networks. Such license is granted for the term of this
Agreement for the sole purpose of enabling Bridge and the Bridge
Subsidiaries 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 (except as permitted
by applicable law) 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.
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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.
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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 or prior to 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 Bridge and not provided by
SAVVIS or (iv) services or equipment provided by or on behalf of
Bridge under the Technical Services Agreement. 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.
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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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<PAGE>
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.
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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.
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
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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
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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
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.
THIS CONTRACT CONTAINS A BINDING ARBITRATION PROVISION WHICH MAY BE
ENFORCED BY THE PARTIES.
SAVVIS COMMUNICATIONS CORPORATION
By____________________________________________________________
Name: Steven M. Gallant
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Title: Vice President and General Counsel
BRIDGE INFORMATION SYSTEMS, INC.
By____________________________________________________________
Name: Daryl A. Rhodes
Title: Executive Vice President
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<PAGE>
SCHEDULE 2.2
QUALITY OF SERVICE STANDARDS
1. Starting one year from the Effective Date, the Acquired Network
Facilities and Additional Network Facilities that are connected to the
St. Louis hub where Bridge houses the data distributed over the
Distribution Network (the "St. Louis Hub") by fully redundant paths
shall be covered by Quality of Service Standards outlined below. These
provisions shall be applicable to Installation Sites performing within
the bandwidth limitations set forth in Section 7.2 of Schedule 3.1 or,
with respect to the SAVVIS Backbone, to be agreed upon, and shall be
measured in performance relative to the St. Louis Hub.
2. For the SAVVIS Backbone supporting the Collection Network and Distribution
Network:
(a) There shall not be less than 99.99% availability to any SAVVIS
POP supporting Installation Sites during each one month period
during the Market Hours applicable to the POP connected to the
St. Louis Hub.
(b) The average round-trip terrestrial latency period to SAVVIS
POP locations supporting Installation Sites during each
one-month period shall not exceed:
(i) 75 milliseconds within the United States,
(ii) 250 milliseconds to Australia, Eastern Asia, Europe,
and North America,
(iii) 425 milliseconds to all other areas, including South
America, Middle East, Africa, New Zealand and India.
3. For Installation Sites, network availability shall be measured in terms
of server upstream connectivity during Market Hours for each one-month
period. Resultant availability to the Installation Sites shall be not
less than 99.99% based on the following criteria:
(a) All server disconnects will be considered as potential network
outages.
(b) Disconnects which are attributed to bandwidth limitations,
process failures, and server faults will be eliminated from
the sample population.
(c) Remaining disconnects that reflect total outage conditions on
both redundant pieces of the network shall be considered a
network outage to the Installation Site. The time duration of
the network outage shall be used to determine the availability
percentage.
3. SAVVIS will continue to monitor performance of the acquired Bridge OA
Network. Performance problems with specific OA sites will be resolved
jointly by Bridge and SAVVIS.
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4. 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, plus (other than in Distributor Countries) the actual charges
for Installation Site Local Access Facilities, permanent virtual circuits
or other means for connecting such Installation Site to the SAVVIS POP:
<TABLE>
<CAPTION>
CONNECTION MONTHLY MONTHLY MONTHLY MONTHLY CREDIT
SPEED CREDIT CREDIT CREDIT [DISTRIBUTOR
[UNITED STATES] [EUROPE] [ASIA] COUNTRIES]
<S> <C> <C> <C> <C>
T1 [*] [*] [*] [*]
E1 [*] [*] [*] [*]
256 Kbs [*] [*] [*] [*]
128 Kbs [*] [*] [*] [*]
64 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.
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<PAGE>
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. "SAVVIS BACKBONE" means the collection of long-haul
circuits, Backbone Local Access Facilities and POPS,
including switching and routing equipment, that are owned
by, or leased to, SAVVIS providing telecommunications
utilizing the Internet Protocol, excluding any Installation
Site Local Access Facilities.
<PAGE>
1.8. "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.
1.9. "POP SITE" means any Installation Site that accesses a SAVVIS POP
by means of Local Access Facilities.
1.10. "NON-POP SITE" means any Installation Site other than a POP Site.
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, but in any event not less
than [*] per month from the Effective Date, such amount to be
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, as set forth in Schedule
3.1-A hereto; 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, as set forth in
Schedule 3.1-A hereto, plus a benefits loading
factor to be mutually agreed upon;
(b) less the actual cost to Bridge of backbone circuits
and associated Backbone Local Access Facilities
removed or replaced subsequent to October 31, 1999,
and prior to the Effective Date;
(c) plus, (i) with respect to the Distribution Network,
the actual cost to SAVVIS as of the Effective Date
of backbone circuits and associated Backbone Local
Access added or substituted or used in part by any
party other than Bridge, subsequent to October 31,
1999, multiplied by the
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oportionate megabit reserved usage of such circuits
as ordered by Bridge under this Agreement as of the
Effective Date, and further multiplied by [*]; 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
and associated Backbone Local Access
Facilities added or substituted subsequent to
October 31, 1999, and prior to the Effective
Date, multiplied by [*];
(d) plus the actual cost to Bridge of the additional
Installation Site Local Access Facilities added
subsequent to October 31, 1999, and prior to the
Effective Date.
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 and Installation Sites
connected to the Networks by satellite shall be mutually
agreed upon following an analysis to be conducted by the
parties of the costs pertaining to such Installation Sites.
Such pricing shall be determined in a manner reasonably
consistent with the pricing for other Installation Sites.
In the event that the parties are unable to reach agreement
on such pricing after exercising good faith efforts to do
so over a reasonable period of time, such pricing shall be
determined by binding arbitration as provided below.
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. 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, 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).
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3.2. 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 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, 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).
3.3. 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 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, 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 E1 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 9.1 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.
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4. FIRST-YEAR PRICES FOR ADDITIONAL NON-POP SITES IN THE UNITED STATES
4.1. 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, 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. 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, 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).
4.3. 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
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(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, 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. 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, 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. FIRST-YEAR PRICES FOR ADDITIONAL NON-POP SITES IN EUROPE
5.1. 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, 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. 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
33
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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, 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).
5.3. 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, 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. 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, plus
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<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).
5.5. 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, 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. FIRST-YEAR PRICES FOR ADDITIONAL NON-POP SITES IN ASIA
6.1. 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, 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).
6.2. 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:
35
<PAGE>
(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, 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. 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, 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. 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, 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).
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<PAGE>
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, 3.2, 3.3, 4, 5 or 6 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.
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 8.1 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. For each Agreement Year following the first Agreement Year of this
Agreement, the rates and charges for the Networks and any
Additional Network Facilities 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,
in Europe or Asia where the Additional Network Facilities charge
does not include a Backbone component, the charge for any Backbone
circuit in the
37
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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 Sections 9.1 and 9.2, reduced
by [*] 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 and the Bridge
Subsidiaries to SAVVIS and the SAVVIS Subsidiaries 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
38
<PAGE>
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.
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.
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<PAGE>
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.
40
<PAGE>
SCHEDULE 3.1-A
ACTUAL COST AMOUNTS
1. The parties agree that the actual cost to Bridge of
operating the Networks as of October 31, 1999, is
$__________________.
2. The parties agree that 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, is $_____________.
3. SAVVIS shall have the right, at reasonable times and on
reasonable notice, to audit the books and records of Bridge
in order to verify the amounts set forth in paragraphs 1
and 2 above. Such audits shall be conducted within 120 days
after the Effective Date, and 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.
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<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, plus (other than in
Distributor Countries) the actual charges for Installation Site Local
Access Facilities, permanent virtual circuits or other means for
connecting such Installation Site to the SAVVIS POP:
<TABLE>
<CAPTION>
United States:
INSTALLATION SITES INSTALLATION SITES
EXISTING AS OF ADDED AFTER
CONNECTION SPEED THE EFFECTIVE DATE THE EFFECTIVE DATE
<S> <C> <C>
T1 [*] [*]
256 Kbs [*] [*]
128 Kbs [*] [*]
56 Kbs [*] [*]
ISDN [*] [*]
<CAPTION>
Europe:
INSTALLATION SITES INSTALLATION SITES
AS OF ADDED AFTER DISTRIBUTOR
CONNECTION SPEED THE EFFECTIVE DATE THE EFFECTIVE DATE COUNTRY
<S> <C> <C> <C>
256 Kbs [*] [*] [*]
128 Kbs [*] [*] [*]
64 Kbs [*] [*] [*]
ISDN [*] [*] [*]
E1 [*] [*] [*]
</TABLE>
42
<PAGE>
<TABLE>
<CAPTION>
Asia:
INSTALLATION SITES INSTALLATION SITES
AS OF ADDED AFTER DISTRIBUTOR
CONNECTION SPEED EFFECTIVE DATE EFFECTIVE DATE COUNTRY
<S> <C> <C> <C>
256 Kbs [*] [*] [*]
128 Kbs [*] [*] [*]
64 Kbs [*] [*] [*]
ISDN [*] [*] [*]
E1 [*] [*] [*]
</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.
43
<PAGE>
EXHIBIT A
TO NETWORK SERVICES AGREEMENT
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 Communications 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, 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 Addenda, provided
that if such a conflict shall arise, the Addenda 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
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<PAGE>
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
2
<PAGE>
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.
3
<PAGE>
"NETWORK SERVICES AGREEMENT" means the Network Services Agreement
between SAVVIS Communications 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 COMMUNICATIONS" 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."
4
<PAGE>
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.
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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
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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 legal
currency of [jurisdiction] 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
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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
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(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
Communications 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 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 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:
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(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
Communications 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
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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.
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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 Communications or
Affiliates of SAVVIS Communications, 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
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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.
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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 Customer 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 or [Bridge Parent]/[Telerate Parent] or any
customer of [Bridge Parent]/[Telerate Parent] has claimed
liquidated damages under this Section or under a Network Services
Agreement or any Local [Telerate]/[Bridge] Network Services
Agreement, or (ii) more than 36 months following the most recent
Event of Default by SAVVIS for which Customer or [Bridge
Parent]/[Telerate Parent] or any customer of [Bridge
Parent]/[Telerate Parent] has claimed liquidated damages under
this Section or under a Network Services Agreement or any Local
[Telerate]/[Bridge] Network Services Agreement.
12. LIMITATIONS OF LIABILITY
12.1. Subject to Section 11.4, 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.
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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 (except as
permitted by applicable law) 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
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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
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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
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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
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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
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("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.
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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.]
[Except as expressly provided in this Agreement, nothing in this
Agreement will create or confer any rights or other benefits on or
in favor of any person who is not a party to this Agreement
whether pursuant to the Contracts (Rights of Third Parties) Act,
1999 or otherwise.]
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:
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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
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.
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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.
THIS CONTRACT CONTAINS A BINDING ARBITRATION PROVISION WHICH
MAY BE ENFORCED BY THE PARTIES.
[local SAVVIS entity]
---------------------
By
----------------------------------
Name: Steven M. Gallant
[local Bridge/Telerate entity].
By
----------------------------------
Name:
-------------------------------
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SCHEDULE 2.2
QUALITY OF SERVICE STANDARDS
1. Starting one year from the Effective Date, the Acquired Network
Facilities and Additional Network Facilities that are connected to the
St. Louis hub where [Bridge Parent]/[Telerate Parent] houses the data
distributed over the Distribution Network (the "ST. LOUIS HUB") by
fully redundant paths shall be covered by Quality of Service Standards
outlined below. These provisions shall be applicable to Installation
Sites performing within the bandwidth limitations set forth in Section
7.2 of Schedule 3.1 to the Network Services Agreement or, with respect
to the SAVVIS Backbone, to be agreed upon, and shall be measured in
performance relative to the St. Louis Hub.
2. For the SAVVIS Backbone supporting the Collection Network and
Distribution Network:
(a) There shall not be less than 99.99% availability to any SAVVIS
POP supporting Installation Sites during each one month period
during the Market Hours applicable to the POP connected to the
St. Louis Hub.
(b) The average round-trip terrestrial latency period to SAVVIS
POP locations supporting Installation Sites during each
one-month period shall not exceed:
(i) 75 milliseconds within the United States,
(ii) 250 milliseconds to Australia, Eastern Asia, Europe,
and North America,
(iii) 425 milliseconds to all other areas, including South
America, Middle East, Africa, New Zealand and India.
3. For Installation Sites, network availability shall be measured in terms
of server upstream connectivity during Market Hours for each one-month
period. Resultant availability to the Installation Sites shall be not
less than 99.99% based on the following criteria:
(a) All server disconnects will be considered as potential network
outages.
(b) Disconnects which are attributed to bandwidth limitations,
process failures, and server faults will be eliminated from
the sample population.
(c) Remaining disconnects that reflect total outage conditions on
both redundant pieces of the network shall be considered a
network outage to the Installation Site. The time duration of
the network outage shall be used to determine the availability
percentage.
3. SAVVIS will continue to monitor performance of the acquired Customer OA
Network. Performance problems with specific OA sites will be resolved
jointly by Customer and SAVVIS.
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4. 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 MONTHLY MONTHLY MONTHLY
SPEED CREDIT CREDIT CREDIT
[EUROPE] [ASIA] [AMERICAS]
T1 [*] [*] [*]
256 KBS [*] [*] [*]
128 KBS [*] [*] [*]
64 KBS [*] [*] [*]
56 KBS [*] [*] [*]
ISDN [*] [*] [*]
E1 [*] [*] [*]
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.
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EXHIBIT B
TO NETWORK SERVICES AGREEMENT
-----------------------------
TELERATE NETWORK SERVICES AGREEMENT
NETWORK SERVICES AGREEMENT
This NETWORK SERVICES AGREEMENT (the "AGREEMENT") is effective as of
___________________, 2000 (the "EFFECTIVE DATE"), between SAVVIS Communications
Corporation, a Missouri corporation ("SAVVIS"), and Telerate Holdings, Inc., a
Delaware corporation ("TELERATE").
RECITALS
A. Telerate is engaged in the business of collecting and distributing
various financial, news and other data. Bridge Information Systems, Inc., a
Missouri corporation ("BRIDGE") is the ultimate parent of Telerate, and is also
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 Bridge and SAVVIS under the Master
Establishment and Transition Agreement to cause this Agreement to be entered
into between SAVVIS and Telerate, and the Bridge 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 Telerate
and Bridge.
E. In conjunction with this Agreement, SAVVIS and Bridge 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 SAVVIS Subsidiaries and certain
Bridge Subsidiaries are entering into, and may in the future enter into, Local
Transfer Agreements, Local Network Services Agreements substantially in the form
of Exhibit A hereto (the "LOCAL NETWORK SERVICES AGREEMENTS"), Equipment
Collocation
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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 Telerate, 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 Addenda, provided that if such a conflict
shall arise, the Addenda 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.
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"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 LOCAL NETWORK SERVICES AGREEMENTS" means the local
network services agreements between certain SAVVIS Subsidiaries
and certain Bridge Subsidiaries, as provided for in the Bridge
Network Services Agreement.
"BRIDGE NETWORK SERVICES AGREEMENT" means the network services
agreement pursuant to which SAVVIS shall provide Internet
Protocol backbone and other data transport services to Bridge.
"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 Telerate, 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 Telerate 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
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(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 Telerate and Telerate 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.
"INSTALLATION SITE" means any facility of Telerate or a
Telerate Subsidiary or of vendors or customers of Telerate or
a Telerate Subsidiary 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 Telerate 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.
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"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 SUBSIDIARIES" means the direct and indirect
subsidiaries of Telerate which will be involved in the
operation or ownership of the Acquired Network Facilities.
"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
Telerate and the Telerate Subsidiaries the following managed
packet-data transport networks, including the operation,
management and maintenance thereof:
(a) a global office-automation network, providing connectivity
among the offices of Telerate and 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."
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 Telerate 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, Telerate shall be entitled to receive, upon
written request by Telerate within 30 days of its receipt of
the performance
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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 Telerate 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 Telerate
or a Telerate Subsidiary or a vendor or customer of Telerate or
a Telerate Subsidiary or (ii) equipment or software used by
Telerate 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 Telerate and Telerate 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 centers for such
portions of the SAVVIS Backbone or other operations of SAVVIS
that are not used to provide the Networks to Telerate.
2.4. [Intentionally omitted.]
2.5. Unless otherwise mutually agreed by the parties, each Addendum
providing for the provision of Additional Network Facilities
shall have a term of three years. Such Addendum may also
include provisions with respect to the level of redundancy to
be provided and the Quality of Service Standards to apply to
such Additional Network Facilities. 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.
2.6. Throughout the term of this Agreement, SAVVIS shall use its
commercially reasonable best efforts to continue to meet the
requests of Telerate 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 Telerate 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
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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 Telerate, 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.
3. RATES AND CHARGES
3.1. Telerate 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 Telerate, if only Telerate or Telerate Subsidiaries use
those consolidated Local Access Facilities, or between SAVVIS,
Telerate and Bridge, if both Telerate or Telerate Subsidiaries
and Bridge or any subsidiaries of Bridge use those consolidated
Local Access Facilities. 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 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. STRATEGIC ADVISORY COMMITTEE
4.1. According to the Bridge Network Services Agreement, within 30
days after the Effective Date, SAVVIS and Bridge will each
appoint three senior executives to the "STRATEGIC ADVISORY
COMMITTEE," and one outside consultant will be jointly
appointed by both parties.
4.2. The mission of the Strategic Advisory Committee will 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
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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, Telerate and Bridge.
5. INVOICES
5.1. The amounts due to SAVVIS from Telerate 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 Telerate 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, Telerate may, by written
notice to SAVVIS, have one or more Installation Sites removed
from the Networks. Each monthly invoice from SAVVIS to Telerate
shall reflect a reduction in the amount charged to Telerate 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. Telerate 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, Telerate shall provide SAVVIS with a
certificate evidencing Telerate'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 Telerate is entitled
as a result of the resolution of a billing dispute shall be
credited promptly to Telerate'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.
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5.5. Against the amounts owed by Telerate to SAVVIS under this
Agreement, Telerate shall have the right to offset any amounts
owed by SAVVIS to Telerate under this Agreement, and against
any amounts owed by SAVVIS to Bridge under the Bridge Network
Services 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 Telerate 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 Telerate 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, Telerate shall pay SAVVIS for the use of
the Networks at the rates in effect for third party customers
of SAVVIS at the effective date of termination. If Telerate 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 Telerate until Telerate has completely migrated
to another provider.
7. TERMINATION BY TELERATE
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 Telerate; 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 Bridge
Network Services Agreement.
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7.2. Telerate 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) Telerate provides written notice to SAVVIS, at any time
after the ninth anniversary of the Effective Date, of
Telerate's intent to terminate, such termination to be
effective not less than one year following the date of
such notice; or
(b) Telerate 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. A failure of the Quality of Service Standards to be met
shall not constitute an Event of Default or give Telerate the
right to terminate this Agreement to the extent that such
failure is due to (i) an act or omission of Telerate or a
Telerate Subsidiary or a vendor or customer of Telerate or a
Telerate Subsidiary or (ii) equipment or software used by
Telerate and not provided by SAVVIS. 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 Telerate, within
30 days of its receipt of the performance report of 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) Telerate 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
Telerate with written notice thereof, provided that
Telerate shall have a further 30 days from the time it
receives such notice from SAVVIS of nonpayment to cure any
such default;
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(b) SAVVIS provides 10 days written notice of its intent to
terminate in the event that Telerate has failed to perform
or comply with or has violated any material
representation, warranty, term, condition or obligation of
Telerate under this Agreement, and Telerate has failed to
cure such failure or violation within 60 days after
receiving notice thereof from SAVVIS;
(c) Telerate 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 Bridge 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 Telerate to perform or
comply with, a violation by Telerate of, the obligations of
Telerate 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 Telerate 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 2.5, and shall promptly inform
Telerate of such test results. If test results show that the
Additional Network Facilities are performing in accordance with
the Acceptance Criteria, Telerate 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
Telerate 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 Telerate of such test
results.
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10. RIGHTS AND OBLIGATIONS OF TELERATE
10.1. SITE PREPARATION. For the installation of Additional Network
Facilities, Telerate 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. Telerate
shall ensure that Telerate-provided equipment is on-site by the
scheduled installation date. If SAVVIS is required to
reschedule the installation of Telerate-provided equipment
because it is not on-site by the scheduled installation date,
Telerate shall pay SAVVIS to redispatch installation personnel.
10.2. PROPER USE OF NETWORKS.
10.2.1. Telerate 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 Telerate shall surrender to SAVVIS the
equipment provided by SAVVIS, in good working order,
ordinary wear and tear excepted.
10.2.2. Telerate shall be liable for damages to the Networks
caused by the negligence or willful acts or omissions
of Telerate's officers, employees, agents or
customers, 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. Telerate 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 Telerate shall relieve SAVVIS from any
liability or obligation hereunder (including any
warranty or indemnity obligation) relating to the
affected Network, and Telerate 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. Telerate shall not abuse
or fraudulently use the Networks, or use the Networks for any
unauthorized or illegal purposes, and shall neither permit nor
assist others to do so, including but not limited to:
(a) obtaining or attempting to obtain service by any
fraudulent means or device to avoid payment; or
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(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; or
(e) using the Networks in a manner contrary to or inconsistent
with such acceptable use policies as SAVVIS may adopt and
publish from time to time consistent with industry
standards.
Notwithstanding the provisions of Section 8, upon the breach
of this Section 10.3 by Telerate, SAVVIS shall have the right
to terminate this Agreement with respect to all or part of the
Networks immediately upon written notice to Telerate.
10.4. COVENANT NOT TO COMPETE.
10.4.1. As an inducement to SAVVIS to enter into this Agreement, which
Telerate acknowledges is of benefit to it, and in consideration
of the promises and representations of SAVVIS under this
Agreement, Telerate covenants and agrees that during the term
of this Agreement and for a period of five years thereafter,
neither Telerate 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) Telerate and the Telerate Subsidiaries shall
be free to continue to use the Call Assets and the satellite
networks currently used by Telerate, 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) Telerate 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.
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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. Telerate specifically acknowledges and agrees that the
foregoing covenants are commercially reasonable and reasonably
necessary to protect the interests of SAVVIS hereunder.
Telerate 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 Telerate 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,
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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
Telerate of the use of the Networks, could cause irreparable
harm to Telerate, the amount of which may be difficult to
determine, thus potentially making any remedy at law or in
damages inadequate. SAVVIS, therefore, agrees that Telerate
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 Telerate in law or equity. SAVVIS further agrees
that, upon the occurrence of an Event of Default by SAVVIS,
SAVVIS shall pay to Telerate, as liquidated damages and not as
a penalty, an amount equal to the lesser of (a) the aggregate
amounts paid by Telerate to SAVVIS under this Agreement during
the six months preceding such Event of Default by SAVVIS or (b)
$50,000,000; provided, however, that Telerate 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 Telerate or Bridge or any Telerate
Subsidiary or any Bridge Subsidiary has claimed liquidated
damages under this Section or under the Bridge Network Services
Agreement or under any Local Network Services Agreement or
under any Bridge Local Network Services Agreement, or (ii) more
than 36 months following the most recent Event of Default by
SAVVIS for which Telerate or Bridge or any Telerate Subsidiary
or any Bridge Subsidiary has claimed liquidated damages under
this Section or under the Bridge Network Services Agreement or
under any Local Network Services Agreement or under any
Telerate Local Network Services Agreement.
12. LIMITATIONS OF LIABILITY
12.1. Subject to Section 11.4, 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 Telerate's
negligence or that of their
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respective agents, subcontractors or employees. Nothing
contained in this Section shall limit SAVVIS' intellectual
property indemnification obligations under Section 16.1 or
Telerate'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
Telerate uses equipment or software not provided by SAVVIS
hereunder in a manner that impairs Telerate's use of the
Networks, Telerate 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 Telerate. 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, Telerate 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 Telerate. SAVVIS shall, upon the
receipt of appropriate specifications from Telerate, inform
Telerate of the compatibility with the Networks of any
equipment or software that Telerate 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 Telerate and the Telerate Subsidiaries
a non-exclusive and non-transferable license to use all
programming and software necessary for Telerate and the
Telerate Subsidiaries to use the Networks. Such license is
granted for the term of this Agreement for the sole purpose of
enabling Telerate and the Telerate Subsidiaries 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. Telerate shall not (except as
permitted by applicable law) attempt to examine, copy, alter,
reverse engineer, decompile, disassemble, tamper with or
otherwise misuse the Networks, programming and software.
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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. Telerate 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
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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 Telerate 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 Telerate or a
Telerate Subsidiary or a vendor or customer of Telerate or a
Telerate Subsidiary or (iii) equipment or software used by
Telerate and not provided by SAVVIS or (iv) services or
equipment provided by or on behalf of Bridge under the
Technical Services Agreement. Telerate shall notify SAVVIS
promptly in writing of any such claim or suit and shall
cooperate
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with SAVVIS in a reasonable way to facilitate the settlement or
defense thereof. SAVVIS further agrees to indemnify and hold
Telerate 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 Telerate's use of all or part of
any Network is enjoined, SAVVIS shall, at its option and
expense, either: (a) procure for Telerate 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 Telerate may terminate the affected
portion of such Network, and SAVVIS shall refund to Telerate
any prepaid charges therefor.
16.3. Subject to Section 12, Telerate 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
Telerate; and
(b) claims for infringement of patents arising from the use by
Telerate 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 Telerate 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.
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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 Telerate, 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
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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.
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
Telerate unless otherwise directed by Bridge. This Section
shall not apply where (a) Telerate is in default under this
Agreement or (b) the dispute or controversy between the parties
relates to harm to the Networks allegedly caused by Telerate
and Telerate 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, Telerate may, at its option and at its own
cost, contract with one or more third parties for the affected
portion of the Network for
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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 Telerate 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 Telerate'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, Telerate 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 Telerate 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.
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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 Telerate: 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.
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 Telerate. 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.
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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.
THIS CONTRACT CONTAINS A BINDING ARBITRATION PROVISION WHICH
MAY BE ENFORCED BY THE PARTIES.
SAVVIS COMMUNICATIONS CORPORATION
By
---------------------------------------
Name: Steven M. Gallant
Title: Vice President and General Counsel
TELERATE HOLDINGS, INC.
By
---------------------------------------
Name: Richard R. Snape
Title: Chief Operating Officer
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SCHEDULE 2.2 TO THE TELERATE NETWORK SERVICES AGREEMENT
QUALITY OF SERVICE STANDARDS
[To be substantially in the form of Schedule 2.2 to
the Bridge Network Services Agreement]
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<PAGE>
SCHEDULE 3.1 TO THE TELERATE NETWORK SERVICES AGREEMENT
PRICING
[To be substantially in the form of Schedule 3.1 to
the Bridge Network Services Agreement]
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SCHEDULE 3.1-A TO THE TELERATE NETWORK SERVICES AGREEMENT
[To be substantially in the form of Schedule 3.1-A to
the Bridge Network Services Agreement]
<PAGE>
SCHEDULE 5.2 TO THE TELERATE NETWORK SERVICES AGREEMENT
INSTALLATION SITE REMOVAL AMOUNTS
[To be substantially in the form of Schedule 5.2 to
the Bridge Network Services Agreement]
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<PAGE>
EXHIBIT A TO THE TELERATE NETWORK SERVICES AGREEMENT
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 Communications 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 Addenda, provided
that if such a conflict shall arise, the Addenda 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
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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
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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.
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"NETWORK SERVICES AGREEMENT" means the Network Services
Agreement between SAVVIS Communications 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 COMMUNICATIONS" 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."
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<PAGE>
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.
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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
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<PAGE>
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
legal currency of [jurisdiction] 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
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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
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(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 Communications 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
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 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:
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(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 Communications 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
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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.
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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 Communications or
Affiliates of SAVVIS Communications, 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
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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.
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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 Customer 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 or [Bridge Parent]/[Telerate Parent] or any
customer of [Bridge Parent]/[Telerate Parent] has
claimed liquidated damages under this Section or
under a Network Services Agreement or any Local
[Telerate]/[Bridge] Network Services Agreement, or
(ii) more than 36 months following the most recent
Event of Default by SAVVIS for which Customer or
[Bridge Parent]/[Telerate Parent] or any customer of
[Bridge Parent]/[Telerate Parent] has claimed
liquidated damages under this Section or under a
Network Services Agreement or any Local
[Telerate]/[Bridge] Network Services Agreement.
12. LIMITATIONS OF LIABILITY
12.1. Subject to Section 11.4, 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.
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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 (except as
permitted by applicable law) 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
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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
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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
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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
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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
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("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.
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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.] [Except as expressly provided in this Agreement,
nothing in this Agreement will create or confer any rights or
other benefits on or in favor of any person who is not a party
to this Agreement whether pursuant to the Contracts (Rights of
Third Parties) Act, 1999 or otherwise.]
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:
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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
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.
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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.
THIS CONTRACT CONTAINS A BINDING ARBITRATION PROVISION WHICH MAY
BE ENFORCED BY THE PARTIES.
[local SAVVIS entity]
---------------------
By
--------------------------------------
Name: Steven M. Gallant
[local Bridge/Telerate entity].
-------------------------------
By
--------------------------------------
Name:
-------------------------------------
Title:
-------------------------------------
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SCHEDULE 2.2 TO EXHIBIT A OF THE TELERATE NETWORK SERVICES AGREEMENT
QUALITY OF SERVICE STANDARDS
[To be substantially in the form of Schedule 2.2 to Exhibit A
of the Bridge Network Services Agreement]
CONFIDENTIAL MATERIALS HAVE BEEN OMITTED FROM THE
SCHEDULES TO THIS AGREEMENT PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT AND HAVE
BEEN FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION.
ASTERISKS DENOTE OMISSIONS.
TECHNICAL SERVICES AGREEMENT
This TECHNICAL SERVICES AGREEMENT (the "AGREEMENT") is effective as of
12:01 A.M. February _____, 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 Technical Services Agreement to be
entered into between SAVVIS and Bridge, pursuant to which Bridge shall provide
technical 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 an Administrative Services Agreement of even date herewith (the
"ADMINISTRATIVE SERVICES AGREEMENT"), providing for the provision of certain
services to SAVVIS by Bridge. Certain SAVVIS Subsidiaries and certain Bridge
Subsidiaries are entering into, and may in the future enter into, Local Transfer
<PAGE>
Agreements, Local Network Services Agreements (the "LOCAL NETWORK SERVICES
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 Technical 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 Addenda,
provided that if such a conflict shall arise, the Addenda
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 shall 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.
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"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.
"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.
"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 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.
"EUROPE" means Austria, Belgium, Denmark, Finland, France,
Germany, Greece, Hungary, Ireland, Italy, Luxembourg,
Netherlands, Norway, Poland, Spain, Sweden, Switzerland,
Turkey and the United Kingdom.
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<PAGE>
"INITIAL TERM" shall mean a period of ten consecutive
Agreement Years beginning on the Effective Date.
"LOCAL ACCESS FACILITIES" means the local access line or other
local communications circuit provided by a local exchange
carrier connecting the Acquired Network Facilities or the
Additional Network Facilities to an Installation Site.
"NOC" means each Network Operations Center that is part of the
SAVVIS Network, including the NOCs currently in St. Louis,
London and Singapore.
"QUALITY OF SERVICE STANDARDS" means the standards for the
performance of the Services contained in a Schedule or an
Addendum to this Agreement.
"SAVVIS" means SAVVIS Communications Corporation, a Missouri
corporation.
"SAVVIS EQUIPMENT" means all items of equipment owned by
SAVVIS or provided to SAVVIS by others related to the SAVVIS
Network.
"SAVVIS NETWORK" means the managed packet-data transport
networks operated by SAVVIS, whether using the Acquired
Network Facilities or using Additional Network Facilities.
"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.
"SERVICES" means the and services provided by Bridge to SAVVIS
hereunder.
"SERVICE SITE" means any location at which Bridge provides
Services to SAVVIS. The Service Sites may be changed by mutual
agreement of the parties as set forth from time to time in
Addenda to this Agreement.
2. THE SERVICES
2.1. Bridge agrees to provide to SAVVIS the following services:
(a) help desk support for the operation of the SAVVIS
Network, as described in Schedule 2.1(a) hereto;
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<PAGE>
(b) installation, maintenance and repair of facilities
and equipment used in the SAVVIS Network (other than
the NOC), as described in Schedule 2.1(b) hereto;
(c) other services related to the SAVVIS Network with
respect to the customers of both SAVVIS and Bridge,
including, without limitation, processing orders for
service and provisioning interconnection to the
SAVVIS Network, as described in Schedule 2.1(c)
hereto; and
(d) collocation of third-party equipment in SAVVIS
facilities, including, without limitation, management
of the facilities in which such equipment is
collocated, installation and maintenance of hardware,
and the provision and management of computer
operations staff, as described in Schedule 2.1(d)
hereto; and
(e) management of the NOCs for the SAVVIS Network, as
described in Schedule 2.1(e) hereto;
which shall be referred to in this Agreement collectively as
the "SERVICES" and individually as a "SERVICE." Each Service
shall be provided according to such Quality of Service
Standards set forth in the applicable Schedule. Bridge shall
be responsible for monitoring the compliance of the Services
with the Quality of Service Standards and shall provide SAVVIS
with monthly reports of such compliance substantially in the
form of the "SummEx Client Services Executive Summary"
regularly prepared by Bridge prior to the Effective Date.
2.2. Any changes to the Services or in the Quality of Service
Standards applicable thereto shall be provided for in an
Addendum hereto mutually agreed upon by the parties in the
manner set forth in Section 1.2 hereof. Unless otherwise
mutually agreed by the parties, each such Addendum shall have
a term of three years.
2.3. SAVVIS agrees that it will request Bridge to provide such
Services for which Bridge has prepaid under the contract
between Bridge Information Systems (UK) Limited and British
Telecommunications PLC, executed by the parties thereto on 16
December 1998 and 31 December 1998, respectively.
3. RATES AND CHARGES
3.1. For the first Agreement Year in the Initial Term of this
Agreement, SAVVIS shall pay Bridge for the Services according
to the rates and charges set forth in the applicable Schedule.
3.2. For all cases not covered by Section 3.1, Bridge shall charge
SAVVIS the rates and charges for the Services as shall be
provided for in an Addendum hereto mutually agreed upon by the
parties in the manner set forth in Section 1.2 hereof. If the
parties fail to reach agreement on any such Addendum prior to
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<PAGE>
the expiration of the Addendum then in effect, the rates and
charges shall be determined by binding arbitration, as
follows:
3.3. 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.
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, 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.
All other taxes, charges or levies, including any ad valorem,
income, franchise, privilege, value added or occupation taxes
of Bridge shall be paid by Bridge.
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
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<PAGE>
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.
4.4. Against the amounts owed by SAVVIS to Bridge under this
Agreement, SAVVIS shall have the right to offset any amounts
owed by Bridge to SAVVIS under this Agreement, the Network
Services Agreement, or otherwise.
5. TERM AND EXTENSIONS
5.1. 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.
5.2. The term of this Agreement shall automatically terminate upon
the termination of the Network Services Agreement for any
reason, and shall automatically be extended for such period as
the term of the Network Services Agreement may be extended,
including any Transition Period, as defined in the Network
Services Agreement.
6. TERMINATION BY SAVVIS
6.1. SAVVIS shall have the right to terminate this Agreement, with
no liability to Bridge other than for charges (less any
applicable credits) for Services provided prior to such
termination, if:
(a) 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;
or
(b) Bridge 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.
6.2. In the event that SAVVIS exercises this option, Bridge will
continue to provide the Services in accordance with the terms,
conditions and rates herein for a period of up to 12 months
after the effective date of termination. If the Services have
not completely transitioned from Bridge after 12 months,
Bridge will provide the Services at Bridge's then current list
rates. Bridge and its successor will cooperate with SAVVIS
until the Services are completely migrated to another
provider.
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7. 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 60 days of the
date on which such payment is due and Bridge has
provided SAVVIS with written notice thereof, provided
that SAVVIS shall have 30 days from the time it
receives such notice from Bridge of nonpayment to
cure any such default; 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, admits in writing its inability
to pay debts when due.
8. CONTRACT MANAGERS
8.1. CONTRACT MANAGER. SAVVIS shall assign a representative to
serve as Bridge's point-of-contact for all matters concerning
its performance under this Agreement.
8.2. CONTRACT MANAGER. Bridge shall assign a representative to
serve as SAVVIS' point-of-contact for all matters concerning
its performance under this Agreement.
9. RIGHTS AND OBLIGATIONS OF BRIDGE
9.1. PROVISION OF THE SERVICES. Bridge shall provide the Services
at the Service Sites designated by SAVVIS in accordance with
the Quality of Service Standards and other terms of this
Agreement.
9.2. ACCESS AND SECURITY. Bridge personnel shall have such access
to SAVVIS' premises as is reasonably necessary to provide the
Services in accordance with this Agreement, provided that
Bridge personnel shall comply at all times with SAVVIS'
reasonable security requirements. SAVVIS shall have the right
immediately to terminate the right of access of any Bridge
personnel to any or all Service Sites should SAVVIS determine
in its sole discretion that such termination is in SAVVIS'
best interest, provided that SAVVIS shall not exercise this
right on grounds unrelated to job performance or in a manner
that obliges Bridge to commit an unlawful act. Unless Bridge
knew or should reasonably have known that particular Bridge
personnel would be barred from a Service Site, the time
allowed for any installation, repair, maintenance or similar
action that such personnel were to perform shall be extended
for the period reasonably required by Bridge to deploy
substitute personnel, provided that Bridge shall use its best
efforts to deploy such substitute personnel as quickly as
possible. For purposes of this Section, any subcontractor or
other agent of Bridge shall be treated as Bridge personnel.
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9.3. PROPER USE OF SAVVIS EQUIPMENT.
9.3.1. Bridge shall use any SAVVIS Equipment in connection
with the Services in accordance with its
documentation, which documentation shall be provided
by SAVVIS at no additional charge.
9.3.2. Bridge shall be liable for damages to the SAVVIS
Equipment caused by the negligence or willful acts or
omissions of Bridge's officers, employees, agents or
contractors, and for damages to SAVVIS Equipment
caused by the use of equipment or supplies not
authorized by SAVVIS.
9.3.3. Bridge shall neither permit nor assist others to use
the SAVVIS Equipment for any purpose other than that
for which they are intended, and Bridge shall be
liable to SAVVIS for any direct costs incurred by
SAVVIS as a result of such use.
9.4. INSURANCE.
9.4.1. At all times during the term of this Agreement,
Bridge shall maintain for itself, its officers,
employees, agents and representatives insurance as
shall be provided for in an Addendum mutually agreed
upon by the parties in the manner set forth in
Section 1.2 hereof.
9.4.2. 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
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.
9.4.3. 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.
9.5. REPRESENTATIONS AND WARRANTIES.
9.5.1. Bridge hereby warrants that the Services will be
provided in accordance with the Quality of Service
Standards throughout the term of this Agreement. In
the event that Bridge fails to provide any of the
Services in accordance with the Quality of Service
Standards, SAVVIS shall be entitled to recover from
Bridge (i) a refund of all amounts paid by SAVVIS to
Bridge, if any, for the performance of the specific
Service that fails to meet the applicable Quality of
Service Standards, plus (ii) the costs actually
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incurred by SAVVIS in order to have such service
provided by a third party, to the extent such costs
are in excess of the amounts that SAVVIS actually
paid, or would have paid, to Bridge for the
performance of the specific Service that fails to
meet the applicable Quality of Service Standards.
9.5.2. 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.
10. LIMITATIONS OF LIABILITY
10.1. 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.
10.2. 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.
Nothing contained in this Section shall limit Bridge's
intellectual property indemnification obligations under
Section 13.
11. PROPRIETARY RIGHTS; LICENSE
11.1. Bridge hereby grants to SAVVIS a non-exclusive and
non-transferable license to use all hardware, equipment,
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.
11.2. 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.
12. CONFIDENTIALITY
12.1. 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
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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.
12.2. 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.
12.3. 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.
12.4. 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.
12.5. 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.
12.6. 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
11
<PAGE>
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.
12.7. 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 than such due diligence review.
13. INDEMNIFICATIONS
13.1. Bridge shall defend, settle, or otherwise manage at its own
cost and expense any claim or action against SAVVIS or any of
its directors, officers, employees or assigns for actual or
alleged infringement of any patent, copyright, trademark,
trade secret or similar proprietary right to the extent that
such claim or action arises from Bridge's provision of the
Services. SAVVIS shall notify Bridge promptly in writing of
any such claim or suit and shall cooperate with Bridge in a
reasonable way to facilitate the settlement or defense
thereof. Bridge further agrees to indemnify and hold SAVVIS
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).
13.2. If, as a consequence of a claim or action of the kind
described in Section 13.1, SAVVIS' or Bridge's use of any
Service or related documentation is enjoined, Bridge shall, at
its option and expense, either: (a) procure for SAVVIS the
right to continue using the affected Services or
documentation; (b) modify such Service or documentation so
that it is non-infringing, provided that such modification
does not affect the intended use of the Service or
documentation as contemplated hereunder; or (c) upon written
notice to SAVVIS, substitute for such Service or documentation
12
<PAGE>
a comparable, non-infringing product or service or
documentation. If Bridge does not take any of the actions
described in clauses (a), (b) and (c), then SAVVIS may
terminate any affected Service pursuant to Section 5, and
Bridge shall refund to SAVVIS any prepaid charges therefor.
14. DISPUTES
14.1. 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.
14.2. 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.
14.3. 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.
14.4. 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.
14.5. 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
13
<PAGE>
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.
14.6. 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.
14.7. 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.
14.8. 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.
14.9. 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.
15. FORCE MAJEURE
15.1. 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.
15.2. 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
14
<PAGE>
one or more third parties for (or provide for itself) 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 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.
15.3. 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.
16. GENERAL PROVISIONS
16.1. 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.
16.2. 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.
16.3. 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.
16.4. 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.
16.5. 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.
16.6. 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:
15
<PAGE>
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.
16.7. 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.
16.8. 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.
16.9. 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.
16
<PAGE>
16.10. 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.
16.11. 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.
16.12. 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 Technical
Services Agreement to be executed as of the date first above written.
THIS CONTRACT CONTAINS A BINDING ARBITRATION PROVISION WHICH
MAY BE ENFORCED BY THE PARTIES.
SAVVIS COMMUNICATIONS CORPORATION
By
---------------------------------------
Name: Steven M. Gallant
Title: Vice President and General Counsel
BRIDGE INFORMATION SYSTEMS, INC.
By
---------------------------------------
Name: Daryl A. Rhodes
Title: Executive Vice President
17
<PAGE>
SCHEDULE 2.1(a)
HELP DESK SERVICES
1. Bridge will provide help desk support for 24 hours a day, seven days a
week, to SAVVIS customers using the SAVVIS Network, including customers
using the SAVVIS Dial Service. Help desk support shall include, without
limitation, assistance with establishing network connections and
response to inquiries regarding network performance.
2. The number of phone lines and staff personnel will be such that the
mean wait time per call, determined daily, will not exceed two minutes.
3. Help desk inquiries will be escalated as follows:
<TABLE>
<CAPTION>
Escalation to next level in how many hours
-----------------------------------------------------------------------
OUTAGE MTTR LEVEL 2 LEVEL 3 LEVEL 4 LEVEL 5 LEVEL 6
SEVERITY EXAMPLES (HOURS) TAM MANAGER DIRECTOR VP SVP
<S> <C> <C> <C> <C> <C> <C> <C>
Single site or
I user impaired 8 2 8 12 24 48
Multiple sites
II or users impaired 6 1 2 4 8 16
Site(s) down or 30
III unable to communicate 3 minutes 1 2 4 8
</TABLE>
4. Bridge will ensure that help desk staff are trained to be knowledgeable
in all aspects of the operations of the SAVVIS Network.
5. Unless otherwise agreed by Bridge and SAVVIS, Bridge will provide the
following help desk software, and will maintain the most current
version thereof: Summex, Vantive and OP Center.
6. Unless otherwise agreed by Bridge and SAVVIS, Bridge will provide the
following telecommunications equipment and computer hardware for the
help desk: Lucent Difinity G4.
7. Bridge will provide toll-free calling access to the help desk from the
following locations: the Americas, Europe, and Asia.
8. In the event that SAVVIS believes that the performance of a specific
member of Bridge's help desk staff is not satisfactory with respect to
assisting SAVVIS customers, SAVVIS may raise the matter with Bridge,
and Bridge and SAVVIS will work together to resolve the matter,
including the possible removal of such person from providing help desk
services to SAVVIS customers under this Agreement.
18
<PAGE>
9. SAVVIS will compensate Bridge for help desk support at the following
rates:
(a) For calls relating to the SAVVIS dial-in service, [*] per
call;
(b) For calls relating to the SAVVIS DSL service, [*] per call;
and
(c) For calls relating to SAVVIS Internet managed data virtual
private networks, [*] per call.
Call records relating to the products or services provided by Bridge,
whether or not also relating to the performance of the SAVVIS Network
or Dial Service, shall not be billed to SAVVIS by Bridge.
10. The parties will review the response times specified in this Schedule
on an annual basis and revise them as may be required to ensure that
they are consistent with the then current standards in the
telecommunications industry.
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.
19
<PAGE>
SCHEDULE 2.1(b)
FIELD INSTALLATION AND SUPPORT SERVICES
1. Bridge will, if requested by SAVVIS, provide the installation of
equipment for the operation of the SAVVIS Network and the connection of
customers of Bridge and SAVVIS to the SAVVIS Network.
2. Bridge will, if requested by SAVVIS, provide the installation of
equipment in response to an order for new service from a customer of
Bridge or SAVVIS.
3. Bridge will, if requested by SAVVIS, provide the installation of
equipment relating to the expansion or modification of the backbone of
the SAVVIS Network.
4. Orders for new service from customers of Bridge or SAVVIS will be
received and processed by Bridge in accordance with Addendum 2.1(c).
5. The equipment to be installed that will constitute part of the SAVVIS
Network will be specified by SAVVIS.
6. Bridge will be responsible for configuring and installing certain
network equipment at the Installation Site.
7. Bridge will, if requested by SAVVIS, dispatch field personnel to
install the equipment. Such personnel shall be employees or contractors
of Bridge.
8. In the event that SAVVIS believes that the performance of a specific
member of Bridge's field installation and support staff is not
satisfactory with respect to assisting SAVVIS customers, SAVVIS may
raise the matter with Bridge, and Bridge and SAVVIS will work together
to resolve the matter, including the possible removal of such person
from providing such services to SAVVIS customers under this Agreement.
9. Bridge will, if requested by SAVVIS, provide repair services for the
installed equipment of the SAVVIS Network, including equipment that is
part of the SAVVIS backbone.
10. Bridge will ensure that, on a global basis, mean response time for the
configuration and installation of new equipment, determined monthly,
will not exceed three days (five days, for customer sites outside the
United States) after Bridge has been notified that the customer's site
is ready for such installation.
11. Bridge will provide telephone support 24 hours a day, seven days a
week, for the installation of the SAVVIS network at the customer's
site.
12. Bridge will ensure that, on a global basis, mean response time for the
repair or replacement of equipment on the SAVVIS Network, determined
monthly, will not exceed
20
<PAGE>
12 hours (24 hours, for locations outside the United States) after
Bridge has received a trouble report.
13. Bridge will be compensated by SAVVIS for providing field engineer
support, according to the following hourly rate on a global basis:
Field engineer support [*] per hour (two hours minimum), with no
charge for travel time to the site
14. Bridge will be compensated by SAVVIS for the installation and repair of
equipment on a time and materials basis, and according to the following
hourly rate on a global basis:
(a) Field engineer [*] per hour (two hours minimum) , with no
charge for travel time to the site
(b) Materials Cost plus ten percent ([*])
15. In addition, Bridge will provide system support and programming
services when requested by SAVVIS, at the following rates:
(a) Base fee to maintain the system as of the Effective Date to be
mutually agreed between the parties.
(b) Software development on a per-project, time and materials
basis.
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.
21
<PAGE>
SCHEDULE 2.1(c)
CUSTOMER ORDER PROCESSING SERVICES
1. Bridge will provide the necessary services to receive and process
orders from prospective customers for the products and services offered
by Bridge or by SAVVIS on the SAVVIS Network, but excluding orders from
Bridge for network services under the Network Services Agreement.
2. Bridge will be responsible for managing all steps required for the
fulfillment of such order, including without limitation:
(a) the configuration and installation of necessary equipment;
(b) scheduling installation and service initiation with the
customer;
(c) provisioning of interconnection to the SAVVIS Network; and
(d) additional services that may be provided under the
Administrative Services Agreement, such as credit
authorization, billing information and the like.
3. SAVVIS will compensate Bridge for customer order processing at the rate
of [*] per Vantive work order.
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.
22
<PAGE>
SCHEDULE 2.1(d)
COLLOCATION SERVICES
1. Collocation services provided by Bridge at SAVVIS facilities shall
include, without limitation, facilities management (e.g., power,
heating, air conditioning, lighting and other utilities), project
management for the installation and connection of such equipment,
installation and maintenance of the equipment, and full monitoring and
management of such equipment with Bridge employees.
2. SAVVIS will market such space to its customers at rates to be
determined by SAVVIS.
3. For providing such space, Bridge shall be compensated at the following
rates per square foot to be mutually agreed upon following an analysis
to be conducted by the parties of the costs pertaining to such space,
plus the actual cost of providing electrical power to such spaces:
<TABLE>
<CAPTION>
UNITED STATES
AND CANADA EUROPE ASIA
<S> <C> <C> <C>
POP COLLOCATIONS [*] [*] [*]
[*]
REGIONAL CUSTOMER
COLLOCATION [*] [*] [*]
ST. LOUIS NOC
COLLOCATION [*] N/A N/A
</TABLE>
4. For providing facilities management services, Bridge shall be
compensated at the following rates to be mutually agreed upon following
an analysis to be conducted by the parties of the costs pertaining to
such services:
<TABLE>
<CAPTION>
UNITED STATES
AND CANADA EUROPE ASIA
<S> <C> <C> <C>
POP COLLOCATIONS
REGIONAL CUSTOMER
COLLOCATION
ST. LOUIS NOC
COLLOCATION
</TABLE>
23
<PAGE>
5. If requested by SAVVIS or by a customer of SAVVIS, Bridge will install
the customer's equipment in the space provided, including racking,
cabling and powering. Bridge will be compensated by SAVVIS for such
work at the rate of [*] per rack.
6. If requested by SAVVIS or by a customer of SAVVIS, Bridge will perform
scheduled and other required maintenance of such equipment, will
provide monitoring of such equipment 24 hours a day, seven days a week,
and will provide reports and statistics on the operation of such
equipment. Bridge will be compensated by SAVVIS for such work annually
at a rate equal to [*] of the vendor's list price for such equipment.
7. If requested by SAVVIS or by a customer of SAVVIS to perform additional
project management responsibilities, such as loading software or
configuring equipment, Bridge will perform and be compensated for such
work on an individual case basis.
8. If requested by SAVVIS or by a customer of SAVVIS, Bridge will arrange
for the replacement of existing collocated equipment and will be
compensated in an amount equal to the actual cost charged to Bridge by
the hardware vendor for such work.
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.
24
<PAGE>
SCHEDULE 2.1(e)
NOC MANAGEMENT SERVICES
1. Bridge will provide management of the operations of each of the
following SAVVIS Network Operations Centers ("NOCs"):
St. Louis: 24 hours a day, seven days a week
London: seven days a week, from 7:00 a.m. to 7:00 p.m. local time
Singapore: seven days a week, from 7:00 a.m. to 7:00 p.m. local time
2. The operations personnel staffing each NOC will be employees of SAVVIS
and the supervisory personnel will be employees of Bridge.
3. SAVVIS will compensate Bridge for management of the NOCs at the rate of
[*] per year.
4. In the event that the performance of a specific member of Bridge's NOC
management is not satisfactory to SAVVIS, SAVVIS may raise the matter
with Bridge, and Bridge and SAVVIS will work together to resolve the
matter, including the possible removal of such person from providing
such services to SAVVIS under this Agreement.
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
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT, dated as of February 7, 2000, among SAVVIS
COMMUNICATIONS CORPORATION, a Delaware corporation ("SAVVIS"), WELSH, CARSON,
ANDERSON & STOWE VIII, L.P., a Delaware limited partnership ("WCAS VIII") and
BRIDGE INFORMATION SYSTEMS, INC., a Missouri corporation ("BRIDGE"). WCAS VIII
and its successors and permitted assigns are hereinafter sometimes collectively
called the "INVESTORS".
W I T N E S S E T H:
WHEREAS, WCAS VIII and Bridge are parties to a Stock Purchase Agreement,
dated as of the date hereof (the "PURCHASE AGREEMENT"), pursuant to which Bridge
desires to sell to WCAS VIII the number of shares ("SAVVIS COMMON SHARES") of
Common Stock. $.01 par value ("SAVVIS COMMON STOCK"), of Savvis determined in
accordance with Section 1 thereof, on the terms and conditions set forth
therein;
WHEREAS, Savvis is currently engaged in the registration on Form S-1
(Registration No. 333-90881) of Savvis Common Stock for an initial public
offering of Savvis Common Stock for sale by itself and Bridge, as a selling
stockholder, through a firm commitment underwritten public offering (the
"OFFERING");
WHEREAS, the purchase contemplated by the Purchase Agreement will (i) help
to assure the successful completion of the Offering on a timely basis and (ii)
strengthen Bridge financially, better assuring its ability to perform its
obligations under the network transfer agreements to be entered into by Savvis,
Bridge and certain of their respective subsidiaries concurrently with the
closing of the Offering; and
WHEREAS, in order to induce WCAS VIII to enter into the Purchase Agreement
and consummate the transactions contemplated thereby, Bridge and Savvis wish to
grant to WCAS VIII certain registration rights with respect to the shares of
Savvis Common Stock purchased by WCAS VIII pursuant thereto;
NOW, THEREFORE, the parties hereto agree as follows:
1. SECTION Certain Definitions. For purposes of this Agreement, the
following terms have the meanings set forth below:
"COMMISSION" means the Securities and Exchange Commission, or any other
federal agency at the time administering the Securities Act.
<PAGE>
"EXCHANGE ACT" means the Securities Exchange Act of 1934 or any successor
federal statute, and the rules and regulations of the Commission thereunder, all
as the same shall be in effect at the time.
"RESTRICTED STOCK" means, at any time, the Savvis Common Shares and any
shares of Savvis common stock issuable upon or issuable with respect to the
Savvis Common Shares by way of stock dividend or stock split or in connection
with a combination of shares, recapitalization, merger, consolidation or other
reorganization or otherwise, in each case only so long as such shares have not
been sold to the public pursuant to an effective registration statement under,
or pursuant to Rule 144 under, the Securities Act.
"SECURITIES ACT" means the Securities Act of 1933 (or any successor federal
statute) and the rules and regulations of the Commission thereunder, as the same
shall be in effect at the time.
"TRANSFER" means, with respect to any Restricted Stock, the sale, transfer,
assignment, pledge, encumbrance, distribution or other disposition of such
securities.
SECTION 2. TRANSFERS OF RESTRICTED STOCK.
(a) NOTICE OF TRANSFER. If any Investor shall Transfer any shares of
Restricted Stock, notice of which Transfer is not otherwise required to be
delivered to Savvis hereunder, then within three days following the consummation
of such Transfer, such Investor shall deliver notice thereof to Savvis.
(b) SECURITIES LAW COMPLIANCE. Each Investor agrees that it will not effect
any Transfer of any shares of Restricted Stock unless such Transfer is made
pursuant to an effective registration statement under the Securities Act or
pursuant to an exemption from, or in a transaction not subject to, the
registration requirements of the Securities Act (and, in either case, in
compliance with all applicable state securities laws). Savvis agrees, and each
Investor understands and consents, that Savvis will not cause or permit the
Transfer of any shares of Restricted Stock to be made on its books (or on any
register of securities maintained on its behalf) unless the Transfer is
permitted by, and has been made in accordance with, (x) the terms of this
Agreement and (y) all applicable federal and state securities laws. Each
Investor agrees that in connection with any Transfer of Restricted Stock that is
not made pursuant to a registered public offering, Savvis may request an opinion
of legal counsel reasonably acceptable to Savvis (it being agreed that Reboul,
MacMurray, Hewitt, Maynard & Kristol and Schulte Roth & Zabel LLP shall be
satisfactory) for the transferring Investor stating that such transaction is
exempt from registration under all applicable laws; PROVIDED, HOWEVER, that no
such opinion shall be required in the case of a transfer by any Investor to its
affiliates or, if any such entity is a partnership or limited liability company,
a transfer by any Investor or its affiliates to its partners or members.
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(c) SECURITIES ACT LEGEND FOR CERTIFICATES. From and after the date hereof
(and until such time as such securities have been sold to the public pursuant to
an effective registration statement under the Securities Act or pursuant to Rule
144 or the holder of such securities shall have requested the issuance of new
certificates in writing and delivered to Savvis an opinion of legal counsel
reasonably acceptable to Savvis (it being agreed that Reboul, MacMurray, Hewitt,
Maynard & Kristol and Schulte Roth & Zabel LLP shall be satisfactory) to such
effect) all certificates representing shares of Restricted Stock that are held
by any Investor shall bear a legend which shall state the following:
"THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, NOR ANY APPLICABLE STATE LAW, AND
NO INTEREST HEREIN MAY BE OFFERED, SOLD, ASSIGNED, DISTRIBUTED, PLEDGED OR
OTHERWISE TRANSFERRED UNLESS (A) THERE IS AN EFFECTIVE REGISTRATION
STATEMENT WITH RESPECT THERETO UNDER SAID ACT AND LAWS OR (B) SUCH
TRANSACTION IS EXEMPT FROM SUCH REGISTRATION."
SECTION 3. Registration Rights.
(a) DEMAND REGISTRATION RIGHTS. Subject to paragraph (j) below, if Savvis
shall at any time be requested by Investors holding a majority in interest of
the Restricted Stock, in a writing that states the number of shares of
Restricted Stock to be sold and the intended method of disposition thereof (each
such written request, a "DEMAND NOTICE"), to effect a registration under the
Securities Act of all or any portion of the Restricted Stock then held by such
requesting Investors, Savvis shall immediately notify in writing (each such
notice, a "DEMAND FURTHER NOTICE") each other Investor (other than the
requesting Investors) of such proposed registration and shall use its reasonable
best efforts to register under the Securities Act (each such registration, a
"DEMAND REGISTRATION"), for public sale in accordance with the method of
disposition specified in such Demand Notice, the number of shares of Restricted
Stock specified in such Demand Notice (plus the number of shares of Restricted
Stock specified in any written requests for registration of shares of Restricted
Stock that are received from other Investors (other than the requesting
Investors) within 30 days after receipt by such other Investors of a Demand
Further Notice). Savvis shall not be obligated pursuant to this paragraph (a) to
file and cause to become effective more than two Demand Registrations.
(b) ADDITIONAL SHORT-FORM REGISTRATION RIGHTS. If Savvis becomes eligible
to use Form S-3 or a successor form, Savvis shall use its reasonable best
efforts to continue to qualify at all times for registration on Form S-3 or such
successor form. Subject to paragraph (j) below, if (x) Savvis is eligible to
register shares of Savvis Common Stock on Form S-3 or a successor form and (y)
it is requested by any Investor, in a writing that states the number of shares
of Restricted Stock to be sold and the intended method of disposition thereof
(each such written request, a "SHORT FORM REGISTRATION NOTICE"), to effect a
registration on Form S-3 or such successor form (a "SHORT FORM REGISTRATION") of
all or any portion of the Restricted Stock
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then held by such requesting Investor, Savvis shall immediately notify in
writing (each such notice, a "SHORT FORM FURTHER NOTICE") each other Investor
(other than the requesting Investor) of such proposed registration and shall use
its reasonable best efforts to register on Form S-3 or such successor form, for
public sale in accordance with the method of disposition specified in such Short
Form Further Notice, the number of shares of Restricted Stock specified in such
Short Form Further Notice (plus the number of shares of Restricted Stock
specified in any written requests for registration of shares of Restricted Stock
that are received from other Investors (other than the requesting Investor)
within 30 days after receipt by such other Investors of a Savvis Short Form
Registration Notice); provided, no Investor or group of Investors shall have the
right to request a Short Form Registration unless the proposed aggregate net
proceeds to the requesting Investor(s) (which shall be specified in the Short
Form Registration Request delivered in connection therewith) exceeds $5,000,000.
(c) CERTAIN PROVISIONS RELATING TO REQUIRED REGISTRATIONS. Notwithstanding
anything to the contrary contained in this Agreement, Savvis shall not be
obligated to effect any registration under paragraph (a) or (b) above except in
accordance with the following provisions:
(i) the obligations of Savvis under paragraph (a) or (b) above, as the
case may be, to effect a registration shall be deemed satisfied only when a
registration statement covering all of the shares of Restricted Stock
specified in the applicable Demand Notice or Short Form Registration
Notice, as the case may be, for sale in accordance with the intended method
of disposition specified by the requesting Investors, shall have become
effective and, if such method of disposition is a firm commitment
underwritten public offering, all such shares of Restricted Stock shall
have been sold pursuant thereto;
(ii) so long as Savvis has provided written notice of a prior
registration statement to each Investor in compliance with paragraph (d)
below, Savvis shall not be obligated under paragraph (a) or (b) above to
file and cause to become effective any registration statement so long as
such prior registration statement (other than a registration statement on
Form S-4 or Form S-8 promulgated under the Securities Act (or any successor
forms thereto) or any other form not available for registering the
Restricted Stock for sale to the public) pursuant to which shares of common
stock of Savvis are to be (or were to be) sold to the public was filed
prior to the delivery of the applicable Demand Notice or Short Form
Registration Notice, as the case may be (and such prior registration
statement has not been withdrawn); PROVIDED, Savvis shall not be permitted
to delay a requested registration under paragraph (a) or (b) above in
reliance on this paragraph (c)(ii) more than 180 days following the
effective date of such prior registration statement;
(iii) if the proposed method of disposition specified by the
requesting Investors shall be an underwritten public offering, the number
of shares of Restricted Stock to be included in such an offering may be
reduced (PRO RATA among the Investors seeking to include Restricted Stock
in such offering based on the number of shares of
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Restricted Stock so requested to be registered by such Investors) if and to
the extent that, in the good faith opinion of the managing underwriter of
such offering, inclusion of all shares would adversely affect the marketing
(including, without limitation, the offering price) of the Restricted Stock
to be sold;
(iv) in the event that the proposed method of disposition specified by
the requesting Investors shall be an underwritten public offering, Savvis
shall choose the managing underwriter (which shall be a nationally
recognized investment banking firm reasonably acceptable to the (A) the
requesting Investors and (B) Investors holding a majority of the Restricted
Stock being sold in such offering);
(v) Savvis shall be entitled to include in any registration referred
to in paragraph (a) or (b) above, as the case may be, for sale in
accordance with the method of disposition specified by the requesting
Investors, shares of common stock of Savvis to be sold by Savvis for its
own account, except as and to the extent that, in the opinion of the
managing underwriter of such offering (if such method of disposition shall
be an underwritten public offering), such inclusion would adversely affect
the marketing (including, without limitation, the offering price) of the
Restricted Stock to be sold;
(vi) except as provided in paragraph (c)(v) above, Savvis will not
effect any other registration of its common stock, whether for its own
account or that of other holder(s) of common stock of Savvis, from the date
of receipt of a Demand Notice or the date of receipt of a Short Form
Registration Notice, as the case may be, until the completion of the period
of distribution of the registration contemplated thereby;
(vii) if any Investor (other than the requesting Investors) requests
that some or all of such Investor's shares of Restricted Stock be included
in an offering initiated pursuant to paragraph (a) or (b) above, and the
registration is to be, in whole or in part, an underwritten public offering
of common stock, such request by such other Investor shall specify that
such Investor's Restricted Stock is to be included in the underwriting on
the same terms and conditions as the shares of Restricted Stock otherwise
being sold through the underwriter; and
(viii) if, while a registration is pending, Savvis determines in good
faith that the filing of a registration statement would require the
disclosure of a material transaction or another set of material facts and
such disclosure would either have a material adverse effect on such
material transaction or Savvis and its subsidiaries (taken as a whole),
then Savvis shall not be required to effect a registration pursuant to
paragraph (a) or (b) above, as the case may be, until the earlier of (A)
the date upon which such material information is otherwise disclosed to the
public or ceases to be material and (B) 90 days after Savvis makes such
good faith determination; PROVIDED, Savvis shall not be permitted to delay
a requested registration under paragraph (a) or (b) above in reliance on
this paragraph (c)(viii) more than twice or for more than an aggregate of
90 days in any consecutive twelve-month period.
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(d) PIGGYBACK REGISTRATION RIGHTS. If at any time Savvis proposes to
register any of its common stock under the Securities Act for sale to the
public, whether for its own account or for the account of other security holders
or both (other than a registration on Form S-4 or Form S-8 promulgated under the
Securities Act (or any successor forms thereto) or any other form not available
for registering the Restricted Stock for sale to the public), it will give
written notice (each such notice a "PIGGYBACK NOTICE") at such time to each
Investor of its intention to do so. Subject to paragraph (j) below, upon the
written request of any Investor, given within 30 days after receipt by such
holder of the Piggyback Notice, to register any of its Restricted Stock (which
request shall state the amount of Restricted Stock to be so registered and the
intended method of disposition thereof), Savvis will use its reasonable best
efforts to cause the Restricted Stock, as to which registration shall have been
so requested, to be included in the securities to be covered by the registration
statement proposed to be filed by Savvis, all to the extent requisite to permit
the sale or other disposition by such Investor (in accordance with its written
request) of such Restricted Stock so registered; PROVIDED, nothing herein shall
prevent Savvis from abandoning or delaying such registration at any time. In the
event that any registration referred to in this paragraph (d) shall be, in whole
or in part, an underwritten public offering of common stock of Savvis, any
request by an Investor pursuant to this paragraph (d) to register Restricted
Stock shall specify either that (i) such Restricted Stock is to be included in
the underwriting on the same terms and conditions as the shares of Savvis common
stock otherwise being sold through underwriters under such registration or (ii)
such Restricted Stock is to be sold in the open market without any underwriting,
on terms and conditions comparable to those normally applicable to offerings of
common stock in reasonably similar circumstances. The number of shares of
Restricted Stock to be included in such an underwritten offering may be reduced
(PRO RATA among the requesting Investors based upon the number of shares of
Restricted Stock so requested to be registered or PRO RATA among all the
requesting stockholders based upon the number of shares of common stock of
Savvis so requested to be registered if stockholders other than Investors also
request to be included) if and to the extent that the managing underwriter of
such offering shall be of the good faith opinion that such inclusion would
adversely affect the marketing (including, without limitation, the offering
price) of the securities to be sold by Savvis therein, or by the other security
holders for whose benefit the registration statements has been filed.
(e) HOLDBACK AGREEMENT. Notwithstanding anything to the contrary contained
in this Agreement, (i) if there is a firm commitment underwritten public
offering of securities of Savvis pursuant to a registration covering Restricted
Stock and an Investor does not elect to sell his Restricted Stock to the
underwriters of Savvis's securities in connection with such offering, such
Investor shall refrain from selling such Restricted Stock during the period of
distribution of Savvis's securities by such underwriters and the period in which
the underwriting syndicate participates in the after market; PROVIDED, such
Investor shall, in any event, be entitled to sell its Restricted Stock
commencing on the 180th day after the effective date of such registration
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statement; and (ii) if there is a firm commitment underwritten public offering
of securities of Savvis by Savvis, each Investor agrees that, except to the
extent otherwise permitted to participate in such offering pursuant to paragraph
(d) above, upon the request of the managing underwriter in such offering, such
Investor shall not sell Savvis Common Stock held by such Investor for a period
of 180 days from the effective date of the registration statement relating
thereto.
(f) CERTAIN REGISTRATION PROCEDURES. If and whenever Savvis is required by
the provisions of this Section 3 to use its reasonable best efforts to effect
the registration of Restricted Stock under the Securities Act, Savvis will, as
expeditiously as possible:
(i) prepare (and afford counsel for the selling Investors reasonable
opportunity to review and comment thereon) and file with the Commission a
registration statement with respect to such securities and use its
reasonable best efforts to cause such registration statement to become and
remain effective for the period of the distribution contemplated thereby
(determined as hereinafter provided);
(ii) prepare (and afford counsel for the selling Investors reasonable
opportunity to review and comment thereon) and file with the Commission
such amendments and supplements to such registration statement and the
prospectus used in connection therewith as may be necessary to keep such
registration statement effective for the period of distribution
contemplated thereby (determined as hereinafter provided) and as comply
with the provisions of the Securities Act with respect to the disposition
of all Restricted Stock covered by such registration statement in
accordance with the selling Investors' intended method of disposition set
forth in such registration statement for such period;
(iii) furnish to each selling Investor and to each underwriter such
number of copies of the registration statement and the prospectus included
therein (including, without limitation, each preliminary prospectus) as
such persons may reasonably request in order to facilitate the public sale
or other disposition of the Restricted Stock covered by such registration
statement;
(iv) use its reasonable best efforts to register or qualify the
Restricted Stock covered by such registration statement under the
securities or blue sky laws of such jurisdictions as the sellers of
Restricted Stock or, in the case of an underwritten public offering, the
managing underwriter, shall reasonably request; PROVIDED, Savvis will not
be required to (x) qualify generally to do business in any jurisdiction
where it would not otherwise be required to qualify but for this paragraph
(iv), (y) subject itself to taxation in any such jurisdiction or (z)
consent to general service of process in any jurisdiction;
(v) immediately notify each selling Investor under such registration
statement and each underwriter, at any time when a prospectus relating
thereto is required to be
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delivered under the Securities Act, of the happening of any event as a
result of which the prospectus contained in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state any material fact required to be stated therein or necessary to make
the statements therein not misleading in the light of the circumstances
then existing, and each Investor agrees to refrain from further using such
prospectus upon receipt of such notice;
(vi) use its reasonable best efforts (if the offering is underwritten)
to furnish, at the request of any selling Investor, on the date that
Restricted Stock is delivered to the underwriters for sale pursuant to such
registration: (A) an opinion dated such date of counsel representing Savvis
for the purposes of such registration, addressed to the underwriters and to
such selling Investor, stating that such registration statement has become
effective under the Securities Act and that (1) to the best knowledge of
such counsel, no stop order suspending the effectiveness thereof has been
issued and no proceedings for that purpose have been instituted or are
pending or contemplated under the Securities Act, (2) the registration
statement, the related prospectus, and each amendment or supplement
thereof, comply as to form in all material respects with the requirements
of the Securities Act and the applicable rules and regulations of the
Commission thereunder (except that such counsel need express no opinion as
to financial statements, the notes thereto, and the financial schedules and
other financial and statistical data contained therein) and (3) to such
other effects as may reasonably be requested by counsel for the
underwriters or by such selling Investor or its counsel, and (B) a letter
dated such date from the independent public accountants retained by Savvis,
addressed to the underwriters, stating that they are independent public
accountants within the meaning of the Securities Act and that, in the
opinion of such accountants, the financial statements of Savvis included in
the registration statement or the prospectus, or any amendment or
supplement thereof, comply as to form in all material respects with the
applicable accounting requirements of the Securities Act, and such letter
shall additionally cover such other financial matters (including, without
limitation, information as to the period ending no more than five business
days prior to the date of such letter) with respect to the registration in
respect of which such letter is being given as such underwriters or such
selling Investor may reasonably request; and
(vii) make available for inspection by each selling Investor, any
underwriter participating in any distribution pursuant to such registration
statement, and any attorney, accountant or other agent retained by such
selling Investor or underwriter, all financial and other records, pertinent
corporate documents and properties of Savvis, and cause Savvis's officers,
directors and employees to supply all information reasonably requested by
any such selling Investor, underwriter, attorney, accountant or agent in
connection with such registration statement and permit such selling
Investor, attorney, accountant or agent to participate in the preparation
of such registration statement.
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For purposes of paragraphs (f)(i) and (f)(ii) above (as well as paragraphs
(c)(vi) and(e) above), the "PERIOD OF DISTRIBUTION" of Restricted Stock in a
firm commitment underwritten public offering shall be deemed to extend until
each underwriter has completed the distribution of all securities purchased by
it, and the period of distribution of Restricted Stock in any other registration
shall be deemed to extend until the sale of all Restricted Stock covered
thereby, but in either case, such period shall not extend beyond the 180th day
(or, in the case of paragraph (c)(vi) above, the 90th day) after the effective
date of the registration statement filed in connection therewith.
(g) INFORMATION FROM SELLING INVESTORS. In connection with each
registration hereunder, Investors selling Restricted Stock will furnish to
Savvis in writing such information with respect to themselves and the proposed
distribution by them as shall be reasonably necessary in order to assure
compliance with federal and applicable state securities laws.
(h) UNDERWRITING AGREEMENT. In connection with any registration pursuant to
this Section 3 that covers an underwritten public offering, Savvis and Investors
selling Restricted Stock (and Bridge, to the extent requested by the managing
underwriter) each agree to enter into a written agreement with the managing
underwriter selected in the manner herein provided in such form and containing
such provisions as are customary in the securities business for such an
arrangement between major underwriters, selling stockholders and companies of
Savvis' and Bridge's size and investment stature; PROVIDED, (i) such agreement
shall not contain any such provision applicable to Savvis which is inconsistent
with the provisions hereof and (ii) the time and place of the closing under said
agreement shall be as mutually agreed upon among Savvis such managing
underwriter and, except in the case of a registration pursuant to paragraph (d)
above, Investors holding a majority of the Restricted Stock being sold in such
offering.
(i) EXPENSES. Bridge will pay all Registration Expenses incurred in
complying with Section 3 of this Agreement. All Selling Expenses incurred in
connection with any registered offering of securities that, pursuant to this
Section 3, includes Restricted Stock, shall be borne by the participating
sellers in proportion to the number of shares sold by each, or by such persons
other than Savvis (except to the extent Savvis shall be a seller) as they may
agree. All expenses incident to performance of or compliance by Savvis with
Section 3 hereof, including, without limitation, all Commission, stock exchange
or National Association of Securities Dealers, Inc. ("NASD") registration and
filing fees (including, without limitation, fees and expenses incurred in
connection with the listing of the common stock of Savvis on any securities
exchange or exchanges), printing, distribution and related expenses, fees and
disbursements of counsel and independent public accountants for Savvis, all fees
and expenses incurred in connection with compliance with state securities or
blue sky laws and the rules of the NASD or any securities exchange, transfer
taxes and fees of transfer agents and registrars, but excluding any Selling
Expenses, are herein called "REGISTRATION EXPENSES". All underwriting discounts
and selling commissions applicable to the sale of Restricted Stock are herein
called "SELLING EXPENSES".
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(j) AVAILABILITY OF RULE 144(d). Each Investor agrees that during any
period in which such Investor is eligible to sell all of its shares of
Restricted Stock pursuant to Rule 144(k), such Investor shall not be entitled to
invoke or otherwise participate with respect to the registration rights granted
pursuant to paragraphs (a), (b) and (d) above.
SECTION 4. INDEMNIFICATION RIGHTS AND OBLIGATIONS IN RESPECT OF REGISTERED
OFFERINGS OF RESTRICTED STOCK.
(a) SAVVIS INDEMNIFICATION OF SELLING INVESTORS. In the event of a
registration of any of the Restricted Stock under the Securities Act pursuant to
Section 3 of this Agreement, Savvis will indemnify and hold harmless each seller
of Restricted Stock thereunder and each other person, if any, who controls such
seller within the meaning of the Securities Act, against any losses, claims,
damages or liabilities, joint or several, (or actions in respect thereof) to
which such seller or controlling person may become subject under the Securities
Act or otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact contained in any registration
statement under which such Restricted Stock was registered under the Securities
Act, any preliminary prospectus or final prospectus contained therein, or any
amendment or supplement thereof, or arise out of or are based upon the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, and will
reimburse each such seller and each such controlling person for any legal or
other expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action; PROVIDED, Savvis
will not be liable in any such case if and to the extent that any such loss,
claim, damage, liability or action arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission so made in
conformity with information furnished by such seller or such controlling person
in writing specifically for use in such registration statement or prospectus.
(b) SELLING INVESTOR INDEMNIFICATION OF SAVVIS AND THE OTHER SELLING
STOCKHOLDERS. In the event of a registration of any of the Restricted Stock
under the Securities Act pursuant to Section 3 of this Agreement, each seller of
such Restricted Stock thereunder, severally and not jointly, will indemnify and
hold harmless Savvis and each person, if any, who controls Savvis within the
meaning of the Securities Act, each officer of Savvis who signs the registration
statement, each director of Savvis, each underwriter and each person who
controls any underwriter within the meaning of the Securities Act, and each
other seller of Restricted Stock and each person who controls any such other
seller of Restricted Stock, against all losses, claims, damages or liabilities,
joint or several, (or actions in respect thereof) to which Savvis or such
officer or director or underwriter or other seller or controlling person may
become subject under the Securities Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of or
are based upon any untrue statement or alleged untrue statement of any material
fact contained in the registration statement under which such Restricted Stock
was registered under the Securities Act, any preliminary prospectus or final
prospectus contained therein, or any amendment or supplement thereof, or arise
out of or are based upon the
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omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, and
will reimburse Savvis and each such officer, director, underwriter, other seller
of Restricted Stock and controlling person for any legal or other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, damage, liability or action; PROVIDED, such seller will be
liable hereunder in any such case if and only to the extent that any such loss,
claim, damage, liability or action arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission made in
reliance upon and in conformity with information pertaining to such seller, as
such, furnished in writing to Savvis by such seller specifically for use in such
registration statement or prospectus; PROVIDED, FURTHER, the liability of each
seller hereunder shall be limited to the proportion of any such loss, claim,
damage, liability or expense which is equal to the proportion that the public
offering price of shares sold by such seller under such registration statement
bears to the total public offering price of all securities sold thereunder, but
not to exceed the proceeds (net of underwriting discounts and commissions)
received by such seller from the sale of Restricted Stock covered by such
registration statement.
(c) INDEMNIFICATION PROCEDURES. Promptly after receipt by an indemnified
party hereunder of notice of the commencement of any action, such indemnified
party shall, if a claim in respect thereof is to be made against the
indemnifying party hereunder, notify the indemnifying party in writing thereof,
but the omission so to notify the indemnifying party shall not relieve it from
any liability which it may have to any indemnified party other than under this
Section 4. In case any such action shall be brought against any indemnified
party and it shall notify the indemnifying party of the commencement thereof,
the indemnifying party shall be entitled to participate in and, to the extent it
shall wish, to assume and undertake the defense thereof with counsel
satisfactory to such indemnified party, and, after notice from the indemnifying
party to such indemnified party of its election so to assume and undertake the
defense thereof, the indemnifying party shall not be liable to such indemnified
party under this Section 4 for any legal expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable
costs of investigation and of liaison with counsel so selected; PROVIDED, if the
defendants in any such action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably concluded
that there may be reasonable defenses available to it which are different from
or additional to those available to the indemnifying party, or if the interests
of the indemnified party reasonably may be deemed to conflict with the interests
of the indemnifying party, the indemnified party shall have the right to select
a separate counsel and to assume such legal defenses and otherwise to
participate in the defense of such action, with the expenses and fees of such
separate counsel and other expenses related to such participation to be
reimbursed by the indemnifying party as incurred. Notwithstanding the foregoing,
any indemnified party shall have the right to retain its own counsel in any such
action, but the fees and disbursements of such counsel shall be at the expense
of such indemnified party unless (i) the indemnifying party shall have failed to
retain counsel for the indemnified person as aforesaid or (ii) the indemnifying
party and such indemnified party shall have mutually agreed to the retention of
such counsel. It is understood that the indemnifying party shall not, in
connection with any action or related actions in the same jurisdiction, be
liable for the fees and
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disbursements of more than one separate firm qualified in such jurisdiction to
act as counsel for the indemnified party. The indemnifying party shall not be
liable for any settlement of any proceeding effected without its written
consent, but if settled with such consent or if there be a final judgment for
the plaintiff, the indemnifying party agrees to indemnify the indemnified party
from and against any loss or liability by reason of such settlement or judgment.
The indemnification of underwriters provided for in this Section 4 shall be on
such other terms and conditions as are at the time customary and reasonably
required by such underwriters. In that event the indemnification of the sellers
of Restricted Stock in such underwriting shall at the sellers' request be
modified to conform to such terms and conditions.
(d) CONTRIBUTION. If the indemnification provided for in paragraphs (a) and
(b) of this Section 4 is unavailable or insufficient to hold harmless an
indemnified party under such paragraphs in respect of any losses, claims,
damages or liabilities or actions in respect thereof referred to therein, then
each indemnifying party shall in lieu of indemnifying such indemnified party
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages, liabilities or actions in such proportion as
appropriate to reflect the relative fault of Savvis and Bridge, on the one hand,
and the underwriters and the sellers of such Restricted Stock, on the other, in
connection with the statements or omissions which resulted in such losses,
claims, damages, liabilities or actions as well as any other relevant equitable
considerations, including, without limitation, the failure to give any notice
under paragraph (c) above. The relative fault shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact relates to information supplied by Savvis or Bridge, on the one
hand, or the underwriters and the sellers of such Restricted Stock, on the
other, and to the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. Savvis, Bridge and
each of you agree that it would not be just and equitable if contributions
pursuant to this paragraph were determined by pro rata allocation (even if all
of the sellers of such Restricted Stock were treated as one entity for such
purpose) or by any other method of allocation which did not take account of the
equitable considerations referred to above in this paragraph. The amount paid or
payable by an indemnified party as a result of the losses, claims, damages,
liabilities or action in respect thereof, referred to above in this paragraph,
shall be deemed to include any legal or other expenses reasonably incurred by
such indemnified party in connection with investigating or defending any such
action or claim. Notwithstanding the provisions of this paragraph, the sellers
of such Restricted Stock shall not be required to contribute any amount in
excess of the amount, if any, by which the total price at which the Restricted
Stock sold by each of them was offered to the public exceeds the amount of any
damages which they would have otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission. No person guilty of fraudulent
misrepresentations (within the meaning of Section 11(f) of the Securities Act),
shall be entitled to contribution from any person who is not guilty of such
fraudulent misrepresentation.
SECTION 5. RULE 144. Savvis agrees with the Investors that from and after
the consummation of the Offering it shall file any and all reports required to
be filed by it under the
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Securities Act and the Exchange Act and the rules and regulations adopted by the
Commission thereunder, or, if Savvis is not required to file any such reports,
it shall, upon the written request of any Investor, make publicly available such
information as is necessary to permit sales pursuant to Rule 144 under the
Securities Act. Upon the written request of any Investor, Savvis shall promptly
furnish to such Investor a written statement by Savvis as to its compliance with
the reporting requirements set forth in this Section 5.
SECTION 6. DURATION OF AGREEMENT. This Agreement shall survive so long as
any Investor owns Restricted Stock.
SECTION 7. REPRESENTATIONS AND WARRANTIES. Each party hereto, severally and
not jointly, represents and warrants to the other parties hereto as follows:
(i) such party has the corporate or partnership power and authority,
as the case may be, to execute and deliver this Agreement and to perform
its obligations hereunder. The execution, delivery and performance by such
party of this Agreement have been duly authorized by all requisite
corporate or partnership action, as the case may be, on the part of such
party and will not (i) violate any provision of law, any order of any court
or other agency of government, the charter and other organizational
documents of such party, or any provision of any indenture, agreement or
other instrument by which such party or any of such party's properties or
assets is bound; (ii) 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 (iii) result in the creation
or imposition of any lien, charge or encumbrance of any nature upon any of
the properties or assets of such party; and
(ii) this Agreement has been duly executed and delivered by such party
and constitutes a legal, valid and binding agreement of such party,
enforceable against such party in accordance with its terms, subject, as to
enforcement of remedies, to applicable bankruptcy, insolvency,
reorganization, moratorium and similar laws from time to time in effect
affecting the enforcement of creditors' rights generally and to general
principles of equity.
SECTION 8. Miscellaneous.
(a) ADDITIONAL REGISTRATION RIGHTS. Without the consent of Investors
holding at least a majority of the shares of Restricted Stock then outstanding,
Savvis shall not grant any registration rights to any other person that are
inconsistent or conflict with the registration rights granted hereunder.
(b) HEADINGS. Headings of sections and paragraphs of this Agreement are
inserted for convenience of reference only and shall not affect the
interpretation or be deemed to constitute a part hereof.
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(c) SEVERABILITY. In the event that any one or more of the provisions
contained in this Agreement or in any other instrument referred to herein shall,
for any reason, be held to be invalid, illegal or unenforceable, such
invalidity, illegality or unenforceability shall not affect any other provisions
of this Agreement.
(d) BENEFITS OF AGREEMENT. All covenants and agreements contained herein by
or on behalf of any of the parties hereto shall bind and inure solely and
exclusively to the benefit of the respective successors and permitted assigns of
the parties hereto. Except as expressly permitted hereby, each party's rights
and obligations under this Agreement shall not be subject to assignment or
delegation by any party hereto, and any attempted assignment or delegation in
violation hereof shall be null and void.
(e) ENTIRE AGREEMENT; MODIFICATION. This Agreement and the Purchase
Agreement constitute the entire agreement of the parties with respect to the
subject matter hereof. This Agreement may not be modified or amended except by a
writing signed by Savvis, Bridge and Investors holding at least a majority of
the shares of Restricted Stock then outstanding. Any waiver of any provision of
this Agreement must be in a writing signed by the party against whom enforcement
of such waiver is sought.
(f) NOTICES. Any notice or other communications required or permitted
hereunder shall be deemed to be sufficient if contained in a written instrument
delivered in person or duly sent by national overnight courier service, by first
class certified mail, postage prepaid, or by facsimile (followed by delivery by
overnight courier) addressed to such party at the address or facsimile number
set forth below:
(i) if to Savvis, WCAS VIII or Bridge, to it at the address or
facsimile number set forth for such party on the signature page hereto: and
(ii) if to any subsequent Investor, to such Investor at such address
or facsimile number as may have been furnished to the other parties hereto
in writing by such holder;
or, in any case, at such other address or facsimile number as shall have been
furnished in writing by such party to the other parties hereto. All such
notices, requests, consents and other communications shall be deemed to have
been received (1) in the case of personal or courier delivery, on the date of
such delivery, (2) in the case of mailing, on the fifth business day following
the date of such mailing and (3) in the case of facsimile, when received.
(g) COUNTERPARTS. This Agreement may be executed in any number of
counterparts, and each such counterpart hereof shall be deemed to be an original
instrument, but all such counterparts together shall constitute but one
agreement.
(h) CHANGES IN COMMON STOCK OF SAVVIS. If, and as often as, there are any
changes in the common stock of Savvis by way of stock split, stock dividend,
combination or
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reclassification, or through merger, consolidation, reorganization or
recapitalization, or by any other means, appropriate adjustment shall be made in
the provisions hereof as may be required so that the rights and privileges
granted hereby shall continue with respect to the Restricted Stock as so
changed.
(i) SPECIFIC PERFORMANCE. Each party hereto agrees that a remedy at law for
any breach or threatened breach by such party of this Agreement would be
inadequate and therefore agrees that any other party hereto shall be entitled to
specific performance of this Agreement in addition to any other available rights
and remedies in case of any such breach or threatened breach.
(j) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE
CONFLICTS OF LAWS PROVISIONS THEREOF.
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IN WITNESS WHEREOF, each of the parties hereto has duly executed and
delivered this Agreement as of the day and year first above written.
SAVVIS COMMUNICATIONS CORPORATION
By /s/ Steven M. Gallant
-----------------------------------
Name: Steven M. Gallant
Title: Vice President and
General Counsel
Address: 7777 Bonhomme Avenue
St. Louis, MO 63105
Attention: Steven M. Gallant, Esq.
Facsimile: (314) 468-7550
WELSH, CARSON, ANDERSON
& STOWE VIII, L.P.
By WCAS VIII Associates LLC,
General Partner
By /s/ Patrick J. Welsh
-----------------------------------
Name: Patrick J. Welsh
Title: Managing Member
Address: 320 Park Avenue, Suite 2500
New York, NY 10022
Attention: Mr. Patrick J. Welsh
Facsimile: (212) 893-9575
BRIDGE INFORMATION SYSTEMS, INC.
By /s/ Daryl A. Rhodes
-----------------------------------
Name: Daryl A. Rhodes
Title: Executive Vice President and
Treasurer
Address: 3 World Financial Center
27th Floor
New York, NY 10281-1009
Attention: Mr. Steve Wilson
Facsimile: (212) 372-7190
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the use in this Amendment No. 8 to Registration Statement No.
333-90881 of SAVVIS Communications Corporation, formerly SAVVIS Holdings
Corporation, of our report dated August 12, 1999, except for Note 13 as to which
the date is January 14, 2000 and Note 14 as to which the date is January 25,
2000 (which report expresses an unqualified opinion and includes an explanatory
paragraph relating to the Company's ability to continue as a going concern and
an explanatory paragraph relating to the restatement described in Note 14)
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
February 9, 2000
EXHIBIT 23.2
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Experts" and
"Selected Historical Consolidated Financial Data" and to the use of our report
dated April 23, 1998, except for Note 14 as to which the date is January 25,
2000, with respect to the financial statements of SAVVIS Communications
Corporation included in the Registration Statement (Amendment No. 8 to Form S-1
No. 333-90881) and related Prospectus of SAVVIS Communications Corporation for
the registration of 19,550,000 shares of its common stock.
/s/ Ernst & Young LLP
St. Louis, Missouri
February 9, 2000
EXHIBIT 23.3
CONSENT OF INDEPENDENT AUDITORS
We consent to the use in this Amendment No. 8 to Registration Statement No.
333-90881 of SAVVIS Communications Corporation, a majority-owned subsidiary of
Bridge Information Systems, Inc. ("Bridge"), of our report dated April 30, 1999,
except for Note 21 as to which the date is February 9, 2000 (relating to the
consolidated financial statements of Bridge presented separately herein, which
report expresses an unqualified opinion and includes an explanatory paragraph
relating to Bridge's ability to continue as a going concern) appearing in the
Prospectus, which is part of this Registration Statement, and to the reference
to us under the heading "Experts" in such Prospectus.
/s/ Deloitte & Touche LLP
St. Louis, Missouri
February 9, 2000
