<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 12, 1999
REGISTRATION NO. 333-72409
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 2
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
RHYTHMS NETCONNECTIONS INC.
(Exact Name of Registrant as Specified in its Charter)
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<S> <C> <C>
DELAWARE 4813 33-0747515
(State or Other Jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Classification Code Number) Identification
Incorporation or Organization) Number)
</TABLE>
6933 SOUTH REVERE PARKWAY
ENGLEWOOD, COLORADO 80112
(303) 476-4200
(Address, Including Zip Code, and Telephone Number, Including
Area Code, of Registrant's Principal Executive Offices)
--------------------------
CATHERINE HAPKA
PRESIDENT AND CHIEF EXECUTIVE OFFICER
RHYTHMS NETCONNECTIONS INC.
6933 SOUTH REVERE PARKWAY
ENGLEWOOD, COLORADO 80112
(303) 476-4200
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
of Agent for Service)
--------------------------
COPIES TO:
JOHN A. DENNISTON, ESQ. MALCOLM I. ROSS, ESQ.
MARTIN C. NICHOLS, ESQ. MICHAEL S. NOVINS, ESQ.
BROBECK, PHLEGER & HARRISON LLP BAKER & MCKENZIE
550 WEST "C" STREET, SUITE 1200 805 THIRD AVENUE
SAN DIEGO, CALIFORNIA 92101 NEW YORK, NEW YORK 10022
(619) 234-1966 (212) 751-5700
--------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: AS SOON AS
PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
--------------------------
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act 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, please 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 delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
--------------------------
CALCULATION OF REGISTRATION FEE
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PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED OFFERING PRICE(1) REGISTRATION FEE
<S> <C> <C>
Common stock (including the associated Rights to purchase
Series 1 Junior Participating Stock)(2)......................................... $165,000,000 $45,870
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(o) under the Securities Act of 1933.
(2) The Rights to purchase shares of our Series 1 Junior Participating Preferred
Stock initially are attached to and trade with the shares of our common
stock being registered. Value attributed to such Rights, if any, is
reflected in the market price of our common stock.
--------------------------
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 SUCH SECTION 8(a),
MAY DETERMINE.
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<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth all expenses, other than underwriting
discounts and commissions, payable by the Registrant in connection with the sale
of the common stock being registered. All the amounts shown are estimates,
except for the registration fee and the NASD fee.
<TABLE>
<S> <C>
Registration fee................................................ $ 45,870
Nasdaq National Market fee...................................... 70,000
NASD fee........................................................ 17,000
Blue Sky fees and expenses...................................... 5,000
Printing and engraving expenses................................. 350,000
Legal fees and expenses......................................... 500,000
Accounting fees and expenses.................................... 200,000
Transfer Agent and Registrar fees............................... 10,000
Miscellaneous expenses.......................................... 52,130
---------
Total....................................................... $1,250,000
---------
---------
</TABLE>
ITEM 14. INDEMNIFICATION OF OFFICERS AND DIRECTORS.
Section 145 of the Delaware General Corporation Law permits indemnification
of the Registrant's officers and directors under certain conditions and subject
to certain limitations. Section 145 of the Delaware General Corporation Law also
provides that a corporation has the power to purchase and maintain insurance on
behalf of its officers and directors against any liability asserted against such
person and incurred by him or her in such capacity, or arising out of his or her
status as such, whether or not the corporation would have the power to indemnify
him or her against such liability under the provisions of Section 145 of the
Delaware General Corporation Law.
Article VII, Section 1 of the Registrant's Restated Bylaws provides that the
Registrant shall indemnify its directors and executive officers to the fullest
extent not prohibited by the Delaware General Corporation Law. The rights to
indemnity thereunder continue as to a person who has ceased to be a director,
officer, employee or agent and inure to the benefit of the heirs, executors and
administrators of the person. In addition, expenses incurred by a director or
executive officer in defending any civil, criminal, administrative or
investigative action, suit or proceeding by reason of the fact that he or she is
or was a director or officer of the Registrant (or was serving at the
Registrant's request as a director or officer of another corporation) shall be
paid by the Registrant in advance of the final disposition of such action, suit
or proceeding upon receipt of an undertaking by or on behalf of such director or
officer to repay such amount if it shall ultimately be determined that he or she
is not entitled to be indemnified by the Registrant as authorized by the
relevant section of the Delaware General Corporation Law.
As permitted by Section 102(b)(7) of the Delaware General Corporation Law,
Article V, Section (A) of the Registrant's Restated Certificate of Incorporation
provides that a director of the Registrant shall not be personally liable for
monetary damages for breach of fiduciary duty as a director, except for
liability (i) for any breach of the director's duty of loyalty to the Registrant
or its stockholders, (ii) for acts or omissions not in good faith or acts or
omissions that involve intentional misconduct or a knowing violation of law,
(iii) under Section 174 of the Delaware General Corporation Law or (iv) for any
transaction from which the director derived any improper personal benefit.
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<PAGE>
The Registrant has entered into indemnification agreements with each of its
directors and executive officers. Generally, the indemnification agreements
attempt to provide the maximum protection permitted by Delaware law as it may be
amended from time to time. Moreover, the indemnification agreements provide for
certain additional indemnification. Under such additional indemnification
provisions, however, an individual will not receive indemnification for
judgments, settlements or expenses if he or she is found liable to the
Registrant (except to the extent the court determines he or she is fairly and
reasonably entitled to indemnity for expenses), for settlements not approved by
the Registrant or for settlements and expenses if the settlement is not approved
by the court. The indemnification agreements provide for the Registrant to
advance to the individual any and all reasonable expenses (including legal fees
and expenses) incurred in investigating or defending any such action, suit or
proceeding. In order to receive an advance of expenses, the individual must
submit to the Registrant copies of invoices presented to him or her for such
expenses. Also, the individual must repay such advances upon a final judicial
decision that he or she is not entitled to indemnification.
The Registrant has purchased directors' and officers' liability insurance.
The Registrant intends to enter into additional indemnification agreements with
each of its directors and executive officers to effectuate these indemnity
provisions.
The underwriting agreement (Exhibit 1.1 hereto) contains provisions by which
the underwriters have agreed to indemnify the Registrant, each person, if any,
who controls the Registrant within the meaning of Section 15 of the Securities
Act, each director of the Registrant, and each officer of the Registrant who
signs this registration statement, with respect to information furnished in
writing by or on behalf of the underwriters for use in the registration
statement.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
Since its incorporation in February 1997, the Registrant has issued and sold
unregistered securities as follows:
(1) An aggregate of 1,801,470 shares of common stock was issued in
private placements in February through June 1997 to Enterprise Partners in
connection with the Registrant's initial funding. The consideration received
for such shares was $901.
(2) An aggregate of 6,140,000 shares of Series A preferred stock (which
are currently convertible into 12,280,000 shares of common stock) was issued
in a private placement in July 1997 to Brentwood Venture Capital, Enterprise
Partners, Kleiner Perkins Caufield & Byers, the Sprout Group and certain
other purchasers pursuant to a Series A preferred stock Purchase Agreement.
The consideration received for such shares was $6,138,500.
(3) An aggregate of 6,350,000 shares of Series A preferred stock (which
are currently convertible into 12,700,000 shares of common stock) was issued
in a private placement in December 1997 to Brentwood Venture Capital,
Enterprise Partners, Kleiner Perkins Caufield & Byers, the Sprout Group and
certain other purchasers pursuant to a Series A preferred stock Purchase
Agreement and a Subsequent Closing Purchase Agreement. The consideration
received for such shares was $6,350,000.
(4) An aggregate of 365,094 shares of Series A preferred stock (which
are currently convertible into 730,188 shares of common stock) was issued in
a private placement in February 1998 to Catherine Hapka in connection with
the Series A preferred stock Purchase Agreement, the Subsequent Closing
Purchase Agreement and an employment agreement between the Company and Ms.
Hapka. The consideration received for such shares was $292,075.
(5) An aggregate of 4,044,943 shares of Series B preferred stock (which
are currently convertible into 8,089,866 shares of common stock) was issued
in a private placement in March 1998 to Brentwood Venture Capital,
Enterprise Partners, Kleiner Perkins Caufield & Byers, the
II-2
<PAGE>
Sprout Group and Enron Communications Group, Inc. The consideration received
for such shares was $18,000,000.
(6) In May 1998 the Registrant issued 290,000 units consisting of
13 1/2% senior discount notes due 2008 and warrants to purchase an aggregate
of 3,944,000 shares of common stock with exercise prices of $0.005 per share
to Merrill Lynch & Co. and Donaldson, Lufkin & Jenrette Securities
Corporation, as initial purchasers, for resale to qualified institutional
buyers. Merrill Lynch & Co. and Donaldson, Lufkin & Jenrette Securities
Corporation received commissions of $5,262,920 for acting as initial
purchasers in connection with this transaction.
(7) In May 1998 the Registrant issued to Sun Financial Group, Inc., now
GATX Capital Corporation, a warrant to purchase 478,650 shares of common
stock with an exercise price of $2.225 per share in connection with an
equipment lease financing.
(8) In March 1999 the Registrant issued to MCI WorldCom Venture Fund,
Inc. 3,731,410 shares of Series C preferred stock and a warrant to purchase
600,000 shares of common stock for an aggregate purchase price of $30.0
million.
(9) From August 1997 through January 31, 1999, the Registrant granted
stock options to purchase an aggregate of 8,507,393 shares of common stock
to employees and consultants with aggregate exercise prices ranging from
$0.05 to $4.00 per share pursuant to the Registrant's stock option plan. As
of January 31, 1999, 4,962,238 shares of common stock have been issued upon
exercise of options.
No underwriters were used in connection with these sales and issuances
except for the issuance of the senior discount notes and related warrants in (6)
above. The sales and issuances of these securities except for those in (6) above
were exempt from registration under the Securities Act pursuant to Rule 701
promulgated thereunder on the basis that these securities were offered and sold
either pursuant to a written compensatory benefit plan or pursuant to written
contracts relating to consideration, as provided by Rule 701, or pursuant to
Section 4(2) thereof on the basis that the transactions did not involve a public
offering. The sales and issuance in (6) above were exempt from registration
under the Securities Act pursuant to Section 4(2) and, in connection with the
resale by the initial purchasers of the securities described in (6) above, Rule
144A thereunder.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits.
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<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
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<C> <S>
1.1+ Form of Purchase Agreement.
3.1** Restated Certificate of Incorporation of the Registrant, as amended.
3.2+ Form of Restated Certificate of Incorporation of the Registrant to become effective immediately prior
to the Offering.
3.3** Bylaws of the Registrant, as amended.
3.4+ Form of Restated Bylaws of the Registrant to be effective upon completion of the Offering.
4.1+ Form of Certificate of common stock.
4.2* Indenture, dated as of May 5, 1998, by and between the Registrant and State Street Bank and Trust
Company of California, N.A., as trustee, including form of the Registrant's 13 1/2% Senior Discount
Notes due 2008, Series A and form of the Registrant's 13 1/2% Senior Discount Notes due 2008, Series
B.
4.3* Warrant Agreement, dated as of May 5, 1998, by and between the Registrant and State Street Bank and
Trust Company of California, N.A.
</TABLE>
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<PAGE>
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<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
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<C> <S>
4.4* Warrant Registration Rights Agreement, dated as of May 5, 1998, by and among the Registrant and
Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated, and Donaldson, Lufkin &
Jenrette Securities Corporation.
4.5** Warrant to Purchase Shares of Common Stock, dated May 19, 1998, by and between the Registrant and Sun
Financial Group, Inc.
4.6** Common Stock Purchase Warrant, dated March 3, 1999, by and between the Registrant and MCI WorldCom
Venture Fund, Inc.
5.1+ Opinion of Brobeck, Phleger & Harrison LLP with respect to the common stock being registered.
9.1* Voting Trust Agreement, dated as of May 5, 1998, by and among Sprout Capital VII, L.P., Donaldson
Lufkin & Jenrette Securities Corporation, and First Union Trust Company, National Association, as
trustee.
9.2* Voting Trust Agreement, dated as of March 12, 1998, by and between Enron Communications Group, Inc.
and the Registrant, as trustee.
9.3* Amended and Restated Voting Agreement, dated March 12, 1998, by and among the Registrant and the
parties listed on the Schedule of Investors attached thereto as Schedule A, as amended.
9.4** Voting Trust Agreement, dated March 3, 1999, by and between MCI WorldCom Venture Fund, Inc. and the
Registrant, as trustee.
10.1* Series A Preferred Stock Purchase Agreement, dated July 3, 1997, by and among the Registrant and the
Investors listed on Schedule A thereto.
10.2* Subsequent Closing Purchase Agreement, dated December 23, 1997, by and among the Registrant and the
Investors listed on Schedule A thereto.
10.3* Series B Preferred Stock Purchase Agreement, dated March 12, 1998, by and among the Registrant and
the Investors listed on Schedule A thereto.
10.4++ Enterprise Services Solution Agreement between Cisco Systems, Inc. and the Registrant, dated December
3, 1998
10.5** Series C Preferred Stock Purchase Agreement, dated March 3, 1999, by and among the Registrant and MCI
WorldCom Venture Fund, Inc.
10.6** Amended and Restated Investors' Rights Agreement, dated March 3, 1999, by and among the Registrant
and the Investors listed on Schedule A thereto.
10.7++ Agreement, dated March 3, 1999, by and between the Registrant and MCI WorldCom, Inc.
10.8* Master Lease Agreement No. 1642 and Addendum thereto, each dated November 19, 1997, and Second
Addendum thereto, dated as of May 19, 1998, between the Registrant and Sun Financial Group, Inc.
10.9 Business Lease (Single Tenant) between the Registrant and BR Venture, LLC dated September 1998.
10.10* Employment Agreement between the Registrant and Catherine M. Hapka, dated June 10, 1997.
10.11* Employment Agreement between the Registrant and Jeffrey Blumenfeld, dated August 10, 1997.
10.12* Employment Agreement between the Registrant and James A. Greenberg, dated July 14, 1997.
</TABLE>
II-4
<PAGE>
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<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
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10.13* Employment Agreement between the Registrant and Rand A. Kennedy, dated August 22, 1997.
10.14* 1997 Stock Option/Stock Issuance Plan.
10.15+ 1999 Stock Incentive Plan.
10.16+ 1999 Stock Incentive Plan Form of Notice of Grant.
10.17+ 1999 Stock Incentive Plan Form of Stock Option Agreement.
10.18+ 1999 Stock Incentive Plan Form of Stock Issuance Agreement.
10.19+ 1999 Employee Stock Purchase Plan.
10.20* Form of Indemnification Agreement between the Registrant and each of its directors.
10.21* Form of Indemnification Agreement between the Registrant and each of its officers.
10.22* QuickStart Loan and Security Agreement, dated October 29, 1997, between the Registrant and Silicon
Valley Bank.
21.1* Subsidiaries of the Registrant.
23.1+ Consent of Brobeck, Phleger & Harrison LLP (filed with Exhibit 5.1)
23.2** Consent of PricewaterhouseCoopers LLP.
24.1** Powers of Attorney.
27.1** Financial Data Schedule.
</TABLE>
- ------------------------
* Previously filed with the Commission as an exhibit to the registration
statement on Form S-4 (File No. 333-59393) and incorporated herein by
reference.
** Previously filed.
+ To be filed by amendment.
++ Certain confidential portions of this Exhibit were omitted by means of
redacting a portion of the text (the "Mark"). This Exhibit has been filed
separately with the Secretary of the Commission without the Mark pursuant to
the Registrant's Application Requesting Confidential Treatment under Rule
406 under the Securities Act.
(b) Financial Statement Schedules included separately in the registration
statement.
All other schedules are omitted because they are not required, are not
applicable or the information is included in the Financial Statements or notes
thereto.
ITEM 17. UNDERTAKINGS.
The undersigned 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 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 provisions described in Item 14, 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. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being
II-5
<PAGE>
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.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Englewood, State of
Colorado, on the 12th day of March 1999.
RHYTHMS NETCONNECTIONS INC.
By: /s/ SCOTT C. CHANDLER
-----------------------------------------
Scott C. Chandler
CHIEF FINANCIAL OFFICER
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
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<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------ -------------------------- -------------------
<C> <S> <C>
*
- ------------------------------ President, Chief Executive March 12, 1999
Catherine M. Hapka Officer and Director
/s/ SCOTT C. CHANDLER
- ------------------------------ Chief Financial Officer March 12, 1999
Scott C. Chandler
*
- ------------------------------ Director March 12, 1999
Kevin R. Compton
*
- ------------------------------ Director March 12, 1999
Keith B. Geeslin
*
- ------------------------------ Director March 12, 1999
Ken L. Harrison
/s/ SUSAN MAYER
- ------------------------------ Director March 12, 1999
Susan Mayer
*
- ------------------------------ Director March 12, 1999
William R. Stensrud
</TABLE>
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<PAGE>
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SIGNATURE TITLE DATE
- ------------------------------ -------------------------- -------------------
<C> <S> <C>
*
- ------------------------------ Director March 12, 1999
John L. Walecka
/s/ EDWARD J. ZANDER
- ------------------------------ Director March 12, 1999
Edward J. Zander
</TABLE>
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<S> <C> <C> <C>
*By: /s/ SCOTT C. CHANDLER
-------------------------
Scott C. Chandler
ATTORNEY IN FACT
</TABLE>
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<PAGE>
EXHIBIT 10.4
ENTERPRISE SERVICES SOLUTION AGREEMENT
Agreement, dated December 3, 1998 (the "Agreement"), by and between Cisco
Systems, Inc., a California corporation ("Cisco"), and Rhythms NetConnections
Inc., a Delaware corporation ("Rhythms").
PREAMBLE:
Rhythms and Cisco have recently announced a long-term working relationship
in connection with Rhythms' purchase of significant telecommunications equipment
from Cisco and Rhythms' establishment of a new platform for the San Francisco,
and adjacent areas in the Bay Area, San Diego, Los Angeles, California, and
adjacent areas, Boston, Massachusetts and adjacent areas, and when operational
in calendar 1999, Austin, Texas and adjacent areas, Research Triangle Park, and
adjacent areas, and other specified United States locations (collectively, the
"Market").
After Rhythms successful demonstration of a pilot DSL program for Cisco
telecommuters in the San Diego market, Cisco has chosen Rhythms to be the
primary provider of a DSL network to Cisco's Operations/Information Services
telecommuters in the Market, and Rhythms is willing to accept such appointment
and to provide a DSL network designed to serve each of Cisco's approximately
(***) current and projected telecommuters on the terms and conditions described
herein.
NOW, THEREFORE, in connection with the premises hereof, and the mutual
agreements, covenants, and representations and warranties set forth herein, the
parties thereto hereby agree as follows:
1. ENTERPRISE SERVICES SOLUTION.
1.1 ENTERPRISE SERVICES SOLUTION DEFINED. Rhythms Enterprise Services
Solution is an end-to-end managed and supported telework program or LAN
interconnect service for branch office connectivity, designed for Cisco
consisting of the following features: (a) Rhythms' provision of all necessary
telework service ordering, installation, billing, reporting, and support; (b)
Rhythms' implementation of seamless service functions into Cisco's ordering,
installation, billing, reporting and support services; (c) Rhythms' management
of Cisco's telework program with 24 x 7, Tier 1 support for both ingress/egress
circuits as well as appropriate customer premises equipment ("CPE"); (d)
Rhythms' provision of CPE needed for such telework program and related
installation, configuration and management of all CPE; (e) Rhythms' ownership
and management of all circuits; (f) Rhythms' provision of xDSL (i.e., IDSL
128/144K, ADSL speed range 384Kbps symmetrical to 7Mbps/1Mbps asymmetrical,
Fractional T1 at comparable ADSL speeds); (g) Rhythms' provision of DHCP
Services in the network; (h) Rhythms will supply Cisco products for respective
deployments; (i) Rhythms' provision of (***) dedicated customer service
technicians and a dedicated project management resource; and (j) a dedicated
Rhythms Account Team, which shall include Account Management, Program
Management, and Network
(***) Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
<PAGE>
Engineering team members. This team will be appropriately scaled with ESS
volume. The purpose of the Rhythms Enterprise Services Solution is to offer
Cisco's remote teleworkers a network experience comparable to that utilized by
Cisco's on-site workers who are connected directly to Cisco's existing corporate
LAN. The Rhythms Enterprise Services Solution shall be referred to in this
Agreement as the "ESS".
1.2 PRICING. Rhythms shall sell ESS at a data rate of 384 Kilobits
symmetrically to Cisco, and Cisco shall purchase ESS as so configured, at the
prices set forth in Exhibit A hereto for each access connection (the "ESS Base
Prices"). Each individual Cisco teleworker shall receive ESS for a minimum
period of 12 months. In addition, Rhythms shall sell DS3 Egress at a data rate
of 45 Mbps symmetrically (including related installation) at the prices set
forth in Exhibit A hereto. Furthermore, Rhythms shall sell Rhythms' California
LAN/National LAN service carrying Cisco's California/ National DSL user's
traffic back to Cisco headquarters in San Jose, California or any other Cisco
location in the Market with a regional connection to Rhythms at the prices set
forth in Exhibit A1 hereto. Rhythms shall provision, if required, based on
DSL/DS1 deployment mix, DS1s at a 384 Kilobit speed to such end-user teleworkers
at the prices set forth in Exhibit A2 hereto. Rhythms shall also be prepared to
provide Cisco with (i) rerouting of Cisco's Internet traffic through Rhythms
Internet Service, in each instance upon such terms and conditions and such
implementation schedules as may be mutually agreed upon by Rhythms and Cisco
during the term of this Agreement. If and upon the occurrence of Rhythms'
failure to meet during any calendar month the performance criteria set forth in
the Service Level Agreements attached hereto as Exhibit B, the Monthly Recurring
Rates that are included in the ESS Base Prices shall be adjusted for such month
by Rhythms in the percentage amounts indicated in Exhibit B corresponding to any
applicable level of Rhythms' non-performance occurring in any such calendar
month. To the extent that any non-performance discounts may be applicable to
the ESS Base Prices, (***)
(***) the month in which the Rhythms'
non-performance occurred.
1.3 ESS DEPLOYMENT. The parties mutual objective is to apply best
effort in deploying ESS to 100% of the telecommuting population of the Cisco
Operations/Information Services nationally, provided that the ESS technology is
the most practical and cost effective solution. The parties shall each use
their commercially reasonable efforts to refine, implement and fully deploy the
ESS to all Cisco teleworkers as promptly as possible. Initially, implementation
and deployment of ESS shall commence in the Market and shall serve
(***)
(***)
(***) . In recognition of, and reliance upon, the
parties mutual objectives, Rhythms shall (a) accelerate and expand its
installation and support personnel and capacity to provide Cisco with the
monthly teleworker activation rates as determined and set forth in Exhibit C
hereto (the "ESS Monthly Activation Rates"); and (b) deploy xDSL-based services
to support ESS; PROVIDED, HOWEVER, that, in the event that central office reach
or central office deployment affects the provisioning of xDSL-based services to
certain end-user teleworkers, (***)
(***) PROVIDED,
(***) Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
2
<PAGE>
FURTHER, HOWEVER, that the (***) shall not exceed (***) to
(***) of the cumulative deployment to date. Cisco and Rhythms shall
hold operational-level meetings (***) and executive-level meetings
(***) to review the status of ESS until successful deployment of ESS
is completed in accordance with the parties objectives.
2. INSTALLATION. If Cisco requests Rhythms to deploy any new product
for use in connection with ESS service (a "New Product"), Rhythms shall not be
required to commence any such deployment until the (***) after either
(a) Cisco's (***) (***) or (b)
Rhythms (***) (***)
(***) .
Rhythms will need to install certain equipment and software, that is
compliant with Cisco corporate Information Technology standards, into the
computer system of Cisco and/or each Cisco teleworker to connect Cisco and/or
each Cisco teleworker to the Rhythms Network. Rhythms will supply all standard
components to connect Cisco and/or each Cisco teleworker to the Rhythms Network
(all of which components will remain the sole and exclusive property of Rhythms)
and (***)
(***) . Cisco agrees that Cisco and its
teleworkers will (a) not abuse or otherwise damage the components while they are
in their possession, (b) operate the equipment according to manufacturer
specifications, and (c) return the components in good condition (except for
deterioration from normal usage) to Rhythms upon the termination of this
Agreement and/or such teleworkers' access to ESS.
In connection with the installation, testing or subsequent service relating
to your connection with ESS, it will be necessary for Rhythms personnel or its
authorized representatives (collectively, "Rhythms Installers") to insert
certain software in each computer and possibly reconfigure some aspects of such
computer system to accommodate ESS, that is compliant with Cisco corporate
Information Technology standards. It is possible that such activities might
inadvertently result in the loss of certain programming on that computer system
that could be important, and Cisco hereby agrees that it is its responsibility
to make appropriate arrangements to prepare diskettes of all such important
information prior to the installation, testing or service of ESS. Cisco, on
behalf of Cisco and each of its teleworkers, hereby agrees that neither Rhythms
nor the Rhythms Installers will be responsible in any manner for any loss of, or
damage to, any information or programming on any such computer system or any
breach or violation of any manufacturer's or other warranty relating to such
computer or any elements included in such computer system which may occur as a
result of any installation, testing or later service conducted by Rhythms or the
Rhythms Installers as requested with respect to Rhythms components or other
equipment or programming. Rhythms agrees to provide at the conclusion of the
installation an "Introductory Package", of which contents are referenced in
Appendix A hereto, relative to the ESS service.
3. USE OF SERVICES; RIGHTS TO RESTRICT, INTERRUPT OR END SERVICE OR
THIS AGREEMENT. Rhythms is providing products and services solely for the
internal business use of Cisco as an end user, and Cisco shall be solely
responsible for the content of any transmissions
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over the Rhythms Network from its premises location or any location of any Cisco
teleworker. Cisco shall, and shall cause such of its teleworkers to, use
Rhythms' services in a manner that conforms with the terms of this Agreement,
and Cisco and its teleworkers shall not (a) attempt to gain unauthorized access
to any other system or network, or (b) interfere or disrupt other End Users,
Network Operations or Network equipment of Rhythms or any of its affiliates.
Cisco and its teleworkers shall also not (1) propagate computer viruses or other
harmful code or data or (2) impersonate any person using forged headers or other
identifying information (provided, however, that the use of anonymous re-mailers
and nicknames is allowed). Cisco hereby warrants that Cisco and each of its
teleworkers will not infringe the copyright, trademark, or other intellectual
property rights of any other person or entity through the use of the Rhythms
Network or services, and that Cisco shall not, and shall cause each of its
teleworkers not to, use the Rhythms Network or services to defame, cause an
invasion of privacy or otherwise violate the rights of any person or entity, or
violate any local, state, federal, or international statute, regulation or
treaty. The transfer of certain technical data and software across national
boundaries (including the electronic transmission thereof) is regulated by the
federal government. Cisco shall not, directly or indirectly, export or
re-export (including by electronic transmission) any regulated technical data or
software without first obtaining any required export license or governmental
approval and otherwise complying with all governmental rules and regulations
applicable to that activity. If any conduct described in this first paragraph
of Section 3 shall occur, Rhythms shall promptly notify Cisco of such offending
conduct and, if Cisco shall have failed to cause such offending conduct to cease
in a manner calculated to avoid any repetition to the reasonable satisfaction of
Rhythms, Rhythms shall have the right, in addition to other available remedies,
to suspend and interrupt ESS service to the teleworker(s) or location(s) that
Rhythms shall have identified are responsible for such offending conduct.
To maintain or improve Rhythms service or the Rhythms Network, to prevent
fraud or for other business reasons, Rhythms can restrict, interrupt or modify
the ESS service, (***) (***) but, with
respect to each interruption, restriction or modification, Rhythms will promptly
seek to resolve any situation or condition that has caused an interruption in
service to the extent that the fault involves the Rhythms Network or its
equipment. Rhythms can restrict or end ESS service to Cisco and/or any Cisco
teleworkers, if Cisco: (a) carries past due balances; (b) incurs charges larger
than any required deposit;(c) makes a false statement to Rhythms or otherwise is
in violation of any material term of this Agreement; (d) interferes with
Rhythms' customer service or any other business operations; (e) becomes
insolvent or goes bankrupt; or (f) breaches any part of this Agreement, provided
however, that no restriction for interruption of ESS shall occur if Cisco
effects a cure of any such condition within (***) after receipt of notice
from Rhythms concerning such condition. Rhythms also reserves the right to
serve notice if (i) Rhythms believes that its service is being misused or used
by anyone for unlawful activity, or (ii) the use of Rhythms service in any
premises of Cisco or any Cisco teleworker adversely affects Rhythms service to
other Rhythms' customers. All products and services of Rhythms shall be
provided subject to Rhythms' business polices, practices and procedures, which
Rhythms' reserves the right to change at any time and from time to time in its
sole discretion.
4. (***) WAIVERS AND LIMITATIONS OF LIABILITY. Rhythms' (***)
under any theory (including but not limited to fraud, misrepresentation, breach
of contract,
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personal injury, negligence, or products liability) (***)
(***) . The (***) (***) under
any theory (including but not limited to fraud, misrepresentation, breach of
contract, personal injury, negligence, or products liability) (***)
(***)
(***)
(***) . Neither Cisco nor Rhythms shall
(***)
(***) (a) (***) (b) (***)
(***) or (c) (***) . Rhythms and Cisco
agree not to make, and to waive to the fullest extent allowed by law, (***)
(***) . Rhythms and Cisco also agree not
to make, and to waive to the fullest extent allowed by law, (***)
(***)
(***)
Cisco agrees (***)
(***)
. Rhythms shall not be liable to Cisco for interrupted service
or problems caused by or contributed to (i) by Cisco; (ii) by any third party;
(iii) by, atmospheric conditions or other things Rhythms does not control; or
(iv) by any act of God or natural disaster. Rhythms shall not be liable for any
claim by or against Cisco arising out of or related to (i) alteration, theft or
destruction of Cisco's computer programs, information, data files, procedures or
other property, (ii) any losses or damages Cisco may suffer in connection with
the use or inability to use Rhythms products or services, or (iii) any data,
materials or other information transmitted or received by or to Cisco or Cisco's
intended recipient that are lost or improperly intercepted via the Internet.
5. BILLING AND PAYMENT. Rhythms shall prepare and deliver to Cisco
monthly invoices which shall include applicable monthly connectivity charges and
Cisco's usage charges (if any) for the previous period (as well as any
applicable taxes, surcharges, assessments and fees and charges charged by any
federal, state, or local government, agency or authority). Cisco shall remit
full payment to Rhythms for each such invoice within (***) after Cisco's receipt
of such invoice. If, however, Cisco believes in good faith that any such
invoice is incorrect, Cisco shall (a) timely remit payment of all undisputed
portions of any such invoice, and (b) concurrently object in writing to the
disputed portion or portions of the invoice and set forth with particularity
each basis upon which Cisco believes the invoice to be inaccurate. If payment
of any invoice by Cisco occurs after the stated payment date, Cisco shall pay a
further amount to Rhythms equal to (***) per month ( (***) annually) on
balances that remain unpaid (or, if such rate exceeds the maximum interest rate
then allowed under applicable law, then such monthly interest rate shall be the
maximum interest rate then allowed under applicable law). If the parties are
unable to resolve any such disputed invoice within (***) after the date
payment of the invoice was initially due to Rhythms, such disputed amount shall
be submitted to binding arbitration as provided in Section 10.9 of this
Agreement. Cisco's payment of any invoice shall not affect Cisco's rights to
receive any adjustment to the ESS Base Prices that may be due to Cisco pursuant
to Section 1.2 hereof or under the provisions of Article 7 hereof.
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Invoices shall be sent to the following address:
Cisco Systems, Inc.
IS Billing Department
P.O. Box 641570
San Jose, CA 95164-1570
6. CONFIDENTIAL INFORMATION.
6.1 "PROPRIETARY INFORMATION" DEFINED. As used herein, the term
"Proprietary Information" shall mean information that was or will be developed,
created or discovered by or on behalf of a specific person, or which becomes or
will become known by, or was/is conveyed by a specified person to another person
with an expectation of nondisclosure. "Proprietary Information" includes, but
is not limited to, trade secrets, computer programs, ideas, techniques,
inventions (whether patentable or not), business and product development plans,
customers and other information concerning a specified person's actual or
anticipated business, research or development, and/or personnel information, or
which is received in confidence by or for a specified reason from any other
person.
6.2 NON DISCLOSURE. Each party hereto recognizes and acknowledges that
the other party hereto possesses Proprietary Information which is important to
its business and that this Agreement creates a relationship of trust and
confidence between Rhythms and Cisco with regard to Proprietary Information. At
all times, both during the term of this Agreement and after its termination,
each party hereto (including its personnel and/or subcontractors) shall (a) keep
in confidence and trust and not use or disclose any Proprietary Information of
the other party without the prior written consent of the party who is the
rightful owner of such Proprietary Information, and (b) take reasonable
protective measures to ensure such non disclosure (which measures shall be at
least the same as measures it normally takes to protect it's own Proprietary
Information); PROVIDED, HOWEVER, that such Proprietary Information may be used
by such party in the ordinary course of performing the services and complying
with its obligations under this Agreement. Each party shall require its
personnel and/or its subcontractor(s) to execute a Non-Disclosure Agreement
containing the same requirements and conditions as set forth in this Section
6.2.
6.3 EXCEPTIONS TO NON-DISCLOSURE. Notwithstanding the provisions of
Section 6.2 hereof, neither Rhythms nor Cisco shall be limited in its use or
disclosure of any Proprietary Information that Rhythms or Cisco can demonstrate:
(a) is or has become readily publicly available without restriction through no
fault of Rhythms (or its employees or agents) or Cisco (or its employees or
agents), respectively; (b) is received without restriction from a third party
lawfully in possession of such Information and such third party was under no
obligation or duty not to disclose such Information; (c) was rightfully in
possession of Rhythms or Cisco (as the case may be) without restriction prior to
its disclosure by Cisco or Rhythms, respectively; (d) was independently
developed by employees or consultants of Rhythms or Cisco (as the case may be)
without access to Proprietary Information; or (e) is required to be disclosed by
applicable law or in connection with any legal, administrative, judicial or
governmental proceeding, hearing or process (in which event, the disclosing
party shall promptly notify the other of such proposed disclosure).
Rhythms and Cisco represents and warrants to the other party hereto that
(a) performance of the terms of this Agreement will not breach any agreement to
keep in confidence Proprietary
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Information acquired by Rhythms or Cisco, respectively, in confidence or in
trust prior to the execution of this Agreement, and (b) Rhythms and Cisco,
respectively, has not entered into (and Rhythms and Cisco, respectively, agrees
not to enter into) any agreement or commitment, either written or oral, that
conflicts or might conflict with its confidentiality obligations under this
Agreement.
6.4 EQUITABLE RELIEF. The parties each acknowledge and agree that it
would be (***)
(***)
(***)
that would likely result from any such breach or threatened breach.
Accordingly, in such an event, the non-breaching party shall be entitled to
temporary and permanent injunctive relief (including specific performance, an
injunction and/or a temporary restraining order) in addition to other rights and
remedies (including, without damages, monetary damages provided by law).
7. (***) Rhythms represents and warrants to Cisco that
throughout the term of this Agreement, (***)
(***)
(***) . In the event
that, while this Agreement is in effect, (***)
(***)
(***) . If Cisco believes in good faith that
Rhythms may be in violation of the terms of this Article 7, Cisco may, (***)
(***)
(***)
(***) . In the event (***)
(***)
(***) shall be calculated as of the date beginning (***)
(***)
(***) . Each of the parties hereto agrees that any (***)
(***)
(***) .
8. INSURANCE. During the term of this Agreement, Rhythms at its sole
cost shall carry insurance with an "A" rated company, including but not limited
to, Comprehensive General Liability, Workers Compensation Insurance and
Automobile Liability Insurance. Rhythms will provide Cisco with a Certificate
of insurance stating that the foregoing policies are in full force and effect
within thirty (30) days after the effective date of this Agreement.
9. TERM; TERMINATION.
9.1 TERM. This Agreement shall be for (***) period, (***)
(***)
(***) . This contract will continue on a
month-to-month
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Confidential Treatment and filed separately with the Commission.
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basis, pursuant to the terms and conditions herein, until such time that notice
is received with the intent to extend or terminate this agreement.
9.2 TERMINATION.
(a) BY CISCO. Subsequent to (***) of this
agreement, Cisco shall have the right to terminate this agreement (***)
to Rhythms. Any termination cost shall be in accordance with this article 9.2.
If Rhythms shall fail to meet the ESS Monthly Activation Rate for any full
calendar month, Cisco shall be entitled to issue a written notice (the "Default
Notice") to Rhythms reporting such non-performance that occurred during the
calendar month immediately prior to the issuance of the Default Notice. Upon
receipt of the Default Notice, if Rhythms shall thereafter fail to satisfy the
ESS Monthly Activation Rate in the next subsequent full calendar month, Cisco
shall have the right to terminate this Agreement upon thirty (30) days notice to
Rhythms. In the event that an installed ESS teleworker terminates from ESS in
the first twelve months of receiving service, Rhythms will be reimbursed (***)
for that teleworker. Not withstanding the foregoing; (a) Rhythms shall be not
deemed to have failed to meet the activation rate for any month if such failure
was as a result of Cisco's lack of demand for ESS activation's during such
month, (b) Rhythms shall be not deemed to have failed to meet the activation
rate for any month if such failure was as a result of Cisco's providing
teleworkers outside the deployment schedule, timeline for Central Office
deployment and project plan.
(b) BY RHYTHMS. Rhythms shall have the right to terminate
this Agreement, upon (***) notice to Cisco, if Cisco shall have failed
to promptly satisfy its obligations under this Agreement.
(c) BY EITHER PARTY. Either party may terminate this
Agreement upon (***) written notice to the other in the event that
the other party becomes bankrupt or insolvent, or makes an assignment for
benefit of creditors, if such proceedings are not dismissed within (***)
after commencement.
(d) TERMINATION DAMAGES. In addition to the other remedies
provided herein, each party shall be responsible for (***)
(***)
9.3 RIGHT UPON TERMINATION. Upon the expiration or earlier termination
of this Agreement, each party shall return to the other within thirty (30) days
following such expiration or termination all papers, materials, and properties
of the other, including all Proprietary Information.
9.4 NO DAMAGE FOR TERMINATION. Neither party shall have the right to
recover damages or indemnification of any nature (whether by way of lost
profits, expenditures for promotion, payment for goodwill or payments otherwise
made in connection with the business
(***) Portions of this page have been omitted pursuant to a request for
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<PAGE>
contemplated by this Agreement) solely as a result of the expiration or
permitted or lawful termination of this Agreement.
9.5 SURVIVAL. The termination or expiration of this Agreement shall
not affect the provisions of Articles 3, 4, 6, 9 and 10 of this Agreement, each
of which shall survive any such termination or expiration and continue in full
force and effect thereafter.
10. MISCELLANEOUS.
10.1 SUCCESSORS AND ASSIGNS. This Agreement shall not be assigned by
Rhythms or Cisco without the prior written approval of Cisco or Rhythms,
respectively, which consent shall not be unreasonably withheld; PROVIDED,
however, that either party may assign this Agreement to any successor to at
least a majority of its respective business or assets. Except as otherwise
provided herein, the terms and conditions of this Agreement shall inure to the
benefit of and be binding upon the respective permitted successors and assigns
of the parties. Nothing in this Agreement, express or implied, is intended to
confer upon any party other than the parties hereto or their respective
permitted successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.
10.2 BUSINESS UPTURN, DOWNTURN, AND TECHNOLOGY CHANGE. If, due to a
business upturn, corporate growth or acquisition by Cisco of a new affiliated
company that significantly affects the provisioning of the Service to Cisco
and/or the overall needs of Cisco for the Service, Cisco will be able to incur
sufficient charges to substantially reduce Rhythms's or any Carrier's costs of
providing Service to Cisco, Rhythms and Cisco will cooperate in determining any
appropriate modifications to this Agreement and applicable Carrier agreements.
Such mutually agreeable modifications may include, without limitation, changes
to the minimum requirements, the Initial Term, applicable rates and charges,
price plan tiers, and or/other provisions.
If a business downturn, corporate downsizing or divestiture of Cisco or an
affiliated company significantly affects the provisioning of the Service to
Cisco and/or the overall needs of Cisco for the Service such that Cisco will be
unable, notwithstanding its reasonable efforts, to satisfy one or more
applicable minimum commitments, Rhythms, and Cisco will jointly determine
appropriate modifications to such commitments and other provisions of this
Agreement so that Cisco is able to satisfy the affected commitments. Such
modifications may include, without limitation, changes to the affected
commitments, the initial term, applicable rates and charges, and/or other
provisions. If the parties are unable to agree upon appropriate modifications
to achieve the goals of this Section, the matter will be resolved pursuant to
Section 10.9 (Arbitration).
If Cisco is unable, notwithstanding all reasonable efforts, to meet one or
more of the minimum commitments as a result of significant changes in Cisco's
use of telecommunications technology, Rhythms, any affected Carrier, and Cisco
will jointly determine appropriate modifications to the affected commitments and
other provisions of this Agreement so that Cisco is able to satisfy the affected
commitments. Such mutually agreeable modifications may include, without
limitation, changes to the affected commitments, the initial term, applicable
rates and charges, and/or other provisions. If the parties are unable to agree
upon appropriate modifications to achieve the goals of this Section, the matter
will be resolved pursuant to Section 10.9 (Arbitration).
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10.3 TECHNOLOGY OPTIMIZATION. As reasonably requested by Cisco, but no
more than semi annually during the Initial Term and all extensions thereof,
Rhythms shall, at (***) (***) review the mix and
configuration of the Service based on Cisco's expected needs during the
succeeding twelve (12) months and consider Cisco's need for additional services,
service upgrades and all changes thereto so as to optimize the efficiency and
cost-effectiveness of Cisco's use of the Service. Based on each such review,
Rhythms shall make written recommendations to Cisco that Rhythms believes will
improve the efficiency and cost-effectiveness of the Service, including bringing
to Cisco's attention any existing or planned promotional offerings of Rhythms or
other Carriers, service upgrades, or additional services that are applicable to
Cisco's use of the Service and that Rhythms believes may be of value to Cisco.
Rhythms shall also offer advice concerning the Service, and its configuration
where Rhythms believes that they do not appear to be the most technically or
economically appropriate for addressing a known business communications need.
10.4 NEW TECHNOLOGIES
10.4.1 Rhythms acknowledges Cisco's substantial interest in
state-of-the-art technologies that offer improved performance and more efficient
and cost-effective ways to meet Cisco's communications and related requirements.
Rhythms desires to offer to Cisco such advanced technologies, whether in the
form of Service or equipment upgrades or new Services (collectively, "New
Technologies") and to keep Cisco apprised of improvements to existing
technologies and of the expected and actual availability and implementation of
New Technologies by Rhythms and other Carriers.
10.4.2 Rhythms shall offer Cisco opportunities to participate in
Beta test programs for New Technologies and services and, where mutually
agreeable, shall reasonably cooperate in the testing and deployment of new or
enhanced functions, technologies or applications, including those conceived or
developed by Cisco and/or third parties working with Cisco.
10.4.3 Rhythms shall inform Cisco of Rhythms's and any Carrier's
plans for, or the existence of, any New Technologies offered by Rhythms (or by a
third party but available through Rhythms) that Rhythms believes Cisco might
wish to consider procuring. Upon Cisco's request, Rhythms shall provide (when
available ) the price, performance specifications, installation intervals,
and/or effects of any Rhythms New Technologies on Services then being purchased
by Cisco under this Agreement.
10.4.4 Upon Rhythms's and Cisco's agreement that a potential New
Technology will be provided to Cisco or to certain End Users under this
Agreement, either in addition to, or in place of, existing Services or
technologies, such New Technology shall be considered part of the Service for
all purposes under this Agreement.
10.4.5 (***)
(***) , Cisco may, at its sole option and upon reasonable
written notice to Rhythms, (***)
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Confidential Treatment and filed separately with the Commission.
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(***) . In such event, Cisco may (***)
(***)
Cisco shall also receive (***)
Rhythms and Cisco shall also mutually agree to (***)
(***) . If the parties are unable to reach mutual agreement within
thirty (30) days of Cisco's (***) the matter will be resolved through
arbitration under Section 10.9 of this Agreement.
10.4.6 (***) (***) . Cisco may, at its sole option and upon
reasonable written notice to Rhythms, (***)
(***) (***) Cisco's
and the relevant End User's obligations with respect to Services and
technologies (***)
(***)
(***) . Cisco shall also receive (***)
(***) .
10.4.7 Before agreeing to purchase any New Technology from Rhythms,
the parties shall negotiate the terms to govern provision of the New Technology
according to the following procedures:
(a) Rhythms and Cisco shall negotiate in good faith to
develop mutually agreeable rates, specifications, and other terms and conditions
for the New Technology.
(***)
(***)
(***) .
(b) (***)
(***)
(***) respects (***)
(***) and that were (***)
At Rhythms's request after Cisco determines that Rhythms (***)
(***)
(***) an officer of Cisco shall
certify in writing to Rhythms that the (***) Cisco shall not be
required to reveal the confidential or proprietary information
(***)
(***) this Subsection, but shall apprise Rhythms (***)
(***)
(***)
PROVIDED, that if Rhythms agrees (***) then Cisco may not
subsequently claim that (***) Rhythms shall have a
(***) in connection with (***)
(***) and (when applicable)
(***) in all material respects (***) Rhythms shall
not (***)
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as provided in this Subsection (***) (i) demonstrates (***)
and the ability (***) during the negotiations
preceding (***) and (ii) submitted a reasonably (***) .
(c) If Rhythms is not (***)
pursuant to Subsection (a) or (b), Cisco may, at its sole option, (***)
(***) . If Cisco (***)
to the degree that the (***) .
10.4.8 Rhythms represents that all (***)
Agreement have (***)
10.5 GOVERNING LAW. This Agreement shall be governed by, and construed
and enforced in accordance with, the laws of the Sate of California without
regard to the choice of law principles thereunder.
10.6 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
10.7 HEADINGS. The titles, subtitles and other headings used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
10.8 NOTICES. Unless otherwise provided, any notice, request, demand,
instruction, document or other communication required or permitted under this
Agreement shall be given in writing and shall be deemed effectively given upon
its receipt addressed to the party to be notified at the address or number
indicated for such party below, or at such other address or number as such party
may designate by advanced written notification to the other party delivered as
provided in this Section 10.5. All notices, requests, demands, instructions,
documents and other communications shall be deemed duly given upon the earliest
of (i) hand delivery; (ii) the first business day after sending by reputable
overnight delivery service for next-day delivery; (iii) the third business day
after sending by first class United States mail, postage prepaid; (iv) the time
of successful facsimile or e-mail transmission as evidenced by a confirmation of
successful transmission (or in the event that the time of receipt of the fax or
e-mail in the city where the fax or e-mail is received is not during regular
business hours on a business day, then at the customary hour for the opening of
business on the next business day); or (v) the date actually received by the
other party. The current addresses and numbers of the parties hereto are as
follows:
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Rhythms NetConnections Inc.
7337 S. Revere Parkway, Suite 100
Englewood, Colorado
Tel. No.: 303-476-4200
Fax. No.: 303-476-4201
E-Mail: [email protected]
Attention: Mr. Frederick Smith
Cisco Systems, Inc.
170 West Tasman Drive
San Jose, California 95134
Tel. No.: 408-527-2852
Fax. No: 408-526-4841
E-Mail:mirodrig @cisco.com
Attention: Michael A. Rodrigues
10.7 EXPENSES. If any action at law or in equity is necessary to
enforce or interpret the terms of this Agreement, the prevailing party shall be
entitled to reasonable attorney's fees, costs and necessary disbursements in
addition to any other relief to which such party may be entitled.
10.8 AMENDMENTS AND WAIVERS. Any term of this Agreement may be amended,
either in whole or in part, only with the written consent of each of the parties
hereto. Notwithstanding any course of conduct or dealing by the parties during
the course of this Agreement, no waiver (either generally or in a particular
instance and either retroactively or prospectively) shall be deemed to have been
made by either party hereto unless expressed in writing and signed by the
waiving party. The failure of either party to insist in any one or more
instances upon strict performance of any of the terms or provisions of this
Agreement, or to exercise any election herein contained, shall not be construed
as a waiver of any prior or subsequent rights or remedies hereunder or at law.
All remedies afforded in this Agreement shall be taken and construed as in
addition to every other remedy available at law or in equity.
10.9 SEVERABILITY. If one or more provisions of this Agreement are held
to be unenforceable under applicable law, such provision shall be appropriately
limited in its scope and application to make it enforceable or, if any such
limitations is not possible, such provision shall be excluded from this
Agreement and the balance of the Agreement shall be interpreted as if such
provision were so excluded and shall be enforceable in accordance with its
terms.
10.10 DISPUTE RESOLUTION. All claims arising out of this Agreement shall
be resolved in accordance with the then prevailing rules of the American
Arbitration Association. Any arbitration hereunder shall be conducted in the
City of San Jose, State of California, and the arbitrator's decision and award
shall be final and binding and may be entered and enforced in any court of
competent jurisdiction. Any arbitration under this Agreement shall be heard
before a panel of three arbitrators, one selected by each party and the third
(who shall preside) selected by the first two. The arbitrators shall adhere to
the terms of this Agreement and applicable legal and regulatory requirements and
limitations in evaluating the merits of the dispute and determining the
appropriate remedy (which shall not include injunctive relief). The arbitrators
shall deliver a written opinion setting forth findings of fact and the rationale
for their decision. Rhythms and Cisco hereby submit to personal jurisdiction in
San Jose, California solely for the purposes of conducting any arbitration under
this Agreement and hereby waive all objections to the venue described herein
solely for purposes of any arbitration under this Agreement.
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10.11 RELATIONSHIP OF PARTIES. In fulfilling its obligations under this
Agreement, each party shall be acting as an independent contractor. This
Agreement does not make either party the employee, agent, or legal
representative of the other. Nothing stated in this Agreement shall be
construed as constituting Cisco and Rhythms as partners or joint venture, or
creating any other type of relationship such as principal and agent, master and
servant, etc.
10.12 PUBLICITY. From and after the execution of this Agreement, Rhythms
and Cisco shall be entitled to engage in the activities and utilize the
informational programs described in Exhibit D hereto. Except as contemplated
herein or to the extent its legal, investment or financial advisors recommend
disclosure to comply with legal or financial obligations of any such party or to
fully and accurately inform its existing shareholders or note holders and/or any
prospective investors, neither party shall disclose the existence or the terms
and conditions of this Agreement to third parties (other than subcontractors
and/or consultants) without the prior written consent of the other party unless
disclosure is compelled by operation of law or by an instrumentality of the
government (including, but not limited to, any court, tribunal or administrative
agency) or as necessary to enforce its rights hereunder.
10.13 ENTIRE AGREEMENT. This Agreement (including the Exhibits hereto,
each of which are incorporated herein and made a part of this Agreement by this
reference) constitutes the full and entire understanding and agreement between
the parties with regard to the subject matter hereof and thereof.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
RHYTHMS NETCONNECTIONS INC.
By: /s/Frederick H. Smith 12/9/98
---------------------------------------
Frederick H. Smith Date
Vice President
National Sales
CISCO SYSTEMS, INC.
By: /s/Michael A. Rodrigues 12/3/98
---------------------------------------
Michael A. Rodrigues Date
Commodity Manager
Corporate Supply Management
14
<PAGE>
Enterprise Service Solution
Custom Pricing
PART 1: Monthly Recurring Rates for ACCESS CONNECTION, (***)
YEAR 1 Committed
Client Level
FROM TO (***)
(***)
YEAR 2 Committed
Client Level
FROM TO (***)
(***)
YEAR 3 Committed
Client Level
FROM TO (***)
(***)
(***) Installation per ACCESS CONNECTION: (***)
Part 2: DS3 EGRESS PRICING
Monthly Reacurring Rate per egress connection, (***) (***)
Part 3: HUBLETT
(***)
(***)
(***)
(***) Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
<PAGE>
U S LAN/CA LAN PRICING EXHIBIT A1
PRICING
Each site with the capability of sending traffic over the WAN will be charged
for the service based on the speed of that site's access into the Rhythms
network. The WAN charges are in addition to the amount the customer will pay
for their Enterprise Teleworker and LAN Interconnect solutions. The pricing for
each WAN connected capable site is as follows:
<TABLE>
<CAPTION>
-----------------------------------------------------------
NETWORK CONNECTION WAN PRICE
-----------------------------------------------------------
<S> <C>
384k DSL (***)
-----------------------------------------------------------
512k DSL (***)
-----------------------------------------------------------
768k DSL (***)
-----------------------------------------------------------
IM DSL (***)
-----------------------------------------------------------
</TABLE>
EXAMPLE 1 - ENTERPRISE TELEWORKER SOLUTION WITH WAN CAPABILITY
[DIAGRAM]
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------
ENTERPRISE TELEWORKER WAN MONTHLY TOTAL MONTHLY
LOCATION NETWORK CONNECTION MONTHLY PRICE PRICE PRICE
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
A 384k DSL (***) (***) (***)
-------------------------------------------------------------------------------------------------------------
B 512k DSL (***) (***) (***)
-------------------------------------------------------------------------------------------------------------
C 384k DSL (***) (***) (***)
-------------------------------------------------------------------------------------------------------------
D 1.544M DS1 (Egress) (***) (***) (***)
-------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------
total (***) (***) (***)
---------------------------------------------------------------------------------------------
</TABLE>
In this example, a customer is using Rhythms Enterprise Teleworker solution to
connect remote workers in San Diego (locations A and B) and San Francisco
(location C) to the San Francisco headquarters (location D). The remote
locations communicate only with the headquarters site; traffic does not flow
directly from remote location to remote location (e.g., location B to location
C). For this customer, only locations A, B, and D send traffic over the WAN and
will be charged the additional WAN pricing as shown in the table above.
Location C does not incur additional WAN charges because its traffic is solely
local in nature.
PRICE COMPARISON VS. FRAME RELAY
THE PRICING FOR OUR SAN DIEGO - SAN FRANCISCO WAN CAPABILITY IS A GREAT DEAL!
RHYTHMS' PRICE FOR A 384K CONNECTION TO THE WAN IS ONLY (***) PER MONTH - (***)
FOR EITHER LAN INTERCONNECT OR ENTERPRISE TELEWORKER AND (***) FOR WAN ACCESS -
INCLUDING CPE, NETWORK ACCESS, AND MANAGED SERVICES. TO ACCOMPLISH THE SAME
CAPABILITY USING FRAME RELAY WOULD COST A CUSTOMER APPROXIMATELY (***) PER
MONTH.
(***) Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
August 3, 1998
Page 1 of 1 Proprietary & Confidential [LOGO]
Rhythms NetConnectsions, Inc.
<PAGE>
DS1 PRICING EXHIBIT A2
PRICING
Cisco remote access group, may elect due to distance or Central Office location,
to receive DSI as an alternative. The table below provides pricing based on the
utilization of DSI in the telecommuter population.
<TABLE>
<CAPTION>
-------------------------------------------------------------------------
DS1 @ 384K PRICE DSI@ 384K PRICE
PERCENTAGE (DSL/DS1) (MONTHLY) (INSTALL)
-------------------------------------------------------------------------
<S> <C> <C>
90/10 - 10% DS1 (***) (***)
-------------------------------------------------------------------------
75/25 - 25% DS1 (***) (***)
-------------------------------------------------------------------------
Greater than 25% DS1 (***) (***)
-------------------------------------------------------------------------
</TABLE>
(***) Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
August 3, 1998
Page 1 of 1 Proprietary & Confidential [LOGO]
Rhythms NetConnectsions, Inc.
<PAGE>
Exhibit B
- --------------------------------------------------------------------------------
RHYTHMS Service Level Agreements
- --------------------------------------------------------------------------------
NETWORK AVAILABILITY
RHYTHMS is committed to providing a reliable network for its customers. With
that goal, RHYTHMS's target for Network Availability is (***) per month.
RHYTHMS's Regional Network Availability is defined as:
1 - Total minutes of connection downtime in given month
---------------------------------------------------
# of minutes in month
Regional Network Availability is measured on every interface to RHYTHMS's
Regional Network (see Figure 1).
[DIAGRAM]
FIGURE 1: BOUNDARIES FOR AVAILABILITY
The availability target does not account for non-redundant Customer
Connections, natural disasters, scheduled outages on RHYTHMS's Network,
scheduled or unscheduled outages on the customer network, or end user
equipment outages. Network downtime is calculated commencing with the date
and time on which the customer opens the trouble ticket and ending upon
confirmation from RHYTHMS that the network is restored.
If RHYTHMS does not meet *** Regional Network Availability per the above
definition, RHYTHMS will credit the customer for each affected Client or
Customer Connection according to the following table:
<TABLE>
<CAPTION>
------------------------- ---------------------------------
if availability is in service credit per affected
the range Client/Customer
Connection per month is
----------------------------------------------------------
<S> <C>
(***) (***)
----------------------------------------------------------
(***) (***)
----------------------------------------------------------
(***) (***)
----------------------------------------------------------
</TABLE>
RHYTHMS will supply *** for Regional Network Availability.
(***) Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
Confidential Page 1
<PAGE>
Exhibit B
NETWORK DELAY
RHYTHMS is committed to providing a fast network for its customers. RHYTHMS
supports (***) for the time to transmit a (***) message from the DSL modem
interface up to, but not including, the customer egress and back. This
measurement does not include Client Connection serialization time (see
Figure 2).
[DIAGRAM]
FIGURE 2: BOUNDARIES FOR DELAY
RHYTHMS defines round trip message delay as the sum of the following:
- time from when the last bit of the outgoing message arrives at the DSL
modem until when the last bit of the message arrives at the customer egress
- time from when the last bit of the incoming message leaves the customer
egress until when the last bit of the message leaves the DSL modem
If RHYTHMS does not meet the delay objective, RHYTHMS will credit the customer
according to the following table:
<TABLE>
<CAPTION>
---------------------------------------------------------
if delay objective is service credit per affected
not met during Client/Customer Connection
per month is
---------------------------------------------------------
<S> <C>
(***) (***)
---------------------------------------------------------
(***) (***)
---------------------------------------------------------
(***) (***)
---------------------------------------------------------
(***) (***)
---------------------------------------------------------
(***) (***)
---------------------------------------------------------
</TABLE>
RHYTHMS will provide (****) for Regional Network Delay.
(***) Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
Confidential Page 2
<PAGE>
Exhibit B
THROUGHPUT
RHYTHMS is committed to minimizing network congestion for its customers.
RHYTHMS's target for the customer to achieve the speed of their contracted
access through the RHYTHMS's Regional Network is (***) (see Figure 3).
Throughput is defined as the ability of the network to transmit traffic at the
contracted access speed.
[DIAGRAM]
FIGURE 3: BOUNDARIES FOR THROUGHPUT
If RHYTHMS does not meet the throughput target, RHYTHMS will credit the customer
according to the following table:
<TABLE>
<CAPTION>
--------------------------------------------------------------
if delivery objective is not service credit per affected
met during Client/Customer
Connection per month is
--------------------------------------------------------------
<S> <C>
(***) (***)
--------------------------------------------------------------
(***) (***)
--------------------------------------------------------------
(***) (***)
--------------------------------------------------------------
(***) (***)
--------------------------------------------------------------
(***) (***)
--------------------------------------------------------------
</TABLE>
RHYTHMS will supply (***) for Throughput. All reporting will be reviewed in
a mutually agreed upon fashion during the term of this Agreement. Cisco will be
generating a (***) on Rhythms's performance based on statistics on network
performance which shall be provided by Rhythms.
MEAN RESPONSE TIME
RHYTHMS commits itself to providing the best customer care experience in the
telecommunications industry. To that end, RHYTHMS promises to answer the phone
(***) and a customer is on hold (***) In additions,
Rhythms will respond to customer requests for repair and other technical
problems (***)
(***) RHYTHMS promises to update the customer on expected repair time or
RHYTHMS dispatch time to resolve the problem.
(***) Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
Confidential Page 3
<PAGE>
Exhibit B
MEAN TIME TO RESTORE SERVICE
RHYTHMS commits itself to restoring service within certain periods of time based
on severity of problem, and whether single or multiple clients are affected.
RHYTHMS guarantees restoration of services within the following time frames:
CUSTOMER CONNECTIONS:
- mean time to repair (***) (excluding lack of access issues) -
(***) of monthly service charge credited if not repaired (***)
- mean time to repair (***) (excluding lack of access issues) -
(***) of monthly service charge credited if not repaired (***)
RHYTHMS will manage the local loop vendor (or Incumbent Local Exchange Carrier)
on behalf of the customer for any repairs or problems related to
RHYTHMS-provided Customer Connections.
ESCALATION PROCEDURES:
RHYTHMS will escalate problems involving customers and clients based on the
escalation table in Appendix A (as developed by Rhythms and mutually agreed upon
by Rhythms and Cisco). The matrix is used as a GUIDELINE in escalating network
problems within RHYTHMS. If at any time the customer feels that results and/or
progress in resolving a network trouble is unsatisfactory, escalation using the
numbers on the contact list is encouraged. Areas to be covered are as follows:
1.) (***)
2.) (***)
3.) (***)
PROVISIONING AND INSTALLATION INTERVAL
Rhythms will target that the customer is in service between (***) of the
time, of placing the order with Rhythms (excluding customer delays). A (***)
will be given on the installation if it is not completed within this
interval.
CLIENT INSTALLATION PROMISE
Monday - Friday; appointments begin at 8:00am and the last appointment will end
at 5:00pm local time. A RHYTHMS Field Service Technician (FST) will arrive
(***) of the installation time set with the customer. If RHYTHMS technician
fails to arrive within (***) Clients installation (***) The Client
should plan for the installation to take (***) to complete after the arrival
of the FST. The Customer or Client must confirm the installation date and time
by 12:00 noon the day before the installation is scheduled or the installation
will be rescheduled. The installation is completed correctly the first time as
based on a post installation performance check completed by the installation
technician. If the installation is not completed correctly a (***) credit
on the installation shall be credited.
INSIDE WIRE WARRANTY
All RHYTHMS-installed or repaired premise wiring is warranted to be free from
defects for a period of (***) from the date of work completion. RHYTHMS
may outsource inside wire installations.
SERVICE DETERMINATION, APPROVAL, AND ORDER ENTRY PROCESS
Appendix A contains the mutually agreed upon flowchart for the service
determination, approval, and order entry process.
(***) Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
Confidential Page 4
<PAGE>
Exhibit B
SERVICE CHANGES (UPGRADES, MOVES, DISCONNECTS)
Appendix A contains the mutually agreed upon flowchart for service changes
including upgrades, moves, and disconnects.
GENERAL TERMS
All Network Performance Parameters are based on the assumption that the customer
network is appropriately engineered (i.e., Customer Connections are within
reasonable over-subscription limits). If Rhythms determines that the customer
network is inappropriately configured, no credits will be given.
No credits will be provided for Availability, Throughput, or Network Latency
prior to successful completion of installation. The customer will automatically
be credited. Credits provided by Rhythms hereunder shall not be cumulative for
any single failure or greater than (***) for the monthly charge within any given
month and (***) for the installation charge.
No service credits will be granted to any customer for any service interruption
or other transmission problems (including, without limitation, any inability by
Rhythms to maintain (***) under its Network Availability, Network Delay,
and Throughput commitments contained in this Exhibit B) which are caused by or
contributed to (a) by Cisco, (b) by any third party (including the customer),
(c) by atmospheric or environmental conditions, (d) by any Act of God or natural
disaster, or (e) by any person who is not controlled by, or under common control
with, Rhythms. Rhythms will nevertheless use its reasonable efforts to seek a
prompt resumption of service and/or resolution of transmission problems in
circumstances where such efforts have a reasonable likelihood of achieving those
results promptly.
DEFINITION SECTION
[DIAGRAM]
(***) Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
Confidential Page 5
<PAGE>
SERVICE LEVEL AGREEMENT
APPENDIX A
<TABLE>
<S> <C> <C>
1) Service Determination Process Page #1
2) Approval and Service Installation Process Page #2
3) Employee Move Process Page #3
4) Disconnect/Change Process Page #4
5) Service Installation and Escalation Process Page #5
6) Rhythms/Cisco Systems Integration Page #6
7) Cisco/Rhythms File Transaction Process Page #7
8) Customer Acceptance Questionnaire Page #8
9) Introductory Package components Page #9
</TABLE>
<PAGE>
Rhythms NetConnections
System Engineering
Richard Weborg
CISCO SERVICE DETERMINATION PROCESS
(***)
(***)
(***)
(***) Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
<PAGE>
CISCO APPROVAL AND SERVICE INSTALLATION PROCESS
APPROVAL PROCESS
(***)
(***)
(***)
INSTALLATION PROCESS
(***)
(***)
(***)
(***) Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
<PAGE>
CISCO EMPLOYEE MOVE PROCESS
(***)
(***)
(***)
(***) Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
<PAGE>
CISCO DISCONNECT/CHANGE
PROCESSES
CISCO DISCONNECT PROCESSE (SCHEDULED)
(***)
(***)
(***)
CISCO DISCONNECT PROCESS (IMMEDIATE)
(***)
(***)
(***)
CISCO CHANGE PROCESS
(***)
(***)
(***)
(***) Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
<PAGE>
CISCO SERVICE INSTALLATION ESCALATION PROCESS
- --------------------------------------------------------------------------------
The following escalation levels will be used for Installation WORK ORDERS. This
will help ensure that orders are completed as outlined in the CISCO/Rhythms
service agreement. During the Installation process if a NEW ORDER is not
assigned and being worked (***) of submission then the following escalation
will occur.
- --------------------------------------------------------------------------------
- -------------------------------------- ---------------------------------
LEVEL 1
(***) (***)
- -------------------------------------- ---------------------------------
- -------------------------------------- ---------------------------------
LEVEL 2
(***) (***)
- -------------------------------------- ---------------------------------
- -------------------------------------- ---------------------------------
LEVEL 3
(***) (***)
- -------------------------------------- ---------------------------------
- -------------------------------------- ---------------------------------
LEVEL 4
(***) (***)
- -------------------------------------- ---------------------------------
(***) Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
<PAGE>
RHYTHMS/CISCO SYSTEM INTEGRATION
A) SERVICE DETERMINATION REQUEST D) ORDER ACKNOWLEDGEMENT
(CISCO > RHYTHMS)
(***) (***)
B) APPROVAL REQUEST (RHYTHMS >CISCO) E) ORDER COMPLETED NOTIFICATION
(RHYTHMS > CISCO)
(***) (***)
C) ORDER REQUEST (CISCO>RHYTHMS) MONTHLY BILLING
(***) (***)
(***) Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
<PAGE>
CISCO\RHYTHMS
PROPOSED FILE TRANSACTION PROCESS
RHYTHMS CISCO
(***)
(***)
(***)
(***) Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
<PAGE>
CUSTOMER ACCEPTANCE QUESTIONNAIRE
We would like to verify your satisfaction with our service. Could you please
take a few moments to complete the following questions and return this with our
Installer.
1. Were you able to access your corporate site from your PC? YES / NO
2. Are you satisfied with the performance of the Link? YES / NO
3. Was the entire installation process pleasing? YES / NO
4. Do you feel that you are in a position to begin using
this service immediately? YES / NO
5. How would you rate our overall performance? 1 2 3 4 5
(1 - Great, 5 - Poor)
6. Comments:
--------------------------------------------------------
-----------------------------------------------------------
-----------------------------------------------------------
By signing this form, I accept service and agree that it was received to my
satisfaction.
- --------------------------------------------- ------------------
NAME (Printed) Date
- ---------------------------------------------
NAME (Signature)
<PAGE>
INTRODUCTORY PACKAGE CONTENTS
1. Welcome letter
2. Overview of Rhythms/Cisco Telework Program.
3. Desktop Configuration Guide
4. Troubleshooting Guide
5. Frequently Asked Questions
<PAGE>
Enterprise Service Solution Exhibit C
Monthly Activation Rates for
Cisco Systems
<TABLE>
<CAPTION>
ESS Monthly Activation Rates
month monthly cumulative planned
deployment* deployment at deployment
end of month
<S> <C> <C> <C> <C>
1998 Dec (***) (***) (***) (***)
-----------------------------------------------------------------------------------
1999 Jan (***) (***) (***) (***)
Feb (***) (***) (***) (***)
Mar (***) (***) (***) (***)
Apr (***) (***) (***) (***)
May (***) (***) (***) (***)
Jun (***) (***) (***) (***)
Jul (***) (***) (***) (***)
Aug (***) (***) (***) (***)
Sep (***) (***) (***) (***)
Oct (***) (***) (***) (***)
Nov (***) (***) (***) (***)
Dec (***) (***) (***) (***)
-----------------------------------------------------------------------------------
2000 Jan (***) (***) (***) (***)
Feb (***) (***) (***) (***)
Mar (***) (***) (***) (***)
Apr (***) (***) (***) (***)
May (***) (***) (***) (***)
Jun (***) (***) (***) (***)
-----------------------------------------------------------------------------------
</TABLE>
* Adjustments to Monthly Activation Rates
If Rhythms shall be prevented from activating any Cisco teleworkers(s) due to
any act of God, war or other period of hostilities, labor disputes, unusual
delay in transportation, adverse weather conditions, fire, unfavorable
casualties, or other causes beyond Rhythms' reasonable control (a "Delaying
Event"), then (a) Monthly Activation Rates adversely affected by such Delaying
Events shall be reduced by the number of activation's prevented by such Delaying
Event. Not withstanding the foregoing, Rhythms shall be deemed to have failed to
meet the activation rate for any month if such failure was as a result of
Cisco's lack of demand for ESS activation's during such month.
(***) Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
11/30/98 RhythmsNetConnections, Inc. Confidential
<PAGE>
Enterprise Service Solution Exhibit D
Publicity Activities for
Cisco Systems
PUBLICITY ACTIVITIES
(***)
(***)
(***)
SUBJECT TO FINAL APPROVAL (***)
12/9/98
(***) Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
<PAGE>
EXHIBIT 10.7
AGREEMENT
This Agreement (the "Agreement") is made and entered into this 3rd day of
March, 1999, (the "Effective Date") between RHYTHMS NETCONNECTIONS, INC., a
Delaware corporation, and MCI WORLDCOM, INC., a Georgia corporation.
R E C I T A L S
MCI WORLDCOM, Inc. through its operating Affiliates and Alliance Entities
(MCI WORLDCOM, Inc. and said operating Affiliates and Alliance Entities referred
to collectively herein as "MCI WORLDCOM") provides integrated local, long
distance, and Internet voice and data communications services, including
metropolitan area, long distance and Internet network transport services (the
"Network Services").
Rhythms NetConnections, Inc., through its operating subsidiaries (Rhythms
NetConnections, Inc. and said operating subsidiaries referred to collectively
herein as "Rhythms") is a networking solutions company that provides high-speed
communications services to providers of telecommunications services and other
users. Its services include digital transmission technology deployed over
standard local copper telephone lines to enable high speed connections between
end-users and a network service provider (the "DSL Services") and other
technologies and services utilizing the unbundled network elements of the ILEC
(the "UNE Services") (DSL Services and UNE Services shall be collectively
referred to as the "Rhythms Services").
MCI WORLDCOM intends through this Agreement to, among other things,
(i) encourage Rhythms' rapid development and deployment of the DSL
Services so that such services will be available to MCI WORLDCOM
for use and marketing;
(ii) secure Rhythms as a customer for the Network Services; and
(iii) secure Rhythms for cooperation in the development of the
commercialization of voice (and other) services exploiting the DSL
Services.
Rhythms intends through this Agreement to, among other things
(i) obtain a strategic contractual relationship with MCI WORLDCOM
encouraging MCI WORLDCOM to utilize the DSL Services to permit
Rhythms to accelerate the development and deployment of the DSL
Services; and
(ii) secure MCI WORLDCOM for cooperation in the development of the
commercialization of voice (and other) services exploiting the DSL
Services.
NOW, THEREFORE, in consideration of the premises, the mutual covenants and
agreements contained herein and of Ten Dollars cash in hand paid and other
valuable
MCI WORLDCOM CONFIDENTIAL
<PAGE>
consideration, the receipt and sufficiency of all of which are hereby
acknowledged, MCI WORLDCOM and Rhythms agree as follows:
I. DEFINITIONS
As used in this Agreement, the following capitalized terms shall have the
definitions set forth below unless otherwise indicated in this Agreement:
1.1 "Affiliate" of a Party or other entity shall mean a corporation,
partnership, joint venture or other entity directly or indirectly,
through one or more intermediaries, controlling, controlled by or under
common control with such party or other entity.
1.2 "Agreement" shall mean this Agreement and all schedules and exhibits
attached hereto.
1.3 "Alliance Entity" shall those entities listed on SCHEDULE 1.3, which may
be amended from time to time by mutual agreement.
1.4 "Confidential Information" shall mean confidential or proprietary
information (including without limitation this Agreement, technical and
business plans, specifications, drawings, computer programs, Developed
IP, network configurations, facilities deployment information,
procedures, orders for services, usage information, and customer account
data) that one party or its affiliates (Owner) may disclose to the other
party or its affiliates (Recipient) in connection with the performance of
this Agreement and is disclosed by an Owner to a Recipient in document or
other tangible form (including on magnetic tape) or by oral, visual or
other means, and which should reasonably have been understood by such
Recipient to be proprietary and confidential to such Owner, because of
legends or other markings, the circumstances of the disclosure or the
nature of the information itself.
1.5 "CMSA" shall mean Consolidated Metropolitan Statistical Area as such term
is defined in "OMB Bulletin 98-06: Revised Statistical Definitions of
Metropolitan Areas (MAs) and Guidance on Uses of MA Definitions" which is
available from the National Technical Information Service (Accession
Number PB98-146160).
1.6 "CPE" shall have the meaning given in Section 5.1.
1.7 "CSA" shall have the meaning given in Section 2.1.
1.8 "Developed IP" shall have the meaning given in Section 5.3(a).
1.9 "DSL Egress Circuit" shall mean any connection from the Rhythms Metro
Service Center to MCI WORLDCOM's point of presence in a particular CMSA
or MSA.
1.10 "DSL Ingress Circuit" shall mean any single connection from an MCI
WORLDCOM customer using DSL Services to the Rhythms Connection Point to
the Rhythms Metro Service Center for a particular CMSA or MSA.
MCI WORLDCOM CONFIDENTIAL 2
<PAGE>
1.11 "DSL Services" shall have the meaning given in the Recitals and shall
include DSL Ingress Circuits and DSL Egress Circuits, as applicable.
1.12 "ILEC" shall mean an incumbent local exchange carrier, as such term is
defined in the Communications Act of 1934, as amended by the
Telecommunications Act of 1996.
1.13 "Rhythms Connection Point" shall mean Rhythms' physical collocation
within an ILEC serving wire center, or adjacent to an ILEC wire center,
or adjacent to the ILEC Digital Loop Carrier, which enables Rhythms to
order and provision unbundled network loops from the ILEC in support of
DSL Services.
1.14 "Line Commitment Period" shall have the meaning given in Section 2.4(a).
1.15 "MCI WORLDCOM shall have the meaning given in the Recitals.
1.16 "MSA" shall mean Metropolitan Statistical Area as such term is defined in
"OMB Bulletin 98-06: Revised Statistical Definitions of Metropolitan
Areas (MAs) and Guidance on Uses of MA Definitions" which is available
from the National Technical Information Service (Accession Number
PB98-146160).
1.17 "Network Services" shall have the meaning given in the Recitals.
1.18 "NSA" shall have the meaning given in Section 3.1.
1.19 "OSS" shall have the meaning given in Section 4.1.
1.20 "Purchase Commitment" shall have the meaning given in Section 2.4(a).
1.21 "Rhythms" shall have the meaning given in the Recitals.
1.22 "Rhythms Metro Service Center" shall mean the facility located in each
CMSA or MSA, as applicable, that concentrates all of the DSL traffic that
is aggregated by each Rhythms Connection Point in that particular CMSA or
MSA. MCI WORLDCOM connects to the Rhythms Metro Service Center via a DSL
Egress Circuit.
1.23 "Rhythms Services" shall have the meaning given in the Recitals.
1.24 "UNE Services" shall have the meaning given in the Recitals.
1.25 "UUNET" shall have the meaning given in Section 2.2.
II. AGREEMENT FOR DSL SERVICES
2.1 CARRIER SERVICES AGREEMENT. Simultaneously with the execution of this
Agreement, Rhythms and MCI WORLDCOM shall enter into the Carrier Services
Agreement (the "CSA") in substantially the form attached hereto as
SCHEDULE 2.1 pursuant to which
MCI WORLDCOM CONFIDENTIAL 3
<PAGE>
Rhythms will provide and MCI WORLDCOM will purchase Rhythms Services.
The CSA shall provide the geographical markets to be covered and the
schedule of availability of DSL Services in each market. In the event
that agreement has not been reached as to any material terms and the CSA
is not executed simultaneously with this Agreement, the parties shall
negotiate in good faith in an effort to reach agreement and to execute
the CSA (***) of the Effective Date of this Agreement unless
extended by mutual agreement. The parties (***) this
Agreement. Moreover, the binding effect of the CSA shall be contingent
upon the execution of the NSA and the OSS Licensing Agreement.
2.2 PREFERRED PROVIDER STATUS. Subject to the conditions and limitations
contained in Sections 2.3 and 2.4 hereof and pursuant to the CSA, Rhythms
shall have the right to provide, (***) DSL
Services (***) DSL Services under the terms
of the CSA (***) . In the event
that MCI WORLDCOM (***) (***) , MCI WORLDCOM
shall (***) (***) provided,
however, if MCI WORLDCOM (***) .
2.3. (***) FOR DSL SERVICES. The price of DSL Services to be paid pursuant
to the CSA shall be as set forth in the CSA; (***)
(***) under the CSA, MCI WORLDCOM shall (***)
(***) . Rhythms shall (***)
(***) . If (***)
(***) provide such DSL Services
(***) , or if Rhythms (***)
(***) , then Rhythms shall (***)
(***) provide such services
(***) . In the event that MCI WORLDCOM (***)
(***) , when such
(***) in such (***)
Within (***)
(***) , Rhythms shall (***)
(***) , in its sole discretion, may
elect to (***) . MCI WORLDCOM shall (***)
(***) . MCI WORLDCOM will
(***) .
2.4. PURCHASE COMMITMENT.
(a) COMMITMENT; (***) . Under the terms of the CSA, and subject to
the terms, conditions and limitations of this Section 2.4, MCI
WORLDCOM shall purchase,
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MCI WORLDCOM CONFIDENTIAL 4
<PAGE>
and Rhythms shall provide, a minimum of 100,000 DSL Ingress
Circuits (the "Purchase Commitment") for providing DSL Services
during the sixty (60) month line commitment period (the "Line
Commitment Period"). The Line Commitment Period shall begin on
the first day of the month after the first month during which
(i) Rhythms has 1,250 Rhythms Connection Points in commercial
service in a minimum of twenty-nine (29) CMSAs and/or MSAs and
(ii) the (***) , and shall end the last
day of the 60th month thereafter, or the date on which the
100,000th DSL Ingress Circuit is ordered by MCI WORLDCOM,
whichever date is earlier. To establish the date on which the
Line Commitment Period commences, MCI WORLDCOM and Rhythms shall
complete and sign the Commencement Date Certificate attached
hereto as SCHEDULE 2.4. In connection with the Commencement
Date Certificate, Rhythms shall provide to MCI WORLDCOM such
documentation as may be reasonably necessary to prove (i) that
1,250 Rhythms Connection Points are in commercial service in a
minimum of twenty-nine (29) CMSAs and/or MSAs and (ii) the
(***) . MCI WORLDCOM agrees that it will
satisfy the Purchase Commitment in accordance with the milestone
dates of the Line Commitment Period provided in SCHEDULE 2.4(a)
hereto (***) (***)
. Rhythms agrees that (***) the
Purchase Commitment by the milestone dates specified in SCHEDULE
2.4(a) and that Rhythms will (***)
(***) . Nothing contained hereon or
in the CSA shall (***)
(***) .
(b) (***) PURCHASE COMMITMENT. (***)
MCI WORLDCOM has satisfied the Purchase Commitment, MCI WORLDCOM
shall (***)
(i) (***) MCI WORLDCOM (***)
(***) the Line Commitment Period;
(ii) (***) MCI WORLDCOM (***)
(***) the Line Commitment Period;
(iii) (***) MCI WORLDCOM (***)
(***) the Line Commitment Period
or other relevant times set forth in SCHEDULE 2.4;
(iv) (***) the Rhythms' direct sales
force (***)
(***)
(***) ; and
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MCI WORLDCOM CONFIDENTIAL 5
<PAGE>
(v) (***) MCI WORLDCOM pursuant to the
CSA which (***) with the
terms and conditions of the CSA.
2.5 (***) . In addition to all other requirements as to quality of
service and capacity availability contained herein or in the CSA,
(***) (***) in
accordance with the CSA by (***)
(***) in which DSL Service (***)
(***) in accordance with the CSA (***) .
III. AGREEMENT FOR NETWORK SERVICES
3.1 NETWORK SERVICES AGREEMENT. Simultaneously with the execution of this
Agreement, Rhythms and MCI WORLDCOM shall enter into the Network Services
Agreement (the "NSA") in substantially the form attached hereto as
SCHEDULE 3.1 pursuant to which MCI WORLDCOM will provide and Rhythms will
purchase Network Services. The NSA shall provide the geographical
markets to be covered and the schedule of availability of Network
Services in each market. In the event that agreement has not been reached
as to any material terms and the NSA is not executed simultaneously with
this Agreement, the parties shall negotiate in good faith in an effort to
reach agreement and to execute the NSA (***) of the
Effective Date of this Agreement unless extended by mutual agreement.
The parties (***)
(***)
of this Agreement. Moreover, the binding effect of the NSA shall be
contingent upon the execution of the CSA and the OSS Licensing Agreement.
3.2 PREFERRED PROVIDER STATUS. Subject to the conditions and limitations
contained in Section 3.3, MCI WORLDCOM shall have the right to provide,
pursuant to the NSA, all of the Network Services utilized by Rhythms at
those locations where MCI WORLDCOM provides Network Services. (***)
(***) .
3.3. (***) FOR NETWORK SERVICES. The price of Network Services to be
paid pursuant to the NSA shall be as set forth in the NSA; (***)
(***) provided in
the NSA, Rhythms shall (***)
(***) . MCI
WORLDCOM shall (***)
(***) . If MCI WORLDCOM (***)
(***) , or if MCI WORLDCOM (***)
(***) , then MCI WORLDCOM shall (***)
of which MCI WORLDCOM (***) . In the event that (***)
in (***) .
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MCI WORLDCOM CONFIDENTIAL 6
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3.4. NETWORK PLANNING. MCI WORLDCOM shall designate Rhythms as a (***)
(***) as is more particularly described in the
NSA hereto. (***)
with internal MCI WORLDCOM organizations to
facilitate deployment of Rhythms' networks for the provisioning of DSL
Services.
IV. INTEGRATION OF OPERATIONAL SUPPORT SYSTEMS
4.1 WORKING GROUP; INTEGRATION PLAN. Promptly following execution of this
Agreement, MCI WORLDCOM and Rhythms will form an OSS-integration working
group to develop and implement systems and procedures necessary to deploy
on a national basis MCI WORLDCOM DSL service utilizing the DSL Services
provided by Rhythms. At a minimum the working group will (***)
(***) . The working group will use
reasonable efforts to (***)
after the Effective Date of this Agreement which shall include, among
other things, objectives, responsibilities and timelines.
4.2. OSS LICENSING AGREEMENT. Subject to the terms set forth in SCHEDULE 4.2,
Rhythms will license to MCI WORLDCOM, on an non-exclusive basis, software
programs, electronic interfaces and processes for, among other things,
order entry, provisioning, customer management, maintenance and repair of
DSL Services. Such licenses, (***) , shall be in
substantially the form attached hereto as SCHEDULE 4.2. In the event that
agreement has not been reached as to any material terms and the OSS
Licensing Agreement is not executed simultaneously with this Agreement,
the parties shall negotiate in good faith in an effort to reach agreement
and to execute the OSS Licensing Agreement (***) of
the Effective Date of this Agreement unless extended by mutual agreement.
The parties (***) (***)
this Agreement. Moreover, the binding effect of the OSS Licensing
Agreement shall be contingent upon the execution of the CSA and the NSA.
V. DEVELOPMENT AGREEMENT
5.1. NETWORK. Rhythms and MCI WORLDCOM shall use reasonable efforts to
assure network compatibility, including collaboration in the selection of
network technologies for Rhythms' and MCI WORLDCOM's network, including,
but not limited to,
(***)
necessary to support the respective DSL network deployments during the
term of this Agreement. This will include, to the extent reasonably
possible, selection of the same or compatible equipment platforms and
technologies. Throughout the term of this Agreement, Rhythms and MCI
WORLDCOM will cooperate to test and deploy capabilities where use of such
capabilities is necessary or desirable to support MCI
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MCI WORLDCOM CONFIDENTIAL 7
<PAGE>
WORLDCOM's customers and it is technically and economically reasonable for
both parties to do so.
5.2 VOICE OVER DSL. MCI WORLDCOM and Rhythms agree to cooperate
reasonably to jointly develop access services for voice applications
utilizing DSL technology. (***)
(***)
(a) (***)
(***)
(b) (***) , jointly study and complete the definition and
specification of any services the parties agree jointly to develop
during the term of this Agreement, including required interfaces,
business plans and budgets for a pilot program involving selected
customer sites.
5.3 USE OF DEVELOPED TECHNOLOGIES.
(a) (***) obtain patent or other appropriate
protections with respect to intellectual property rights in any
technologies and processes jointly developed under the terms of this
Agreement (the "Developed IP") (***)
to do so. At the time that the parties agree that a Developed IP is
entitled to proprietary protection, (***)
obtain patent or other appropriate protections with respect to such
Developed IP. (***) obtain
such protections, or (***)
(***) obtain such
protection and (***) obtain patent or other
appropriate protections with respect to such Developed IP.
(b) The Developed IP will be for the exclusive use and benefit of MCI
WORLDCOM (including any customers to whom MCI WORLDCOM provides
services) and Rhythms (***) from
the date such processes or technologies become commercially
available throughout the Rhythms network; provided, however,
(***) the Developed IP (***)
(***)
and further provided that (***)
the Developed IP (***)
(***) MCI WORLDCOM.
(c) Subject to subsection (b) above, the Developed IP will be jointly
owned by the parties and each of the parties may utilize the
Developed IP (***)
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MCI WORLDCOM CONFIDENTIAL 8
<PAGE>
. During the term of the exclusive use, each party may
utilize the Developed IP for permitted purposes (***)
.
VI. OTHER INTELLECTUAL PROPERTY RIGHTS
6.1 (***) license, (***)
owned or developed patents, processes, technology or other
intellectual property (***) . The terms of
this license shall permit (***)
(***) to the extent necessary to
(***) .
6.2 Except as is otherwise provided herein, each party will continue to
independently own, and the other party shall not have or acquire any
rights in, its intellectual property, including patents, trademarks, trade
secrets, proprietary processes and other forms of intellectual property
used in or necessary to providing the DSL Services or the Network Services
which are the subject of this Agreement. Any intellectual property solely
developed by a party, including pre-existing and improvements to pre-
existing intellectual property, will continue to be held by the party
already holding such intellectual property.
VII. STOCK PURCHASE AGREEMENT
7.1 PURCHASE OF PREFERRED STOCK. Simultaneously with the execution of this
Agreement, MCI WORLDCOM Investment Company, Inc. and Rhythms shall enter
into the Stock Purchase Agreement in substantially the form attached
hereto as SCHEDULE 7.1.
VIII. TERM AND TERMINATION
8.1 TERM. The term of this Agreement shall begin on the Effective Date and
shall expire on (***) , unless terminated earlier pursuant to
the provisions hereof or extended by agreement of the parties; provided,
however, Section 2.4 of this Agreement shall not terminate until the end
of the Line Commitment Period, unless terminated earlier pursuant to the
provisions hereof or extended by the written agreement of the parties.
Upon termination of the Agreement, the parties shall (***)
unless otherwise mutually agreed to by the parties. However,
it is the intention of the parties that, notwithstanding any termination
of the Agreement, the terms and conditions of the Agreement shall continue
to govern with respect to any then-existing services for so long as such
services (including any permitted renewals thereof) remain in effect.
8.2 TERMINATION.
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MCI WORLDCOM CONFIDENTIAL 9
<PAGE>
(a) FOR CAUSE. In the event that either party commits a material breach
of this Agreement, which breach is not cured (***)
following written notice of breach, or in the event of a material
breach which is not capable of being cured (***) , or in
the event of numerous breaches which collectively constitute a
material breach of this Agreement or the repeated failure to meet
obligations identified in this Agreement, then the non-breaching
party may, by giving written notice to the other party, terminate
this Agreement, in whole or in part, as of a date specified in the
notice of termination. If either party chooses to terminate this
Agreement in part, the charges payable under this Agreement will be
equitably adjusted to reflect those portions that are terminated.
(b) CHANGE IN CONTROL. In the event of a change in control of either
party, whether such control is acquired, directly or indirectly, in
a single transaction or series of related transactions, or all or
substantially all of the assets of such party are acquired by any
entity, or such party is merged with or into another entity to form
a new entity, then, at any time (***) after the last to
occur of such events, the other party may terminate this Agreement
by giving at least (***) prior written notice and designating
a date upon which such termination shall be effective. For purposes
of this Agreement, "control" and its derivatives mean with regard to
this paragraph the legal, beneficial or equitable ownership,
directly or indirectly, of fifty percent (50%) or more of the
capital stock (or other ownership interests, if not a corporation)
of a party ordinarily having voting rights.
(c) INSOLVENCY. In the event that either party
(i) files for bankruptcy,
(ii) becomes or is declared insolvent, or is the subject to any
proceedings related to its liquidation, insolvency or the
appointment of a receiver or similar officer of it,
(iii) makes an assignment for the benefit of all or substantially
all of its creditors;
(iv) enters into an agreement for the composition, extension or
readjustment of substantially all of its obligations; or
(v) has the repayment of any indebtedness in principle amount in
excess of (***) in the aggregate accelerated by its
creditors,
then the other party may, by giving written notice of termination
to the other, terminate this Agreement as of a date specified in
such notice of termination.
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MCI WORLDCOM CONFIDENTIAL 10
<PAGE>
(d) TERMINATION FOR FAILURE TO EXECUTE THE CSA, NSA AND OSS LICENSING
AGREEMENT. If, (***) after the Effective Date of this
Agreement, or such later time as the parties may mutually agree, the
parties have failed to execute either the CSA, the NSA, or the OSS
Licensing Agreement, then either party may, by written notice to the
other party, terminate (***)
of this Agreement, at its option (***)
, and neither the CSA, the NSA or the OSS Licensing Agreement
shall be binding on either party until all three such agreements
have been executed by the parties.
(e) EFFECT OF TERMINATION. Except as provided in Sections 2.1, 3.1 and
4.2 of this Agreement, each of the contracts and agreements provided
herein shall be independent of the others. Breach of any such
separate agreement shall not be treated as a breach of this
Agreement or any other agreement mentioned hereunder.
Notwithstanding the previous sentence or anything contained in this
Agreement (***)
(***)
of this Agreement. The remedies for breach of any
the separate agreements referenced herein shall be as set forth in
such separate agreements.
IX. CONFIDENTIALITY; ADVERTISING AND PUBLICITY
9.1 By virtue of this Agreement, Rhythms and MCI WORLDCOM may have access to
or exchange Confidential Information. A Recipient (as defined in Section
1.2) of such Confidential Information shall not disclose any Confidential
Information to any person or entity except (i) Affiliates (defined below)
who agree, in advance, in writing, to be bound by this Article IX, and
(ii) Recipient's employees, contractors and consultants, and Affiliates'
employees, contractors and consultants, who have a need to know and who
are bound in writing to protect the received Confidential Information
from unauthorized use or disclosure. Confidential Information shall not
otherwise be disclosed to any third party without the prior written
consent of Owner (as defined in Section 1.2). Recipient shall use
Confidential Information only for the purpose of this Agreement and shall
protect such Confidential Information from disclosure to others, using
the same degree of care used to protect its own confidential or
proprietary information of like importance, but in any case using no less
than a reasonable degree of care. For the purposes of this Article IX,
the term "Affiliate" shall mean shall mean any entity controlling,
controlled by or under common control (either directly or indirectly)
with MCI WORLDCOM or Rhythms, as applicable
9.2 Each party shall cause its Affiliates to comply with the terms of this
Article IX. A failure of any Affiliate of a party to comply with the
terms of this Article IX shall be deemed a breach of this Agreement by
such party. To the extent any Confidential Information is the information
of an Affiliate, such Affiliate shall be entitled to enforce the
confidentiality
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MCI WORLDCOM CONFIDENTIAL 11
<PAGE>
obligations of the other party and its Affiliates as a third party
beneficiary of this Agreement.
9.3 The restrictions of this Article IX shall not apply to information that:
(i) was publicly known at the time of Owner's communication thereof to
Recipient; (ii) becomes publicly known through no fault of Recipient
subsequent to the time of Owner's communication thereof to Recipient;
(iii) was in Recipient's possession free of any obligation of confidence
at the time of Owner's communication thereof to Recipient; (iv) is
developed by Recipient independently of and without reference to any of
Owner's Confidential Information or other information that Owner
disclosed in confidence to any third party; (v) is rightfully obtained by
Recipient from third parties authorized to make such disclosure without
restriction; or (vi) is identified by Owner as no longer proprietary or
confidential.
9.4 In the event Recipient is required by law, regulation or court order to
disclose any of Owner's Confidential Information, Recipient will promptly
notify Owner in writing prior to making any such disclosure in order to
facilitate Owner seeking a protective order or other appropriate remedy
from the proper authority. Recipient agrees to cooperate with Owner in
seeking such order or other remedy. Recipient further agrees that if
Owner is not successful in precluding the requesting legal body from
requiring the disclosure of the Confidential Information, Recipient will
furnish only that portion of the Confidential Information which is
legally required and will exercise all reasonable efforts to obtain
reliable assurances that confidential treatment will be accorded the
Confidential Information.
9.5 All Confidential Information disclosed in connection with this Agreement
shall be and remain the property of Owner. All such information in
tangible form shall be returned to Owner promptly upon written request
and shall not thereafter be retained in any form by Recipient.
9.6 The parties acknowledge that Confidential Information is unique and
valuable, and that disclosure in breach of this Article IX will result in
irreparable injury to Owner for which monetary damages alone would not be
an adequate remedy. Therefore, the parties agree that in the event of a
breach or threatened breach of confidentiality, Owner shall be entitled
to specific performance and injunctive or other equitable relief as a
remedy for any such breach or anticipated breach without the necessity of
posting a bond. Any such relief shall be in addition to and not in lieu
of any appropriate relief in the way of monetary damages.
9.7 Neither party shall publish or use any advertising, sales, promotions, or
other publicity materials that use the other party's name, logo,
trademarks or service marks without the prior written approval of the
other party. Each party agrees not to issue any publicity materials,
press releases or other public statements that refer to, or describe any
aspect of, this Agreement, without the prior written approval of the other
party. Nothing in this Agreement establishes a license for either party
to use any of the other party's brands, marks or logos without the prior
written approval of the other party.
MCI WORLDCOM CONFIDENTIAL 12
<PAGE>
9.8 The provisions of this Article IX shall survive the termination or
expiration of this Agreement.
X. MISCELLANEOUS
10.1 BINDING NATURE AND ASSIGNMENT. Neither party shall have the power to
assign this Agreement, or any of its duties or obligations under this
Agreement, to any other party (whether by operation of law or otherwise),
without the prior written consent of the other party except that either
party may assign all duties, obligations and rights among its Affiliates
without approval. Any purported assignment in violation of this section
shall be null and void and shall constitute a material breach of this
Agreement. No permitted assignment shall become effective until the
assignee has agreed in writing to be bound by this Agreement and to
assume the assignor's duties and obligations under this Agreement. No
such assignment shall relieve the contracting party from its obligations
hereunder.
10.2. ENTIRE AGREEMENT; AMENDMENT. This Agreement, including any Schedules
referred to herein and attached hereto, each of which is incorporated
herein for all purposes, and any other agreements between the parties
referenced herein or executed of even date herewith, constitute the
entire agreement between the parties with respect to the subject matter
hereof and supercedes all prior agreements, whether written or oral, with
respect to the subject matter contained in this Agreement. No change,
waiver, or discharge hereof shall be valid unless in writing and signed
by an authorized representative of the party against which such change,
waiver or discharge is sought to be enforced.
10.3 (***) . Except as is otherwise provided herein, (***)
(***)
(***) , in any market.
10.4 REGULATORY. MCI WORLDCOM and Rhythms will cooperate reasonably in state
and/or federal regulatory proceedings that may be necessary or desirable
in authorizing the provision of the Network Services and the DSL Services
as contemplated by this Agreement; provided, however, this shall not
require either party to take any particular position in any particular
regulatory proceeding except as may be determined by such party in its
sole discretion.
10.5 EXPENSES. Each party shall bear and pay all costs and expenses incurred
by it in connection with the transactions contemplated in this Agreement,
including fees and expenses of its own financial consultants, accountants
and counsel.
10.6 NOTICES. All notices and other communications which are required or
permitted hereunder shall be in writing and shall be deemed duly given
(i) when delivered by hand, (ii) one day after being given to an express
carrier with a reliable system for tracking
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MCI WORLDCOM CONFIDENTIAL 13
<PAGE>
delivery, (iii) when sent by electronic mail to the destination specified
by the applicable party, or (iv) six (6) days after the day of mailing,
when mailed by United States mail, postage prepaid and addressed as
follows:
In the case of Rhythms:
Scott Chandler
6933 South Revere Parkway
Englewood, CO 80112-3931
Phone Number: (303)476-4238
Fax Number: (303)476-4201
E-Mail Address: [email protected]
With a copy to:
Jeff Blumenfeld, Esq.
Summer Square
1615 M Street, N.W., Suite 700
Washington, D.C. 20036
Phone Number: (202)955-6300
Fax Number: (202)955-6614
E-Mail Address: [email protected]
In the case of MCI WORLDCOM:
Susan Mayer
President
MCI WORLDCOM Venture Fund, Inc.
1801 Pennsylvania Avenue, NW
Washington, DC 20006-3606
Phone Number: (202)887-2299
Fax Number: (202)887-3226
E-Mail Address: [email protected]
With a copy to:
P. Bruce Borghardt
General Counsel - Corporate Development
MCI WORLDCOM, Inc.
10777 Sunset Office Drive, Suite 330
St. Louis, MO 63127
Phone Number: (314)909-4100
Fax Number: (314)909-4101
MCI WORLDCOM CONFIDENTIAL 14
<PAGE>
E-Mail Address: [email protected]
A party may from time to time change its address or designee for
notification purposes by giving the other prior written notice of the new
address or designee and the date upon which it become effective.
10.7 COUNTERPARTS. This Agreement may be executed in several counterparts,
all of which taken together shall constitute one single Agreement between
the parties hereto.
10.8 CAPTIONS. The article and section headings used herein are for reference
and convenience only and shall not enter into the interpretation hereof.
10.9 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, without giving effect
to its principles of conflicts of law.
10.10 DISPUTE RESOLUTION. Without prejudice to either party's right to seek
equitable relief (including, but not limited to injunction) from a court,
any dispute arising out of or related to this Agreement which cannot be
resolved by negotiation, shall be settled by binding arbitration in
accordance with the J.A.M.S./ENDISPUTE Arbitration Rules and Procedures,
as amended by this Agreement. The costs of arbitration, including the
fees and expenses of the arbitrator, shall be shared equally by MCI
WORLDCOM and Rhythms unless the arbitration award provides otherwise.
MCI WORLDCOM and Rhythms shall each bear the cost of preparing and
presenting its case. The parties agree that this provision and the
arbitrator's authority to grant relief shall be subject to the United
States Arbitration Act, 9 U.S.C. 1-16 et seq. ("USAA"), the provisions of
this Agreement, and the ABA-AAA Code of Ethics for Arbitrators in
Commercial Disputes. The parties agree that the arbitrator shall have no
power or authority to make awards or issue orders of any kind except as
expressly permitted by this Agreement, and in no event shall the
arbitrator have the authority to make any award that provides for
punitive or exemplary damages. The arbitrator's decision shall follow
the plain meaning of the relevant documents, and shall be final and
binding. The award may be confirmed and enforced in any court of
competent jurisdiction. All post-award proceedings shall be governed by
the USAA.
10.11 RELATIONSHIP OF PARTIES. Each of the parties in furnishing the
respective services hereunder is acting as an independent contractor.
Neither party is an agent of the other party and neither party has any
authority to represent the other party as to any matters, except as
expressly authorized in this Agreement.
10.12 SEVERABILITY. In the event that any provision of this Agreement
conflicts with the law under which this Agreement is to be construed or
if any such provision is held invalid by an arbitrator or a court with
jurisdiction over the parties, such provision shall be deemed to be
restated to reflect as nearly as possible the original intention of the
parties in
MCI WORLDCOM CONFIDENTIAL 15
<PAGE>
accordance with applicable law. The remainder to this Agreement shall
remain in full force and effect.
10.13 WAIVER OF DEFAULT; CUMULATIVE REMEDIES. A delay or omission by either
party hereto to exercise any right or power under this Agreement shall
not be construed to be a waiver thereof. A waiver by either of the
parties hereto of any of the covenants to be performed by the other or
any breach thereof shall not be construed to be a waiver of any
succeeding breach thereof or of any other covenant herein contained. All
remedies provided for in this Agreement shall be cumulative and in
addition to and not in lieu of any other remedies available to either
party at law, in equity or otherwise.
10.14 SURVIVAL. Any provision of this Agreement which contemplates performance
or observance subsequent to any termination or expiration of this
Agreement shall survive any termination or expiration of this Agreement
and continue in full force and effect.
10.15 THIRD PARTY BENEFICIARIES. This Agreement is entered into solely
between, and may be enforced only by, MCI WORLDCOM and Rhythms; and this
Agreement shall not be deemed to create in third parties, including
supplier and customers of a party, or to create any obligations of a
party to any such third parties.
10.16 LIMITATION OF LIABILITY. IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE
OTHER PARTY OR ANY THIRD PARTY FOR ANY INCIDENTAL, INDIRECT,
CONSEQUENTIAL, PUNITIVE, EXEMPLARY, OR SPECIAL DAMAGES EVEN IF A PARTY IS
ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
10.17 (***) . Commencing on the Effective Date of this Agreement
and continuing for a period of (***) thereafter, (***)
(***) ; provided, however, that the
foregoing provision shall not prevent (***)
and, provided further, that nothing contained herein shall preclude
(***) (***) .
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MCI WORLDCOM CONFIDENTIAL 16
<PAGE>
IN WITNESS WHEREOF, MCI WORLDCOM and Rhythms have each caused this
Agreement to be signed and delivered by its duly authorized officer, all as of
the date first set forth above.
MCI WORLDCOM, INC.
BY: /s/ Susan Mayer
------------------------------------
Name
SVP
------------------------------------
Title
3.3.99
------------------------------------
Date
RHYTHMS NETCONNECTIONS, INC.
BY: /s/ Scott C. Chandler
------------------------------------
Name
CFO
------------------------------------
Title
3 - 3 - 99
------------------------------------
Date
MCI WORLDCOM CONFIDENTIAL 17
<PAGE>
SCHEDULE 1.3
ALLIANCE ENTITIES
(***)
(***)
(***)
(***)
(***)
(***)
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MCI WORLDCOM CONFIDENTIAL 18
<PAGE>
SCHEDULE 2.1
CARRIER SERVICES AGREEMENT
MCI WORLDCOM CONFIDENTIAL 19
<PAGE>
SCHEDULE 2.4
COMMENCEMENT DATE CERTIFICATE
THIS COMMENCEMENT DATE CERTIFICATE is made and entered into this ____ day
of ________________, ______, between Rhythms NetConnections, Inc. ("Rhythms")
and MCI WORLDCOM, Inc. ("MCI WORLDCOM").
WHEREAS, Rhythms and MCI WORLDCOM entered into an Agreement dated March
______, 1999, whereby, among other things, Rhythms agreed to provide and MCI
WORLDCOM agreed to purchase certain DSL Services.
NOW, THEREFORE, pursuant to Section 2.4(a) of the Agreement, Rhythms and
MCI WORLDCOM agree as follows:
1. The date on which Rhythms has 1,250 Rhythms Connection Points in
commercial service in twenty-nine (29) CMSAs and/or MSAs and the ordering
and provisioning systems are in compliance with the Carrier Services
Agreement is _____________________.
2. The date on which the Line Commitment Period commences is the date set
forth above in Section 1 of this Commencement Date Certificate.
IN WITNESS WHEREOF, Rhythms and MCI WORLDCOM have each caused this
Commencement Date Certificate to be signed and delivered as of the date first
above written.
RHYTHMS NETCONNECTIONS, INC. MCI WORLDCOM, INC.
By: By:
------------------------- -------------------------
Name: Name:
------------------------ ------------------------
Title: Title:
----------------------- -----------------------
MCI WORLDCOM CONFIDENTIAL 20
<PAGE>
SCHEDULE 2.4(a)
PURCHASE COMMITMENT AND
LINE COMMITMENT PERIOD
The following schedule outlines the MCI WORLDCOM Purchase Commitment (***)
(***) at various dates during the 60 month Line
Commitment Period. At the indicated date (A), (***)
(B) (***)
(C) (***) (D). The assumed (***)
. In the event (***)
(***)
. In addition, (***) .
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
Milestone Date DSL Ingress Circuit Assumed (***) (***) Percentage
(Months)(1) Order Commitment (***) Term
(A) (B) (C) (D)
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
(***) (***) (***) (***)%
- -------------------------------------------------------------------------------------------------------------
(***) (***) (***) (***)%
- -------------------------------------------------------------------------------------------------------------
(***) (***) (***) (***)%
- -------------------------------------------------------------------------------------------------------------
60 100,000 (***) (***)%
- -------------------------------------------------------------------------------------------------------------
</TABLE>
MCI WORLDCOM would have an additional (***) after the 60 month
Milestone Date to order additional DSL Ingress Circuits to meet the Purchase
Commitment.
EXAMPLE: Assume (***) . Assume (***)
(***) .
Assume (***) achieved (***)
(***) .
Assume (***)
(***) .
(***) Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
(1) Date on which Rhythms has 1,250 Rhythms Connection Points are available
for service in 29 CMSAs and/or MSAs and ordering and provisioning systems are in
compliance with the CSA as such date is certified by the parties in
Schedule 2.4.
MCI WORLDCOM CONFIDENTIAL 21
<PAGE>
SCHEDULE 3.1
NETWORK SERVICES AGREEMENT
MCI WORLDCOM CONFIDENTIAL 22
<PAGE>
SCHEDULE 4.2
OSS LICENSING AGREEMENT
MCI WORLDCOM CONFIDENTIAL 23
<PAGE>
SCHEDULE 7.1
STOCK PURCHASE AGREEMENT
MCI WORLDCOM CONFIDENTIAL 24
<PAGE>
EXHIBIT 10.9
BUILDING LEASE
(SINGLE TENANT)
ARTICLE ONE: BASIC TERMS
This Article One contains the Basic Terms of this Lease Agreement between
the Landlord and Tenant named below. Other Articles, Sections and Paragraphs of
the Lease referred to in this Article One explain and define the Basic Terms and
are to be read in conjunction with the Basic Terms.
Section 1.01 DATE OF LEASE: September 3, 1998.
Section 1.02 LANDLORD: BR Venture, LLC, a Delaware limited liability
company having its principal place of business at 600 Grant Street, Suite 620,
Denver, CO 80203.
Section 1.03 TENANT: Rhythms NetConnections, Inc., a Delaware
corporation.
Section 1.04 PROPERTY: The premises subject to this Lease consists of
certain land located in Arapahoe County, Colorado, more particularly described
as Lot 1, CENTENNIAL PLAZA FILING NO. 3 (the "Property"), which includes a
building containing approximately 46,400 square feet (the "Building") under
construction to be known as 6933 S. Revere Parkway, Englewood. The proposed
configuration of the Building and related improvements are shown on Exhibit A
attached hereto (the Phase I and Phase 11 buildings and parking areas are
included for reference only).
Section 1.05 LEASE TERM: Five years beginning on the Commencement Date
(as defined in paragraph 2.03 below), subject to the right of Tenant to extend
the term for one option period of three or five years as set forth in Section
2.01 below.
Section 1.06 PERMITTED USES: Office functions or any other use permitted
by applicable zoning ordinances and regulations.
Section 1.07 TENANT'S GUARANTOR: None.
Section 1.08 BROKERS: Frederick Ross Company, representing Landlord, and
Grubb & Ellis Company, representing Tenant.
Section 1.09 COMMISSIONS: Pursuant to separate agreement.
Section 1.10 INITIAL SECURITY DEPOSIT: None.
Section 1.11 VEHICLE PARKING SPACES ALLOCATED TO TENANT: All parking
spaces located on the Property as shown on Exhibit A attached hereto, which
shall be in the ratio of five spaces for each 1000 square feet of space in the
Building and shall conform with applicable zoning regulations.
<PAGE>
Section 1.12 RENT AND OTHER CHARGES PAYABLE BY TENANT: Subject to
adjustment as provided in section 3.02 below, Tenant shall pay monthly Base Rent
in a variable amount based on the following annual per-square-foot rental rates
for the Building: $12.00 for the first three years of the Lease Term; $12.25 for
the fourth and fifth years of the Lease Term. Once the actual area of the
Building is determined by multiplying the per-square-foot rental rate by the
actual total area of the Building as determined by Landlord's architect
(measured from the outside surface of the outside walls) expressed in square
feet (the "Building Area") and the finish of the Building is complete, Landlord
and Tenant shall execute an amendment to this Lease setting out the actual
amount of Base Rent payable during the initial Lease Term (the "Rent
Amendment"), Tenant shall also pay Real Property Taxes (see Section 4.02),
Utilities (see Section 4.03), Insurance Premiums (see Section 4.04), Impounds
for Insurance Premiums (see Section 4.08), and Maintenance, Repairs and
Alterations (see Article Six).
Section 1.13 RIDERS: The following Riders are attached to and made a part
of this Lease: Exhibit A (Site Plan); Exhibit B (Work Letter).
ARTICLE TWO: LEASE TERM; CONSTRUCTION OBLIGATIONS
Section 2.01 LEASE OF PROPERTY FOR LEASE TERM. Landlord hereby leases
the Property to Tenant and Tenant leases the Property from Landlord for the
Lease Term specified in Section 1.05 above. Landlord hereby grants to Tenant an
option ("Option") to extend the term of this Lease for one period of three or
five years, at the option of Tenant (the "Option Term"). The Option may only be
exercised in the event that Tenant is not in default (beyond any applicable
notice and cure periods) under any of the provisions of this Lease. In order to
exercise the Option, Tenant must provide written notice of its exercise of the
Option to Landlord (the "Extension Notice") at least six months prior to the
expiration of the initial Lose Term. Base Rent during the Option Term shall be
determined as set forth in Section 3.02 below. In the event that Tenant fails
to timely provide the Extension Notice, then Tenant's right to exercise the
Option shall automatically terminate. After exercise of the Option as set forth
above, Tenant shall have no further right to extend the term of this Lease.
Section 2.02 CONSTRUCTION OBLIGATIONS. The Building and related
improvements, including tenant improvements, will be constructed substantially
as shown on Exhibit A attached hereto (the "Site Plan") in accordance with
Exhibit B attached hereto. Landlord shall obtain industry standard warranties
from the contractors and subcontractors which perform Landlord's Work, and shall
be solely responsible for presenting and pursuing warranty claims arising from
any defects in Landlord's Work promptly after written notice thereof from
Tenant. Landlord shall also be solely responsible for correcting any latent
defects in Landlord's Work which are discovered after the expiration of the
applicable warranty period.
Section 2.03 SUBSTANTIAL COMPLETION; COMMENCEMENT DATE. The term
"Substantial Completion" as used herein shall mean that Landlord's Work is
complete to the point where Tenant may obtain a building permit for the Tenant
Finish Work (as confirmed in writing by Landlord or its architect). Based on
Landlord's current construction schedule, the projected date of Substantial
Completion is October 1, 1998, Tenant may enter the Building prior to
Substantial Completion to prepare for occupancy, so long as such activities do
not interfere with Landlord's
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<PAGE>
construction activities. As used in this Lease, the term "Commencement Date"
shall mean the date which is sixty (60) days after Substantial Completion.
Section 2.04 ALLOWANCES.
(a) Landlord shall pay $.10 per square foot for a preliminary
space plan (including up to two revisions), $1.25 per square foot to pay
the cost of construction/mechanical/electrical drawings, plus an amount
equal to $23.00 multiplied by the Building Area (together, the "Tenant
Allowance") to cover costs associated with design and construction of
Tenant Improvements. When all Tenant Improvements have been completed and
paid for, and prior to the execution of the Rent Amendment (as defined in
Section 1.12 above), Landlord and Tenant shall compare the total
expenditures for Tenant Improvements with the total amount of the Tenant
Allowance. Tenant shall be solely responsible for paying any such
expenditures which are in excess of the Tenant Allowance. Any portion of
the Tenant Allowance which is not needed to pay for the initial Tenant
Improvements shall be reserved for 12 months after Substantial Completion
and shall be paid to Tenant as reimbursement for any additional tenant
improvements to the Building made by Tenant, promptly after receipt by
Landlord of a written request therefor accompanied by reasonable supporting
documentation.
(b) Upon Substantial Completion, Landlord shall pay to Tenant
the sum of $50,000 as an allowance against moving expenses.
Section 2.05 HOLDING OVER. Tenant shall vacate the Property upon the
expiration or earlier termination of this Lease. Tenant shall reimburse
Landlord for and indemnify Landlord against all damages which Landlord incurs
from Tenant's delay in vacating the Property. If Tenant does not vacate the
Property upon the expiration or earlier termination of the Lease and Landlord
thereafter accepts rent from Tenant, Tenant's occupancy of the Property shall be
a "month-to-month" tenancy, subject to all of the terms of this Lease except
that the Base Rent then in effect shall be increased by twenty-five percent
(25%).
ARTICLE THREE: BASE RENT
Section 3.01 TIME AND MANNER OF PAYMENT. Tenant shall pay Base Rent to
Landlord in the amount stated in Paragraph 1.12 (prorated for any partial month
at the beginning or end of the Lease Term) on the Commencement Date and on the
first day of each month thereafter during the Lease Term, in advance, without
offset (except as expressly provided in this Lease), deduction or prior demand;
provided, however, that (i) Tenant shall have no obligation to pay Base Rent
for the first 30 days of the Lease Term, and (ii) Tenant shall only be obligated
to pay Base Rent for 30,000 square feet of the Building for 165 days thereafter
(that is, until the 190th day of the Lease Term), after which Base Rent shall be
payable for the entire Building Area. Base Rent shall be payable at Landlord's
address or such other place as Landlord may designate in writing.
Section 3.02 BASE RENT DURING OPTION TERM. If Tenant exercises its
Option to extend the term of this Lease as provided in Section 2.01 above, Base
Rent for the Option Term shall be determined by the parties based on the market
rate then prevailing (including
3
<PAGE>
commissions, tenant concessions and construction allowance) in the Southeast
Denver metropolitan area for leases of space of similar size and finish in
commercial properties of similar size and condition to the Property for
three-year or five-year leases, as applicable ("Market Rate"). Landlord and
Tenant shall endeavor in good faith to agree upon Base Rent for the Option Term
within thirty (30) days after Landlord receives the Extension Notice provided in
Section 2.01 above. If the parties agree on Base Rent for the Option Term
within such period, they shall immediately execute an amendment to this Lease
stating the Base Rent for the Option Term. If the parties are unable to agree
on Base Rent for the Option Term within such period, Landlord and Tenant shall
promptly thereafter jointly select three licensed real estate brokers
experienced in the leasing of commercial real estate in the Southeast Denver
metropolitan area who shall advise Landlord and Tenant in writing of their
opinion of Market Rate, and Base Rent for the Option Term shall be established
accordingly. In no event shall Base Rent during the Option Term be less than
Base Rent for the last year of the initial Lease Term.
ARTICLE FOUR: OTHER CHARGES PAYABLE BY TENANT
Section 4.01 ADDITIONAL RENT. All charges payable by Tenant other than
Base Rent are called "Additional Rent". Unless this Lease provides otherwise,
Tenant shall pay all, Additional Rent then due with the next monthly installment
of Base Rent The term "Rent" shall mean Base Rent and Additional Rent.
Section 4.02 PROPERTY TAXES.
(a) REAL PROPERTY TAXES. Tenant shall pay all real property
taxes on the Property (including any fees, taxes or assessments against, or
as a result of, any tenant improvements installed on the Property by or
for the benefit of Tenant) attributable to the Lease Term directly to the
taxing authority not less than ten days prior to the delinquency date
thereof, and shall promptly furnish to Landlord satisfactory written
evidence of payment. If Tenant fails to pay the real property taxes before
delinquency, Landlord May pay the taxes and Tenant shall reimburse Landlord
for the amount so paid (including any penalties and interest) as Additional
Rent. If any penalties or interest are imposed by the taxing authority for
delays in payment caused by Landlord, Landlord shall be solely responsible
for payment of such penalties and interest.
(b) DEFINITION OF "REAL PROPERTY TAX." "Real property tax"
means: (i) any fee, license fee, license tax, business license fee,
commercial rental tax, levy, charge, assessment, penalty or tax imposed by
any taxing authority against the Property; (ii) any tax on Landlord's right
to receive, or the receipt of, rent or income from the Property or against
Landlord's business of leasing the Property; (iii) any tax or charge for
fire protection, streets, sidewalks, road maintenance, refuse or other
services provided to the Property by any governmental agency; (iv) any
re-assessment of the Property due to a change of ownership, as defined by
applicable law; and (v) any charge or fee replacing any tax previously
included within the definition of real property tax. "Real property tax"
does not, however, include Landlord's federal or state income, franchise,
inheritance or estate taxes, or any tax imposed upon this transaction or
any other transfer of all or part of Landlord's interest in the Property.
4
<PAGE>
(c) PERSONAL PROPERTY TAXES. Tenant shall pay all taxes charged
against trade fixtures, furnishings, equipment or any other personal
property belonging to Tenant, and shall try to have personal property
taxed separately from the Property.
Section 4.03 UTILITIES. Tenant shall pay, directly to the appropriate
supplier, the cost of all natural gas, heat, light, power, sewer service,
telephone, water, refuse disposal and other utilities and services supplied to
the Property.
Section 4.04 INSURANCE POLICIES.
(a) LIABILITY INSURANCE. During the Lease Term, Tenant shall
maintain a policy of commercial general liability insurance (sometimes
known as broad form comprehensive general liability insurance) insuring
Tenant against liability for bodily injury, property damage (including loss
of use of property) and personal injury arising out of the operation, use
or occupancy of the Property, specifically including Tenant's use of
chemicals at the Property. Tenant shall name Landlord as an additional
insured under such policy. The initial amount of such insurance she be One
Million Dollars ($1,000,000) per occurrence and shall be subject to
periodic increase based upon inflation, increased liability awards,
recommendation of Landlord's professional insurance advisors and other
relevant factors. The liability insurance obtained by Tenant under this
Paragraph 4.04(a) shall (i) be primary and non-contributing, (ii) contain
cross-liability endorsements, and (iii) insure Landlord against Tenant's
performance under Section 5,05, if the matters giving rise to the indemnity
under Section 5.05 result from the negligence of Tenant. The amount and
coverage of such insurance shall not limit Tenant's liability nor relieve
Tenant of any other obligation under this Lease. Landlord may also obtain
comprehensive public liability insurance in an amount and with coverage
determined by Landlord insuring Landlord against liability arising out of
ownership, operation, use or occupancy of the Property. Any such policy
shall be obtained by Landlord at Landlord's sole expense, shall not be
contributory and shall not provide primary insurance.
(b) PROPERTY AND BUSINESS INTERRUPTION INSURANCE. During the
Lease Term, Tenant shall maintain a policy of insurance covering loss of or
damage to the Property (including Tenant's fixtures, equipment and
leasehold improvements) in the full amount of its replacement value and
including business interruption insurance in an amount sufficient to pay
one year's Base Rent plus estimated real property taxes and insurance
premiums. Landlord and Landlord's mortgagee shall be named loss payee
under such policy, as their interests may appear. Such policy shall
contain an Inflation Guard endorsement, shall not provide for any
deductible amount greater than $10,000, and shall provide protection
against all perils included within the classification of fire, extended
coverage (including any perils arising from Tenant's use of chemicals at
the Property), vandalism, malicious mischief, special extended perils (all
risk), sprinkler leakage and any other perils which Landlord deems
reasonably necessary (including flood and earthquake insurance, if required
by any lender holding a security interest in the Property). Tenant shall
not do or permit anything to be done which invalidates any such insurance
policies.
5
<PAGE>
(c) PAYMENT OF PREMIUMS. Subject to Section 4.08, Tenant shall
pay all premiums for the insurance policies described in Paragraphs 4.04(a)
and 4.04(b) when due, except that Landlord shall pay all premiums for
non-primary comprehensive public liability insurance which Landlord elects
to obtain as provided in Paragraph 4.04(a). Before the Commencement Date,
Tenant shall deliver to Landlord a certificate of insurance, executed by an
authorized officer or agent of the insurance company, showing that the
insurance which Tenant is required to maintain under this Section 4.04 is
in full force and effect and containing such other information which
Landlord reasonably requires. At last thirty (30) days prior to the
expiration of any such policy, Tenant shall deliver to Landlord reasonably
satisfactory evidence of renewal.
(d) NOTICE OF CANCELLATION. Any insurance which Tenant is
required to maintain under this Lease shall include a provision which
requires the insurance carrier to give Landlord written notice of any
cancellation or modification of coverage not less than thirty (30) days
prior to the effective date of change (or not less than ten (10) days prior
to the effective date of change, if Tenant has used its best efforts to
obtain a longer notice period but has been unable to de so). If any
insurance policy is cancelled on account of the business or activities of
Tenant, Tenant shall immediately cease such activities or secure a
replacement policy acceptable to Landlord.
(e) FAILURE TO OBTAIN OR CONFIRM COVERAGE. If Tenant fails to
deliver any policy, certificate or renewal to Landlord required under this
Lease within the prescribed time period or if any such policy is cancelled
or modified during the Lease Term without Landlord's consent, Landlord may
obtain such insurance, in which case Tenant shall reimburse Landlord for
the cost of such insurance within fifteen (15) days after receipt of a
statement that indicates the cost of such insurance.
(f) MINIMUM STANDARDS. Tenant shall maintain all insurance
required under this Lease with companies holding a "General Policy Rating"
of A-12 or better, as set forth in the most current issue of "Best Key
Rating Guide". Landlord and Tenant acknowledge the insurance markets are
rapidly changing and that insurance in the form and amounts described in
this Section 4.04 is for the primary benefit of Landlord. If at any time
during the Lease Term, Tenant is unable to maintain the insurance required
under the Lease, Tenant shall nevertheless maintain insurance coverage
which is customary and commercially reasonable in the insurance industry
for Tenant's type of business, as that coverage may change from time to
time. Landlord makes no representation as to the adequacy of such
insurance to protect Landlord's or Tenant's interests. Therefore, Tenant
shall obtain any such additional property or liability insurance which
Tenant deems necessary to protect Landlord and Tenant.
(g) WAIVER OF SUBROGATION. Landlord and Tenant each hereby
waive any and all rights of recovery against the other, or against the
officers, employees, agents or representatives of the other, for loss of or
damage to its property or the property of others under its control, if such
loss or damage is covered by any insurance policy in force (whether or not
described in this Lease) at the time of such loss or damage. Upon
obtaining the required policies of insurance, Landlord and Tenant shall
give notice to the insurance carriers of this mutual waiver of subrogation.
6
<PAGE>
Section 4.05 MAINTENANCE OF PROPERTY. Tenant shall pay all costs to
maintain the Property as provided in Section 6.04 below.
Section 4.06 LATE CHARGES. Tenant's failure to pay Rent promptly may
cause Landlord to incur unanticipated costs. The exact amount of such costs are
impractical or extremely difficult to ascertain. Such costs may include, but
are not limited to, processing and accounting charges and late charges which may
be imposed on Landlord by any ground lease, mortgage or trust deed encumbering
the Property. Therefore, if Landlord does not receive, more than twice in any
period of twelve consecutive months, any Rent payment within ten (10) days after
it becomes due, Tenant shall pay Landlord a late charge equal to five percent
(5%) of the overdue amount. The parties agree that such late charge represents
a fair and reasonable estimate of the costs Landlord will incur by reason of
such late payment.
Section 4.07 INTEREST ON PAST DUE OBLIGATIONS. Any amount owed by Tenant
to Landlord which is not paid when due shall bear interest at the rate equal to
the prime commercial lending rate announced from time to time by Bank of
America, N.A. plus 3% per annum (the "Default Rate") from the due date of such
amount. However, interest shall not be payable on late charges to be paid by
Tenant under this Lease. The payment of interest on such amounts shall not
excuse or cure any default by Tenant under this Lease. If the interest rate
specified in this lease is higher than the rate permitted by law, the interest
rate is hereby decreased to the maximum legal interest rate permitted by law.
Section 4.08 IMPOUND FOR INSURANCE PREMIUMS. Tenant shall pay Landlord a
sum equal to one-twelfth (1/12) of the annual insurance premiums payable by
Tenant under this Lease, together with each payment of Base Rent, and Tenant
shall be relieved of its obligations to pay insurance premiums to the full
extent of the amount so paid to Landlord. Landlord shall hold such payments in
a non-interest bearing impound account. If unknown, Landlord shall reasonably
estimate the amount of real insurance premiums when due. Tenant shall pay any
deficiency of funds in the impound account to Landlord upon written request. If
Tenant defaults under this Lease, Landlord may apply any funds in the impound
account to any obligation then due under this Lease.
ARTICLE FIVE: USE OF PROPERTY
Section 5.01 PERMITTED USES. Tenant may use the Property only for the
Permitted Uses set forth in Section 1.06 above.
Section 5.02 Manner of Use. Tenant shall not cause or permit the
Property to be used in any way which constitutes a violation of any law,
ordinance, or governmental regulation or order, which annoys or interferes with
the rights of owners or occupants of adjacent properties, or which constitute a
nuisance or waste. Although Landlord shall be responsible for obtaining the
permits for any work on the Building which Landlord is obligated to perform
hereunder, Tenant shall pay for all permits, including a Certificate of
Occupancy, required for Tenant's occupancy of the Property and shall promptly
take all actions necessary to comply with all applicable statutes, ordinances,
rules, regulations, orders and requirements regulating the use by Tenant of the
Property, including the Occupational Safety and Health Act and all laws and
regulations regarding the use, storage and disposal of anything used in its
manufacturing or
7
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otherwise. Landlord shall cooperate as reasonably necessary in any application
by Tenant for governmental permits relating to use of the Property consistent
with this Lease.
Section 5.03 HAZARDOUS MATERIALS.
(a) As used in this Lease, the term "Hazardous Material" means
any flammable items, explosives, radioactive materials, hazardous or toxic
substances, material or waste or related materials, including any
substances defined as or included in the definition of "hazardous
substances," "hazardous wastes," "hazardous materials" or "toxic
substances" now or subsequently regulated under any applicable federal,
state or local laws or regulations, including without limitation
petroleum-based products, paints, solvents, lead, cyanide, DDT, printing
inks, acids, pesticides, ammonia compounds and other chemical products,
asbestos, PCBs and similar compounds, and including any different products
and materials which are subsequently found to have adverse effects on the
environment or the health and safety of persons.
(b) Tenant shall not cause or permit any Hazardous Material to
be generated, produced, brought upon, used, stored, treated or disposed of
in or about the Property by Tenant, its agents, employees, contractors,
sublessees or invitees without the prior written consent of Landlord.
Landlord shall be entitled to take into account such other factors or facts
as Landlord may reasonably determine to be relevant in determining whether
to grant or withhold consent to Tenant's proposed activity with respect to
Hazardous Material. Landlord acknowledges that Tenant will store and use
on the Property the Hazardous Materials listed or described on Exhibit C
attached hereto, and Tenant covenants and agrees that all storage, use or
other disposition of all such Hazardous Materials shall be in strict
compliance with all applicable laws, ordinances and regulations. In any
event, however, shall Landlord be required to consent to the installation
or use of any storage tanks on the Property.
(c) Landlord represents and warrants to Tenant that as of the
date of this Lease, there are (and as of the Commencement Date there will
be) no Hazardous Materials on or other environmental conditions affecting
the Building or the rest of the Property in violation of any applicable
law. Landlord agrees to indemnify, defend and hold Tenant and its
officers, employees and agents harmless from any claims, judgments,
damages, penalties, fines, costs, liabilities (including sums paid in
settlement of claims) or loss, including actual attorney fees, consultant
fees and expert fees, which arise during or after the term of this Lease
from or in connection with the presence or suspected presence of Hazardous
Materials in the Building or in the soil, groundwater or soil vapor on or
under the Property, unless the Hazardous Materials are present solely as a
result of the negligence or willful misconduct of Tenant, its officers,
employees or agents. The foregoing indemnities shall not be construed to
limit or adversely affect the ability of either Landlord or Tenant to avail
itself of the benefits of the insurance coverages set forth in this Lease.
The foregoing indemnification shall survive the expiration or earlier
termination of this Lease.
Section 5.04 SIGNS AND AUCTIONS. Tenant shall not place any signs on the
Property without Landlord's prior written consent, which shall not be
unreasonably withheld so long as
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the proposed signs comply with applicable zoning regulations. Tenant shall not
conduct or permit any auctions or sheriff's sales at the Property.
Section 5.05 INDEMNITY.
(a) Subject to applicable insurance coverage and to the waiver
of subrogation contained in Section 4.04(g), Tenant shall indemnify
Landlord against and hold Landlord harmless from any and all costs, claims
or liability arising from (i) Tenant's use of the Property, (ii) the
conduct of Tenant's business or anything else done or permitted by Tenant
to be done in or about the Property, including any contamination of the
Property or any other property resulting from the presence of use of
Hazardous Material caused or permitted by Tenant, (iii) any breach or
default in the performance of Tenant's obligations under this Lease, (iv)
any misrepresentation or breach of warranty by Tenant under this Lease, or
(v) other acts or omissions of Tenant. Tenant shall defend Landlord
against any such cost, claim or liability at Tenant's expense with counsel
reasonably acceptable to Landlord or, at Landlord's election, Tenant shall
reimburse Landlord for any legal fees or costs incurred by Landlord in
connection with any such claim.
(b) Landlord shall indemnify Tenant against and hold Tenant
harmless from any and all costs, claims or liability arising from (i)
Landlord's use of the Property, (ii) anything done or permitted by Landlord
to be done in or about the Property, including any contamination of the
Property or any other property resulting from the presence of use of
Hazardous Material caused or permitted by Landlord, (iii) any breach or
default in the performance of Landlord's obligations under this Lease, (iv)
any misrepresentation or breach of warranty by Landlord under this Lease,
or (v) other negligent or wrongful acts or omissions of Landlord. Landlord
shall defend Tenant against any such cost, claim or liability at Landlord's
expense with counsel reasonably acceptable to Tenant or, at Tenant's
election, Landlord shall reimburse Tenant for any legal fees or costs
incurred by Tenant in connection with any such claim.
(c) As a material part of the consideration to Landlord, Tenant
hereby assumes all risk of damage to property or injury to persons in or
about the Property arising from any cause, and Tenant hereby waives all
claims in respect thereof against Landlord, except for any claim arising
out of Landlord's negligence or willful misconduct.
(d) As used in this Section, the term "Tenant" shall include
Tenant's employees, agents, contractors and invitees, if applicable, and
the term "Landlord" shall include Landlord's agents, partners, officers,
managers, employees and lenders.
Section 5.06 LANDLORD'S ACCESS. Landlord or its agents may enter the
Building at all reasonable times to show the Building to potential buyers,
investors or other parties, to inspect and conduct tests in order to monitor
Tenant's compliance with all applicable environmental laws and all laws
governing the presence and use of Hazardous Material, or for any other purpose
Landlord deems necessary. In all events, Landlord shall make a good faith
effort to minimize the effect of any such entry on Tenant's business in the
Building. Except in the case of an emergency, Landlord shall give Tenant
reasonable prior notice of such entry and Tenant shall
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have the right, if it has reasonable suspicion, to approve who may tour or
inspect the Property, to designate an agent of Tenant to accompany Landlord on
any inspection, or to devise reasonable procedures to ensure that no trade
secrets or confidential information is being misappropriated or taken. Landlord
may place customary "For Sale" or "For Lease" signs on the Property during the
last six months of the Lease Term.
Section 5.07 QUIET POSSESSION. If Tenant pays the rent and is not in
default beyond any applicable notice and cure period, Tenant may occupy and
enjoy the Building and the remainder of the Property for the full Lease Term,
subject to the provisions of this Lease.
ARTICLE SIX: CONDITION OF PROPERTY; MAINTENANCE, REPAIRS AND ALTERATIONS
Section 6.01 EXISTING CONDITIONS. Tenant understands and acknowledges
that Tenant's occupancy and use of the Property is subject to certain recorded
mattes, laws, ordinances, and governmental regulations and orders. Landlord
represents and warrants that no matter of record substantially impairs Tenant's
ability to occupy and use the Property in accordance with the provisions of this
Lease. Except as provided herein, Tenant acknowledges that neither Landlord nor
any agent of Landlord has made any representation as to the condition of the
Property or the suitability of the Property for Tenant's intended use other than
that upon Substantial Completion, the Building shall be suitable for
construction of the Tenant Improvements.
Section 6.02 EXEMPTION OF LANDLORD FROM LIABILITY. Landlord shall not be
liable for any damage or injury to the person, business (or any loss of income
therefrom), goods, wares, merchandise or other property of Tenant or anyone
claiming by or through Tenant in or about the Property, whether such damage or
injury is caused by or results from (i) fire, steam, electricity, water, gas or
rain, (ii) the breakage, leakage, obstruction or other defects of pipes,
sprinklers, wires, appliances, plumbing, air conditioning or lighting fixtures
or any other cause, or (iii) conditions arising in or about the Property, or
from other sources or places which are not under the ownership or control of
Landlord. Landlord shall not be liable for any such damage or injury even
though the cause of or the means of repairing such damage or injury are not
accessible to Tenant (unless Landlord has failed to correct the cause of such
damage or injury within a reasonable time after notice of the condition). The
provisions of this Section 6.02 shall not, however, exempt Landlord from
liability for Landlord's negligence or willful misconduct.
Section 6.03 LANDLORD'S OBLIGATIONS.
(a) Except as provided in Article Seven (Damage and Destruction)
and Article Eight (Condemnation), Landlord shall maintain the foundations,
exterior walls (excluding windows, doors, plate glass) and the interior
surfaces of exterior walls and painting of the exterior surfaces of
exterior walls) and roof of the Building in good condition and repair, at
Landlord's sole expense. Landlord shall have no other obligation to bear
any other expense of operation or maintenance of the Property (subject to
Landlord's obligations under Section 2.03 to correct any latent defects in
Landlord's Work or Tenant's Improvements).
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(b) Landlord shall maintain the mechanical systems and utilities
serving the Building and all parking areas, driveways, sidewalks, loading
areas, access roads, corridors, fences, landscaping and planted areas of
the Property in good order, condition and repair, consistent with
first-class office/warehouse commercial property. Tenant shall pay all
costs incurred by Landlord for such Maintenance ("Property Expenses"),
including without limitation costs and expenses for the following:
gardening and landscaping; exterior building repainting and glass cleaning,
as necessary; resurfacing of asphalt parking areas and driveways if further
patching or other repair is inconsistent with a first-class property or if
the cost of such resurfacing, amortized as an annual charge over the
expected useful life of the new surface, will be comparable to or less than
the annual cost of repair); utilities, water and storm sewer charges;
repairing, resurfacing, painting, lighting, cleaning, refuse removal,
security and similar items; and a reasonable allowance to Landlord or
Landlord's agent (which may include Chandelle Development LLC, an affiliate
of Landlord) for management and supervision. Landlord may cause any or all
of such services to be provided by third parties at market rates for
similar services including all customary elements, and the cost of such
services shall be charged to Tenant in conformity with generally accepted
accounting principles, consistently applied.
(c) Landlord shall estimate in advance the Property Expenses
payable by Tenant hereunder for each calendar year during the term of this
Lease, and shall provide statements of such estimated costs to Tenant
annually (provided, however, that Landlord may adjust such estimates at any
time based upon Landlord's experience and reasonable anticipation of
costs). Tenant shall pay annual Property Expenses (prorated for any
fractional month) in monthly installments concurrently with payment of Base
Rent. Within ninety (90) days after the end of each calendar year of the
Lease term, Landlord shall deliver to Tenant a statement prepared in
accordance with generally accepted accounting principles setting forth, in
reasonable detail, the Property Expenses paid or incurred by Landlord
during the preceding calendar year. Upon receipt of such statement, there
Shall be an adjustment between Landlord and Tenant, with payment to or
credit given by Landlord (as the case may be) so that Landlord shall
receive the entire amount of Building Expenses for such period. Tenant
shall have the right, within sixty (60) days after receipt of any such
statements of estimated costs or annual reconciliation, to question in
writing any particular item or items of expense which Tenant believes in
good faith are not chargeable to Tenant under this Lease or are excessive
and, if Landlord is unable to resolve the items in question to the
reasonable satisfaction of Tenant within a reasonable time, the matter
shall be referred for determination to an independent commercial property
management professional selected jointly by Landlord and Tenant. Tenant
shall nonetheless continue to pay installments against Property Expenses
based on Landlord's estimate or reconciliation pending resolution of the
dispute. Tenant shall also have the right to audit Landlord's books and
records relating to Property Expenses, at Tenant's expense, not more
frequently than once per calendar year.
(c) Landlord shall make repairs under this Section 6.03 within a
reasonable time after receipt of written notice from Tenant of the need for
such repairs. Tenant waives the benefit of any statute in effect now or in
the future which might give Tenant The right to make repairs at Landlord's
expense (subject to the provisions of Section
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10.05 below) or to terminate this Lease due to Landlord's failure to keep
the Property in good order, condition and repair as required under this
Section 6.03.
Section 6.04 TENANT'S OBLIGATIONS.
(a) Except as provided in Section 6.03, Article Seven (Damage
and Destruction) and Article Eight (Condemnation), Tenant shall keep all
portions of the Building in good order, condition and repair (including.
interior repainting and refinishing, as needed). If any portion of the
Building which Tenant is obligated to repair cannot be fully repaired or
restored, Tenant shall promptly replace such portion of the Building. If
any part of the Property is damaged by any negligent or wrongful act or
omission of Tenant, Tenant shall pay Landlord the cost of repairing or
replacing such damaged property in excess of proceeds of applicable
insurance, whether or not Landlord would otherwise be obligated to pay the
cost of maintaining or repairing such property. It is the intention of
Landlord and Tenant that Landlord shall deliver the Building to Tenant as
an attractive and first-class office/warehouse budding in fully operative
condition, and that at all times thereafter Tenant shall maintain in the
same condition all portions of the Building which Tenant is obligated to
maintain (ordinary wear and tear and damage by the elements excepted).
(b) Tenant shall fulfill all of Tenant's obligations under this
Section 6.04 at Tenant's sole expense. If Tenant fails to effect any
maintenance, repair or replacement required by this Section 6.04, Landlord
may, upon ten (10) days prior notice to Tenant (except that no notice shall
be required in the case of an emergency), enter the Property and perform
such maintenance or repair (including replacement, as needed) on behalf of
Tenant. In such case, Tenant shall reimburse Landlord for all reasonable
costs incurred in performing such maintenance or repair immediately upon
demand.
Section 6.05 ALTERATIONS, ADDITIONS AND IMPROVEMENTS.
(a) Tenant shall not make any alterations, additions or
improvements to the Property (other than Tenant's Improvements) without
Landlord's prior written consent, except for non-structural alterations
which do not exceed Forty Thousand Dollars ($40,000) in cost cumulatively
over the Lease Term and which are not visible from the outside of the
Building. Landlord may require Tenant to provide demolition and/or lien
and completion bonds for amounts in excess of $40,000 in form and amount
reasonably satisfactory to Landlord. Tenant shall promptly remove any
alterations, additions or improvements constructed in violation of this
Paragraph 6.05(a) upon Landlord's written request. All alterations,
additions and improvements shall be done in a good and workmanlike manner,
in conformity with all applicable laws and regulations, and by a contractor
approved by Landlord. Upon completion of any such work, Tenant shall
provide Landlord with "as built" plans, copies of all construction
contracts and proof of payment for all labor and materials.
(b) Tenant shall pay when due all claims for labor and material
furnished to the Property. Tenant shall give Landlord at least ten (10)
days' prior written notice of the commencement of any work on the Property,
regardless of whether Landlord's consent m
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such work is required. Landlord may elect to record and post notices of
non-responsibility on the Property,
(c) Tenant shall have not have the right to remove any fixtures
or installed at the Property unless, prior to installation of any such
fixtures, Tenant shall notify Landlord in writing of such installation and
of Tenant's intent to retain ownership of such fixtures and Landlord agrees
in writing that such fixtures may be installed at the Property and shall
remain the property of Tenant (which agreement shall not be unreasonably
withheld). Any such fixtures so installed at the Property with the written
agreement of Landlord shall be considered to be "Tenant's Equipment" for
purposes of Section 6.06 below.
Section 6.06 CONDITION UPON TERMINATION. Upon the termination of the
Lease, Tenant shall surrender the Property to Landlord, broom clean and in the
same condition as received except for damage by the elements and ordinary wear
and tear which Tenant was not otherwise obligated to remedy under any provision
of this Lease. However, Tenant shall not be obligated to repair any damage
which Landlord is required to repair under Article Seven (Damage or
Destruction). In addition, Landlord may require Tenant to remove any
alterations, additions or improvements (whether or not made with Landlord's
consent) prior to the expiration of the Lease and to restore the Property to its
prior condition, all at Tenant's expense. All alterations, additions and
improvements which Landlord (at the time of granting consent, if required) has
not required Tenant to remove shall be Landlord's property and shall be
surrendered to Landlord upon the expiration or earlier termination of the Lease,
except that Tenant may remove any of Tenant's Equipment which can be removed
without material damage to the Property. Tenant shall repair, at Tenant's
expense, any damage to the Property caused by the removal of any of Tenant's
Equipment. In no event shall Tenant remove any of the following materials or
equipment (which shall be deemed Landlord's property) without Landlord's prior
written consent; any power wiring or power panels; lighting or lighting
fixtures; wall coverings; drapes, blinds or other window coverings; carpets or
other floor coverings; heaters, air conditioners (other than package units) or
any other heating or air conditioning equipment; fencing or security gates; or
other similar building operating equipment and decorations.
ARTICLE SEVEN: DAMAGE OR DESTRUCTION
Section 7.01 PARTIAL DAMAGE TO PROPERTY.
(a) Tenant shall notify Landlord in writing immediately upon the
occurrence of any damage to the Budding. If the Building is only partially
damaged (that is, less than fifty percent (50%) of the Property is
untenantable as a result of such damage or less then fifty percent (50%) of
Tenant's operations are materially impaired) and can be repaired within 120
days (in the written opinion of a licensed architect), and if insurance
proceeds are sufficient to pay for the necessary repairs, this Lease shall
remain in effect and Landlord shall repair the damage to the Building
(including Tenant's fixtures, equipment and improvements, to the extent of
available insurance proceeds) as soon as reasonably possible.
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(b) If the insurance proceeds are not sufficient to pay the
entire cost of repair, or if the cause of the damage is not covered by the
insurance policies which Tenant maintains under Paragraph 4.04(b), Landlord
may elect either to (i) repair the damage as soon as reasonably possible,
in which case this Lease shall remain in full force and effect, or (ii)
terminate this Lease as of the date the damage occurred. Landlord shall
notify Tenant within thirty (30) days after receipt of notice of the
occurrence of the damage whether Landlord elects to repair the damage or
terminate the Lease. If Landlord elects to repair the damage, Tenant shall
(subject to the terms of this Lease) pay Landlord the "deductible amount"
(if any) under Tenant's insurance policies and, if the damage was due to an
act or omission of Tenant, or Tenant's employees, agents, contractors or
invitees, the difference between the actual cost of repair and any
insurance proceeds received by Landlord. If Landlord elects to terminate
the Lease, Tenant may elect to continue this Lease in fall force and
effect, in which case Tenant shall repair any damage to the Property and
pay the cost of such repair, except that upon satisfactory completion of
such repairs, Landlord shall deliver to Tenant any insurance proceeds
received by Landlord for the damage repaired by Tenant. Tenant shall give
Landlord written notice of such election within ten (10) days after
receiving Landlord's termination notice.
(c) If (i) the damage to the Building occurs during the last six
(6) months of the Lease Term and such damage will require more than thirty
(30) days to repair or (ii) any damage to the Building is so severe (in the
written opinion of Landlord's architect) that it cannot practically be
repaired within 120 days (or within 150 days, if any mortgagee of the
Property will not permit termination of this Lease by Tenant for damage
requiring less than 150 days to repair despite Landlord's best efforts to
obtain such mortgagee's approval of a 120-day repair period), either
Landlord or Tenant may elect to terminate this Lease of the date the damage
occurred, regardless of the sufficiency of any insurance proceeds. The
party electing to terminate this Lease shall give written notification to
the other party of such election within thirty (30) days after Tenant's
notice to Landlord of the occurrence of the damage.
(d) Any rights of Tenant to terminate this Lease under this
Section 7.02 may not be exercised by Tenant if Tenant or its agents or
employees were the cause of the damage.
Section 7.02 SUBSTANTIAL OR TOTAL DESTRUCTION. If the Building is
substantially or totally destroyed by any cause whatsoever (that is, the damage
to the Property is greater than partial damage as described in Section 7.01),
this Lease shall terminate as of the date the destruction occurred, regardless
of whether Landlord receives any insurance proceeds. Notwithstanding the
preceding sentence, if the Building can be rebuilt within 120 days after the
date of destruction (in the written opinion of a licensed architect), Landlord
may elect to rebuild the Building at no expense to Tenant, in which case this
Lease shall remain in full force and effect. Landlord shall notify Tenant of
such election within thirty (30) days after Tenant's notice of the occurrence of
total or substantial destruction. If Landlord so elects, Landlord shall rebuild
the Property at Landlord's sole expense, except that if the destruction was
caused by an act or omission of Tenant, or Tenant's employees, agents,
contractors or invitees, Tenant shall pay Landlord the difference between the
actual cost of repair and any insurance proceeds received by Landlord (except m
the extent that such difference results from failure of Landlord to carry
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casualty insurance of the types and in the amounts required by this Lease). Any
rights of Tenant hereunder may not be exercised by Tenant if Tenant or its
agents or employees were the cause of the damage.
Section 7.03 TEMPORARY REDUCTION OF RENT. If the Property is destroyed
or damaged and Landlord or Tenant repairs or restores the Property pursuant to
the provisions of this Article Seven, Rent shall continue to be due in
accordance with this Lease; however, Base Rent shall be paid from proceeds of
Landlord's loss of rents insurance to the full available extent of such
insurance and, to the extent that such proceeds are not available or have been
exhausted, Base Rent shall abate during the period of reconstruction
proportionately to the area of the Building involved in such reconstruction.
Except as so provided, Tenant shall not be entitled to any compensation,
reduction or reimbursement from Landlord as a result of any damage, destruction,
repair or restoration of or to the Property.
Section 7.04 WAIVER. Tenant waives the protection of any statute, code
or judicial provision which grants a tenant the right to terminate a lease in
the event of a substantial or total destruction of the leased property. Tenant
agrees that the provisions of Section 7.02 above shall govern the rights and
obligations of Landlord and Tenant in the event of any substantial or total
destruction of the Building.
ARTICLE EIGHT: CONDEMNATION
If all or any portion of the Property is taken under the power of eminent
domain or sold under the threat of that power (all of which are called
"Condemnation"), this Lease shall terminate as to the part taken or sold on the
date the condemning authority takes title or possession, whichever occurs first.
If more than twenty percent (20%) of the floor area of the Building is taken,
either Landlord or Tenant may terminate this Lease as of the date the condemning
authority takes title or possession, by delivering written notice to the other
within ten (10) days after receipt of written notice of such taking (or, in the
absence of such notice, within ten (10) days after the condemning authority
takes title or possession). If neither Landlord nor Tenant terminates this
Lease, this Lease shall remain in effect as to the portion of the Building not
taken, except that the Rent shall be reduced in proportion to the reduction (if
any) in the floor area of the Building. Any Condemnation award or payment shall
be distributed in the following order: (a) first, to any ground lessor,
mortgagee or beneficiary under a deed of trust encumbering the Property, the
amount of its interest in the Property; (b) second, to Tenant, only the amount
of any award specifically designated for loss of or damage to Tenant's trade
fixtures or removable personal property; and (c) third, to Landlord, the
remainder of such award, whether as compensation for reduction in the value of
the leasehold, the taking of the fee, or otherwise. If this Lease is not
terminated, Landlord shall as soon as reasonably practicable repair any damage
to the Property caused by the Condemnation, except that Landlord shall not be
obligated to repair any damage for which Tenant has been reimbursed by the
condemning authority. If the severance damages received by Landlord are not
sufficient to pay at least 80% of the cost of such repair, Landlord shall have
the right to either terminate this Lease or make such repair at Landlord's
expense.
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ARTICLE NINE: ASSIGNMENT AND SUBLETTING
Section 9.01 LANDLORD'S CONSENT REQUIRED. No portion of the Property or
of Tenant's interest in this Lease may be acquired by any other person or
entity, whether by sale, assignment, mortgage, sublease, transfer, operation of
law, or act of Tenant, without Landlord's prior written consent, except as
provided in Section 9.02 below. Landlord has the right to grant or withhold its
consent as provided in Section 9.05 below. Any attempted transfer without
consent shall be void and shall constitute a non-curable breach of this Lease.
Section 9.02 TENANT AFFILIATE. Tenant may assign this Lease or sublease
the Property, without Landlord's consent, to any corporation which controls, is
controlled by or is under common control with Tenant, or to any corporation
resulting from the merger of, consolidation with or acquisition of Tenant
("Tenant's Affiliate"). In such case, any Tenant's Affiliate shall assume in
writing all of Tenant's obligations under this Lease.
Section 9.03 NO RELEASE OF TENANT. No transfer permitted by this Article
Nine, whether with or without Landlord's consent, shall release Tenant or change
Tenant's primary liability to pay the Rent and to perform all other obligations
of Tenant under this Lease. Landlord's acceptance of rent from any other person
is not a waiver of any provision of Article Nine. Consent to one transfer is
not a consent to any subsequent transfer. If Tenant's transferee defaults under
this Lease, Landlord may proceed directly against Tenant without pursuing
remedies against the transferee. Landlord may consent to subsequent assignments
or modifications of this Lease by Tenant's transferee, without notifying Tenant
or obtaining its consent. Such action shall not relieve Tenant's liability
under this Lease.
Section 9.04 LANDLORD'S CONSENT. Tenant's request for consent to any
transfer described in Section 9.01 shall set forth in writing the details of the
proposed transfer, including the name, business and financial condition of the
prospective transferee, financial details of the proposed transfer (such as the
term of and the rent and security deposit payable under any proposed assignment
or sublease), and any other information which Landlord reasonably deems
relevant. Landlord shall have the right to withhold consent, if reasonable, or
to grant consent, based on the following factors: (i) the business of the
proposed assignee or subtenant and the proposed use of the Property; (ii) the
net worth and financial reputation of the proposed assignee or subtenant; (iii)
absence of material default by Tenant in regard to its obligations under the
Lease; and (iv) such other factors as Landlord may reasonably deem relevant.
Landlord shall be deemed to have consented to an assignment of Tenant's rights
under this Lease if Landlord falls to respond to a written request for such
consent within 15 days after receipt of such request.
Section 9.05 NO MERGER. No merger shall result from Tenant's sublease of
the Property under this Article Nine, Tenant's surrender of this Lease or the
termination of this Lease in any other manner. In any such event, Landlord may
terminate any or all subtenancies or succeed to the interest of Tenant as
sublandlord under any or all sub-tenancies.
ARTICLE TEN: DEFAULTS; REMEDIES
Section 10.01 COVENANTS AND CONDITIONS. Tenant's performance of each of
Tenant's obligations under this Lease is a condition as well as a covenant.
Tenant's right to continue in
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possession of tile Property is conditioned upon such performance. Time is of
the essence in the performance of all covenants and conditions,
Section 10.02 DEFAULTS. Tenant shall be in material default under this
Lease:
(a) If Tenant abandons the Building, or if Tenant's vacation of
the Building results in the cancellation of any insurance described in
Section 4.04 which is not promptly replaced by Tenant;
(b) If Tenant fails to pay Rent or any other charge within ten
(10) days after written notice from Landlord that such payment is due;
(c) If Tenant fails to perform any of Tenant's non-monetary
obligations under this Lease for a period of thirty (30) days after
written notice from Landlord (provided, however, that if more than thirty
(30) days are required to complete such performance, Tenant shall not be in
default if Tenant commences such performance within the 30-day period and
thereafter diligently pursues is completion); and
(d) If (i) Tenant makes a general assignment or general
arrangement for the benefit of creditors, (ii) if a petition for
adjudication of bankruptcy or for reorganization or rearrangement is filed
by or against Tenant and is not dismissed within sixty (60) days, (iii) a
trustee or receiver is appointed to take possession of substantially all of
Tenant's assets located at the Property or of Tenant's interest in the
Lease and possession is not restored to Tenant within thirty (30) days, or
(iv) substantially all of Tenant's assets located at the Property or of
Tenant's interest in the Lease is subjected to attachment, execution or
other judicial seizure which is not discharged within thirty (30) days
(provided, however, that if a court of competent jurisdiction determines
that any of the acts described in this subparagraph (d) is not a default
under this Lease, and a trustee is appointed to take possession (or if
Tenant remains a debtor in possession) and such trustee or Tenant transfers
Tenant's interest hereunder, then Landlord shall receive, as Additional
Rent, the excess, if any, of the Rent (or any other consideration paid in
connection with such assignment or sublease) over the rent payable by
Tenant under this Lease.
Any notice required by this Section 10.02 is intended to satisfy any and all
notice requirements imposed by law on Landlord and is not in addition to any
such requirement.
Section 10.03 REMEDIES. On the occurrence of any material default by
Tenant which is not cured within any applicable grace period, Landlord may take
any of the following actions at any time thereafter, with or without notice or
demand and without limiting Landlord in the exercise of any right or remedy
which Landlord may have.
(a) Landlord may terminate Tenant's right to possession of the
Property by any lawful means, in which case this Lease, at Landlord's option and
election, shall terminate and Tenant shall immediately surrender possession of
the Property to Landlord. In such event, Landlord shall be entitled to recover
from Tenant all damages incurred by Landlord by reason of Tenant's default,
including (i) the worth at the time of the award of the unpaid Base Rent and all
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Additional Rent and other charges which Landlord has earned at the time of the
termination, (ii) the worth at the time of the award of the amount by which the
unpaid Base Rent and all Additional Rent and other charges which Landlord would
have earned after termination until the time of the award exceed the amount of
such rental loss that Tenant proves Landlord could have reasonably avoided;
(iii) the net present value of the worth at the time of the award of the amount
by which the unpaid Base Rent and all Additional Rent and other charges which
Tenant would have paid for the balance of the Lease Term after the time of the
award exceeds the amount of such rental loss that Tenant proves Landlord could
have reasonably avoided; and (iv) any other amount necessary to compensate
Landlord for all the detriment proximately caused by Tenant's failure to perform
its obligations under the Lease or which in the ordinary course of things would
be likely to result therefrom, including, but not limited to, any costs or
expenses Landlord incurs in maintaining or preserving the Property after such
default, the cost of recovering possession of the Property, expenses of
reletting, including necessary renovation or alteration of tile Property,
Landlord's reasonable attorney fees incurred in connection therewith, and any
real estate commission paid or payable. As used in subparts (i) and (ii) above,
the "worth at the time of the award" is computed by allowing interest on unpaid
amounts at the Default Rate. As used in subpart (iii) above, the "worth at the
time of the award" is computed by discounting such amount at the discount rate
of the Federal Reserve Bank of San Francisco at the time of the award plus one
percent (1%).
(b) Landlord may maintain Tenant's right to possession, in which
case this Lease shall continue in effect whether or not Tenant has abandoned the
Property. In such event, Landlord shall be entitled to enforce all of
Landlord's rights and remedies under this Lease, including the right to recover
the rent as it becomes due.
(c) Landlord may pursue any other remedy now or hereafter
available to Landlord under the laws or judicial decisions of the state in which
the Property is located.
If Tenant has abandoned the Property, Landlord shall have the option of retaking
possession of the Property and recovering from Tenant the amount specified in
subparagraph (a) above, or proceeding under subparagraph (b) above. All rights
and remedies provided to Landlord hereunder are cumulative with all other rights
and remedies provided hereunder or otherwise available at law or in equity, and
Landlord's exercise of any right or remedy shall not prevent it from exercising
any other right or remedy.
Section 10.04 LANDLORD DEFAULT; TENANT'S RIGHT TO OFFSET. In the event
that Landlord fails to comply with any covenant or satisfy any other obligation
set forth in this Lease within 30 days after written notice of the condition
requiring action (or immediately after such written notice, if such condition
creates an emergency), Tenant may take all reasonable steps to correct such
condition and shall have the right to offset the cost of such action against the
next installment or installments of Base Rent.
ARTICLE ELEVEN: PROTECTION OF LENDERS
Section 11.01 SUBORDINATION. Tenant acknowledges that the Property is
currently subject to an existing deed of trust to which this Lease is
subordinate. Landlord shall, prior to the Commencement Date, obtain from the
beneficiary of such deed of trust a non-disturbance
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agreement, in form reasonably satisfactory to Tenant, relating to this Lease and
Tenant's leasehold interest hereunder. Landlord shall have the right to
subordinate this Lease to any ground lease, deed of trust or mortgage
encumbering the Property, any advances made on the security thereof and any
renewals, modifications, consolidations, replacements or extensions thereof,
whenever made or recorded. Tenant shall cooperate with Landlord and any lender
which is acquiring a security interest in the Property or the Lease, and in that
regard Tenant shall execute such further documents and assurances as such lender
may require; provided, however, that any such lender or ground lessor shall also
execute a non-disturbance agreement, in form reasonably satisfactory to Tenant,
confirming that Tenant's obligations under this Lease shall not be increased in
any material way (the performance of ministerial acts shall not be deemed
material), the financial terms of this Lease shall not be changed and Tenant
shall not be deprived of its rights under this Lease. Tenant's right to quiet
possession of the Property during the Lease Term shall not be disturbed if
Tenant pays the Rent and performs all of Tenant's obligations under this Lease
and is not otherwise in default beyond any applicable notice and cure period.
If any ground lessor, beneficiary or mortgagee elects to have this Lease prior
to the lien of such ground lease, deed of trust or mortgage and gives written
notice thereof to Tenant, this Lease shall be deemed prior to such ground lease,
deed of trust or mortgage whether this Lease is dated prior to subsequent to the
date of such ground lease, deed of trust or mortgage or the date of recording
thereof.
Section 11.02 ATTORMENT. If Landlord's interest in the Property is
acquired by any ground lessor, beneficiary under a deed of trust, mortgagee or
purchaser at a foreclosure sale, Tenant shall attorn to the transferee of or
successor to Landlord's interest in the Property and recognize such transferee
or successor as Landlord under this Lease. Tenant waives the protection of any
statute or rule of law which gives or purports to give Tenant any right to
terminate this Lease or surrender possession of the Property upon the transfer
of Landlord's interest.
Section 11.03 SIGNING OF DOCUMENTS. Tenant shall sign and deliver any
instrument or documents necessary to evidence any such attornment or
subordination or agreement to do so within ten (10) days after written request.
Section 11.04 ESTOPPEL CERTIFICATES. Upon Landlord's written request,
Tenant shall execute, acknowledge and deliver to Landlord a written statement
certifying: (i) that none of the terms or provisions of this Lease have been
changed (or if they have been changed, stating how they have been changed); (ii)
that this Lease has not been cancelled or terminated; (iii) the last date of
payment of the Base Rent and other charges and the time period covered by such
payment; (iv) that Landlord is not in default under this Lease (or, if Landlord
is claimed to be in default, stating why); and (v) such other representations or
information with respect to Tenant or the Lease as Landlord may reasonably
request or which any prospective purchaser or encumbrancer of the Property may
reasonably require. Tenant shall deliver such statement to Landlord within ten
(10) days after Landlord's request. Landlord may give any such statement by
Tenant to any prospective purchaser or encumbrancer of the Property, who may
rely conclusively upon such statement as true and correct.
Section 11.05 TENANT'S FINANCIAL CONDITION. Tenant hereby warrants,
represents, and agrees that it has the financial ability to perform all
obligations and covenants hereunder. Tenant
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agrees that it will immediately advise landlord of any adverse financial reports
or matter which might materially impair Tenant's ability to perform its
obligations and covenants hereunder. Tenant shall deliver to any lender
designated by Landlord any internally-prepared (or audited, if available)
financial statements which may be required by such lender to facilitate the
financing and refinancing of the Property. Tenant represents and warrants to
Landlord that each such financial statement will be a true and accurate
statement as of the date thereof. Landlord shall execute a confidentiality
agreement, in form reasonably satisfactory to Tenant, in which Landlord confirms
that all such financial statements shall be kept confidential and shall be used
only for the purposes set forth in this Lease.
ARTICLE TWELVE: LEGAL COSTS
Section 12.01 LEGAL PROCEEDINGS. If Tenant or Landlord shall be in breach
or default under this Lease, such party (the "Defaulting Party") shall reimburse
the other party (the "Nondefaulting Party") upon demand for any costs or
expenses that the Nondefaulting Party incurs in connection with any breath or
default of the Defaulting Party under this Lease, whether or not suit is
commenced or judgment entered. Such costs shall include legal fees and costs
incurred for the negotiation of a settlement, enforcement of rights or
otherwise. Furthermore, if any action for breach of or to enforce the
provisions of this Lease is commenced, the court in such action shall award to
the parry in whose favor a judgment is entered, a reasonable sum as attorney
fees and costs. The losing party in such action shall pay such attorney fees
and costs. Tenant shall also indemnify Landlord against and hold Landlord
harmless from all costs, expenses, demands and liability Landlord may incur if
Landlord becomes or is made a party to any claim or action which is: (a)
instituted by Tenant against any third party, or by any third party against
Tenant, or by or against any person holding any interest under or using the
Property by license of or agreement with Tenant; (b) for foreclosure of any lien
for labor or material furnished to or for Tenant or such other person; (c)
otherwise arising out of or resulting from any act or transaction of Tenant or
such other person; or (d) necessary to protect Landlord's interest under this
Lease in a bankruptcy proceeding, or other proceeding under Title 11 of the
United States Code, as amended. Tenant shall defend Landlord against any such
claim or action at Tenant's expense with counsel reasonably acceptable to
Landlord or, at Landlord's election, Tenant shall reimburse Landlord for any
legal fees or costs Landlord incurs in any such claim or action.
Section 12.02 LANDLORD'S CONSENT. Tenant shall pay Landlord's reasonable
attorney fees incurred in connection with Tenant's request for Landlord's
consent under Article Nine (Assignment and Subletting), or in connection with
any other act which Tenant proposes to do and which requires Landlord's consent.
ARTICLE THIRTEEN: FIRST RIGHT OF REFUSAL
The Building is one of three similar office/warehouse buildings owned by
Landlord near the intersection of Briarwood Avenue and S. Revere Parkway. If,
at any time during the first 30 months of the Lease Term, any area in the other
two buildings which contains at least 10,000 square feet of space becomes
available for lease (a space shall not be considered available for lease if it
remains subject to any right of refusal previously granted to Big O Development,
Inc., AT&T, or Pitney Bowes Inc.), Landlord shall so notify Tenant in writing,
and Tenant shall have
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the right, exercisable in writing delivered to Landlord within five business
days after receipt of Landlord's notice of availability, to lease not less than
10,000 square feet or more than 20,000 square feet of such space at the Market
Rate (determined as described in Section 3.02 above).
ARTICLE FOURTEEN: MISCELLANEOUS PROVISIONS
Section 14.01 LANDLORD'S LIABILITY; CERTAIN DUTIES.
(a) As used in this Lease, the term "Landlord" means only the
current owner or owners of the fee title to the Property or the leasehold
estate under a ground lease of the Property at the time in question. Each
Landlord is obligated to perform the obligation of Landlord under the Lease
only during the time such Landlord owns such interest or title. Any
Landlord who transfers its title or interest is relieved of all liability
with respect to the obligations of Landlord under this Lease to be
performed on or after the date of transfer, provided that the transferee
assumes in writing all such subsequent obligations. However, each Landlord
shall deliver to its transferee all funds that Tenant previously paid if
such funds have not yet been applied under the terms of this Lease.
(b) Tenant shall give written notice of any failure by Landlord
to perform any of its obligations under this Lease to Landlord and to any
ground lessor, mortgagee or beneficiary under any deed of trust encumbering
the Property whose name and address has been furnished to Tenant in
writing. Landlord shall not be in default under this Lease unless Landlord
(or such ground lessor, mortgagee or beneficiary) fails to cure such
nonperformance within thirty (30) days after receipt of Tenant's notice.
However, if such non-performance reasonably requires more than thirty (30)
days to cure, Landlord shall not be in default if such cure is commenced
within such 30-day period and thereafter diligently pursued to completion.
(c) Notwithstanding any term of provision herein to the
contrary, the liability of Landlord for the performance of its duties and
obligations under this Lease is limited to Landlord's interest in the
Property, and neither the Landlord nor its partners, shareholders,
officers, members, managers or other principals shall have any personal
liability under this Lease.
Section 14.02 SEVERABILITY. A determination by a court of competent
jurisdiction that any provision of this Lease or any part thereof is illegal or
unenforceable shall not cancel or invalidate the remainder of such provision or
this Lease, which shall remain in full force and effect.
Section 14.03 INTERPRETATION. The captions of the Articles or Sections of
this Lease are to assist the parties in reading this Lease and are not a part of
the terms or provisions of this Lease. Whenever required by the context of this
Lease, the singular shall include the plural and the plural shall include the
singular. The masculine, feminine and neuter genders she each include the
others. In any provision relating to the conduct, acts or omissions of Tenant,
the term "Tenant" shall include Tenant's agents, employees, contractors,
invitees, successors or other using the Property with Tenant's expressed or
implied permission.
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Section 14.04 INCORPORATION OF PRIOR AGREEMENTS; MODIFICATIONS. This
Lease is the only agreement between the parties pertaining to the Property, and
supersedes all prior written and oral agreements. All amendments to this Lease
shall be in writing and signed by all parties. Any other attempted amendment
shall be void.
Section 14.05 NOTICES. All notices required or permitted under this Lease
shall be in writing and shall be personally delivered or sent by certified mail,
return receipt requested, postage prepaid, or by any recognized national
overnight courier service. Notices to Tenant shall be delivered to the Building
(with a copy to Blumenfeld & Cohen, 1615 M Street, N.W., Suite 700. Washington,
D.C. 20036), except that upon Tenant's taking possession of the Property, the
Property shall be Tenant's address for notice purposes. Notices to Landlord
shall be delivered to the address specified in Section 1.02 above. All notices
shall be effective upon delivery. Either party may change its notice address
upon written notice to the other party.
Section 14.06 WAIVERS. All waivers must be in writing and signed by the
waiving party. Either party's failure to enforce any provision of this Lease,
or Landlord's acceptance of Rent, shall not be a waiver and shall not prevent
such party from enforcing that provision or any other provision of this Lease in
the future. No statement on a payment check from Tenant or in a letter
accompanying a payment check shall be binding on Landlord. Landlord may, with
or without notice to Tenant, negotiate such check without being bound to the
conditions of such statement.
Section 14.07 NO RECORDATION. Tenant shall not record this Lease without
prior written consent from Landlord. However, either Landlord or Tenant may
require that a "Short Form" memorandum of this Lease executed by both parties be
recorded. The party requesting such recording shall pay all transfer taxes and
recording fees.
Section 14.08 BINDING EFFECT; CHOICE OF LAW. This Lease binds any party
who legally acquires any rights or interest in this Lease from Landlord or
Tenant. However, Landlord shall have no obligation to Tenant's successor unless
the rights or interests of Tenant's successor are acquired in accordance with
the terms of this Lease. The laws of the state in which the Property is located
shall govern this Lease, and the exclusive venue for any action relating to this
Lease shall be in Colorado.
Section 14.09 CORPORATE, COMPANY OR PARTNERSHIP AUTHORITY. If Tenant is
an entity, each person signing this Lease on behalf of Tenant represents and
warrants that he has full authority to do so and that this Lease binds the
corporation, company or partnership, as the case may be. If Landlord so
requests, Tenant shall promptly deliver to Landlord written evidence of such
authority, in form and substance reasonably acceptable to Landlord.
Section 14.10 FORCE MAJEURE. If Landlord (or Tenant) cannot perform any
of its obligations due to events beyond the control of Landlord (or Tenant), the
time provided for performing such obligations shall be extended by a period of
time equal to the duration of such events. Events beyond a party's control
include, but are not limited to, acts of God, war, civil commotion, labor
disputes, strikes, fire, flood or other casualty, shortages of labor or
materials government regulation or restriction and weather conditions, but shall
not include any inability to pay money.
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Section 14.11 EXECUTION OF LEASE. This Lease may be executed in
counterparts and, when all counterpart documents are executed, the counterparts
shall constitute a single binding instrument. Landlord's delivery of this Lease
to Tenant shall not be deemed to be an offer to lease and shall not be binding
upon either parry until executed and delivered by both parties.
Section 14.12 SURVIVAL. All representations and warranties of Landlord
and Tenant shall survive the termination of this Lease.
ARTICLE FIFTEEN: BROKERS
Landlord and Tenant acknowledge that Frederick Ross Company has represented
Landlord and Grubb & Ellis Company has represented Tenant in this transaction,
and that Landlord shall pay any commissions due to these brokers pursuant to
separate agreement. If either party has dealt with any other real estate
broker, person or firm with respect to leasing or renting space in the Building,
such party shall be solely responsible for the payment of any fee due such
broker, person or firm and shall indemnify and hold the other party harmless
from and against any liability with respect thereto.
IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease as of
the date set forth in Section 1.01 above.
LANDLORD:
BR VENTURE, LLC,
a Delaware limited liability company
By BRIARWOOD/REVERE DEVELOPMENT LLC, a
Colorado limited liability company,
By /s/ [ILLEGIBLE]
-------------------------------------
Manager
TENANT:
RHYTHMS NETCONNECTIONS, INC.
a Delaware corporation
By /s/ James Greenberg 9/3/98
-------------------------------------
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BRIARWOOD REVERE I, II AND III
[DIAGRAM]
<PAGE>
EXHIBIT B
September ____ 1998
Rhythms Netconnections, Inc.
- ---------------------
- ---------------------
- ---------------------
Re: Tenant: Rhythms NetConnections, Inc.
Premises: Approximately 46,400 rentable square feet of space in the
Briarwood Revere III building (the "Premises")
Address: 6933 South Revere Parkway, Englewood, CO
Gentlemen:
Concurrently herewith, you as Tenant and the undersigned as Landlord have
executed a Lease (the "Lease") covering the Premises (the provisions of the
Lease are hereby incorporated by reference as if fully set forth herein). In
consideration of the execution of the Lease, Landlord and Tenant mutually agree
as follows:
I. LANDLORD'S WORK
1.1 Landlord, at its sole cost and expense, shall cause the Building, as
defined in the Lease, and related improvements, to be constructed in accordance
with Exhibit A, as supplemented by those specific items contained in Schedule 1
attached hereto and incorporated herein by this reference ("Landlord's Work").
For purposes of this Work Letter, Landlord's Work shall also include
installation of all windows in the Building as well as insulation of sprinklers
in connection with landscaping. The complete list of plane and specifications
for Landlord's Work shall be attached hereto as Schedule 2 and incorporated
herein by this reference (the "Plans and Specifications"). Landlord shall (i)
cause the Landlord's Work to be done in a good and workmanlike manner, using
first-class materials, in compliance with all applicable federal, state and
local laws, regulations, codes, ordinances and lawful orders of public
authorities (collectively, "Legal Requirements"), including, without limitation,
the Americans With Disabilities Act of 1990 ("ADA"), in substantial conformity
with the Plans and Specifications; (ii) cause Landlord's Work to be carried
forward expeditiously and with adequate work forces so as to achieve Substantial
Completion (defined below) of the Landlord's Work on or before October 1, 1998.
In the event Landlord has not achieved Substantial Completion of Landlord's Work
on or before October 1, 1998 (the "Penalty Date"), then Tenant shall receive a
credit against Base Rent in the amount of $1,000 for each day beyond the Penalty
Date that Landlord has not achieved Substantial Completion and such failure
causes a delay in the
<PAGE>
commencement of the Tenant Finish Work. If Landlord has not achieved
Substantial Completion on or before January 1, 1999 (the "Second Penalty Date"),
then Tenant shall receive a credit against Base Rent in the amount of $1,500 for
each day beyond the Second Penalty Date that Landlord has not achieved
Substantial Completion. For purposes of this subsection, the term "Substantial
Completion" shall have the meaning set forth in Section 2.03 of the Lease Upon
Substantial Completion, Tenant and Landlord shall jointly inspect the Building
and related improvements in order to determine and record its condition and to
prepare a comprehensive list of items that have not been completed (or which
have not been correctly or properly completed) in conformity with the Plans and
Specifications ("Punch List Items"). Thereafter, Landlord shall proceed
promptly to complete and correct all Punch List Items.
II. SPACE PLANNING AND ENGINEERING
2.1 Landlord shall, within three (3) business days after the date hereof,
provide to Tenant (or "Tenant's Architect" as hereinafter defined) the
architectural and engineering drawings for the Building and related improvements
("Landlord's Drawings").
2.2 Tenant shall provide to Landlord Tenant-approved space plans for the
Premises (collectively referred to herein as "Space Plans") prepared by
Acquilano Leslie, Incorporated (the "Architect"). The Space Plans shall be
sufficiently complete to permit Landlord to review such drawings for the purpose
of determining conformity with the base building specifications for the Building
and for the purposes described in Section 2.3 below.
2.3 Within three (3) business days of receipt by Landlord of the Space
Plans, Landlord and engineers selected by Landlord ("Landlord's Engineers")
shall review the Space Plans and confer with Tenant concerning such review. The
Architect shall advise Landlord and Landlord's Engineers whether the Building
HVAC System and/or the electrical service will have to be supplemented in order
to allow installation of work shown on the Space Plans. It Landlord determines
that the Space Plans (i) are inconsistent with the base building specifications
for the Building, including, without limitation, the HVAC system or electrical
system; (ii) are not sufficiently complete to permit Landlord to review them for
the purposes set forth herein; or (iii) indicate space usages inconsistent with
the Lease, Landlord shall so advise Tenant and Tenant shall revise the Space
Plans accordingly and resubmit them to Landlord and the review procedure and
time frames set forth above shall be repeated. Landlord shall pay all costs and
expenses incurred in connection with review and approval of the Space Plans by
Landlord's Engineers, which costs shall not be included within the Allowance as
hereinafter provided. When approved by Landlord and Tenant, the Space Plans
shall be acknowledged as such by Landlord and Tenant signing each sheet therefor
and such approved drawings shall be deemed the "Approved Space Plans."
2.4 Based upon the Approved Space Plans, Tenant shall have prepared the
structural, plumbing, fire protection, mechanical controls, electrical and life
safety engineering drawings ("Engineering working Drawings"). The costs for the
preparation of the Engineering working Drawings shall be borne by Tenant,
subject to Landlord's payment of the Allowance provided in the Lease .
2
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2.5 Tenant shall provide Landlord with architectural working drawings
prepared by the Architect (the Architectural Working Drawings") for the Premises
approved by Tenant for review by Landlord and Landlord's Engineers. The
Architectural Working Drawings shall be coordinated by the Architect with the
Engineering Working Drawings. The Architectural working Drawings shall be a
logical extension of the Approved Space Plans. If the review by Landlord or
Landlord's Engineers uncovers design errors, Landlord shall give notice thereof
within four (4) business days after Landlord's receipt of Architectural Working
Drawings submitted by Tenant; if the drawings are deemed acceptable, Landlord
shall communicate its approval on or before the expiration of such period. If
Landlord does not reply within such period, it shall be deemed that Landlord has
no objection thereto. If Landlord notifies Tenant of design errors, Tenant
shall revise the Architectural Working Drawings accordingly and resubmit them to
Landlord and the review procedure set forth above shall be repeated. When
approved by Landlord and Tenant, the Engineering Working Drawings and the
Architectural Working Drawings shall be acknowledged as such by Tenant and
Landlord signing each sheet thereof and such approved drawings shall be deemed
the "Final Working Drawings." Landlord shall pay all costs and expenses
incurred in connection with its review and approval of the Architectural working
Drawings.
2.6 Material changes to the Final Working Drawings may be made only upon
prior written approval of Landlord, which approval shall not be unreasonably
withheld. Landlord shall respond to all written requests for changes within
three (3) business days of Landlord's receipt of the same. If Landlord does not
respond within much period, Landlord shall be deemed to have consented to the
requested changes.
III. TENANT FINISH WORK AND TENANT FINISH ALLOWANCE
3.1 Following approval of the Final Working Drawings, Tenant shall be
responsible for the diligent completion of all tenant finish work substantially
in accordance with the Final Working Drawings (the "Tenant Finish Work"), at its
sole cost and expense, subject to Landlord's payment of the Allowance. Landlord
shall deliver possession of the Premises to Tenant for the purpose of completing
the Tenant Finish Work within two (2) business days after approval of the Final
Working Drawings (the 'Delivery Date").
3.2 Landlord, at no cost or expense to Tenant, shall assist Tenant in
obtaining three bids from qualified contractors to handle the Tenant Finish Work
and Tenant shall thereafter enter into a direct contract for design and
construction services to complete the Tenant Finish Work with one of the
proposed contractors (and subcontractors) (all of whom are collectively referred
to herein as "Tenant's Contractors") .
3.3 Landlord shall have no obligation with respect to Tenant's Contractors
except for the provision to Tenant's Contractors of so-called "value
engineering" services.
3.4 In connection with performance of all work by Tenant's Contractors,
Tenant shall assume full responsibility therefor, and for all Tenant's and/or
Tenant's Contractors' property, equipment, materials, tools or machinery placed
or stored in the Premises during the completion of the Tenant Finish Work.
Further, all work performed by Tenant's Contractors shall be in compliance with
all applicable local, state and federal laws, and rules and regulations
applicable
3
<PAGE>
thereto. Tenant shall be responsible for causing all such work to be performed
in a good and workmanlike manner.
3.5 Tenant shall cause Tenant's Contractors to: (i) conduct their work in
such a manner so as not to unreasonably interfere with any other construction
occurring on or in the Building, if any; (ii) maintain such insurance and bonds
in force and effect as is customary for a construction project of this type but
in any event not less than that required by applicable law; and (iii) be
mutually responsible for reaching agreement with Landlord's Engineers as to the
terms and conditions for hoisting, systems interfacing, and use of temporary
utilities, if necessary.
3.6 Landlord shall pay the cost of the Tenant Finish Work completed in
accordance with the Final Working Drawings (including the cost of preparation of
the Space Plans and Working Drawings and Landlord's review thereof) up to the
maximum Allowance set forth in Section 2.04 of the Lease. Except as otherwise
provided above, the cost of all Tenant Finish Work in excess of the Allowance to
which Tenant is entitled as set forth above shall be at Tenant's expense.
3.7 As design, engineering, and construction work of the Premises is
completed and Tenant (or its construction manager) receives invoices therefor,
Tenant's Contractor shall submit a request for payment to Landlord in the
customary forms (including supporting documentation) utilized in the
construction industry. Any such request received by the first day of a month
shall be paid by the fifteenth (15th) day of that month. In the event that
Tenant's construction contract contains payment provisions which are less
favorable to Tenant than those described in the previous sentence, Landlord and
Tenant shall cooperate to minimize the adverse financial consequences to Tenant
arising from delayed payment by Landlord. Landlord shall pay the amounts
requested by delivery to Tenant of Landlord's check(s) payable to Tenant or, at
Tenant's option, payable to Tenant's contractors.
3.8 Except for Landlord's obligation to pay the Allowance, Tenant shall be
responsible, at its sole cost and expense, for all work and materials utilized
in connection with the Tenant Finish Work.
3.9 Tenant agrees to submit to Landlord copies, consisting of one reverse
mylar sepia and two blueprint copies, of the record drawings with approved
changes to the Final Working Drawings shown thereon upon completion of all work
by Tenant's Contractors.
3.10 Tenant has designated Brad Wherry as its sole representative with
respect to the matters set forth in this Work Letter, who shall have full
authority and responsibility to act behalf of the Tenant as required in this
Work Letter. Tenant shall have the right, by written notice to Landlord, to
change its designated representative.
3.11 Landlord has designated Darrell Groth as its representative with
respect to Landlord's responsibilities under this Work Letter, who shall have
full authority and responsibility to act on behalf of the Landlord as required
in this Work Letter. Landlord shall have the right, by written notice to
Tenant, to change its designated representative.
4
<PAGE>
3.12 Any and all notices required to be given hereunder shall be in writing
in accordance with the terms and provisions of the Lease. However, in all cases
notices shall also be given to those individuals to be specified pursuant to
Paragraphs 3.10 and 3.11 above.
Very truly yours,
BR VENTURE, LLC,
a Delaware limited liability company
By:
----------------------------------------
Authorized Agent
"Landlord"
ACCEPTED AND APPROVED this ____ day
of September 1996.
RHYTMS NETCONNECTIONS, INC.
a Delaware corporation
By:
------------------------------------
Title:
----------------------------------
ATTEST:
By:
------------------------------------
Title:
----------------------------------
"Tenant"
5
<PAGE>
SCHEDULE 1
LANDLORD'S WORK
(BASE BUILDING SPECIFICATIONS)
The following items are not part of Tenant Improvements, and have been included
in the the base building at Landlord's expense:
1. Masonry insulated exterior walls, grey tinted insulated store
front system, steel bar joint metal deck roof framing with ballasted 45 ml.
EPDM roof over R-19 roof insulation. Slab on grade is 5" reinforced
concrete.
2. Sanitary sewer line to the Building is 4" and ready for Tenant
connection.
3. Domestic water service to the Building is 1" meter with 1-1/2"
line run to bar joists.
4. Electrical service to the Building is a 2,000 amp bussed gutter
system, with the panel located on the west side of the Building but
excluding distribution of such electrical service within the Building.
5. Fire alarm control panel is provided for Tenant connection.
6. Fire protection sprinkler system designed to .29 GPM/sq. ft. over
2,000 square feet.
7. Base exterior Building lighting (includes no interior lighting
for the Building).
8. Conduit from the Building to South Revere Parkway for fiber optic
hookup.
9. All exterior site work required by the development plan approved
by applicable governmental authorities, including landscaping, parking lot
and sidewalks.
