<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 18, 1998.
REGISTRATION NO. 333-
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- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------
ONEPOINT COMMUNICATIONS CORP.
ONEPOINT COMMUNICATIONS HOLDINGS, LLC
ONEPOINT COMMUNICATIONS--GEORGIA, LLC
ONEPOINT COMMUNICATIONS--ILLINOIS, LLC
ONEPOINT COMMUNICATIONS--COLORADO, LLC
VIC-RMTS-DC, LLC
(EXACT NAME OF REGISTRANTS AS SPECIFIED IN THEIR CHARTER OR OPERATING
AGREEMENT)
DELAWARE 4813 36-4225811
DELAWARE 4813 36-4152762
DELAWARE 4813 36-4141380
DELAWARE 4813 36-4115274
DELAWARE 4813 36-4149806
DELAWARE 4813 36-4134906
(STATE OR OTHER (PRIMARY STANDARD (I.R.S. EMPLOYER
JURISDICTION OF INDUSTRIAL IDENTIFICATION NO.)
INCORPORATION OR CLASSIFICATION NUMBER)
ORGANIZATION) --------------
2201 WAUKEGAN ROAD, SUITE E200, BANNOCKBURN, ILLINOIS 60015
TELEPHONE: (847) 374-3700
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANTS' PRINCIPAL EXECUTIVE OFFICES)
--------------
JOHN D. STAVIG
2201 WAUKEGAN ROAD, SUITE E200, BANNOCKBURN, ILLINOIS 60015
TELEPHONE: (847) 374-3700
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
--------------
COPY TO:
LAURIE T. GUNTHER
KIRKLAND & ELLIS
200 EAST RANDOLPH DRIVE, CHICAGO, ILLINOIS 60601
TELEPHONE: (312) 861-2000
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: As soon as practicable after this Registration Statement becomes
effective.
If any securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, 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. [_]
CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
PROPOSED
PROPOSED MAXIMUM
TITLE OF MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO BE AMOUNT TO OFFERING PRICE OFFERING REGISTRATION
REGISTERED BE REGISTERED PER UNIT(1) PRICE(1) FEE
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<S> <C> <C> <C> <C>
14 1/2% Senior Notes due
2008, Series B......... $175,000,000 100% $175,000,000 $51,625
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Guarantees of 14 1/2%
Senior Notes due 2008,
Series B............... $175,000,000 (2) (2) None
</TABLE>
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(1) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457(f)
(2) No further fee is payable pursuant to Rule 457(n).
--------------
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT THAT SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION
8(A), MAY DETERMINE.
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<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED SEPTEMBER , 1998
PRELIMINARY PROSPECTUS
, 1998
ONEPOINT COMMUNICATIONS CORP.
OFFER TO EXCHANGE ITS 14 1/2% SENIOR NOTES DUE 2008, SERIES B
FOR ANY AND ALL OF ITS OUTSTANDING 14 1/2% SENIOR NOTES DUE 2008.
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON ,
1998, UNLESS EXTENDED.
OnePoint Communications Corp., a Delaware corporation ( the "Company") hereby
offers (the "Exchange Offer"), upon the terms and conditions set forth in this
Prospectus (the "Prospectus") and the accompanying Letter of Transmittal (the
"Letter of Transmittal"), to exchange $1,000 principal amount of its 14 1/2%
Senior Notes due 2008, Series B (the "Exchange Notes"), registered under the
Securities Act of 1933, as amended (the "Securities Act"), pursuant to a
Registration Statement of which this Prospectus is a part, for each $1,000
principal amount of its outstanding 14 1/2% Senior Notes due 2008 (the "Old
Notes"), of which $175,000,000 principal amount is outstanding. The form and
terms of the Exchange Notes are the same as the form and term of the Old Notes
except that (i) the Exchange Notes will bear a Series B designation and a
different CUSIP number than the Old Notes, (ii) the Exchange Notes will have
been registered under the Securities Act and, therefore, will not bear legends
restricting the transfer thereof and (iii) holders of the Exchange Notes will
not be entitled to certain rights of holders of Old Notes under the
Registration Rights Agreements (as defined). The Exchange Notes will evidence
the same debt as the Old Notes (which they replace) and will be issued under
and be entitled to the benefits of the Indenture dated as of May 21, 1998 (the
"Indenture") by and among the Company, the Subsidiary Guarantors (as defined)
and Harris Trust and Savings Bank, as trustee, governing the Old Notes. The Old
Notes and the Exchange Notes are sometimes referred to herein collectively as
the "Notes." See "The Exchange Offer" and "Description of the Notes."
The Company will accept for exchange any and all Old Notes validly tendered
and not withdrawn prior to 5:00 p.m., New York City time on , 1998,
unless extended by the Company in its sole discretion (the "Expiration Date").
Tenders of Old Notes may be withdrawn at any time prior to 5:00 p.m. on the
Expiration Date. The Exchange Offer is subject to certain customary conditions.
See "The Exchange Offer."
Interest on the Notes will accrue from their date of original issuance and
will be payable semiannually in arrears on June 1 and December 1 of each year,
commencing December 1, 1998, at the rate of 14 1/2% per annum. The Notes will
mature on June 1, 2008. The Notes are redeemable, in whole or in part, at the
option of the Company on or after June 1, 2003, at the redemption prices set
forth herein, plus accrued and unpaid interest, if any, to the date of
redemption. In addition, prior to June 1, 2001, the Company, at its option, may
redeem up to 35% of the aggregate principal amount of the Notes originally
issued with the net cash proceeds of one or more public or private public or
private offerings of Common Stock by the Company generating net cash proceeds
to the Company in excess of $20.0 million at a redemption price equal to 114.5%
of the principal amount thereof, plus accrued and unpaid interest, if any, to
the date of redemption; provided that at least 65% of the aggregate principal
amount of the Notes originally issued remains outstanding following such
redemption. See "Description of the Notes."
The Exchange Notes will be, as the Old Notes (which they replace) are, senior
obligations of the Company, and will, as the Old Notes (which they replace),
rank pari passu in right of payment with all existing and future unsubordinated
Indebtedness (as defined herein) of the Company and senior in right of payment
to any
(cover continued on following page)
-----------
SEE "RISK FACTORS" BEGINNING ON PAGE 15 FOR A DESCRIPTION OF CERTAIN RISKS TO
BE CONSIDERED BY HOLDERS WHO TENDER THEIR OLD NOTES IN THE EXCHANGE OFFER.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMIS-
SION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADE-
QUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE>
(cover page continued)
subordinated Indebtedness of the Company. As of June 30, 1998, the Company had
no senior Indebtedness (as
defined) other than the Notes. The Notes will be unconditionally guaranteed
(the "Subsidiary Guarantees") by all Restricted Subsidiaries (as defined) of
the Company (together, the "Subsidiary Guarantors"). The Subsidiary Guarantees
will be general unsecured obligations of the Subsidiary Guarantors, will rank
senior in right of payment to any subordinated Indebtedness of the Subsidiary
Guarantors and pari passu with any unsubordinated Indebtedness of the
Subsidiary Guarantors. See "Description of Notes."
The Old Notes were sold by the Company on May 21, 1998 to Bear Stearns & Co.
Inc. and NationsBanc Montgomery Securities LLC (the "Initial Purchasers")
pursuant to the offering (the "Initial Offering") of Units (the "Units"), each
consisting of $1,000 principal amount of Old Notes and a Warrant to purchase
0.635 shares of the common stock of the Company (a "Warrant"). The Initial
Offering was made in a transaction not registered under the Securities Act in
reliance upon an exemption under the Securities Act. The Initial Purchasers
subsequently placed the Old Notes with qualified institutional buyers in
reliance upon Rule 144A under the Securities Act. Accordingly, the Old Notes
may not be reoffered, resold or otherwise transferred in the United States
unless registered under the Securities Act or unless an applicable exemption
from the registration requirements of the Securities Act is available. The
Exchange Notes are being offered hereunder in order to satisfy the obligations
of the Company and the Subsidiary Guarantors under the Registration Rights
Agreements entered into by the Company, the Subsidiary Guarantors and the
Initial Purchasers in connection with the Initial Offering (the "Registration
Rights Agreements"). See "The Exchange Offer."
Based upon an interpretation by the staff of the Securities and Exchange
Commission (the "Commission") set forth in certain no-action letters issued to
third parties, the Company believes that the Exchange Notes issued pursuant to
the Exchange Offer in exchange for Old Notes may be offered for resale, resold
and otherwise transferred by any holder thereof (other than any such holder
that is an "affiliate" of the Company within the meaning of Rule 405 under the
Securities Act) without compliance with the registration and prospectus
delivery requirements of the Securities Act, provided that such Exchange Notes
are acquired in the ordinary course of such holder's business and such holder
has no arrangement or understanding with any person to participate in the
distribution of such Exchange Notes. See "The Exchange Offer--Resale of the
Exchange Notes." Holders of Old Notes wishing to accept the Exchange Offer
must represent to the Company, as required by the Registration Rights
Agreements, that such conditions have been met. Each broker-dealer (a
"Participating Broker-Dealer") that receives Exchange Notes for its own
account pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. The Letter of
Transmittal states that by so acknowledging and by delivering a prospectus, a
participating Broker-Dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act. This Prospectus, as it
may be amended or supplemented from time to time, may be used by a
Participating Broker-Dealer in connection with resales of Exchange Notes
received in exchange for Old Notes where such Old Notes were acquired by such
Participating Broker-Dealer as a result of market-making activities or other
trading activities. The Company has agreed that, for a period of 180 days
after the Expiration Date, it will make this Prospectus available to any
Participating Broker-Dealer for use in connection with any such resale. See
"Plan of Distribution."
Holder of Old Notes not tendered and accepted in the Exchange Offer will
continue to hold such Old Notes and will be entitled to all the rights and
benefits and will be subject to the limitations applicable thereto under the
Indenture and with respect to transfer under the Securities Act. The Company
will not receive any proceeds from the Exchange Offer. The Company has agreed
to bear the expenses of the Exchange Offer. No underwriter is being used in
connection with the Exchange Offer.
There has not previously been any public market for the Old Notes or the
Exchange Notes. The Company does not intend to list the Exchange Notes on any
securities exchange or to seek approval for quotation through any automated
quotation system. There can be no assurance that an active market for the
Exchange Notes will develop. See "Risk Factors--Absence of a Public Market
Could Adversely Affect the Value of Exchange
ii
<PAGE>
Notes." Moreover, to the extent that Old Notes are tendered and accepted in
the Exchange Offer, the trading market for untendered and tendered but
unaccepted Old Notes could be adversely affected.
THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL THE COMPANY ACCEPT
SURRENDERS FOR EXCHANGE FROM, HOLDERS OF OLD NOTES IN ANY JURISDICTION IN
WHICH THE EXCHANGE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE
WITH THE SECURITIES OR BLUE SKY LAWS OF SUCH JURISDICTION.
NO PERSON IS AUTHORIZED IN CONNECTION WITH ANY OFFERING HEREBY TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS OR
THE ACCOMPANYING LETTER OF TRANSMITTAL, AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR THE SUBSIDIARY GUARANTORS. NEITHER THE DELIVERY
OF THIS PROSPECTUS OR THE ACCOMPANYING LETTER OF TRANSMITTAL, NOR ANY EXCHANGE
MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE ANY IMPLICATION THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE
HEREOF.
THE EXCHANGE NOTES WILL BE AVAILABLE INITIALLY ONLY IN BOOK-ENTRY FORM.
EXCEPT AS DESCRIBED UNDER "BOOK--ENTRY; DELIVERY AND FORM", THE COMPANY
EXPECTS THAT THE EXCHANGE NOTES ISSUED PURSUANT TO THE EXCHANGE OFFER WILL BE
REPRESENTED BY A GLOBAL NOTES (AS DEFINED), WHICH WILL BE DEPOSITED WITH, OR
ON BEHALF OF, THE DEPOSITORY TRUST COMPANY ("DTC") AND REGISTERED IN ITS NAME
OR IN THE NAME OF EUROCLEAR SYSTEM AND CEDEL, SOCIETE ANONYME, ITS NOMINEES.
BENEFICIAL INTERESTS IN THE GLOBAL NOTES REPRESENTING THE EXCHANGE NOTES WILL
BE SHOWN ON, AND TRANSFERS THEREOF WILL BE EFFECTED THROUGH, RECORDS
MAINTAINED BY DTC AND ITS PARTICIPANTS. AFTER THE INITIAL ISSUANCE OF THE
GLOBAL NOTES, NOTES IN CERTIFICATED FORM WILL BE ISSUED IN EXCHANGE FOR THE
GLOBAL NOTES ONLY UNDER LIMITED CIRCUMSTANCES AS SET FORTH IN THE INDENTURE.
SEE "BOOK--ENTRY; DELIVERY AND FORM."
PROSPECTIVE INVESTORS IN THE EXCHANGE NOTES ARE NOT TO CONSTRUE THE CONTENTS
OF THIS PROSPECTUS AS INVESTMENT, LEGAL OR TAX ADVICE. EACH INVESTOR SHOULD
CONSULT ITS OWN COUNSEL, ACCOUNTANT AND OTHER ADVISORS AS TO LEGAL, TAX,
BUSINESS, FINANCIAL AND RELATED ASPECTS OF THE EXCHANGE NOTES. NEITHER THE
COMPANY NOR ANY OF THE SUBSIDIARY GUARANTORS IS MAKING ANY REPRESENTATION TO
ANY PROSPECTIVE INVESTOR IN THE EXCHANGE NOTES REGARDING THE LEGALITY OF AN
INVESTMENT THEREIN BY SUCH PERSON UNDER APPROPRIATE LEGAL INVESTMENT OR
SIMILAR LAWS.
AVAILABLE INFORMATION
The Company has filed with the Commission a Registration Statement on Form
S-4 (the "Exchange Offer Registration Statement," which term shall encompass
all amendments, exhibits, annexes and schedules thereto) pursuant to the
Securities Act, and the rules and regulations promulgated thereunder, covering
the Exchange Offer contemplated hereby. This Prospectus does not contain all
the information set forth in the Exchange Offer Registration Statement. For
further information with respect to the Company and the Exchange Offer,
reference is made to the Exchange Offer Registration Statement. Statements
made in this Prospectus as to the contents of any contract, agreement or other
document referred to are not necessarily complete. With respect to each such
contract, agreement or other document filed as an exhibit to the Exchange
Offer Registration Statement, reference is made to the exhibit for a more
complete description of the document or matter involved, and each such
statement shall be deemed qualified in its entirety by such reference.
iii
<PAGE>
The Exchange Offer Registration Statement, including the exhibits thereto,
and periodic reports and other information filed by the Company with the
Commission can be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Washington,
D.C. 20549, and inspected at the Commission's regional offices at 7 World
Trade Center, Suite 1300, New York, New York 10048 and Citicorp Center, Suite
1400, 500 West Madison Street, Chicago, Illinois 60601. Copies of such
materials can be obtained from the Public Reference Section of the Commission
at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. The
Commission maintains a Web site that contains reports, proxy and information
statements and other information regarding registrants that file
electronically with the Commission. The address of such site is
http://www.sec.gov.
As a result of the Exchange Offer Registration Statement being declared
effective by the Commission, the Company will become subject to the
informational requirements of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and in accordance therewith will be required to file
periodic reports and other information with the Commission. The obligation of
the Company to file periodic reports and other information with the Commission
will be suspended if the Exchange Notes are held of record by fewer than 300
holders as of the beginning of any fiscal year of the Company other than the
fiscal year in which the Exchange Offer Registration Statement is declared
effective. The Company has agreed that, whether or not it is required to do so
by the rules and regulations of the Commission, for so long as any Notes
remain outstanding, it will furnish to the holders of such Notes and, to the
extent permitted by applicable law or regulation, file with the Commission (i)
all quarterly and annual financial information that would be required to be
contained in a filing with the Commission on Forms 10-Q and 10-K if the
Company was required to file such Forms, including for each a "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and,
with respect to the annual information only, a report thereof by the Company's
independent certified public accountants and (ii) all reports that would be
required to be filed on Form 8-K if it were required to file such reports. In
addition, for so long as any of the Notes remain outstanding, the Company has
agreed to make available upon request to securities analysts and any
prospective purchaser of the Notes or beneficial owner of the Notes, in
connection with any sale thereof, the information required by Rule 144A(d)(4)
under the Securities Act.
The Company, a corporation organized under the laws of the state of
Delaware, has its principal executive office located at 2201 Waukegan Road,
Suite E200, Bannockburn, Illinois; telephone number is (847) 374-3700.
iv
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read in
conjunction with, the more detailed information and the consolidated financial
statements, including the notes thereto, appearing elsewhere in this
Prospectus. Prospective investors should carefully consider the factors set
forth in "Risk Factors." As the context requires, references in this Prospectus
to the "Company" or "OnePoint" shall mean OnePoint Communications, LLC or
OnePoint Communications Corp., its successor by merger, and the subsidiaries in
which the Company has a greater than 50% interest. Unless otherwise indicated,
all information contained in this Prospectus has been adjusted to give effect
to the Recapitalization (as defined below).
THE COMPANY
OnePoint Communications Corp. is a rapidly growing provider of bundled
telephony and video services to residents of multi-dwelling unit buildings
("MDUs") in high growth, densely populated urban and suburban markets. The
Company offers MDU residents bundled telephony and video services at moderate
to significant discounts to prices charged by incumbent local exchange carriers
("ILECs"), interexchange carriers ("IXCs") or franchise cable providers with
the convenience of "one point" of contact and a single integrated bill for such
multiple services. OnePoint seeks to offer bundled telephony and video services
by entering into long-term contracts providing preferential rights for on-site
marketing of telephony and video services (with respect to each service, a
"Right of Entry" for the MDU and a "passing" for each residential unit therein)
with national real estate investment trusts ("REITs") and other MDU property
owners, developers and managers (each, an "MDU Manager") and, where
appropriate, by acquiring private cable television operators having exclusive
video Rights of Entry for MDUs. Where the Company is initially unable to obtain
video Rights of Entry, it may pursue alternative arrangements, such as co-
marketing with the incumbent operator, in order to provide bundled services. In
addition, the Company plans to enhance its existing bundled product offering by
introducing high speed Internet access service by the end of 1998.
The Company was founded in 1996 with a $35 million investment, primarily from
a subsidiary of SBC Communications Inc. ("SBC") (the sole stockholder of
Southwestern Bell Telephone Co. ("Southwestern Bell"), a regional Bell
operating company ("RBOC")). The Company's strategy evolved from SBC's highly
successful SmartMoves(R) program for marketing to MDU residents within SBC's
service area. As a result of the Recapitalization, SBC currently indirectly
owns 19.7% of the Common Stock of the Company. The remaining 80.3% of the
Company's Common Stock is indirectly owned by James A. Otterbeck, the Company's
Chairman and Chief Executive Officer.
Through June 1998, the Company had entered into long term contracts with 5
national REITs and numerous other MDU Managers providing for approximately
127,000 telephony passings and 800 video passings in 456 MDUs in the Company's
6 targeted markets. From February to June 1997, the Company made investments
totalling approximately $12.0 million in Mid-Atlantic Telcom Plus, LLC ("Mid-
Atlantic"), a large private cable television operator with approximately 40,000
subscribers in 111 MDUs and 7 franchise cable areas in the
Washington/Baltimore/Philadelphia metropolitan area. The Company currently
holds an approximately 41% equity interest in Mid-Atlantic. As a result of its
interest in Mid-Atlantic, the Company has been able to begin marketing local
and long distance telephony services to Mid-Atlantic's approximately 68,000
video passings.
The Company's current targeted markets are Atlanta; Charlotte/Raleigh/Durham;
Chicago; Denver; Phoenix; and Washington/Baltimore/Philadelphia, in each of
which it has aggregated over 6,000 telephony passings. The Company is an
authorized competitive local exchange carrier ("CLEC") and has obtained
authority for the resale of local exchange services in nine states (Colorado,
Delaware, Florida, Georgia, Illinois, Maryland, North Carolina, Pennsylvania
and Virginia). Additionally, it has applied for CLEC status in Arizona
1
<PAGE>
and is permitted to provide telecommunications services there while its
application is pending. The Company also has an application for CLEC
authorization pending in the District of Columbia. Although the Company had
previously obtained authorization in the District of Columbia in May 1997, such
authorization was voided in November 1997 because of inconsistencies cited by
the District of Columbia Public Service Commission (the "PSC") between its
rules and applicable law. Following discussions with the PSC, the Company
reapplied for CLEC authorization in the District of Columbia in April 1998. See
"Risk Factors--Risks Related to District of Columbia CLEC Status."
Commencing in July 1997, the Company initiated service in a limited number of
MDUs in order to refine its billing, provisioning and customer care
infrastructure. In January 1998 the Company began actively marketing its
services. From the beginning of the year through June 1998 the Company had
marketed telephony services in 373 MDUs with a total of 104,000 units
(including approximately 28,700 Mid-Atlantic video passings), and had marketed
video services to approximately 800 units in 3 MDUs (not including Mid-Atlantic
video passings). Through June, 1998 the Company's ratio of subscribers for each
service to the number of units marketed (the "Penetration Rate") was 6.9% and
74.1%, respectively, for telephony and video. The Company primarily targets new
residents and believes that it will be able to achieve significantly higher
telephony Penetration Rates with respect to such residents, who are introduced
to the Company's services when moving in. The Company estimates that its
overall Penetration Rates will lag behind new resident Penetration Rates but
will increase over time as a result of residential turnover. According to data
compiled by the National Multi-Housing Council, annual apartment turnover rates
average 35% to 40%.
The Company offers a wide range of services, including local telephony,
domestic and international long distance telephony, cellular telephony and
cable and Direct Broadcast Satellite ("DBS") television. The Company also plans
to enhance its bundled product offering by introducing high-speed Internet
access service by the end of 1998. The Company currently delivers telephony
services exclusively through resale of services offered by ILECs and an IXC.
Management believes that the Company's long distance resale cost position is
superior to those of other similarly sized CLECs as a result of the Company's
affiliation with SBC. The Company plans to replace selectively its resale
platform with higher margin facilities-based services by implementing a demand-
driven capital expenditure program as warranted by subscriber traffic levels
and the availability of alternative network facilities within each market.
Video services are delivered through Satellite Master Antenna Television
("SMATV") or DBS systems and point-to-point 18GHz microwave links. Management
believes that the Company's expanded use of DBS systems will reduce capital
requirements and expand the number of channels available.
KEY STRATEGIC RELATIONSHIPS
The Company has several relationships and agreements which management
believes offer significant advantages, including:
SBC. The terms of certain contracts pursuant to which SBC purchases
products and services are available to the Company and other entities in
which SBC has a sufficient equity interest. Accordingly, the Company has
been able to purchase a number of products and services from third parties
at prices lower than those that would otherwise be available to it. Through
such arrangements, OnePoint purchases long distance service from an IXC and
has leveraged SBC's procurement function to purchase
telecommunications equipment. As the Company invests selectively in a
facilities-based telephony strategy, management believes the Company may be
able to obtain further cost advantages in the purchase of telephony
equipment based on similar arrangements with vendors. Management believes
that these arrangements will enable the Company to provide a bundled
communications offering at a competitive price and provide opportunities
for better margins than competitors lacking such an affiliation can
achieve. The Company's ability to purchase services and equipment under
these arrangements is dependent upon (i) SBC's continued ownership of an
equity interest in the Company which meets or exceeds the definition of
2
<PAGE>
"affiliate" in the underlying contracts and (ii) the continuation of the
current underlying SBC contracts or their replacement by SBC with contracts
having comparable terms. In addition, SBC has guaranteed the Company's
payment obligations under its $9 million secured bank credit facility (the
"Credit Facility") with The Northern Trust Company ("Northern Trust") and
two of the Company's leases for office space.
Mid-Atlantic. In late 1997, the Company and Mid-Atlantic began joint
marketing of telephony and video services under the OnePoint brand name on
a building by building basis to the approximately 68,000 passings in the
111 MDUs and 7 franchise cable areas served by Mid-Atlantic in the
Washington/ Baltimore/Philadelphia metropolitan area. The Company has also
partnered with Mid-Atlantic to develop integrated customer care and billing
capabilities designed to support both telephony and video services. The
principals of Mid-Atlantic own a minority interest in the Company's
telephony operations in the six-state Mid-Atlantic region.
Relationships with National REITs. Management estimates that the five
national REITs, including Equity Residential Properties Trust, with which
the Company has entered into agreements providing for telephony Rights of
Entry control approximately 6% of the MDUs in the Company's targeted
markets. All of such agreements have a term of seven years. The Company
seeks to obtain video and/or Internet Rights of Entry for the buildings in
which it has telephony Rights of Entry, and believes its relationships with
such REITs and other MDU Managers will be a competitive advantage in
obtaining video Rights of Entry (when existing agreements expire or are
otherwise terminated) and Internet Rights of Entry. Management believes
that the REIT industry is growing and concentrating, and that the REITs
with which it has relationships are seeking to acquire additional
properties and/or other REITs, which should provide opportunities for the
Company to obtain additional Rights of Entry.
MARKET OPPORTUNITY
MDUs comprise a wide variety of high density residential complexes, including
high and low-rise apartment buildings, condominiums and cooperatives. According
to the U.S. Census Bureau, over 24 million residential housing units were
included in these categories as of 1990 and an additional 1.3 million new
apartments were completed from 1991 to 1997. Of the over 24 million units
nationwide as of 1990, approximately 2.8 million were within the Company's
existing or targeted markets. The following table sets forth the approximate
MDU units currently subject to the Company's Rights of Entry and other
marketing opportunities in the Company's targeted markets as of June 30, 1998.
<TABLE>
<CAPTION>
MDU UNITS
OTHER MDU MARKETING TOTAL MDU ACTIVELY
MDU PASSINGS OPPORTUNITIES OPPORTUNITIES MARKETED(1)
--------------- --------------------- ----------------- ---------------
MARKET TELEPHONY VIDEO TELEPHONY(2) VIDEO(3) TELEPHONY VIDEO TELEPHONY VIDEO
------ --------- ----- ------------ -------- --------- ------- --------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Atlanta....................................... 21,600 800 -- 20,800 21,600 21,600 13,800 800
Charlotte/ Raleigh/ Durham.................... 10,000 -- -- 10,000 10,000 10,000 8,600 --
Chicago....................................... 8,800 -- -- 8,800 8,800 8,800 6,200 --
Denver........................................ 6,700 -- -- 6,700 6,700 6,700 6,000 --
Phoenix....................................... 24,500 -- -- 24,500 24,500 24,500 7,900 --
Washington/Baltimore/ Philadelphia............ 55,300 -- 39,200 55,300 94,500 55,300 61,500 --
------- --- ------ ------- ------- ------- ------- ---
Total...................................... 126,900 800 39,200 126,100 166,100 126,900 104,000 800
======= === ====== ======= ======= ======= ======= ===
</TABLE>
- --------
(1) Units in MDUs in which the Company had one or more subscribers as of June
30, 1998.
(2) MDU units for which Mid-Atlantic has video Rights of Entry but for which
the Company does not currently have telephony Rights of Entry.
(3) MDU units for which the Company has telephony Rights of Entry, but does not
currently have video Rights of Entry.
The Company has targeted the markets listed above primarily because of their
high proportion of REIT-controlled MDUs, attractive growth rates, availability
of SBC-owned assets (currently in Chicago and
3
<PAGE>
Washington, D.C.) and sufficient potential subscriber density to permit a
subsequent move to a facilities-based telephony platform. Pursuant to its
"smart-build" strategy, the Company seeks to utilize the most cost-effective
means of providing services in a market, and management believes that
significant opportunities exist with respect to underutilized facilities of
other CLECs, many of which target business customers.
BUSINESS STRATEGY
OnePoint's objective is to be a leading provider of bundled telephony and
video services to MDU residents in selected markets. The key elements of the
Company's strategy are as follows:
. Focus on Dense Concentrations of Demographically Attractive Customers.
The Company targets high revenue potential "A" and "B" properties in
markets where it can aggregate at least 10,000 telephony and/or video
passings. Management believes that residents of such buildings tend to
have high demand for telephony and video services and will find the
Company's superior customer service, lower prices and the convenience of
"one point" of contact for multiple services attractive. High customer
density reduces per-unit capital costs and increases the efficiency of
the Company's sales, marketing, installation and repair efforts.
. Utilize a "Smart-Build" Strategy to Expedite Customer Acquisition and
Minimize Initial Investment Risk. OnePoint seeks to minimize initial
investment risk by developing a subscriber base in its markets prior to
making significant investments in telephony switching, transport and
digital loop carrier equipment. Telephony services are currently
delivered through a resale platform. The Company plans to replace
selectively its resale platform with higher margin facilities-based
services as warranted by subscriber traffic levels and the availability
of alternative network facilities within each market. The Company plans
to move toward a network design based on Company-owned switches and
leased unbundled network elements ("UNEs") including transmission
facilities, on an incremental basis. Management believes that this
approach balances the cost savings and capital expenditure requirements
associated with a facilities-based platform. Video services are provided
through SMATV and DBS systems and point-to-point 18GHz microwave links.
As a private cable operator, the Company is not required to serve any
particular customer base and generally does not incur capital costs to
build its video systems until it has obtained a Right of Entry for the
property. The Company expects to deploy digital DBS systems where
justified, based on subscriber demographics and demand. Management
believes that this "smart-build" strategy reduces up-front capital
expenditures, expedites entry into markets and MDUs and allows the
Company to take advantage of evolving regulatory and technical
developments.
. Leverage SBC Affiliation. The Company realizes significant benefits from
favorable costs on certain services and equipment made available to SBC
and its affiliates by third party vendors. The availability of these
favorable costs is dependent upon (i) SBC's continued ownership of an
equity interest in the Company which meets or exceeds the definition of
"affiliate" in the underlying contracts and (ii) the continuation of the
current underlying SBC contracts or their replacement by SBC with
contracts having comparable terms. Through such arrangements, the
Company currently purchases wholesale long distance telephony service at
the prices negotiated by SBC and has purchased telecommunications
equipment. The Company also benefits from SBC's technical and regulatory
expertise as well as access to personnel with specialized knowledge.
. Build Customer Base Through Long-Term Contracts. OnePoint enters into
long-term contracts with MDU Managers providing Rights of Entry for
telephony and video services. The Company's bundled telephony and video
services should benefit MDU Managers by differentiating their properties
and potentially raising rental values. OnePoint also provides revenue
sharing programs for property owners and commissions, and training and
support for on-site leasing consultants at the MDUs it serves. These
programs motivate the leasing consultants to serve as an effective face-
to-face sales channel to residents.
4
<PAGE>
The Company also seeks to become the exclusive video service provider to
the buildings in which it has telephony Rights of Entry, and believes its
relationships with MDU Managers will be a competitive advantage in
obtaining video Rights of Entry (when existing agreements with other
providers expire or are otherwise terminated) and Internet Rights of
Entry.
. Build Customer Base Through Acquisitions. The Company believes it can
further build its customer base by acquiring established private cable
television operators with MDU video Rights of Entry, or by acquiring
assets from such operators. The Company believes it can cross-sell its
local and long distance telephony services to acquired video subscribers
by promoting the convenience of a single point of contact, integrated
billing and pricing incentives. In furtherance of its strategy, the
Company is engaged in discussions with respect to certain such
acquisitions. See "Recent Developments."
. Increase Revenue Through Bundling, Creative Marketing and Cross-
Promotions. OnePoint seeks to increase revenue by offering customers
incentives to purchase bundled services, such as discounted video
services for long-distance subscribers and all-in-one bundled prices for
local and long distance telephony and video services. To the extent
permitted under Federal Communications Commission ("FCC") rules,
subscribers to each service receive information about the Company's other
services in their bill. Residents can subscribe for available services by
completing a single form when leasing an apartment, can schedule a single
installation visit for all services, and thereafter receive a single
integrated bill for all services. Management believes the bundling of
telephony and video services leverages sales, marketing and servicing
costs, increases market penetration, reduces churn and improves account
collections.
. Provide Superior Customer Care. The Company has developed an integrated
billing system and an advanced customer care facility, which opened in
June 1997. The Company seeks to provide customer care that is superior to
that of incumbent providers, including prompt, courteous repair service,
a single toll-free number for telephony and video customer service and
"hassle-free" installation, with a single installation service call for
all services that can be made on an expedited basis and without the
subscriber present. As a private cable television provider, the Company
can also provide customized programming in each building to match the
demographics and special interests of residents.
Management believes that OnePoint's MDU Manager relationships, its smart-
build approach and its favorable cost position due to its relationship with SBC
are significant competitive advantages. The Company's focus on MDU customers
enables it to concentrate its marketing, service and support efforts, and
requires lower capital costs per unit than targeting other residential customer
groups. The MDU focus also permits the Company to offer programming and
promotions targeted to the demographic characteristics of a specific building.
The Company's Rights of Entry give it the exclusive right to market its
services using the MDU's leasing staff as an on-site face-to-face sales
channel. The smart-build approach permits the Company to enter markets quickly
with a limited initial capital commitment, as compared to a facilities-led
approach which requires significant up-front capital expenditures prior to
providing service and gaining market share. In addition, management believes
that the Company currently has a favorable cost position for long distance
telephony services.
MANAGEMENT EXPERTISE
OnePoint believes that its management and operations team is a critical
component of its initial success and will continue to be a key element of
differentiation for the Company. The Company has built an aggressive and
experienced management team with extensive prior experience at ILECs, CLECs,
IXCs and cable television companies, including MFS Communications Company, MCI
WorldCom, Inc. ("MCI WorldCom"), Sprint Communications Co. ("Sprint") and AT&T
Corp. ("AT&T"), among others. James A. Otterbeck, the Company's Chairman and
Chief Executive Officer has served as a Vice President of Gemini Consulting, a
global management consulting firm ("Gemini Consulting"), where he co-founded
and managed the $100 million global communications business unit of the firm.
Mr. Otterbeck has also previously worked for AT&T Bell Laboratories in product
design and management positions and has worked at IBM in sales and marketing
positions. William
5
<PAGE>
F. Wallace, the Company's President and Chief Operating Officer, served as the
Chief Operating Officer of Gemini Consulting, where he co-founded and built
Gemini Consulting's communications business unit with Mr. Otterbeck over a four
year period. See "Management."
FINANCING STRATEGY
The Company used approximately $80.5 million of the net proceeds from the
Initial Offering to fund the purchase of a portfolio of U.S. government
securities (the "Pledged Securities"), which is intended to provide funds
sufficient to pay in full when due the first seven scheduled interest payments
on the Notes. The Pledged Securities are pledged as security for the repayment
of principal of and interest on the Notes, Liquidated Damages, if any, and all
other obligations under the Indenture. See "Use of Proceeds" and "Description
of the Exchange Notes--Interest Reserve." Other proceeds have been, or will be,
used to acquire private cable television operators or their assets, to invest
in video infrastructure, to invest selectively in a facilities-based platform
for telephony services, to repay borrowings under the Credit Facility (which
may be reborrowed prior to December 15, 1998), to fund future capital calls by
Mid-Atlantic, to fund working capital and for general corporate purposes,
including operating losses. The Company believes the net proceeds of the
Initial Offering will be sufficient to fund the Company's planned aggregate
capital expenditures, working capital requirements and operating losses for its
six initially targeted markets. The Company may require additional capital if
it achieves market penetration for its services significantly different than,
or at a different stage than, current management estimates, achieves lower than
expected pricing for its services, enters additional markets, locates
additional or larger acquisition opportunities or encounters higher than
expected costs to purchase or upgrade telephony, cable or DBS services,
equipment or facilities. The Company also expects that it will require
additional financing (or require financing sooner than anticipated) if the
Company's development plans or projections change or prove to be inaccurate, or
if the Company is unable to continue to take advantage of the pricing provided
for in certain SBC-negotiated contracts for any reason. There can be no
assurance that the Company will be successful in raising sufficient additional
debt or equity capital, or of the terms of any such capital. Failure to raise
and generate sufficient funds may require the Company to delay or abandon some
of its planned future expansion or expenditures, which could have a material
adverse effect on the Company's growth and its ability to compete in the
telephony and video industry.
RECENT DEVELOPMENTS
PCTV Acquisition
In June 1998, the Company, through a wholly owned subsidiary, entered into a
definitive agreement to acquire substantially all of the assets used by
People's Choice TV Corp. ("PCTV") and Preferred Entertainment, Inc. to provide
video service to MDUs in Chicago. Pursuant to the agreement, the Company
acquired approximately 27,800 video passings in 159 properties in July and
August (the "PCTV Acquisition"). The financial statements of PCTV are attached
hereto. Management expects to invest in video reception and transmission
equipment to upgrade the video services offering for the acquired passings.
Potential Acquisitions
The Company has entered into letters of intent to acquire certain cable
rights of entry and related equipment from three companies located in North
Carolina (the "Potential Acquisitions"). If consummated, the Potential
Acquisitions would result in the addition of approximately 4,300 video passings
in 14 properties. The Company is at various stages of discussion with respect
to other potential acquisitions in its targeted markets.
The Company is also negotiating a letter of intent with two franchise cable
television operators in one of its targeted markets providing for co-marketing
of local and long distance telephony services to residents of the
6
<PAGE>
150,000 MDU passings served by these franchise cable television operators (the
"Potential Co-Marketing Arrangement" and, together with the Potential
Acquisitions, the "Potential Transactions").
There can be no assurance that any of the Potential Transactions will be
consummated, or of the terms on which such transactions may be consummated.
Consummation of the Potential Transactions would have a material effect on the
Company's results of operations and financial condition, and there can be no
assurance that any such effect would not be negative.
THE RECAPITALIZATION
The Company is the successor to OnePoint Communications, LLC (the
"Predecessor"). The Predecessor was originally formed in 1996 by Ventures in
Communications, L.L.C. ("VIC"), and AMI-VCOM2, Inc. ("AMI2"). Through a series
of transactions from the fourth quarter of 1997 through April 1998, VenCom,
L.L.C. acquired an equity interest in the Predecessor, and the Predecessor was
recapitalized and merged with the Company in order to become a corporation. See
"The Recapitalization."
RISK FACTORS
See "Risk Factors" for a discussion of certain factors relating to the
Company and its business that should be carefully considered before tendering
Old Notes in exchange for Exchange Notes.
THE INITIAL OFFERING
OLD NOTES................... The Old Notes were sold by the Company on May
21, 1998 to the Initial Purchasers as part of
the Units pursuant to a Purchase Agreement
dated May 15, 1998 (the "Purchase
Agreement"). The Initial Purchasers
subsequently resold the Units, including the
Old Notes to qualified institutional buyers
pursuant to Rule 144A under the Securities
Act.
REGISTRATION RIGHTS Pursuant to the Purchase Agreement, the
AGREEMENT................... Company, the Subsidiary Guarantors and the
Initial Purchasers entered into a
Registration Rights Agreement dated as of May
21, 1998 (the "Registration Rights
Agreements"), which grants the holders of the
Old Notes certain exchange and registration
rights. The Exchange Offer is intended to
satisfy such exchange rights which terminate
upon the consummation of the Exchange Offer.
THE EXCHANGE OFFER
SECURITIES OFFERED.......... $175,000,000 aggregate principal amount of 14
1/2% Senior Notes due 2008, Series B.
THE EXCHANGE OFFER.......... $1,000 principal amount of Exchange Notes in
exchange for each $1,000 principal amount of
Old Notes. As of the date hereof,
$175,000,000 aggregate principal amount of
Old Notes are outstanding. The Company will
issue the Exchange Notes to holders on or
promptly after the Expiration Date.
Based on an interpretation by the staff of
the Commission set forth in no-action letters
issued to third parties, the Company believes
that Exchange Notes issued pursuant to the
Exchange Offer in exchange
7
<PAGE>
for Old Notes may be offered for resale,
resold and otherwise transferred by any
holder thereof (other than any such holder
which is an "affiliate" of the Company within
the meaning of Rule 405 under the Securities
Act) without compliance with the registration
and prospectus delivery provisions of the
Securities Act, provided that such Exchange
Notes are acquired in the ordinary course of
such holder's business and that such holder
does not intend to participate and has no
arrangement or understanding with any person
to participate in the distribution of such
Exchange Notes.
Any Participating Broker-Dealer that acquired
Old Notes for its own account as a result of
market-making activities or other trading
activities may be a statutory underwriter.
Each Participating Broker-Dealer that
receives Exchange Notes for its own account
pursuant to the Exchange Offer must
acknowledge that it will deliver a prospectus
in connection with any resale of such
Exchange Notes. The Letter of Transmittal
states that by so acknowledging and by
delivering a prospectus, a Participating
Broker-Dealer will not be deemed to admit
that it is an "underwriter" within the
meaning of the Securities Act. This
Prospectus, as it may be amended or
supplemented from time to time, may be used
by a Participating Broker-Dealer in
connection with resales of Exchange Notes
received in exchange for Old Notes where such
Old Notes were acquired by such Participating
Broker-Dealer as a result of market-making
activities or other trading activities. The
Company has agreed that, for a period of 180
days after the Expiration Date, it will make
this Prospectus available to any
Participating Broker-Dealer for use in
connection with any such resale. See "Plan of
Distribution."
Any holder who tenders in the Exchange Offer
with the intention to participate, or for the
purpose of participating, in a distribution
of the Exchange Notes could not rely on the
position of the staff of the Commission
enunciated in no-action letters and, in the
absence of an exemption therefrom, must
comply with the registration and prospectus
delivery requirements of the Securities Act
in connection with any resale transaction.
Failure to comply with such requirements in
such instance may result in such holder
incurring liability under the Securities Act
for which the holder is not indemnified by
the Company.
EXPIRATION DATE............. 5:00 p.m., New York City time, on ,
1998 unless the Exchange Offer is extended,
in which case the term "Expiration Date"
means the latest date and time to which the
Exchange Offer is extended.
ACCRUED INTEREST ON THE
EXCHANGE NOTES AND THE OLD
NOTES.......................
Each Exchange Note will bear interest from
its issuance date. Holders of Old Notes that
are accepted for exchange will receive, in
cash, accrued interest thereon to, but not
including, the issuance date of the Exchange
Notes. Such interest will be paid with the
first
8
<PAGE>
interest payment on the Exchange Notes.
Interest on the Old Notes accepted for
exchange will cease to accrue upon issuance
of the Exchange Notes.
CONDITIONS TO THE EXCHANGE The Exchange Offer is subject to certain
OFFER....................... customary conditions, which may be waived by
the Company. See "The Exchange Offer--
Conditions."
PROCEDURES FOR TENDERING Each holder of Old Notes wishing to accept
OLD NOTES................... the Exchange Offer must complete, sign and
date the accompanying Letter of Transmittal,
or a facsimile thereof, in accordance with
the instructions contained herein and
therein, and mail or otherwise deliver such
Letter of Transmittal, or such facsimile,
together with the Old Notes and any other
required documentation to the Exchange Agent
(as defined) at the address set forth herein.
By executing the Letter of Transmittal, each
holder will represent to the Company that,
among other things, the Exchange Notes
acquired pursuant to the Exchange Offer are
being obtained in the ordinary course of
business of the person receiving such
Exchange Notes, whether or not such person is
the holder, that neither the holder nor any
such other person has any arrangement or
understanding with any person to participate
in the distribution of such Exchange Notes
and that neither the holder nor any such
other person is an "affiliate," as defined
under Rule 405 of the Securities Act, of the
Company. See "The Exchange Offer--Purpose and
Effect of the Exchange Offer" and "--
Procedures for Tendering."
UNTENDERED OLD NOTES........ Following the consummation of the Exchange
Offer, holders of Old Notes eligible to
participate but who do not tender their Old
Notes will not have any further exchange
rights and such Old Notes will continue to be
subject to certain restrictions on transfer.
Accordingly, the liquidity of the market for
such Old Notes could be adversely affected.
CONSEQUENCES OF FAILURE TO
EXCHANGE................... The Old Notes that are not exchanged pursuant
to the Exchange Offer will remain restricted
securities. Accordingly, such Old Notes may
be resold only (i) to the Company, (ii)
pursuant to Rule 144A or Rule 144 under the
Securities Act or pursuant to some other
exemption under the Securities Act, (iii)
outside the United States to a foreign person
pursuant to the requirements of Rule 904
under the Securities Act, or (iv) pursuant to
an effective registration statement under the
Securities Act. See "The Exchange Offer--
Consequences of Failure to Exchange."
SHELF REGISTRATION If any holder of the Old Notes (other than
STATEMENT................... any such holder which is an "affiliate" of
the Company or a Subsidiary Guarantor within
the meaning of Rule 405 under the Securities
Act) is not eligible under applicable
securities laws to participate in the
Exchange Offer, and such holder has satisfied
certain conditions relating to the provision
9
<PAGE>
of information to the Company for use
therein, the Company and the Subsidiary
Guarantors have agreed to register the Old
Notes on a shelf registration statement (the
"Shelf Registration Statement") and use their
best efforts to cause it to be declared
effective by the Commission as promptly as
practical on or after the consummation of the
Exchange Offer. The Company and the
Subsidiary Guarantors have agreed to maintain
the effectiveness of the Shelf Registration
Statement for, under certain circumstances, a
maximum of two years, to cover resales of the
Old Notes held by any such holders.
SPECIAL PROCEDURES FOR
BENEFICIAL OWNERS..........
Any beneficial owner whose Old Notes are
registered in the name of a broker, dealer,
commercial bank, trust company or other
nominee and who wishes to tender should
contact such registered holder promptly and
instruct such registered holder to tender on
such beneficial owner's behalf. If such
beneficial owner wishes to tender on such
owner's own behalf, such owner must, prior to
completing and executing the Letter of
Transmittal and delivering its Old Notes,
either make appropriate arrangements to
register ownership of the Old Notes in such
owner's name or obtain a properly completed
bond power from the registered holder. The
transfer of registered ownership may take
considerable time.
GUARANTEED DELIVERY Holders of Old Notes who wish to tender their
PROCEDURES.................. Old Notes and whose Old Notes are not
immediately available or who cannot deliver
their Old Notes, the Letter of Transmittal or
any other documents required by the Letter of
Transmittal to the Exchange Agent (or comply
with the procedures for book-entry transfer)
prior to the Expiration Date must tender
their Old Notes according to the guaranteed
delivery procedures set forth in "The
Exchange Offer--Guaranteed Delivery
Procedures."
WITHDRAWAL RIGHTS........... Tenders may be withdrawn at any time prior to
5:00 p.m., New York City time, on the
Expiration Date.
ACCEPTANCE OF OLD NOTES AND
DELIVERY OF EXCHANGE
NOTES....................... The Company will accept for exchange any and
all Old Notes which are properly tendered in
the Exchange Offer prior to 5:00 p.m., New
York City time, on the Expiration Date. The
Exchange Notes issued pursuant to the
Exchange Offer will be delivered promptly
following the Expiration Date. See "The
Exchange Offer--Terms of the Exchange Offer."
USE OF PROCEEDS............. There will be no cash proceeds to the Company
from the exchange pursuant to the Exchange
Offer.
EXCHANGE AGENT.............. Harris Trust and Savings Bank (the "Exchange
Agent") is serving as Exchange Agent in
connection with the exchange offer of
Exchange Notes for Old Notes.
10
<PAGE>
THE EXCHANGE NOTES
GENERAL..................... The form and terms of the Exchange Notes are
the same as the form and terms of the Old
Notes (which they replace) except that (i)
the Exchange Notes bear a Series B
designation and a different CUSIP number than
the Old Notes, (ii) the Exchange Notes will
have been registered under the Securities Act
and, therefore, will not bear legends
restricting the transfer thereof, and (iii)
the holders of Exchange Notes will not be
entitled to certain rights under the
Registration Rights Agreements, including the
provisions providing for an increase in the
interest rate on the Old Notes in certain
circumstances relating to the timing of the
Exchange Offer, which rights will terminate
when the Exchange Offer is consummated. See
"The Exchange Offer--Purpose and Effect of
the Exchange Offer." The Exchange Notes will
evidence the same debt as the Old Notes and
will be entitled to the benefits of the
Indentures. See "Description of Exchange
Notes."
MATURITY.................... June 1, 2008.
INTEREST.................... The Exchange Notes will bear interest at the
rate of 14 1/2% per annum, payable semi-
annually in arrears on June 1 and December 1,
commencing December 1, 1998.
RANKING..................... The Exchange Notes will be general
obligations of the Company, will rank pari
passu in right of payment with all existing
or future unsubordinated Indebtedness of the
Company, and will rank senior in right of
payment to any subordinated Indebtedness of
the Company. As of June 30, 1998, the Company
had no senior Indebtedness other than the
Notes.
INTEREST RESERVE............ The Company used approximately $80.5 million
of the net proceeds from the Initial Offering
to purchase the Pledged Securities, which
were pledged to the Trustee for the benefit
of the holders of the Notes, and which are in
an amount intended to be sufficient upon
receipt of scheduled interest and principal
payments, to provide for payment in full when
due of the first seven scheduled interest
payments on the Notes. When each of the first
seven interest payments is due, the Trustee
will apply the proceeds of a sufficient
amount of Pledged Securities to pay the
interest then due.
Upon the acceleration of the maturity of the
Notes or upon certain redemptions and
repurchases of the Notes, the Pledge
Agreement provides that the Trustee will
apply the proceeds of a sufficient amount of
Pledged Securities to pay the amounts owed by
the Company to holders of the Notes at such
time. Immediately following the earlier of
(i) the payment in full of the seventh
scheduled interest payment on the Notes and
(ii) the day on which all of the Notes have
been repurchased, redeemed or defeased, if no
Default or Event of Default is then
continuing, the remaining Pledged Securities,
if any, will be released from the pledge and
the outstanding Notes (if any) will be
unsecured obligations of the Company.
11
<PAGE>
SUBSIDIARY GUARANTEES....... The Company's obligations under the Notes are
jointly and severally guaranteed by the
Subsidiary Guarantors. The Subsidiary
Guarantees will rank senior in right of
payment to any subordinated Indebtedness of
the Subsidiary Guarantors and pari passu with
any unsubordinated Indebtedness of the
Subsidiary Guarantors. See "Description of
the Notes--Subsidiary Guarantees."
SINKING FUND................ None.
OPTIONAL REDEMPTION......... The Notes may be redeemed at the option of
the Company, in whole or in part, on or after
June 1, 2003, at a premium declining to par
in 2006, plus accrued and unpaid interest and
Liquidated Damages, if any, through the
redemption date.
In addition, the Company will be entitled, at
any time on or before June 1, 2001 to redeem
up to 35% of the aggregate principal amount
of the Notes with the net cash proceeds of
one or more public or private offerings of
Common Stock by the Company generating net
cash proceeds to the Company in excess of
$20.0 million at a redemption price equal to
114.5% of the principal amount thereof, plus
accrued and unpaid interest and Liquidated
Damages, if any, thereon, to the redemption
date; provided at least 65% of the aggregate
principal amount of Notes originally issued
remain outstanding immediately after giving
effect to such redemption. See "Description
of the Notes--Optional Redemption."
CHANGE OF CONTROL........... In the event of a Change of Control, the
holders of the Notes have the right to
require the Company to purchase the Notes at
a price equal to 101% of the aggregate
principal amount thereof, plus accrued and
unpaid interest and Liquidated Damages, if
any, to the date of purchase. See
"Description of the Notes--Repurchase at the
Option of the Holders--Change of Control."
COVENANTS................... The Indenture contains certain covenants
that, among other things, limits the ability
of the Company and its Restricted
Subsidiaries to make certain restricted
payments, incur additional Indebtedness and
issue Disqualified Stock (as defined herein),
pay dividends or make other distributions,
repurchase equity interests or subordinated
Indebtedness, engage in sale or leaseback
transactions, create certain liens, enter
into certain transactions with affiliates,
sell assets of the Company or its Restricted
Subsidiaries, conduct certain lines of
business, issue or sell equity interests of
the Subsidiary Guarantors or enter into
certain mergers and consolidations. In
addition, under certain circumstances, the
Company is required to offer to purchase the
Notes at a price equal to 100% of the
principal amount thereof, plus accrued and
unpaid interest and Liquidated Damages, if
any, to the date of purchase, with the
proceeds of certain asset sales. See
"Description of Notes--Certain Covenants."
For additional information concerning the Notes and the definitions of
certain capitalized terms used above, see "Description of Notes."
12
<PAGE>
SUMMARY HISTORICAL AND PRO FORMA FINANCIAL DATA OF THE COMPANY
The following table sets forth selected historical and pro forma financial
and other data of the Company. The selected consolidated statement of earnings
and balance sheet data set forth below as of December 31, 1996 and 1997 and for
the periods then ended are derived from the financial statements of the Company
which have been audited by Ernst & Young LLP, independent auditors. The
unaudited consolidated financial data at June 30, 1998 and for the six months
ended June 30, 1998 include all adjustments (consisting only of normal
recurring adjustments) which management considers necessary for a fair
presentation of the financial information for these unaudited periods. The
results of operations for the six months ended June 30, 1998 are not
necessarily indicative of the results of operations that may be expected for
the full fiscal year 1998. The Company was formed in 1996 and has generated
operating losses and negative cash flow from its limited operating activities
to date. As a result of the Company's limited operating history, prospective
investors have limited operating and financial data about the Company upon
which to base an evaluation of the Company's performance and the decision to
tender Old Notes in exchange for Exchange Notes. The selected financial data
set forth below should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations," the consolidated
financial statements, including the notes thereto and the Pro Forma Unaudited
Condensed Statement of Operations, contained elsewhere in this Prospectus.
<TABLE>
<CAPTION>
UNAUDITED
SIX MONTHS ENDED
PERIOD FROM UNAUDITED PRO FORMA JUNE 30, 1998
MARCH 14, 1996 TO YEAR ENDED YEAR ENDED -----------------------
DECEMBER 31, 1996 DECEMBER 31, 1997 DECEMBER 31, 1997(1) ACTUAL PRO FORMA(1)
----------------- ----------------- -------------------- --------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Net revenue............ $ -- $ 43 $ 5,251 $ 675 $
Cost of revenue........ -- 83 3,077 1,906
Selling, general and
administrative
expenses.............. 2,021 12,788 14,626 8,865
Depreciation and
amortization.......... 19 235 1,957 310
Loss from operations... (2,040) (13,063) (14,409) (10,406)
Interest expense....... -- (11) (26,865) (2,977)
Other income
(expense)............. 4 54 54 603
Income tax provision
(2)(3)................ -- -- -- --
Loss on equity
investments........... -- (3,071) (3,071) (1,499)
Net loss............... (2,036) (16,091) (44,291) (14,279)
OTHER FINANCIAL DATA:
Pro forma income tax
provision (3)......... $ -- $ -- $ --
EBITDA (4)............. (2,021) (12,845) (11,578)
Net cash used in
operating activities.. (2,020) (11,507) (7,403)
Net cash used in
investing activities
(5). (13,517) (2,573) (163,156)
Net cash from
financing activities.. 15,640 19,440 165,532
Capital expenditures... 517 2,441 1,496
Ratio of losses to
fixed charges (6)..... -- -- --
OTHER DATA:
Passings:
Telephony passings
under contract...... -- 71,034 71,034 127,000
Telephony passings
actively
marketed (7)........ -- 17,536 17,536 104,000
Video passings under
contract............ -- 184 184 800
Video passings
actively
marketed (7)........ -- -- -- 800
Telephony
subscribers......... -- 365 365 7,176
Telephony Penetration
Rate................ -- 2.1% 2.1% 6.9%
Video subscribers.... -- -- -- 596
Video Penetration
Rate................ -- -- -- 74.1%
</TABLE>
<TABLE>
<CAPTION>
AS OF
DECEMBER 31, AS OF JUNE 30, 1998
1997 (UNAUDITED)
------------ ---------------------
ACTUAL ACTUAL PRO FORMA
------------ --------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................... $ 5,463 $ 562 $
Working capital............................. 3,932 75,070
Total assets................................ 19,761 186,901
Long term debt.............................. 1,500 175,000
Unitholders' equity......................... 15,453 --
Stockholder's equity........................ -- 2,674
</TABLE>
13
<PAGE>
- --------
(1) Gives effect to the issuance and registration of $175.0 million aggregate
principal amount of Notes with an interest rate of 14 1/2% per annum, the
PCTV Acquisition and the change in tax status from a limited liability
company to a "C" corporation.
(2) Prior to the merger with OnePoint Communications Corp. in April 1998 the
Company was treated as a partnership for income tax purposes. Accordingly,
no provision for income taxes has been included in these financial
statements, as taxable income or loss passed through to unitholders
individually.
(3) See pro forma tax discussion in the notes to the Pro Forma Unaudited
Statement of Operations.
(4) EBITDA is defined as net income (loss) before loss on equity investments,
net interest expense, income taxes and depreciation and amortization.
EBITDA is presented because it is a widely accepted financial indicator of
a company's ability to incur and service debt. However, EBITDA should not
be considered in isolation as a substitute for net loss or cash flow data
prepared in accordance with generally accepted accounting principles or as
a measure of a company's profitability or liquidity. In addition, this
measure of EBITDA may not be comparable to similar measures reported by
other companies.
(5) Cash flows from investing activities included the changes in the Company's
restricted cash balances on deposit in an escrow account pending investment
in Mid-Atlantic. Cash and cash equivalents as of December 31, 1996 includes
$13 million of restricted cash.
(6) For the purpose of the ratio of losses to fixed charges, (i) losses are
calculated as net loss before fixed charges and (ii) fixed charges include
interest on all Indebtedness, and operating lease expense. Fixed charges
for the period from March 14, 1996 to December 31, 1996, for the year ended
December 31, 1997 and for the six months ended June 30, 1998 were
approximately $79,000, $641,000 and $3.4 million, respectively. For the
period from March 14, 1996 to December 31, 1996, the year ended December
31, 1997 and for the six months ended June 30, 1998, the Company's
deficiency of earnings to cover fixed charges was approximately $2.0
million and $16.1 million and $14.3 million, respectively.
(7) Passings actively marketed are passings in an MDU in which the Company had
one or more subscribers at the end of the relevant period.
14
<PAGE>
RISK FACTORS
In addition to the other information contained in this Prospectus, holders
of Old Notes should consider carefully the following information relating to
the Company and the Notes before tendering their Old Notes in the Exchange
Offer. The risk factors set forth below are generally applicable to the Old
Notes as well as the Exchange Notes.
CONSEQUENCES OF FAILURE TO EXCHANGE
Holders of Old Notes who do not exchange their Old Notes for Exchange Notes
pursuant to the Exchange Offer will continue to be subject to the restrictions
on transfer of such Old Notes, as set forth in the legend thereon, as a
consequence of the issuance of the Old Notes pursuant to exemptions from, or
in transactions not subject to, the registration requirements of the
Securities Act and applicable state securities laws. The Company does not
currently anticipate that it will register the Old Notes under the Securities
Act. Based on interpretations by the staff of the Commission set forth in no-
action letters issued to third parties, including Exxon Capital Holdings
Corporation, SEC No-Action Letter (available April 13, 1988) (the "Exxon
Capital Letter"), Morgan Stanley & Co. Incorporated, SEC No-Action Letter
(available June 5, 1991) (the "Morgan Stanley Letter"), and similar letters,
the Company believes that the Exchange Notes issued pursuant to the Exchange
Offer may be offered for resale, resold or otherwise transferred by any holder
thereof (other than any such holder which is an "affiliate" of the Company or
any Subsidiary Guarantor within the meaning of Rule 405 under the Securities
Act) without compliance with the registration and prospectus delivery
provisions of the Securities Act provided that such Exchange Notes are
acquired in the ordinary course of such holder's business and such Holder has
no arrangement with any person to participate in the distribution of such
Exchange Notes. Notwithstanding the foregoing, each broker-dealer that
receives Exchange Notes for its own account pursuant to the Exchange Offer
must acknowledge that it will deliver a prospectus in connection with any
resale of such Exchange Notes. The Letter of Transmittal states that by so
acknowledging and by delivering a prospectus, a broker-dealer will not be
deemed to admit that it is an "underwriter" within the meaning of the
Securities Act. This Prospectus, as it may be amended or supplemented from
time to time, may be used by a broker-dealer in connection with any resale of
Exchange Notes received in exchange for Old Notes where such Old Notes were
acquired by such broker-dealer as a result of market-making activities or
other trading activities (other than Old Notes acquired directly from the
Company). The Company has agreed that, for a period of 180 days from the
Expiration Date, it will make this Prospectus available to any broker-dealer
for use in connection with any such resale. See "Plan of Distribution." Any
holder who tenders in the Exchange Offer for the purpose of participating in a
distribution of the Exchange Notes cannot rely on the Morgan Stanley Letter or
similar letters and must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with a secondary resale
transaction. To the extent that Old Notes are tendered and accepted in the
Exchange Offer, the trading market, if any, for the Old Notes not so tendered
could be adversely affected. See "The Exchange Offer."
ABSENCE OF A PUBLIC MARKET COULD ADVERSELY AFFECT THE VALUE OF EXCHANGE NOTES
The Old Notes were issued to, and the Company believes are currently owned
by, a relatively small number of beneficial owners. Prior to the Exchange
Offer, there has not been any public market for the Old Notes. The Old Notes
have not been registered under the Securities Act and will be subject to
restrictions on transferability to the extent that they are not exchanged for
Exchange Notes by holders who are entitled to participate in this Exchange
Offer. The holders of Old Notes (other than any such holder that is an
"affiliate" of the Company or any Subsidiary Guarantor within the meaning of
Rule 405 under the Securities Act) who are not eligible to participate in the
Exchange Offer are entitled to certain registration rights, and the Company
and the Subsidiary Guarantors are required to file a Shelf Registration
Statement with respect to such Old Notes. The Exchange Notes will constitute
new issues of securities with no established trading market. The Company does
not intend to list the Exchange Notes on any national securities exchange or
seek the admission thereof to trading in the National Association of
Securities Dealers Automated Quotation System. The Initial Purchasers have
advised the Company that they currently intend to make a market in the
Exchange Notes, but they are not obligated to do so and may discontinue such
market making at any time. In addition, such market making activity will be
subject to the limits imposed by the Securities Act and the Exchange Act and
may be limited during the
15
<PAGE>
Exchange Offer and the pendency of the Shelf Registration Statement.
Accordingly, no assurance can be given that an active public or other market
will develop for the Exchange Notes or as to the liquidity of the trading
market for the Exchange Notes. If a trading market does not develop or is not
maintained, holders of the Exchange Notes may experience difficulty in
reselling the Exchange Notes or may be unable to sell them at all. If a market
for the Exchange Notes develops, any such market may be discontinued at any
time.
If a public trading market develops for the Exchange Notes, future trading
prices of such securities will depend on many factors including, among other
things, prevailing interest rates, the Company's results of operations and
market for similar securities. Depending on prevailing interest rates, the
market for similar securities and other factors, including the financial
condition of the Company, the Exchange Notes may trade at a discount from
their principal amount.
FAILURE TO FOLLOW EXCHANGE OFFER PROCEDURES COULD ADVERSELY AFFECT HOLDERS
Issuance of the Exchange Notes in exchange for the Old Notes pursuant to the
Exchange Offer will be made only after a timely receipt by the Company of such
Old Notes, a properly completed and duly executed Letter of Transmittal and
all other required documents. Therefore, holders of the Old Notes desiring to
tender such Old Notes in exchange for Exchange Notes should allow sufficient
time to ensure timely delivery. The Company is under no duty to give
notification of defects or irregularities with respect to the tenders of Old
Notes for exchange. Old Notes that are not tendered or are tendered but not
accepted will, following the consummation of the Exchange Offer, continue to
be subject to the existing restrictions upon transfer thereof, and, upon
consummation of the Exchange Offer certain registration rights under the
Registration Rights Agreement will terminate. In addition, any holder of Old
Notes who tenders in the Exchange Offer for the purpose of participating in a
distribution of the Exchange Notes may be deemed to have received restricted
securities, and if so, will be required to comply with the registration and
prospectus delivery requirements of the Securities Act in connection with any
resale transaction. Each broker-dealer that receives Exchange Notes for its
own account in exchange for Old Notes, where such Old Notes were acquired by
such broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such Exchange Notes. See "Plan of Distribution." To the
extent that Old Notes are tendered and accepted in the Exchange Offer, the
trading market for untendered and tendered but unaccepted Old Notes could be
adversely affected. See "The Exchange Offer."
LIMITED HISTORY; EARLY STAGE OF OPERATIONS; HISTORICAL AND ANTICIPATED FURTHER
NEGATIVE CASH FLOW FROM OPERATIONS AND OPERATING LOSSES
The Company was formed in 1996 and has generated operating losses and
negative cash flow from its limited operating activities to date. Until
January 1998, the Company's primary activities consisted of the procurement of
governmental authorizations, the negotiation of telephony and video Rights of
Entry for MDUs, the hiring of management and other key personnel, the raising
of capital, the development, acquisition and integration of customer service,
billing and other back office systems, the identification of potential
acquisition targets and the negotiation of resale agreements. The Company
commenced its marketing efforts in a limited number of MDUs in July 1997 and
began actively marketing its services in January 1998 in the
Washington/Baltimore/Philadelphia metropolitan area, in February 1998 in
Atlanta and Chicago and in March 1998 in Charlotte/Raleigh/Durham, Denver and
Phoenix. Through June, 1998, the Company had 7,176 telephony subscribers and
596 video subscribers.
As a result of the Company's limited operating history, prospective
investors have limited operating and financial data about the Company upon
which to base an evaluation of the Company's performance and a decision to
tender Old Notes in exchange for Exchange Notes. The Company's ability to
provide bundled telephony and video services in its six targeted markets and
to generate operating profits and positive operating cash flow will depend on
its ability to, among other things: (i) attract and retain an adequate
customer base; (ii) attract and retain qualified personnel; (iii) implement
and manage interconnection arrangements with ILECs; (iv) obtain additional
state authorizations to operate as a CLEC and any other required governmental
authorizations; (v) obtain necessary video programming on satisfactory terms
and (vi) expand its customer service, billing and
16
<PAGE>
other back office systems. There can be no assurance that it will be able to
achieve any of these objectives or generate sufficient cash flow to make
principal and interest payments on the Notes or any other existing or future
Indebtedness. The Company may require additional capital if it achieves market
penetration for its services significantly different than, or at a different
stage than, management estimates, achieves lower than expected pricing for its
services, enters additional markets, locates additional or larger acquisition
opportunities or encounters higher than expected costs to purchase or upgrade
telephony, cable or DBS services, equipment or facilities. The Company also
expects that it will require additional financing (or require financing sooner
than anticipated) if the Company's development plans or projections change or
prove to be inaccurate or, if the Company is unable to continue to take
advantage of the pricing provided for in certain SBC-negotiated contracts for
any reason. See "Business--Business Strategy."
The Company expects to continue to generate negative cash flow from
operations while it develops and expands its telephony and video services
business. Revenues to date have been minimal and may be slow in growing due to
start-up and other delays. For the year ended December 31, 1997, the Company
had an operating loss of $13.1 million, a net loss of $16.1 million and
negative cash flow from operations of $11.5 million. For the six months ended
June 30, 1998, the Company had an operating loss of $10.4 million, a net loss
at $14.3 million and negative cash flow from operations of $7.4 million. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations." There can be no assurance that the Company will achieve or
sustain profitability or generate sufficient cash flow from operations to meet
its working capital and debt service requirements, which could have a material
adverse effect on the Company's results of operations and financial condition
and its ability to meet its obligations on the Notes. See "--Substantial
Leverage; Possible Inability to Service Indebtedness."
SUBSTANTIAL LEVERAGE; POSSIBLE INABILITY TO SERVICE INDEBTEDNESS
As a result of the Initial Offering, the Company will be highly leveraged.
At June 30, 1998, the Company's aggregate outstanding Indebtedness was $175.0
million, and the Company's stockholder's equity was $2.7 million. See
"Selected Historical Financial Data," "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital
Resources," "Description of Certain Indebtedness" and "Description of the
Notes." The Indenture limits, but does not prohibit, the incurrence of
additional Indebtedness by the Company. See "Description of the Notes--Certain
Covenants."
The Company's high degree of leverage could have important consequences to
holders of Notes, including but not limited to: (i) impairing the Company's
ability to obtain additional financing for working capital, capital
expenditures, acquisitions or general corporate purposes; (ii) requiring the
Company to dedicate a substantial portion of its cash flow from operations to
the payment of principal and interest on its Indebtedness, thereby reducing
the funds available to the Company for its operations and other purposes,
including acquisitions of private cable television operations, investments in
telephony infrastructure for MDUs, development of facilities-based telephony
platforms, deployment of video services infrastructure and investments in
billing and customer care capabilities; (iii) placing the Company at a
competitive disadvantage relative to competitors which are not as highly
leveraged as the Company; (iv) impairing the Company's ability to adjust
rapidly to changing market conditions; and (v) making the Company more
vulnerable in the event of a downturn in general economic conditions or in its
business or with respect to changing market conditions and regulations.
There can be no assurance that the Company will be able to meet its debt
service obligations. If the Company is unable to generate sufficient cash flow
or otherwise obtain funds necessary to make required payments, or if the
Company otherwise fails to comply with the various covenants in its debt
obligations, it would be in default under the terms thereof, which would
permit the holders of such Indebtedness to accelerate the maturity of such
Indebtedness and could cause defaults under the terms of the Company's other
Indebtedness. The Company's ability to repay or to refinance its obligations
with respect to its Indebtedness will depend on its future financial and
operating performance, which, in turn, will be subject to prevailing economic
and competitive conditions and to certain financial, business and other
factors, many of which are beyond the Company's control. These factors could
include operating difficulties, increased operating costs, pricing pressures,
the response of competitors, regulatory developments and delays in
implementing strategic projects.
17
<PAGE>
The successful implementation of the Company's business strategy and
significant and sustained growth in the Company's cash flow are necessary for
the Company to be able to meet its debt service and working capital
requirements. There can be no assurance that the Company will successfully
implement its business strategy, that the anticipated results of its strategy
will be realized, or that the Company will be able to generate sufficient cash
flow from operating activities to meet its debt service obligations and
working capital requirements. See "Business--Business Strategy." If the
Company's cash flow and capital resources are insufficient to fund its debt
service and working capital obligations, the Company may be forced to reduce
or delay product development or capital expenditures, sell assets, seek to
obtain additional capital, or to refinance or restructure its debt or employ
other measures to enhance liquidity, none of which may prove successful. A
disposition of assets in order to make up for any shortfall in the payments
due on the Company's Indebtedness could take place under circumstances that
might not be conducive to realizing the highest price for such assets. There
can be no assurance that the Company's cash flow and capital resources will be
sufficient for payment of principal of, and premium, if any, and interest on,
its Indebtedness (including the Notes) in the future, or that any such
alternative measures would be successful or would permit the Company to meet
its debt service and working capital obligations. In addition, because the
Company's Obligations under its Credit Facility bear interest at floating
rates, an increase in interest rates could adversely affect, among other
things, the Company's ability to meet its debt service requirements. See
"Description of Certain Indebtedness."
SIGNIFICANT CAPITAL REQUIREMENTS; UNCERTAINTY OF ADDITIONAL FINANCING
The expansion and development of the Company's business will require
significant capital to finance investment in billing and customer care
capabilities, investment in video infrastructure, including capacity upgrades
or customer equipment, acquisitions of private cable television operators,
selective investment in a facilities-based platform for telephony services,
repayment of borrowings under the Company's Credit Facility and the funding of
working capital and general corporate purposes, including operating losses.
The Company believes the proceeds of the Initial Offering, together with
borrowings under its Credit Facility and cash generated from operations will
be sufficient to fund the Company's planned aggregate capital expenditures,
working capital requirements and operating losses for its six initially
targeted markets. The actual amount and timing of the Company's future capital
requirements may differ materially from the Company's estimates as a result
of, among other things, the demand for the Company's services and regulatory,
technological and competitive developments (including additional market
developments and new opportunities) in the Company's industry. The Company's
revenues and costs are dependent upon factors that are not within the
Company's control, such as regulatory changes, changes in technology and
increased competition. Due to the uncertainty of these factors, actual
revenues and costs may vary from expected amounts, possibly to a material
degree, and such variations are likely to affect the Company's future capital
requirements. The Company also expects that it will require additional
financing (or require financing sooner than anticipated) if the Company's
development plans or projections change or prove to be inaccurate, if the
Company is unable to continue to take advantage of the pricing provided for in
certain SBC-negotiated contracts for any reason, or if the Company engages in
other acquisitions. Sources of additional financing may include commercial
bank borrowings, vendor financing, or the private or public sale of equity or
debt securities.
There can be no assurance that the Company will be successful in raising
sufficient additional capital at all or on terms that it will consider
acceptable, that the terms of any additional Indebtedness will be within the
limitations contained in the Company's financing agreements, including the
Indenture, or that the terms of such Indebtedness will not impair the
Company's ability to develop its business. See "--Restrictive Covenants." The
Company's ability to raise equity capital may be constrained by its desire to
retain its status as an SBC affiliate. Failure to raise sufficient funds may
require the Company to modify, delay or abandon elements of its planned future
expansion or expenditures, which could have a material adverse effect on the
Company's results of operations and financial condition and its ability to
meet its obligations on the Notes. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations--Liquidity and Capital
Resources."
18
<PAGE>
HOLDING COMPANY STRUCTURE; STRUCTURAL SUBORDINATION OF NOTES
The Company is a holding company and its principal assets consist of equity
interests in its operating subsidiaries and an equity interest in Mid-
Atlantic. Mid-Atlantic has not paid dividends in the past, and its current
agreements with its lenders prohibit payment of dividends. The Company does
not anticipate that Mid-Atlantic will pay dividends for the foreseeable
future. Accordingly, the Company will rely upon dividends and other payments
from its subsidiaries to generate the funds necessary to meet its obligations,
including the payment of principal of and interest on the Notes. The
subsidiaries, however, are legally distinct from the Company. The ability of
the Company's subsidiaries to make such payments to the Company will be
subject to, among other things, the availability of funds, the terms of such
subsidiaries' Indebtedness and applicable state laws.
EFFECTIVE SUBORDINATION OF NOTES TO SECURED INDEBTEDNESS
The Notes will not be secured by any of the Company's or its subsidiaries'
assets. The Company's obligations under its Credit Facility are secured by a
security interest in certain of the assets of the Company, including its
accounts, leases, contract rights, general intangibles (including intellectual
property rights), inventory, goods other than inventory, funds on deposit with
the lender, books and records, documents of title and proceeds and products of
the foregoing. In the event that a default were to occur with respect to any
secured Indebtedness of the Company (including the Credit Facility) and the
holders thereof were to foreclose on the collateral, or in the event of a
bankruptcy, liquidation or reorganization of the Company, the holders of such
Indebtedness would be entitled to payment out of the proceeds of their
collateral prior to any holders of general unsecured Indebtedness, including
the Notes, notwithstanding the existence of an event of default with respect
to the Notes. Also, to the extent that the value of such collateral is
insufficient to satisfy such secured Indebtedness, holders of amounts
remaining outstanding on such secured Indebtedness would be entitled to share
pari passu with holders of the Notes with respect to any other assets of the
Company. Such assets may not be sufficient to pay amounts due on any or all of
the Notes then outstanding. See "Description of Certain Indebtedness." In
addition, the Indenture permits the Company to incur additional secured
Indebtedness, and such secured Indebtedness would have a prior claim over the
Notes to the assets of the Company that secure such Indebtedness. See
"Description of the Notes--Certain Covenants" and "Description of Certain
Indebtedness."
DEPENDENCE ON SBC AFFILIATION; RESTRICTIONS ON ABILITY TO PROVIDE SERVICE IN
SBC REGION; RISK OF LOSS OF FAVORABLE CONTRACTS
The Company is dependent upon its status as an affiliate of SBC in order to
retain its ability to purchase services and equipment on terms available to
and negotiated by SBC, including but not limited to the Company's agreement
for long distance services. The Company's ability to purchase services and
equipment pursuant to SBC-negotiated contracts is dependent upon SBC's
continued ownership, directly or indirectly, of an equity interest in the
Company which meets or exceeds the definition of "affiliate" in any SBC
contract and whether such contract provides SBC "affiliates" opportunities to
purchase thereunder. The definition of "affiliate" varies in such contracts.
Although SBC has an incentive to keep the definition broad, its negotiation of
vendor contracts is typically based on considerations other than the
inclusiveness of the definition of affiliate and the interests of potential
affiliates in the availability of such contracts. There can be no assurance
that future SBC contracts or amendments or renewals of existing SBC contracts
will contain provisions which have the effect of permitting the Company to
purchase services or equipment pursuant thereto. Moreover, the Company has
received no indication or assurance from SBC that it will retain its indirect
ownership interest in the Company for any period of time.
On May 11, 1998 SBC announced that it had agreed to merge with Ameritech
Corporation ("Ameritech") to create a telecommunications company with a
"national-local" focus to compete against ILECs, CLECs, long distance
companies and global competitors. SBC stated that it hoped to complete the
merger within a year, but noted that the merger is subject to approval by
stockholders, the public utilities commissions in Ameritech's
19
<PAGE>
region, other local regulators and the Federal Communications Commission. The
merger is also subject to review by the United States Department of Justice.
As an affiliate of SBC for regulatory purposes, the Company is currently
prohibited from providing long distance service to customers in Arkansas,
California, Kansas, Missouri, Nevada, Oklahoma and Texas (the "SBC Region"),
and if Ameritech has not received approval to provide long distance service in
Illinois prior to the consummation of the merger, the Company would be
prohibited from continuing to provide long distance service in Chicago
following consummation of the merger, and similarly, if Ameritech has not
received approval to provide long distance service in Indiana, Michigan, Ohio
and Wisconsin (together with Illinois, the "Ameritech Region"), the Company
would be prohibited from providing long distance service in such states
following consummation of the merger. In the event that the merger is
consummated and Ameritech has not received approval to provide long distance
service by that time, the Company believes that, under current regulatory
conditions, it may be able to restructure its Illinois operations in such a
way that it would not be prohibited from providing long distance service in
Illinois, although such restructuring could require amendments or consents
under certain of the Company's agreements, including the agreement pursuant to
which it purchases long distance service. There can be no assurance, however,
that such an approach would be successful. Such inability to provide long
distance service could have a material adverse effect on the Company's results
of operations and financial condition and its ability to meet its obligations
under the Notes.
SBC also announced that in connection with the merger, the company resulting
from the SBC-Ameritech merger (the "Combined Company") would provide an
integrated mix of local, long distance, Internet and high-speed data services
to consumers and businesses in 30 additional U.S. markets outside of its
region, including certain of the Company's other currently targeted markets:
Atlanta, Baltimore, Denver, Philadelphia, Phoenix and Washington. Upon entry
into these markets, the Combined Company would be competing with OnePoint if
it elected to target residential customers residing MDUs other than through a
cooperation arrangement or other agreement with the Company. While the Company
believes that opportunities may exist for the Company to utilize the Combined
Company's assets in such markets on favorable terms, the Company cannot
predict the effect on OnePoint of entry of the Combined Company into such
markets, including the effect on OnePoint's ability to compete in such markets
and its ability to continue to purchase certain services and equipment on
favorable terms pursuant to SBC agreements, and there can be no assurance that
such competition from the Combined Company would not have a material adverse
effect on the Company's results of operations and financial condition and its
ability to meet its obligations under the Notes.
SBC currently holds a 19.7% indirect equity ownership interest in OnePoint.
There can be no assurance that SBC will retain its equity ownership interest
for any period of time. The loss of the Company's affiliate status with SBC
would have a material adverse effect on the Company's results of operations
and financial condition and its ability to meet its obligations under the
Notes. In addition, failure of SBC to retain, directly or indirectly, at least
9.9% of the total Voting Stock of the Company constitutes a Change of Control
under the Indenture. See "--Limitations on Repurchase Upon a Change of
Control."
Due to SBC's indirect ownership of 19.7% of the sole stockholder of the
Company, the Company is considered to be an affiliate of SBC for regulatory
purposes, and is therefore prohibited from providing long distance telephony
service to customers in the SBC Region. On May 11, 1998 SBC announced that it
had agreed to merge with Ameritech to create a telecommunications company with
a "national-local" focus to compete against ILEC's, CLECs, long distance
companies and global competitors. SBC stated that it hoped to complete the
merger within a year, but noted that the merger is subject to approval by
stockholders, the public utilities commissions in the Ameritech Region, other
local regulators and the Federal Communications Commission. The merger is also
subject to review by the United States Department of Justice. As an affiliate
of SBC for regulatory purposes, the Company is currently prohibited from
providing long distance service to customers in the SBC Region, and if
Ameritech has not received approval to provide long distance service in
Illinois prior to the consummation of the merger, the Company would be
prohibited from continuing to provide long distance service in Chicago
following consummation of the merger, and similarly, if Ameritech has not
received approval to provide long distance service in the other states in the
Ameritech Region, the Company would be prohibited
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from providing long distance service in such states following consummation of
the merger. In the event that the merger is consummated and Ameritech has not
received approval to provide long distance service by that time, the Company
believes that, under current regulatory conditions, it may be able to
restructure its Illinois operations in such a way that it would not be
prohibited from providing long distance service in Illinois, although such
restructuring could require amendments or consents under certain of the
Company's agreements, including the agreement pursuant to which it purchases
long distance service. There can be no assurance, however, that such an
approach would be successful. Such inability to provide long distance service
could have a material adverse effect on the Company's results of operations
and financial condition and its ability to meet its obligations under the
Notes.
As a result of the foregoing restrictions, the Company does not expect to
enter the markets in the SBC Region while current regulatory conditions
persist, although the Company intends to continue to increase its presence in
the Chicago market. Accordingly, the Company's competitors may obtain MDU
Rights of Entry in the SBC Region that would either preclude the Company from
subsequently competing in such markets or make it more costly to do so.
Difficulty in obtaining MDU Rights of Entry could have a material adverse
effect on the Company's results of operations and financial condition and its
ability to meet its obligations under the Notes.
The area which constitutes the SBC Region may change due to other
transactions entered into by SBC or regulatory changes. Expansion of the SBC
Region, through a business combination between SBC and another RBOC or
otherwise, could have a material adverse effect on the Company's results of
the operations and financial condition and its ability to meet its obligations
under the Notes. There can be no assurance that the SBC Region, in which the
Company is currently prohibited from providing long distance telephony
service, or the Ameritech Region, in which the Company may be prohibited from
providing long distance telephony service, will not expand, or that any such
expansions will not include areas currently served, or targeted to be served,
by the Company.
The Company believes that its long distance telephony contract is a
significant competitive advantage because it permits the Company to obtain
long distance service at costs which are significantly less than those which
would otherwise be available to the Company. As the Company invests
selectively in a facilities-based telephony strategy, management believes the
Company may be able to obtain cost advantages in the purchase of telephony
infrastructure based on similar arrangements with equipment vendors. There can
be no assurance that such arrangements will be available, however. The long
distance telephony agreement terminates automatically upon termination of
SBC's underlying agreement for any reason and may be terminated by either
party if SBC's direct or indirect ownership interest in the Company falls
below 10.1%. If the Company is not able to continue to enjoy the advantageous
prices on services and equipment derived from its relationship with SBC, its
results of operations and financial condition would be materially adversely
affected, which would in turn affect the Company's ability to meet its
obligations under the Notes.
The long distance telephony agreement terminates in January 2002 but may be
terminated by SBC upon 90 days notice if SBC (i) has not received regulatory
approval to provide in-region long distance telephony service in at least one
state by January 1, 1999 or (ii) has received such approval but elects not to
provide in-region long distance telephony service. SBC has requested authority
to provide in-region long distance service but to date such authority has not
been granted. There can be no assurance that SBC will succeed in obtaining
such approval by January 1, 1999 and that its right to terminate the contract
will not be triggered. If, as a result of such termination, or for any other
reason, the Company's long distance telephony contract were to terminate, and
the Company were unable to renew or otherwise replace such contract on
similarly favorable terms, its ability to provide long distance telephony
services at competitive prices would be materially impaired, which would
result in a material adverse effect on the Company's results of operations and
financial condition and its ability to meet its obligations under the Notes.
SBC has guaranteed the Company's $9 million Credit Facility and the
Company's obligations under two of its leases for office space. Management
believes that the Company would have been unable to obtain the Credit Facility
or such leases absent the SBC guarantee. Any repudiation or unenforceability
of the SBC guarantee or
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the lender's otherwise deeming itself insecure constitutes an event of default
under the Credit Facility. Any such event of default could have a material
adverse effect on the Company's results of operations and financial condition
and its ability to meet its obligations under the Notes.
From time to time, at the Company's request, SBC has provided material
assistance to the Company with regard to systems evaluation and procurement,
technical due diligence, corporate development and regulatory filings and
other matters. In addition, SBC has seconded and is currently seconding
employees to the Company, in some cases for extended periods of time. There
can be no assurance that SBC will continue to provide similar assistance in
the future on terms acceptable to the Company, or at all. See "Certain
Relationships and Related Transactions--SBC Affiliation and Related
Contracts."
RISKS ASSOCIATED WITH MDU RIGHTS OF ENTRY
The Company's business depends upon its ability to obtain, capitalize upon
and renew Rights of Entry. The Company enters into long-term contracts with
national REITs and other MDU Managers providing telephony and video Rights of
Entry. The Company also seeks to acquire private cable television operators
which have video Rights of Entry for MDUs or to acquire assets from such
operators. The Company's success in entering into and capitalizing on such
contracts may be affected by a number of factors, including (i) the extent of
competition in the provision of telephony and video services, (ii) the
Company's ability to identify suitable MDUs and obtain Rights of Entry, (iii)
the demographics of the markets in which the Company has chosen to focus its
business, (iv) occupancy rates in the MDUs that the Company serves, (v) the
quality of customer service the Company provides, (vi) regulatory developments
and (vii) the enforceability of the material terms of its contracts, including
exclusivity provisions. See "Business--Competition," "--Federal Regulation"
and "--State Regulation."
The Company's telephony Right of Entry contracts typically grant the Company
the exclusive rights to market on-site and the right to provide voice
telecommunications services to the residents of applicable MDUs, subject to
the legal right of ILECs and other third parties to provide telephony services
where specifically requested by a resident. The Company's video Right of Entry
contracts typically grant the Company the exclusive rights to market on-site
and the right to provide video services to residents of applicable MDUs,
subject to the legal rights of franchise cable providers to offer services to
residents. While the Company believes that these exclusivity provisions are
now generally enforceable under applicable law, current trends at the state
and federal level suggest that the future enforceability of these provisions
may be uncertain. Certain states and local governments, including the states
of Delaware, Florida, Illinois and Pennsylvania and the District of Columbia,
have adopted "mandatory access" laws that provide that no resident of an MDU
may be denied access to programming provided by incumbent franchise cable
systems, regardless of any rights granted by an MDU Manager to another
multichannel television operator. In addition, the FCC is currently
considering whether it should adopt new rules that would cap or otherwise
limit the ability of multichannel video programming distributors ("MVPDs") to
enter into future exclusive contracts with MDU Managers, address existing
exclusive contracts, apply its rules concerning wiring inside a customer's
premises to all MVPDs, and require the sharing of cable wiring by multiple
providers. The FCC has recently initiated a proceeding that is examining the
propriety of exclusive contracts entered into between MVPDs and MDU Managers
for the provision of multichannel video services, such as cable service. In
addition to numerous other proposals, the FCC has proposed a "cap" on such
contracts, limiting them to the amount of time reasonably necessary for an
MVPD to recover its specific capital costs of providing service in that MDU.
In particular, the FCC has asked for comment on the length of such a cap and
whether it should establish a presumption that a seven-year term is
enforceable for all existing and future exclusivity provisions.
In this proceeding, the FCC is also seeking comment on whether it can and
should take any specific actions regarding "perpetual" exclusive contracts,
including whether such contracts should be limited under any general rule on
exclusive contracts that the FCC adopts. The FCC is considering whether to
allow MDU Managers to elect to terminate (or take a "fresh look" at) existing
"perpetual" exclusive or other exclusive long-term
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contracts with incumbent cable operators to give all competitive MVPDs the
opportunity to compete for MDU business that would otherwise be foreclosed to
them because of an exclusive contract. In addition, the comments filed in
response to the FCC's proposals are divided on the issue of exclusive and
perpetual contracts. For example, a number of incumbent providers have argued
that the FCC lacks statutory authority or a policy basis to apply its proposed
"fresh look" policy. A number of these parties also urge the FCC to adopt a
limit on the duration of future exclusive contracts, which in some cases is
shorter than the time period proposed by the FCC. On the other hand, several
new entrant MVPDs assert that a prospective limit on exclusive contracts
should not be adopted, while supporting a fresh look for existing contracts.
The arguments raised in the record and the alternative proposals advanced by a
number of parties may well affect the final outcome of the FCC's
determinations concerning both existing and future exclusive contracts.
If the FCC concludes that exclusive contracts should be limited, the
Company's ability to market its bundled services could be adversely affected,
which could have a material adverse effect on the Company's results of
operations and financial condition and its ability to meet its obligations
under the Notes. If the FCC does not grant MDU Managers the rights to take a
"fresh look" at incumbent cable operator exclusive contracts, the addressable
market for the Company's services could be sharply diminished, which could
have a material adverse effect on the Company's results of operations and
financial condition and its ability to meet its obligations under the Notes.
Broad mandatory access requirements would likely increase the Company's
capital costs associated with new video Rights of Entry if construction of
duplicative video infrastructure (or "overbuilding") were required. It should
also be noted that in a number of instances video Rights of Entry are
subordinate by their terms to indebtedness secured by the MDU, with the effect
that enforcement of the security interest or default under the indebtedness
could result in termination of the Right of Entry. Bankruptcy of an MDU owner
could also result in rejection of the agreement as an "executory contract."
DEPENDENCE ON PRODUCTS AND SERVICES OF OTHERS
The Company's success requires that the Company effectively market its
products to MDU residents and provide reliable service to its subscribers. The
Company relies to a significant extent on face-to-face marketing efforts of
on-site leasing staff. Although these leasing consultants receive commissions
from the Company for their sales of the Company's services, they are not
employees of the Company, and there can be no assurances that leasing
consultants will market the Company's services to MDU residents effectively,
or at all.
The Company currently resells telephony services offered by the ILECs and an
IXC, and provides video programming provided by others. Such services and the
ultimate service providers are subject to power loss, capacity limitations,
signal interference, software defects, network outages and other factors,
certain of which have caused in the past, and will continue to cause,
interruptions in service or reduced capacity for the Company's customers. Such
problems, whether they are the result of actions or inactions by the Company
or others, can result in dissatisfaction among the Company's customers with
the services provided by the Company. The Company's success will depend in
part on customer satisfaction with its services, and any dissatisfaction with
such services could have a material adverse effect on the Company's results of
operations and financial condition and its ability to meet its obligations
under the Notes.
RISKS RELATED TO DISTRICT OF COLUMBIA CLEC STATUS
In May 1997, the Company applied for and received CLEC authorization in the
District of Columbia. The Company subsequently commenced local telephony
service with eleven customers in the District of Columbia. On October 30,
1997, the PSC concluded that its rules were inconsistent with the D.C. Code,
voided previously issued CLEC approvals and directed all previously approved
carriers (including the Company) to file new applications by November 29,
1997. The Company subsequently ceased accepting orders for local telephony
services in the District of Columbia. In April 1998 the Company reapplied for
CLEC authorization in the District of Columbia under the new PSC rules and
subsequently recommenced marketing efforts in July 1998. There can
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be no assurance that such authorization will be granted. The lapse in
regulatory approval since November 30, 1997 could be deemed to cause a default
to exist under certain of the Company's agreements, including the Company's
agreement for the resale of local telephony services in the District of
Columbia and certain telephony Right of Entry agreements. If not timely cured,
a default under any such agreement could have a material adverse effect on the
Company's results of operations and financial condition and its ability to meet
its obligations under the Notes.
In addition, failure to obtain CLEC status in the District of Columbia could
preclude the Company from offering local telephony service in the District of
Columbia. Inability to offer local telephony service in the District of
Columbia could have a material adverse effect on the Company's results of
operations and financial condition and its ability to meet its obligations
under the Notes.
DIFFICULTIES IN IMPLEMENTING LOCAL EXCHANGE AND LONG DISTANCE TELEPHONY
SERVICES
The Company is a recent entrant into the newly created competitive local
telephony services industry. The local exchange telephony services market in
most states was only recently opened to competition due to the passage of the
Telecommunications Act of 1996 (the "Telecommunications Act") and related
regulatory rulings. There are numerous operating complexities associated with
providing these services. The Company will be required to develop new products,
services and systems and will need to develop new marketing initiatives to sell
these services. The inability to overcome any of these operating complexities
could have a material adverse effect on the Company's results of operations and
financial condition and its ability to meet its obligations under the Notes. In
addition, the Company's local exchange telephony services may not be profitable
due to, among other factors, attempts by local governments to impose franchise
fees on CLECs, attempts by property owners to obtain unreasonable access
payments, lack of customer demand, difficulties initiating service and
competition and pricing pressure from the ILECs and other CLECs. There can be
no assurance that the Company will be able to successfully implement its
services strategy.
The Company currently resells local telephony services provided by ILECs.
Although the Telecommunications Act requires all ILECs to permit resale of
their telephony services without unreasonable restrictions or conditions, and
requires ILECs to offer their retail telecommunications services to other
telecommunications carriers for resale at discounted rates, based on the costs
avoided by the ILEC in such offering, there can be no assurance that the
Company will be able to initiate or provide service in a timely manner or at
competitive prices. The Company's ability to expand its services to new markets
will require the negotiation of additional resale agreements with the ILECs,
which can require considerable time, effort and expense and are subject to
federal, state and local regulation. As long as the Company is considered to be
an affiliate of SBC for regulatory purposes it is prohibited from providing
long distance telephony service to customers in the SBC Region until SBC has
obtained regulatory authority to do so and is also subject to certain other
restrictions, including regulations regarding provision of other services in
the SBC Region.
The Company plans to replace selectively its resale platform with higher
margin facilities-based services as warranted by subscriber traffic levels and
the availability of alternative network facilities within each market. The
Telecommunications Act requires ILECs to permit their competitors to
interconnect with the ILEC's facilities on nondiscriminatory terms, and permits
competitors to purchase from the ILECs only the origination and termination
services needed (thereby decreasing the competitors' operating expenses). There
can be no assurance that this "unbundling" will be effected in a timely manner
or that it will result in prices favorable to the Company.
Migration to facilities-based services will also require the Company to face
increased operational complexity and risks as it takes over functions performed
by the ILECs under existing resale arrangements. In particular, the Company
will become responsible for designing, constructing, operating and maintaining
key elements of its own network and providing for required resident services
such as 911, operator services and
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directory assistance. Building the capabilities to provide such services will
require the recruiting, selection, and hiring of significant numbers of
skilled engineers and technicians, as well as the purchase and successful
installation of complex network equipment. There can be no assurance that the
Company will be able to effect this migration to facilities-based services
efficiently and without temporary service interruptions. In addition, the
Company's ability to migrate to facilities-based services will require the
negotiation of interconnection agreements with ILECs, which can take
considerable time, effort and expense and are subject to federal, state and
local regulation.
In addition, the Company might incur significant expenses to assure that its
networks comply with the requirements of the Communications Assistance for Law
Enforcement Act ("CALEA"). Under CALEA, telecommunications carriers are
required to: (i) provide law enforcement officials with call content and call
identifying information pursuant to a valid electronic surveillance warrant
("assistance capability requirements"); and (ii) reserve a sufficient number
of circuits for use by law enforcement officials in executing court authorized
electronic surveillance ("capacity requirements"). To the extent that the
Company provides facilities-based services, it may incur costs in meeting both
of these requirements. In particular, regarding the assistance capability
requirements, the government is only required to compensate carriers for the
costs of making equipment installed or deployed before January 1, 1995 CALEA-
compliant. While the telecommunications industry is attempting to negotiate
legislative and administrative changes to this reimbursement cut-off date, as
it stands today, the Company will be financially responsible for ensuring that
its post-1995 equipment is in compliance. Regarding the capacity requirements,
the government will finance any necessary increases in capacity for equipment
installed or deployed prior to September 8, 1998, and the Company will be
responsible for paying for any necessary increases in capacity for equipment
installed or deployed after that date.
In August 1996, the FCC released a decision implementing the interconnection
portions of the Telecommunications Act (the "Interconnection Decision"). The
Interconnection Decision establishes rules for negotiating interconnection
agreements and guidelines for review of such agreements by state public
utilities commissions. On July 18, 1997, the United States Court of Appeals
for the Eighth Circuit (the "Eighth Circuit") vacated certain portions of the
Interconnection Decision, including provisions establishing a pricing
methodology for unbundled network elements and a procedure permitting new
entrants to "pick and choose" among various provisions of existing
interconnection agreements between ILECs and their competitors. On October 14,
1997, the Eighth Circuit issued a decision which vacated additional FCC rules
and will likely have the effect of increasing the cost of obtaining the use of
combinations of an ILEC's unbundled network elements. The Eighth Circuit
decision may require renegotiation of existing agreements. See "--
Competition." The Supreme Court has granted a writ of certiorari to review the
Eighth Circuit decision. Certain CLECs have publicly stated that they have
experienced difficulties in working with the ILECs with respect to
provisioning, interconnection, collocation and implementing the systems used
by these new carriers to order and receive unbundled network elements and
telecommunications services from the ILECs. Coordination with ILECs is
necessary for new carriers such as the Company to provide local service to
customers on a timely and competitive basis.
As part of its offering of bundled telephony and video services to its
customers, the Company offers long distance services to its customers. The
long distance business is highly competitive and prices have declined
substantially in recent years and are expected to continue to decline. In
addition, the long distance industry has historically had a high average churn
rate, and customers continue to change long distance providers frequently in
response to the offering of lower rate or promotional incentives by
competitors. The Company relies on other carriers to provide transmission and
termination services for all of its long distance traffic pursuant to resale
agreements. Such agreements typically provide for the resale of long distance
services on a per-minute basis. Negotiation of these agreements involves
estimates of future supply and demand for transmission capacity as well as
estimates of the calling pattern and traffic levels of the Company's future
customers. In the event the Company underestimates its need for transmission
capacity, it may be required to obtain capacity through more expensive means.
See "--Dependence on SBC Affiliation; Inability to Provide Long Distance
Service in SBC Region; Risk of Loss of Favorable Contracts."
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A federal District Court has recently held provisions of the
Telecommunications Act restricting the offering of interLATA services by RBOCs
to be unconstitutional. See "--Government Regulation." This decision has been
stayed pending appeal. If the decision is upheld, this would allow RBOCs to
enter the long distance market immediately, increasing competition in the long
distance market and in the market for bundled services.
AVAILABILITY OF TRANSMISSION SITES
The Company's microwave network expansion plans require the Company to lease
or otherwise obtain permission to install equipment at rooftop and tower
transmission sites in substantially all of its markets. The availability of
these sites is subject to market conditions and may be subject to zoning and
other municipal restrictions. The Company believes that as additional wireless
video services and telecommunications providers emerge, competition for such
transmission sites will continue to increase. There can be no assurance that
the Company will be able to obtain or maintain the necessary rights to
implement its microwave network expansion plan on acceptable terms, in a
timely manner, or at all. The Company's inability to obtain such rights could
preclude it from providing video services at a reasonable cost, and could
therefore have a material adverse effect on the Company's results of
operations and financial condition and its ability to meet its obligations
under the Notes.
RISKS RELATED TO SUBSCRIBER TURNOVER
Many of the MDU units served by the Company are apartments, which generally
have significantly higher turnover rates than businesses and other types of
residences. As a result, the Company's potential subscriber base is likely to
have a higher rate of turnover than other types of subscribers. Higher
turnover rates typically result in increased administrative and promotional
expenses. The Company has had, and expects to continue to have, a higher
Penetration Rate among residents moving into a served building than among
existing residents. Management believes that a majority of apartment turnover
occurs between the months of April and October. Should the Company fail to
maximize its subscription of new customers for any reason during these
critical months, such a failure could have a material adverse effect on the
Company's results of operations and financial condition and ability to meet
its obligations under the Notes. Moreover, although management believes the
Company's resources, including its customer care facility and billing systems,
are adequate to handle a large increase in customer volume, there can be no
assurances that they will perform adequately under such circumstances.
BUSINESS DEVELOPMENT AND EXPANSION RISKS; POSSIBLE INABILITY TO MANAGE GROWTH
The Company is in the early stages of its operations and only began actively
marketing its services in January 1998. As of August 31, 1998 the Company had
200 employees. Management expects that the Company will need to increase its
number of employees rapidly as it obtains new Rights of Entry and adds
subscribers. The need for installation and repair technicians and customer
care representatives is expected to be particularly acute. The Company's
success will depend upon, among other things, the Company's ability to provide
timely, courteous service to its customers, and difficulties in hiring a
sufficient number of qualified employees could result in delays in
installation and repair calls and lower levels of customer care, particularly
during any periods of rapid growth. The Company's ability to market its
services effectively in MDUs will be dependent upon the Company's training and
support of third party on-site leasing agents. The Company anticipates that it
will need to increase its training and marketing resources as its business
expands. Delay or failure in providing such training or support may affect the
Company's ability to achieve its revenue and Penetration Rate targets. Failure
by the Company to train and support leasing agents, to meet the demands of
customers or to manage the expansion of its business and operations could have
a material adverse effect on the Company's results of operations and financial
condition and its ability to meet its obligations on the Notes.
The Company's success will also depend on its ability to assess potential
markets, obtain additional required governmental authorizations, franchises
and permits, secure financing, provision new customers, implement resale and
interconnection arrangements with ILECs, develop and implement a facilities-
based platform, including obtaining capacity and equipment (either through the
leasing of existing facilities or the installation of
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new switches, digital loop carrier equipment, fiber optic cable or other
similar facilities), implement efficient customer service, billing and other
back office systems and develop a sufficient customer base. In addition, as
the Company implements a facilities-based platform, it may be subject to more
extensive regulation.
The successful implementation of the Company's business plan will result in
rapid expansion of its operations and the provision of bundled telephony and
video services on a widespread basis. The Company's ability to manage such
future growth, should it occur, will depend upon its ability to develop
efficient customer service, billing and other back office systems, monitor
operations, control costs, maintain regulatory compliance, maintain effective
quality controls and significantly expand the Company's internal management,
technical, information and accounting systems and to attract, assimilate and
retain additional qualified personnel. See "--Dependence on Key Personnel."
Failure of the Company to manage its future growth effectively could adversely
affect the expansion of the Company's customer base and service offerings.
There can be no assurance that the Company will successfully implement and
maintain such operational and financial systems or successfully obtain,
integrate and utilize the employees and management, operational and financial
resources necessary to manage a developing and expanding business in an
evolving, highly regulated and increasingly competitive industry. Any failure
to expand these areas and to implement and improve such systems, procedures
and controls in an efficient manner at a pace consistent with the growth of
the Company's business could have a material adverse effect on the Company's
results of operations and financial condition and its ability to meet its
obligations under the Notes.
RISKS RELATED TO MARKET ACCEPTANCE AND VALUE OF BUNDLED SERVICE OFFERING
The Company is providing services which have historically been provided by
the ILECs, and the OnePoint brand is not well known. The Company's success
will depend upon, among other things, the willingness of customers to accept
the Company as an alternate provider of local and long distance telephony
service and/or video service. There can be no assurance that such acceptance
will occur, and the lack of such acceptance could have a material adverse
effect on the Company's results of operations and financial condition and its
ability to meet its obligations under the Notes.
Management believes that the Company's ability to offer bundled services in
MDUs will result in increased market penetration leading to additional
revenues, reduced subscriber churn and reduced operating and other expenses.
There can be no assurance that the Company will be successful in creating or
marketing its bundled service offering, or that it will be able to realize
incremental revenue and cost savings from its bundled offerings. Failure to
market bundled services successfully or to realize incremental revenue and
cost savings in connection therewith could have a material adverse effect on
the Company's results of operations and financial condition and its ability to
meet its obligations under the Notes.
ABILITY TO PROCURE PROGRAMMING SERVICES
The Company purchases video programming primarily from a programming
wholesaler and programming suppliers. The Company's video programming services
are dependent upon management's ability to procure programming that is
attractive to its customers at reasonable commercial rates. The Company is
dependent upon third parties for the development and delivery of programming
services. These programming suppliers charge the Company for the right to
distribute the programming to the Company's customers. The costs to the
Company for programming services are determined through negotiations with
these programming suppliers. Management believes that the availability of
sufficient programming on a timely basis will be important to the Company's
future success. There can be no assurance that the Company will have access to
programming services or that management can secure rights to attractive
programming on commercially acceptable terms.
RISKS RELATING TO INTERNET BUSINESS
With respect to its planned Internet offerings, the Company believes that it
is not currently subject to direct regulation by the FCC or any other
governmental agency, other than regulations applicable to businesses
generally. To date, the FCC has not actively sought to regulate the provision
of Internet access and related
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services. Under current law, operators of "enhanced" services, which currently
include Internet access services, are exempt from FCC regulation, but
operators of "basic" services are not similarly exempt. The FCC recently
announced its intention to determine on a case-by-case basis whether to
require Internet telephony services to contribute financially to universal
service support mechanisms which could also subject these services to other
forms of regulation.
Due to the increase in Internet use and publicity, it is possible that new
laws and regulations may be adopted, and that changes in laws or regulations
may be made, with respect to the Internet, including laws regarding privacy,
pricing, and characteristics of services or products. Certain other
legislative initiatives, including those involving taxation of Internet
services and transactions, and payment of access charges by Internet providers
have also been proposed. BellSouth recently announced that it will assess
access charges on certain providers of IP-based telephony. Any legislation or
regulation regarding the Internet could impact adversely the Company's ability
to provide various planned services and have a material adverse effect on the
Company's results of operations and financial condition and its ability to
meet its obligations under the Notes. The Company cannot predict the impact,
if any, that future laws or any legal changes may have on its business.
There are also a number of ongoing proceedings at the FCC regarding whether
the FCC should regulate the Internet. On April 10, 1998, the FCC reported to
Congress on the meaning of various provisions in the Telecommunications Act,
including whether the provision of Internet access is a "telecommunications"
service. In its report, the FCC concluded that Internet access service,
defined as a bundled offering combining various computer processing and
content applications, is an information service under the Telecommunications
Act and that the transmission capabilities provided over the facilities
underlying Internet access and other information service offerings constitute
"telecommunications" under the Telecommunications Act, whether provided by a
common carrier or self-provisioned by an Internet service provider. The FCC
noted that Internet-protocol ("IP") phone-to-phone telephony appears to be a
telecommunications service rather than an information service, but a final
conclusion was deferred to subsequent ad hoc proceedings. The regulatory
status of cable television system facilities used to provide Internet access
was specifically not addressed, and how universal service funding obligations
will apply will be the subject of a further proceeding. The ultimate
resolution of these issues could affect the regulatory status, cost, or other
aspects of the Company's service offerings.
The introduction of, or changes to, regulations that directly or indirectly
affect the regulatory status of Internet services, affect telecommunications
costs (including the application of reciprocal compensation requirements,
access charges or universal service contribution obligations to Internet
services), or increase the competition from regional telecommunications
companies or others, could have a material adverse effect on the Company's
results of operations and financial condition and its ability to meet its
obligations under the Notes. For instance, if the FCC determines, through any
one of the ongoing or future proceedings, that the Internet is subject to
regulation, the Company could be required to comply with a number of FCC
entry/exit regulations, reporting, fee, and record-keeping requirements,
marketing restrictions, access charge obligations, and universal service
contribution obligations, which could adversely impact the Company's ability
to provide various planned services and have a material adverse effect on the
Company's results of operations and financial condition and its ability to
meet its obligations under the Notes. The Company cannot predict the impact,
if any, that regulations or regulatory changes may have on its business. A
final determination by the FCC that providing Internet transport or telephony
services to customers over an IP-based network is subject to regulation also
could impact adversely the Company's ability to provide various planned
services and could have a material adverse effect on the Company's results of
operations and financial condition and its ability to meet its obligations
under the Notes.
Federal and state laws and regulations relating to the liability of online
services companies and Internet access providers for information carried on or
disseminated through their networks are currently unsettled. Several private
lawsuits seeking to impose such liability upon online services companies and
Internet access providers are currently pending. In addition, legislation has
been enacted and new legislation has been proposed that imposes liability for
the transmission of or prohibits the transmission of certain types of
information on the Internet, including sexually explicit and gambling
information. The imposition of potential liability on the Company as an
Internet access provider for information carried on or disseminated through
its systems could
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require the Company to implement measures to reduce its exposure to such
liability, which may require the Company to expend substantial resources or to
discontinue certain service or product offerings. The increased attention on
liability issues as a result of these lawsuits and legislative actions and
proposals could impact the growth of Internet use. While the Company carries
professional liability insurance, it may not be adequate to compensate or may
not cover the Company in the event the Company becomes liable for information
carried on or disseminated through its networks. Any costs not covered by
insurance incurred as a result of such liability or asserted liability could
have a material adverse effect on the Company's results of operations and
financial condition and its ability to meet its obligations under the Notes.
DEPENDENCE ON BILLING, CUSTOMER CARE AND INFORMATION SYSTEMS
Sophisticated back office information and processing systems are vital to the
Company's growth and its ability to monitor costs, bill customers, provision
customer orders and achieve operating efficiencies. The Company's right to use
these systems is dependent upon license agreements with third party vendors.
Certain of such agreements may be cancelable by the vendor and the cancellation
or nonrenewal of these agreements could have a material adverse effect on the
Company's results of operations and financial condition and its ability to meet
its obligations on the Notes. The Company's customer care and billing systems
were designed in conjunction with Beechwood Data Systems Inc. and Columbia
Services Group Inc. ("CSG"). Other computer interfaces are utilized for pre-
ordering and trouble management. The Company's employees input customer
information into the systems and interface with the ILECs to provision
services. CSG processes, prints and mails the Company's billing statements,
however. The Company has been using its customer information systems for less
than twelve months and only with respect to a limited number of subscribers.
The failure of the Company's customer care, billing and information systems to
perform as expected, or failure of CSG to perform bill processing and
distribution in a timely and effective manner could have a material adverse
effect on the Company's results of operations and financial condition and its
ability to meet its obligations under the Notes. The Company's customer care
facility and billing systems have never been tested with large numbers of
subscribers and although management believes such resources are adequate to
handle a large increase in customer volume, there can be no assurances that
they will perform adequately under such circumstances. Portions of the customer
care facility are currently operated jointly with Mid-Atlantic. See "--Risks
Related to Mid-Atlantic Joint Ventures."
DEPENDENCE ON KEY PERSONNEL
The Company's performance is dependent upon the performance of its officers
and key employees. Given the early stage of deployment, the Company is
dependent on its ability to retain and motivate high quality personnel,
especially its management, which currently consists of a small number of key
executive officers, most notably James A. Otterbeck, the Company's Chairman and
Chief Executive Officer, William F. Wallace, the Company's President and Chief
Operating Officer and John Stavig, the Company's Chief Financial Officer. Mr.
Otterbeck is President of The VenCom Group, Inc., a venture capital company
("VenCom"), and devotes a portion of his time and attention to the affairs of
VenCom. Mr. Otterbeck does not currently receive any compensation as an
employee of OnePoint. See "Management" and "Certain Relationships and Related
Transactions." The loss of services of one or more of these key individuals
could have a material adverse effect on the Company's results of operations and
financial condition and its ability to meet its obligations on the Notes. The
Company believes that its success will depend in large part on its ability to
develop large and effective sales and service forces and its ability to attract
and retain highly skilled and qualified personnel. The Company maintains key
person life insurance only for its Chairman and Chief Executive Officer.
Although the Company has been successful in attracting and retaining qualified
personnel, the competition for qualified managers in the telecommunications
industry is intense and, accordingly, there can be no assurance that the
Company will be able to hire or retain necessary personnel in the future.
CONTROL BY INVESTORS; POTENTIAL CONFLICTS OF INTEREST
Mr. Otterbeck and SBC (collectively, the "Equity Investors"), own indirectly
90% of the common stock of the Company on a fully diluted basis after giving
effect to the exercise of the Warrants. Accordingly, the Equity Investors are
able to control the management policy of the Company and all fundamental
corporate actions,
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including mergers, substantial acquisitions and divestitures and other
agreements and the election of the Board of Directors of the Company. See
"Security Ownership of Certain Beneficial Owners and Management" and "Certain
Relationships and Related Transactions."
Certain decisions concerning the operations or financial structure of the
Company may present conflicts of interest between the Equity Investors and the
holders of the Notes. For example, if the Company encountered financial
difficulties or were unable to pay its debts as they matured, the interests of
the Equity Investors might conflict with those of the holders of Notes. In
addition, the Equity Investors may have an interest in pursuing acquisitions,
divestitures, financings or other transactions that, in their judgment, could
enhance their investment in the Company, even though such transactions might
involve increased risk to the holders of the Notes. In addition to their
investment in the Company, the Equity Investors and their affiliates currently
have significant investments in other telecommunications companies and may in
the future invest in other entities engaged in the telecommunications business
or in related business (including entities engaged in the business and in areas
in which the Company operates). As a result, the Equity Investors have, and may
develop additional, relationships with businesses that are or may be
competitive with the Company. Conflicts may also arise in the negotiation or
enforcement of arrangements entered into by the Company and entities in which
these investors have an interest.
ACQUISITION-RELATED RISKS
The Company expects to acquire other businesses that management believes will
complement its existing business. Management is unable to predict whether or
when any prospective acquisitions will occur or the likelihood of a material
transaction being completed on favorable terms and conditions. The Company's
ability to finance acquisitions may be constrained by, among other things, its
high degree of leverage. The Indenture may significantly limit the Company's
ability to make acquisitions and to incur Indebtedness in connection with
acquisitions. The inability of the Company to effect such transactions will
limit its ability to achieve rapid market penetration and execute its strategy
and thus have a material adverse effect on the Company's results of operations
and financial condition and its ability to meet its obligations on the Notes.
Such transactions, if effected, are likely to involve certain risks, including,
among other things: the difficulty of assimilating the acquired operations and
personnel; the potential disruption of the Company's ongoing business and
diversion of resources and management time; the possible inability of
management to maintain uniform standards, controls, procedures and policies;
the risks of entering markets in which the Company has little or no direct
prior experience; and the potential impairment of relationships with employees
or customers as a result of changes in management. There can be no assurance
that any acquisition will be made, that the Company will be able to obtain
additional financing needed to finance such acquisitions and, if any
acquisitions are so made, that the acquired business will be successfully
integrated into the Company's operations or that the acquired business will
perform as expected. In June 1998, the Company, through a wholly owned
subsidiary, entered into a definitive agreement to acquire substantially all of
the assets used by People's Choice TV Corp. and Preferred Entertainment, Inc.
to provide video service to MDUs in Chicago. Pursuant to the agreement, the
Company acquired approximately 27,800 video passings in 159 properties in July
and August. Management expects to invest in video reception and transmission
equipment to upgrade the video services offering for the acquired passings.
From time to time the Company has discussions with other companies and assesses
opportunities on an ongoing basis. The Company is at various stages of
discussion with respect to certain potential acquisitions in its targeted
markets. The Company has entered into letters of intent to acquire certain
cable rights of entry contracts and related equipment from three companies in
North Carolina. If consummated, the acquisitions would result in the addition
of approximately 4,300 video passings in 14 properties. There can be no
assurance that the Potential Transactions will be consummated or of the terms
on which such transactions may be consummated.
The Company may also enter into joint venture transactions. See "--Risks
Related to Mid-Atlantic Joint Ventures." These transactions present many of the
same risks involved in acquisitions and may also involve the risk that other
joint venture partners have economic, business or legal interests or objectives
that are inconsistent with those of the Company. Joint venture partners may
also be unable to meet their economic or other obligations, thereby forcing the
Company to fulfill these obligations. The inability of any joint venture
partners to meet their obligations could have a material adverse effect on the
Company's results of operations or financial condition and its ability to meet
its obligations under the Notes.
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RISKS RELATED TO MID-ATLANTIC JOINT VENTURES
From February to June 1997, the Company made investments totalling
approximately $12.0 million to acquire a 50% ownership interest in Mid-
Atlantic. The Company elected not to meet capital calls in February and June
of 1998, and as a result it currently holds an approximately 41% equity
interest in Mid-Atlantic. The Company's equity in Mid-Atlantic constitutes a
significant portion of its assets, accounting for $9.3 million of the
Company's $19.8 million in assets (based on book values) as of December 31,
1997 and $7.8 million of the Company's $186.9 million in assets (based on book
values) as of June 30, 1998. In late 1997 the Company and Mid-Atlantic began
joint marketing of telephony and video services under the OnePoint brand name
on a building by building basis to the approximately 68,000 passings in the
approximately 111 MDUs and 7 franchise cable areas served by Mid-Atlantic in
the Washington/Baltimore/Philadelphia metropolitan area. Pursuant to the terms
of Mid-Atlantic's Operating Agreement, the joint venture is not managed by the
Company. As a consequence, the Company has limited ability to control Mid-
Atlantic and may be unable to prevent actions by Mid-Atlantic which might be
adverse to the interests of the Company, and which might result in a material
adverse change in the value of the Company's interest in Mid-Atlantic.
The Company's consent is required for a limited number of actions by Mid-
Atlantic, including entry into new lines of business, entry into a merger,
consolidation, recapitalization or reorganization transaction, making of
certain payments to members or entry into transactions with insiders on other
than an arm's-length basis, entry into agreements in excess of $1 million
(other than cable operator acquisitions and contracts to provide cable
services), sales of assets other than in the ordinary course and other than
strategic sales of contracts with a fair market value not exceeding $500,000
in any 12-month period, and liquidation or dissolution.
Mid-Atlantic is highly leveraged. The degree of leverage of Mid-Atlantic
could have important consequences to the Company, including but not limited to
the ability of Mid-Atlantic to fulfill its obligations under its agreements,
the frequency and amount of capital calls by Mid-Atlantic, and the value of
the Company's equity in Mid-Atlantic and the likelihood that the Company will
be able to recoup its investment in the future. Although the Company is not
required to make additional capital contributions to Mid-Atlantic, its failure
to do so on a pro rata basis will result in a decline in the Company's
percentage ownership of Mid-Atlantic, and could affect the value of the
Company's investment in Mid-Atlantic. There can be no assurance that a
reduction in the Company's percentage ownership of Mid-Atlantic would not have
a material adverse effect on the Company's results of operations and financial
condition and its ability to meet its obligations on the Notes. Mid-Atlantic's
agreements with its lenders prohibit the payment of dividends by Mid-Atlantic.
On August 6, 1998 OnePoint made a demand for arbitration of certain disputes
under the Mid-Atlantic Operating Agreement. The arbitration demand seeks
resolution of the following questions: (i) whether OnePoint is entitled to
obtain and disclose Mid-Atlantic's results in connection with the Exchange
Offer; (ii) whether the Mid-Atlantic Cable Holdings, LLC ("Mid-Atlantic
Holdings"), the other owner of membership interest in Mid-Atlantic, and John
Norcutt ("Norcutt"), the Business Manager of Mid-Atlantic and a principal of
Mid-Atlantic Holdings, breached their contractual and fiduciary obligations to
OnePoint by delaying and then conditioning the release of Mid-Atlantic's 1997
audited financial statements on a grant of business concessions from OnePoint;
(iii) whether the Mid-Atlantic Holdings and Norcutt breached their contractual
and fiduciary obligations to Mid-Atlantic and OnePoint by rejecting an offer
of financing from OnePoint in favor of an inferior offer from an unaffiliated
financing source; (iv) whether Mid-Atlantic Holdings and Norcutt violated
their contractual and fiduciary duties to OnePoint by imposing on OnePoint a
four-day deadline to meet a June 1998 capital call for Mid-Atlantic; and (v)
whether Mid-Atlantic Holdings and Norcutt are liable for damages to OnePoint
resulting from the breaches of contractual and fiduciary duties described
above. On August 27, 1998, Mid-Atlantic Holdings filed a motion in Circuit
Court in Lake County, Illinois seeking an injunction staying the arbitration
with respect to the first question on the grounds that because OnePoint is not
a party to the Mid-Atlantic Operating Agreement, the dispute is not
arbitrable.
The Company contributed $5 million to form VIC-RMTS-DC, LLC, the company
that provides telephony services in the Mid-Atlantic region, and South Central
Development Company L.P. ("South Central"), an
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affiliate of the other owners of equity in Mid-Atlantic, was to contribute a
like amount of assets or cash. Upon review, however, the Company believes that
the value of the assets contributed by South Central was sufficient to give
South Central only an 8% interest. OnePoint has also made additional capital
contributions to VIC-RMTS-DC, LLC which have not been matched by South
Central. OnePoint will be entitled only to that portion of any distributions
made by VIC-RMTS-DC, LLC corresponding to its percentage ownership therein.
In December 1997 OnePoint invested $750,000 to acquire a 50% equity interest
(with a preferred return) in Mid-Atlantic Telcom Plus Interactive ("MAC
Interactive"). In December 1997, MAC Interactive entered into an agreement
with ODS Technologies, L.P. ("ODS") to acquire set top boxes and marketing
rights from ODS for its pari-mutuel horse racing wagering service for an
aggregate of $750,000. It is anticipated that MAC Interactive will provide
such set top boxes and market ODS services to Mid-Atlantic subscribers. The
other investors in MAC Interactive are the investors that also own the equity
interests in Mid-Atlantic which are not owned by the Company. VIC was a
limited partner of ODS until July 1998. There can be no assurance that ODS
will be able to introduce its pari-mutuel wagering service in any
jurisdictions, or that the Company will realize any returns on its investment
in MAC Interactive.
Portions of the Company's customer care facility are currently operated
jointly with Mid-Atlantic. The billing and operating support system is
operated pursuant to a contract between the Company and a third party, and
Mid-Atlantic reimburses the Company for a portion of the variable expenses
related to the system, based on usage. Both the Company and Mid-Atlantic
utilize the facility to perform services for their customers, and data
relating to both companies' customers are integrated into the billing and
operating support systems. The PBX/ACD telephone equipment used at the
facility is leased by Mid-Atlantic and the Company reimburses Mid-Atlantic for
half of the expenses related to such equipment. In certain circumstances, the
Company relies on Mid-Atlantic's employees to answer the Company's inbound
phone calls. The Company also reimburses Mid-Atlantic for certain payroll and
other expenses with respect to shared employees. Any event that required the
separation of Mid-Atlantic and OnePoint customer care and billing operations
could result in a disruption in the Company's ability to provide adequate
service to its customers. There can be no assurance that such occurrence would
not have a material adverse effect on the Company's results of operations and
financial condition and its ability to meet its obligations under the Notes.
In addition, the Company is a co-tenant with Mid-Atlantic with respect to both
companies' offices in Washington, D.C., and is jointly and severally liable
for lease payments with respect to space used by Mid-Atlantic.
RISKS RELATED TO THE MID-ATLANTIC JOINT VENTURE NON-COMPETITION AGREEMENTS
In connection with the Mid-Atlantic joint venture, the Company, its co-joint
venturer and certain of their affiliates entered into a series of Non-
Competition Agreements. Such agreements restrict the rights of such parties
(other than Mid-Atlantic and VIC-RMTS-DC, LLC, the telephony joint venture
company controlled by the Company) to provide cable and telephony services,
respectively, under certain circumstances in either (i) the "D.C. Metro" area,
defined to include Washington D.C., Baltimore, Maryland and certain areas of
Virginia, or (ii) the "Territory," defined to include the States of Delaware,
Maryland, New Jersey, Pennsylvania and Virginia and Washington, D.C.
The agreements restrict parties other than Mid-Atlantic from pursuing any
opportunity related to, or providing, any private cable service or any
franchise cable service with less than 75,000 dwelling units passed or
available to be passed anywhere in the Territory unless such opportunity has
been offered first to Mid-Atlantic, and then to VIC-RMTS-DC, LLC and, within
the D.C. Metro area, only if Mid-Atlantic has ceased to develop cable
opportunities therein for not less than six consecutive months.
The agreements restrict parties other than VIC-RMTS-DC, LLC from pursuing
any opportunity related to, or providing any, telephony services in the
Territory unless such opportunity has been offered first to VIC-RMTS-DC, LLC,
and then to Mid-Atlantic and, within the DC Metro area, only if VIC-RMTS-DC,
LLC has ceased to develop telephony opportunities therein for not less than
six consecutive months.
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In the event that any proposed telephony or cable acquisition would provide
a legal or regulatory conflict for SBC such that neither VIC-RMTS-DC, LLC nor
Mid-Atlantic could pursue such acquisition, there is no offer requirement.
Each party to the agreements is restricted from providing a bundled service
offering consisting of telephony and cable services (other than pursuant to
the joint venture) within the D.C. Metro area. The agreements prohibit the
recruiting or solicitation of any employees, customers, subscribers or
suppliers of either of the joint venture companies who perform services in the
Territory. The duration of such agreements with respect to any party is
dependent on such party's continued equity ownership in the joint venture
entities, and the continued operation of the joint venture entities, but last
in no event longer than one year following the end of such party's affiliation
with the joint venture entities.
COMPETITION
The Company competes with a wide range of service providers for each of the
services that it provides. Virtually all markets for telephony and video
services are highly competitive, and the Company expects that competition will
intensify in the future. In each of the markets in which it offers services,
the Company faces significant competition, often from larger, better-financed
ILECs, IXCs and cable companies, and the Company often competes directly with
incumbent providers which have historically dominated their respective local
telephony, long distance telephony and cable television markets. These
incumbents have numerous advantages as a result of their size and historic
control of their respective markets. On May 11, 1998 SBC announced that in
connection with its planned merger with Ameritech, the Combined Company would
provide an integrated mix of local, long distance, Internet and high-speed
data services to consumers and businesses in 30 additional U.S. markets
outside of its region, including certain of the Company's other currently
targeted markets: Atlanta, Baltimore, Denver, Philadelphia, Phoenix and
Washington. Upon entry into these markets, the Combined Company would be
competing with OnePoint if it elected to target residential customers residing
in MDUs other than through a cooperation arrangement or other agreement with
the Company. While the Company believes that opportunities may exist for the
Company to utilize the Combined Company's assets in such markets on favorable
terms, the Company cannot predict the effect on OnePoint of entry of the
Combined Company into such markets, including the effect on OnePoint's ability
to compete in such markets and its ability to continue to purchase certain
services and equipment on favorable terms pursuant to SBC agreements, and
there can be no assurance that such competition from the Combined Company
would not have a material adverse effect on the Company's results of
operations and financial condition and its ability to meet its obligations
under the Notes. See "--Dependence on SBC Affiliation; Restrictions on Ability
to Provide Service in SBC Region; Risk of Loss of Favorable Contracts."
With respect to local telephony services, the Company competes with the
ILECs and alternative service providers including CLECs and cellular and other
wireless telephony service providers. With respect to long distance telephony
services, the Company faces, and expects to continue to face, significant
competition from IXCs, including AT&T, Sprint and MCI WorldCom), which account
for the majority of all long distance revenue. AT&T, MCI WorldCom, Sprint and
other IXCs have announced their intention to offer local services in major
U.S. markets using their existing infrastructure in combination with resale of
ILEC service, lease of unbundled local loops, new facilities or other
providers' services.
The Company believes that among the existing competitors serving MDU
customers, the ILECs, the IXCs, the incumbent cable providers and other CLECs
provide the most direct competition to the Company. In each of its target
markets for bundled telecommunication and video services to MDUs, the Company
faces, and expects to continue to face, significant competition from the
ILECs, which currently dominate their local telephony markets. The Company
competes with the ILECs on the basis of product offerings, customer service
and price, and the ILECs generally have greater resources than the Company to
devote to the implementation of new product offerings, enhanced customer
service and pricing alternatives. The ILECs have begun to expand the amount of
fiber facilities in their networks and to prepare to enter the long distance
telephony services market
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and, in addition, have long-standing relationships with their customers. ILECs
other than RBOCs already may provide in-region long distance telephony
service, and all ILECs may provide out-of-region long distance telephony
service. The Company expects that the increased competition made possible by
regulatory reform will result in certain pricing and margin pressures in the
telecommunications services business.
The Telecommunications Act permits the ILECs and others to provide a wide
variety of video services directly to subscribers in competition with the
Company. Various ILECs, including certain subsidiaries of SBC, currently are
providing video services within and outside their telephony service areas
through a variety of distribution methods, including the deployment of
broadband wire facilities and the use of wireless transmission facilities. The
Company cannot predict the likelihood of success of video service ventures by
ILECs or the impact on the Company of such competitive ventures.
Certain of the Company's video service businesses compete with incumbent
franchise cable companies in their respective service areas. In particular,
OnePoint's wireless satellite systems (DBS and SMATV) compete for cable
subscribers with the major franchise cable operators such as Jones Intercable
Inc. and District Cablevision in the Washington, D.C. metropolitan area,
MediaOne Inc. in Atlanta, Tele-Communications Inc. ("TCI") in Chicago and
Denver and Cox Communications Inc. in Phoenix. In addition, the Company also
competes with home satellite dish earth stations and wireless program
distribution services such as multi-channel multipoint distribution service
systems. The Company expects that its video service will face growing
competition from current and new DBS service providers.
The market for most Internet-related services is extremely competitive.
Currently there are four general types of entities providing the Internet-
related services that will compete with OnePoint: (i) traditional online
service providers, including America Online, and the Microsoft Network, that
offer a combination of Internet access, content, and web hosting services via
the public switched telephone network; (ii) cable-delivered online service
providers, such as @Home Corporation ("@Home") and Internet at Roadrunner
("Roadrunner"), that offer Internet access, content, and web hosting services
via a coaxial infrastructure; (iii) Internet service providers ("ISPs"),
including PSINet, Inc. ("PSINet"), NETCOM OnLine Communications Services, Inc.
("NETCOM"), and numerous regional providers that offer Internet access
services without or with only a limited amount of the content and web hosting
services offered by online service providers; and (iv) telecommunications
providers, including interexchange carriers, local exchange carriers, and non-
carrier telecommunications companies, using wireline, wireless, and satellite
technologies, that offer both traditional telecommunications services such as
voice telephone service as well as many of the services offered by the other
identified competitors, including Internet access.
Most of these competitors have more experience than OnePoint in offering
Internet-related services, as well as superior engineering, marketing, and
personnel resources. Many of these competitors also have greater financial
resources than OnePoint and several competitors are among the largest
corporations in the world. These competitors may be able to use these superior
resources to develop their service offerings and infrastructures more rapidly
and more efficiently than OnePoint. They may be able to react more quickly and
more appropriately to changes in technology or the marketplace. Additionally,
these competitors may be able to improve their competitive position through
mergers and acquisitions.
The number of competitors in the Internet-related services market is likely
to increase steadily. There are few barriers to entry in many Internet-related
markets, and new competitors, such as computer hardware or software
manufacturers, other telecommunications providers, and foreign entities, may
enter the market with considerable resources. Furthermore, competitors
currently devoting only a small part of their resources to Internet-related
services may expand their presence in the marketplace. Regulatory changes may
allow telecommunications providers to improve their competitive position by
permitting service bundling that will create attractive new one-stop-shopping
marketing opportunities.
Changes in the business practices or market positions of competitors or
suppliers of OnePoint also may undermine OnePoint's ability to compete
effectively. For example, commenters that participated in the FCC's
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and Department of Justice's review of the merger of MCI and WorldCom expressed
concern that the merger would give the merged entity a dominant position in
the Internet backbone market. In light of this concern the Justice Department
(after consultation with the antitrust authorities of the European Union)
conditioned approval of the WorldCom/MCI merger on the sale of MCI's Internet
business to a third party (Cable & Wireless). The effectiveness of that sale
in ameliorating competitive concerns remain unclear. If MCI WorldCom has a
dominant position in the Internet backbone market notwithstanding the sale,
this dominance could be used to undermine competition in other Internet-
related markets, to the detriment of OnePoint. The Company cannot predict
whether competition from existing entities, new entrants, or changes in
business practices or market positions of existing or new competitors will
have a material impact on its operations.
The Company also faces, and expects to continue to face, competition from
other potential providers of bundled telephony and video services in certain
of the markets in which the Company offers its services. The Company competes
with companies such as RCN Corporation ("RCN") in Washington, D.C. and 21st
Century Telecom Group, Inc. ("21st Century") in Chicago, which are deploying
advanced fiber optic networks to provide bundled telephony and video services
to residents in MDUs and single-family homes and which may have greater
resources than those of the Company. Other CLECs compete in the local
telephony services market, although they have to date focused primarily on the
market for commercial customers. In addition, potential competitors capable of
offering private line and special access services also include other smaller
long distance carriers, cable television companies, electric utilities,
microwave carriers, wireless telephony system operators and private networks
built by large end-users.
Other new technologies may become competitive with services that the Company
offers. Advances in communications technology as well as changes in the
marketplace and the regulatory and legislative environment are constantly
occurring. In addition, a continuing trend toward business combinations and
alliances in the telecommunications industry may also create significant new
competitors to the Company. The Company cannot predict whether competition
from such developing and future technologies or from such future competitors
will have a material impact on its operations. For additional information on
the competitive environment in which the Company operates, see "Business--
Competition."
GOVERNMENT REGULATION
The Company's networks and the provision of telecommunications services are
subject to significant regulation at the federal, state and local levels. See
"Business--Federal Regulations," "--State Regulation" and "--Local
Regulation." Delays in receiving required regulatory approvals or the
enactment of new adverse regulation or regulatory requirements may have a
material adverse effect upon the Company's results of operations and financial
condition and its ability to meet its obligations under the Notes.
Tariffs
The FCC exercises jurisdiction over the Company with respect to interstate
and international services. Additionally, the Company files tariffs with the
FCC. On October 29, 1996, the FCC approved an order that eliminates the tariff
filing requirements for interstate domestic long distance service provided by
non-dominant carriers such as the Company. On February 13, 1997, the United
States Court of Appeals for the District of Columbia Circuit stayed the FCC
order, and the Company is required to continue filing tariffs while this stay
remains in effect. If the stay is lifted and the FCC order becomes effective,
telecommunications carriers such as the Company will no longer be able to rely
on the filing of tariffs with the FCC as a means of providing notice to
customers of prices, terms, and conditions on which they offer interstate
services. While tariffs offered a means of providing notice of prices, terms,
and conditions, the Company intends to rely primarily on its sales and service
forces and direct marketing to provide such information to its customers.
Tariffs also allow the Company to limit its liability to its customers,
including in connection with service interruptions. If tariffs are eliminated,
the Company may become subject to significantly increased liability risks, and
there can be no assurance that
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such liabilities will not have a material adverse effect on the Company's
results of operations and financial condition and its ability to meet its
obligations under the Notes. In addition, the Company must obtain prior FCC
authorization for installation and operation of international facilities and
the provision (including resale) of international long distance services. There
has been no proposal to detariff international services, and the Company has
therefore filed tariffs to offer these services.
CPNI
In February 1998, the FCC adopted rules implementing Section 222 of the
Communications Act of 1934, as amended (the "Communications Act"), which
governs the use of customer proprietary network information ("CPNI") by
telecommunications carriers. CPNI generally includes any information regarding
a subscriber's use of a telecommunications service, where it is obtained by a
carrier solely by virtue of the carrier-customer relationship. CPNI does not
include a subscriber's name, telephone number, and address, if that information
is published or accepted for publication in any directory format. Under the
FCC's rules, a carrier may only use a customer's CPNI to market a service that
is "necessary to, or used in," the provision of a service that the carrier
already provides to the customer, unless it receives the customer's prior oral
or written consent to use that information to market other services. A number
of parties have asked the FCC to modify several of these rules. Those requests
remain pending. These rules, either as adopted or as modified, may impede the
Company's ability to effectively market integrated packages of services and to
expand existing customers' use of the Company's services.
State Regulation
The Telecommunications Act is intended to increase competition in the
telecommunications industry, especially in the local exchange market. With
respect to local services, ILECs are required to allow interconnection to their
networks and to provide unbundled access to network facilities, and are
required to comply with a number of other procompetitive measures. Because the
implementation of the Telecommunications Act is subject to numerous state
rulemaking proceedings and arbitrations on these issues, it is currently
difficult to predict how quickly full competition for local services, including
local dial tone, will be realized.
All states in which the Company operates require a certification or other
authorization from the state regulatory commission to offer intrastate
telecommunications services. Many of the states in which the Company operates
are in the process of addressing issues relating to the regulation of CLECs.
Some states may require authorization to provide enhanced services.
In a few states, existing state statutes, regulations or regulatory policy
may preclude some or all forms of local service competition. The
Telecommunications Act contains provisions that prohibit states and localities
from adopting or imposing any legal requirement that may prohibit, or have the
effect of prohibiting, the ability of any entity to provide any interstate or
intrastate telecommunications service. The FCC is required to preempt any such
state or local requirements to the extent necessary to enforce the
Telecommunications Act's open market entry requirements. States and localities
may, however, continue to regulate the provision of intrastate
telecommunications services and require carriers to obtain certificates or
licenses before providing service.
In states where the Company operates, numerous state rulemaking proceedings
and arbitrations that may affect the Company's ability to compete with ILECs
are now underway or may be instituted in the future. These rulemaking
proceedings and arbitrations involve a variety of telecommunications issues,
including but not limited to: pricing and pricing methodologies of local
exchange and intrastate interexchange services; development and approval of
resale agreements between ILECs and CLECs and among CLECs; terms and conditions
governing the provision of telecommunications services; customer service and
unauthorized changes in customer-selected telephone service providers;
complaints regarding anticompetitive practices and transactions between
affiliated telecommunications companies; denial of entry into
telecommunications markets; discount levels for resale of local exchange and
toll services; treatment of and compensation for calls to Internet service
providers; charges
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for access to ILEC networks; cost sharing and implementation of interim and
permanent number portability; dialing parity; access to and responsibility for
universal service funding; and review and recommendation to the FCC concerning
RBOC authorization to offer in-region long distance service. To the extent the
Company decides in the future to install its own transmission facilities, other
state rulemaking proceedings and arbitrations may also affect the Company's
ability to compete with ILECs. These rulemaking proceedings and arbitrations
may involve issues including but not limited to: collocation of ILEC and CLEC
facilities; interconnection agreements between ILECs and CLECs; and access to
unbundled and combined network elements of ILECs. In addition, states in which
the Company operates may consider legislation that involves issues including
but not limited to: any of the aforementioned issues in state rulemaking
proceedings and arbitrations; alternative forms of regulation; and limitations
on the provision of competitive telecommunications services.
The Company is an authorized CLEC, and has obtained authority for the resale
of local exchange services, in Colorado, Delaware, Florida, Georgia, Illinois,
Maryland, North Carolina, Pennsylvania and Virginia. The Company is also
authorized to resell long distance telephone services in these jurisdictions.
The Company has applied for CLEC status and resale authority in Arizona and is
permitted to provide telecommunications services there while its application is
pending. The Company also has an application for CLEC authorization pending in
the District of Columbia. Although the Company had previously obtained
authorization in the District of Columbia in May 1997, such authorization was
voided in November 1997 because of inconsistencies cited by the PSC between its
rules and applicable law. Following discussions with the PSC, the Company
reapplied for CLEC authorization in the District of Columbia in April 1998. See
"--Risks Related to District of Columbia CLEC Status." In addition, the Company
expects that it will offer more intrastate services, including intrastate
switched services, as its business expands. There can be no assurance that the
Company will receive the authorizations it now seeks or may seek in the future
to the extent it expands into other states or seeks additional services from
the aforementioned states. In most states, the Company is required to file
tariffs or price lists setting forth the terms, conditions and prices for
services that are classified as intrastate. In all states, the Company must
comply with state regulations and policies regarding service quality,
reporting, auditing, customer service, and other matters.
The Company believes that, as the degree of intrastate competition increases,
the states will offer the ILECs increasing pricing flexibility, which could
provide certain competitive advantages to the ILECs. The Company cannot predict
the extent to which this may occur or its impact on the Company's business.
Local Regulation
The Company's networks are subject to numerous local regulations, including
those relating to building codes and licensing. Such regulations vary on a city
by city and county by county basis. To the extent the Company decides in the
future to install its own transmission facilities, it will need to obtain
rights-of-way over private and publicly owned land. There can be no assurance
that such rights-of-way will be available to the Company on economically
reasonable or advantageous terms.
Long Distance Restrictions
The Telecommunications Act provides for a significant deregulation of the
domestic telecommunications industry, including the local exchange, long
distance and cable television industries. The Telecommunications Act remains
subject to judicial review and additional FCC rulemaking, and thus it is
difficult to predict what effect the legislation will have on the Company and
its operations. There are currently many regulatory actions underway and being
contemplated by federal and state authorities regarding the telecommunications
industry. There can be no assurance that these changes will not have a material
adverse effect upon the Company's results of operations and financial condition
and its ability to meet its obligations under the Notes.
Due to SBC's indirect ownership of 19.7% of the sole stockholder of the
Company, the Company is considered to be an affiliate of SBC for regulatory
purposes and is, therefore, prohibited from providing long distance telephony
service to customers in the SBC Region. The Company is also subject to certain
other
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restrictions, including regulations regarding the provision of other services
in the SBC Region. Under current regulatory conditions, such restrictions
would hamper the Company's ability to enter into and compete in the SBC
Region. As a result, the Company does not expect to enter the markets in the
SBC Region while current regulatory conditions persist. Accordingly, the
Company's competitors may enter such regions and obtain MDU Rights of Entry
that would either preclude the Company from subsequently competing in such
regions or make it more costly to do so. The area which constitutes the SBC
Region may change due to transactions entered into by SBC or regulatory
changes. Expansion of the SBC Region, through a business combination between
SBC and another RBOC or otherwise, could have a material adverse effect on the
Company's results of operations and financial condition and its ability to
meet its obligations under the Notes. There can be no assurance that the SBC
Region, in which the Company is currently prohibited from providing long
distance telephony service, will not expand, or that any such expansion will
not include areas currently served, or targeted to be served by the Company.
On December 31, 1997, the U.S. District Court for the Northern District of
Texas issued a decision (the "SBC Decision") finding that Sections 271 to 275
of the Telecommunications Act are unconstitutional. These sections of the
Telecommunications Act impose restrictions on the lines of business in which
the RBOCs may engage, including establishing the conditions they must satisfy
before they may provide in-region interLATA telecommunications services. Under
the SBC Decision, the RBOCs would be able to provide such in-region services
immediately without satisfying the statutory conditions. The Fifth Circuit
overturned the SBC Decision on September 4th, 1998. It is possible that SBC
will seek Supreme Court review of the Fifth Circuit's decision. If the SBC
Decision ultimately is upheld it would likely result in significant additional
competition from RBOCs in the long distance telephony market.
Local Exchange Requirements
In addition to requirements placed on ILECs, the Telecommunications Act
subjects the Company to certain federal regulatory requirements relating to
the provision of local exchange service in a market. All ILECs and CLECs must
interconnect with other carriers, provide nondiscriminatory access to rights-
of-way, offer reciprocal compensation for termination of traffic, and provide
dialing parity and telephone number portability. The Telecommunications Act
also requires all telecommunications carriers to ensure that their services
are accessible to and usable by persons with disabilities. In addition, the
FCC's rules require that the Company contribute to universal service funds,
the Telecommunications Relay Services fund and the North American Numbering
Plan Administrator fund. See "--Government Regulation--Universal Service." The
Company is also subject to other FCC filing requirements. Compliance with
these obligations, individually and in the aggregate, may cause the Company to
incur substantial expenses. There can be no assurance that these expenses will
not have a material adverse effect upon the Company's results of operations
and financial condition and its ability to meet its obligations under the
Notes.
In addition, the Company might incur significant expenses to assure that its
networks comply with the requirements of CALEA. Under CALEA,
telecommunications carriers are required to: (i) provide law enforcement
officials with call content and call identifying information pursuant to a
valid electronic surveillance warrant ("assistance capability requirements");
and (ii) reserve a sufficient number of circuits for use by law enforcement
officials in executing court authorized electronic surveillance ("capacity
requirements"). To the extent that the Company provides facilities-based
services, it may incur costs in meeting both of these requirements. In
particular, regarding the assistance capability requirements, the government
is only required to compensate carriers for the costs of making equipment
installed or deployed before January 1, 1995 CALEA-compliant. While the
telecommunications industry is attempting to negotiate legislative and
administrative changes to this reimbursement cut-off date, as it stands today,
the Company will be financially responsible for ensuring that its post-1995
equipment is in compliance. Regarding the capacity requirements, the
government will finance any necessary increases in capacity for equipment
installed or deployed prior to September 8, 1998, and the Company will be
responsible for paying for any necessary increases in capacity for equipment
installed or deployed after that date.
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Universal Service
On May 8, 1997, the FCC released an order establishing a significantly
expanded federal universal service subsidy regime. For example, the FCC
established new subsidies for telecommunications and certain information
services provided to qualifying schools and libraries with an annual cap of
$2.25 billion and for services provided to rural health care providers with an
annual cap of $400 million. The FCC also expanded the federal subsidies for
local exchange telephony service provided to low-income consumers and consumers
in high-cost areas. Providers of interstate telecommunications services, such
as the Company, as well as certain other entities, must pay for these programs.
The Company's share of these federal subsidy funds will be calculated based on
end-user revenues. For the schools and libraries and rural health care support
mechanisms, end-user interstate, international and intrastate revenues will be
used. For the high cost and low income support mechanisms, contributions will
be based on interstate and international end-user revenues. Currently, the FCC
is calculating assessments based on the prior year's revenues. Assuming that
the FCC continues to calculate contributions based on prior years' revenues,
the Company believes that it will not be liable for subsidy payments in any
material amount during 1998 because it had no significant revenues in 1997.
With respect to subsequent years, however, the Company is currently unable to
quantify the amount of subsidy payments that it will be required to make and
the effect that these required payments will have on its financial condition.
In the May 8th order, the FCC also announced that it will soon revise its rules
for subsidizing service provided to consumers in high cost areas, which may
result in further substantial increases in the overall cost of the subsidy
program. Several parties have appealed the May 8th order. Such appeals have
been consolidated and transferred to the United States Court of Appeals for the
Fifth Circuit where they are currently pending. Several petitions for
administrative reconsideration of the order are pending.
Access Charges
To the extent the Company provides interexchange telecommunications service,
it is required to pay access charges to ILECs when it uses the facilities of
those companies to originate or terminate interexchange calls. Also, as a CLEC,
the Company provides access services to other interexchange service providers.
The interstate access charges of ILECs are subject to extensive regulation by
the FCC, while those of CLECs are subject to a lesser degree of FCC regulation
but remain subject to the requirement that all charges be just, reasonable, and
not unreasonably discriminatory. With limited exceptions, the current policy of
the FCC for most interstate access services dictates that ILECs charge all
customers the same price for the same service. Thus, the ILECs generally cannot
lower prices to some customers without also lowering charges for the same
service to all similarly situated customers in the same geographic area. The
FCC may, however, alleviate this constraint on the ILECs and permit them to
offer special rate packages to certain customers, as it has done in a few
cases, or permit other forms of rate flexibility. In two orders released on
December 24, 1996, and May 16, 1997, the FCC made major changes in the
interstate access charge structure. In the December 24th order, the FCC removed
restrictions on ILECs' ability to lower access charges and relaxed the
regulation of new switched access services in those markets where there are
other providers of access services. This could result in increased competition
from ILECs. The May 16th order substantially increased the costs that ILECs
subject to the FCC's price cap rules ("price cap LECs") recover through
monthly, non-traffic-sensitive access charges and substantially decreased the
costs that price cap LECs recover through traffic-sensitive access charges.
Further FCC action is expected during 1998 that may grant price cap LECs
increased pricing flexibility upon demonstrations of increased competition (or
potential competition) in relevant markets. The manner in which the FCC
implements this approach to lowering access charge levels could have a material
adverse effect on the Company's ability to compete in providing interstate
access services. Several parties appealed the May 16th order. Those appeals
were consolidated and transferred to the United States Court of Appeals for the
Eighth Circuit. That court upheld the May 16th order in a decision released on
August 19, 1998.
Reciprocal Compensation
Certain ILECs have been contesting whether the obligation to pay reciprocal
compensation to CLECs should apply to local telephone calls terminating to
ISPs. The ILECs claim that this traffic is interstate in nature and therefore
should be exempt from compensation arrangements applicable to local, intrastate
calls. The FCC
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has determined on a number of occasions, including in its May 16, 1997 access
charge reform order, that calls to ISPs should be exempt from interstate access
charges and should be governed by local exchange tariffs. However, several
petitions have been filed on this issue and are still pending at the FCC.
Several state commissions, including those in Maryland, New York, Pennsylvania,
Texas and Virginia have ruled that reciprocal compensation arrangements do
apply to ISP traffic, although the New York commission is continuing to
consider this issue. In addition, federal district courts in Illinois and Texas
have determined that reciprocal compensation arrangements apply to ISP traffic.
The FCC has been asked to address this issue, and may do so in the near future.
Disputes over the appropriate treatment of ISP traffic are pending in a number
of states. A final decision on the interstate or intrastate nature of this
traffic will determine whether the Company is eligible to receive reciprocal
compensation payments or whether the Company must make such payments. It could
therefore have a material adverse effect on the Company's results of operations
and financial condition and its ability to meet its obligations under the
Notes.
Video Regulation
A number of recent and on-going developments in Congress, at the FCC, and at
the United States Copyright Office are likely to have an impact on the extent
to which governmental regulations burden the entertainment component of the
Company's business and on its ability to compete with other MVPDs.
Access to Property. The Communications Act contains a provision affording
franchise cable operators access to public rights-of-way and certain private
easements. Because judicial interpretations generally limit the applicability
of this federal right of access to external easements, franchise cable
operators have not been successful in using it to gain access to internal ducts
or conduits of MDUs without consent of the landlord or management. Thus, cable
operators must rely on state or local access laws to obtain the right to
compete for MDU subscribers for which private cable systems hold exclusive
rights. These statutes, referred to as "mandatory access" provisions, typically
empower only franchise cable operators to gain access to an MDU in order to
provide service to the residents regardless of whether the MDU owner objects or
has entered into a contract with an alternative provider of video services such
as the Company. Thus, in jurisdictions where a mandatory access provision has
been enacted, a franchise operator might be able to access an MDU and provide
service in competition with the Company despite any exclusive Rights of Entry
contract that the company might have entered into with the owner. The ability
of franchise operators to force access to an MDU may create additional
competition for a limited subscriber base and poses a potential threat to the
Company's operating margin at the property in question. A number of
jurisdictions in which the Company's targeted markets are located have enacted
mandatory access provisions, including the states of Illinois and Pennsylvania
and the District of Columbia. While the state of Virginia has not enacted a
mandatory access statute, its laws prohibit landlords from accepting payment
from a video services provider in exchange for access to an MDU. The inability
of video service providers such as the Company to include compensation
provisions in video Rights of Entry contracts for properties located in
Virginia may limit their ability to induce property owners to enter into these
contracts. See also "--Risks Associated with MDU Rights of Entry." There can be
no assurance that existing or future mandatory access provisions will not have
a material adverse effect on the Company's results of operations and financial
condition and its ability to meet its obligations under the Notes.
Inside Wiring. In late 1997, the FCC issued new rules to govern the
disposition of inside wiring by incumbent MVPDs in MDUs on termination of
service. These rules, which are intended to encourage competition by new
entrants offering franchise and private video service, impose conditions on the
sale, removal or abandonment of wiring and govern shared use of space by
competing providers. Petitions seeking reconsideration of certain aspects of
these rules remain pending at the FCC, and at least one judicial challenge to
these rules has been filed in the U.S. Court of Appeals for the Eighth Circuit.
In some instances, a new provider such as the Company faces difficulty in
taking over a property because the ownership of the wiring is uncertain or
contested and the property owner is hesitant to allow installation of
additional wiring. The new rules address this issue and facilitate competition
from new providers by requiring the incumbent to choose between sale, removal
or abandonment of the wiring within certain time constraints and allowing for
shared use of space by
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competing providers in certain circumstances. See "--Risks Associated with MDU
Rights of Entry" above for discussion of risks associated with exclusive
contracts.
Equipment Availability. As part of the Telecommunications Act of 1996, the
FCC adopted regulations to ensure the commercial availability of equipment
(such as converter boxes and interactive equipment) used to access services
offered over multichannel video programming distribution systems, from sources
that are unaffiliated with any MVPD. These regulations require that all MVPDs,
including One Point's systems, (1) allow customers to attach their own
equipment to their systems, (2) not prevent equipment from being offered by
retailers, manufacturers or other unaffiliated vendors, (3) separate out
security functions from non-security functions of equipment by July 1, 2000
(not applicable to DBS or other systems that operate throughout the U.S. if
equipment is available from independent sources), (4) not offer equipment with
integrated security and non-security functions after January 1, 2005, and (5)
provide, upon request, technical information concerning interface parameters
needed to permit equipment to operate with their systems. MVPDs are allowed to
protect the security of their systems and programming from unauthorized
reception. The rules are subject to sunset after the markets for MVPDs and
equipment become fully competitive in a particular geographic market. The FCC
refused to adopt specific requirements that equipment be made interoperable
between different types of MVPDs. These rules are subject to petitions for
reconsideration, which remain pending at the FCC.
Program Access and Exclusivity. In accordance with the Cable Television
Consumer Protection and Competition Act of 1992, the FCC adopted regulations
intended to facilitate access to programming by competing MVPDs. The rules
generally preclude programmers that share ownership ties with franchise cable
television operators ("vertically-integrated programmers") from granting
particular MVPDs the exclusive right to carry their programming. In addition,
the rules prohibit vertically-integrated programmers that deliver their
programming by satellite from engaging in other unfair or discriminatory
practices. Both the FCC and Congress currently are considering requests to
expand restrictions on exclusive contracting and other unfair or discriminatory
practices to non-vertically-integrated programmers and to programming that is
distributed by terrestrial means as well as by satellite. In addition, the FCC
recently adopted new procedures to make it easier for competing MVPDs to pursue
complaints against programmers that violate the rules.
Regulation of DBS Providers. Congress is considering several pieces of DBS
legislation that could facilitate the Company's ability to receive local and
network TV programming, on the one hand, and enhance the ability of DBS
providers to compete with traditional franchise cable systems or private cable
operators like the Company on the other. Although federal law currently
precludes DBS providers from distributing local TV stations or network signals
to viewers other than those living in so-called "white areas" where over-the-
air broadcast service is unavailable, Congress is considering removing those
restrictions. Pressure for Congressional action has intensified as a result of
recent federal court decisions that would require certain DBS providers to
discontinue delivery of network signals to thousands of ineligible subscribers
outside "white areas"; however, broadcasters who requested the injunctions have
agreed not to enforce them until January 1, 1999. In addition, a DBS provider
is seeking FCC action that would greatly expand so-called "white areas" where
delivery of network signals via DBS is permissible. Passage of such legislation
or FCC rules would facilitate delivery of local signals by Company facilities
relying on DBS as a source of programming. At the same time, removing
restrictions from DBS providers could strengthen DBS as a competitor to the
Company's video distribution business. Initial legislative steps also have been
taken to establish competitive parity between DBS providers and franchise or
private cable operators by reducing the higher license fees that DBS providers
must pay for carrying broadcast signals. Current FCC rules preempt any state or
local restrictions that "impair" a viewer's ability to receive video
programming through devices designed for over-the-air reception of television
broadcast service, multi-channel multi-point distribution system ("MMDS") or
DBS. The rules also preempt laws, regulations, private covenants and
homeowners' association rules impairing reception to the extent they apply to
property within the exclusive control of the antenna user and where the user
has an ownership interest in the property. In addition, the FCC has proposed
prohibiting MDU Managers from imposing restrictions that might impair reception
by viewers who do not own the affected property, including MDU residents. If
the FCC limits the rights of the MDU Managers to impose restrictions on
residents' subscription to DBS or MMDS, this could
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adversely affect the value of the Company's present and future Rights of Entry,
which could have a material effect on the Company's results of operations and
financial condition and its ability to meet its obligations under the Notes.
Regulation of Franchise Cable Television Rates. Private cable operators are
not subject to FCC rate regulation; however, a complex regulatory scheme
currently governs the rates that traditional franchise cable systems charge for
basic monthly service, expanded basic and certain customer premises equipment.
Although, as a general rule, the FCC requires franchise cable systems to charge
uniform rates to all customers within a geographic area, the regulations allow
these operators to offer certain "bulk" discounts to MDU customers, enabling
franchise cable systems to be more competitive with private cable providers. As
a result of statutory language in the Telecommunications Act, the FCC currently
is considering revisions to the uniform rate requirements, which, if adopted,
may affect the level of protection these provisions afford private operators.
For example, the statutory language currently prohibits only "predatory" bulk
discounts. The FCC is considering whether to define this term by reference to a
"bright line" standard based upon the price differential or whether to rely on
federal antitrust law. The FCC's eventual decision could make it more difficult
or burdensome to prove whether a bulk discount is predatory. The scope of rate
regulation is limited in other ways as well. The FCC rules, including its
uniform pricing requirements, do not apply when the franchise operator can
demonstrate, pursuant to procedures established by the FCC, that it is subject
to "effective competition" from providers of similar services in its franchise
area. More generally, the regulations do not prohibit discriminatory pricing
for services other than rate regulated services and associated installation and
equipment costs. Although regulations currently holding down the price
franchise cable operators can charge for expanded basic service are scheduled
to be eliminated in March 1999, recent cable rate increases have resulted in
pressure on Congress to extend the scheduled March 1999 regulatory "sunset"
date.
Regulatory Status and Regulation of Private Cable Operations. Franchise cable
systems must comply with a host of FCC regulations including rate regulation,
substantial channel set-asides for mandatory carriage of local television
stations and for leasing by unaffiliated parties, provisions governing content
and presentation of advertising and of local cablecast programming, customer
service standards, technical testing and performance standards and reporting
requirements. See "--Government Regulation--Regulation of Franchise Cable
Television Rates." Local franchising authorities play a role in enforcing some
of these provisions. In addition, local (and sometimes state) officials issue
traditional cable systems their chief operating authorization, the local
franchise, which frequently imposes requirements such as construction and
design standards, channel set-asides and production facilities for public,
educational and governmental use, and payment of annual franchise fees or other
"in kind" benefits to the community.
Pursuant to the Communications Act, wired MVPD facilities that serve
subscribers without using any public right-of-way (commonly known as "private
cable systems") are exempt from local franchise requirements and the majority
of FCC regulations applicable to franchise systems that use public rights-of-
way. (The FCC does not consider use of microwave relays instead of wires to
cross public right-of-way a "use of the public right-of-way" for jurisdictional
purposes.) Thus, in order to avoid becoming subject to these extensive
governmental requirements, the Company must confine its wired plant to private
property and must rely on microwave transmission to cross public rights-of-way.
Use of certain frequencies commonly used in the microwave links that connect
properties is limited in the Washington, D.C. area by a recent FCC order
establishing a local zone where, in order to protect sensitive government
operations, new facilities will not be authorized. The use of these frequencies
for microwave links nationwide also could be affected generally by other FCC
rulemakings investigating the introduction of new services in the frequency
band in question on a shared basis. The outcome of these proceedings is
impossible to predict, but could require discontinuation or detrimental
modification of the Company's use of such frequency band.
In a recent decision, the FCC clarified the law and held that another avenue
exists for private operators that will allow them to avoid the requirement for
a municipal franchise. The FCC held that under certain circumstances a private
operator does not need to receive a municipal franchise to provide its video
service to
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MDUs where the operator provides such service in part through subscribing to a
service offered by one of the telephone companies. Under the telephone
company's service, the video signal would travel through the telephone
company's facilities over the public streets and rights of way. These
facilities would connect to the private operator's facilities on private
property. The FCC limited its holding that a franchise is unnecessary to the
facts involved in the matter before it, which included (but were not limited
to) the following: (i) there was absolute separation of ownership between the
private operator and telephone company and there was nothing more than a
carrier-user relationship between them; (ii) the private operator's facilities
were located entirely on private property; (iii) the facilities primarily used
by the telephone company to provide service to the private operator were not
constructed at the private operator's request; (iv) there was capacity to
serve several other programming providers using the telephone companies'
fiber; and (v) the private operator had committed to make its drops available
to other programming providers. Several entities have appealed the FCC's
decision, which appeal is pending before the United States Court of Appeals
for the Seventh Circuit. The FCC's ruling, if upheld, may increase operating
efficiencies by enabling the Company to link facilities much more widely
dispersed throughout an area than it could using microwave links and still
remain largely unregulated. The FCC's conditions on the decision listed above,
however, and particularly the fifth condition, may limit the usefulness of the
decision to the Company.
Although private cable systems are exempt from the majority of federal
regulations, a few FCC rules apply. Among these are rules which, depending on
the configuration of the system and the ownership of TV reception equipment,
impose the obligation to obtain retransmission consent prior to delivering
certain television stations, limitations on radiation and interference, rules
governing equal employment opportunity and closed captioning requirements.
Copyright. Private cable systems must obtain copyright clearance for
programming and other copyrighted material they distribute to subscribers. For
satellite-delivered services, such clearance typically is obtained from the
program supplier. To obtain copyright clearance for broadcast signals they
retransmit, private cable systems must rely on a statutory blanket license
which they can obtain by filing semi-annual reports and making payments into a
federally-administered royalty pool. Recent action by the U.S. Copyright
Office affecting the method private cable operators use to calculate these
payments may increase copyright liability; however, copyright reform efforts
underway in Congress may further affect regulation of the Company in this area
by replacing the current payment formula with a flat fee that could result in
significant savings.
The foregoing discussion of regulatory considerations does not review all
laws or regulations under consideration by federal and state governmental
bodies that may affect the Company's operations. It is possible that present
and future laws and regulations not discussed here could have a material
adverse effect on the Company's results of operations and financial condition
and its ability to meet its obligations under the Notes.
IMPACT OF THE YEAR 2000 ISSUE
The year 2000 issue is the result of computer programs being written using
two digits rather than four to define the applicable year. Any of the
Company's computer programs that have date-sensitive software may recognize a
date using "00" as the year 1900 rather than the year 2000. This could result
in a system failure or miscalculations causing disruptions of operations,
including, among other things, a temporary inability to process transactions,
send invoices, or engage in similar normal business activities.
The Company has undertaken a program to address the Year 2000 issue with
respect to the following: (i) the Company's information technology and
operating and support systems (including its customer care, trouble tracking,
billing and provisioning systems); (ii) the Company's non-information
technology systems; and (iii) certain systems of the Company's major suppliers
and material service providers (insofar as such systems relate to the
Company's business activities with such parties). The Company's Year 2000
program involves (i) an assessment of the Year 2000 problems that may affect
the Company, (ii) the development of remedies to address the problems
discovered in the assessment phase, (iii) the testing of such remedies and
(iv) the preparation of contingency plans to deal with worst case scenarios.
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Although the Company's Year 2000 efforts are intended to minimize the
adverse effects of the Year 2000 issue on the Company's business and
operations, the actual effects of the issue and the success or failure of the
Company's efforts described above cannot be known until the Year 2000. Failure
by the Company or its major suppliers to address adequately their respective
Year 2000 issues in a timely manner (insofar as such issues relate to the
Company's business) could have a material adverse effect on the Company's
results of operations and financial condition and its ability to meet its
obligations on the Notes. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Impact of the Year 2000 Issue."
RAPID TECHNOLOGICAL CHANGES AND UNCERTAIN MARKET DEVELOPMENT
The telephony and video industries are subject to rapid and significant
changes in technology and frequent service innovations. The effect on the
business of the Company of future technological changes, such as changes
relating to emerging transmission technologies, cannot be predicted. The
Company believes that its future success will depend on its ability, as to
which no assurance can be given, to enhance its existing systems or implement
new systems to respond to new technologies and to develop and introduce in a
timely fashion new products and services on a competitive basis.
The markets in which the Company competes are constantly evolving. The
convergence of traditional telephony services and video services is a recent
trend in the industry in which the Company competes. As part of this trend,
many telephony and video services providers are attempting to integrate
network components. For example, multi-channel television distribution
equipment is being considered for voice and data telecommunications and vice
versa. The convergence of these traditional services towards integrated
multimedia services presents both opportunity and material risk to companies
such as OnePoint. The Company will face enhanced competition from competitors
with much greater financial, technical, marketing and other resources. Many of
these competitors may offer packages of services that are more extensive than
the services which the Company plans to offer. There can be no assurance that
the Company will be able to predict accurately the direction of this evolving
market or be able to respond effectively to the highly competitive
environment. See "--Competition."
LIMITATIONS ON REPURCHASE UPON A CHANGE OF CONTROL
In the event of a Change of Control (as defined in the Indenture to include
the first day on which SBC fails to hold, whether directly or indirectly, 9.9%
or more of the total Voting Stock (as defined herein) of the Company or the
first day on which the Company's existing long distance telephony contract (or
any replacement thereof ) terminates and is not replaced by a contract having
no less favorable economic terms than the Company's long distance telephony
contract in existence as of the Closing Date, and a term (assuming exercise of
any renewal options) ending after the maturity date of the Notes), each holder
of the Notes will have the right, at such holder's option, to require the
Company to repurchase all or a portion of such holder's Notes at a purchase
price equal to 101% of the principal amount thereof plus accrued and unpaid
interest to the date of purchase. The ability of the Company to repurchase the
Notes upon a Change of Control will be dependent upon the availability of
sufficient funds and compliance with applicable securities laws. A Change of
Control may cause an acceleration of other Indebtedness of the Company,
including the Company's Credit Facility, in which case such Indebtedness may
be required to be repaid in full before redemption or repurchase of the Notes.
Accordingly, there can be no assurance that the Company will be able to
repurchase the Notes upon the occurrence of a Change of Control. The
requirement that the Company offer to repurchase the Notes would not
necessarily afford holders of the Notes protection in the case of a highly
leveraged reorganization, merger or similar transaction involving the Company.
See "Description of the Notes--Change of Control" and "Description of Certain
Indebtedness."
ANTITAKEOVER PROVISIONS
The Company's Certificate of Incorporation and Bylaws and the Delaware
General Corporation Law contain certain provisions that may have the effect of
discouraging, delaying or making more difficult a change in control of the
Company or preventing the removal of incumbent directors. The existence of
these provisions may have a negative impact on the price of the Common Stock
and may discourage third-party bidders from making a bid for the Company or
may reduce any premiums paid to stockholders for their Common Stock. Pursuant
to the Operating Agreement of the Company's sole stockholder, the consent of
VIC is required for the sale of all or substantially all of the Company's
assets.
44
<PAGE>
ABSENCE OF PUBLIC MARKET
The Notes are a new issue of securities for which there presently is no
active trading market and none may develop. If the Notes are traded after their
initial issuance, they may trade at a discount from their initial offering
price, depending upon prevailing interest rates, the market for similar
securities, the financial condition and prospects of the Company and other
factors beyond the control of the Company, including general economic
conditions. Although the Initial Purchasers have informed the Company that they
currently intend to make a market in the Notes, the Initial Purchasers are not
obligated to do so and any such market-making may be discontinued at any time
without notice, at the sole discretion of the Initial Purchasers. Accordingly,
there can be no assurance as to the development or liquidity of any market for
the Notes. See "Plan of Distribution."
FRAUDULENT CONVEYANCE RISKS
Under applicable provisions of the federal bankruptcy law or comparable
provisions of state fraudulent transfer law, if the Company, at the time of
issuance of, or making any payment in respect of, the Notes, (a)(i) was or was
rendered insolvent thereby, was engaged or about to engage in a business or
transaction for which its assets constituted unreasonably small capital, or
intended to incur, or believed that it would incur, debts beyond its ability to
pay such debts as they matured and (ii) the Company received less than
reasonably equivalent value or fair consideration for such issuance or (b) the
Company issued the Notes or made any payment thereunder with intent to hinder,
defraud or delay any of its creditors, the obligations of the Company under
some or all of the Notes could be voided or held to be unenforceable by a
court, the obligations of the Company under the Notes could be subordinated to
claims of other subordinated creditors, or the holders of Notes could be
required to return payments already received. In particular, if the Company
were to cause a subsidiary to pay a dividend in order to enable the Company to
make payments in respect of the Notes, and such transfer were deemed a
fraudulent transfer, the holders of Notes could be required to return the
payment. In any of the foregoing cases, there could be no assurance that the
holders would ultimately recover the amounts owing under the Notes.
The measure of insolvency for purposes of the foregoing will vary depending
upon the law applied in any such case. Generally, however, the Company would be
considered insolvent if the sum of its debts, including contingent liabilities,
was greater than all of its assets at a fair valuation, if it had unreasonably
small capital to conduct its business, or if the present fair salable value of
its assets were less than the amount that would be required to pay the probable
liability on its existing debts, including contingent liabilities, as they
become absolute and matured. The Company believes that it was not insolvent at
the time of or as a result of the Initial Offering, that it has not engaged in
a business or transaction for which its remaining assets constituted
unreasonably small capital and that it did not and does not intend to incur or
believe that it will incur debts beyond its ability to pay such debts as they
mature. There can be no assurance, however, that a court passing on such
questions would agree with the Company's analysis.
The Indenture provides that certain subsidiaries of the Company will be
required to guarantee the obligations of the Company under the Indenture and
the Notes. When any subsidiary enters into such a guarantee, if bankruptcy or
insolvency proceedings were initiated by or against that subsidiary within 90
days (or, possibly, one year) after that subsidiary issued a guarantee, or if
that subsidiary incurred obligations under its guarantee in anticipation of
insolvency, all or a portion of the guarantee could be avoided as a
preferential transfer under federal bankruptcy or applicable state law. In
addition, a court could require holders of the Notes to return all payments
made within any such 90 day (or, possibly, one year) period as preferential
transfers.
ORIGINAL ISSUE DISCOUNT; POSSIBLE UNFAVORABLE TAX AND OTHER LEGAL CONSEQUENCES
FOR HOLDERS OF NOTES AND THE COMPANY
The Notes are deemed to have been initially issued at a discount equal to the
sum of the estimated value of the Warrants and the amount, if any, by which the
principal amount of the Notes exceeds the issue price of the Units.
Consequently, for federal income tax purposes, original issue discount (that
is, the difference between the stated redemption price at maturity and the
deemed issue price of the Notes) may accrue from the issue date of the Notes
and may be includable in a holder's gross income as it accrues. See "Certain
United States Federal
45
<PAGE>
Income Tax Considerations" for a more detailed discussion regarding the
federal income tax consequences of the purchase, ownership and disposition of
the Notes.
The "yield to maturity" on the Notes exceeds the sum of 5% and the
"applicable federal rate" (a rate based on the yield on Treasury Securities
with similar maturity) in effect for the month in which the Notes were issued.
Accordingly, if the Notes have "significant" OID, the Notes will be considered
"applicable high yield discount obligations." A debt instrument has
"significant" OID if the aggregate amount of unpaid interest (including OID)
as of the close of any accrual period ending after the date five years after
the date of issue exceeds the product of the issue price of such instrument
and its yield to maturity.
If the Notes are "applicable high yield discount obligations," the Company
will not be permitted to deduct for United States federal income tax purposes
OID accrued on the Notes until such time as the Company actually pays such OID
in cash or in property other than stock or debt of the Company (or persons
related to the Company). Moreover, to the extent that the yield to maturity of
the Notes exceeds the sum of 6% and the applicable federal rate, such excess
(the "Dividend-Equivalent Interest") will not be deductible at any time by the
Company for United States federal income tax purposes (regardless of whether
the Company actually pays such Dividend-Equivalent Interest in cash or in
other property). Such Dividend-Equivalent Interest would be treated as a
dividend to the extent it is deemed to have been paid out of the Company's
current or accumulated earnings and profits. Accordingly, a holder of Notes
that is a domestic corporation may be entitled to take a dividends-received
deduction with respect to any Dividend-Equivalent Interest received by such
corporate holder on the Note.
If a bankruptcy case under the U.S. Bankruptcy Code were to be commenced by
or against the Company after the issuance of the Notes, the claim of a holder
of Notes with respect to the principal amount thereof may be limited to an
amount equal to the sum of (i) the initial offering price and (ii) that
portion of the original issue discount that is not deemed to constitute
"unmatured interest" for purposes of the U.S. Bankruptcy Code. Any original
issue discount that was not amortized as of the time of any such bankruptcy
filing would constitute "unmatured interest."
CORPORATE ACQUISITION INDEBTEDNESS--POSSIBLE LIMITATION OF FEDERAL TAX
DEDUCTION FOR INTEREST EXPENSE ON THE NOTES
Interest on a debt obligation issued as part of an investment unit (such as
the Notes) may not be deductible for federal income tax purposes to the extent
such interest exceeds $5 million (subject to certain reductions) for a tax
year if, among other things, the proceeds of such debt are used to make
certain asset or stock acquisitions and the debt is expressly subordinated or
is subordinated to trade creditors (determined on a group basis). While the
Company believes that the federal tax deduction for interest on the Notes
should not be subject to such limitation due to, among other things, the
presence of the Subsidiary Guarantees (resulting in the Notes being ranked
pari passu with the trade creditors of such Subsidiaries), no assurances can
be given in this regard and a ruling from the Internal Revenue Service has not
been sought.
RESTRICTIVE COVENANTS
The Indenture contains a number of covenants that will limit the discretion
of the Company's management with respect to certain business matters. These
covenants, among other things, restrict the ability of the Company to incur
additional Indebtedness, pay dividends and make other distributions, prepay
subordinated Indebtedness, make Investments and other restricted payments,
enter into sale and leaseback transactions, create liens, sell assets, and
engage in certain transactions with affiliates. See "Certain Relationships and
Related Transactions," "Description of Certain Indebtedness" and "Description
of the Notes."
A failure to comply with the covenants and restrictions contained in the
Indenture or agreements relating to any subsequent financing could result in
an event of default under such agreements which could permit acceleration of
the related debt and acceleration of debt under other debt agreements that may
contain cross-acceleration or cross-default provisions, and the commitments of
the lenders to make further extensions under such other agreements could be
terminated.
46
<PAGE>
CLASSIFICATION AS AN INVESTMENT COMPANY
Until the proceeds of the Initial Offering are deployed in the Company's
business, the Company will have substantial short-term investments and other
investment securities. See "Capitalization," "Use of Proceeds" and the
consolidated financial statements, including the notes thereto. This may result
in the Company being treated as an "investment company" under the Investment
Company Act of 1940 (the "1940 Act"). The 1940 Act requires the registration
of, and imposes various substantive restrictions on, certain companies
("investment companies") that are, or hold themselves out as being, engaged
primarily, or propose to engage primarily in, the business of investing,
reinvesting or trading in securities, or that fail certain statistical tests
regarding composition of assets and sources of income and are not primarily
engaged in businesses other than investing, reinvesting, owning, holding or
trading securities.
The Company believes that it is primarily engaged in a business other than
investing, reinvesting, owning, holding or trading securities and, therefore,
is not an investment company within the meaning of the 1940 Act. If the Company
were to be an investment company, the Company currently would intend to rely
upon a one year safe harbor exemption from the 1940 Act for certain "transient"
or temporary investment companies.
If the Company were required to register as an investment company under the
1940 Act, it would become subject to substantial regulation with respect to its
capital structure, management, operations, transactions with affiliated persons
(as defined in the 1940 Act) and other matters. Application of the provisions
of the 1940 Act to the Company would have a material adverse effect on the
Company's results of operations and financial condition and its ability to meet
its obligations under the Notes.
THE RECAPITALIZATION
The Predecessor was initially formed in 1996 by VIC, which initially owned
99% of the equity interests in the Predecessor, and AMI2, which owned the
remaining 1% equity interest in the Predecessor. VIC is an affiliate of SBC,
and 99% of the equity of VIC is owned indirectly by SBC. The remaining 1% of
the equity of VIC is owned by The VenCom Group, Inc., which is, in turn, owned
by James A. Otterbeck, the Company's Chairman and Chief Executive Officer. VIC
is the sole stockholder of AMI2.
In October 1997, AMI2 transferred to VIC its membership units of the
Predecessor, Mr. Otterbeck became a member of the Predecessor and the
Predecessor was recapitalized. Pursuant to the Recapitalization, VIC agreed to
guarantee up to $9 million of secured indebtedness of the Predecessor,
contributed additional capital to the Predecessor (resulting in aggregate
equity contributions to the Predecessor of $33.5 million) and exchanged its
membership interests for (i) 19.9% of the Predecessor's membership units, which
had a preferred return of 10% per annum and a priority on the first $33.5
million of distributions, (ii) a promissory note in the principal amount of
$1.5 million due October 15, 2007 which bore interest at 10% per annum (the
"Predecessor Note"), and (iii) a warrant to purchase 5% of the common units
outstanding following exercise of the warrant. In connection with the
Recapitalization, Mr. Otterbeck purchased 80.1% of the Predecessor's membership
units (which did not have a preferential return or priority on distributions)
for an aggregate of $80,100 and agreed to contribute up to an additional $1.5
million to the Predecessor no later than the Predecessor's dissolution. The
parties also entered into (i) a Members Agreement that restricted the transfer
of membership units and provided preemptive rights on the sale of new
securities and (ii) a Registration Agreement that provided certain rights to
register the Predecessor's securities under the Securities Act of 1933, as
amended. In April 1998, Mr. Otterbeck transferred his equity interest in the
Predecessor to VenCom, L.L.C., of which he is the sole member.
In April 1998, in order to convert the Predecessor into a corporation, VIC
and VenCom, L.L.C. contributed their membership interests in the Predecessor
and the Predecessor Note to Ventures in Communications II, LLC ("VIC2"), a
newly-formed limited liability company, in exchange for membership interests of
VIC2. VIC's membership units in VIC2 do not accrue dividends, however, and the
VIC2 warrant relates to 9.9% of the common units of VIC2. Subsequently, the
Predecessor merged with and into the Company, with the Predecessor's
outstanding membership interests and the Predecessor Note exchanged for shares
of the
47
<PAGE>
Company's common stock and preferred stock. In addition, the Predecessor Note
was replaced with a note in the same principal amount issued by VIC2 to VIC
(the "VIC2 Note"), and the parties entered into a Registration Agreement. As a
result of the merger transactions, the Company is a Delaware corporation which
is wholly owned by VIC2; 80.1% of VIC2's membership units are owned by VenCom,
L.L.C. and the remaining 19.9% of VIC2's membership units are owned by VIC. As
a result of SBC's indirect ownership of 99% of the equity interests of VIC, SBC
indirectly owns 19.7% of the Company's Common Stock.
The Operating Agreement of VIC2 entered into in April 1998 in connection with
the Recapitalization (i) imposes certain restrictions on the transfer of VIC2's
membership units; (ii) grants certain participation rights in connection with a
sale of membership units by a member; (iii) grants VIC certain preemptive
rights with respect to VIC2 membership units in connection with issuances by
VIC2 of membership units or issuances by the Company of Common Stock; (iv)
grants VIC the right to require VenCom, L.L.C. to purchase all or any portion
of the VIC2 membership units held by VIC; (v) grants a first refusal right to
the members in connection with a transfer of VIC2 membership units and shares
of the Company's Common Stock; (vii) requires the members to take certain
actions in the event of an initial public offering by VIC2; and (viii) grants
VIC the right to require VIC2 to exercise its demand and piggyback registration
rights and to require VIC2 to distribute the proceeds of the resulting
offering.
USE OF PROCEEDS
The net proceeds from the Initial Offering were approximately $168.1 million.
The Company used approximately $80.5 million to fund the purchase of Pledged
Securities. The remaining $87.6 million of net proceeds has been or will be
used (i) to acquire private cable television operators or their assets, (ii) to
invest in video infrastructure, (iii) to invest selectively in a facilities-
based platform for telephony services, (iv) to repay borrowings under the
Credit Facility, which may be reborrowed prior to December 15, 1998, (v) to
fund future capital calls by Mid-Atlantic and (vi) to fund working capital and
for general corporate purposes, including operating losses. Prior to the
application of the net proceeds of the Initial Offering, such funds will be
invested in Cash Equivalents.
The Exchange Offer is intended to satisfy certain of the Company's
obligations under the Purchase Agreement and the Registration Rights
Agreements. The Company will not receive any cash proceeds from the issuance of
the Exchange Notes offered hereby. In consideration for issuing the Exchange
Notes contemplated in this Prospectus, the Company will receive Old Notes in
like principal amount, the form and terms of which are the same as the form and
terms of the Exchange Notes (which replace the Old Notes), except as otherwise
described herein. The Old Notes surrendered in exchange for Exchange Notes will
be retired and canceled and cannot be reissued. Accordingly, issuance of the
Exchange Notes will not result in any increase or decrease in the indebtedness
of the Company. As such, no effect has been given to the Exchange Offer in the
pro forma statements or capitalization table.
DIVIDEND POLICY
The Company has never declared or paid any cash dividends on its Common Stock
and does not expect to declare any such dividends in the foreseeable future.
Payment of any future dividends will depend upon earnings and capital
requirements of the Company, the Company's debt facilities and other facts the
Board of Directors considers relevant. OnePoint intends to retain its earnings,
if any, to finance the development and expansion of its business, and therefore
does not anticipate paying any cash dividends in the foreseeable future. The
Company's Certificate of Incorporation prohibits the payment on cash dividends
on the Common Stock while the Company's Preferred Stock is outstanding and,
upon liquidation of the Company, requires payment of the liquidation value of
the Preferred Stock prior to any payments with respect to the Common Stock. See
"Description of Capital Stock." The Company's ability to declare and pay cash
dividends on its Common Stock is also restricted by certain covenants in the
Indenture. See "Description of Notes--Certain Covenants--Restricted Payments."
48
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization and cash and cash
equivalents of the Predecessor at June 30, 1998. The table should be read in
conjunction with "Selected Historical Financial Data," "Pro Forma Unaudited
Condensed Financial Data," "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the Company's consolidated financial
statements, including the notes thereto, included elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
AS OF JUNE 30, 1998
-----------------------
ACTUAL PRO FORMA
----------- ----------
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Cash and cash equivalents(1)....................... $ 436 $
=========== ==========
Debt:
Credit facility(2)............................... $ -- $
14 1/2% Senior Notes due 2008(3)................. 175,000
Long term debt--affiliate........................ --
----------- ----------
Total debt................................... 175,000
----------- ----------
Stockholders' equity:
Common stock $0.01 par value, 2,000,000 shares
authorized, 1,000,000 shares issued and
outstanding(4).................................. 10
Preferred stock, $1.00 par value, 35,000 shares
authorized, 35,000 shares issued and
outstanding..................................... 35
Additional paid-in capital(3).................... 35,035
Accumulated deficit.............................. (32,406)
----------- ----------
Total stockholders' equity................... $ 2,674 $
=========== ==========
</TABLE>
- --------
(1) Excludes the $80.5 million of net proceeds from the Initial Offering used
to purchase Pledged Securities.
(2) The Company has up to $9.0 million available for borrowing under the
Credit Facility. As of June 30, 1998, no amounts were outstanding under
the Credit Facility.
(3) The pro forma unaudited balances reflect the debt discount of $5.3 million
resulting from the issuance of Warrants in conjunction with the Old Notes.
The Company has obtained an independent valuation to determine the fair
value of the Warrants.
(4) Excludes 111,125 shares of Common Stock reserved for issuance upon
exercise of the Warrants.
49
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA
The following table sets forth selected historical financial and other data
of the Company. The selected consolidated statement of operations and balance
sheet data set forth below as of December 31, 1996 and 1997 and for the
periods then ended are derived from the financial statements of the Company
which have been audited by Ernst & Young LLP, independent auditors. The
unaudited consolidated financial data at June 30, 1998 and for the six months
ended June 30, 1998 include all adjustments (consisting only of normal
recurring adjustments) which management considers necessary for a fair
presentation of the financial information for these unaudited periods. The
results of operations for the six months ended June 30, 1998 are not
necessarily indicative of the results of operations that may be expected for
the full fiscal year 1998. The Company was formed in 1996 and has generated
operating losses and negative cash flow from its operating activities to date.
As a result of the Company's short operating history, prospective investors
have limited operating and financial data about the Company upon which to base
an evaluation of the Company's performance and the decision to tender Old
Notes in exchange for Exchange Notes. The selected financial data set forth
below should be read in conjunction with "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and the consolidated
financial statements, including the notes thereto, contained elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
PERIOD FROM
MARCH 14, 1996 TO YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, 1996 DECEMBER 31, 1997 JUNE 30, 1998
----------------- ----------------- ----------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Net revenue............... $ -- $ 43 $ 675
Cost of revenue:.......... -- 83 1,906
Selling, general and
administrative expenses.. 2,021 12,788 8,865
Depreciation and
amortization............. 19 235 310
Loss from operations...... (2,040) (13,063) (10,406)
Other income (expense).... 4 43 (2,374)
Income tax provision (1).. -- -- --
Loss on equity
investments.............. -- (3,071) (1,499)
Net loss.................. (2,036) (16,091) (14,279)
OTHER FINANCIAL DATA:
Pro forma income tax
provision (2)............ $ -- $ -- $ --
EBITDA (3)................ (2,021) (12,845) (11,578)
Net cash used in operating
activities............... (2,020) (11,507) (7,403)
Net cash used in investing
activities (4)........... (13,517) (2,573) (163,156)
Net cash from financing
activities............... 15,640 19,440 165,532
Capital expenditures...... 517 2,441 1,496
Ratio of losses to fixed
charges (5).............. -- -- --
OTHER DATA:
Passings:
Telephony passings under
contract............... -- 71,034 127,000
Telephony passings
actively marketed (6).. -- 17,536 104,000
Video passings under
contract............... -- 184 800
Video passings actively
marketed (6)........... -- -- 800
Telephony subscribers..... -- 365 7,176
Telephony Penetration
Rate..................... -- 2.1% 6.9%
Video subscribers......... -- -- 596
Video Penetration Rate.... -- -- 74.1%
<CAPTION>
AS OF DECEMBER 31,
----------------------------------- AS OF JUNE 30,
1996 1997 1998
----------------- ----------------- ----------------
(DOLLARS IN THOUSANDS) (UNAUDITED)
<S> <C> <C> <C>
CONSOLIDATED BALANCE SHEET
DATA:
Cash and cash equivalents
(4)...................... $ 13,103 $ 5,463 $ 562
Working capital........... 12,771 3,932 75,070
Total assets.............. 14,031 19,761 186,901
Long term debt............ -- 1,500 175,000
Unitholders'/stockholders'
equity................... 13,604 15,453 2,674
</TABLE>
50
<PAGE>
- --------
(1) Prior to the merger with OnePoint Communications Corp. in April 1998 the
Company was treated as a partnership for income tax purposes. Accordingly,
no provision for income taxes has been included in the pre-merger
financial statements, as taxable income or loss passes through to, and is
reported by, unitholders individually. Since the merger, the Company has
recognized a net loss on interim results.
(2) See pro forma tax discussion in the notes to the Pro Forma Unaudited
Statement of Operations.
(3) EBITDA is defined as net income (loss) before loss on equity investments,
net interest expense, income taxes and depreciation and amortization.
EBITDA is presented because it is a widely accepted financial indicator of
a company's ability to income and service debt. However, EBITDA should not
be considered in isolation as a substitute for net loss or cash flow data
prepared in accordance with generally accepted accounting principles or as
a measure of a company's profitability or liquidity. In addition, this
measure of EBITDA may not be comparable to similar measures reported by
other companies.
(4) Cash flows from investing activities included the changes in the Company's
restricted cash balances on deposit in an escrow account pending
investment in Mid-Atlantic. Cash and cash equivalents as of December 31,
1996 includes $13 million of restricted cash.
(5) For the purpose of the ratio of losses to fixed charges, (i) losses are
calculated as net loss before fixed charges and (ii) fixed charges include
interest on all Indebtedness, and operating lease expense. Fixed charges
for the period from March 14, 1996 to December 31, 1996, for the year
ended December 31, 1997 and for the six months ended June 30, 1998 were
approximately $79,000, $641,000, and $3.4 million respectively. For the
period from March 14, 1996 to December 31, 1996, the year ended December
31, 1997, and for the six months ended June 30, 1998 the Company's
deficiency of earnings to cover fixed charges was approximately $2.0
million, $16.1 million, and $14.3 million respectively.
(6) Passings actively marketed are passings in an MDU in which the Company had
one or more subscribers at the end of the relevant period.
51
<PAGE>
PRO FORMA UNAUDITED CONDENSED FINANCIAL DATA
The following pro forma unaudited condensed financial data is based upon the
historical financial statements of OnePoint Communications, LLC as of June 30,
1998 and for the six months ended June 30, 1998 and the year ended December
31, 1997, adjusted to give effect to (i) the issuance and registration of
$175.0 million aggregate principal amount of Notes and recognition of (a) the
relative interest expense thereon with an interest rate of 14 1/2% per annum,
(b) amortization of deferred debt issuance costs and (c) amortization of the
discount on debt resulting from the issuance of warrants for 111,125 shares of
common stock; (ii) the change in the tax status from a limited liability
company to a "C" corporation; and (iii) the PCTV Acquisition.
The transaction and the related adjustments are described in the
accompanying notes. The pro forma adjustments are based upon available
information and certain assumptions that management believes are reasonable.
The Pro Forma Financial Data does not purport to represent what the Company's
results of operations would have actually been had such transaction in fact
occurred on January 1, 1997 or January 1, 1998 or to project the Company's
results of operations for any future period. The Pro Forma Financial Data
should be read in conjunction with the historical financial statements of
OnePoint Communications, LLC included elsewhere in this Prospectus and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
PRO FORMA UNAUDITED CONDENSED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
PRO FORMA
ONEPOINT ONEPOINT
COMMUNICATIONS, INITIAL COMMUNICATIONS
LLC OFFERING AND ADJUSTMENTS TO CORP.
YEAR ENDED INCORPORATION REFLECT PCTV YEAR ENDED
DECEMBER 31, 1997 ADJUSTMENTS ACQUISITION (C) DECEMBER 31, 1997
----------------- ------------- --------------- -----------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Revenue................. $ 43 $ -- $ 5,208 $ 5,251
Cost of revenue......... 83 -- 2,994 3,077
-------- -------- ------- --------
(40) -- 2,214 2,174
Selling, general and
administrative
expenses............... 12,788 -- 1,838 14,626
Depreciation and
amortization........... 235 -- 1,722 1,957
-------- -------- ------- --------
Loss from operations.... (13,063) -- (1,346) (14,409)
Interest expense (a).... 11 26,854 -- 26,865
Other (income) expense.. (54) -- -- (54)
-------- --------
Income before taxes and
loss on equity
investments............ (13,020) -- -- (41,220)
Income tax provision
(b).................... -- -- -- --
-------- -------- ------- --------
Income before losses in
equity method
investments............ (13,020) (26,854) (1,346) (41,220)
Losses on equity method
investments............ (3,071) -- -- (3,071)
-------- -------- ------- --------
Net loss................ $(16,091) $(26,854) $(1,346) $(44,291)
======== ======== ======= ========
<CAPTION>
PRO FORMA
ONEPOINT ONEPOINT
COMMUNICATIONS, COMMUNICATIONS
CORP. OFFERING AND ADJUSTMENTS TO CORP.
SIX MONTHS ENDED INCORPORATION REFLECT PCTV SIX MONTHS ENDED
JUNE 30, 1998 ADJUSTMENTS ACQUISITION (C) JUNE 30, 1998
----------------- ------------- --------------- -----------------
<S> <C> <C> <C> <C>
Revenue................. $ 675 $ -- $ $
Cost of revenue......... 1,906 --
-------- -------- ------- --------
(1,231) --
Selling, general and
administrative
expenses............... 8,865 --
Depreciation and
amortization........... 310 --
-------- -------- ------- --------
Loss from operations.... (10,406) --
Interest expense (a).... 2,979 10,449
Other (income) expense.. (605) --
--------
Income before taxes and
loss on equity
investments............ (12,780) --
Income tax provision
(b).................... -- --
-------- -------- ------- --------
Income before losses on
equity method
investments............ (12,780) (10,449)
Losses on equity method
investments............ (1,499) --
-------- -------- ------- --------
Net loss................ $(14,279) $(10,449) $ $
======== ======== ======= ========
</TABLE>
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<PAGE>
PRO FORMA BALANCE SHEET
AS OF JUNE 30, 1998 (UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
ONEPOINT PRO FORMA
COMMUNICATIONS PRO FORMA BALANCE
CORP. PCTV (D) ADJUSTMENTS SHEET
-------------- -------- ----------- ---------
<S> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents........ $ 436
Restricted cash.................. 126
Investments, current ($24,009
restricted) .................... 81,809
Accounts receivable, net......... 398
Affiliate receivable............. 552
Prepaid expenses................. 976
-------- ------ ------ ------
Total current assets......... 84,297 --
Investments, non-current ($56,395
restricted) .................... 79,813
Investment in unconsolidated
subsidiaries.................... 8,562
Property and equipment, net...... 3,931
Other assets..................... 10,298
-------- ------ ------ ------
$186,901 --
======== ====== ====== ======
LIABILITIES AND STOCKHOLDERS'
EQUITY
Accounts payable................. 6,250
Accrued interest payable......... 2,977
-------- ------ ------ ------
Current liabilities............ 9,227 --
Notes payable, non-current....... 175,000
Stockholders' equity:
Common stock................... 10
Preferred stock................ 35
Additional capital............. 35,035
Accumulated deficit............ (32,406)
-------- ------ ------ ------
Total stockholders' equity... 2,674 --
-------- ------ ------ ------
Total liabilities and
stockholders' equity........ $186,901 --
======== ====== ====== ======
</TABLE>
- --------
(a) The pro forma adjustment to interest expense for the year ended December
31, 1997 reflects the following:
<TABLE>
<S> <C>
Elimination of historical interest expense for amounts repaid
under the existing long term debt............................. $ (11)
Interest expense on the Notes, at an interest rate of 14 1/2%
per annum..................................................... 25,375
Amortization of debt issuance costs related to the Initial
Offering...................................................... 960
Amortization of debt discount.................................. 530
-------
$26,854
=======
</TABLE>
The pro forma adjustment to interest expense for the six months ended June 30,
1998 reflects the following:
<TABLE>
<S> <C>
Elimination of historical interest expense for amounts repaid
under the existing long term debt............................. $(2,977)
Interest expense on the Notes, at an interest rate of 14 1/2%
per annum..................................................... 12,688
Amortization of debt issuance costs related to the Initial
Offering...................................................... 473
Amortization of debt discount.................................. 265
-------
$10,449
=======
</TABLE>
53
<PAGE>
(b) As part of the Company's Recapitalization, in April 1998, OnePoint
Communications, LLC merged with and into OnePoint Communications Corp. See
"The Recapitalization." The pro forma condensed statement of operations
contains adjustments to reflect the estimated income tax provision on
historical income before taxes which would have occurred had OnePoint
Communications LLC been a "C" corporation for the period presented. The
Company was in a loss position for all periods presented, accordingly, no
tax provisions have been provided.
(c) The Pro Forma acquisition adjustments assume the PCTV Acquisition occurred
at the beginning of the respective period. The acquisition adjustments
include an adjustment to record the increase in depreciation and
amortization expense of $715,000 and $ , related to the re-valuation
of certain assets and the recognition of intangibles and goodwill. The pro
forma adjustments reflect the revenues and expenses related to the assets
and liabilities purchased by the Company, and do not include certain
indirect costs which would have been incurred if the Company was not a
division of a Company for the periods disclosed (Also see the Company's
June 30, 1998 interim financial statements, the Predecessor's 1997 audited
financial statement and PCTV's 1997 financial statements).
(d) The Pro Forma acquisition adjustments assume the PCTV Acquisition occurred
on June 30, 1998. The Company has adjusted the historical balance sheet of
PCTV to reflect adjustments resulting from an independent valuation of the
Company's assets. As a result of the acquisition, the Company would have
recorded intangibles of approximately $10.1 million (Identifiable
intangibles--$5.4 million, Goodwill $4.7 million).
54
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of the Company's financial condition
and results of operations is qualified in its entirety by, and should be read
in conjunction with, the consolidated financial statements, including the
notes thereto, included elsewhere in this Prospectus. This discussion contains
forward-looking statements that involve risks and uncertainties. The Company's
actual results could differ materially from those anticipated in the forward-
looking statements as a result of certain factors including, but not limited
to, those discussed in "Risk Factors," "Business" and elsewhere in this
Prospectus. The Company disclaims any obligation to update information
contained in any forward-looking statement.
OVERVIEW
OnePoint is a rapidly growing provider of bundled telephony and video
services to residents of MDUs in high growth, densely populated urban and
suburban markets. The Company offers a wide range of residential telephony and
video services, including local and long-distance telephony services and video
subscription services, in six regional markets. From its inception in 1996
until January 1998, the Company's principal activities consisted of procuring
governmental authorizations, negotiating telephony and video Rights of Entry
for MDUs, hiring management and other key personnel, raising capital,
developing, acquiring and integrating customer service, billing and other back
office systems, identifying potential acquisition targets, and negotiating
resale agreements. The Company commenced active marketing efforts in January
1998 in the Washington/Baltimore/Philadelphia metropolitan area, in February
1998 in Atlanta and Chicago, and in March 1998 in Charlotte/Raleigh/Durham,
Denver and Phoenix. As a result of the Company's limited operating history,
prospective investors have limited operating and financial data about the
Company upon which to base an evaluation of the Company's performance and a
decision to tender the Old Notes in exchange for the Exchange Notes.
Revenues
Addressable Telephony Market. Through June 1998, the Company had entered
into long term contracts with five national REITs and numerous other MDU
Managers providing for approximately 127,000 telephony passings in 456 MDUs in
the Company's six targeted markets. The Company expects to increase the number
of buildings for which it has Rights of Entry through a combination of
agreements with additional MDU Managers and the expansion of existing
agreements as MDU Managers acquire additional properties in the Company's
target markets. Through the above activities, the Company seeks to add between
approximately 300 to 450 buildings representing approximately 90,000 to
150,000 telephony passings per year (at the higher end of such range in later
years).
In addition, the Company seeks to acquire private cable operators or their
assets in order to have the opportunity to market a full bundle of services to
the MDUs served, either directly or by obtaining a telephony Right of Entry
from the MDU Manager.
The Company also seeks to form strategic relationships with franchise or
private cable providers to co-market telephony services to their MDU customer
bases. Such strategic relationships may take a variety of forms, including but
not limited to equity investments by the Company (as in the case of Mid-
Atlantic). For example, OnePoint is leveraging its strategic relationship with
Mid-Atlantic to market telephony services to residents of MDUs currently
receiving video services from Mid-Atlantic. In addition, the Company is
currently negotiating telephony co-marketing agreements with two franchise
cable operators. Pursuant to such strategic relationships, the Company may
market its services under the OnePoint brand name or that of the strategic
partner. The Company believes that such arrangements will benefit the Company
and the franchise or private cable operator through greater revenues and
reduced churn. The Company anticipates that it will market telephony services
to approximately 20,000 additional Mid-Atlantic video passings per year over
the next three to four years through its relationship with Mid-Atlantic.
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<PAGE>
Addressable Video Market. OnePoint seeks opportunities to (i) acquire
private cable operators or their assets, (ii) replace existing cable operators
in buildings where the Company has telephony Rights of Entry; and (iii)
install video distribution systems in newly constructed MDUs. The Company
believes that the expansion of its video service passings and resulting
increase in the number of MDUs where the Company can offer bundled telephony
and video services will increase subscriber revenues and reduce marketing and
sales expenses.
The Company seeks to acquire private cable operators or their assets in
order to build scale rapidly by obtaining rights which are otherwise currently
unavailable to provide video services. In June 1998, the Company, through a
wholly owned subsidiary, entered into a definitive agreement to acquire
substantially all of the assets used by People's Choice TV Corp. and Preferred
Entertainment, Inc. to provide video services to MDUs in Chicago. Pursuant to
the agreement, the Company acquired approximately 27,800 video passings in 159
properties in July and August. Management expects to invest in video reception
and transmission equipment to upgrade the video services offering for the
acquired passings. The Company has also entered into letters of intent to
acquire certain cable rights of entry and related equipment from three
companies located in North Carolina. If consummated, the Potential
Acquisitions would result in the addition of approximately 4,300 video
passings in 14 properties.
Market Penetration. From the beginning of the year through June, 1998,
OnePoint had marketed telephony services in 373 MDUs with a total of 104,000
units (including approximately 28,700 Mid-Atlantic video passings), and had
marketed video services to approximately 800 units in 3 MDUs (not including
Mid-Atlantic video passings). Through June, 1998 the Company's Penetration
Rates were 6.9% and 74.1%, respectively, for telephony and video. The Company
primarily targets new residents and believes that it will be able to achieve
significantly higher telephony Penetration Rates with respect to such
residents, who are introduced to the Company's services when moving in. The
Company estimates that its overall Penetration Rates will lag behind new
resident Penetration Rates but will increase over time as a result of
residential turnover.
The turnover of residents is a key factor in the penetration of the
Company's telephony services. OnePoint anticipates that initial telephony
penetration for MDU residents at the time the Company commences offering
service will be significantly lower than that of residents who move in
subsequently. The Company focuses its marketing efforts on new residents at
the time they move in. Anticipated regulation mandating number portability may
enable the Company to accelerate telephony penetration, although the timing
for the implementation of this requirement is uncertain. Management believes
that the average term of an apartment lease is 18 months and, based on data
from the National Multi-Housing Council, that apartment turnover averages
approximately 35% to 40% per year. Management believes it has designed its
marketing efforts, sales channels and operational infrastructure so the
Company may benefit from this expected high turnover of MDU residents.
Telephony Prices and Services. OnePoint offers a full range of local
telephony services at discounted rates to those charged by the ILEC, with
feature packages at discounts of up to 30%. Installation and service charges
are similar to those charged by the ILECs. Long distance telephony is offered
at prices competitive with major IXCs. Average subscriber revenues will be
impacted by the Company's ability to bundle local and long distance telephony
services as well as any pricing pressure brought about by deregulation and
increased competition. The Company is an authorized agent for CellularOne.
The Company plans in the future to offer various options for high speed
Internet access, including cable modem and xDSL. The Company has commenced
market trials under a memorandum of understanding with an Internet service
provider to test on a limited basis an MDU-specific Ethernet-based application
in up to ten MDUs during 1998.
Video Prices and Services. OnePoint plans to offer basic and expanded cable
service at a slight discount to the franchise provider. The Company estimates
that average revenue per subscriber will exceed $35 per month as the Company
improves the number and variety of channels and services offered, upgrades its
delivery systems
56
<PAGE>
and adds DBS capability to individual buildings. In addition, average monthly
revenue per subscriber will be affected by any acquisition of private cable
operators having different average revenue per subscriber and service levels.
Moreover, the Company's average revenue per subscriber will be affected by the
demographics of any MDUs for which the Company obtains video Rights of Entry
in the future. Pricing may be affected by potential regulatory actions
restricting price increases by franchise cable providers.
Costs of Products and Services
Telephony. OnePoint resells local services purchased from the ILECs. Future
regulatory and/or judicial developments may affect the timing and method of
the Company's partial migration to a facilities-based platform and thus affect
the Company's ability to reduce its local service cost structure. To the
extent that the concentration of the Company's telephony subscriber base leads
to investment in facilities to replace ILEC facilities, the Company believes
it will be able to achieve significant ongoing savings in the provisioning of
telephony services. Long-distance services are provided by an IXC at
competitive prices as a result of the Company's affiliation with SBC, or by
the ILEC for intraLATA services within certain markets. Costs are typically
higher for intraLATA toll services, varying by market based on the cost of
intraLATA services from either the ILEC or IXC.
Video. The Company has entered into an agreement for the purchase of video
programming with a programming wholesaler. The Company has purchased
programming to date on the terms of Mid-Atlantic's contracts with such
programming wholesaler and individual programming providers, although the
Company is not a party to Mid-Atlantic's contracts. The Company's programming
costs are directly related to the number of subscribers. The Company expects
to realize a small reduction in programming costs per subscriber as the volume
of purchases increases.
General. For both telephony and video services, OnePoint frequently
compensates MDU Managers on either a flat rate per passing per year or a
percentage of revenues tied to penetration rates, as well as compensating
leasing agents based on new subscribers. The Company has already made
significant capital expenditures to develop its integrated billing system,
automated EDI interfaces with ILECs for telephony service provisioning and
customer care center systems and equipment. These investments and utilization
of third-party leasing agents reduce the cost of acquiring customers and
improve the Company's ability to increase subscription rates.
Selling, General and Administrative Expenses
The principal component of OnePoint's selling, general and administrative
expenses is employee compensation and benefits. Other significant components
include marketing expenses, facilities rental costs and depreciation and
amortization, communications and information systems and
professional/consulting fees. Bad debt expense is anticipated to be 3% to 4%
of revenues.
EBITDA
OnePoint expects to achieve positive EBITDA by the end of 2000 and
anticipates its EBITDA margin will increase to 14% to 16% in subsequent years.
The Company does not expect to achieve positive EBITDA (before allocation of
corporate overhead) in any market until at least 18 months after it commences
initial service in such market, and expects to continue to experience
increasing operating losses and negative EBITDA as it expands its operations.
EBITDA within a market will be impacted by availability of private cable
acquisitions, the concentration of passings held by large private operators
and REITs, as well as the Company's ability to migrate to a facilities-based
platform.
Capital Expenditures
Telephony. The Company currently offers telephony services through a resale
platform, thereby avoiding capital expenditures for network facilities. The
Company plans to replace selectively its resale platform with a facilities-
based infrastructure as warranted by subscriber traffic levels and the
availability of alternative network
57
<PAGE>
facilities within each market in order to improve gross margins. Such
investments may include installation of switches, installation of digital loop
carriers and leasing of transmission capacity from ILECs. The Company will
also evaluate the potential for leasing transmission facilities and/or
partitioning switch capacity from facilities-based CLECs with excess capacity.
Expenses for operating and maintaining equipment may increase significantly as
the Company's investment in network facilities increases, although such
increases are expected to be offset by savings from the elimination of certain
other costs, such as local access and origination fees. The Company may incur
other costs, including installation of inside telephony wiring required for
newly constructed properties, for which costs vary according to the number of
buildings and units on the property.
Video. Capital expenditures for video services vary according to the number
of properties served, the number of units in the MDUs, and the delivery
platform. SMATV systems require multiple large receiving dishes and headend
equipment for each property. Point-to-point microwave links enable the
utilization of a single headend for multiple properties via installation of
transmission and reception equipment at each property. The DBS delivery
platform requires a single receiving dish for each property and less expensive
headend equipment, if any. Converter boxes are required for certain network
configurations and services. Installation of inside wiring is required for
newly constructed properties with costs varying according to the number of
buildings and units on the property. Additional capital expenditures may be
required to upgrade or retrofit equipment, depending on the age, configuration
and capacity of existing wiring.
HISTORICAL RESULTS OF OPERATIONS
From its inception in 1996 until January 1998, the Company engaged
principally in procuring governmental authorizations, negotiating telephony
and video Rights of Entry for MDUs, hiring management and other key personnel,
raising capital, developing, acquiring and integrating customer service,
billing and other back office systems, identifying potential acquisition
targets, and negotiating resale agreements. Accordingly, the Company's
historical results should not be relied upon as an indicator of future
performance.
Six Months Ended June 30, 1998 Compared with Six Months Ended June 30, 1997
Revenue
The Company began actively marketing its services in January 1998 in the
Washington/Baltimore/ Philadelphia metropolitan area, in February 1998 in
Atlanta and Chicago and in March 1998 in Charlotte/Raleigh/Durham, Denver and
Phoenix. Total revenues for the six months ended June 30, 1998, were $0.67
million. No revenue was generated for the six-month period ended June 30, 1997
as the Company did not commence operations until the third quarter of 1997.
Telephony revenues and cable television revenues for the six months ended June
30, 1998 were $0.62 million and $0.05 million, respectively.
Cost of Revenue
Cost of Revenue (programming, telecommunication service costs and revenue
sharing with payments to owners of MDUs) was $1.9 million in the six months
ended June 30, 1998. Cost of Revenue in 1998 exceeded revenues due primarily
to payments to certain larger MDU owners being based on a per-passing
structure. The Company anticipates improvement in the relationship between
costs of services and revenue as subscriber penetration increases.
Selling, General and Administrative Expenses
Selling, general and administrative expenses were $8.9 million for the six
months ended June 30, 1998 compared to $5.5 million in the comparable period
of 1997, an increase of $3.4 million, or 62%. The increase in overall customer
support, selling, general and administrative expenses was largely due to an
increase in personnel and related costs associated with the expansion and roll
out of the Company's bundled communications services.
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Depreciation and Amortization
Depreciation and amortization was $0.31 million for the first six months of
1998 compared to $0.08 million in the comparable period of 1997, an increase
of $0.23 million, or 269%. The increase is primarily attributable to an
increase in cable and telephone systems and intangible assets resulting from
purchase and construction of such equipment.
Interest Income and Expenses
Interest expense was $3.0 million for the six months ended June 30, 1998.
Interest income was $0.6 million for the six months ended June 30, 1998, an
increase of $0.5 million over the six months ended June 30, 1997. The
increases in both interest expense and interest income reflect the interest
costs associated with the Notes and the interest income derived from the
short-term investment of the proceeds of the Initial Offering.
Other
The Company recognized an equity loss of $1.5 million from the operations of
Mid-Atlantic during the six months ended June 30, 1998.
Year Ended December 31, 1997 Compared with Year Ended December 31, 1996
Revenue
The Company commercially introduced service on a very limited basis in July
of 1997, while it was refining its organization and customer care capability.
In 1997 the Company generated revenue of approximately $43,000 from telephony
services in the Washington/Baltimore/Philadelphia metropolitan area. The
Company did not generate any revenue during 1996.
Cost of Revenue
Cost of Revenue for 1997 was approximately $82,000. This consisted of
charges from ILECs for local service, installation and order processing,
charges for long-distance usage and payments to MDU Managers and leasing
consultants. Additionally, certain connection charges from the ILECs during
1997 resulted from the manual entry of orders, prior to the completion of the
automated EDI links for provisioning of services. The Company did not generate
any revenue during 1996.
Selling, General and Administrative Expenses
Total selling, general and administrative expenses were approximately $12.8
million for 1997, an increase of $10.8 million over 1996 expenses of $2.0
million as a result of increased development expenses, headcount and other
start-up costs. Such expenses consisted primarily of salaries and related
expenses for the development of the Company's business and operational
infrastructure, completion of regulatory filings, systems development expenses
and sales and marketing efforts directed toward MDU Managers.
Depreciation and Amortization
Depreciation and amortization was approximately $235,000 in 1997, an
increase of $216,000 over 1996 depreciation and amortization of $19,000,
primarily due to the depreciation of equipment and leasehold improvements
which were purchased in 1997.
Taxes
Income taxes will consist of federal, state and local taxes, when
applicable. The Company expects significant net losses for the foreseeable
future which should generate net operating loss ("NOL") carryforwards.
However, utilization of such prospective NOLs is subject to substantial annual
limitations. In addition, income
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<PAGE>
taxes may be payable during this time due to operating income in certain tax
jurisdictions. Once the Company achieves operating profits and the NOLs have
been exhausted or have expired, the Company may experience significant tax
expense. The Company has recognized no provision for taxes as it operated at a
loss through 1997. The Predecessor was a limited liability company, and,
accordingly, NOLs for periods prior to April 29, 1998 will not be available to
the Company.
Other
The Company recognized an Equity Loss of $3.1 million from the operations of
Mid-Atlantic during 1997, based on its 50% equity ownership during the period.
LIQUIDITY AND CAPITAL RESOURCES
The Company has financed its development through June, 1998 with $35.0
million of funding provided by VIC, $80,100 of equity invested by VenCom,
L.L.C., borrowings under the Credit Facility and the proceeds of the Initial
Offering. As a result of the Recapitalization transactions, as of June 30,
1998: (i) VIC2 owns all of the Company's outstanding capital stock; (ii) Mr.
Otterbeck indirectly owns 80.3% of VIC2's common membership units; (iii) SBC
indirectly owns 19.7% of VIC2's common membership units, and has a priority on
the first $35.0 million of distributions by VIC2 (less all principal and
interest payments on the VIC2 Note), and VIC has a warrant exercisable for
9.9% of VIC2's equity. See "The Recapitalization."
From February to June 1997, the Company made investments totalling
approximately $12.0 million in Mid-Atlantic and in December 1997 the Company
invested $750,000 in MAC Interactive to establish a separate joint venture
with the other investors in Mid-Atlantic to secure exclusive marketing rights
for certain programming services from an affiliated company. See "Certain
Relationships and Related Transactions--MAC Interactive." Net cash used in the
Company's operating activities from inception through December 1997 totaled
$13.5 million. Net cash used by the Company for acquisitions of property and
equipment during this period totaled $3.0 million. As of December 31, 1997 the
Company had an accumulated deficit of $18.1 million, and had cash and cash
equivalents of $5.5 million. Net cash used in the Company's operating
activities for the six-month period ended June 30, 1998 totaled $7.4 million.
Net cash used by the Company for acquisitions of property and equipment during
this period totaled $1.5 million. As of June 30, 1998 the Company had an
accumulated deficit of $32.4 million, and had cash and cash equivalents of
$0.4 million and available investments $81.3 million (excluding the Pledged
Securities).
Subsequent to December 31, 1997, the Company obtained the Credit Facility.
Borrowings under the Credit Facility as of December 15, 1998 will be amortized
over a five-year period. The interest rate on borrowings under the Credit
Facility is, at the Company's election: (i) Northern Trust's prime rate less
3/4 of 1%; (ii) LIBOR plus 50 basis points; or (iii) the federal funds rate
(as defined) plus 50 basis points. As of August 31, 1998, there was no balance
outstanding under the Credit Facility. The Company used a portion of the
proceeds from the Initial Offering to pay down all borrowings under this line
of credit, but anticipates drawing on the Credit Facility in the future. See
"Description of Certain Indebtedness."
The Company used approximately $80.5 million of the net proceeds from the
Initial Offering to purchase Pledged Securities. The balance of the net
proceeds have been, or will be, used to acquire private cable operators or
their assets, to invest in video infrastructure, to invest selectively in a
facilities-based platform for telephony services, to fund future capital calls
by Mid-Atlantic and to fund working capital and for general corporate
purposes, including operating losses. The Company believes that the net
proceeds from the Initial Offering, will be sufficient to fund the Company's
planned aggregate capital expenditures, working capital requirements and
operating losses for its six initially targeted markets. The Company may
require additional capital if it achieves market penetration for its services
significantly different than, or at a different stage than, management
estimates, achieves lower than expected pricing for its services, enters
additional markets, locates additional or larger acquisition opportunities or
encounters higher than expected costs to purchase or upgrade telephony, cable
or DBS services, equipment or facilities. The Company also expects that it
will require additional financing (or require financing sooner than
anticipated) if the Company's development plans or projections change or prove
to be inaccurate or if the Company is unable to continue to take advantage of
the pricing provided for in SBC-negotiated contracts for any reason. There can
be no assurance that the Company will be successful in raising
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<PAGE>
sufficient additional debt or equity capital, or of the terms of any such
capital-raising activities. Failure to raise and generate sufficient funds may
require the Company to delay or abandon some of its planned future expansion
or expenditures, which could have a material adverse effect on the Company's
growth and its ability to compete in the telephony and video industry. See
"Risk Factors."
In addition, depending on market conditions and the availability of
acquisitions on favorable terms, the Company may determine to raise additional
capital. The Company may obtain additional funding through the sale of public
or private debt and/or equity securities or through additional borrowings from
banks or other lending institutions.
The Company expects significant cash requirements for at least the next
several years due to continued expansion of its customer base and the need to
invest in facilities and equipment to support telephony and video services.
The Company's future cash requirements will depend on a number of factors
including (i) the rate at which the Company secures Rights of Entry, (ii) the
level of penetration achieved for telephony and video services and the pricing
of such services, (iii) the availability of private cable acquisitions on
favorable terms, (iv) the rate at which the Company deploys telephony
facilities, the cost of equipment required to do so, and its ability to
aggregate traffic onto the Company's facilities, (v) the expansion to
additional markets, if any.
In June 1998, the Company, through a wholly owned subsidiary, entered into a
definitive agreement to acquire substantially all of the assets used by
People's Choice TV Corp. and Preferred Entertainment, Inc. to provide video
service to MDUs in Chicago. Pursuant to the agreement, the Company acquired
approximately 27,800 video passings in 159 properties in July and August.
Management expects to invest in video reception and transmission equipment to
upgrade the video services offering for the acquired passings. The Company has
entered into letters of intent to acquire certain cable rights of entry and
related equipment from three companies located in North Carolina. If
consummated, the Potential Acquisitions would result in the addition of
approximately 4,300 video passings in 14 properties. Consummation of any or
all of the Potential Acquisitions would have a material effect on the
Company's results of operations and financial condition, and there can be no
assurance that any such effect will not be negative.
YEAR 2000 ISSUE
The year 2000 issue is the result of computer programs being written using
two digits rather than four to define the applicable year. Any of the
Company's computer programs that have date-sensitive software may recognize a
date using "00" as the year 1900 rather than the year 2000. This could result
in a system failure or miscalculations causing disruptions of operations,
including, among other things, a temporary inability to process transactions,
send invoices, or engage in similar normal business activities.
The Company's Program. The Company has undertaken a program to address the
Year 2000 issue with respect to the following: (i) the Company's information
technology and operating and support systems (including its customer care,
trouble tracking, billing and provisioning systems); (ii) the Company's non-
information technology systems; and (iii) certain systems of the Company's
major suppliers and material service providers (insofar as such systems relate
to the Company's business activities with such parties). As described below,
the Company's Year 2000 program involves (i) an assessment of the Year 2000
problems that may affect the Company, (ii) the development of remedies to
address the problems discovered in the assessment phase, (iii) the testing of
such remedies and (iv) the preparation of contingency plans to deal with worst
case scenarios.
Assessment Phase. As part of the assessment phase of its program, the
Company has and will continue to attempt to identify substantially all of the
major components of the systems described above. In order to determine the
extent to which such systems are vulnerable to the Year 2000 issue, the
Company continuously evaluates its internal software applications. The Company
believes all internal systems and software have been purchased or developed
after 1995 and will thus be Year 2000 compliant. From the outset of
operations, the Company's intent has been to procure hardware and software
that is Year 2000 compliant. The Company has requested Year 2000 Compliance
statements from the equipment, billing and communications carriers from which
it procures equipment and services, and has received written confirmation of
their compliance or their
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intention to become compliant before the Year 2000. The Company also relies on
the information regarding Year 2000 compliance of its communications carrier
wholesalers as supplied to Public Service Commissions in each state.
Remediation and Testing Phase. Based on the results of its assessment
efforts, the Company will undertake remediation and testing activities. The
activities conducted during the remediation and testing phase are intended to
address information technology systems and non-information technology systems
in an attempt to demonstrate that this software will be made substantially
Year 2000 compliant on a timely basis. In the phase, the Company evaluates
program applications and, if a potential Year 2000 problem is identified,
takes steps to attempt to remediate the problem and to test the application to
confirm that the remediating changes are effective and have not adversely
affected the functionality of the application.
Contingency Plans. The Company intends to develop contingency plans to
handle the most reasonably likely worst case Year 2000 scenarios, which it has
not yet identified fully. The Company intends to complete its determination of
worst case scenarios after it has monitored progress made by the
communications carriers referred to above. Following this analysis, the
Company intends to develop a timetable for completing its contingency plans.
Costs Related to the Year 2000 Issue. To date, the Company has incurred no
explicit costs for its Year 2000 program, aside from indirect management costs
related to the research of internal and vendors' systems, plans and
procedures. While the Company anticipates relatively low direct costs related
to its internal systems, total costs related to the Year 2000 issue will be a
function of its vendors ability to make timely progress toward their year 2000
compliance.
Risks related to the Year 2000 Issue. Although the Company's Year 2000
efforts are intended to minimize the adverse effects of the Year 2000 issue on
the Company's business and operations, the actual effects of the issue and the
success or failure of the Company's efforts described above cannot be known
until the Year 2000. Failure by the Company or its major suppliers to address
adequately their respective Year 2000 issues in a timely manner (insofar as
such issues relate to the Company's business) could have a material adverse
effect on the Company's results of operations and financial condition and its
ability to meet its obligations on the Notes.
INFLATION
The Company's obligations under the Credit Facility bear interest at
floating rates, and an increase in interest rates could adversely affect,
among other things, the Company's ability to meet its debt service
requirements.
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BUSINESS
THE COMPANY
OnePoint Communications Corp. is a rapidly growing provider of bundled
telephony and video services to residents of MDUs in high growth, densely
populated urban and suburban markets. The Company offers MDU residents bundled
telephony and video services at moderate to significant discounts to prices
charged by ILECs, IXCs or franchise cable providers with the convenience of
"one point" of contact and a single integrated bill for such multiple
services. OnePoint seeks to offer bundled telephony and video services by
entering into long-term contracts providing Rights of Entry with MDU Managers
and, where appropriate, by acquiring private cable television operators having
exclusive video Rights of Entry for MDUs. Where the Company is initially
unable to obtain video Rights of Entry, it may pursue alternative
arrangements, such as co-marketing with the incumbent operator, in order to
provide bundled services. In addition, the Company plans to enhance its
existing bundled product offering by introducing high speed Internet access
service by the end of 1998.
The Company was founded in 1996 with a $35 million investment, primarily
from a subsidiary of SBC (the sole stockholder of Southwestern Bell, an RBOC).
The Company's strategy evolved from SBC's highly successful SmartMoves(R)
program for marketing to MDU residents within SBC's service area. As a result
of the Recapitalization, SBC currently indirectly owns 19.7% of the Common
Stock of the Company. The remaining 80.3% of the Company's Common Stock is
indirectly owned by James A. Otterbeck, the Company's Chairman and Chief
Executive Officer.
Through June 1998, the Company had entered into long term contracts with 5
national REITs and numerous other MDU Managers providing for approximately
127,000 telephony passings and 800 video passings in 456 MDUs in the Company's
6 targeted markets. From February to June 1997, the Company made investments
totalling approximately $12.0 million in Mid-Atlantic, a large private cable
television operator with approximately 40,000 subscribers in 111 MDUs and 7
franchise cable areas in the Washington/Baltimore/ Philadelphia metropolitan
area. The Company currently holds an approximately 41% equity interest in Mid-
Atlantic. As a result of its interest in Mid-Atlantic, the Company has been
able to begin marketing local and long distance telephony services to Mid-
Atlantic's approximately 68,000 video passings.
The Company's current targeted markets are Atlanta;
Charlotte/Raleigh/Durham; Chicago; Denver; Phoenix; and
Washington/Baltimore/Philadelphia, in each of which it has aggregated over
6,000 telephony passings. The Company is an authorized CLEC and has obtained
authority for the resale of local exchange services in nine states (Colorado,
Delaware, Florida, Georgia, Illinois, Maryland, North Carolina, Pennsylvania
and Virginia). Additionally, it has applied for CLEC status in Arizona and is
permitted to provide telecommunications services there while its application
is pending. The Company also has an application for CLEC authorization pending
in the District of Columbia. Although the Company had previously obtained
authorization in the District of Columbia in May 1997, such authorization was
voided in November 1997 because of inconsistencies cited by the PSC between
its rules and applicable law. Following discussions with the PSC, the Company
reapplied for CLEC authorization in the District of Columbia in April 1998.
See "Risk Factors--Risks Related to District of Columbia CLEC Status."
Commencing in July 1997, the Company initiated service in a limited number
of MDUs in order to refine its billing, provisioning and customer care
infrastructure. In January 1998 the Company began actively marketing its
services. From the beginning of the year through June 1998, the Company had
marketed telephony
services in 373 MDUs with a total of 104,000 units (including approximately
28,700 Mid-Atlantic video passings), and has marketed video services to
approximately 800 units in 3 MDUs (not including Mid-Atlantic video passings).
Through June 1998 the Company's Penetration Rate was 6.9% and 74.1%,
respectively, for telephony and video. The Company primarily targets new
residents and believes that it will be able to achieve significantly higher
telephony Penetration Rates with respect to such residents, who are introduced
to the Company's services when moving in. The Company estimates that overall
Penetration Rates will lag behind new
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resident Penetration Rates but will increase over time as a result of
residential turnover. According to data compiled by the National Multi-Housing
Council, annual apartment turnover rates average 35% to 40%.
The Company offers a wide range of services, including local telephony,
domestic and international long distance telephony, cellular telephony and
cable and DBS television. The Company also plans to enhance its bundled
product offerings by introducing high-speed Internet access service by the end
of 1998. The Company currently delivers telephony services exclusively through
resale of services offered by ILECs and an IXC. Management believes that the
Company's long distance resale cost position is superior to those of other
similarly sized CLECs as a result of the Company's affiliation with SBC. The
Company plans to replace selectively its resale platform with higher margin
facilities-based services by implementing a demand-driven capital expenditure
program as warranted by subscriber traffic levels and the availability of
alternative network facilities within each market. Video services are
delivered through SMATV or DBS systems and point-to-point 18GHz microwave
links. Management believes that the Company's expanded use of DBS systems will
reduce capital requirements and expand the number of channels available.
KEY STRATEGIC RELATIONSHIPS
The Company has several relationships and agreements which management
believes offer significant advantages, including:
SBC. The terms of certain contracts pursuant to which SBC purchases
products and services are available to the Company and other entities in
which SBC has a sufficient equity interest. Accordingly, the Company has
been able to purchase a number of products and services from third parties
at prices lower than those that would otherwise be available to it. Through
such arrangements, OnePoint purchases long distance service from an IXC and
has leveraged SBC's procurement function to purchase telecommunications
equipment. As the Company invests selectively in a facilities-based
telephony strategy, management believes the Company may be able to obtain
further cost advantages in the purchase of telephony equipment based on
similar arrangements with vendors. Management believes that these
arrangements will enable the Company to provide a bundled communications
offering at a competitive price and provide opportunities for better
margins than competitors lacking such an affiliation can achieve. The
Company's ability to purchase services and equipment under these
arrangements is dependent upon (i) SBC's continued ownership of an equity
interest in the Company which meets or exceeds the definition of
"affiliate" in the underlying contracts and (ii) the continuation of the
current underlying SBC contracts or their replacement by SBC with contracts
having comparable terms. In addition, SBC has guaranteed the Company's
payment obligations under its $9 million Credit Facility with Northern
Trust and two of the Company's leases for office space.
Mid-Atlantic. In late 1997, the Company and Mid-Atlantic began joint
marketing of telephony and video services under the OnePoint brand name on
a building by building basis to the approximately 68,000 passings in the
111 MDUs and 7 franchise cable areas served by Mid-Atlantic in the
Washington/Baltimore/Philadelphia metropolitan area. The Company has also
partnered with Mid-Atlantic to develop integrated customer care and billing
capabilities designed to support both telephony and video services. The
principals of Mid-Atlantic own a minority interest in the Company's
telephony operations in the six-state Mid-Atlantic region.
Relationships with National REITs. Management estimates that the five
national REITs, including Equity Residential Properties Trust, with which
the Company has entered into agreements providing for telephony Rights of
Entry control approximately 6% of the MDUs in the Company's targeted
markets. All of such agreements have a term of seven years. The Company
seeks to obtain video and/or Internet Rights of Entry for the buildings in
which it has telephony Rights of Entry, and believes its relationships with
such REITs and other MDU Managers will be a competitive advantage in
winning video Rights of Entry (when existing agreements expire or are
otherwise terminated) and Internet Rights of Entry. Management believes
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that the REIT industry is growing and concentrating, and that the REITs
with which it has relationships are seeking to acquire additional
properties and/or other REITs, which should provide opportunities for the
Company to obtain additional Rights of Entry.
MARKET OPPORTUNITY
MDUs comprise a wide variety of high density residential complexes,
including high and low-rise apartment buildings, condominiums and
cooperatives. According to the U.S. Census Bureau, over 24 million residential
housing units were included in these categories as of 1990 and an additional
1.3 million new apartments were completed from 1991 to 1997. Of the over 24
million units nationwide as of 1990, approximately 2.8 million were within the
Company's existing or targeted markets. The following table sets forth the
approximate MDU units currently subject to the Company's Rights of Entry and
other marketing opportunities in the Company's targeted markets as of June 30,
1998.
<TABLE>
<CAPTION>
MDU UNITS
OTHER MDU MARKETING TOTAL MDU ACTIVELY
MDU PASSINGS OPPORTUNITIES OPPORTUNITIES MARKETED(1)
--------------- --------------------- ----------------- ---------------
MARKET TELEPHONY VIDEO TELEPHONY(2) VIDEO(3) TELEPHONY VIDEO TELEPHONY VIDEO
------ --------- ----- ------------ -------- --------- ------- --------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Atlanta....................................... 21,600 800 -- 20,800 21,600 21,600 13,800 800
Charlotte/Raleigh/
Durham....................................... 10,000 -- -- 10,000 10,000 10,000 8,600 --
Chicago....................................... 8,800 -- -- 8,800 8,800 8,800 6,200 --
Denver........................................ 6,700 -- -- 6,700 6,700 6,700 6,000 --
Phoenix....................................... 24,500 -- -- 24,500 24,500 24,500 7,900 --
Washington/Baltimore/Philadelphia............. 55,300 -- 39,200 55,300 94,500 55,300 61,500 --
------- --- ------ ------- ------- ------- ------- ---
Total...................................... 126,900 800 39,200 126,100 166,100 126,900 104,000 800
======= === ====== ======= ======= ======= ======= ===
</TABLE>
- --------
(1) Units in MDUs in which the Company had one or more subscribers as of June
30, 1998.
(2) MDU Units for which Mid-Atlantic has video Rights of Entry but for which
the Company does not currently have telephony Rights of Entry.
(3) MDU Units for which the Company has telephony Rights of Entry, but does
not currently have video Rights of Entry.
The Company has targeted the markets listed above primarily because of their
high proportion of REIT-controlled MDUs, attractive growth rates, availability
of SBC-owned assets (currently in Chicago and Washington, D.C.) and sufficient
potential subscriber density to permit a subsequent move to a facilities-based
telephony platform. Pursuant to its "smart-build" strategy, the Company seeks
to utilize the most cost-effective means of providing services in a market,
and management believes that significant opportunities exist with respect to
underutilized facilities of other CLECs, many of which target business
customers.
Management believes that the MDU market is growing and consolidating. The
following table sets forth information regarding the estimated number of
apartments in each of the Company's targeted markets, and the projected growth
rate in apartments in such markets from 1997 to 2000. The table does not
include condominiums, townhouses, cooperatives and other types of MDUs.
<TABLE>
<CAPTION>
ESTIMATED
NUMBER OF 1997-2000
TOTAL MDU ESTIMATED MDU
MARKET UNITS IN 1997 GROWTH RATE
------ ------------- -------------
<S> <C> <C>
Atlanta....................................... 282,000 6.7%
Charlotte/Raleigh/Durham...................... 119,000 10.9%
Chicago....................................... 443,000 4.5%
Denver........................................ 125,000 11.2%
Phoenix....................................... 216,000 13.0%
Washington/Baltimore/Philadelphia............. 652,000 6.5%
</TABLE>
Source: The REIS Reports, Inc.
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BUSINESS STRATEGY
OnePoint's objective is to be a leading provider of bundled telephony and
video services to MDU residents in selected markets. The key elements of the
Company's strategy are as follows:
. Focus on Dense Concentrations of Demographically Attractive Customers.
The Company targets high revenue potential "A" and "B" properties in
markets where it can aggregate at least 10,000 telephony and/or video
passings. Management believes that residents of such buildings tend to
have high demand for telephony and video services and will find the
Company's superior customer service, lower prices and the convenience of
"one point" of contact for multiple services attractive. High customer
density reduces per-unit capital costs and increases the efficiency of
the Company's sales, marketing, installation and repair efforts.
. Utilize a "Smart-Build" Strategy to Expedite Customer Acquisition and
Minimize Initial Investment Risk. OnePoint seeks to minimize initial
investment risk by developing a subscriber base in its markets prior to
making significant investments in telephony switching, transport and
digital loop carrier equipment. Telephony services are currently
delivered through a resale platform. The Company plans to replace
selectively its resale platform with higher margin facilities-based
services as warranted by subscriber traffic levels and the availability
of alternative network facilities within each market. The Company plans
to move toward a network design based on Company-owned switches and
leased UNEs, including transmission facilities, on an incremental basis.
Management believes that this approach balances the cost savings and
capital expenditure requirements associated with a facilities-based
platform. Video services are provided through SMATV and DBS systems and
point-to-point 18GHz microwave links. As a private cable operator, the
Company is not required to serve any particular customer base and
generally does not incur capital costs to build its video systems until
it has obtained a Right of Entry for the property. The Company expects to
deploy digital DBS systems where justified, based on subscriber
demographics and demand. Management believes that this "smart-build"
strategy reduces up-front capital expenditures, expedites entry into
markets and MDUs and allows the Company to take advantage of evolving
regulatory and technical developments.
. Leverage SBC Affiliation. The Company realizes significant benefits from
favorable costs on certain services and equipment made available to SBC
and its affiliates by third party vendors. The availability of these
favorable costs is dependent upon (i) SBC's continued ownership of an
equity interest in the Company which meets or exceeds the definition of
"affiliate" in the underlying contracts and (ii) the continuation of the
current underlying SBC contracts or their replacement by SBC with
contracts having comparable terms. Through such arrangements, the Company
currently purchases wholesale long distance telephony services at the
prices negotiated by SBC and has purchased telecommunications equipment.
The Company also benefits from SBC's technical and regulatory expertise
as well as access to personnel with specialized knowledge.
. Build Customer Base Through Long-Term Contracts. OnePoint enters into
long-term contracts with MDU Managers providing Rights of Entry for
telephony and video services. The Company's bundled telephony and video
services should benefit MDU Managers by differentiating their properties
and potentially raising rental values. OnePoint also provides revenue
sharing programs for property owners and commissions, and training and
support for on-site leasing consultants at the MDUs it serves. These
programs motivate the leasing consultants to serve as an effective face-
to-face sales channel to residents. The Company also seeks to become the
exclusive video service provider to the buildings in which it has
telephony Rights of Entry, and believes its relationships with MDU
Managers will be a competitive advantage in obtaining video Rights of
Entry (when existing agreements with other providers expire or are
otherwise terminated) and Internet Rights of Entry.
. Build Customer Base Through Acquisitions. The Company believes it can
further build its customer base by acquiring established private cable
television operators with MDU video Rights of Entry, or acquiring assets
from such operators. The Company believes it can cross-sell its local and
long distance telephony services to acquired video subscribers by
promoting the convenience of a single point of contact,
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integrated billing and pricing incentives. In furtherance of its strategy,
the Company recently consummated the PCTV Acquisition and is engaged in
discussions with respect to additional acquisitions. See "Recent
Developments." In addition, in February 1998, the Company acquired
equipment and infrastructure and assumed telephony and video services
agreements in connection with two MDUs with a total of 964 passings
located in Atlanta, Georgia.
. Increase Revenue Through Bundling, Creative Marketing and Cross-
Promotions. OnePoint seeks to increase revenue by offering customers
incentives to purchase bundled services, such as discounted video
services for long-distance subscribers and all-in-one bundled prices for
local and long distance telephony and video services. To the extent
permitted under FCC rules, subscribers to each service receive
information about the Company's other services in their bill. Residents
can subscribe for available services by completing a single form when
leasing an apartment, can schedule a single installation visit for all
services, and thereafter receive a single integrated bill for all
services. Management believes the bundling of telephony and video
services leverages sales, marketing and servicing costs, increases market
penetration, reduces churn and improves account collections.
. Provide Superior Customer Care. The Company has developed an integrated
billing system and an advanced customer care facility, which opened in
June 1997. The Company seeks to provide customer care that is superior to
that of incumbent providers, including prompt, courteous repair service,
a single toll-free number for telephony and video customer service and
"hassle-free" installation, with a single installation service call for
all services that can be made on an expedited basis and without the
subscriber present. As a private cable television provider, the Company
can also provide customized programming in each building to match the
demographics and special interests of residents.
Management believes that OnePoint's MDU Manager relationships, its smart-
build approach and its favorable cost position due to its relationship with
SBC are significant competitive advantages. The Company's focus on MDU
customers enables it to concentrate its marketing, service and support
efforts, and requires lower capital costs per unit than targeting other
residential customer groups. The MDU focus also permits the Company to offer
programming and promotions targeted to the demographic characteristics of a
specific building. The Company's Rights of Entry give it the exclusive right
to market its services using the MDU's leasing staff as an on-site face-to-
face sales channel. The smart-build approach permits the Company to enter
markets quickly with a limited initial capital commitment, as compared to a
facilities-led approach which requires significant up-front capital
expenditures prior to providing service and gaining market share. In addition,
management believes that the Company currently has a favorable cost position
for long distance telephony services.
MANAGEMENT EXPERTISE
OnePoint believes that its management and operations team is a critical
component of its initial success and will continue to be a key element of
differentiation for the Company. The Company has built an aggressive and
experienced management team with extensive prior experience at ILECs, CLECs,
IXCs and cable television companies, including MFS Communications Company, MCI
WorldCom, Sprint, and AT&T, among others. James A. Otterbeck, the Company's
Chairman and Chief Executive Officer has served as a Vice President of Gemini
Consulting, where he co-founded and managed the $100 million global
communications business unit of the firm. Mr. Otterbeck has also previously
worked for AT&T Bell Laboratories in product design and management positions
and has worked at IBM in sales and marketing positions. William F. Wallace,
the Company's President and Chief Operating Officer, served as the Chief
Operating Officer of Gemini Consulting, where he co-founded and built Gemini
Consulting's communications business unit with Mr. Otterbeck over a four year
period. See "Management."
FINANCING STRATEGY
The Company used approximately $80.5 million of the net proceeds from the
Initial Offering to fund the purchase of a portfolio of U.S. government
securities (the "Pledged Securities"), which is intended to provide funds
sufficient to pay in full when due the first seven scheduled interest payments
on the Notes. The Pledged
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Securities are pledged as security for the repayment of principal of and
interest on the Notes, Liquidated Damages, if any, and all other obligations
under the Indenture. See "Use of Proceeds" and "Description of the Exchange
Notes--Interest Reserve." Other proceeds have been, or will be, used to
acquire private cable television operators or their assets, to invest in video
infrastructure, to invest selectively in a facilities-based platform for
telephony services, to repay borrowings under the Credit Facility (which may
be reborrowed prior to December 15, 1998), to fund future capital calls by
Mid-Atlantic, to fund working capital and for general corporate purposes,
including operating losses. The Company believes the net proceeds of the
Initial Offering will be sufficient to fund the Company's planned aggregate
capital expenditures, working capital requirements and operating losses for
its six initially targeted markets. The Company may require additional capital
if it achieves market penetration for its services significantly different
than, or at a different stage than current management estimates, achieves
lower than expected pricing for its services, enters additional markets,
locates additional or larger acquisition opportunities or encounters higher
than expected costs to purchase or upgrade telephony, cable or DBS services,
equipment or facilities. The Company also expects that it will require
additional financing (or require financing sooner than anticipated) if the
Company's development plans or projections change or prove to be inaccurate,
or if the Company is unable to continue to take advantage of the pricing
provided for certain SBC-negotiated contracts for any reason. There can be no
assurance that the Company will be successful in raising sufficient additional
debt or equity capital, or of the terms of any such capital. Failure to raise
and generate sufficient funds may require the Company to delay or abandon some
of its planned future expansion or expenditures, which could have a material
adverse effect on the Company's growth and its ability to compete in the
telephony and video industry. See "Risk Factors."
RECENT DEVELOPMENTS
PCTV Acquisition
In June 1998, the Company, through a wholly owned subsidiary, entered into a
definitive agreement to acquire substantially all of the assets used by
People's Choice TV Corp. and Preferred Entertainment, Inc. to provide video
service to MDUs in Chicago. Pursuant to the agreement, the Company acquired
approximately 27,800 video passings in 159 properties in July and August. The
financial statements of PCTV are attached hereto. Management expects to invest
in video reception and transmission equipment to upgrade the video services
offering for the acquired passings.
Potential Acquisitions
The Company has entered into letters of intent to acquire certain cable
rights of entry and related equipment from three companies located in North
Carolina. If consummated, the Potential Acquisitions would result in the
addition of approximately 4,300 video passings in 14 properties. The Company
is at various stages of discussion with respect to other potential
acquisitions in its targeted markets.
The Company is also negotiating a letter of intent with two franchise cable
television operators in one of its targeted markets providing for co-marketing
of local and long distance telephony services to residents of the 150,000 MDU
passings served by these franchise cable television operators.
There can be no assurance that any of the Potential Transactions will be
consummated, or of the terms on which such transactions may be consummated.
Consummation of the Potential Transactions would have a material effect on the
Company's results of operations and financial condition, and there can be no
assurance that any such effect would not be negative.
DELIVERY PLATFORM
Telephony Services
The Company currently delivers telephony services through the resale of
services provided by the ILECs and an IXC. The resale of telephony services is
less capital-intensive than providing facilities-based local and long distance
services and the Company believes resale will be more economically attractive
until a critical mass
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of customers is obtained. It also allows rapid service deployment in any
location that is served by the ILEC and does not require service interruption,
change in service of any significance or change in telephone number for the
customer. This platform ensures customers receive all available services with
the reliability and redundancy enjoyed by ILEC customers, and the Company and
its customers further benefit by having the ILEC manage a degree of
operational risk and complexity for services such as 911, directory and
operator assistance. Resale can also be migrated to a UNEs-based platform by
extending the responsibilities of the Company and taking on the rebundling
role that the underlying carrier currently performs.
The Company plans to invest selectively in a network design based on
Company-owned switches and leased UNEs, including transmission facilities, on
an incremental basis. Facilities deployment requires switching equipment,
dedicated trunking to each building and remote access nodes at each building.
The Company will make network deployment decisions based on the availability
of and prices for equipment, distribution facilities and UNEs purchased from
the ILEC, which will be driven by market and regulatory developments. As it
invests selectively in a facilities-based platform, the Company will need to
take on increased operational responsibilities, including network design and
engineering and the employment and retention of a highly expert workforce to
manage and maintain the network. The Company will also need to negotiate
interconnection agreements. See "--Network Deployment."
The Company is authorized as a CLEC and has obtained authority for the
resale of local exchange services in nine states (Colorado, Delaware, Florida,
Georgia, Illinois, Maryland, North Carolina, Pennsylvania and Virginia). It
has also applied for CLEC status in Arizona and is permitted to provide
telecommunications services there while its application is pending. The
Company also has an application for CLEC authorization pending in the District
of Columbia. Although the Company had previously obtained authorization in the
District of Columbia in May 1997, such authorization was voided in November
1997 because of inconsistencies cited by the PSC between its rules and
applicable law. Following discussions with the PSC, the Company reapplied for
CLEC authorization in the District of Columbia in April 1998. See "Risk
Factors--Risks Related to District of Columbia CLEC Status." The Company has
also received authorization to resell domestic long distance service in the
United States and international long distance service. Telephony services are
provisioned through direct EDI interfaces with the underlying carriers. The
interfaces are integrated with the Company's customer care and billing systems
and were designed in conjunction with Beechwood Data Systems and CSG. Other
computer interfaces are utilized for pre-ordering and trouble management.
These systems are in use with Bell Atlantic Corporation ("Bell Atlantic"),
Ameritech Corporation ("Ameritech"), BellSouth Corporation ("BellSouth") and
Sprint.
The Company markets cellular telephony service provided by CellularOne to
MDU residents in the Chicago and Washington, D.C. markets. CellularOne is
responsible for service provisioning, order fulfillment, billing and customer
care.
Video Services
Video services are delivered through private cable systems that serve one or
more MDUs. Service is provided through SMATV systems or DBS systems and point-
to-point 18GHz microwave links. Private cable operators are not required to
serve any particular customer base and thereby have greater flexibility with
respect to programming, service provisioning and pricing than do franchise
cable operators. Management believes that the Company's expanded use of DBS
systems will reduce capital requirements and expand channel capacity. The DBS
delivery platform utilizes only one satellite that requires a single,
lightweight, 18-inch dish, eliminating the need for the traditional
configuration of two 3-meter dishes secured to a reinforced concrete base. DBS
headend equipment also costs less than the equivalent analog equipment it
replaces, and can be installed more quickly. In addition, where inside wiring
is of sufficient capacity, the Company's use of DBS systems may eliminate the
need for headend equipment. Video services are provisioned from the Company's
integrated customer care, provisioning, trouble management and billing system.
Through use of interdiction systems, customers can be activated, deactivated,
or have service altered remotely, which allows for more efficient use of the
technical field staff.
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Internet
The Company is currently conducting trials of high speed Internet access
service at a limited number of properties. This service allows customers high
speed connectivity to the Internet and will be offered in conjunction with
other Internet-related services, including software, content and e-mail
service. The Company expects to more broadly deploy high speed access in
viable properties based on size and demographics. The Company intends to
deliver connectivity and provide private label wholesale access services by
partnering with a Tier 1 or 2 ISP. Each property will be connected to the ISP
point of presence ("POP") through wireline or wireless T1s. The Company will
most likely utilize a combination of end-user technologies including cable
modem, Ethernet and a variety of digital subscriber line (or "xDSL")
technologies to broaden deployment opportunities. Products will be offered at
varying speeds and will be priced accordingly. The Company has entered into a
memorandum of understanding with an Internet service provider to test on a
limited basis an MDU-specific Ethernet-based application in up to ten MDUs
during 1998.
THE COMPANY'S SERVICES
The Company offers a wide range of telephony and video services, which it
tailors to meet the specific needs of the customers in its target markets. The
Company offers (or plans to offer) the following services:
Local Telephony Services. The Company offers a full range of local
telephony services including enhanced features such as call forwarding,
call waiting, dial back and caller ID in all of its target markets through
resale agreements with ILECs. Former ILEC customers who switch to
OnePoint's telephony services will in most cases be able to retain their
telephone number.
Long Distance Telephony Services. The Company offers domestic and
international long distance telephony services, including "1+" outbound
calling and inbound toll free service through a resale agreement with an
IXC.
Cellular Telephony Services. The Company markets cellular telephony
service to MDU residents in the Chicago and Washington, D.C. metropolitan
markets as an agent for CellularOne.
Video Services. As a private cable operator, the Company offers multi-
channel television programming customized to the demographic profile and
special interests of residents. Depending on the system, the Company offers
from 50 to 80 channels, with basic video programming featuring major cable
and broadcast networks and premium services including HBO, Cinemax,
Showtime and The Movie Channel. In addition, where installed, DBS allows
the Company to deliver up to 175 channels of programming including
exclusive sports programming and up to 50 pay-per-view channels.
Internet Services. The Company plans to offer a range of options to MDU
Managers for high-speed Internet access, depending on resident demand and
demographics. The Company believes that high speed Internet access is a
value-added amenity which will be highly attractive to MDU Managers and
will enable the Company to increase per subscriber revenue. The Company is
evaluating and testing several technologies for providing this service,
including cable modems, Ethernet and xDSL.
PROGRAMMING
The Company purchases video programming primarily from a programming
wholesaler and programming suppliers. The Company has generally obtained
programming on terms and conditions that it considers reasonable and has
obtained favorable pricing as a result of its relationship with Mid-Atlantic.
OnePoint's programming includes basic channels, premium channels including
pay-per-view movies and events, adult entertainment, electronic program guide
services and digital music services, as well as retransmission arrangements
for relevant network broadcasters.
The Company generally pays a monthly fee per subscriber per channel for
programming. Programming costs increase in the ordinary course of the
Company's business as a result of increases in the number of subscribers,
expansion of the number of channels provided to customers and contractual rate
increases from
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programming suppliers. The Company anticipates that its programming costs,
particularly for sports programming, will increase in the future.
MARKETING
The Company focuses on MDU customers in order to concentrate its marketing,
service and support efforts and reduce its capital costs. The Company has
developed a comprehensive sales and marketing approach aimed at three key
decision-makers: the MDU Managers, the on-site leasing staff and the
residential end-user. The Company's bundled telephony and video services offer
MDU Managers the opportunity to earn additional income through revenue sharing
arrangements and also differentiate the property. Management believes that
such differentiation enables the MDU Manager to achieve greater occupancy
rates and potentially raises rental values. On-site leasing staff are an
important part of the Company's marketing strategy, because they are a direct
face-to-face sales channel to residents. The Company provides commissions to,
trains and supports on-site leasing consultants to promote the benefits of
OnePoint's service options. The Company's Residential Marketing Coordinators
work with MDU Managers and leasing staff to increase subscription rates. The
Residential Marketing Coordinators also provide initial and ongoing training
and marketing materials and sponsor launch events to build product and brand
awareness and encourage residents to subscribe immediately. The financial
incentive to purchase bundled services is reinforced by face-to-face marketing
by on-site leasing consultants to existing residents and to new residents at
the critical move-in period. The Company is devoting considerable efforts to
promoting the OnePoint brand name among the MDU Manager community and within
MDUs for which it has Rights of Entry. Management believes that this value-
driven strategy will lead to increased penetration, subscriber loyalty, market
share and profitability and reduced subscriber churn.
The Company offers MDU residents bundled telephony and video services at
moderate to significant discounts to prices charged by ILECs, IXCs or
franchise cable providers with the convenience of "one point" of contact and a
single integrated bill for multiple services. OnePoint uses additional
marketing and discounts to encourage the subscriber to purchase a bundle of
services (including, when available, cellular phone and Internet service), or
to purchase premium or feature packages. Residents are offered a simple
subscription process, with all services installed at the time of move-in. They
have a single toll-free point of contact for all telephony and video services,
including service inquiries, billing inquiries and trouble reporting. The
Company provides its customers with a single integrated bill and the
opportunity to write a single check each month for all services. The Company's
resale of telephony services ensures customers the reliability and redundancy
enjoyed by customers of ILECs and other major carriers. As a private cable
operator, the Company can offer video programming customized to the
demographic profile and special interests of residents. The Company offers a
diverse line-up of high quality basic, premium and pay-per-view programming.
TELEPHONY AND VIDEO RIGHTS OF ENTRY
Telephony Rights of Entry. Through June 1998, the Company had entered into
long term contracts with 5 national REITs (Equity Residential Properties
Trust, Charles E. Smith Residential Realty, Summit Properties, United Dominion
Realty Trust and Walden Residential Properties, Inc.) and numerous other MDU
Managers providing for approximately 127,000 telephony passings in 456 MDUs in
the Company's 6 targeted markets. Each of such REIT Right of Entry agreements
has a term of seven years. These agreements typically grant the Company, on a
property by property basis, and, in each case, to the extent permitted under
applicable law, (i) the right to provide specific telecommunications services
to the property (including the installation and maintenance of necessary on-
site equipment and the wiring of the building) and (ii) the right to market
local, long distance and other telephony services directly to residents of the
property, including the sole right to market such services on the property.
The Company's rights under such contracts do not prohibit other
telecommunications service providers from soliciting residents to use
telecommunications services other than through on-site solicitations, nor do
they restrict third parties from providing services to a resident at the
request of such resident. Services covered under the contracts vary, and may
or may not include dial-up Internet access. The Company's right to market its
services, subject to certain limitations, typically extends to advertising
within
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the building through use of signs, handbills and door-to-door visits. The
Company may also train, coordinate and provide incentives to property
management personnel to provide marketing materials and telephony service
agreements to potential lessees. Under these contracts, MDU Managers typically
receive volume-based financial incentives. MDU Managers are required to
promote generally the use of the Company's services and to use their best
efforts not to permit physical entry onto the property by any other party for
the purpose of marketing or providing the services covered under the contract;
however, the contracts do not prohibit other service providers from indirectly
soliciting residents through other legal means, such as direct mailings or
telemarketing, or providing any services specifically at the request of a
resident. To the extent the Company requires permits to market or provide
services covered by the contract, MDU Managers are obligated to cooperate and
use their best efforts to assist the Company in obtaining necessary permits.
Under these contracts, an MDU Manager may, but is not obligated to, offer
additional properties to the Company. To the extent existing conflicting
agreements would prohibit the Company from offering services to residents at
offered properties, MDU Managers are obligated to terminate such agreements as
soon as legally permissible under the terms of those agreements.
Video Rights of Entry. Through June 1998, the Company had entered into
contracts with 3 MDU Managers providing for video Rights of Entry in relation
to approximately 800 passings in 3 MDUs in Atlanta. Such Right of Entry
agreements have an average term of eight years. These contracts typically
grant the Company the sole right to install, own, operate and maintain a
private cable system on the property and to provide private cable services to
the residents of the property, but do not restrict provision of such services
by others where state, local or federal laws require such other parties to
have the right to provide such services. The Company also is granted the sole
license to solicit residents on-site to subscribe to its private cable
services. Except as otherwise required by federal, state or local laws, MDU
Managers agree to refrain from granting access to the property and any rights
relating to the marketing or provision of video/cable services to any other
person or entity for the duration of the contract. Additionally, the contracts
cannot prevent third party solicitations of residents by mail, telephone or
other indirect means outside of the MDU Managers' control. MDU Managers agree
to use their best efforts to promote the use of private cable services, and
the Company is permitted to train property management personnel to promote the
Company's services. To the extent the Company requires permits to market or
provide services covered by the contract, an MDU Manager is obligated to
cooperate and use its best efforts to assist the Company in obtaining any
necessary permits.
CUSTOMER CARE AND BILLING
The Company has implemented a flexible, customer-service oriented approach
which it believes differentiates it from the mass-market strategy of incumbent
providers. The Company provides customer service from a central care center
located in Largo, Maryland. The customer care center is equipped with a toll-
free "888-ONE-POINT" line through which customers can coordinate all of their
service needs, including the initial service order, repair and billing
inquiries. The facility utilizes an operating support system that integrates
all customer information and can be accessed by activation, billing, customer
care and technical personnel. The Company's customer care professionals,
installers and technicians have been professionally trained to address both
telephony and video service needs. A single, integrated bill is distributed to
each customer for all of the services provided by the Company to that
customer, which management believes provides a competitive advantage in its
cross-marketing efforts. In certain properties where wiring and scrambling
does not preclude the theft of video signals, the Company relies upon periodic
field audits by its technicians to monitor and detect any piracy of video
signals. The Company relies upon the software algorithms utilized by the
wholesale provider of long distance telephony services to monitor potential
fraudulent calling patterns. Through this provider, pre-established controls
and procedures to disconnect service are in place to limit the exposure from
fraudulent long-distance and international telephony calling. The Company
depends upon the credit screening processes employed by the leasing staff in
determining the suitability of the prospective tenant. Service is suspended
for non-payment after 75 days at most properties.
Portions of the customer care facility are currently operated jointly with
Mid-Atlantic. The billing and operating support system is operated pursuant to
a contract between the Company and a third party, and Mid-
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Atlantic reimburses the Company for a portion of the variable expenses related
to the system, based on usage. Both the Company and Mid-Atlantic utilize the
facility to perform services for their customers, and data relating to both
companies' customers are integrated into the billing and operating support
systems. The PBX/ACD telephone equipment used at the facility is owned by Mid-
Atlantic and the Company reimburses Mid-Atlantic for half of the expenses
related to such equipment. In certain circumstances, the Company relies on
Mid-Atlantic's employees to answer the Company's inbound phone calls. The
Company also reimburses Mid-Atlantic for certain payroll and other expenses
with respect to shared employees. Any event that required the separation of
Mid-Atlantic and OnePoint customer care and billing operations could result in
a disruption in the Company's ability to provide adequate service to its
customers.
INFORMATION SYSTEMS
OnePoint has invested significant resources to develop tailored information
systems and procedures that it believes provide a significant competitive
advantage in terms of cost, cross-marketing and customer care. These systems
are required to enter, schedule, provision and track a customer's order from
the point of sale to the installation and testing of service and also include
or interface with trouble management, inventory, billing, collection and
customer care systems. Telephony services are provisioned through direct EDI
interfaces with the underlying carriers, which currently include Bell
Atlantic, Ameritech, BellSouth and Sprint. The interfaces are integrated with
the Company's customer care and billing systems and were designed in
conjunction with Beechwood Data Systems and CSG. Other computer interfaces are
utilized for pre-ordering and trouble management. The Company's employees
input customer information into the systems and interface with the ILECs to
provision services; CSG processes, prints and mails the Company's billing
statements.
NETWORK DEPLOYMENT
The Company plans to deploy switching, concentration and distribution
infrastructure where it achieves significant customer density in a target
market, i.e., in locations where in excess of 2,000 local customer lines in 12
or fewer MDUs can be served from a single central office. The actual size,
class and configuration of the switch deployed will be dependent on the
concentration of subscribers, the likelihood for further utilization and the
Company's ability to obtain SBC's favorable pricing terms from vendors. The
Company may also seek to negotiate agreements to partition capacity of
existing switching facilities from the ILEC, other CLECs, or in the
Washington, D.C. and Chicago markets, from SBC or its affiliates. After
evaluating the cost-effectiveness of UNEs, the Company may elect to lease
point-to-point local loops from either the ILEC or, if available, another CLEC
to span the "last mile." The Company may also elect to lease dedicated T1
facilities to connect large and proximate properties to its switching
equipment, and will then complete the connection with its customers by
installing digital loop carriers, or other concentrating equipment, at each
property. When the Company's local switching facilities are being utilized,
the Company will dedicate long distance traffic and provide transport via
dedicated facilities to an IXC POP, thereby bypassing the ILEC's tandem
switching. While management believes that deploying switches and other
equipment is a cost-effective approach for connecting properties covered by
long-term agreements, ongoing regulatory changes may alter management's view
in this respect by creating additional opportunities through UNEs which may
lead to alternative approaches for deploying leased unbundled facilities. The
Company will make network deployment decisions based on the availability of,
and prices for, equipment, distribution facilities and UNEs purchased from the
ILEC, which will be driven by market and regulatory developments. As it
invests selectively in a facilities-based platform, the Company will need to
take on increased operational responsibilities, including network design and
engineering and the employment and retention of a highly expert workforce to
manage and maintain the network. The Company will also need to negotiate,
among other things, facilities interconnection agreements with the ILECs as
well as reciprocal compensation arrangements and 911 handling arrangements.
See "Risk Factors--Significant Capital Requirements; Uncertainty of Additional
Financing" and "Management's Discussion and Analysis of Financial Condition
and Results of Operations--Liquidity and Capital Resources."
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THE RECAPITALIZATION
The Company is the successor to OnePoint Communications, LLC. The
Predecessor was originally formed in 1996 by VIC and AMI2. Through a series of
transactions from the fourth quarter of 1997 through April 1998, VenCom,
L.L.C. acquired an equity interest in the Predecessor, and the Predecessor was
recapitalized and merged with the Company in order to become a corporation.
See "The Recapitalization."
MAC INTERACTIVE
In December 1997 OnePoint invested $750,000 to acquire a 50% equity interest
(with a preferred return) in MAC Interactive. In December 1997, MAC
Interactive entered into an agreement with ODS to acquire set top boxes and
marketing rights from ODS for its pari-mutuel horse racing wagering service
for an aggregate of $750,000. It is anticipated that MAC Interactive will
provide such set top boxes and market ODS services to Mid-Atlantic
subscribers. The other investors in MAC Interactive are the investors that
also own the equity interests in Mid-Atlantic which are not owned by the
Company. VIC was a limited partner of ODS until July 1998. There can be no
assurance that ODS will be able to introduce its pari-mutuel wagering service
in any jurisdictions, or that the Company will realize any returns on its
investment in MAC Interactive.
MID-ATLANTIC JOINT VENTURE NON-COMPETITION AGREEMENTS
In connection with the Mid-Atlantic joint venture, the Company, its co-joint
venturer and certain of their affiliates entered into a series of Non-
Competition Agreements. Such agreements restrict the rights of such parties
(other than Mid-Atlantic and VIC-RMTS-DC, LLC, the telephony joint venture
company controlled by the Company) to provide cable and telephony services,
respectively, under certain circumstances in either (i) the "D.C. Metro" area,
defined to include Washington D.C., Baltimore, Maryland and certain areas of
Virginia, or (ii) the "Territory," defined to include the States of Delaware,
Maryland, New Jersey, Pennsylvania, and Virginia and Washington, D.C.
The agreements restrict parties other than Mid-Atlantic from pursuing any
opportunity related to, or providing, any private cable service or any
franchise cable service with less than 75,000 dwelling units passed or
available to be passed anywhere in the Territory unless such opportunity has
been offered first to Mid-Atlantic, and then to VIC-RMTS-DC, LLC and, within
the D.C. Metro area, only if Mid-Atlantic has ceased to develop cable
opportunities therein for not less than six consecutive months.
The agreements restrict parties other than VIC-RMTS-DC, LLC from pursuing
any opportunity related to, or providing any, telephony services in the
Territory unless such opportunity has been offered first to VIC-RMTS-DC, LLC,
and then to Mid-Atlantic and, within the DC Metro area, only if VIC-RMTS-DC,
LLC has ceased to develop telephony opportunities therein for not less than
six consecutive months.
In the event that any proposed telephony or cable acquisition would provide
a legal or regulatory conflict for SBC such that neither VIC-RMTS-DC, LLC nor
Mid-Atlantic could pursue such acquisition, there is no offer requirement.
Each party to the agreements is restricted from providing a bundled service
offering consisting of telephony and cable services (other than pursuant to
the joint venture) within the D.C. Metro area. The agreements prohibit the
recruiting or solicitation of any employees, customers, subscribers or
suppliers of either of the joint venture companies who perform services in the
Territory. The duration of such agreements with respect to any party is
dependent on such party's continued equity ownership in the joint venture
entities, and the continued operation of the joint venture entities, but last
in no event longer than one year following the end of such party's affiliation
with the joint venture entities.
FEDERAL REGULATION
The Company's networks and the provision of telecommunications services are
subject to significant regulation at the federal, state and local levels.
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General FCC Regulation
The FCC regulates interstate and international telecommunications services.
The Company provides service on a common carrier basis. The FCC imposes
certain regulations on common carriers such as the RBOCs that have some degree
of market power ("dominant carriers"). The FCC imposes less regulation on
common carriers without market power ("nondominant carriers") including, to
date, CLECs. Under the FCC's rules, the Company is a nondominant carrier and
as such does not need authorization to provide domestic services and can file
tariffs on one day's notice. The FCC requires common carriers to receive an
authorization to construct and operate telecommunications facilities, and to
provide or resell telecommunications services, between the United States and
international points.
ILEC and CLEC Obligations
The Telecommunications Act is intended to increase competition. The act
opens the local services market by requiring ILECs to permit interconnection
to their networks and establishing ILEC obligations with respect to:
Reciprocal Compensation. Requires all ILECs and CLECs to complete calls
originated by competing carriers under reciprocal arrangements. The prices
charged by ILECs for terminating calls originated on a CLEC's network must
be based on a reasonable approximation of additional cost or through mutual
exchange of traffic without explicit payment.
Resale. Requires all ILECs and CLECs to permit resale of their
telecommunications services without unreasonable restrictions or
conditions. In addition, ILECs are required to offer all retail
telecommunications services to other carriers for resale at discounted
rates, based on the costs avoided by the ILEC in such offering.
Interconnection. Requires all ILECs and CLECs to permit their competitors
to interconnect with their facilities. Requires all ILECs to permit
interconnection at any technically feasible point within their networks, on
nondiscriminatory terms, at prices based on cost (which may include a
reasonable profit). At the option of the carrier seeking interconnection,
collocation of the requesting carrier's equipment on the ILECs' premises
must be offered, except where an ILEC can demonstrate space limitations or
other technical impediments to collocation.
Unbundled Access. Requires all ILECs to provide nondiscriminatory access
to unbundled network elements (including network facilities, equipment,
features, functions, and capabilities) at any technically feasible point
within their networks, on nondiscriminatory terms, at prices based on cost
(which may include a reasonable profit).
Number Portability. Requires all ILECs and CLECs to permit users of
telecommunications services to retain existing telephone numbers without
impairment of quality, reliability or convenience when switching from one
local exchange carrier to another.
Dialing Parity. Requires all ILECs and CLECs to provide nondiscriminatory
access to telephone numbers, operator services, directory assistance, and
directory listing with no unreasonable dialing delays. They must also
provide dialing parity for interLATA services and for intraLATA toll
services. RBOCs generally do not have to provide dialing parity for
intraLATA toll services in a state until one of the following occurs: they
are granted the authority to provide long distance services in that state
or three years has passed since passage of the Telecommunications Act.
Access to Rights-of-Way. Requires all ILECs and CLECs to permit competing
carriers access to poles, ducts, conduits and rights-of-way at reasonable
and nondiscriminatory rates, terms and conditions.
ILECs are required to negotiate in good faith with carriers requesting any
or all of the above arrangements. If the negotiating carriers cannot reach
agreement within a prescribed time, either carrier may request binding
arbitration of the disputed issues by the state regulatory commission. Where
an agreement has not been reached, ILECs remain subject to interconnection
obligations established by the FCC and state telecommunication regulatory
commissions.
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In August 1996, the FCC released a decision (the "Interconnection Decision")
establishing rules implementing the Telecommunications Act requirements that
ILECs negotiate interconnection agreements and providing guidelines for review
of such agreements by state public utilities commissions. On July 18, 1997,
the Eighth Circuit vacated certain portions of the Interconnection Decision,
including provisions establishing a pricing methodology and a procedure
permitting new entrants to "pick and choose" among various provisions of
existing interconnection agreements between ILECs and their competitors. On
October 14, 1997, the Eighth Circuit issued a decision vacating additional FCC
rules that will likely have the effect of increasing the cost of obtaining the
use of combinations of an ILEC's unbundled network elements. The Eighth
Circuit decision may require renegotiation of existing agreements. There can
be no assurance that the Company will be able to obtain interconnection
agreements on favorable terms. The Supreme Court has granted a writ of
certiorari to review the Eighth Circuit decision.
The Telecommunications Act also requires all telecommunications carriers to
ensure that their services are accessible to and usable by persons with
disabilities. In addition, the FCC's rules require that the Company contribute
to universal service funds, the Telecommunications Relay Services fund and the
North American Numbering Plan Administrator fund. See "--Federal Regulation--
Universal Service." The Company is also subject to other FCC filing
requirements. Compliance with these obligations, individually and in the
aggregate, may cause the Company to incur substantial expenses. There can be
no assurance that these expenses will not have a material adverse effect upon
the Company's results of operations and financial condition and its ability to
meet its obligations under the Notes. In addition, the Company might incur
significant expenses to assure that its networks comply with the requirements
of CALEA. Under CALEA, telecommunications carriers are required to: (i)
provide law enforcement officials with call content and call identifying
information pursuant to a valid electronic surveillance warrant ("assistance
capability requirements"); and (ii) reserve a sufficient number of circuits
for use by law enforcement officials in executing court authorized electronic
surveillance ("capacity requirements"). To the extent that the Company
provides facilities-based services, it may incur costs in meeting both of
these requirements. In particular, regarding the assistance capability
requirements, the government is only required to compensate carriers for the
costs of making equipment installed or deployed before January 1, 1995 CALEA-
compliant. While the telecommunications industry is attempting to negotiate
legislative and administrative changes to this reimbursement cut-off date, as
it stands today, the Company will be financially responsible for ensuring that
its post-1995 equipment is in compliance. Regarding the capacity requirements,
the government will finance any necessary increases in capacity for equipment
installed or deployed prior to September 8, 1998, and the Company will be
responsible for paying for any necessary increases in capacity for equipment
installed or deployed after that date.
Tariffs and Pricing Requirements
In October 1996, the FCC adopted an order in which it eliminated the
requirement that non-dominant interstate carriers such as the Company maintain
tariffs on file with the FCC for domestic interstate services. This order
applies to all non-dominant interstate carriers. The order does not apply to
the switched and special access services of the RBOCs or other local exchange
providers. The FCC order was issued pursuant to authority granted to the FCC
in the Telecommunications Act to "forbear" from regulating any
telecommunications services provider under certain circumstances. After a
nine-month transition period, relationships between interstate carriers and
their customers will be set by contract. At that point, long distance
companies are prohibited from filing tariffs with the FCC for interstate,
domestic, interexchange services. Carriers have the option to immediately
cease filing tariffs. Several parties have filed notices for reconsideration
of the FCC order and other parties have appealed the decision. On February 13,
1997, the United States Court of Appeals for the District of Columbia Circuit
stayed the implementation of the FCC order pending its review of the order on
its merits. Currently, that stay remains in effect and interstate long
distance telephony companies are therefore still required to file tariffs.
If the stay is lifted and the FCC order becomes effective,
telecommunications carriers such as the Company will no longer be able to rely
on the filing of tariffs with the FCC as a means of providing notice to
customers
of prices, terms and conditions on which they offer their interstate services.
The obligation to provide
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non-discriminatory, just and reasonable prices remains unchanged under the
Communications Act. While tariffs provide notice of prices, terms and
conditions, the Company intends to rely primarily on its sales force and
direct marketing to provide such information to its customers. Tariffs also
allow the Company to limit its liability to its customers, including in
connection with service interruptions. If tariffs are eliminated, the Company
may become subject to significantly increased liability risks, and there can
be no assurance that such liabilities will not have a material adverse effect
on the Company's results of operations and financial condition and ability to
meet its obligations under the Notes. In addition, the Company must obtain
prior FCC authorization for installation and operation of international
facilities and the provision (including resale) of international long distance
services. There has been no proposal to detariff international services and
the Company has filed tariffs to offer those services.
Pursuant to authority granted by the FCC, the Company will resell the
international telecommunications services of other common carriers between the
United States and international points.
With respect to its domestic service offerings, various subsidiaries of the
Company have filed tariffs with the FCC stating the rates, terms and
conditions for their interstate services. The Company's tariffs are generally
not subject to pre-effective review by the FCC, and can be amended on one
day's notice. The Company's interstate and intrastate toll services are
provided in competition with interexchange carriers (including ILECs in some
cases). The Company's access services are provided in competition with the
ILECs.
With limited exceptions, the current policy of the FCC for most interstate
access services dictates that ILECs charge all customers the same price for
the same service. Thus, the ILECs generally cannot lower prices to some
customers without also lowering charges for the same service to all similarly
situated customers in the same geographic area, including those whose
telecommunications requirements would not justify the use of such lower
prices. The FCC may, however, alleviate this constraint on the ILECs and
permit them to offer special rate packages to certain customers, as it has
done in few cases, or permit other forms of rate flexibility.
CPNI
In February 1998, the FCC adopted rules implementing Section 222 of the
Communications Act, which governs the use of customer proprietary network
information ("CPNI") by telecommunications carriers. CPNI generally includes
any information regarding a subscriber's use of a telecommunications service,
where it is obtained by a carrier solely by virtue of the carrier-customer
relationship. CPNI does not include a subscriber's name, telephone number, and
address, if that information is published or accepted for publication in any
directory format. Under the FCC's rules, a carrier may only use a customer's
CPNI to market a service that is "necessary to, or used in," the provision of
a service that the carrier already provides to the customer, unless it
receives the customer's prior oral or written consent to use that information
to market other services. A number of parties have asked the FCC to modify
several of these rules. These requests remain pending. These rules, either as
adopted or as modified, may impede the Company's ability to effectively market
integrated packages of services and to expand existing customers' use of the
Company's services.
Universal Service
On May 8, 1997, the FCC released an order establishing a significantly
expanded federal universal service subsidy regime. For example, the FCC
established new subsidies for telecommunications and certain information
services provided to qualifying schools and libraries with an annual cap of
$2.25 billion and for services provided to rural health care providers with an
annual cap of $400 million. The FCC also expanded the federal subsidies for
local exchange telephony services provided to low-income consumers and
consumers in high-cost areas. Providers of interstate telecommunications
services, such as the Company, as well as certain other entities, must pay for
these programs. The Company's share of these federal subsidy funds will be
calculated based on end-user revenues. For the schools and libraries and rural
health care support mechanisms, end-user interstate, international, and
intrastate revenues will be used. For the high cost and low income support
mechanisms, contributions will be based on interstate and international end-
user revenues. Currently, the FCC is calculating
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assessments based on the prior year's revenues. Assuming that the FCC
continues to calculate contributions based on the prior year's revenues, the
Company believes that it will not be liable for subsidy payments in any
material amount during 1998 because it had no significant revenues in 1997.
With respect to subsequent years, however, the Company is currently unable to
quantify the amount of subsidy payments that it will be required to make or
the effect that these required payments will have on its financial condition.
In the May 8th order, the FCC also announced that it will soon revise its
rules for subsidizing service provided to consumers in high cost areas, which
may result in further substantial increases in the overall cost of the subsidy
program. Several parties have appealed the May 8th order. Such appeals have
been consolidated and transferred to the United States Court of Appeals for
the Fifth Circuit where they are currently pending. Several petitions for
administrative reconsideration of the order are pending.
Long Distance Restrictions
The Telecommunications Act codifies the ILECs' equal access and
nondiscrimination obligations and preempts inconsistent state regulation. The
Telecommunications Act also contains special provisions that eliminate the
AT&T Antitrust Consent Decree restricting the RBOCs from providing long
distance services and engaging in telecommunications equipment manufacturing.
The Telecommunications Act permitted the RBOCs to enter the out-of-region long
distance market immediately upon its enactment. Further, provisions of the
Telecommunications Act permit a RBOC to enter the long distance market in its
traditional service area if it satisfies several procedural and substantive
requirements, including obtaining FCC approval upon a showing that the RBOC
has entered into interconnection agreements (or, under some circumstances, has
offered to enter into such agreements) in those states in which it seeks long
distance relief, the interconnection agreements satisfy a 14-point "checklist"
of competitive requirements, and the FCC is satisfied that the RBOC's entry
into long distance markets is in the public interest. To date, several
petitions by RBOCs for such entry have been denied by the FCC, and none has
been granted.
Due to SBC's indirect ownership of 19.7% of the sole stockholder of the
Company, the Company is considered to be an affiliate of SBC for regulatory
purposes, and is therefore prohibited from providing long distance telephony
service to customers in the SBC Region. On May 11, 1998 SBC announced that it
had agreed to merge with Ameritech to create a telecommunications company with
a "national-local" focus to compete against ILECs, CLECs, long distance
companies and global competitors. SBC stated that it hoped to complete the
merger within a year, but noted that the merger is subject to approval by
stockholders, the public utilities commissions in the Ameritech Region, other
local regulators and the Federal Communications Commission. The merger is also
subject to review by the United States Department of Justice. As an affiliate
of SBC for regulatory purposes, the Company is currently prohibited from
providing long distance service to customers in the SBC Region, and if
Ameritech has not received approval to provide long distance service in
Illinois prior to the consummation of the merger, the Company would be
prohibited from continuing to provide long distance service in Chicago
following consummation of the merger, and similarly, if Ameritech has not
received approval to provide long distance service in the other states in the
Ameritech Region, the Company would be prohibited from providing long distance
service in such states following consummation of the merger. In the event that
the merger is consummated and Ameritech has not received approval to provide
long distance service by that time, the Company believes that, under current
regulatory conditions, it may be able to restructure its Illinois operations
in such a way that it would not be prohibited from providing long distance
service in Illinois, although such restructuring could require amendments or
consents under certain of the Company's agreements, including the agreement
pursuant to which it purchases long distance service. There can be no
assurance, however, that such an approach would be successful. Such inability
to provide long distance service could have a material adverse effect on the
Company's results of operations and financial condition and its ability to
meet its obligations under the Notes. See "Risk Factors--Dependence on SBC
Affiliation; Restrictions on Ability to Provide Service in SBC Region; Risk of
Loss of Favorable Contracts."
The area which constitutes the SBC Region may change due to other
transactions entered into by SBC or regulatory changes. Expansion of the SBC
Region, through a business combination between SBC and another RBOC or
otherwise, could have a material adverse effect on the Company's results of
operations and financial
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condition and its ability to meet its obligations under the Notes. There can
be no assurance that the SBC Region, in which the Company is currently
prohibited from providing long distance telephony service, or the Ameritech
Region, in which the Company may be prohibited from providing long distance
telephony service, will not expand, or that any such expansions will not
include areas currently served, or targeted to be served, by the Company.
On December 31, 1997, the U.S. District Court for the Northern District of
Texas issued the SBC Decision finding that Sections 271 to 275 of the
Telecommunications Act are unconstitutional. These sections of the
Telecommunications Act impose restrictions on the lines of business in which
the RBOCs may engage, including establishing the conditions they must satisfy
before they may provide in-region interLATA telecommunications services. Under
the SBC Decision, the RBOCs would be able to provide such in-region services
immediately without satisfying the statutory conditions. The Fifth Circuit
reversed the SBC Decision on September 4th, 1998. It is possible that SBC will
seek Supreme Court review of the Fifth Circuit decision. If the SBC Decision
ultimately is upheld on appeal it would likely result in significant
additional competition from RBOCs in the long distance telephony market. See
"--Competition."
Under the Telecommunications Act, any entity, including cable television
companies and electric and gas utilities, may enter any telecommunications
market, subject to reasonable state regulation of safety, quality and consumer
protection. Because implementation of the Telecommunications Act is subject to
numerous federal and state policy rulemaking proceedings and judicial review
there is still uncertainty as to what impact such legislation will have on the
Company.
Access Charges
To the extent the Company provides interexchange telecommunications service,
it is required to pay access charges to ILECs when it uses the facilities of
those companies to originate or terminate interexchange calls. Also, as a
CLEC, the Company provides access services to other interexchange service
providers. The interstate access charges of ILECs are subject to extensive
regulation by the FCC, while those of CLECs are subject to a lesser degree of
FCC regulation but remain subject to the requirement that all charges be just,
reasonable, and not unreasonably discriminatory. With limited exceptions, the
current policy of the FCC for most interstate access services dictates that
ILECs charge all customers the same price for the same service. Thus, the
ILECs generally cannot lower prices to some customers without also lowering
charges for the same service to all similarly situated customers in the same
geographic area. The FCC may, however, alleviate this constraint on the ILECs
and permit them to offer special rate packages to certain customers, as it has
done in a few cases, or permit other forms of rate flexibility. In two orders
released on December 24, 1996, and May 16, 1997, the FCC made major changes in
the interstate access charge structure. In the December 24th order, the FCC
removed restrictions on ILECs' ability to lower access charges and relaxed the
regulation of new switched access services in those markets where there are
other providers of access services. The May 16th order increased the costs
that ILECs subject to the FCC's price cap rules ("price cap LECs") recover
through monthly, non-traffic sensitive access charges and decreased reliance
on traffic-sensitive charges. In the May 16th order, the FCC also announced
its plan to bring interstate access rate levels more in line with cost. The
plan will include rules that are expected to be established sometime in 1998
that may grant price cap LECs increased pricing flexibility upon
demonstrations of increased competition (or potential competition) in relevant
markets. The manner in which the FCC implements this approach to lowering
access charge levels could have a material effect on the Company's ability to
compete in providing interstate access services. Several parties appealed the
May 16th order. Those appeals were consolidated and transferred to the United
States Court of Appeals for the Eighth Circuit where they are currently
pending. That court upheld the FCC's May 16th order in a decision issued on
August 19, 1998.
Reciprocal Compensation
Certain ILECs have been contesting whether the obligation to pay reciprocal
compensation to CLECs should apply to local telephone calls terminating to
ISPs. The ILECs claim that this traffic is interstate in nature and therefore
should be exempt from compensation arrangements applicable to local,
intrastate calls. The FCC
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has determined on a number of occasions, including in its May 16, 1997, access
charge reform order, that calls to ISPs should be exempt from interstate
access charges and should be governed by local exchange tariffs. However,
several petitions have been filed on this issue and are still pending at the
FCC. Several state commissions, including those in Maryland, New York,
Pennsylvania, Texas and Virginia have ruled that reciprocal compensation
arrangements do apply to ISP traffic, although the New York commission is
continuing to consider this issue. In addition, federal district courts in
Illinois and Texas have determined that reciprocal compensation arrangements
apply to ISP traffic. The FCC has been asked to address this issue, and may do
so in the near future. Disputes over the appropriate treatment of ISP traffic
are pending in a number of states. A final decision on the interstate or
intrastate nature of this traffic will determine whether the Company is
eligible to receive reciprocal compensation payments or whether the Company
must make such payments. It could therefore have a material adverse effect on
the Company's results of operations and financial condition and its ability to
meet its obligations under the Notes.
Internet Regulation
With respect to its planned Internet offerings, the Company believes that it
is not currently subject to direct regulation by the FCC or any other
governmental agency, other than regulations applicable to businesses
generally. To date, the FCC has not actively sought to regulate the provision
of Internet access and related services. Under current law, operators of
"enhanced" services, which currently include Internet access services, are
exempt from FCC regulation, but operators of "basic" services are not
similarly exempt. The FCC recently announced its intention to determine on a
case-by-case basis whether to require Internet telephony services to
contribute financially to universal service support mechanisms, which could
also subject these services to other forms of regulation.
Due to the increase in Internet use and publicity, it is possible that new
laws and regulations may be adopted, and that changes in laws or regulations
may be made, with respect to the Internet, including laws regarding privacy,
pricing, and characteristics of services or products. Certain other
legislative initiatives, including those involving taxation of Internet
services and transactions, and payment of access charges by Internet providers
have also been proposed. BellSouth has announced that it will assess access
charges on certain providers of IP-based telephony. Any legislation regarding
the Internet could impact adversely the Company's ability to provide various
services and could have a material adverse effect on the Company's results of
operations and financial condition and its ability to meet its obligations
under the Notes. The Company cannot predict the impact, if any, that future
laws or any legal changes may have on its business.
There are also a number of ongoing proceedings at the FCC regarding whether
the FCC should regulate the Internet. On April 10, 1998, the FCC reported to
Congress on the meaning of various provisions in the Telecommunications Act,
including whether the provision of Internet access is a "telecommunications"
service. In its report, the FCC concluded that Internet access service,
defined as a bundled offering combining various computer processing and
content applications, is an information service under the Telecommunications
Act and that the transmission capabilities provided over the facilities
underlying Internet access and other information service offerings constitute
"telecommunications" under the Telecommunications Act, whether provided by a
common carrier or self-provisioned by an Internet service provider. The FCC
noted that IP phone-to-phone telephony appears to be a telecommunications
service rather than an information service, but a final conclusion was
deferred to subsequent ad hoc proceedings. The regulatory status of cable
television system facilities used to provide Internet access was specifically
not addressed, and how universal service funding obligations will apply will
be the subject of a further proceeding. The ultimate resolution of these
issues could affect the regulatory status, cost, or other aspects of the
Company's service offerings.
The introduction of, or changes to, regulations that directly or indirectly
affect the regulatory status of Internet services, affect telecommunications
costs (including the application of reciprocal compensation requirements,
access charges or universal service contribution obligations to Internet
services), or increase the competition from regional telecommunications
companies or others, could have a material adverse effect on the Company's
results of operations and financial condition and its ability to meet its
obligations under the Notes.
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For instance, if the FCC determines, through any one of the ongoing or future
proceedings, that the Internet is subject to regulation, the Company could be
required to comply with a number of FCC entry/exit regulations, reporting,
fee, and record-keeping requirements, marketing restrictions, access charge
obligations, and universal service contribution obligations, which could
adversely impact the Company's ability to provide various planned services and
have a material adverse effect on the Company's results of operations,
financial condition and its ability to meet its obligations under the Notes.
The Company cannot predict the impact, if any, that regulations or regulatory
changes may have on its business. A final determination by the FCC that
providing Internet transport or telephony services to customers over an IP-
based network is subject to regulation also could impact adversely the
Company's ability to provide various planned services and could have a
material adverse effect on the Company's results of operations and financial
condition and its ability to meet its obligations under the Notes.
Federal and state laws and regulations relating to the liability of online
services companies and Internet access providers for information carried on or
disseminated through their networks are currently unsettled. Several private
lawsuits seeking to impose such liability upon online services companies and
Internet access providers are currently pending. In addition, legislation has
been enacted and new legislation has been proposed that imposes liability for
the transmission of or prohibits the transmission of certain types of
information on the Internet, including sexually explicit and gambling
information. The imposition of potential liability on the Company and other
Internet access providers for information carried on or disseminated through
their systems could require the Company to implement measures to reduce its
exposure to such liability, which may require the Company to expend
substantial resources or to discontinue certain service or product offerings.
The increased attention to liability issues as a result of these lawsuits and
legislative actions and proposals could impact the growth of Internet use.
While the Company carries professional liability insurance, it may not be
adequate to compensate claimants or may not cover the Company in the event the
Company becomes liable for information carried on or disseminated through its
networks. Any costs not covered by insurance incurred as a result of such
liability or asserted liability could have a material adverse effect on the
Company's results of operations and financial condition and its ability to
meet its obligations under the Notes.
Video Regulation
A number of recent and on-going developments in Congress, at the FCC, and at
the United States Copyright Office are likely to have an impact on the extent
to which governmental regulations burden the entertainment component of the
Company's business and on its ability to compete with other MVPDs.
Access to Property. The Communications Act contains a provision affording
franchise cable operators access to public rights-of-way and certain private
easements. Because judicial interpretations generally limit the applicability
of this federal right of access to external easements, franchise cable
operators have not been successful in using it to gain access to internal
ducts or conduits of MDUs without consent of the landlord or management. Thus,
cable operators must rely on state or local access laws to obtain the right to
compete for MDU subscribers for which private cable systems hold exclusive
rights. These statutes, referred to as "mandatory access" provisions,
typically empower only franchise cable operators to gain access to an MDU in
order to provide service to the residents regardless of whether the MDU owner
objects or has entered into a contract with an alternative provider of video
services such as the Company. Thus, in jurisdictions where a mandatory access
provision has been enacted, a franchise operator might be able to access an
MDU and provide service in competition with the Company despite any exclusive
Rights of Entry contract that the Company might have entered into with the
owner. The ability of franchise operators to force access to an MDU may create
additional competition for a limited subscriber base and poses a potential
threat to the Company's operating margin at the property in question. A number
of jurisdictions in which the Company's targeted markets are located have
enacted mandatory access provisions, including the states of Illinois and
Pennsylvania and the District of Columbia. While the state of Virginia has not
enacted a mandatory access statute, its laws prohibit landlords from accepting
payment from a video services provider in exchange for access to an MDU. The
inability of video service providers such as the Company to include
compensation provisions in video Rights of Entry contracts for properties
located in Virginia may limit their ability to induce property owners to enter
into these contracts.
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The Company's business depends upon its ability to obtain, capitalize and
renew Rights of Entry. The Company enters into long-term contracts with
national REITs and other MDU Managers providing telephony and video Rights of
Entry.
These rights may be affected by a proceeding in which the Commission is
considering whether it should adopt new rules that would cap or otherwise
limit the ability of MVPDs to enter into future exclusive contracts with MDU
Managers, address existing exclusive contracts, apply its rules concerning
wiring inside a customer's premises to all MVPDs, and require the sharing of
cable wiring by multiple providers. The FCC has recently initiated a
proceeding that is examining the propriety of exclusive contracts entered into
between MVPDs and MDU Managers for the provision of multichannel video
services, such as cable service. In addition to numerous other proposals, the
Commission has proposed a "cap" on such contracts, limiting them to the amount
of time reasonably necessary for an MVPD to recover its specific capital costs
of providing service in that MDU. In particular, the FCC has asked for comment
on the length of such a cap and whether it should establish a presumption that
a seven-year term is enforceable for all existing and future exclusivity
provisions.
In this proceeding, the FCC is also seeking comment on whether it can and
should take any specific actions regarding "perpetual" exclusive contracts,
including whether such contracts should be limited under any general rule on
exclusive contracts that the FCC adopts. The FCC is considering whether to
allow MDU Managers to elect to terminate (or take a "fresh look" at) existing
"perpetual" exclusive or other exclusive long-term contracts with incumbent
cable operators to give all competitive MVPDs the opportunity to compete for
MDU business that would otherwise be foreclosed to them because of an
exclusive contract. In addition, the comments filed in response to the
Commission's proposals are divided on the issue of exclusive and perpetual
contracts. For example, a number of incumbent providers have argued that the
Commission lacks statutory authority or a policy basis to apply its proposed
"fresh look" policy. A number of these parties also urge the FCC to adopt a
limit on the duration of future exclusive contracts, which in some cases is
shorter than the time period proposed by the FCC. On the other hand, several
new entrant MVPDs assert that a prospective limit on exclusive contracts
should not be adopted, while supporting a fresh look for existing contracts.
The arguments raised in the record and the alternative proposals advanced by a
number of parties may well affect the final outcome of the Commission's
determinations concerning both existing and future exclusive contracts.
If the FCC concludes that exclusive contracts should be limited, the
Company's ability to market its bundled services could be adversely affected,
which could have a material adverse effect on the Company's results of
operations and financial conditions and its ability to meet its obligations
under the Notes. If the FCC does not grant MDU Managers the rights to take a
"fresh look" at incumbent cable operator exclusive contracts, the addressable
market for the Company's services could be sharply diminished, which could
have a material adverse effect on the Company's results of operations and
financial condition and its ability to meet its obligations under the Notes.
Inside Wiring. In late 1997, the FCC issued new rules to govern the
disposition of inside wiring by incumbent MVPDs in MDUs on termination of
service. These rules, which are intended to encourage competition by new
entrants offering franchised and private video service, impose conditions on
the sale, removal or abandonment of wiring and govern shared use of space by
competing providers. Petitions seeking reconsideration of certain aspects of
these rules remain pending at the FCC, and at least one judicial challenge to
these rules has been filed in the U.S. Court of Appeals for the Eighth
Circuit. In some instances, a new provider such as the Company faces
difficulty in taking over a property because the ownership of the wiring is
uncertain or contested and the property owner is hesitant to allow
installation of additional wiring. The new rules address this issue and
facilitate competition from new providers by requiring the incumbent to choose
between sale, removal or abandonment of the wiring within certain time
constraints and allowing for shared use of space by competing providers in
certain circumstances.
Equipment Availability. As part of the Telecommunications Act of 1996, the
FCC adopted regulations to ensure the commercial availability of equipment
(such as converter boxes and interactive equipment) used to access services
offered over multichannel video programming distribution systems, from sources
that are
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unaffiliated with any MVPD. These regulations require that all MVPDs,
including One Point's systems, (1) allow customers to attach their own
equipment to their systems, (2) not prevent equipment from being offered by
retailers, manufacturers or other unaffiliated vendors, (3) separate out
security functions from non-security functions of equipment by July 1, 2000
(not applicable to DBS or other systems that operate throughout the U.S. if
equipment is available from independent sources), (4) not offer equipment with
integrated security and non-security functions after January 1, 2005, and (5)
provide, upon request, technical information concerning interface parameters
needed to permit equipment to operate with their systems. MVPDs are allowed to
protect the security of their systems and programming from unauthorized
reception. The rules are subject to sunset after the markets for MVPDs and
equipment become fully competitive in a particular geographic market. The FCC
refused to adopt specific requirements that equipment be made interoperable
between different types of MVPDs. These rules are subject to petitions for
reconsideration, which remain pending at the FCC.
Program Access and Exclusivity. In accordance with the Cable Television
Consumer Protection and Competition Act of 1992, the FCC adopted regulations
intended to facilitate access to programming by competing MVPDs. The rules
generally preclude programmers that share ownership ties with franchise cable
television operators ("vertically-integrated programmers") from granting
particular MVPDs the exclusive right to carry their programming. In addition,
the rules prohibit vertically-integrated programmers that deliver their
programming by satellite from engaging in other unfair or discriminatory
practices. Both the FCC and Congress currently are considering requests to
expand restrictions on exclusive contracting and other unfair or
discriminatory practices to non-vertically-integrated programmers and to
programming that is distributed by terrestrial means as well as by satellite.
In addition, the FCC is considering new procedures to make it easier for
competing MVPDs to pursue complaints against programmers that violate the
rules.
Regulation of DBS Providers. Congress is considering several pieces of DBS
legislation that could facilitate the Company's ability to receive local and
network TV programming, on the one hand, and enhance the ability of DBS
providers to compete with traditional franchise cable systems or private cable
operators like the Company on the other. Although federal law currently
precludes DBS providers from distributing local TV stations or network signals
to viewers other than those living in so-called "white areas" where over-the-
air broadcast service is unavailable, Congress is considering removing those
restrictions. Pressure for Congressional action has intensified as a result of
recent federal court decisions that would require certain DBS providers to
discontinue delivery of network signals to thousands of ineligible subscribers
outside "white areas"; however, broadcasters who requested the injunctions
have agreed not to enforce them until January 1, 1999. In addition, a DBS
provider is seeking FCC action that would greatly expand so-called "white
areas" where delivery of network signals via DBS is permissible. Passage of
such legislation or FCC rules would facilitate delivery of local signals by
Company facilities relying on DBS as a source of programming. At the same
time, removing restrictions from DBS providers could strengthen DBS as a
competitor to the Company's video distribution business. Initial legislative
steps also have been taken to establish competitive parity between DBS
providers and franchise or private cable operators by reducing the higher
license fees that DBS providers must pay for carrying broadcast signals.
Current FCC rules preempt any state or local restrictions that "impair" a
viewer's ability to receive video programming through devices designed for
over-the-air reception of television broadcast service, MMDS or DBS. The rules
also preempt laws, regulations, private covenants and homeowners' association
rules impairing reception to the extent they apply to property within the
exclusive control of the antenna user and where the user has an ownership
interest in the property. In addition, the FCC has proposed prohibiting MDU
Managers from imposing restrictions that might impair reception by viewers who
do not own the affected property, including MDU residents. If the FCC limits
the rights of the MDU Managers to impose restrictions on residents'
subscription to DBS or MMDS, this could adversely affect the value of the
Company's present and future Rights of Entry, which could have a material
effect on the Company's results of operations and financial condition and its
ability to meet its obligations under the Notes.
Regulation of Franchise Cable Television Rates. Private cable operators are
not subject to FCC rate regulation; however, a complex regulatory scheme
currently governs the rates that traditional franchise cable systems charge
for basic monthly service, expanded basic and certain customer premises
equipment. Although,
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as a general rule, the FCC requires franchise cable systems to charge uniform
rates to all customers within a geographic area, the regulations allow these
operators to offer certain "bulk" discounts to MDU customers, enabling
franchise cable systems to be more competitive with private cable providers.
As a result of statutory language in the Telecommunications Act, the FCC
currently is considering revisions to the uniform rate requirements, which, if
adopted, may affect the level of protection these provisions afford private
operators. For example, the statutory language currently prohibits only
"predatory" bulk discounts. The FCC is considering whether to define this term
by reference to a "bright line" standard based upon the price differential or
whether to rely on federal antitrust law. The FCC's eventual decision could
make it more difficult or burdensome to prove whether a bulk discount is
predatory. The scope of rate regulation is limited in other ways as well. The
FCC rules, including its uniform pricing requirements, do not apply when the
franchise operator can demonstrate, pursuant to procedures established by the
FCC, that it is subject to "effective competition" from providers of similar
services in its franchise area. More generally, the regulations do not
prohibit discriminatory pricing for services other than rate regulated
services and associated installation and equipment costs. Although regulations
currently holding down the price franchise cable operators can charge for
expanded basic service are scheduled to be eliminated in March 1999, recent
cable rate increases have resulted in pressure on Congress to extend the
scheduled March 1999 regulatory "sunset" date.
Regulatory Status and Regulation of Private Cable Operations. Franchise
cable systems must comply with a host of FCC regulations including rate
regulation, substantial channel set-asides for mandatory carriage of local
television stations and for leasing by unaffiliated parties, provisions
governing content and presentation of advertising and of local cablecast
programming, customer service standards, technical testing and performance
standards and reporting requirements. Local franchising authorities play a
role in enforcing some of these provisions. See "--Regulation of Franchise
Cable Television Rates." In addition, local (and sometimes state) officials
issue traditional cable systems their chief operating authorization, the local
franchise, which frequently imposes requirements such as construction and
design standards, channel set-asides and production facilities for public,
educational and governmental use, and payment of annual franchise fees or
other "in kind" benefits to the community.
Pursuant to the Communications Act, wired MVPD facilities that serve
subscribers without using any public right-of-way (commonly known as "private
cable systems") are exempt from local franchise requirements and the majority
of FCC regulations applicable to franchise systems that do use public rights-
of-way. The FCC does not consider use of microwave relays instead of wires to
cross public right-of-way a "use of the public right-of-way" for
jurisdictional purposes. Thus, in order to avoid becoming subject to these
extensive governmental requirements, the Company must confine its wired plant
to private property and must rely on microwave transmission to cross public
rights-of-way. Use of certain frequencies commonly used in the microwave links
that connect properties is limited in the Washington, D.C. area by a recent
FCC order establishing a local zone where, in order to protect sensitive
government operations, new facilities will not be authorized. The use of these
frequencies for microwave links nationwide also could be affected generally by
other FCC rulemakings investigating the introduction of new services in the
frequency band in question on a shared basis. The outcome of these proceedings
is impossible to predict, but could require discontinuation or detrimental
modification of the Company's use of such frequency band.
In a recent decision, the FCC clarified the law and held that another avenue
exists for private operators that will allow them to avoid the requirement for
a municipal franchise. The FCC held that under certain circumstances a private
operator does not need to receive a municipal franchise to provide its video
service to MDUs where the operator provides such service in part through
subscribing to a service offered by one of the telephone companies. Under the
telephone company's service, the video signal would travel through the
telephone company's facilities over the public streets and rights of way.
These facilities would connect to the private operator's facilities on private
property. The FCC limited its holding that a franchise is unnecessary to the
facts involved in the matter before it, which included (but were not limited
to) the following: (i) there was absolute separation of ownership between the
private operator and telephone company and there was nothing more than a
carrier-user relationship between them; (ii) the private operator's facilities
were located entirely on
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private property; (iii) the facilities primarily used by the telephone company
to provide service to the private operator were not constructed at the private
operator's request; (iv) there was capacity to serve several other programming
providers using the telephone companies' fiber; and (v) the private operator
had committed to make its drops available to other programming providers.
Several entities have appealed the FCC's decision, which appeal is pending
before the United States Court of Appeals for the Seventh Circuit. The FCC's
ruling, if upheld, may increase operating efficiencies by enabling the Company
to link facilities much more widely dispersed throughout an area than it could
using microwave links and still remain largely unregulated. The FCC's
conditions on the decision listed above, however, and particularly the fifth
condition, may limit the usefulness of the decision to the Company.
Although private cable systems are exempt from the majority of federal
regulations, a few FCC rules apply. Among these are rules which, depending on
the configuration of the system and the ownership of TV reception equipment,
impose the obligation to obtain retransmission consent prior to delivering
certain television stations, limitations on radiation and interference, rules
governing equal employment opportunity and closed captioning requirements.
Copyright. Private cable systems must obtain copyright clearance for
programming and other copyrighted material they distribute to subscribers. For
satellite-delivered services, such clearance typically is obtained from the
program supplier. To obtain copyright clearance for broadcast signals they
retransmit, private cable systems must rely on a statutory blanket license
which they can obtain by filing semi-annual reports and making payments into a
federally-administered royalty pool. Recent action by the U.S. Copyright
Office affecting the method private cable operators use to calculate these
payments may increase copyright liability; however, copyright reform efforts
underway in Congress may further affect regulation of the Company in this area
by replacing the current payment formula with a flat fee that could result in
significant savings.
STATE REGULATION
The Telecommunications Act is intended to increase competition in the
telecommunications industry, especially in the local exchange market. With
respect to local services, ILECs are required to allow interconnection to
their networks and to provide access to unbundled network facilities, as well
as a number of other procompetitive measures. Because the implementation of
the Telecommunications Act is subject to rulemaking proceedings, arbitration
proceedings and other state regulatory proceedings on these issues, it is
currently difficult to predict how quickly full competition for local
services, including local dial tone, will be realized.
All states in which the Company operates require a certification or other
authorization from the state regulatory commission to offer intrastate
telecommunications services. Many of the states in which the Company operates
are in the process of addressing issues relating to the regulation of CLECs.
Some states may require authorization to provide enhanced services.
In a few states, existing state statutes, regulations or regulatory policy
may preclude some or all forms of local service competition. The
Telecommunications Act contains provisions that prohibit states and localities
from adopting or imposing any legal requirement that may prohibit, or have the
effect of prohibiting, the ability of any entity to provide any interstate or
intrastate telecommunications service. The FCC is required to preempt any such
state or local requirements to the extent necessary to enforce the
Telecommunications Act's open market entry requirements. States and localities
may, however, continue to regulate the provision of intrastate
telecommunications services and require carriers to obtain certificates or
licenses before providing service.
In states where the Company operates, rulemaking proceedings, arbitration
proceedings and other state regulatory proceedings may affect the Company's
ability to compete with ILECs are now underway or may be instituted in the
future. These proceedings involve a variety of telecommunications issues,
including but not limited to: pricing and pricing methodologies of local
exchange and intrastate interexchange services; development and approval of
resale agreements between ILECs and CLECs and among CLECs; terms and
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conditions governing the provision of telecommunications services; customer
service and unauthorized changes in customer-selected telephone service
providers; complaints regarding anticompetitive practices and transactions
between affiliated telecommunications companies; denial of entry into
telecommunications markets; discount levels for resale of local exchange and
toll services; treatment of and compensation for calls to Internet service
providers; charges for access to ILEC networks; cost sharing and
implementation of interim and permanent number portability; dialing parity;
access to and responsibility for universal service funding; and review and
recommendation to the FCC concerning RBOC authorization to offer in-region
long distance service. To the extent the Company decides in the future to
install its own transmission facilities, rulemaking proceedings, arbitration
proceedings and other state regulatory proceedings may also affect the
Company's ability to compete with ILECs. These proceedings may involve issues
including but not limited to: collocation of ILEC and CLEC facilities;
interconnection agreements between ILECs and CLECs; and access to unbundled
and combined network elements of ILECs. In addition, states in which the
Company operates may consider legislation that involves issues including but
not limited to: any of the aforementioned issues in rulemaking proceedings,
arbitration proceedings and other state regulatory proceedings; alternative
forms of regulation; and limitations on the provision of competitive
telecommunications services.
The Company is an authorized CLEC, and has obtained authority for the resale
of local exchange services, in Colorado, Delaware, Florida, Georgia, Illinois,
Maryland, North Carolina, Pennsylvania and Virginia. The Company is also
authorized to resell long distance telephone services in these jurisdictions.
The Company has applied for CLEC status and resale authority in Arizona and is
permitted to provide telecommunications services there while its application
is pending. The Company also has an application for CLEC authorization pending
in the District of Columbia. Although the Company had previously obtained
authorization in the District of Columbia in May 1997, such authorization was
voided in November 1997 because of inconsistencies cited by the PSC between
its rules and applicable law. Following discussions with the PSC, the Company
reapplied for CLEC authorization in the District of Columbia in April 1998.
See "Risk Factors--Risks Related to District of Columbia CLEC Status." In
addition, the Company expects that it will offer more intrastate services,
including intrastate switched services, as its business expands. There can be
no assurances that the Company will receive the authorizations it now seeks or
may seek in the future to the extent it expands into other states or seeks
additional services from the aforementioned states. In most states, the
Company is required to file tariffs or price lists setting forth the terms,
conditions and prices for services that are classified as intrastate. In all
states, the Company must comply with state regulations and policies regarding
service quality, reporting, auditing, customer service, and other matters.
LOCAL REGULATION
The Company's networks are subject to numerous local regulations such as
building codes and licensing. Such regulations vary on a city by city and
county by county basis. To the extent the Company decides in the future to
install its own transmission facilities, it will need to obtain rights-of-way
over private and publicly owned land. There can be no assurance that such
rights-of-way will be available to the Company on economically reasonable or
advantageous terms.
The foregoing discussion of regulatory factors does not describe all laws,
regulations, or restrictions that may apply to the Company. It also does not
review all laws or regulations under consideration by federal and state
governmental bodies that may affect the Company's operations. It is possible
that present and future laws and regulations not discussed here could have a
material adverse effect on the Company's results of operations and financial
condition and its ability to meet its obligations under the Notes.
COMPETITION
Overview
OnePoint has a large number of competitors for each of the services that it
provides. The telephony and video services markets are highly competitive, and
management expects that competition will intensify in the
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future. In each of the markets in which it offers services, OnePoint faces
significant competition from larger, better-financed ILECs, IXCs and cable
companies, and OnePoint competes directly with incumbent providers which have
historically dominated their respective local telephony, long distance
telephony and cable television markets. These incumbents have numerous
advantages as a result of their historic monopoly control of their respective
markets. However, OnePoint believes that most existing and potential
competitors will, at least initially, provide narrower service offerings due
to regulatory constraints (in the case of RBOCs) or slow or limited deployment
(in the case of facilities-based competitors such as RCN in Washington, D.C.
and 21st Century in Chicago), secure fewer MDU Rights of Entry, adopt less
focused MDU marketing and sales approaches (not benefitting from preferential
access to face-to-face sales channels) and retain less flexible pricing and
product bundling strategies. As a result, management believes that OnePoint
has an opportunity to achieve important market penetration.
On May 11, 1998 SBC announced that in connection with its planned merger
with Ameritech, the Combined Company would provide an integrated mix of local,
long distance, Internet and high-speed data services to consumers and
businesses in 30 additional U.S. markets outside of its region, including
certain of the Company's other currently targeted markets: Atlanta, Baltimore,
Denver, Philadelphia, Phoenix and Washington. Upon entry into these markets,
the Combined Company would be competing with OnePoint if it elected to target
residential customers residing in MDUs other than through a cooperation
arrangements or other agreement with the Company. While the Company believes
that opportunities may exist for the Company to utilize the Combined Company's
assets in such markets on favorable terms, the Company cannot predict the
effect on OnePoint of entry of the Combined Company into such markets,
including the effect on OnePoint's ability to compete in such markets and its
ability to continue to purchase certain services and equipment on favorable
terms pursuant to SBC agreements, and there can be no assurance that such
competition from the Combined Company would not have a material adverse effect
on the Company's results of operations and financial condition and its ability
to meet its obligations under the Notes. See "Risk Factors--Dependence on SBC
Affiliation; Restrictions on Ability to Provide Service in SBC Region; Risk of
Loss of Favorable Contracts" and "--Competition."
With respect to local telephony services, OnePoint competes with the ILECs
and alternative service providers including CLECs. Commercial mobile radio
services providers, including cellular carriers (such as Bell Atlantic Mobile
Services), personal communications services ("PCS") carriers (such as Sprint
PCS) and enhanced specialized mobile radio ("ESMR") service providers (such as
Nextel Communications Inc.), may also become a source of competitive local and
long distance telephony service.
With respect to long distance telephony services, OnePoint faces, and
expects to continue to face, significant competition from IXCs, including
AT&T, Sprint and MCI WorldCom, which account for the majority of all long
distance revenue. The major long distance service providers benefit from
established market share and from brand names established through nationwide
advertising. AT&T, MCI WorldCom, Sprint and other IXCs have also announced
their intention to offer local services in major U.S. markets using their
existing infrastructure in combination with resale of ILEC service, lease of
unbundled local loops or other providers' services.
All of the Company's video services face competition from alternative
methods of receiving and distributing television signals and from other
sources of news, information and entertainment such as off-air television
broadcast programming, newspapers, movie theaters, live sporting events,
interactive online computer services and home video products, including video
cassette recorders. Among the alternative video distribution technologies are
fiber distribution from companies like RCN in Washington, D.C. and 21st
Century in Chicago and home satellite dish earth stations ("HSDs") which
enable individual households to receive many of the satellite-delivered
program services formerly available only to cable subscribers. Furthermore,
the Cable Television Consumer Protection and Competition Act of 1992, as
amended (the "1992 Act") contains provisions, which the FCC has implemented
with regulations, to enhance the ability of cable competitors to purchase and
make available to HSD owners certain satellite-delivered cable programming at
competitive costs. The FCC and Congress have adopted policies providing a more
favorable operating environment for new and existing technologies that
provide, or have the potential to provide, substantial competition to the
Company's
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<PAGE>
various video distribution systems. These technologies include, among others,
DBS service whereby signals are transmitted by satellite to receiving
facilities located on customer premises. The Company expects that its video
programming services will face growing competition from current and new DBS
service providers. OnePoint also competes with wireless program distribution
services such as MMDS which use low-power microwave frequencies to transmit
video programming over-the-air to subscribers. The Company is unable to
predict whether wireless video services will have a material impact on its
operations.
Other new technologies, including Internet-based services, may become
competitive with services that OnePoint can offer. Advances in communications
technology as well as changes in the marketplace and the regulatory and
legislative environment are constantly occurring. Thus, it is not possible to
predict the effect that ongoing or future developments might have on the video
services industry or on the operations of the Company.
OnePoint believes that among the existing competitors, the ILECs, IXCs,
incumbent cable providers and other CLECs provide the most direct competition
to OnePoint in the delivery of telephony and video services to residential
customers in concentrated communities.
ILECs
In each of its target markets, OnePoint faces, and expects to continue to
face, significant competition from the ILECs, which currently dominate their
local telephony markets. OnePoint competes with the ILECs in its markets for
local exchange services on the basis of product offerings (including the
ability to offer bundled local and long distance telephony and video services
today), MDU-focused marketing and sales (with preferential access to face-to-
face sales channels) and superior customer service, as well as price. OnePoint
believes that its MDU-focused approach will enable rapid gains in market
share. However, the ILECs have begun to enhance their networks and to prepare
to enter the long distance telephony service market and, in addition, have
long-standing relationships with their customers. ILECs other than RBOCs
already may provide in-region long distance telephony and information
services, and all ILECs may provide out-of-region long distance and
information telephony services.
In addition, under the Telecommunications Act, and ensuing federal and state
regulatory initiatives, barriers to local exchange competition are being
removed. The introduction of such competition, however, also establishes the
prerequisites for the RBOCs, such as Bell Atlantic, to provide in-region
interexchange long distance services. The RBOCs are currently allowed to offer
"incidental" long distance service in-region and to offer out-of-region long
distance service. Once the RBOCs are allowed to offer in-region long distance
services, they will also be in a position to offer single source local and
long distance service similar to that offered by OnePoint and proposed by the
three largest IXCs (AT&T, MCI WorldCom and Sprint). The Company expects that
the increased competition made possible by regulatory reform will result in
certain pricing and margin pressures in the telephony services business.
OnePoint has sought, and will continue to seek, to provide a full range of
local telephony services in competition with ILECs in its service areas. The
Company expects that competition for local telephony services will be based
primarily on service quality, customer service, response to customer needs,
bundled service features and price, and will not be based on any proprietary
technology. As a result of OnePoint's MDU-focused marketing and sales efforts,
and its low long distance cost position, OnePoint may have advantages over
ILECs, as well as the competitive advantage provided by the ability to deliver
a bundled telephony and video service.
The Telecommunications Act permits the ILECs and others to provide a wide
variety of video services directly to subscribers in competition with
OnePoint. Various ILECs currently are providing video services within and
outside their telephony service areas through a variety of distribution
methods, including both the deployment of broadband wired facilities and the
use of wireless transmission facilities. The Company cannot predict the
likelihood of success of video service ventures by ILECs or the impact on the
Company of such competitive ventures.
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CLECs and Other Competitors
OnePoint also faces, and expects to continue to face, competition from other
potential competitors in certain of the markets in which OnePoint offers its
services. Other CLECs compete in the local telephony services market, although
they have to date focused primarily on the market for business customers. In
addition, potential competitors capable of offering private line and special
access services also include other smaller long distance carriers, cable
television companies, electric utilities, microwave carriers, wireless
telephony system operators and private networks built by large end-users.
Advances in communications technology as well as changes in the marketplace
and the regulatory and legislative environment are constantly occurring. In
addition, a continuing trend toward business combinations and alliances in the
telecommunications industry may also create significant new competitors to
OnePoint. Further, as a result of recent international treaties, FCC
regulations have been changed to facilitate entry by foreign
telecommunications companies and other entities into United States
telecommunications markets. The Company cannot predict whether competition
from such developing and future technologies or from such future competitors
will have a material impact on its operations.
Incumbent Video Service Providers
Certain of the Company's video service businesses compete with incumbent
wireline cable companies in their respective service areas. In particular,
OnePoint's wireless satellite systems (DBS and SMATV) compete for cable
subscribers with the major wireline cable operators such as Jones Intercable
Inc. and District Cablevision in the Washington, D.C. metropolitan area,
MediaOne Inc. in Atlanta, TCI in Chicago and Denver and Cox Communications
Inc. in Phoenix.
The Company also faces, and expects to continue to face, competition from
other potential competitors in certain of the markets in which the Company
offers its services. Companies such as RCN in Washington, D.C. and 21st
Century in Chicago are deploying advanced fiber optic networks to provide
bundled communication services to residents in MDUs and single-family homes.
OnePoint competes with these "fiber-led" competitors primarily by obtaining
MDU Rights of Entry, and through its preferential access to face-to-face
marketing and sales channels and low long distance telephony cost position.
See "Risk Factors--Dependence on Third Parties" and "--Dependence on SBC
Affiliation; Inability to Provide Long Distance Service in SBC Region; Risk of
Loss of Favorable Contracts."
Since cable television systems generally operate pursuant to franchises
granted on a non-exclusive basis, and the 1992 Act prohibits franchising
authorities from unreasonably denying requests for additional franchises and
permits franchising authorities to operate cable systems, well-financed
businesses from outside the cable industry (such as the public utilities that
own certain of the poles to which cable is attached) may become competitors
for franchises or providers of competing services.
Long Distance Carriers
The Company faces, and expects to continue to face, significant competition
from IXCs, including AT&T, Sprint, and MCI WorldCom, which accounts for the
majority of all long distance calls. Today the Company competes with IXCs
primarily for the long distance component of its service bundle. However,
AT&T, Sprint, and MCI WorldCom have each announced their intention to offer
local telephony services bundled with existing long distance services to
residences in major U.S. markets. These IXCs benefit from established market
share and brand names, as well as substantially greater resources available
for continued national advertising. They have not to date focused on securing
MDU rights of entry, nor have they developed bundled product and pricing
packages targeted at MDU residents, but the Company believes that IXCs will
ultimately enter the bundled communications business aimed at MDUs and present
formidable competition.
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Internet-Related Competitors
The market for most Internet-related services is extremely competitive.
Currently there are four general types of entities providing the Internet-
related services that will compete with OnePoint: (i) traditional online
service providers, including America Online, and the Microsoft Network, that
offer a combination of Internet access, content, and web hosting services via
the public switched telephone network; (ii) cable-delivered online service
providers, such as @Home and Roadrunner, that offer Internet access, content,
and web hosting services via a coaxial infrastructure; (iii) ISPs, including
PSINet, NETCOM, and numerous regional providers, that offer Internet access
services without or with only a limited amount of the content and web hosting
services offered by online service providers; and (iv) telecommunications
providers, including IXCs, local exchange carriers, and non-carrier
telecommunications companies, using wireline, wireless, and satellite
technologies, that offer both traditional telecommunications services such as
voice telephone service, as well as many of the services offered by the other
identified competitors, including Internet access.
Most of these competitors have more experience than OnePoint in offering
Internet-related services, as well as superior engineering, marketing, and
personnel resources. Many of these competitors also have greater financial
resources than OnePoint and several competitors are among the largest
corporations in the world. These competitors may be able to use these superior
resources to develop their service offerings and infrastructures more rapidly
and more efficiently than OnePoint. They may be able to react more quickly and
more appropriately to changes in technology or the marketplace. Additionally,
these competitors may be able to improve their competitive position through
mergers and acquisitions.
The number of competitors in the Internet-related services market is likely
to increase steadily. There are few barriers to entry in many Internet-related
markets, and new competitors, such as computer hardware or software
manufacturers, other telecommunications providers, and foreign entities, may
enter the market with considerable resources. Furthermore, competitors
currently devoting only a small part of their resources to Internet-related
services may expand their presence in the marketplace. Regulatory changes may
allow telecommunications providers to improve their competitive position by
permitting service bundling that will create attractive new one-stop-shopping
marketing opportunities.
Changes in the business practices or market positions of competitors or
suppliers of OnePoint also may undermine OnePoint's ability to compete
effectively. For example, commenters that participated in the FCC's and
Department of Justice's review of the merger of MCI and WorldCom expressed
concern that the merger would give the merged entity a dominant position in
the Internet backbone market. In light of this concern, the Justice Department
(after consultation with the antitrust authorities of the European Union)
conditioned approval of the WorldCom/MCI merger on the sale of MCI's Internet
business to a third party (Cable &
Wireless). The effectiveness of that sale in ameliorating competitive concerns
remain unclear. If MCI WorldCom has a dominant position in the Internet
backbone market notwithstanding the sale, this dominance could be leveraged to
undermine competition in other Internet-related markets, to the detriment of
OnePoint. The Company cannot predict whether competition from existing
entities, new entrants, or changes in business practices or market positions
of existing or new competitors will have a material impact on its operations.
EMPLOYEES
As of August 31, 1998, the Company had a total of 200 employees. The Company
believes that its future success will depend on its continued ability to
attract and retain highly skilled and qualified employees. None of the
Company's employees is currently represented by a collective bargaining
agreement. The Company believes that it enjoys good relationships with its
employees.
LEGAL PROCEEDINGS
From time to time, the Company has been and is involved in various legal
proceedings, all of which management believes are routine in nature and
incidental to the conduct of its business. The ultimate legal and
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financial liability of the Company with respect to such proceedings cannot be
estimated with certainty, but the Company believes, based on its examination
of such matters, that none of such proceedings, if determined adversely to the
Company, would have a material adverse effect on the Company's results of
operations and financial condition and its ability to meet its obligations
under the Notes.
On August 6, 1998 OnePoint made a demand for arbitration of certain disputes
under the Mid-Atlantic Operating Agreement. The arbitration demand seeks
resolution of the following questions: (i) whether OnePoint is entitled to
obtain and disclose Mid-Atlantic's results in connection with the Exchange
Offer; (ii) whether the Mid-Atlantic Holdings, the other owner of membership
interests in Mid-Atlantic, and Norcutt, the Business Manager of Mid-Atlantic
and a principal of Mid-Atlantic Holdings, breached their contractual and
fiduciary obligations to OnePoint by delaying and then conditioning the
release of Mid-Atlantic's 1997 audited financial statements on a grant of
business concessions from OnePoint; (iii) whether the Mid-Atlantic Holdings
and Norcutt breached their contractual and fiduciary obligations to Mid-
Atlantic and OnePoint by rejecting an offer of financing from OnePoint in
favor of an inferior offer from an unaffiliated financing source; (iv) whether
Mid-Atlantic Holdings and Norcutt violated their contractual and fiduciary
duties to OnePoint by imposing on OnePoint a four-day deadline to meet a June
1998 capital call for Mid-Atlantic; and (v) whether Mid-Atlantic Holdings and
Norcutt are liable for damages to OnePoint resulting from the breaches of
contractual and fiduciary duties described above. On August 27, 1998, Mid-
Atlantic Holdings filed a motion in Circuit Court in Lake County, Illinois
seeking an injunction staying the arbitration with respect to the first
question on the grounds that because OnePoint is not a party to the Mid-
Atlantic Operating Agreement, the dispute is not arbitrable.
FACILITIES
The Company is headquartered in Bannockburn, Illinois and leases offices and
space in certain other locations. The table below lists the Company's current
leased facilities:
<TABLE>
<CAPTION>
APPROXIMATE
LOCATION LEASE EXPIRATION SQUARE FOOTAGE
-------- ------------------ --------------
<S> <C> <C>
Bannockburn, IL......................... December 31, 2002 21,600
Washington, D.C......................... April 30, 2008 8,600(1)
Largo, MD............................... February 28, 2007 16,500
Alpharetta, GA.......................... August 31, 2002 7,200
Aurora, CO.............................. April 30, 2003 10,900
Chicago, IL............................. October 31, 2003 11,900
Phoenix, AZ............................. September 30, 2003 7,700
</TABLE>
- --------
(1) Does not include space used by Mid-Atlantic for which the Company is a co-
tenant with Mid-Atlantic under a single lease.
The Company believes that its leased facilities are adequate to meet its
current needs in its targeted markets and that additional facilities are
available to meet its development and expansion needs in such markets for the
foreseeable future. The Company's obligations under its leases for its
Bannockburn, Illinois and Alpharetta, Georgia offices are guaranteed by SBC.
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MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth certain information concerning the directors
and officers, including the executive officers, of the Company and the
Subsidiary Guarantors, as of August 31, 1998.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<C> <C> <S>
James A. Otterbeck 37 Chairman and Director of the Company; Chief Executive
Officer of the Company and each of the Subsidiary
Guarantors
William F. Wallace 43 Chief Operating Officer and Director of the Company;
President of the Company and each of the Subsidiary
Guarantors
Thomas W. DeCrosta 45 Executive Vice President of Operations of the Company;
Executive Vice President of each of the Subsidiary
Guarantors
John D. Stavig 34 Chief Financial Officer and Director of the Company;
Treasurer of each of the Subsidiary Guarantors
Linda L. Pace 35 Director of the Company
Paul Dahlquist 49 Vice President, General Manager--Mid Atlantic Region of
the Company; Vice President of OnePoint Communications
Holdings, LLC
Laurel A. Dent 34 Vice President, General Manager--South East Region of
the Company; Vice President of OnePoint
Communications--Georgia, LLC
Mary M. Rodino 43 Vice President, General Manager--Central
Region/National Accounts of the Company; Vice President
of OnePoint Communications--Illinois, LLC
Stephen V. Minshew 46 Vice President, Information Systems of the Company
Chantal L. Moore 28 Vice President, Network Planning of the Company; Vice
President of each of the Subsidiary Guarantors
Marge Rodino 36 Vice President, Human Resources of the Company; Vice
President of each of the Subsidiary Guarantors
William J. McMoil 34 Controller of the Company; Vice President of each of
the Subsidiary Guarantors
</TABLE>
MR. OTTERBECK has served as Chairman and Chief Executive Officer since the
Company's inception in March 1996. Mr. Otterbeck has served as President of
The VenCom Group, Inc., a venture capital company focused on investing in
communications related companies, since he founded it in 1995. From 1988 to
1995, Mr. Otterbeck worked for Gemini Consulting, most recently as Vice
President of the firm's global communications practice. Mr. Otterbeck worked
for AT&T Bell Laboratories in product design and management positions from
1984 to 1987, and worked at IBM in sales and marketing positions from 1982 to
1984. Mr. Otterbeck received his B.B.A. from the University of Iowa and his
M.B.A. from the Kellogg Graduate School of Management at Northwestern
University.
MR. WALLACE has served as the President and Chief Operating Officer since
June of 1996. From 1980 to 1996 Mr. Wallace worked at Gemini Consulting, where
he served as the Chief Operating Officer from 1994 to 1996, and where he co-
founded and built a $100 million communications business unit. Mr. Wallace
brings over 15 years of experience in telecommunications. Mr. Wallace received
his B.A. from Harvard College and his M.B.A. from the Harvard Graduate School
of Business.
MR. DECROSTA has served as Executive Vice President of Operations since
March 1997. From 1988 to 1997 Mr. DeCrosta worked for MFS Communications
Company in a variety of senior management field assignments, most recently as
Vice President/General Manager, MFS-Intelenet. From 1980 to 1988 Mr. DeCrosta
held a variety of sales, marketing and technical positions, at MCI, Southern
New England Telephone and Bell of Pennsylvania. Mr. DeCrosta received his B.S.
from the University of Pittsburgh and his M.B.A. from Lehigh University.
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MR. STAVIG has served as Chief Financial Officer since March 1998. Mr.
Stavig has served as VenCom's Vice President since 1995. Since 1995 he has
also served as Chief Executive Officer and Chief Financial Officer for
ComPlus, L.P., a supplier of engineering services to telecommunications firms
which is 99% owned by Ventures in Communications, LLC, which also indirectly
owns 19.9% of the Company's common stock. From 1992 to 1995, he served as
Principal in the Communications practice of Gemini Consulting. Prior to 1992,
Mr. Stavig served as a consultant with Arthur Andersen & Co. Mr. Stavig
received his B.S. from the University of Minnesota and his M.B.A. from the
Wharton School of the University of Pennsylvania.
MS. PACE has served as a Director since June of 1998. Since 1989 Ms. Pace
has served as an Associate and Vice President of La Salle Partners, Inc. where
she has directed the management and disposition of commercial real estate
assets. Prior to 1987, Ms. Pace served as a Banking Officer in the Real Estate
Division of InterFirst Bank Dallas, N.A. Ms. Pace received her B.S. from the
University of Notre Dame and her M.B.A from the Kellogg Graduate School of
Management at Northwestern University.
MR. DAHLQUIST has served as Vice President, General Manager--Mid Atlantic
Region since January 1997. Mr. Dahlquist came to OnePoint directly from the
shared tenant services industry. He served as General Manager of ICS
Communications from 1995 to January 1997. Mr. Dahlquist served with the United
States Navy from 1972 to 1995, achieving the rank of Captain and serving in a
variety of positions including Deputy Director for Operations/OASD (S&R) for
Peacekeeping and Peace Enforcement Policy at the Pentagon, Commanding Officer
of the USS Taylor (FFG-50) and Senior Fellow-Strategic Policy Analysis Group
for the Center for Naval Analysis. Mr. Dahlquist received his B.S. from the
U.S. Naval Academy and an M.A. from the U.S. Naval Post-Graduate School.
MS. DENT has served as Vice President, General Manager--South East Region
since November 1997. Ms. Dent served as a Principal with VenCom from 1995 to
1997. From 1991 to 1995, Ms. Dent worked for Gemini Consulting's
communications practice, leading sales and marketing projects for several
major international telecommunications firms. She has also worked in sales and
marketing positions for the Marriott Corporation. Ms. Dent received her B.A.
from Pomona College and her M.B.A. from the Kellogg Graduate School of
Management at Northwestern University.
MS. MARY RODINO has served as Vice President, General Manager--Central
Region/National Accounts since July 1997. Ms. Rodino has over 15 years
experience in the telecommunications industry. From 1994 to 1997, she served
as a General Manager for AT&T, and from 1982 to 1994 Ms. Rodino held a variety
of sales, operations, quality management and consulting positions within AT&T.
Ms. Rodino received her B.S. from the University of Illinois Medical Center
and her M.B.A. from the University of Illinois.
MR. MINSHEW has served as Vice President, Information Systems since March
1997. Mr. Minshew served as Manager of Strategic Systems Implementations for
GE Capital ResCom, L.P. from 1995 to 1997. From 1993 to 1994, Mr. Minshew
served as Director of Scheduling/Director of Information Services of Express
One International, Inc., and from 1991 to 1993, Mr. Minshew operated a
consulting firm which he founded, specializing in hardware and software
development, communications and network design. From 1986 to 1991, Mr. Minshew
was the Vice President of Engineering for Telecast, Inc. From 1983 to 1986,
Mr. Minshew was the President of Inertek where he developed a new missile
guidance sensor. From 1977 to 1983, Mr. Minshew was the Program Manager for
Texas Instruments Incorporated where he was responsible for new business
development, strategic planning and marketing. Mr. Minshew received his B.S.,
M.S., and M.B.A. from Southern Methodist University.
MS. MOORE has served as Vice President, Network Planning since January 1997.
Ms. Moore joined OnePoint from VenCom, where she served as an associate from
1995 to 1997. Ms. Moore served as a consultant to British Telecom plc from
1993 to 1995. Prior to entering the telecommunications industry, Ms. Moore
conducted robotics research for NASA, the U.S. Navy and the Getty Group. She
has also designed and developed various intelligent robotic systems for
industrial applications, and is published in the IEEE. Ms. Moore received her
B.S. and M.S. from the Massachusetts Institute of Technology.
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MS. MARGE RODINO has served as Vice President, Human Resources since January
1998. Ms. Rodino joined OnePoint with over 13 years experience in Human
Resources. From 1995 to 1997 she served as Director, Human Resources with
WorldCom. During 1995, Ms. Rodino was a consultant with the Human Resources
practice of Deloitte & Touche, LLP. From 1990 to 1995, Ms. Rodino held a
variety of Human Resource management positions within the pharmaceutical
division of BASF Corporation. Ms. Rodino also worked for Harris Bank in Human
Resources from 1984 to 1990, most recently as an Assistant Vice President. Ms.
Rodino received her B.S. from Northern Illinois University.
MR. MCMOIL has served as Controller since January 1998. Mr. McMoil comes to
OnePoint with 12 years of experience in the fields of finance, planning and
accounting for a number of businesses. Mr. McMoil served as Controller for
IoWave, Inc., a wireless telecommunications equipment manufacturer from May to
December 1997. From 1995 to 1997, Mr. McMoil served as Director of Finance of
Martin's Herend Imports, Inc. From 1991 to 1995, Mr. McMoil served as Regional
Controller and Director of Finance for Stewart Title, where he was responsible
for extensive planning, startup, acquisition, and joint-venture activity. He
has also worked as financial director of companies in the retail,
wholesale/distribution and title insurance industries. Mr. McMoil received his
B.A. from Furman University and his M.B.A. from George Mason University.
The following table summarizes the compensation paid by the Company and its
subsidiaries in and with respect to 1997 to the Company's Chief Executive
Officer and two other most highly compensated executive officers at December
31, 1997 (collectively, the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
---------------------------------
NAME AND PRINCIPAL OTHER ANNUAL ALL OTHER
POSITION YEAR SALARY ($) BONUS ($) COMPENSATION COMPENSATION ($)
- ------------------ ---- ---------- --------- ------------ ----------------
<S> <C> <C> <C> <C> <C>
James A. Otterbeck(1).. 1997 -- -- -- --
Chairman and Chief
Executive Officer
William F. Wallace..... 1997 375,000 200,000 -- --
President and Chief
Operating Officer
Thomas W. DeCrosta(2).. 1997 150,312 70,000 -- --
Executive Vice
President of
Operations
</TABLE>
- --------
(1) Mr. Otterbeck is an officer of and is compensated by The VenCom Group,
Inc., which will receive management fees from the Company. He does not
receive any compensation from the Company. See "Certain Relationships and
Related Transactions."
(2) Mr. DeCrosta joined the Company in March 1997.
In August of 1998, the Company implemented a Stock Appreciation Rights Plan,
pursuant to which employees of the Company received contractual rights to
receive a portion of the appreciation of the market value of the Company.
Pegged to a multiple of historical EBITDA or a qualifying triggering event,
these rights are subject to vesting requirements and broad discretion of the
Compensation Committee of the Board of Directors.
COMPENSATION OF DIRECTORS
Directors who are employees of the Company or its subsidiaries are not
entitled to receive any fees for serving as directors. Non-employee directors
receive a fee $12,500 per year, are reimbursed for their expenses, and are
entitled to participate in the Company's Stock Appreciation Rights Plan and to
receive certain life insurance benefits.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
SBC AFFILIATION AND RELATED CONTRACTS
The terms of certain contracts pursuant to which SBC purchases products and
services are available to the Company and other entities in which SBC has a
sufficient equity interest. Through such arrangements, OnePoint purchases long
distance service from an IXC and has leveraged SBC's procurement function to
purchase telecommunications equipment, in each case at prices lower than those
that would otherwise be available to it. The Company's ability to purchase
services and equipment pursuant to SBC-negotiated contracts is dependent upon
SBC's continued ownership, directly or indirectly, of an equity interest in
the Company which meets or exceeds the definition of "affiliate" in any SBC
contract and whether such contract provides SBC "affiliates" opportunities to
purchase thereunder. The definition of "affiliate" varies in such contracts.
Although SBC has an incentive to keep the definition broad, its negotiation of
vendor contracts is typically based on considerations other than the
inclusiveness of the definition of affiliate and the interests of potential
affiliates in the availability of such contracts. There can be no assurance
that future SBC contracts or amendments or renewals of existing SBC contracts
will contain provisions which have the effect of permitting the Company to
purchase services or equipment pursuant thereto. Moreover, the Company has
received no indication or assurance from SBC that it will retain its indirect
ownership interest in the Company for any period of time. The Company also
markets cellular telephony service in the Chicago and Washington, D.C.
metropolitan markets as an agent for CellularOne, which is operated by a
subsidiary of SBC in such cities. SBC currently holds, through wholly owned
subsidiaries, a 19.7% equity ownership interest in the sole stockholder of
OnePoint. See "Risk Factors--Dependence on SBC Affiliation; Inability to
Provide Long Distance Service in SBC Region; Risk of Loss of Favorable
Contracts."
From time to time, at the Company's request, SBC has provided material
assistance to the Company with regard to systems evaluation and procurement,
technical due diligence, corporate development and regulatory filings and
other matters. In addition, SBC has seconded employees to the Company, in some
cases for extended periods of time, and is currently seconding an employee to
the Company. The Company reimburses SBC for such services based on SBC's costs
of providing such services. At December 31, 1997 the Company had accrued
$203,000 in accounts payable due to SBC in respect of such services.
AFFILIATE LOANS AND GUARANTEES
Pursuant to the Recapitalization in October 1997, the Predecessor issued the
Predecessor Note to VIC. The Predecessor Note had a principal amount of $1.5
million and matured on October 15, 2007. It provided for interest at a rate of
10% per annum. No interest in respect of the Predecessor Note was paid during
1997. Pursuant to the Recapitalization, the Predecessor Note was exchanged for
membership units of VIC2 and subsequently converted into the right to receive
common and preferred stock of the Company.
The Company's payment obligations under the Credit Facility are guaranteed
by SBC. See "Description of Certain Indebtedness." The Company's payment
obligations under two of its leases for office space are also guaranteed by
SBC. See "Business--Facilities."
THE RECAPITALIZATION
Through a series of transactions from the fourth quarter of 1997 through
April 1998, VenCom, L.L.C. acquired an equity interest in the Predecessor, and
the Predecessor was recapitalized and merged with the Company in order to
become a corporation. See "The Recapitalization."
The Operating Agreement of VIC2 entered into in April 1998 in connection
with the Recapitalization (i) imposes certain restrictions on the transfer of
VIC2's membership units; (ii) grants certain participation rights in
connection with a sale of membership units by a member; (iii) grants VIC
certain preemptive rights with respect to VIC2 membership units in connection
with issuances by VIC2 of membership units or issuances by the Company of
Common Stock; (iv) grants VIC the right to require VenCom, L.L.C. to purchase
all or any portion of the VIC2 membership units held by VIC; (v) grants a
first refusal right to the members in connection with a
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transfer of VIC2 membership units and shares of the Company's Common Stock;
(vi) requires the members to take certain actions in the event of an initial
public offering by VIC2; and (vii) grants VIC the right to require VIC2 to
exercise its demand and piggyback registration rights and to require VIC2 to
distribute the proceeds of the resulting offering.
REGISTRATION AGREEMENT
In April 1998 the Company and VIC2 entered into a Registration Agreement
pursuant to which VIC2 has the right in certain circumstances, and subject to
certain conditions, to require the Company to register the shares of the
Company's Common Stock held by it under the Securities Act.
EXECUTIVE NON-COMPETITION AGREEMENTS
Each of Messrs. DeCrosta and Wallace has entered into non-disclosure and
non-competition agreements with the Company which provide that the executive
will not: (i) during the term of such executive's employment and for 18 months
thereafter, use or distribute confidential information about the Company,
without authorization; (ii) for six months following the termination of
executive's employment with the Company, own an interest in, be employed by or
provide assistance to any business engaged in the provision of bundled
telecommunications services to residential MDUs on a similar basis as the
Company within any metropolitan area then served by the Company or its
affiliates; (iii) during the term of such executive's employment and for
twelve months thereafter, entice or induce in any manner or influence any
person who is or shall be in the employ or service of the Company to leave
such employ or service for the purpose of engaging in any other business.
MID-ATLANTIC JOINT VENTURE NON-COMPETITION AGREEMENTS
In connection with the Mid-Atlantic joint venture, the Company, its co-joint
venturer and certain of their affiliates entered into a series of Non-
Competition Agreements. Such agreements restrict the rights of such parties
(other than Mid-Atlantic and VIC-RMTS-DC, LLC, the telephony joint venture
company controlled by the Company) to provide cable and telephony services,
respectively, under certain circumstances in either (i) the "D.C. Metro" area,
defined to include Washington D.C., Baltimore, Maryland and certain areas of
Virginia, or (ii) the "Territory," defined to include the states of Delaware,
Maryland, New Jersey, Pennsylvania, and Virginia and Washington D.C. See "Risk
Factors--Risks Related to the Mid-Atlantic Joint Venture Non-Competition
Agreements."
PROFESSIONAL SERVICES AGREEMENT
The Company entered into a Professional Services Agreement with The VenCom
Group, Inc. in April 1998, pursuant to which The VenCom Group, Inc. provides
financial and management consulting services and manages the Company's
relationships with VIC2 and SBC. Under this agreement VenCom receives an
annual management fee of $750,000 and a fee of 2% of the amount of any capital
raising activity or acquisition activity of the Company (without duplication)
(the "Transaction Fee"), including debt and equity placements, for its
assistance in raising such capital. Fees payable under the agreement are
subject to an annual cap of $900,000, provided that if the amount paid in any
calendar year is less than $900,000, the annual cap in the next calendar year
shall be equal to the difference between $1.8 million and the amount paid in
the previous calendar year and further provided that amounts owed in excess of
the cap in any year may be paid in one or more subsequent years if and to the
extent they are within the cap in such years.
MAC INTERACTIVE
In December 1997 OnePoint invested $750,000 to acquire a 50% equity interest
(with a preferred return) in MAC Interactive. In December 1997, MAC
Interactive entered into an agreement with ODS to acquire set top boxes and
marketing rights from ODS for its pari-mutuel horse racing wagering service
for an aggregate of $750,000. It is anticipated that MAC Interactive will
provide such set top boxes and market ODS services to Mid-Atlantic
subscribers. The other investors in MAC Interactive are the investors that
also own the equity interests in Mid-Atlantic which are not owned by the
Company. VIC was a limited partner of ODS until July 1998.
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PROGRAMMING SERVICES
The Company has entered into an agreement for the purchase of video
programming with a programming wholesaler. The Company has in the past
purchased programming on the terms of Mid-Atlantic's contracts with such
programming wholesaler and individual programming providers, although the
Company was not a party to Mid-Atlantic's contracts.
CUSTOMER CARE FACILITY
Portions of the customer care facility are currently operated jointly with
Mid-Atlantic. The billing and operating support system is operated pursuant to
a contract between the Company and a third party, and Mid-Atlantic reimburses
the Company for a portion of the variable expenses related to the system,
based on usage. Both the Company and Mid-Atlantic utilize the facility to
perform services for their customers, and data relating to both companies'
customers are integrated into the billing and operating support systems. The
PBX/ACD telephone equipment used at the facility is leased by Mid-Atlantic and
the Company reimburses Mid-Atlantic for half of the expenses related to such
equipment. In certain circumstances, the Company relies on Mid-Atlantic's
employees to answer the Company's inbound phone calls. The Company also
reimburses Mid-Atlantic for rent for certain payroll and other expenses with
respect to shared employees. The amounts payable to Mid-Atlantic vary each
month, but management estimates that the total amount payable during 1998 will
exceed $500,000. Such amounts are offset by amounts owed by Mid-Atlantic to
the Company with respect to billing and processing charges under the Company's
contract with CSG. In addition, the Company is a co-tenant with Mid-Atlantic
with respect to both companies' offices in Washington, D.C., and is jointly
and severally liable for lease payments with respect to space used by Mid-
Atlantic.
AFFILIATE RECEIVABLES
At the end of 1997, the Company's receivables from The VenCom Group, Inc.
and its sole stockholder, Mr. Otterbeck related to equity capital
contributions and expense reimbursement totalled approximately $81,000. This
amount was paid during 1998.
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SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of September 15, 1998 by (i) each
owner of more than 5% of the Company's Common Stock, (ii) each director and
Named Executive Officer of the Company and (iii) all directors and executive
officers of the Company as a group. Except as otherwise indicated below, each
of the persons named in the table has sole voting and investment power with
respect to the securities beneficially owned by it or him as set forth
opposite its or his name. Unless otherwise noted, the address for each
director and executive officer of the Company is c/o the Company, 2201
Waukegan Road, Suite E200, Bannockburn, Illinois 60015.
<TABLE>
<CAPTION>
COMMON STOCK PREFERRED STOCK
-------------------- --------------------
NAME OF BENEFICIAL OWNER NUMBER(1) PERCENT(2) NUMBER(1) PERCENT(2)
------------------------ --------- ---------- --------- ----------
<S> <C> <C> <C> <C>
Ventures in Communications II,
LLC........................... 1,000,000 90.0% 35,000 100.0%
SBC Communications Inc. (3).... 295,000 26.5 -- --
James A. Otterbeck (4)......... 705,000 63.4 -- --
William F. Wallace............. -- -- -- --
Linda L. Pace.................. -- -- -- --
John D. Stavig................. -- -- -- --
Thomas W. DeCrosta............. -- -- -- --
All executive officers and
directors
as a group (5 persons)........ 705,000 63.4 -- --
</TABLE>
- --------
(1) Includes rights to acquire shares of Common Stock which are exercisable
within 60 days of September 15, 1998.
(2) Rights to acquire shares of Common Stock which are exercisable within 60
days of September 15, 1998 are considered outstanding for the purpose of
determining the percent of the class held by the holder of such rights,
but not for the purpose of computing the percentage held by others.
(3) Through certain wholly owned subsidiaries, SBC owns 99% of the common
membership units of VIC, which in turn owns 19.9% of the equity interests
of VIC2, thus resulting in SBC's indirect ownership of 19.7% of the equity
interests of the Company. VIC owns a warrant to purchase 9.9% of the
membership units of VIC2, and after giving effect to the exercise of such
warrant, SBC would indirectly own 29.5% of the membership units of VIC2.
Pursuant to the terms of the VIC and VIC2 Operating Agreements, SBC shares
voting and dispositive power with respect to the securities owned by VIC2
with VenCom, L.L.C. and The VenCom Group, Inc. (both of which are owned by
Mr. Otterbeck) until such time as the preferred return on membership units
of VIC2 held by VIC has been paid in full. SBC disclaims beneficial
ownership of the securities held by VIC2 except to the extent of its
pecuniary interest therein. The business address of SBC is 175 East
Houston, San Antonio, Texas 78205.
(4) Mr. Otterbeck is the Manager of VIC2 and is the sole member of VenCom,
L.L.C., which owns 80.1% of the common membership units of VIC2 (or 70.5%
upon exercise of VIC's warrant). The VenCom Group, Inc., of which Mr.
Otterbeck is the sole stockholder, is the Manager of VIC. Pursuant to the
terms of the VIC and VIC2 Operating Agreements, Mr. Otterbeck shares
voting and dispositive power with SBC with respect to the securities owned
by VIC2 until such time as the preferred return on membership units of
VIC2 held by VIC is paid in full, at which time he will have sole voting
and dispositive power with respect to such securities.
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DESCRIPTION OF CERTAIN INDEBTEDNESS
In March 1998, the Company entered into a secured Credit Facility with
Northern Trust, which was amended in April 1998 in connection with the
Recapitalization. The Credit Facility permits the Company to borrow up to $9
million and matures on January 1, 2003. Amounts outstanding under the Credit
Facility on December 15, 1998 are converted into a term loan which is payable
in quarterly installments beginning January 1, 1999, with quarterly payments
of $62,500 in the first year, $125,000 in the second year, $562,000 in the
third year and $875,000 in the fourth year, with the balance payable at
maturity. No advances will be made under the Credit Facility after December
15, 1998. Payment of amounts owed under the Credit Facility has been
guaranteed by SBC.
The Credit Facility does not require Northern Trust to advance funds to the
Company if, in Northern Trust's good faith determination, there has occurred
an adverse change in the assets, condition or prospects of the Company or SBC.
In addition, the Credit Facility is revocable upon 48 hours written notice to
the Company as to further advances, notwithstanding any payment of any fees or
maintenance of any account balances.
Borrowings under the Credit Facility are secured by a first priority
security interest in certain of the Company's assets, including its accounts,
leases, contract rights, general intangibles (including intellectual property
rights), inventory, goods, equipment, vehicles, leasehold improvements,
fixtures, deposits at Northern Trust, books and records, documents of title
and the proceeds and products of the foregoing.
The interest rate on borrowings under the Credit Facility will be, at the
Company's election: (i) Northern Trust's prime rate less 3/4 of 1%; (ii) LIBOR
plus 50 basis points; or (iii) the federal funds rate (as defined) plus 50
basis points.
The Credit Facility contains customary covenants, including covenants
requiring the Company to notify Northern Trust of changes in its name or the
locations of the collateral, maintain insurance, defend the collateral from
claims of others, execute financing statements and other necessary documents,
deliver certificates or documents of title, furnish evidence of ownership of
collateral, maintain the collateral in good condition, make appropriate
entries upon the Company's financial statements, books and records disclosing
Northern Trust's interest in the collateral, and notify Northern Trust of any
material loss or depreciation in the value of the collateral. The Credit
Facility also prevents the Company from selling, transferring or otherwise
disposing of collateral without Northern Trust's consent.
The Credit Facility contains customary events of default. Upon the
occurrence of an event of default, Northern Trust may accelerate outstanding
loans and exercise its rights with respect to the collateral, as well as all
other rights and remedies available to it at law or in equity. Events of
default under the Credit Facility include (i) payment and covenant defaults,
(ii) cross defaults to any other indebtedness of the Company, VenCom, L.L.C.,
VIC2 and VIC, (iii) misrepresentations, (iv) repudiation or unenforceability
of SBC's guaranty, (v) failure to maintain existence in good standing, (vi)
dissolution, merger, consolidation or cessation of existence of the Company, a
subsidiary, VIC2, VIC, VenCom, L.L.C. or SBC (vii), bankruptcy and judgment
defaults with respect to the Company, a subsidiary, VIC2, VIC, VenCom, L.L.C.
or SBC, (viii), the existence of a security interest of another person in the
collateral, (ix) material loss or depreciation of value of the collateral or
Northern Trust's otherwise deeming itself insecure, and a (x) change of
control. A change of control is defined in the Credit Facility as the
occurrence of any person or entity not in control of the Company, VIC2, VIC,
VenCom, L.L.C., or SBC obtaining control directly or indirectly of the
Company, VIC2, VIC, VenCom, L.L.C., or SBC, whether by purchase or gift of
stock or assets, by contract or otherwise.
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THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
The Old Notes were originally sold by the Company on May 21, 1998 to the
Initial Purchasers as part of the Units pursuant to the Purchase Agreement.
The Initial Purchasers subsequently resold the Units, including the Old Notes,
to qualified institutional buyers in reliance on Rule 144A under the
Securities Act. As a condition of the Purchase Agreement, the Company and the
Subsidiary Guarantors entered into the Registration Rights Agreement with the
Initial Purchasers pursuant to which the Company and the Subsidiary Guarantors
agreed, for the benefit of the holders of the Old Notes, at the Company's
cost, to use their best efforts to (i) file the Exchange Offer Registration
Statement within 120 days after the date of the original issue of the Old
Notes with the Commission with respect to the Exchange Offer for the Exchange
Notes: (ii) use their best efforts to cause the Exchange Offer Registration
Statement to be declared effective under the Securities Act within 180 days
after the date of the original issuance of the Old Notes and (iii) use their
best efforts to consummate the Exchange Offer on or prior to 30 business days
after the date on which the Exchange Offer Registration Statement was declared
effective by the Commission. Upon the Exchange Offer Registration Statement
being declared effective, the Company will offer the Exchange Notes in
exchange for surrender of the Old Notes. The Company will keep the Exchange
Offer open for not less than 20 business days (or longer if required by
applicable law) after the date on which notice of the Exchange Offer is mailed
to the holders of the Old Notes. For each Old Note surrendered to the Company
pursuant to the Exchange Offer, the holder of such Old Note will receive an
Exchange Note having a principal amount equal to that of the surrendered Old
Note. Interest on each Old Note will accrue from the last interest payment
date on which interest was paid on the Old Note surrendered in exchange
therefor or, if no interest has been paid on such Old Note, from the date of
its original issue. Interest on each Exchange Note will accrue from the date
of its original issue.
Under existing interpretations of the staff of the Commission contained in
several no-action letters to third parties, the Exchange Notes will in general
be freely tradeable after the Exchange Offer without further registration
under the Securities Act. However, any purchaser of Old Notes who is an
"affiliate" of the Company or who intends to participate in the Exchange Offer
for the purpose of distributing the Exchange Notes (i) will not be able to
rely on the interpretation of the staff of the Commission, (ii) will not be
able to tender its Old Notes in the Exchange Offer and (iii) must comply with
the registration and prospectus delivery requirements of the Securities Act in
connection with any sale or transfer of the Old Notes, unless such sale or
transfer is made pursuant to an exemption from such requirements.
As contemplated by these no-action letters and the Registration Rights
Agreement, each holder accepting the Exchange Offer is required to represent
to the Company in the Letter of Transmittal that (i) the Exchange Notes are to
be acquired by the holder or the person receiving such Exchange Notes, whether
or not such person is the holder, in the ordinary course of business, (ii) the
holder or any such other person (other than a broker-dealer referred to in the
next sentence) is not engaging and does not intend to engage, in distribution
of the Exchange Notes, (iii) the holder or any such other person has no
arrangement or understanding with any person to participate in the
distribution of the Exchange Notes, (iv) neither the holder nor any such other
person is an "affiliate" of the Company or any of the Subsidiary Guarantors
within the meaning of Rule 405 under the Securities Act, and (v) the holder or
any such other person acknowledges that if such holder or any other person
participates in the Exchange Offer for the purpose of distributing the
Exchange Notes it must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any resale of the
Exchange Notes and cannot rely on those no-action letters. As indicated above,
each Participating Broker-Dealer that receives a New Note for its own account
in exchange for Old Notes must acknowledge that it (i) acquired the Old Notes
for its own account as a result of market-making activities or other trading
activities, (ii) has not entered into any arrangement or understanding with
the Company or any "affiliate" of the Company or any of the Subsidiary
Guarantors (within the meaning of Rule 405 under the Securities Act) to
distribute the Exchange Notes to be received in the Exchange Offer and (iii)
will deliver a prospectus meeting the requirements of the Securities Act in
connection with any resale of such Exchange Notes. For a description of the
procedures for resales by Participant Broker-Dealers, see "Plan of
Distribution."
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REGISTRATION RIGHTS; LIQUIDATED DAMAGES
Pursuant to the Registration Rights Agreement, the Company and the
Subsidiary Guarantors agreed to file with the Commission the Exchange Offer
Registration Statement on the appropriate form under the Securities Act with
respect to the Exchange Offer. Upon the effectiveness of the Exchange Offer
Registration Statement, the Company will offer to the holders of Transfer
Restricted Securities who are able to make certain representations the
opportunity to exchange their Transfer Restricted Securities for Exchange
Notes pursuant to the Exchange Offer. If (i) the Company or the Subsidiary
Guarantors are not required to file the Exchange Offer Registration Statement
or permitted to consummate the Exchange Offer because the Exchange Offer is
not permitted by applicable law or Commission policy or (ii) any holder of
Transfer Restricted Securities notifies the Company prior to the 20th day
following consummation of the Exchange Offer that (a) it is prohibited by law
or Commission policy from participating in the Exchange Offer or (b) that it
may not resell the Exchange Notes acquired by it in the Exchange Offer to the
public without delivering a prospectus and the prospectus contained in the
Exchange Offer Registration Statement is not appropriate or available for such
resales or (c) that it is a broker-dealer and owns Notes acquired directly
from the Company, the Subsidiary Guarantors or an affiliate thereof, the
Company and the Subsidiary Guarantors will file with the Commission a Shelf
Registration Statement to cover resales of the Notes by the holders thereof
who satisfy certain conditions relating to the provision of information in
connection with the Shelf Registration Statement. For purposes of the
foregoing, "Transfer Restricted Securities" means each Note until (i) the date
on which such Note has been exchanged by a person other than a broker-dealer
for an Exchange Note in the Exchange Offer, (ii) following the exchange by a
broker-dealer in the Exchange Offer of a Note for an Exchange Note, the date
on which such Exchange Note is sold to a purchaser who receives from such
broker-dealer on or prior to the date of such sale a copy of the prospectus
contained in the Exchange Offer Registration Statement, (iii) the date on
which such Note has been effectively registered under the Securities Act and
disposed of in accordance with the Shelf Registration Statement or (iv) the
date on which such Note is distributed to the public pursuant to Rule 144
under the Act.
The Registration Rights Agreement provides that (i) the Company will file an
Exchange Offer Registration Statement with the Commission on or prior to 120
days after the date upon which the Notes were first issued (the "Issue Date"),
(ii) the Company and the Subsidiary Guarantors will use their best efforts to
have the Exchange Offer Registration Statement declared effective by the
Commission on or prior to 180 days after the Issue Date, (iii) unless the
Exchange Offer would not be permitted by applicable law or Commission policy,
the Company will commence the Exchange Offer and use its best efforts to
issue, on or prior to 30 business days after the date on which the Exchange
Offer Registration Statement was declared effective by the Commission,
Exchange Notes in exchange for all Notes tendered prior thereto in the
Exchange Offer and (iv) if obligated to file the Shelf Registration Statement,
the Company will use its best efforts to file the Shelf Registration Statement
with the Commission on or prior to 30 days after such filing obligation arises
and to cause the Shelf Registration to be declared effective by the Commission
on or prior to 120 days after such obligation arises. If (a) the Company and
the Subsidiary Guarantors fail to file any of the Registration Statements
required by the Registration Rights Agreement on or before the date specified
for such filing, (b) any of such Registration Statements is not declared
effective by the Commission on or prior to the date specified for such
effectiveness (the "Effectiveness Target Date"), (c) the Company fails to
consummate the Exchange Offer within 30 business days of the Effectiveness
Target Date with respect to the Exchange Offer Registration Statement, or (d)
the Shelf Registration Statement or the Exchange Offer Registration Statement
is declared effective but thereafter ceases to be effective or usable in
connection with resales of transfer Restricted Securities during the periods
specified in the Registration Rights Agreement (each such event referred to in
clauses (a) through (d) above a "Registration Default"), then the Company will
pay Liquidated Damages to each holder of Notes, with respect to the first 90-
day period immediately following the occurrence of the first Registration
Default in an amount equal to $.05 per week per $1,000 principal amount of
Notes held by such holder. The amount of the Liquidated Damages will increase
by an additional $.05 per week per $1,000 principal amount of Notes with
respect to each subsequent 90-day period until all Registration Defaults have
been cured, up to a maximum amount of Liquidated Damages for all Registration
Defaults of $.50 per week per $1,000 principal amount of Notes. All accrued
Liquidated Damages will be paid by the Company on each Damages Payment Date to
the Global Note holder by wire transfer of immediately available funds or by
federal funds check and to holders of Certificated Securities
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by wire transfer to the accounts specified by them or by mailing checks to
their registered addresses if no such accounts have been specified. Following
the cure of all Registration Defaults, the accrual of Liquidated Damages will
cease.
Holders of Old Notes will be required to make certain representations to the
Company (as described in the Registration Rights Agreement) in order to
participate in the Exchange Offer and will be required to deliver information
to be used in connection with the Shelf Registration Statement and to provide
comments on the Shelf Registration Statement within the time periods set forth
in the Registration Rights Agreement in order to have their Old Notes included
in the Shelf Registration Statement and benefit from the provisions regarding
Additional Interest set forth above.
The summary herein of certain provisions of the Registration Rights
Agreement does not purport to be complete and is subject to, and is qualified
in its entirety by, all the provisions of the Registration Rights Agreement, a
copy of which is filed as an exhibit to the Exchange Offer Registration
Statement of which this Prospectus is a part.
Following the consummation of the Exchange Offer, holders of the Old Notes
who were eligible to participate in the Exchange Offer but who did not tender
their Old Notes will not have any further registration rights and such Old
Notes will continue to be subject to certain restrictions on transfer.
Accordingly, the liquidity of the market for such Old Notes could be adversely
affected.
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this Prospectus
and in the Letter of Transmittal, the Company will accept any and all Old
Notes validly tendered and not withdrawn prior to 5:00 p.m., New York City
time, on the Expiration Date. The Company will issue $1,000 principal amount
of Exchange Notes in exchange for each $1,000 principal amount of outstanding
Old Notes accepted in the Exchange Offer. Holders may tender some or all of
their Old Notes pursuant to the Exchange Offer. However, Old Notes may be
tendered only in integral multiples of $1,000.
The form and terms of the Exchange Notes are the same as the form and terms
of the Old Notes except that (i) the Exchange Notes bear a Series B
designation and a different CUSIP Number from the Old Notes, (ii) the Exchange
Notes have been registered under the Securities Act and hence will not bear
legends restricting the transfer thereof and (iii) the holders of the Exchange
Notes will not be entitled to certain rights under the Registration Rights
Agreement, including the provisions providing for an increase in the interest
rate on the Old Notes in certain circumstances relating to the timing of the
Exchange Offer, all of which rights will terminate when the Exchange Offer is
consummated. The Exchange Notes will evidence the same debt as the Old Notes
and will be entitled to the benefits of the Indentures.
As of the date of this Prospectus, $175,000,000 aggregate principal amount
of Old Notes were outstanding. The Company has fixed the close of business on
, 1998 as the record date for the Exchange Offer for purposes of determining
the persons to whom this Prospectus and the Letter of Transmittal will be
mailed initially.
Holders of Old Notes do not have any appraisal or dissenters' rights under
the General Corporation Law of Delaware, or the Indentures in connection with
the Exchange Offer. The Company intends to conduct the Exchange Offer in
accordance with the applicable requirements of the Exchange Act and the rules
and regulations of the Commission thereunder.
The Company shall be deemed to have accepted validly tendered Old Notes
when, as and if the Company has given oral or written notice thereof to the
Exchange Agent. The Exchange Agent will act as agent for the tendering holders
for the purpose of receiving the Exchange Notes from the Company.
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If any tendered Old Notes are not accepted for exchange because of an
invalid tender, the occurrence of certain other events set forth herein or
otherwise, the certificates for any such unaccepted Old Notes will be
returned, without expense, to the tendering holder thereof as promptly as
practicable after the Expiration Date.
Holders who tender Old Notes in the Exchange Offer will not be required to
pay brokerage commissions or fees or, subject to the instructions in the
Letter of Transmittal, transfer taxes with respect to the exchange of Old
Notes pursuant to the Exchange Offer. The Company will pay all charges and
expenses, other than transfer taxes in certain circumstances, in connection
with the Exchange Offer. See "--Fees and Expenses."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" shall mean 5:00 p.m., New York City time, on
1998, unless the Company, in its sole discretion, extends the Exchange Offer,
in which case the term "Expiration Date" shall mean the latest date and time
to which the Exchange Offer is extended.
In order to extend the Exchange Offer, the Company will notify the Exchange
Agent of any extension by oral or written notice and will mail to the
registered holders an announcement thereof, each prior to 9:00 a.m., New York
City time, on the next business day after the previously scheduled expiration
date.
The Company reserves the right, in its sole discretion, (i) to delay
accepting any Old Notes, to extend the Exchange Offer or to terminate the
Exchange Offer if any of the conditions set forth below under "--Conditions"
shall not have been satisfied, by giving oral or written notice of such delay,
extension or termination to the Exchange Agent or (ii) to amend the terms of
the Exchange Offer in any manner. Any such delay in acceptance, extension,
termination or amendment will be followed as promptly as practicable by oral
or written notice thereof to the registered holders.
INTEREST ON THE EXCHANGE NOTES
The Exchange Notes will bear interest from their date of issuance. Holders
of Old Notes that are accepted for exchange will receive, in cash, accrued
interest thereon to, but not including, the date of issuance of the Exchange
Notes. Such interest will be paid with the first interest payment on the
Exchange Notes on December 1, 1998. Interest on the Old Notes accepted for
exchange will cease to accrue upon issuance of the Exchange Notes.
Interest on the Exchange Notes is payable semi-annually on each June 1 and
December 1, commencing on December 1, 1998.
PROCEDURES FOR TENDERING
Only a holder of Old Notes may tender such Old Notes in the Exchange Offer.
To tender in the Exchange Offer, a holder must complete, sign and date the
Letter of Transmittal, or a facsimile thereof, have the signatures thereon
guaranteed if required by the Letter of Transmittal or submit an Agent's
Message in connection with a book-entry transfer, and mail or otherwise
deliver such Letter of Transmittal or such facsimile, together with the Old
Notes and any other required documents, to the Exchange Agent prior to 5:00
p.m., New York City time, on the Expiration Date. To be tendered effectively,
the Old Notes, Letter of Transmittal or Agent's Message and other required
documents must be completed and received by the Exchange Agent at the address
set forth below under "Exchange Agent" prior to 5:00 p.m., New York City time,
on the Expiration Date. Delivery of the Old Notes may be made by book-entry
transfer in accordance with the procedures described below. Confirmation of
such book-entry transfer must be received by the Exchange Agent prior to the
Expiration Date.
The term "Agent's Message" means a message, transmitted by a book-entry
transfer facility to, and received by, the Exchange Agent forming a part of a
confirmation of a book-entry, which states that such book-entry transfer
facility has received an express acknowledgment from the participant in such
book-entry transfer
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facility tendering the Old Notes that such participant has received and
agrees: (i) to participate in the Automated Tender Option Program ("ATOP");
(ii) to be bound by the terms of the Letter of Transmittal; and (iii) that the
Company may enforce such agreement against such participant.
By executing the Letter of Transmittal or Agent's Message, each holder will
make to the Company the representations set forth above in the third paragraph
under the heading "--Purpose and Effect of the Exchange Offer."
The tender by a holder and the acceptance thereof by the Company will
constitute agreement between such holder and the Company in accordance with
the terms and subject to the conditions set forth herein and in the Letter of
Transmittal or Agent's Message.
THE METHOD OF DELIVERY OF OLD NOTES AND THE LETTER OF TRANSMITTAL OR AGENT'S
MESSAGE AND ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE
ELECTION AND SOLE RISK OF THE HOLDER. AS AN ALTERNATIVE TO DELIVERY BY MAIL,
HOLDERS MAY WISH TO CONSIDER OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES,
SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT
BEFORE THE EXPIRATION DATE. NO LETTER OF TRANSMITTAL OR OLD NOTES SHOULD BE
SENT TO THE COMPANY. HOLDERS MAY REQUEST THEIR RESPECTIVE BROKERS, DEALERS,
COMMERCIAL BANKS, TRUST COMPANIES OR NOMINEES TO EFFECT THE ABOVE TRANSACTIONS
FOR SUCH HOLDERS.
Any beneficial owner whose Old Notes are registered in the name of a broker,
dealer, commercial bank, trust company or other nominee and who wishes to
tender should contact the registered holder promptly and instruct such
registered holder to tender on such beneficial owner's behalf. See
"Instructions to Registered Holder and/or Book-Entry Transfer Facility
Participant from Beneficial Owner" included with the Letter of Transmittal.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the case
may be, must be guaranteed by an Eligible Institution (as defined below)
unless the Old Notes tendered pursuant thereto are tendered (i) by a
registered holder who has not completed the box entitled "Special Registration
Instructions" or "Special Delivery Instructions" on the Letter of Transmittal
or (ii) for the account of an Eligible Institution. In the event that
signatures on a Letter of Transmittal or a notice of withdrawal, as the case
may be, are required to be guaranteed, such guarantee must be by a member firm
of the Medallion System (an "Eligible Institution").
If the Letter of Transmittal is signed by a person other than the registered
holder of any Old Notes listed therein, such Old Notes must be endorsed or
accompanied by a properly completed bond power, signed by such registered
holder as such registered holder's name appears on such Old Notes with the
signature thereon guaranteed by an Eligible Institution.
If the Letter of Transmittal or any Old Notes or bond powers are signed by
trustees, executors, administrators, guardians, attorneys-in-fact, offices of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and evidence satisfactory to the
Company of their authority to so act must be submitted with the Letter of
Transmittal.
The Company understands that the Exchange Agent will make a request promptly
after the date of this Prospectus to establish accounts with respect to the
Old Notes at the book-entry transfer facility, The Depository Trust Company
(the "Book-Entry Transfer Facility"), for the purpose of facilitating the
Exchange Offer, and subject to the establishment thereof, any financial
institution that is a participant in the Book-Entry Transfer Facility's system
may make book-entry delivery of Old Notes by causing such Book-Entry Transfer
Facility to transfer such Old Notes into the Exchange Agent's account with
respect to the Old Notes in accordance with the Book-Entry Transfer Facility's
procedures for such transfer. Although delivery of the Old Notes may be
effected through book-entry transfer into the Exchange Agent's account at the
Book-Entry Transfer Facility unless an Agent's Message is received by the
Exchange Agent in compliance with ATOP, an appropriate Letter of Transmittal
properly completed and duly executed with any required signature guarantee and
all other required
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documents must in each case be transmitted to and received or confirmed by the
Exchange Agent at its address set forth below on or prior to the Expiration
Date, or, if the guaranteed delivery procedures described below are complied
with, within the time period provided under such procedures. Delivery of
documents to the Book-Entry Transfer Facility does not constitute delivery to
the Exchange Agent.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance of tendered Old Notes and withdrawal of tendered Old
Notes will be determined by the Company in its sole discretion, which
determination will be final and binding. The Company reserves the absolute
right to reject any and all Old Notes not properly tendered or any Old Notes
the Company's acceptance of which would, in the opinion of counsel for the
Company, be unlawful. The Company also reserves the right in its sole
discretion to waive any defects, irregularities or conditions of tender as to
particular Old Notes. The Company's interpretation of the terms and conditions
of the Exchange Offer (including the instructions in the Letter of
Transmittal) will be final and binding on all parties. Unless waived, any
defects or irregularities in connection with tenders of Old Notes must be
cured within such time as the Issuer shall determine. Although the Company
intends to notify holders of defects or irregularities with respect to tenders
of Old Notes, neither the Issuer, the Exchange Agent nor any other person
shall incur any liability for failure to give such notification. Tenders of
Old Notes will not be deemed to have been made until such defects or
irregularities have been cured or waived. Any Old Notes received by the
Exchange Agent that are not properly tendered and as to which the defects or
irregularities have not been cured or waived will be returned by the Exchange
Agent to the tendering holders, unless otherwise provided in the Letter of
Transmittal, as soon as practicable following the Expiration Date.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Old Notes and (i) whose Old Notes are not
immediately available, (ii) who cannot deliver their Old Notes, the Letter of
Transmittal or any other required documents to the Exchange Agent or (iii) who
cannot complete the procedures for book-entry transfer, prior to the
Expiration Date, may effect a tender if:
(a) the tender is made through an Eligible Institution;
(b) prior to the Expiration Date, the Exchange Agent receives from such
Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery (by facsimile transmission, mail or hand delivery)
setting forth the name and address of the holder, the certificate number(s)
of such Old Notes and the principal amount of Old Notes tendered, stating
that the tender is being made thereby and guaranteeing that, within five
New York Stock Exchange trading days after the Expiration Date, the Letter
of Transmittal (or facsimile thereof) (or, in the case of a book-entry
transfer, an Agent's Message) together with the certificate(s) representing
the Old Notes (or a confirmation of book-entry transfer of such Notes into
the Exchange Agent's account at the Book-Entry Transfer Facility), and any
other documents required by the Letter of Transmittal will be deposited by
the Eligible Institution with the Exchange Agent; and
(c) such properly completed and executed Letter of Transmittal (of
facsimile thereof), as well as the certificate(s) representing all tendered
Old Notes in proper form for transfer (or a confirmation of book-entry
transfer of such Old Notes into the Exchange Agent's account at the Book-
Entry Transfer Facility), together with a Letter of Transmittal (or
facsimile thereof), properly completed and duly executed, with any required
signature guarantees (or, in the case of a book-entry transfer, an Agent's
Message) and all other documents required by the Letter of Transmittal are
received by the Exchange Agent upon five New York Stock Exchange trading
days after the Expiration Date.
Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be
sent to holders who wish to tender their Old Notes according to the guaranteed
delivery procedures set forth above.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Old Notes may be withdrawn
at any time prior to 5:00 p.m., New York City time, on the Expiration Date.
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To withdraw a tender of Old Notes in the Exchange Offer, a telegram, telex,
letter or facsimile transmission notice of withdrawal must be received by the
Exchange Agent at its address set forth herein prior to 5:00 p.m., New York
City time, on the Expiration Date. Any such notice of withdrawal must (i)
specify the name of the person having deposited the Old Notes to be withdrawn
(the "Depositor"), (ii) identify the Old Notes to be withdrawn (including the
certificate number(s) and principal amount of such Old Notes, or, in the case
of Old Notes transferred by book-entry transfer, the name and number of the
account at the Book-Entry Transfer Facility to be credited), (iii) be signed
by the holder in the same manner as the original signature on the Letter of
Transmittal by which such Old Notes were tendered (including any required
signature guarantees) or be accompanied by documents of transfer sufficient to
have the Trustee with respect to the Old Notes register the transfer of such
Old Notes into the name of the person withdrawing the tender and (iv) specify
the name in which any such Old Notes are to be registered, if different from
that of the Depositor. All questions as to the validity, form and eligibility
(including time of receipt) of such notices will be determined by the Company,
whose determination shall be final and binding on all parties. Any Old Notes
so withdrawn will be deemed not to have been validly tendered for purposes of
the Exchange Offer and no Exchange Notes will be issued with respect thereto
unless the Old Notes so withdrawn are validly retendered. Any Old Notes which
have been tendered but which are not accepted for exchange will be returned to
the holder thereof without cost to such holder as soon as practicable after
withdrawal, rejection of tender or termination of the Exchange Offer. Properly
withdrawn Old Notes may be retendered by following one of the procedures
described above under "--Procedures for Tendering" at any time prior to the
Expiration Date.
CONDITIONS
Notwithstanding any other term of the Exchange Offer, the Company shall not
be required to accept for exchange, or exchange Exchange Notes for, any Old
Notes, and may terminate or amend the Exchange Offer as provided herein before
the acceptance of such Old Notes, if:
(a) any action or proceeding is instituted or threatened in any court or
by or before any governmental agency with respect to the Exchange Offer
which, in the sole judgment of the Company, might materially impair the
ability of the Company to proceed with the Exchange Offer or any material
adverse development has occurred in any existing action or proceeding with
respect to the Company or any of its subsidiaries; or
(b) any law, statute, rule, regulation or interpretation by the staff of
the Commission is proposed, adopted or enacted, which, in the sole judgment
of the Company, might materially impair the ability of the Company to
proceed with the Exchange Offer or materially impair the contemplated
benefits of the Exchange Offer to the Company; or
(c) any governmental approval has not been obtained, which approval the
Company shall, in its sole discretion, deem necessary for the consummation
of the Exchange Offer as contemplated hereby.
If the Company determines in its sole discretion that any of the conditions
are not satisfied, the Company may (i) refuse to accept any Old Notes and
return all tendered Old Notes to the tendering holders, (ii) extend the
Exchange Offer and retain all Old Notes tendered prior to the expiration of
the Exchange Offer, subject, however, to the rights of holders to withdraw
such Old Notes (see "--Withdrawal of Tenders") or (iii) waive such unsatisfied
conditions with respect to the Exchange Offer and accept all properly tendered
Old Notes which have not been withdrawn.
EXCHANGE AGENT
Harris Trust and Savings Bank has been appointed as Exchange Agent for the
exchange of Exchange Notes for Old Notes pursuant to the Exchange Offer.
Questions and requests for assistance, requests for additional
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copies of this Prospectus or of the Letter of Transmittal and requests for
Notice of Guaranteed Delivery should be directed to the Exchange Agent
addressed as follows:
HARRIS TRUST AND SAVINGS BANK, DEPOSITARY
c/o Harris Trust Company of New York
By Mail: Overnight Courier:
Wall Street Station 77 Water Street, 4th Floor
P.O. Box 1023 New York, NY 10005
New York, NY 10268-1023 Attention: Reorganization Dept.
Attention: Reorganization Dept.
By Hand: Facsimile Transmission:
Receive Window (for Eligible Institutions Only)
77 Water Street, 5th Floor (212) 701-7636 or 7637
Attention: Reorganization Dept.
Confirm by Telephone:
(212) 701-7649
DELIVERY TO AN ADDRESS OTHER THAN SET FORTH ABOVE WILL NOT CONSTITUTE A VALID
DELIVERY.
FEES AND EXPENSES
The expenses of soliciting tenders will be borne by the Company. The
principal solicitation is being made by mail; however, additional solicitation
may be made by telegraph, telecopy, telephone or in person by officers and
regular employees of the Company and its affiliates.
The Company has not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to brokers, dealers, or others
soliciting acceptances of the Exchange Offer. The Company, however, will pay
the Exchange Agent reasonable and customary fees for its services and will
reimburse it for its reasonable out-of pocket expenses in connection
therewith.
The cash expenses to be incurred in connection with the Exchange Offer will
be paid by the Company. Such expenses include fees and expenses of the
Exchange Agent and Trustee, accounting and legal fees and printing costs,
among others.
ACCOUNTING TREATMENT
The Exchange Notes will be recorded at the same carrying value as the Old
Notes, which is face value, as reflected in the Company's accounting records
on the date of exchange. Accordingly, no gain or loss for accounting purposes
will be recognized by the Company. The expenses of the Exchange Offer will be
expensed over the term of the Exchange Notes.
CONSEQUENCES OF FAILURE TO EXCHANGE
The Old Notes that are not exchanged for Exchange Notes pursuant to the
Exchange Offer will remain restricted securities. Accordingly, such Old Notes
may be resold only (i) to the Company (upon redemption thereof or otherwise),
(ii) so long as the Old Notes are eligible for resale pursuant to Rule 144A,
to a person inside the United States whom the seller reasonably believes is a
qualified institutional buyer within the meaning of Rule 144A under the
Securities Act in a transaction meeting the requirements of Rule 144A, in
accordance with Rule 144 under the Securities Act, or pursuant to another
exemption from the registration requirements of the Securities Act (and based
upon an opinion of counsel reasonably acceptable to the Company), (iii)
outside
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the United States to a foreign person in a transaction meeting the
requirements of Rule 904 under the Securities Act, or (iv) pursuant to an
effective registration statement under the Securities Act, in each case in
accordance with any applicable securities laws of any state of the United
States.
RESALE OF THE EXCHANGE NOTES
With respect to resales of Exchange Notes, based on interpretations by the
staff of the Commission set forth in no-action letters issued to third
parties, the Company believes that a holder or other person who receives
Exchange Notes, whether or not such person is the holder (other than a person
that is an "affiliate" of the Company or any Subsidiary Guarantor within the
meaning of Rule 405 under the Securities Act) who receives Exchange Notes in
exchange for Old Notes in the ordinary course of business and who is not
participating, does not intend to participate, and has no arrangement or
understanding with any person to participate, in the distribution of the
Exchange Notes, will be allowed to resell the Exchange Notes to the public
without further registration under the Securities Act and without delivering
to the purchasers of the Exchange Notes a prospectus that satisfies the
requirements of Section 10 of the Securities Act. However, if any holder
acquires Exchange Notes in the Exchange Offer for the purpose of distributing
or participating in a distribution of the Exchange Notes, such holder cannot
rely on the position of the staff of the Commission enunciated in such no-
action letters or any similar interpretive letters, and must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction, unless an exemption from registration
is otherwise available. Further, each Participating Broker-Dealer that
receives Exchange Notes for its own account in exchange for Old Notes, where
such Old Notes were acquired by such Participating Broker-Dealer as a result
of market-making activities or other trading activities, must acknowledge that
it will deliver a prospectus in connection with any resale of such Exchange
Notes.
As contemplated by these no-action letters and the Registration Rights
Agreement, each holder accepting the Exchange Offer is required to represent
to the Company in the Letter of Transmittal that (i) the Exchange Notes are to
be acquired by the holder or the person receiving such Exchange Notes, whether
or not such person is the holder, in the ordinary course of business, (ii) the
holder or any such other person (other than a broker-dealer referred to in the
next sentence) is not engaging and does not intend to engage, in the
distribution of the Exchange Notes, (iii) the holder or any such other person
has no arrangement or understanding with any person to participate in the
distribution of the Exchange Notes, (iv) neither the holder nor any such other
person is an "affiliate" of the Company within the meaning of Rule 405 under
the Securities Act, and (v) the holder or any such other person acknowledges
that if such holder or other person participates in the Exchange Offer for the
purpose of distributing the Exchange Notes it must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any resale of the Exchange Notes and cannot rely on those no-
action letters. As indicated above, each Participating Broker-Dealer that
receives Exchange Notes for its own account in exchange for Old Notes must
acknowledge that it will deliver a prospectus in connection with any resale of
such Exchange Notes. For a description of the procedures for such resales by
Participating Broker-Dealers, see "Plan of Distribution."
DESCRIPTION OF NOTES
GENERAL
The Notes are issued pursuant to an Indenture (the "Indenture") between the
Company and Harris Trust and Savings Bank, as trustee (the "Trustee"), in a
private transaction that is not subject to the registration requirements of
the Securities Act. The terms of the Notes include those stated in the
Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939 (the "Trust Indenture Act"). The Notes are subject to
all such terms, and holders of Notes are referred to the Indenture and the
Trust Indenture Act for a statement thereof. The form and terms of the
Exchange Notes are the same as the form and terms of the Old Notes (which they
replace) except that (i) the Exchange Notes bear a Series B designation and
have a different CUSIP number than the Old Notes, (ii) the Exchange Notes have
been registered under the Securities Act and, therefore, will not bear legends
restricting the transfer thereof, and (iii) the holders of Exchange Notes will
not be entitled to certain rights under the Registration Rights Agreement,
including the provisions providing for an
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increase in the interest rate on the Old Notes in certain circumstances
relating to the timing of the Exchange Offer, which rights will terminate when
the Exchange Offer is consummated. The following summary of the material
provisions of the Indenture, the Pledge Agreement and the Registration Rights
Agreement does not purport to be complete and is qualified in its entirety by
reference to such agreements, including the definitions therein of certain
terms used below. Copies of the proposed form of such agreements are available
as set forth below under "--Additional Information." The definitions of
certain terms used in the following summary are set forth below under "--
Certain Definitions." For purposes of this summary, the term "Company" refers
only to OnePoint Communications Corp. and not to any of its Subsidiaries.
The Notes are general obligations of the Company and will rank pari passu in
right of payment with any existing or future unsubordinated Indebtedness of
the Company and senior in right of payment to any subordinated Indebtedness of
the Company. The Company's obligations under the Notes are guaranteed (the
"Subsidiary Guarantees") by all of the Company's Restricted Subsidiaries. In
addition, a portion of the Company's obligations on the Notes are secured by a
first priority pledge to the Trustee for the benefit of the holders of the
Notes of the Pledged Securities, which will be held in the Escrow Account
pursuant to the Pledge Agreement. The proceeds from the Pledged Securities
will be used to pay the first seven interest payments on the Notes. See "--
Interest Reserve" and "--Subsidiary Guarantees."
The operations of the Company are conducted in large part through its
Subsidiaries and, therefore, the Company is dependent upon the cash flow of
its Subsidiaries to meet its obligations, including its obligations under the
Notes. See "Risk Factors--Holding Company Structure; Structural Subordination
of Notes."
Under certain circumstances, the Company will be able to designate
Subsidiaries of the Company, including Subsidiaries that it creates or
acquires in the future, to be Unrestricted Subsidiaries. Unrestricted
Subsidiaries will not be subject to many of the restrictive covenants set
forth in the Indenture. See "--Certain Covenants--Restricted Payments."
SUBSIDIARY GUARANTEES
The Company's payment obligations under the Notes are jointly and severally
guaranteed (the "Subsidiary Guarantees") by the Subsidiary Guarantors. The
obligations of each Subsidiary Guarantor under its Subsidiary Guarantee will
be limited so as not to constitute a fraudulent conveyance under applicable
law. See, however, "Risk Factors--Fraudulent Conveyance Risks."
The Indenture provides that no Subsidiary Guarantor may consolidate with or
merge with or into (whether or not such Subsidiary Guarantor is the surviving
Person) another corporation, Person or entity whether or not affiliated with
such Subsidiary Guarantor unless (i) subject to the provisions of the
following paragraph, the Person formed by or surviving any such consolidation
or merger (if other than such Subsidiary Guarantor) assumes all the
obligations of such Subsidiary Guarantor pursuant to a supplemental indenture
in form and substance reasonably satisfactory to the Trustee, under the Notes,
the Indenture, the Pledge Agreement and the Registration Rights Agreement;
(ii) immediately after giving effect to such transaction, no Default or Event
of Default exists; and (iii) except in the case of any such merger or
consolidation with the Company or another Subsidiary Guarantor, the Company
would, on a pro forma basis, immediately after giving effect to such
transaction, be permitted to incur at least $1.00 of additional Indebtedness
pursuant to the Debt to Cash Flow Ratio test set forth in the covenant
described below under the caption "--Certain Covenants--Incurrence of
Indebtedness and Issuance of Disqualified Stock."
The Indenture provides that in the event of a sale or other disposition of
all of the assets of any Subsidiary Guarantor, by way of merger, consolidation
or otherwise, or a sale or other disposition of all of the capital stock of
any Subsidiary Guarantor, then such Subsidiary Guarantor (in the event of a
sale or other disposition, by way of such a merger, consolidation or
otherwise, of all of the capital stock of such Subsidiary Guarantor) or the
corporation acquiring the property (in the event of a sale or other
disposition of all of the assets of such Subsidiary Guarantor) will be
released and relieved of any obligations under its Subsidiary Guarantee;
provided
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that the Net Proceeds of such sale or other disposition are applied in
accordance with the applicable provisions of the Indenture. See "--Repurchase
at Option of Holders--Asset Sales."
PRINCIPAL, MATURITY AND INTEREST
The Notes are limited in aggregate principal amount to $175.0 million. The
Notes will mature on June 1, 2008. Interest on the Notes will accrue at the
rate of 14 1/2% per annum and will be payable semi-annually in arrears on June
1 and December 1 of each year (each, an "Interest Payment Date"), commencing
on December 1, 1998, to holders of record on the immediately preceding May 15
and November 15. Interest on the Notes accrues from the most recent date to
which interest has been paid or, if no interest has been paid, from the date
of original issuance. Interest is computed on the basis of a 360-day year
comprised of twelve 30-day months. Principal of and premium, interest and
Liquidated Damages, if any, on the Notes is payable at the office or agency of
the Company maintained for such purpose or, at the option of the Company,
payment of interest and Liquidated Damages may be made by check mailed to the
holders of the Notes at their respective addresses set forth in the register
of holders of Notes; provided that all payments of principal, premium,
interest and Liquidated Damages with respect to Notes the holders of which
have given wire transfer instructions to the Company will be required to be
made by wire transfer of immediately available funds to the accounts specified
by the holders thereof. Until otherwise designated by the Company, the
Company's office or agency will be the office of the Trustee maintained for
such purpose. The Notes are issued in denominations of $1,000 and integral
multiples thereof.
INTEREST RESERVE
A portion of the Company's obligations under the Notes will be secured
pending disbursement pursuant to the Pledge Agreement by a pledge of the
Pledged Securities. Upon the consummation of the Initial Offering, the Company
used approximately $80.5 million of the net proceeds of such offering to
purchase, and pledged to the Trustee, for the benefit of the holders of the
Notes, the Pledged Securities, which are in an amount intended to be
sufficient upon receipt of scheduled interest and principal payments, to
provide for payment in full when due of the first seven scheduled interest
payments on the Notes. The Pledged Securities are pledged as security for the
payment of the principal of and interest on the Notes, Liquidated Damages, if
any, and all other Obligations of the Company under the Indenture and the
Notes. When each of the first seven interest payments is due, the Trustee will
apply the proceeds of a sufficient amount of Pledged Securities to pay the
interest then due.
Upon the acceleration of the maturity of the Notes or upon certain
redemptions and repurchases of the Notes, the Pledge Agreement provides that
the Trustee will apply the proceeds of a sufficient amount of Pledged
Securities to pay the amounts owed by the Company to holders of the Notes at
such time. Immediately following the earlier of (i) the payment in full of the
seventh scheduled interest payment on the Notes and (ii) the day on which all
of the Notes have been repurchased, redeemed or defeased, if no Default or
Event of Default is then continuing, the remaining Pledged Securities, if any,
will be released from the Pledge and the outstanding Notes (if any) will be
unsecured obligations of the Company. The ability of holders of the Notes to
realize upon any such funds or receive payment from the proceeds of the
Pledged Securities may be subject to certain bankruptcy law limitations in the
event of a bankruptcy of the Company.
OPTIONAL REDEMPTION
The Notes will not be redeemable at the Company's option prior to June 1,
2003. Thereafter, the Notes will be subject to redemption at any time at the
option of the Company, in whole or in part, upon not less than 30 nor more
than 60 days' notice, at the redemption prices (expressed as percentages of
principal amount) set forth below, plus accrued and unpaid interest and
Liquidated Damages, if any, thereon to the applicable redemption date, if
redeemed during the twelve-month period beginning on June 1 of the years
indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2003.......................... 107.250%
2004.......................... 104.833%
2005.......................... 102.417%
2006 and thereafter........... 100.000%
</TABLE>
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Notwithstanding the foregoing, on or prior to June 1, 2001, the Company may
redeem up to 35.0% or approximately $61,250,000 of the aggregate principal
amount of Notes issued under the Indenture at a redemption price of 114.5% of
the principal amount thereof, plus accrued and unpaid interest and Liquidated
Damages, if any, thereon to the redemption date, with the net cash proceeds of
one or more public or private offerings of Common Stock generating net cash
proceeds to the Company in excess of $20.0 million; provided that at least
65.0% of the aggregate principal amount of Notes issued on the Closing Date
remains outstanding immediately after the occurrence of such redemption.
SELECTION AND NOTICE
If less than all of the Notes are to be redeemed at any time, selection of
Notes for redemption will be made by the Trustee in compliance with the
requirements of the principal national securities exchange, if any, on which
the Notes are listed, or, if the Notes are not so listed, on a pro rata basis,
by lot or by such method as the Trustee shall deem fair and appropriate;
provided that no Notes of $1,000 or less shall be redeemed in part. Notices of
redemption shall be mailed by first class mail at least 30 but not more than
60 days before the redemption date to each holder of Notes to be redeemed at
its registered address. Notices of redemption may not be conditional. If any
Note is to be redeemed in part only, the notice of redemption that relates to
such Note shall state the portion of the principal amount thereof to be
redeemed. A new Note in principal amount equal to the unredeemed portion
thereof will be issued in the name of the holder thereof upon cancellation of
the original Note. Notes called for redemption become due on the date fixed
for redemption. On and after the redemption date, interest ceases to accrue on
Notes or portions of them called for redemption.
MANDATORY REDEMPTION
The Company is not required to make mandatory redemption or sinking fund
payments with respect to the Notes.
REPURCHASE AT THE OPTION OF HOLDERS
Change of Control
Upon the occurrence of a Change of Control, the Indenture requires the
Company to make an offer to each holder of Notes to repurchase all or any part
(equal to $1,000 or an integral multiple thereof) of such holder's Notes
pursuant to the offer described below (the "Change of Control Offer") at an
offer price in cash equal to 101% of the aggregate principal amount thereof,
plus accrued and unpaid interest and Liquidated Damages, if any, thereon to
the date of purchase (the "Change of Control Payment"). Within ten business
days following any Change of Control, the Company will mail a notice to each
holder describing the transaction or transactions that constitute the Change
of Control and offering to repurchase Notes on the date specified in such
notice, which date shall be no earlier than 30 days and no later than 60 days
from the date such notice is mailed (the "Change of Control Payment Date"),
pursuant to the procedures required by the Indenture and described in such
notice. The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of the Notes as a result of a Change of Control.
On the Change of Control Payment Date, the Company will, to the extent
lawful, (i) accept for payment all Notes or portions thereof properly tendered
pursuant to the Change of Control Offer, (ii) deposit with the Paying Agent an
amount equal to the Change of Control Payment in respect of all Notes or
portions thereof so tendered and (iii) deliver or cause to be delivered to the
Trustee the Notes so accepted together with an Officers' Certificate stating
the aggregate principal amount of Notes or portions thereof being purchased by
the Company. The Paying Agent will promptly mail to each holder of Notes so
tendered the Change of Control Payment for such Notes, and the Trustee will
promptly authenticate and mail (or cause to be transferred by book entry) to
each holder a new Note equal in principal amount to any unpurchased portion of
the Notes surrendered, if any; provided that each such new Note will be in a
principal amount of $1,000 or an integral multiple thereof. The Company will
publicly announce the results of the Change of Control Offer on or as soon as
practicable after the Change of Control Payment Date.
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The Change of Control provisions described above will be applicable whether
or not any other provisions of the Indenture are applicable. Except as
described above with respect to a Change of Control, the Indenture does not
contain provisions that permit the holders of the Notes to require that the
Company repurchase or redeem the Notes in the event of a takeover,
recapitalization or similar transaction.
The Company will not be required to make a Change of Control Offer upon a
Change of Control if a third party makes the Change of Control Offer in the
manner, at the times and otherwise in compliance with the requirements set
forth in the Indenture applicable to a Change of Control Offer made by the
Company and purchases all Notes validly tendered and not withdrawn under such
Change of Control Offer.
Asset Sales
The Indenture provides that the Company will not, and will not permit any of
its Restricted Subsidiaries to, consummate an Asset Sale unless (i) the
Company or such Restricted Subsidiary, as the case may be, receives
consideration at the time of such Asset Sale at least equal to the fair market
value (evidenced by a resolution of the Board of Directors set forth in an
Officers' Certificate delivered to the Trustee) of the assets or Equity
Interests issued or sold or otherwise disposed of and (ii) at least 80% of the
consideration therefor received by the Company or such Restricted Subsidiary
is in the form of cash or Cash Equivalents; provided that the amount of (a)
any liabilities (as shown on the Company's or such Restricted Subsidiary's
most recent balance sheet) of the Company or such Restricted Subsidiary (other
than contingent liabilities and liabilities that are by their terms
subordinated to the Notes or any guarantee thereof) that are assumed by the
transferee of any such assets pursuant to a customary novation agreement that
releases the Company or such Restricted Subsidiary from further liability and
(b) any securities, notes or other obligations received by the Company or such
Restricted Subsidiary from such transferee that are contemporaneously (subject
to ordinary settlement periods) converted by the Company or such Restricted
Subsidiary into cash (to the extent of the cash received), shall be deemed to
be cash for purposes of this provision.
Within 270 days after the receipt of any Net Proceeds from an Asset Sale,
the Company may, subject to the provisions of the Indenture described under
"--Certain Covenants--Restricted Payments," (a) apply such Net Proceeds to the
permanent repayment of any Indebtedness that is pari passu with the Notes or
(b) (i) apply such Net Proceeds to the acquisition of the assets or a majority
of the voting equity interests of another Person, the making of capital
expenditures, or the acquisition of other long-term assets, in each case, in
or used or useful in the Telecommunications Business or (ii) enter into a
binding commitment to apply, within 120 days of the date of such commitment,
such Net Proceeds as described in clause (i) above. Pending the final
application of any such Net Proceeds, the Company may temporarily reduce
revolving credit borrowings or otherwise invest such Net Proceeds in any
manner that is not prohibited by the Indenture. Any Net Proceeds from Asset
Sales that are not applied or invested as provided in the first sentence of
this paragraph will be deemed to constitute "Excess Proceeds." When the
aggregate amount of Excess Proceeds exceeds $5.0 million, the Company will be
required to make an offer to all holders of Notes (an "Asset Sale Offer") to
repurchase the maximum principal amount of Notes that may be purchased out of
the Excess Proceeds, at an offer price in cash in an amount equal to 100% of
the principal amount thereof, plus accrued and unpaid interest and Liquidated
Damages, if any, thereon to the repurchase date, in accordance with the
procedures set forth in the Indenture. To the extent that any Excess Proceeds
remain after consummation of an Asset Sale Offer, the Company may use such
Excess Proceeds for any purpose not otherwise prohibited by the Indenture. If
the aggregate principal amount of Notes tendered pursuant to such Asset Sale
Offer exceeds the amount of Excess Proceeds, the Trustee shall select the
Notes to be purchased on a pro rata basis. Upon completion of such offer to
purchase, the amount of Excess Proceeds shall be reset at zero.
CERTAIN COVENANTS
Restricted Payments
The Indenture provides that the Company will not, and will not permit any of
its Restricted Subsidiaries to, directly or indirectly: (i) declare or pay any
dividend or make any other payment or distribution on account of
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the Company's or any of its Restricted Subsidiaries' Equity Interests
(including, without limitation, any payment in connection with any merger or
consolidation involving the Company or any of its Restricted Subsidiaries) or
to the direct or indirect holders of the Company's or any of its Restricted
Subsidiaries' Equity Interests in their capacity as such (other than dividends
or distributions payable in Equity Interests (other than Disqualified Stock)
of the Company or to the Company or a Restricted Subsidiary of the Company);
(ii) purchase, redeem or otherwise acquire or retire for value (including,
without limitation, in connection with any merger or consolidation involving
the Company) any Equity Interests of the Company or any direct or indirect
parent of the Company (other than any such Equity Interests owned by the
Company or any Restricted Subsidiary of the Company); (iii) make any payment
on or with respect to, or purchase, redeem, defease or otherwise acquire or
retire for value, any Indebtedness that is subordinated to the Notes, except a
payment of interest or principal at Stated Maturity; or (iv) make any
Restricted Investment (all such payments and other actions set forth in
clauses (i) through (iv) above being collectively referred to as "Restricted
Payments"), unless, at the time of and after giving effect to such Restricted
Payment:
(a) no Default or Event of Default shall have occurred and be continuing
or would occur as a consequence thereof;
(b) the Company would, at the time of such Restricted Payment and after
giving pro forma effect thereto as if such Restricted Payment had been made
at the beginning of the applicable four-quarter period, have been permitted
to incur at least $1.00 of additional Indebtedness pursuant to the Debt to
Cash Flow Ratio test set forth in the first paragraph of the covenant
described below under caption "--Incurrence of Indebtedness and Issuance of
Disqualified Stock"; and
(c) such Restricted Payment, together with the aggregate amount of all
other Restricted Payments made by the Company and its Restricted
Subsidiaries after the Closing Date (excluding Restricted Payments
permitted by clauses (ii), (iii) and (iv) of the next succeeding
paragraph), is less than the sum, without duplication, of (i) (A)
Cumulative Consolidated Cash Flow minus (B) the product of 1.75 and
Cumulative Interest Expense, in each case as of the date of such Restricted
Payment, plus (ii) 100% of the aggregate net cash proceeds received by the
Company since the Closing Date as a contribution to its common equity
capital or from the issue or sale of Equity Interests of the Company (other
than Disqualified Stock) or from the issue or sale of Disqualified Stock or
debt securities of the Company that have been converted into such Equity
Interests (other than Equity Interests (or Disqualified Stock or
convertible debt securities) sold to a Subsidiary of the Company), plus
(iii) to the extent that any Restricted Investment that was made after the
date of the Indenture is sold for cash or otherwise liquidated or repaid
for cash, the lesser of (A) the cash return of capital with respect to such
Restricted Investment (less the cost of disposition, if any) and (B) the
initial amount of such Restricted Investment, plus (iv) in the event the
Company or any Restricted Subsidiary makes an Investment in a Person that,
as a result of or in connection with such Investment, becomes a Restricted
Subsidiary, an amount equal to the lesser of (A) the fair market value of
such Person at the time it becomes a Restricted Subsidiary as evidenced by
a resolution of the Board of Directors set forth in an officers'
certificate delivered to the Trustee or (B) the net amount of Restricted
Investments made in such Person prior to its becoming a Restricted
Subsidiary.
So long as no Default has occurred and is continuing or would be caused
thereby, the foregoing provisions will not prohibit: (i) the payment of any
dividend within 60 days after the date of declaration thereof, if at said date
of declaration such payment would have complied with the provisions of the
Indenture; (ii) the redemption, repurchase, retirement, defeasance or other
acquisition of any subordinated Indebtedness or Equity Interests of the
Company in exchange for, or out of the net cash proceeds of the substantially
concurrent sale (other than to a Subsidiary of the Company) of, other Equity
Interests of the Company (other than any Disqualified Stock); provided that
the amount of any such net cash proceeds that are utilized for any such
redemption, repurchase, retirement, defeasance or other acquisition shall be
excluded from clause (c)(ii) of the preceding paragraph; (iii) the defeasance,
redemption, repurchase or other acquisition of subordinated Indebtedness with
the net cash proceeds from an incurrence of Permitted Refinancing
Indebtedness; (iv) the payment of any dividend by a Restricted Subsidiary of
the Company to the holders of its common Equity Interests on a pro rata basis;
(v) the payment of cash in lieu of fractional shares of Common Stock pursuant
to the Warrant Agreement; and (vi) the
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repurchase, redemption or other acquisition or retirement for value of any
Equity Interests of the Company or any Restricted Subsidiary of the Company
held by any member of the Company's or any of its Restricted Subsidiaries'
management; provided that the aggregate price paid for all such repurchased,
redeemed, acquired or retired Equity Interests shall not exceed $250,000 in
any twelve-month period.
The amount of all Restricted Payments (other than cash) shall be the fair
market value on the date of the Restricted Payment of the asset(s) or
securities proposed to be transferred or issued by the Company or such
Restricted Subsidiary, as the case may be, pursuant to the Restricted Payment.
The fair market value of any assets or securities that are required to be
valued by this covenant shall be determined by the Board of Directors whose
resolution with respect thereto shall be delivered to the Trustee, such
determination to be based upon an opinion or appraisal issued by an
accounting, appraisal or investment banking firm of national standing if such
fair market value exceeds $5.0 million. Not later than the date of making any
Restricted Payment, the Company shall deliver to the Trustee an Officers'
Certificate stating that such Restricted Payment is permitted and setting
forth the basis upon which the calculations required by the covenant
"Restricted Payments" were computed, together with a copy of any fairness
opinion or appraisal required by the Indenture.
The Board of Directors may designate any Restricted Subsidiary to be an
Unrestricted Subsidiary if such designation would not cause a Default. For
purposes of making such determination, all outstanding Investments by the
Company and its Restricted Subsidiaries (except to the extent repaid in cash)
in the Subsidiary so designated will be deemed to be Restricted Payments at
the time of such designation and will reduce the amount available for
Restricted Payments under the first paragraph of this covenant. All such
outstanding Investments will be deemed to constitute Investments in an amount
equal to the fair market value of such Investments at the time of such
designation. Such designation will only be permitted if such Restricted
Payment would be permitted at such time and if such Restricted Subsidiary
otherwise meets the definition of an Unrestricted Subsidiary. Any such
designation by the Board of Directors shall be evidenced to the Trustee by
filing with the Trustee a certified copy of the Board Resolution giving effect
to such designation and an Officers' Certificate certifying that such
designation complied with the foregoing conditions and was permitted by the
"Restricted Payments" covenant.
If, at any time, any Unrestricted Subsidiary would fail to meet the
definition of an Unrestricted Subsidiary, it shall thereafter cease to be an
Unrestricted Subsidiary for purposes of the Indenture and any Indebtedness of
such Subsidiary shall be deemed to be incurred by a Restricted Subsidiary of
the Company as of such date (and, if such Indebtedness is not permitted to be
incurred as of such date under the covenant described under the caption "--
Incurrence of Indebtedness and Issuance of Disqualified Stock," the Company
shall be in default of such covenant).
The Board of Directors of the Company may at any time designate any
Unrestricted Subsidiary to be a Restricted Subsidiary; provided that such
designation shall be deemed to be an incurrence of Indebtedness by a
Restricted Subsidiary of the Company of any outstanding Indebtedness of such
Unrestricted Subsidiary and such designation shall only be permitted if (i)
such Indebtedness is permitted under the covenant described under the caption
"--Incurrence of Indebtedness and Issuance of Disqualified Stock," calculated
on a pro forma basis as if such designation had occurred at the beginning of
the four-quarter reference period, and (ii) no Default or Event of Default
would be in existence following such designation.
Incurrence of Indebtedness and Issuance of Disqualified Stock
The Indenture provides that the Company will not, and will not permit any of
its Restricted Subsidiaries to, directly or indirectly, create, incur, issue,
assume, guarantee or otherwise become directly or indirectly liable,
contingently or otherwise, with respect to (collectively, "incur") any
Indebtedness (including Acquired Debt) or issue any Disqualified Stock;
provided, however, that the Company may incur Indebtedness (including Acquired
Debt) or issue shares of Disqualified Stock if the Company's Debt to Cash Flow
Ratio is greater than zero and less than or equal to (a) 5.0 to 1, if such
incurrence is on or prior to June 1, 2001, and (b) 4.5 to 1, if such
incurrence of issuance is after June 1, 2001, in each case determined on a pro
forma basis (including a pro forma application of the net proceeds therefrom)
as if the additional Indebtedness had been incurred at the beginning of
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the Company's most recently ended four full fiscal quarters for which internal
financial statements are available immediately preceding the date on which
such additional Indebtedness is incurred. Notwithstanding the foregoing,
neither the Company nor any of its Restricted Subsidiaries may incur any
Indebtedness that is contractually subordinated in right of payment to any
other Indebtedness of the Company or such Restricted Subsidiary unless such
Indebtedness is also contractually subordinated in right of payment to the
Notes on substantially identical terms; provided, however, that no
Indebtedness of the Company or any Restricted Subsidiary shall be deemed to be
contractually subordinated in right of payment to any other Indebtedness of
the Company or such Restricted Subsidiary solely by virtue of being unsecured.
The provisions of the first paragraph of this covenant will not apply to the
incurrence of any of the following items of Indebtedness (collectively,
"Permitted Debt"):
(i) the incurrence by the Company of Indebtedness from a bank or other
financial institution in an aggregate amount at any one time outstanding
not to exceed the greater of (a) $25 million and (b) 80% of the face amount
of all accounts receivable owned by the Company as of such date that are
not more than 90 days past due;
(ii) the incurrence by the Company and its Restricted Subsidiaries of
Existing Indebtedness;
(iii) the incurrence by the Company and its Restricted Subsidiaries of
Indebtedness represented by the Notes and the Subsidiary Guarantees;
(iv) the incurrence by the Company or any of its Restricted Subsidiaries
of Permitted Refinancing Indebtedness in exchange for, or the net proceeds
of which are used to refund, refinance or replace Indebtedness (other than
intercompany Indebtedness) that was permitted by the Indenture to be
incurred under the first paragraph hereof or clauses (ii), (iii), (vi) or
(vii) of this paragraph;
(v) the incurrence by the Company of Indebtedness in an aggregate
principal amount at any one time outstanding, not to exceed 2.0 times the
sum of the net cash proceeds received by the Company after the Closing Date
as a capital contribution or from the issuance and sale of Equity Interests
(other than Disqualified Stock) to a Person that is not a Subsidiary of the
Company to the extent that such net cash proceeds have not been used to
make Restricted Payments pursuant to clause (c)(ii) of the first paragraph
or clauses (ii), (iii) or (vi) of the second paragraph of the covenant
described under the caption "--Restricted Payments" or Investments
described under clause (vi) of the definition of Permitted Investments;
provided that such Indebtedness does not mature prior to the Notes and has
a Weighted Average Life to Maturity greater than that of the Notes;
(vi) the incurrence by the Company and its Restricted Subsidiaries of
Vendor Debt; provided that the aggregate amount of such Vendor Debt does
not exceed the sum of (a) 100% of the total cost of any digital loop
carriers or switches acquired therewith and (b) 80% of the total cost of
any other Telecommunications Equipment or Telecommunications Related Assets
acquired therewith;
(vii) the incurrence by the Company or any of its Restricted Subsidiaries
of Indebtedness in connection with the acquisition of (a) a Person engaged
in a Telecommunications Business or (b) Telecommunications Related Assets,
which include contractual rights of entry, in each case in an aggregate
amount not to exceed the product of $650 and the number of acquired
telephony or video subscribers (as stated in an Officers' Certificate
delivered to the Trustee);
(viii) the incurrence by the Company or any of its Restricted
Subsidiaries of intercompany Indebtedness; provided, however, that (a) any
subsequent issuance or transfer of Equity Interests that results in any
such Indebtedness being held by a Person other than the Company or a
Restricted Subsidiary of the Company and (b) any sale or other transfer of
any such Indebtedness to a Person that is not either the Company or a
Restricted Subsidiary of the Company shall be deemed, in each case, to
constitute an incurrence of such Indebtedness by the Company or such
Restricted Subsidiary, as the case may be, that was not permitted by this
clause (viii);
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(ix) the incurrence by the Company or any of its Restricted Subsidiaries
of Hedging Obligations that are incurred for the purpose of fixing or
hedging interest rate risk with respect to any floating rate Indebtedness
that is permitted by the terms of this Indenture to be outstanding; and
(x) the Guarantee by the Company or any of its Restricted Subsidiaries of
Indebtedness of the Company or any of its Restricted Subsidiaries permitted
to be incurred pursuant to the Debt to Cash Flow Ratio test set forth in
the first paragraph of this covenant or pursuant to any of clauses (i)
through (v) or (vii) through (ix) of this covenant, which guarantee has the
same ranking relative to the Notes and the Guarantees as the guaranteed
Indebtedness does.
For purposes of determining compliance with this covenant, in the event that
an item of proposed Indebtedness meets the criteria of more than one of the
categories of Permitted Debt described in clauses (i) through (ix) above as of
the date of incurrence thereof or is entitled to be incurred pursuant to the
first paragraph of this covenant as of the date of incurrence thereof, the
Company shall, in its sole discretion, classify such item of Indebtedness on
the date of its incurrence in any manner that complies with this covenant.
Accrual of interest and accretion or amortization of original issue discount
will not be deemed to be an incurrence of Indebtedness for purposes of this
covenant.
Liens
The Indenture provides that the Company will not, and will not permit any of
its Restricted Subsidiaries to, directly or indirectly, create, incur, assume
or suffer to exist any Lien of any kind on any asset now owned or hereafter
acquired, or any income or profits therefrom or assign or convey any right to
receive income therefrom, except Permitted Liens.
Dividend and Other Payment Restrictions Affecting Subsidiaries
The Indenture provides that the Company will not, and will not permit any of
its Restricted Subsidiaries to, directly or indirectly, create or otherwise
cause or suffer to exist or become effective any encumbrance or restriction on
the ability of any Subsidiary to (i)(a) pay dividends or make any other
distributions to the Company or any of its Restricted Subsidiaries (1) on its
Capital Stock or (2) with respect to any other interest or participation in,
or measured by, its profits, or (b) pay any Indebtedness owed to the Company
or any of its Restricted Subsidiaries, (ii) make loans or advances to the
Company or any of its Restricted Subsidiaries or (iii) transfer any of its
properties or assets to the Company or any of its Restricted Subsidiaries.
However, the foregoing restrictions do not apply to encumbrances or
restrictions existing under or by reason of (a) Existing Indebtedness as in
effect on the Closing Date, (b) the Indenture and the Notes, (c) applicable
law, (d) any instrument governing Indebtedness or Capital Stock of a Person
acquired by the Company or any of its Restricted Subsidiaries as in effect at
the time of such acquisition (except to the extent such Indebtedness was
incurred in connection with or in contemplation of such acquisition), which
encumbrance or restriction is not applicable to any Person, or the properties
or assets of any Person, other than the Person, or the property or assets of
the Person, so acquired, provided that, in the case of Indebtedness, such
Indebtedness was permitted by the terms of the Indenture to be incurred, (e)
customary non-assignment provisions in contracts entered into in the ordinary
course of business, (f) purchase money obligations for property acquired in
the ordinary course of business that impose restrictions of the nature
described in clause (iii) above on the property so acquired, (g) any agreement
for the sale of a Subsidiary that restricts distributions by that Subsidiary
pending its sale, (h) Permitted Refinancing Indebtedness, provided that the
restrictions contained in the agreements governing such Permitted Refinancing
Indebtedness are no more restrictive, taken as a whole, than those contained
in the agreements governing the Indebtedness being refinanced, (i) secured
Indebtedness otherwise permitted to be incurred pursuant to the provisions of
the covenant described above under the caption "--Liens" that limits the right
of the debtor to dispose of the assets securing such Indebtedness, (j)
provisions with respect to the disposition or distribution of assets or
property in joint venture agreements and other similar agreements entered into
in the ordinary course of business and (k) restrictions on cash or other
deposits or net worth imposed by customers under contracts entered into in the
ordinary course of business.
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Merger, Consolidation, or Sale of Assets
The Indenture provides that neither the Company nor any of its Restricted
Subsidiaries may consolidate or merge with or into (whether or not the Company
or such Restricted Subsidiary is the surviving corporation), or sell, assign,
transfer, convey or otherwise dispose of all or substantially all of its
properties or assets in one or more related transactions, to another Person
unless (i) the Company is the surviving corporation or such Restricted
Subsidiary is the surviving entity, as the case may be, or the Person formed
by or surviving any such consolidation or merger (if other than the Company or
such Restricted Subsidiary) or to which such sale, assignment, transfer,
conveyance or other disposition shall have been made is a corporation (in the
case of the Company) or a corporation or other entity (in the case of such
Restricted Subsidiary) organized or existing under the laws of the United
States, any state thereof or the District of Columbia; (ii) the Person formed
by or surviving any such consolidation or merger (if other than the Company or
such Restricted Subsidiary) or the Person to which such sale, assignment,
transfer, conveyance or other disposition shall have been made assumes all the
obligations of the Company under the Notes, the Indenture, the Pledge
Agreement and the Registration Rights Agreement, or of such Restricted
Subsidiary under its Subsidiary Guarantee, as the case may be, pursuant to a
supplemental indenture in a form reasonably satisfactory to the Trustee; (iii)
immediately after such transaction no Default or Event of Default exists; and
(iv) except in the case of a merger of the Company with or into a Wholly Owned
Restricted Subsidiary of the Company, the Company or the Person formed by or
surviving any such consolidation or merger (if other than the Company), or to
which such sale, assignment, transfer, conveyance or other disposition shall
have been made (a) will have Consolidated Net Worth immediately after the
transaction equal to or greater than the Consolidated Net Worth of the Company
immediately preceding the transaction and (b) will, immediately after such
transaction after giving pro forma effect thereto and to any related financing
transactions as if the same had occurred at the beginning of the applicable
four-quarter period, be permitted to incur at least $1.00 of additional
Indebtedness pursuant to the Debt to Cash Flow Ratio test set forth in the
first paragraph of the covenant described above under the caption "--
Incurrence of Indebtedness and Issuance of Disqualified Stock." The Indenture
also provides that neither the Company nor any of its Restricted Subsidiaries
may, directly or indirectly, lease all or substantially all of its properties
or assets, in one or more related transactions, to any other Person. The
provisions of this covenant are not applicable to a sale, assignment,
transfer, conveyance or other disposition of assets between or among the
Company and any of its Restricted Subsidiaries.
Transactions with Affiliates
The Indenture provides that the Company will not, and will not permit any of
its Restricted Subsidiaries to, make any payment to, or sell, lease, transfer
or otherwise dispose of any of its properties or assets to, or purchase any
property or assets from, or enter into or make or amend any transaction,
contract, agreement, understanding, loan, advance or guarantee with, or for
the benefit of, any Affiliate (each of the foregoing, an "Affiliate
Transaction"), unless (i) such Affiliate Transaction is on terms that are no
less favorable to the Company or such Restricted Subsidiary than those that
would have been obtained in a comparable transaction by the Company or such
Restricted Subsidiary with an unrelated Person and (ii) the Company delivers
to the Trustee (a) with respect to any Affiliate Transaction or series of
related Affiliate Transactions involving aggregate consideration in excess of
$1.0 million, a resolution of the Board of Directors set forth in an Officers'
Certificate certifying that such Affiliate Transaction complies with clause
(i) above and that such Affiliate Transaction has been approved by a majority
of the disinterested members of the Board of Directors and (b) with respect to
any Affiliate Transaction or series of related Affiliate Transactions
involving aggregate consideration in excess of $10.0 million (or if no member
of the Board of Directors is an Independent Director, $1.0 million), an
opinion as to the fairness to the holders of such Affiliate Transaction from a
financial point of view issued by an accounting, appraisal or investment
banking firm of national standing. Notwithstanding the foregoing, the
following items shall not be deemed to be Affiliate Transactions: (i) any
employment agreement entered into by the Company or any of its Restricted
Subsidiaries in the ordinary course of business; (ii) transactions between or
among the Company and/or its Restricted Subsidiaries; (iii) payment of
reasonable directors fees to Persons who are not otherwise Affiliates of the
Company; (iv) provisioning or other agreements with SBC Communications, Inc.
or any Affiliate thereof, and under any amendment or extension thereof so long
as such agreement,
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amendment or extension is not disadvantageous to the holders of the Notes in
any material respect; (v) payment of management and advisory fees to The
VenCom Group, Inc. or any Affiliate thereof in an amount during any calendar
year period not to exceed $900,000, provided, that if the amount paid in any
calendar year is less than $900,000, the annual cap in the next calendar year
shall be equal to the difference between $1.8 million and the amount paid in
the previous calendar year and further provided that amounts owed in excess of
the cap in any year may be paid in one or more subsequent years if and to the
extent that they are within the cap in such years; (vi) any sale or other
issuance of equity interests (other than Disqualified Stock) of the Company;
(vii) reasonable indemnity provided to officers, directors, employees,
consultants or agents of the Company and its Restricted Subsidiaries as
determined in good faith by the Company's Board of Directors and as permitted
by the Company's governing documents and applicable law; (viii) any
transactions undertaken pursuant to any contractual obligations or rights in
existence on the Closing Date, and (ix) Restricted Payments that are permitted
by the provisions of the Indenture described above under the caption "--
Restricted Payments."
Additional Subsidiary Guarantees
The Indenture provides that if the Company or any of its Restricted
Subsidiaries creates or acquires another Restricted Subsidiary, then the
Company shall cause such Restricted Subsidiary to execute a guarantee of the
Notes in the form set forth in the Indenture; provided that the Guarantee of
any Restricted Subsidiary will be released if the Company (i) designates such
Restricted Subsidiary to be an Unrestricted Subsidiary in accordance with the
covenant described under the caption "--Restricted Payments" or (ii) sells all
of the Capital Stock of such Restricted Subsidiary in compliance with the
provisions of the Indenture relating to Asset Sales.
Issuances and Sales of Equity Interests in Wholly Owned Restricted
Subsidiaries
The Indenture provides that the Company (i) will not, and will not permit
any of its Wholly Owned Restricted Subsidiaries to, transfer, convey, sell,
lease or otherwise dispose of any Equity Interests in any Wholly Owned
Restricted Subsidiary of the Company to any Person (other than the Company or
another Wholly Owned Restricted Subsidiary, unless (a) such transfer,
conveyance, sale, lease or other disposition is of all of the Equity Interests
in such Wholly Owned Restricted Subsidiary and (b) the Net Proceeds from such
transfer, conveyance, sale, lease or other disposition are applied in
accordance with the covenant described above under the caption "--Repurchase
at the Option of Holders--Asset Sales," and (ii) will not permit any Wholly
Owned Restricted Subsidiary of the Company to issue any of its Equity
Interests (other than, if necessary, shares of its Capital Stock constituting
directors' qualifying shares) to any Person other than to the Company or
another Wholly Owned Restricted Subsidiary.
Business Activities
The Indenture provides that the Company and its Restricted Subsidiaries may
not, directly or indirectly, engage in any business other than the
Telecommunications Business.
Limitations on Sale and Leaseback Transactions
The Indenture provides that the Company and its Restricted Subsidiaries may
not, directly or indirectly, enter into, assume, Guarantee or otherwise become
liable with respect to any Sale and Leaseback Transactions, provided that the
Company or any Restricted Subsidiary of the Company may enter into any such
transaction if (i) the Company or such Restricted Subsidiary would be
permitted under the covenants described above under "--Incurrence of
Indebtedness and Issuance of Disqualified Stock" and "--Liens" to incur
secured Indebtedness in an amount equal to the Attributable Debt with respect
to such transaction, (ii) the consideration received by the Company or such
Restricted Subsidiary from such transaction is at least equal to the Fair
Market Value of the property being transferred and (iii) the Net Proceeds
received by the Company or such Restricted Subsidiary from such transaction
are applied in accordance with the covenant described above under the caption
"Repurchase at the Option of Holders--Asset Sales."
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Payments for Consent
The Indenture provides that neither the Company nor any of its Affiliates
shall, directly or indirectly, pay or cause to be paid any consideration,
whether by way of interest, fee or otherwise, to any holder of any Notes for
or as an inducement to any consent, waiver or amendment of any of the terms or
provisions of the Indenture or the Notes unless such consideration is offered
to be paid or agreed to be paid to all holders of the Notes that consent,
waive or agree to amend in the time frame and on the terms and conditions set
forth in the solicitation documents relating to such consent, waiver or
agreement.
Reports
The Indenture provides that, whether or not required by the rules and
regulations of the Commission, so long as any Notes are outstanding, the
Company will furnish to the holders of Notes (i) all quarterly and annual
financial information that would be required to be contained in a filing with
the Commission on Forms 10-Q and 10-K if the Company were required to file
such Forms, including a "Management's Discussion and Analysis of Financial
Condition and Results of Operations" that describes the financial condition
and results of operations of the Company and its consolidated Subsidiaries
(showing in reasonable detail, either on the face of the financial statements
or in the footnotes thereto and in Management's Discussion and Analysis of
Financial Condition and Results of Operations, the financial condition and
results of operations of the Company and its Restricted Subsidiaries separate
from the financial condition and results of operations of the Unrestricted
Subsidiaries of the Company) and, with respect to the annual information only,
a report thereon by the Company's certified independent accountants and (ii)
all current reports that would be required to be filed with the Commission on
Form 8-K if the Company were required to file such reports, in each case
within the time periods specified in the Commission's rules and regulations.
In addition, whether or not required by the rules or regulations of the
Commission, the Company will file a copy of all such information and reports
with the Commission (unless the Commission will not accept such a filing) and
make such information and reports available to securities analysts and
prospective investors upon request. In addition, for so long as any Notes are
outstanding, the Company will furnish to the holders and to securities
analysts and prospective investors, upon their request, the information
required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act.
EVENTS OF DEFAULT AND REMEDIES
The Indenture provides that each of the following constitutes an Event of
Default: (i) default for 30 days in the payment when due of interest on, or
Liquidated Damages with respect to, the Notes; (ii) default in payment when
due of the principal of or premium, if any, on the Notes; (iii) failure by the
Company or any of its Restricted Subsidiaries to comply with the provisions
described under the captions "--Repurchase at the Option of Holders--Change of
Control," "--Repurchase at the Option of Holders--Asset Sales," "--Certain
Covenants--Restricted Payments," "--Certain Covenants--Incurrence of
Indebtedness and Issuance of Disqualified Stock" or "--Certain Covenants--
Merger, Consolidation, or Sale of Assets;" (iv) failure by the Company or any
of its Restricted Subsidiaries for 30 days after notice to comply with any of
its other agreements in the Indenture or the Notes; (v) default under any
mortgage, indenture or instrument under which there may be issued or by which
there may be secured or evidenced any Indebtedness for money borrowed by the
Company or any of its Restricted Subsidiaries (or the payment of which is
guaranteed by the Company or any of its Restricted Subsidiaries), whether such
Indebtedness or guarantee now exists or is created after the Closing Date,
which default (a) is caused by a failure to pay principal of or premium, if
any, or interest on such Indebtedness prior to the expiration of the grace
period provided in such Indebtedness on the date of such default (a "Payment
Default") or (b) results in the acceleration of such Indebtedness prior to its
express maturity and, in each case, the principal amount of any such
Indebtedness, together with the principal amount of any other such
Indebtedness under which there has been a Payment Default or the maturity of
which has been so accelerated, aggregates $1.5 million or more; (vi) failure
by the Company or any of its Restricted Subsidiaries to pay final judgments
(other than any judgment or portion thereof as to which an insurance carrier
rated at least A by Standard & Poor's Corporation or A2 by Moody's Investors
Service, Inc. has accepted liability in writing) aggregating in excess of $3.0
million, which judgments are not paid, discharged or stayed for a period of 60
days; (vii) default by the
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Company in the performance of any covenant set forth in the Pledge Agreement,
or repudiation by the Company of its obligations under the Pledge Agreement,
or the unenforceability of the Pledge Agreement against the Company or any of
its Restricted Subsidiaries for any reason; (viii) default by any Restricted
Subsidiary of the Company in the performance of any obligation under its
Subsidiary Guarantee, or repudiation by any of Restricted Subsidiary of the
Company of its obligations under its Subsidiary Guarantee, or the
unenforceability of any Subsidiary Guarantee against any Restricted Subsidiary
of the Company for any reason; (ix) the failure for any reason for the Company
to retain all material licenses necessary to conduct its business; and (x)
certain events of bankruptcy or insolvency with respect to the Company or any
of its Restricted Subsidiaries.
If any Event of Default occurs and is continuing, the Trustee or the holders
of at least 25% in principal amount of the then outstanding Notes may declare
all the Notes to be due and payable immediately. Notwithstanding the
foregoing, in the case of an Event of Default arising from certain events of
bankruptcy or insolvency with respect to the Company, any Significant
Subsidiary or any group of Restricted Subsidiaries that, taken together, would
constitute a Significant Subsidiary, all outstanding Notes will become due and
payable without further action or notice. Holders of the Notes may not enforce
the Indenture or the Notes except as provided in the Indenture. Subject to
certain limitations, holders of a majority in principal amount of the then
outstanding Notes may direct the Trustee in its exercise of any trust or
power. The Trustee may withhold from holders of the Notes notice of any
continuing Default or Event of Default (except a Default or Event of Default
relating to the payment of principal or interest) if it determines that
withholding notice is in their interest.
In the case of any Event of Default occurring by reason of any willful
action (or inaction) taken (or not taken) by or on behalf of the Company with
the intention of avoiding payment of the premium that the Company would have
had to pay if the Company then had elected to redeem the Notes pursuant to the
optional redemption provisions of the Indenture, an equivalent premium shall
also become and be immediately due and payable to the extent permitted by law
upon the acceleration of the Notes. If an Event of Default occurs prior to
June 1, 2003 by reason of any willful action (or inaction) taken (or not
taken) by or on behalf of the Company with the intention of avoiding the
prohibition on redemption of the Notes prior to such date, then the premium
specified in the Indenture shall also become immediately due and payable to
the extent permitted by law upon the acceleration of the Notes.
The holders of a majority in aggregate principal amount of the Notes then
outstanding by notice to the Trustee may on behalf of the holders of all of
the Notes waive any existing Default or Event of Default and its consequences
under the Indenture except a continuing Default or Event of Default in the
payment of interest on, or the principal of, the Notes.
The Company is required to deliver to the Trustee annually a statement
regarding compliance with the Indenture, and the Company is required upon
becoming aware of any Default or Event of Default, to deliver to the Trustee a
statement specifying such Default or Event of Default.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS
No director, officer, employee, incorporator or stockholder of the Company,
as such, shall have any liability for any obligations of the Company under the
Notes or the Indenture or for any claim based on, in respect of, or by reason
of, such obligations or their creation. Each holder of Notes by accepting a
Note waives and releases all such liability. The waiver and release are part
of the consideration for issuance of the Notes. Such waiver may not be
effective to waive liabilities under the federal securities laws and it is the
view of the Commission that such a waiver is against public policy.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Company may, at its option and at any time, elect to have all of its
obligations under the Notes and all obligations of its Restricted Subsidiaries
under the Subsidiary Guarantees discharged ("Legal Defeasance") except for (i)
the rights of holders of outstanding Notes to receive payments in respect of
the principal of and
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premium, interest and Liquidated Damages, if any, on such Notes when such
payments are due from the trust referred to below, (ii) the Company's
obligations with respect to the Notes concerning issuing temporary Notes,
registration of Notes, mutilated, destroyed, lost or stolen Notes and the
maintenance of an office or agency for payment and money for security payments
held in trust, (iii) the rights, powers, trusts, duties and immunities of the
Trustee, and the Company's obligations in connection therewith, and (iv) the
Legal Defeasance provisions of the Indenture. In addition, the Company may, at
its option and at any time, elect to have the obligations of the Company
released with respect to certain covenants that are described in the Indenture
("Covenant Defeasance") and thereafter any omission to comply with such
obligations shall not constitute a Default or Event of Default with respect to
the Notes. In the event Covenant Defeasance occurs, certain events (not
including non-payment, bankruptcy, receivership, rehabilitation and insolvency
events) described under "--Events of Default and Remedies" will no longer
constitute an Event of Default with respect to the Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance, (i) the
Company must irrevocably deposit with the Trustee, in trust, for the benefit
of the holders of the Notes, cash in U.S. dollars, non-callable Government
Securities, or a combination thereof, in such amounts as will be sufficient,
in the opinion of a nationally recognized firm of independent public
accountants, to pay the principal of and premium, interest and Liquidated
Damages, if any, on the outstanding Notes on the stated maturity or on the
applicable redemption date, as the case may be, and the Company must specify
whether the Notes are being defeased to maturity or to a particular redemption
date; (ii) in the case of Legal Defeasance, the Company shall have delivered
to the Trustee an opinion of counsel in the United States reasonably
acceptable to the Trustee confirming that (a) the Company has received from,
or there has been published by, the Internal Revenue Service a ruling or (b)
since the date of the Indenture, there has been a change in the applicable
federal income tax law, in either case to the effect that, and based thereon
such opinion of counsel shall confirm that, the holders of the outstanding
Notes will not recognize income, gain or loss for federal income tax purposes
as a result of such Legal Defeasance and will be subject to federal income tax
on the same amounts, in the same manner and at the same times as would have
been the case if such Legal Defeasance had not occurred; (iii) in the case of
Covenant Defeasance, the Company shall have delivered to the Trustee an
opinion of counsel in the United States reasonably acceptable to the Trustee
confirming that the holders of the outstanding Notes will not recognize
income, gain or loss for federal income tax purposes as a result of such
Covenant Defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been the case
if such Covenant Defeasance had not occurred; (iv) no Default or Event of
Default shall have occurred and be continuing on the date of such deposit
(other than a Default or Event of Default resulting from the borrowing of
funds to be applied to such deposit) or insofar as Events of Default from
bankruptcy or insolvency events are concerned, at any time in the period
ending on the 91st day after the date of deposit; (v) such Legal Defeasance or
Covenant Defeasance will not result in a breach or violation of, or constitute
a default under any material agreement or instrument (other than the
Indenture) to which the Company or any of its Subsidiaries is a party or by
which the Company or any of its Subsidiaries is bound; (vi) the Company must
have delivered to the Trustee an opinion of counsel to the effect that after
the 91st day following the deposit, the trust funds will not be subject to the
effect of any applicable bankruptcy, insolvency, reorganization or similar
laws affecting creditors' rights generally; (vii) the Company must deliver to
the Trustee an Officers' Certificate stating that the deposit was not made by
the Company with the intent of preferring the holders of Notes over the other
creditors of the Company with the intent of defeating, hindering, delaying or
defrauding creditors of the Company or others; and (viii) the Company must
deliver to the Trustee an Officers' Certificate and an opinion of counsel,
each stating that all conditions precedent provided for relating to the Legal
Defeasance or the Covenant Defeasance have been complied with.
TRANSFER AND EXCHANGE
A holder may transfer or exchange Notes in accordance with the Indenture.
The Registrar and the Trustee may require a holder, among other things, to
furnish appropriate endorsements and transfer documents and the Company may
require a holder to pay any taxes and fees required by law or permitted by the
Indenture. The Company is not required to transfer or exchange any Note
selected for redemption. Also, the Company is not required to transfer or
exchange any Note for a period of 15 days before a selection of Notes to be
redeemed.
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The registered holder of a Note will be treated as the owner of it for all
purposes.
AMENDMENT, SUPPLEMENT AND WAIVER
Except as provided in the next two succeeding paragraphs, the Indenture, the
Notes or the Subsidiary Guarantees may be amended or supplemented with the
consent of the holders of at least a majority in principal amount of the Notes
then outstanding (including, without limitation, consents obtained in
connection with a purchase of, or tender offer or exchange offer for, Notes),
and any existing default or compliance with any provision of the Indenture,
the Notes or the Subsidiary Guarantees may be waived with the consent of the
holders of a majority in principal amount of the then outstanding Notes
(including, without limitation, consents obtained in connection with a
purchase of, or tender offer or exchange offer for, Notes).
Without the consent of each holder affected, an amendment or waiver may not
(with respect to any Notes held by a non-consenting holder): (i) reduce the
principal amount of Notes whose holders must consent to an amendment,
supplement or waiver; (ii) reduce the principal of or change the fixed
maturity of any Note or alter the provisions with respect to the redemption of
the Notes (other than provisions relating to the covenants described above
under the caption "--Repurchase at the Option of Holders"); (iii) reduce the
rate of or change the time for payment of interest on any Note; (iv) waive a
Default or Event of Default in the payment of principal of or premium, if any,
or interest on the Notes (except a rescission of acceleration of the Notes by
the holders of at least a majority in aggregate principal amount of the Notes
and a waiver of the payment default that resulted from such acceleration); (v)
make any Note payable in money other than that stated in the Notes; (vi) make
any change in the provisions of the Indenture relating to waivers of past
Defaults or the rights of holders of Notes to receive payments of principal of
or premium, if any, interest or Liquidated Damages, if any, on the Notes;
(vii) waive a redemption payment with respect to any Note (other than a
payment required by one of the covenants described above under the caption "--
Repurchase at the Option of Holders"); (viii) amend the Pledge Agreement in a
manner that adversely affects the holders of the Notes; or (ix) make any
change in the foregoing amendment and waiver provisions.
Notwithstanding the foregoing, without the consent of any holder of Notes,
the Company and the Trustee may amend or supplement the Indenture, the Notes
or the Subsidiary Guarantees to cure any ambiguity, defect or inconsistency,
to provide for uncertificated Notes in addition to or in place of certificated
Notes, to provide for the assumption of the Company's obligations to holders
of Notes in the case of a merger or consolidation or sale of all or
substantially all of the Company's assets, to make any change that would
provide any additional rights or benefits to the holders of Notes or that does
not adversely affect the legal rights under the Indenture of any such holder,
to provide for additional Subsidiary Guarantors, or to comply with
requirements of the Commission in order to effect or maintain the
qualification of the Indenture under the Trust Indenture Act.
CONCERNING THE TRUSTEE
The Indenture contains certain limitations on the rights of the Trustee,
should it become a creditor of the Company, to obtain payment of claims in
certain cases, or to realize on certain property received in respect of any
such claim as security or otherwise. The Trustee will be permitted to engage
in other transactions; however, if it acquires any conflicting interest it
must eliminate such conflict within 90 days, apply to the Commission for
permission to continue or resign.
The holders of a majority in principal amount of the then outstanding Notes
will have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the Trustee, subject to
certain exceptions. The Indenture provides that in case an Event of Default
shall occur (which shall not be cured), the Trustee will be required, in the
exercise of its power, to use the degree of care of a prudent man in the
conduct of his own affairs. Subject to such provisions, the Trustee will be
under no obligation to exercise any of its rights or powers under the
Indenture at the request of any holder of Notes, unless such holder shall have
offered to the Trustee security and indemnity satisfactory to it against any
loss, liability or expense.
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BOOK-ENTRY, DELIVERY AND FORM
The Exchange Notes will be represented in registered, global form by one or
more Global Notes (the "Global Notes") . The Global Notes will be deposited
upon issuance with the Trustee as custodian for The Depository Trust Company
("DTC"), in New York, New York, and registered in the name of DTC or its
nominee, in each case for credit to an account of a direct or indirect
participant in DTC as described below.
Except as set forth below, the Global Notes may be transferred, in whole and
not in part, only to another nominee of DTC or to a successor of DTC or its
nominee. Beneficial interests in the Global Notes may not be exchanged for
Notes in certificated form except in the limited circumstances described
below. See "--Exchange of Book-Entry Securities for Certificated Securities."
Except in the limited circumstances described below, owners of beneficial
interests in the Global Notes will not be entitled to receive physical
delivery of Certificated Securities (as defined below). Transfers of
beneficial interests in the Global Notes will be subject to the applicable
rules and procedures of DTC and its direct or indirect participants, which may
change from time to time.
Initially, the Trustee will act as Paying Agent and Registrar with respect
to the Notes. The Notes may be presented for registration of transfer and
exchange at the offices of the Registrar.
DEPOSITORY PROCEDURES
The following description of the operations and procedures of DTC are
provided solely as a matter of convenience. These operations and procedures
are solely within the control of DTC and are subject to changes by it from
time to time. The Company takes no responsibility for these operations and
procedures and urges investors to contact DTC or its participants directly to
discuss these matters.
DTC has advised the Company that DTC is a limited-purpose trust company
created to hold securities for its participating organizations (collectively,
the "Participants") and to facilitate the clearance and settlement of
transactions in those securities between Participants through electronic book-
entry changes in accounts of its Participants. The Participants include
securities brokers and dealers (including the Initial Purchasers), banks,
trust companies, clearing corporations and certain other organizations. Access
to DTC's system is also available to other entities such as banks, brokers,
dealers and trust companies that clear through or maintain a custodial
relationship with a Participant, either directly or indirectly (collectively,
the "Indirect Participants"). Persons who are not Participants may
beneficially own securities held by or on behalf of DTC only through the
Participants or the Indirect Participants. The ownership interests in, and
transfers of ownership interests in, each security held by or on behalf of DTC
are recorded on the records of the Participants and Indirect Participants.
DTC has also advised the Company that, pursuant to procedures established by
it, (i) upon deposit of the Global Notes, DTC will credit the accounts of
Participants designated by the Initial Purchasers with portions of the
principal amount of the Global Notes and (ii) ownership of such interests in
the Global Notes will be shown on, and the transfer of ownership thereof will
be effected only through, records maintained by DTC (with respect to the
Participants) or by the Participants and the Indirect Participants (with
respect to other owners of beneficial interest in the Global Notes).
Investors in the Global Notes may hold their interests therein directly
through DTC, if they are Participants in such system, or indirectly through
organizations which are Participants in such system. All interests in a Global
Note may be subject to the procedures and requirements of DTC. The laws of
some states require that certain persons take physical delivery in definitive
form of securities that they own. Consequently, the ability to transfer
beneficial interests in a Global Note to such persons will be limited to that
extent. Because DTC can act only on behalf of Participants, which in turn act
on behalf of Indirect Participants and certain banks, the ability of a person
having beneficial interests in a Global Note to pledge such interests to
persons or entities that do not
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participate in the DTC system, or otherwise take actions in respect of such
interests, may be affected by the lack of a physical certificate evidencing
such interests.
EXCEPT AS DESCRIBED BELOW, OWNERS OF INTEREST IN THE GLOBAL NOTES WILL NOT
HAVE NOTES REGISTERED IN THEIR NAMES, WILL NOT RECEIVE PHYSICAL DELIVERY OF
THE NOTES IN CERTIFICATED FORM AND WILL NOT BE CONSIDERED THE REGISTERED
OWNERS OR "HOLDERS" THEREOF UNDER THE INDENTURE FOR ANY PURPOSE.
Payments in respect of the principal of, and premium, if any, Liquidated
Damages, if any, and interest on a Global Note registered in the name of DTC
or its nominee will be payable to DTC in its capacity as the registered holder
under the Indenture. Under the terms of the Indenture, the Company and the
Trustee will treat the persons in whose names the Global Notes, are registered
as the owners thereof for the purpose of receiving such payments and for any
and all other purposes whatsoever. Consequently, neither the Company, the
Trustee, nor any agent of the Company, or the Trustee has or will have any
responsibility or liability for (i) any aspect of DTC's records or any
Participant's or Indirect Participant's records relating to or payments made
on account of beneficial ownership interest in the Global Notes, or for
maintaining, supervising or reviewing any of DTC's records or any
Participant's or Indirect Participant's records relating to the beneficial
ownership interests in the Global Notes or (ii) any other matter relating to
the actions and practices of DTC or any of its Participants or Indirect
Participants. DTC has advised the Company that its current practice, upon
receipt of any payment in respect of securities, is to credit the accounts of
the relevant Participants with the payment on the payment date, in amounts
proportionate to their respective holdings in the principal amount of
beneficial interest in the relevant security as shown on the records of DTC
unless DTC has reason to believe it will not receive payment on such payment
date. Payments by the Participants and the Indirect Participants to the
beneficial owners of Notes will be governed by standing instructions and
customary practices and will be the responsibility of the Participants or the
Indirect Participants and will not be the responsibility of DTC, the Trustee,
or the Company. Neither the Company nor the Trustee will be liable for any
delay by DTC or any of its Participants in identifying the beneficial owners
of the Notes, and the Company and the Trustee, as the case may be, may
conclusively rely on and will be protected in relying on instructions from DTC
or its nominee for all purposes.
Interests in the Global Notes are expected to be eligible to trade in DTC's
Same-Day Funds Settlement System and secondary market trading activity in such
interests will, therefore, settle in immediately available funds, subject in
all cases to the rules and procedures of DTC and its Participants. See "--Same
Day Settlement and Payment."
Transfers between Participants in DTC will be effected in accordance with
DTC's procedures, and will be settled in same day funds.
DTC has advised the Company that it will take any action permitted to be
taken by a holder of Securities only at the direction of one or more
Participants to whose account DTC has credited the interests in the Global
Notes and only in respect of such portion of the amount of the Notes as to
which such Participant or Participants has or have given such direction.
However, if there is an Event of Default under the Notes, DTC reserves the
right to exchange the Global Notes for legended Notes in certificated form,
and to distribute such Notes to its Participants.
Exchange of Book-Entry Notes for Certificated Notes
A Global Note is exchangeable for definitive Notes in registered
certificated form ("Certificated Notes") if (i) DTC (x) notifies the Company
that it is unwilling or unable to continue as depositary for the Global Notes
and the Company thereupon fails to appoint a successor depositary or (y) has
ceased to be a clearing agency registered under the Exchange Act, (ii) the
Company, at its option, notifies the Trustee in writing that it elects to
cause the issuance of the Certificated Notes or (iii) there shall have
occurred and be continuing a Default or Event of Default with respect to the
Securities. In addition, beneficial interests in Global Notes may be exchanged
for Certificated Notes upon request but only upon prior written notice given
to the Trustee or the Warrant Agent, as the case may be, by or on behalf of
DTC in accordance with the Indenture Notes. In all cases, Certificated
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Notes delivered in exchange for any Global Notes or beneficial interests
therein will be registered in the names, and issued in any approved
denominations, requested by or on behalf of the depositary (in accordance with
its customary procedures).
Exchange of Certificated Notes for Book-Entry Notes
Notes issued in certificated form may not be exchanged for beneficial
interests in any Global Notes unless the transferor first delivers to the
Trustee, as the case may be, a written certificate (in the form provided in
the Indenture to the effect that such transfer will comply with any transfer
restrictions applicable to such Notes.
Same Day Settlement and Payment
The Indenture requires that payments in respect of the Notes represented by
the Global Notes (including principal, premium, if any, interest and
Liquidated Damages, if any) be made by wire transfer of immediately available
funds to the accounts specified by the Global Note holder. With respect to
Notes in certificated form, the Company will make all payments of principal,
premium, if any, interest and Liquidated Damages, if any, by wire transfer of
immediately available funds to the accounts specified by the holders thereof
or, if no such account is specified, by mailing a check to each such holder's
registered address. The securities represented by the Global Notes are
expected to be eligible to trade in the PORTAL market and to trade in the
Depositary's Same-Day Funds Settlement System, and any permitted secondary
market trading activity in such Securities will, therefore, be required by the
Depositary to be settled in immediately available funds. The Company expects
that secondary trading in any certificated Notes will also be settled in
immediately available funds.
CERTAIN DEFINITIONS
Set forth below are certain defined terms used in the Indenture. Reference
is made to the Indenture for a full disclosure of all such terms, as well as
any other capitalized terms used herein for which no definition is provided.
"Acquired Debt" means, with respect to any specified Person, (i)
Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Restricted Subsidiary of such specified
Person, including, without limitation, Indebtedness incurred in connection
with, or in contemplation of, such other Person merging with or into or
becoming a Restricted Subsidiary of such specified Person, and (ii)
Indebtedness secured by a Lien encumbering any asset acquired by such
specified Person, in each case to the extent not repaid within five days after
the date of the acquisition.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled
by" and "under common control with"), as used with respect to any Person,
shall mean the possession, directly or indirectly, of the power to direct or
cause the direction of the management or policies of such Person, whether
through the ownership of voting securities, by agreement or otherwise;
provided that beneficial ownership of 10% or more of the Voting Equity
Interests of a Person shall be deemed to be control.
"Asset Sale" means (i) the sale, lease, conveyance or other disposition of
any assets or rights (including, without limitation, by way of a sale and
leaseback) other than sales of services in the ordinary course of business
(provided that the sale, lease, conveyance or other disposition of all or
substantially all of the assets of the Company and its Restricted Subsidiaries
taken as a whole will be governed by the provisions of the Indenture described
above under the caption "--Repurchase at the Option of Holders--Change of
Control" and/or the provisions described above under the caption "--Certain
Covenants--Merger, Consolidation or Sale of Assets" and not by the provisions
of the Asset Sale covenant), and (ii) the issue or sale by the Company or any
of its
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Restricted Subsidiaries of Equity Interests of any of the Company's Restricted
Subsidiaries, in the case of either clause (i) or (ii), whether in a single
transaction or a series of related transactions (a) that have a fair market
value in excess of $1.0 million or (b) for net proceeds in excess of $1.0
million. Notwithstanding the foregoing, the following shall not be deemed to
be Asset Sales: (i) a transfer of assets by the Company to a Restricted
Subsidiary or by a Restricted Subsidiary to the Company or to another
Restricted Subsidiary; (ii) an issuance of Equity Interests by a Restricted
Subsidiary to the Company or to a Wholly Owned Restricted Subsidiary; (iii) a
Restricted Payment that is permitted by the covenant described above under the
caption "--Certain Covenants--Restricted Payments;" (iv) disposals or
replacements of obsolete, uneconomical, negligible, worn-out or surplus
property in the ordinary course of business; (v) the creation of a Lien not
prohibited by the covenant described above under the caption "--Certain
Covenants-- Liens" and (vi) the conversion of Cash Equivalents into cash.
"Attributable Debt" means, with respect to any Sale and Leaseback
Transaction, the present value of the time of determination (discounted at a
rate consistent with accounting guidelines, as determined in good faith by the
Company) of the payments during the remaining term of the lease (including any
period for which such lease has been extended or may, at the option of the
lessor, be extended) or until the earliest date on which the lessee may
terminate such lease without penalty or upon payment of a penalty (in which
case the rental payments shall include such penalty), after excluding all
amounts required to be paid on account of maintenance and repairs, insurance,
taxes, assessments, water, utilities and similar charges.
"Beneficial Owner" means a beneficial owner as defined in Rules 13d-3 and
13d-5 under the Exchange Act (or any successor rules), including the provision
of such Rules that a Person shall be deemed to have beneficial ownership of
all securities that such Person has a right to acquire within 60 days;
provided that a Person will not be deemed a beneficial owner of, or to own
beneficially, any securities if such beneficial ownership (1) arises solely as
a result of a revocable proxy delivered in response to a proxy or consent
solicitation made pursuant to, and in accordance with, the Exchange Act and
(2) is not also then reportable on Schedule 13D or Schedule 13G (or any
successor schedule) under the Exchange Act.
"Capital Lease Obligation" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that
would at such time be required to be capitalized on a balance sheet in
accordance with GAAP.
"Capital Stock" means (i) in the case of a corporation, corporate stock,
(ii) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock, (iii) in the case of a partnership or limited liability
company, partnership or membership interests (whether general or limited) and
(iv) any other interest or participation that confers on a Person the right to
receive a share of the profits and losses of, or distributions of assets of,
the issuing Person.
"Cash Equivalents" means (i) United States dollars, (ii) securities issued
or directly and fully guaranteed or insured by the United States government or
any agency or instrumentality thereof (provided that the full faith and credit
of the United States is pledged in support thereof) having maturities of not
more than six months from the date of acquisition, (iii) certificates of
deposit and eurodollar time deposits with maturities of six months or less
from the date of acquisition, bankers' acceptances with maturities not
exceeding six months and overnight bank deposits, in each case with any
domestic commercial bank having capital and surplus in excess of $500 million
and a Thompson Bank Watch Rating of "B" or better, (iv) repurchase obligations
with a term of not more than seven days for underlying securities of the types
described in clauses (ii) and (iii) above entered into with any financial
institution meeting the qualifications specified in clause (iii) above, (v)
commercial paper having the highest rating obtainable from Moody's Investors
Service, Inc. or Standard & Poor's Corporation and in each case maturing
within six months after the date of acquisition and (vi) money market funds at
least 95% of the assets of which constitute Cash Equivalents of the kinds
described in clauses (i)-(v) of this definition.
"Change of Control" means the occurrence of any of the following: (i) the
sale, lease, transfer, conveyance or other disposition, in one or a series of
related transactions, of all or substantially all of the assets of the Company
and its Restricted Subsidiaries, taken as a whole, to any Person or group (as
such term is used in
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Section 13(d)(3) and 14(d)(2) of the Exchange Act) other than a Permitted
Holder, (ii) the adoption of a plan relating to the liquidation or dissolution
of the Company, (iii) any Person or group (as defined above) other than the
Permitted Holders is or becomes the Beneficial Owner, directly or indirectly,
of more than 50% of the total Voting Stock of the Company (measured by voting
power rather than number of shares), including by way of merger, consolidation
or otherwise, (iv) the first day on which a majority of the members of the
Board of Directors of the Company are not Continuing Directors, (v) the first
day on which SBC Communications, Inc. fails to hold, whether directly or
indirectly, 9.9% or more of the total Voting Stock (measured by voting power
rather than the number of shares) of the Company or (vi) the first day on
which the Company's existing long distance telephony contract (or any
replacement thereof) terminates and is not replaced by a contract having no
less favorable economic terms than the Company's long distance telephony
contract in existence as of the Closing Date, and a term (assuming exercise of
any renewal options) ending after the final maturity date of the Notes.
"Closing Date" shall mean the first date on which Notes are issued by the
Company.
"Consolidated Cash Flow" means, with respect to any Person for any period,
the Consolidated Net Income of such Person for such period plus (i) an amount
equal to any extraordinary loss plus any net loss realized in connection with
an Asset Sale (to the extent such losses were deducted in computing
Consolidated Net Income) plus (ii) provision for taxes based on income or
profits of such Person and its Restricted Subsidiaries for such period, to the
extent that such provision for taxes was included in computing such
Consolidated Net Income, plus (iii) consolidated interest expense of such
Person and its Restricted Subsidiaries for such period, whether paid or
accrued and whether or not capitalized (including, without limitation,
amortization of debt issuance costs and original issue discount, non-cash
interest payments, the interest component of any deferred payment obligations,
the interest component of all payments associated with Capital Lease
Obligations, commissions, discounts and other fees and charges incurred in
respect of letter of credit or bankers' acceptance financings, and net
payments (if any) pursuant to Hedging Obligations), to the extent that any
such expense was deducted in computing such Consolidated Net Income, plus (iv)
depreciation, amortization (including amortization of goodwill and other
intangibles but excluding amortization of prepaid cash expenses that were paid
in a prior period) and other non-cash expenses (excluding any such non-cash
expense to the extent that it represents an accrual of or reserve for cash
expenses in any future period or amortization of a prepaid cash expense that
was paid in a prior period) of such Person and its Restricted Subsidiaries for
such period to the extent that such depreciation, amortization and other non-
cash expenses were deducted in computing such Consolidated Net Income, minus
(v) non-cash items increasing such Consolidated Net Income for such period, in
each case, on a consolidated basis and determined in accordance with GAAP.
Notwithstanding the foregoing, the provision for taxes on the income or
profits of, and the depreciation and amortization and other non-cash expenses
of, a Restricted Subsidiary of the Company shall be added to Consolidated Net
Income to compute Consolidated Cash Flow of the Company only to the extent
that a corresponding amount would be permitted at the date of determination to
be dividended to the Company by such Restricted Subsidiary without prior
governmental approval (that has not been obtained), and without direct or
indirect restriction pursuant to the terms of its charter and all agreements,
instruments, judgments, decrees, orders, statutes, rules and governmental
regulations applicable to that Subsidiary or its stockholders.
"Consolidated Indebtedness" means, with respect to any Person as of any date
of determination, the sum, without duplication, of (i) the total amount of
Indebtedness of such Person and its Restricted Subsidiaries, plus (ii) the
total amount of Indebtedness of any other Person, to the extent that such
Indebtedness has been Guaranteed by the referent Person or one or more of its
Restricted Subsidiaries, plus (iii) the aggregate liquidation value of all
preferred stock of Restricted Subsidiaries of such Person, in each case,
determined on a consolidated basis in accordance with GAAP.
"Consolidated Interest Expense" means, for any Person, for any period, the
aggregate of the following for such Person and its Restricted Subsidiaries for
such period determined on a consolidated basis in accordance with GAAP: (a)
the amount of interest in respect of Indebtedness (including amortization of
original issue discount, amortization of debt issuance costs, and non-cash
interest payments on any Indebtedness and the
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interest portion of any deferred payment obligation), (b) the interest
component of rentals in respect of any Capital Lease Obligation paid, in each
case whether accrued or scheduled to be paid or accrued by such Person during
such period to the extent such amounts were deducted in computing Consolidated
Net Income, determined on a consolidated basis in accordance with GAAP and (c)
the product of (i) all dividend payments, whether or not in cash, on any
series of preferred stock or Disqualified Stock of such Person or any of its
Subsidiaries, other than dividend payments on Equity Interests payable solely
in Equity Interests of the Company (other than Disqualified Stock) or to the
Company or a Subsidiary of the Company, times (ii) a fraction, the numerator
of which is one and the denominator of which is one minus the then current
combined federal, state and local statutory tax rate of such Person, expressed
as a decimal, in each case, on a consolidated basis and in accordance with
GAAP. For purposes of this definition, interest on a Capital Lease Obligation
shall be deemed to accrue at an interest rate reasonably determined by such
Person to be the rate of interest implicit in such Capital Lease Obligation in
accordance with GAAP consistently applied.
"Consolidated Net Income" means, with respect to any Person for any period,
the aggregate of the Net Income of such Person and its Restricted Subsidiaries
for such period, on a consolidated basis, determined in accordance with GAAP;
provided that (i) the Net Income (but not loss) of any Person that is not a
Restricted Subsidiary or that is accounted for by the equity method of
accounting shall be included only to the extent of the amount of dividends or
distributions paid in cash to the referent Person or a Wholly Owned Restricted
Subsidiary thereof, (ii) the Net Income of any Restricted Subsidiary shall be
excluded to the extent that the declaration or payment of dividends or similar
distributions by such Restricted Subsidiary of that Net Income is not at the
date of determination permitted without any prior governmental approval (that
has not been obtained) or, directly or indirectly, by operation of the terms
of its charter or any agreement, instrument, judgment, decree, order, statute,
rule or governmental regulation applicable to such Restricted Subsidiary or
its equity holders, (iii) the Net Income of any Person acquired in a pooling
of interests transaction for any period prior to the date of such acquisition
shall be excluded and (iv) the cumulative effect of a change in accounting
principles shall be excluded.
"Consolidated Net Worth" means, with respect to any Person as of any date,
the sum of (i) the consolidated equity of the common stockholders of such
Person and its consolidated Restricted Subsidiaries as of such date plus (ii)
the respective amounts reported on such Person's balance sheet as of such date
with respect to any series of preferred stock (other than Disqualified Stock)
that by its terms is not entitled to the payment of dividends unless such
dividends may be declared and paid only out of net earnings in respect of the
year of such declaration and payment, but only to the extent of any cash
received by such Person upon issuance of such preferred stock, less (a) all
write-ups (other than write-ups resulting from foreign currency translations
and write-ups of tangible assets of a going concern business made within 12
months after the acquisition of such business) subsequent to the Closing Date
in the book value of any asset owned by such Person or a consolidated
Restricted Subsidiary of such Person, (b) all investments as of such date in
unconsolidated Subsidiaries and in Persons that are not Restricted
Subsidiaries and (c) all unamortized debt discount and expense and unamortized
deferred charges as of such date, all of the foregoing determined in
accordance with GAAP.
"Continuing Director" means as of any date of determination, any member of
the Board of Directors of the Company who (i) was a member of such Board of
Directors on the date of the Indenture or (ii) was nominated for election or
elected to such Board of Directors with the approval of a majority of the
Continuing Directors who were members of such Board at the time of such
nomination or election.
"Cumulative Consolidated Cash Flow" means the cumulative Consolidated Cash
Flow of the Company from and after the first day of the first fiscal quarter
beginning after the date of the Indenture to the end of the fiscal quarter
immediately preceding the date of a proposed Restricted Payment, or, if such
cumulative Consolidated Cash Flow for such period is negative, minus the
amount by which such cumulative Consolidated Cash Flow is less than zero.
"Cumulative Interest Expense" means the aggregate amount of Consolidated
Interest Expense of the Company paid or accrued by the Company from and after
the first day of the first fiscal quarter beginning after
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the Closing Date to the end of the fiscal quarter immediately preceding a
proposed Restricted Payment, determined on a consolidated basis in accordance
with GAAP.
"Debt to Cash Flow Ratio" means, as of any date of determination (the
"Calculation Date"), the ratio of (a) the Consolidated Indebtedness of the
Company as of such date to (b) the Consolidated Cash Flow of the Company for
the four most recent full fiscal quarters ending immediately prior to such
date for which internal financial statements are available, determined on a
pro forma basis after giving effect to all acquisitions or dispositions of
assets made by the Company and its Restricted Subsidiaries from the beginning
of such four-quarter period through and including such date of determination
(including any related financing transactions) as if such acquisitions and
dispositions had occurred at the beginning of such four-quarter period. In
addition, for purposes of making the computation referred to above, (i)
acquisitions that have been made by the Company or any of its Restricted
Subsidiaries, including through mergers or consolidations and including any
related financing transactions, during the four-quarter reference period or
subsequent to such reference period and on or prior to the Calculation Date
shall be deemed to have occurred on the first day of the four-quarter
reference period and Consolidated Cash Flow for such reference period shall be
calculated without giving effect to clause (iii) of the proviso set forth in
the definition of Consolidated Net Income, and (ii) the Consolidated Cash Flow
attributable to discontinued operations, as determined in accordance with
GAAP, and operations or businesses disposed of prior to the Calculation Date,
shall be excluded.
"Default" means any event that is or with the passage of time or the giving
of notice or both would be an Event of Default.
"Disqualified Stock" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible, or for which it is
exchangeable, at the option of the holder thereof), or upon the happening of
any event, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or redeemable at the option of the holder thereof, in
whole or in part, on or prior to the date that is 91 days after the date on
which the Notes mature; provided, however, that any Capital Stock that would
constitute Disqualified Stock solely because the holders thereof have the
right to require the Company to repurchase such Capital Stock upon the
occurrence of a Change of Control or an Asset Sale shall not constitute
Disqualified Stock if the terms of such Capital Stock provide that the Company
may not repurchase or redeem any such Capital Stock pursuant to such
provisions unless such repurchase or redemption complies with the covenant
described above under the caption "--Certain Covenants--Restricted Payments."
"Equity Interests" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Escrow Account" means an account established with the Collateral Agent
pursuant to the terms of the Pledge Agreement for the deposit of the Pledged
Securities purchased by the Company with a portion of the proceeds from the
sale of the Notes.
"Exchange Act" means the Securities Exchange Act of 1934, as amended (or any
successor act), and the rules and regulations thereunder.
"Existing Indebtedness" Indebtedness of the Company and its Restricted
Subsidiaries in existence on the Closing Date, until such amounts are repaid.
"Fair Market Value" means with respect to any asset or property, the sale
value that would be obtained in an arm's length transaction between an
informed and willing seller under no compulsion to sell and an informed and
willing buyer under no compulsion to buy.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect on the Closing Date.
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"Government Securities" means direct obligations of, or obligations
guaranteed by, the United States of America for the payment of which guarantee
or obligations the full faith and credit of the United States is pledged.
"Guarantee" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, by way of a pledge of
assets or through letters of credit or reimbursement agreements in respect
thereof), of all or any part of any Indebtedness.
"Hedging Obligations" means, with respect to any Person, the obligations of
such Person under (i) interest rate swap agreements, interest rate cap
agreements and interest rate collar agreements and (ii) other agreements or
arrangements designed to protect such Person against fluctuations in interest
rates.
"Indebtedness" means, with respect to any Person, any indebtedness of such
Person, whether or not contingent, in respect of borrowed money or evidenced
by bonds, notes, debentures or similar instruments or letters of credit (or
reimbursement agreements in respect thereof) or banker's acceptances or
representing Capital Lease Obligations or the balance deferred and unpaid of
the purchase price of any property or representing any Hedging Obligations,
except any such balance that constitutes an accrued expense or trade payable,
if and to the extent any of the foregoing (other than letters of credit and
Hedging Obligations) would appear as a liability upon a balance sheet of such
Person prepared in accordance with GAAP, as well as all Indebtedness of others
secured by a Lien on any asset of such Person (whether or not such
Indebtedness is assumed by such Person) and, to the extent not otherwise
included, the Guarantee by such Person of any indebtedness of any other
Person. The amount of any Indebtedness outstanding as of any date shall be (i)
the accreted value thereof, in the case of any Indebtedness issued with
original issue discount and (ii) the principal amount thereof, together with
any interest thereon that is more than 30 days past due, in the case of any
other Indebtedness.
"Investments" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including guarantees of Indebtedness or other obligations),
advances or capital contributions (excluding commission, travel and similar
advances to officers and employees made in the ordinary course of business),
purchases or other acquisitions for consideration of Indebtedness, Equity
Interests or other securities, together with all items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP.
If the Company or any Restricted Subsidiary of the Company sells or otherwise
disposes of any Equity Interests of any direct or indirect Restricted
Subsidiary of the Company such that, after giving effect to any such sale or
disposition, such Person is no longer a Subsidiary of the Company, the Company
shall be deemed to have made an Investment on the date of any such sale or
disposition equal to the fair market value of the Equity Interests of such
Subsidiary not sold or disposed of in an amount determined as provided in the
final paragraph of the covenant described above under the caption "--Certain
Covenants--Restricted Payments."
"Lien" means, with respect to any asset, any mortgage, lien, pledge, charge,
security interest or encumbrance of any kind in respect of such asset, whether
or not filed, recorded or otherwise perfected under applicable law (including
any conditional sale or other title retention agreement, any lease in the
nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement
under the Uniform Commercial Code (or equivalent statutes) of any
jurisdiction).
"Net Income" means, with respect to any Person, the net income (loss) of
such Person, determined in accordance with GAAP and before any reduction in
respect of preferred stock dividends, excluding, however, (i) any gain or
loss, together with any related provision for taxes on such gain or loss,
realized in connection with (a) any Asset Sale (including, without limitation,
dispositions pursuant to sale and leaseback transactions) or (b) the
disposition of any securities by such Person or any of its Restricted
Subsidiaries or the extinguishment of any Indebtedness of such Person or any
of its Restricted Subsidiaries and (ii) any extraordinary gain or loss,
together with any related provision for taxes on such extraordinary gain or
loss.
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"Net Proceeds" means the aggregate cash proceeds received by the Company or
any of its Restricted Subsidiaries in respect of any Asset Sale (including,
without limitation, any cash received upon the sale or other disposition of
any non-cash consideration received in any Asset Sale), net of the direct
costs relating to such Asset Sale (including, without limitation, legal,
accounting and investment banking fees, and sales commissions) and any
relocation expenses incurred as a result thereof, taxes paid or payable as a
result thereof (after taking into account any available tax credits or
deductions and any tax sharing arrangements), amounts required to be applied
to the repayment of Indebtedness secured by a Lien on the asset or assets that
were the subject of such Asset Sale, and any reserve for adjustment in respect
of the sale price of such asset or assets established in accordance with GAAP;
provided, however, that the reversal of any such reserve shall be deemed a
receipt of Net Proceeds by the Company in the amount and on the date of such
reversal.
"Non-Recourse Debt" means Indebtedness (i) as to which neither the Company
nor any of its Restricted Subsidiaries (a) provides credit support of any kind
(including any undertaking, agreement or instrument that would constitute
Indebtedness), (b) is directly or indirectly liable (as a guarantor or
otherwise) or (c) constitutes the lender; (ii) no default with respect to
which (including any rights that the holders thereof may have to take
enforcement action against an Unrestricted Subsidiary) would permit (upon
notice, lapse of time or both) any holder of any other Indebtedness of the
Company or any of its Restricted Subsidiaries to declare a default on such
other Indebtedness or cause the payment thereof to be accelerated or payable
prior to its stated maturity; and (iii) as to which the lenders have been
notified in writing that they will not have any recourse to the stock or
assets of the Company or any of its Restricted Subsidiaries.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Officers' Certificate" means a certificate signed by (i) the Chairman of
the Board, a Vice Chairman of the Board, the President, the Chief Executive
Officer or a Vice President, and (ii) the Chief Financial Officer, the Chief
Accounting Officer, the Treasurer, an Assistant Treasurer, the Secretary or an
Assistant Secretary of the Company and delivered to the Trustee, which shall
comply with the Indenture.
"Permitted Holder" means (i) SBC Communications, Inc., (ii) James Otterbeck,
or (iii) Ventures in Communications II, LLC; whether acting in their own name
or as a majority of persons having the power to exercise the voting rights
attached to, or having investment power over, equity interests held by others,
any trust principally for the benefit of one or more members of such persons
and any charitable foundation the majority of whose members, trustees or
directors, as the case may be, are any of such persons.
"Permitted Investments" means (i) any Investment in the Company or in any
Restricted Subsidiary of the Company; (ii) any Investment in Cash Equivalents;
(iii) any Investment by the Company or any Restricted Subsidiary of the
Company in a Person if, as a result of such Investment, (a) such Person
becomes a Restricted Subsidiary of the Company or (b) such Person is merged,
consolidated or amalgamated with or into, or transfers or conveys
substantially all of its assets to, or is liquidated into, the Company or a
Restricted Subsidiary of the Company, (iv) any Investment made as a result of
the receipt of non-cash consideration from an Asset Sale that was made
pursuant to and in compliance with the covenant described above under the
caption "--Repurchase at the Option of Holders--Asset Sales;" (v) any
acquisition of assets to the extent acquired in exchange for the issuance of
Equity Interests (other than Disqualified Stock) of the Company and (vi) any
Investment by the Company in one or more Permitted Telecommunications Joint
Ventures, provided, however, that the aggregate fair market value (measured on
the date such Investment was made and without giving effect to any subsequent
changes in value) of outstanding Investments made pursuant to this clause (vi)
shall not at any time exceed $10.0 million.
"Permitted Liens" means (i) Liens in favor of the Company, Restricted
Subsidiaries or holders of the Notes; (ii) Liens on property of a Person
existing at the time such Person is merged into or consolidated with the
Company or any Restricted Subsidiary of the Company; provided that such Liens
were in existence prior to the contemplation of such merger or consolidation
and do not extend to any assets other than those of the Person
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merged into or consolidated with the Company; (iii) Liens on property existing
at the time of acquisition thereof by the Company or any Restricted Subsidiary
of the Company, provided that such Liens were in existence prior to the
contemplation of such acquisition; (iv) Liens to secure the performance of
statutory obligations, surety or appeal bonds, performance bonds or other
obligations of a like nature incurred in the ordinary course of business; (v)
Liens existing on the Closing Date; (vi) Liens for taxes, assessments or
governmental charges or claims that are not yet delinquent or that are being
contested in good faith by appropriate proceedings promptly instituted and
diligently concluded, provided that any reserve or other appropriate provision
as shall be required in conformity with GAAP shall have been made therefor;
(vii) Liens on accounts receivable owned by the Company and securing
Indebtedness permitted by the Indenture; (viii) Liens securing Vendor Debt
permitted by the Indenture on the acquired property together with proceeds,
product, accessions, substitutions and replacements thereof; (ix) Liens
incurred in the ordinary course of business of the Company or any Restricted
Subsidiary of the Company with respect to obligations that do not exceed $2.0
million at any one time outstanding and that (a) are not incurred in
connection with the borrowing of money or the obtaining of advances or credit
(other than trade credit in the ordinary course of business) and (b) do not in
the aggregate materially detract from the value of the property or materially
impair the use thereof in the operation of business by the Company or such
Restricted Subsidiary; and (x) Liens to secure any refinancings, renewals,
extensions, modifications or replacements (collectively, "refinancings") or
successive refinancings, in whole or in part, of any Indebtedness secured by
Liens referred to in clauses (ii), (iii) and (v) above, so long as such Lien
does not extend to any other property (other than improvements thereto) and is
otherwise no more burdensome than the Lien it replaces.
"Permitted Refinancing Indebtedness" means any Indebtedness of the Company
or any of its Restricted Subsidiaries issued in exchange for, or the net
proceeds of which are used to extend, refinance, renew, replace, defease or
refund other Indebtedness of the Company or such Restricted Subsidiary (other
than intercompany Indebtedness); provided that: (i) the principal amount (or
accreted value, if applicable) of such Permitted Refinancing Indebtedness does
not exceed the principal amount of (or accreted value, if applicable), plus
accrued interest on, the Indebtedness so extended, refinanced, renewed,
replaced, defeased or refunded (plus the amount of reasonable expenses
incurred in connection therewith); (ii) such Permitted Refinancing
Indebtedness has a final maturity date later than the final maturity date of,
and has a Weighted Average Life to Maturity equal to or greater than the
Weighted Average Life to Maturity of, the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded; (iii) if the Indebtedness
being extended, refinanced, renewed, replaced, defeased or refunded is
subordinated in right of payment to the Notes, such Permitted Refinancing
Indebtedness has a final maturity date later than the final maturity date of,
and is subordinated in right of payment to, the Notes on terms at least as
favorable to the holders of Notes as those contained in the documentation
governing the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded; and (iv) such Indebtedness is incurred either by the
Company or by the Restricted Subsidiary who is the obligor on the Indebtedness
being extended, refinanced, renewed, replaced, defeased or refunded.
"Permitted Telecommunications Joint Venture" means a corporation,
partnership, limited liability company or other entity engaged in one or more
Telecommunications Businesses in which the Company owns, directly or
indirectly, an equity interest.
"Person" means any individual, corporation, limited liability company,
partnership, joint venture, association, joint-stock company, trust, business
trust, unincorporated organization or government or any agency or political
subdivision thereof.
"Pledge Agreement" means the Pledge Agreement dated as of the date of the
Indenture between the Company and the Trustee, as amended from time to time.
"Pledged Securities" means the securities purchased by the Company with a
portion of the proceeds from the sale of the Notes, which shall consist of
Government Securities, to be pledged to the Trustee for the benefit of holders
of the Notes and deposited in the Escrow Account.
"Restricted Investment" means an Investment other than a Permitted
Investment.
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"Restricted Subsidiary" of a Person means any Subsidiary of the referent
Person that is not an Unrestricted Subsidiary.
"Sale and Leaseback Transaction" means, with respect to any Person, any
direct or indirect arrangement pursuant to which any property (other than
Capital Stock) is sold by such Person or a Subsidiary, or, in the case of the
Company, a Restricted Subsidiary of such Person and is thereafter leased back
from the purchaser or transferee thereof by such Person or one of its
Subsidiaries or, in the case of the Company, one of its Restricted
Subsidiaries.
"Significant Subsidiary" means any Restricted Subsidiary that would be a
"significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X,
promulgated pursuant to the Act, as such Regulation is in effect on the
Closing Date.
"Stated Maturity" means, with respect to any installment of interest or
principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness, and shall not include any contingent obligations
to repay, redeem or repurchase any such interest or principal prior to the
date originally scheduled for the payment thereof.
"Subsidiary" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total
voting power of shares of Capital Stock entitled (without regard to the
occurrence of any contingency) to vote in the election of directors, managers
or trustees thereof is at the time owned or controlled, directly or
indirectly, by such Person or one or more of the other Subsidiaries of that
Person (or a combination thereof) and (ii) any partnership (a) the sole
general partner or the managing general partner of which is such Person or a
Subsidiary of such Person or (b) the only general partners of which are such
Person or of one or more Subsidiaries of such Person (or any combination
thereof).
"Subsidiary Guarantors" means (i) each existing Subsidiary of the Company
and (ii) any other Subsidiary of the Company that executes a Subsidiary
Guarantee in accordance with the provisions of the Indenture, and their
respective successors and assigns.
"Telecommunications Business" means the business of (i) transmitting, or
providing services relating to the transmission of, voice, video or data
through owned or leased transmission facilities (ii) reselling voice, video or
data services and (iii) creating, developing or marketing communications
related network equipment, software and other devices for use in a
Telecommunications Business.
"Telecommunications Equipment" means video reception, processing,
modulating, transmission and distribution equipment and telecommunication
switching, distribution and transmission equipment and inventory, including,
without limitation, all remote switching nodes, digital loop carriers,
switches, line cards and other equipment, software or hardware necessary to
install, monitor, operate and maintain a video and/or telecommunications
network.
"Telecommunications Related Assets" means all assets, rights (contractual or
otherwise) and properties, whether tangible or intangible, real or personal,
used or to be used, in connection with a Telecommunications Business.
"Unrestricted Subsidiary" means any Subsidiary that is designated by the
Board of Directors as an Unrestricted Subsidiary pursuant to a Board
Resolution, but only to the extent that such Subsidiary: (i) has no
Indebtedness other than Non-Recourse Debt; (ii) is not party to any agreement,
contract, arrangement or understanding with the Company or any Restricted
Subsidiary of the Company unless the terms of any such agreement, contract,
arrangement or understanding are no less favorable to the Company or such
Restricted Subsidiary than those that might be obtained at the time from
Persons who are not Affiliates of the Company; (iii) is a Person with respect
to which neither the Company nor any of its Restricted Subsidiaries has any
direct or indirect obligation (a) to subscribe for additional Equity Interests
or (b) to maintain or preserve such Person's financial condition or to cause
such Person to achieve any specified levels of operating results; (iv) has not
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guaranteed or otherwise directly or indirectly provided credit support for any
Indebtedness of the Company or any of its Restricted Subsidiaries; and (v) has
at least one director on its board of directors (or one individual in an
equivalent position if the entity is not a corporation) that is not a director
or executive officer of the Company or any of its Restricted Subsidiaries and
has at least one executive officer that is not a director or executive officer
of the Company or any of its Restricted Subsidiaries.
"Vendor Debt" means any Indebtedness of the Company or its Restricted
Subsidiaries incurred in connection with the acquisition or construction
within 90 days of the incurrence of such Indebtedness of Telecommunications
Equipment or Telecommunications Related Assets.
"Voting Stock" of any Person means Capital Stock of such Person which
ordinarily has voting power for the election of directors (or Persons
performing similar functions) of such Person, whether at all times or only so
long as no senior class of securities has such voting power by reason of any
contingency.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (i) the sum of the
products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse
between such date and the making of such payment, by (ii) the then outstanding
principal amount of such Indebtedness.
"Wholly Owned Restricted Subsidiary" of any Person means a Restricted
Subsidiary of such Person all of the outstanding Capital Stock or other
ownership interests of which (other than directors' qualifying shares) shall
at the time be owned by such Person or by one or more Wholly Owned Restricted
Subsidiaries of such Person and one or more Wholly Owned Restricted
Subsidiaries of such Person.
DESCRIPTION OF WARRANTS
On May 21, 1998, the Company issued the Warrants as part of the Units
pursuant to the Warrant Agreement between the Company and Harris Trust and
Savings Bank, as warrant agent (the "Warrant Agent") in a private transaction
that is not subject to the registration requirements of the Securities Act.
The following summary of certain provisions of the Warrant Agreement and the
Warrant Registration Rights Agreement does not purport to be complete and is
qualified in its entirety by reference to the Warrant Agreement, the Warrants
and the Warrant Registration Rights Agreement, including the definitions
therein of certain terms. A copy of the Warrant Agreement is filed as an
exhibit to the Exchange Offer Registration Statement of which this Prospectus
forms a part.
GENERAL
Each Warrant, when exercised, entitles the holder thereof to purchase 0.635
shares of Common Stock of the Company at an exercise price of $0.01 per share
(the "Exercise Price"). The Exercise Price and the number of Warrant Shares
issuable on exercise of a Warrant are both subject to adjustment in certain
cases referred to below. The Warrants are exercisable at any time on or after
the earlier to occur of (i) the Separation Date and (ii) in the event a Change
of Control occurs, the date the Company mails notice thereof to holders of
Notes and Warrants. Unless exercised, the Warrants will automatically expire
on June 1, 2008 (the "Expiration Date"). The Warrants entitle the holders
thereof to purchase in the aggregate approximately 10.0% of the outstanding
Common Stock of the Company on a fully diluted basis as of the date of
issuance of the Warrants after giving effect to the (i) consummation of the
Offering and (ii) exercise as of the date of original issuance of the Warrants
of all outstanding options and rights issued by the Company. The Company will
give notice of expiration not less than 90 nor more than 120 days prior to the
Expiration Date to the registered holders of the then outstanding Warrants. If
the Company fails to give this notice, the Warrants will not expire until 90
days after the Company gives such notice. In no event will holders be entitled
to any damages or other remedy for the Company's failure to give such notice
other than any such extension.
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The Warrants may be exercised by surrendering to the Company the Warrant
certificates evidencing such Warrants, if any, with the accompanying form of
election to purchase, properly completed and executed together with payment of
the Exercise Price. Payment of the Exercise Price may be made in the form of
cash or a certified or official bank check, payable to the order of the
Company, or by surrender of additional Warrants. Upon surrender of the Warrant
certificate and payment of the Exercise Price, the Warrant Agent will deliver
or cause to be delivered, to or upon the written order of such holder, stock
certificates representing the number of whole Warrant Shares or other
securities or property to which such holder is entitled under the Warrants and
Warrant Agreement, including without limitation any cash payment to adjust for
fractional interests in Warrant Shares issuable upon such exercise. If less
than all of the Warrants evidenced by a Warrant certificate are exercised, a
new Warrant certificate will be issued for the remaining number of Warrants.
No fractional Warrant Share will be issued upon exercise of the Warrants. If
any fraction of a Warrant Share would, except for the foregoing provision, be
issuable on the exercise of any Warrants (or specified portion thereof), the
Company must pay to the holder an amount in cash equal to the current market
price per Warrant Share, as determined on the day immediately preceding the
date the Warrant is presented for exercise, multiplied by such fraction,
computed to the nearest whole cent.
Certificates for Warrants will be issued in registered form only, and no
service charge will be made of registration or transfer or exchange upon
surrender of any Warrant certificate at the office of the Warrant Agent
maintained for that purpose. The Company may require payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed
in connection with any registration or transfer or exchange of Warrant
certificates.
The holders of the Warrants have no right to vote on matters submitted to
the stockholders of the Company and have no right to receive dividends, except
as provided below. The holders of the Warrants are not entitled to share in
the assets of the Company in the event of the liquidation, dissolution or
winding up of the Company's affairs.
ADJUSTMENTS
Both the number of Warrant Shares purchasable upon the exercise of the
Warrants and the Exercise Price will be subject to adjustment in certain
events including (i) the payment by the Company of dividends (or other
distributions) on Common Stock of the Company payable in Common Stock of the
Company or other shares of the Company's capital stock, (ii) subdivisions,
combinations and reclassifications of Common Stock of the Company, (iii) the
issuance to all holders of Common Stock of the Company of rights, options or
warrants entitling them to subscribe for Common Stock of the Company, or for
securities convertible into or exchangeable for shares of Common Stock of the
Company, in either case for a consideration per share of Common Stock which is
less than the current market price per share (as defined in the Warrant
Agreement) of Common Stock of the Company, and (iv) the distribution to all
holders of Common Stock of the Company of any of the Company's assets, debt
securities or any rights or warrants to purchase securities (excluding those
rights and warrants referred to in clause (iii) above and excluding cash
dividends or other cash distributions from current or retained earnings).
No adjustment in the Exercise Price will be required unless such adjustment
would require an increase or decrease of at least one percent (1%) in the
Exercise Price; provided, however, that any adjustment which is not made will
be carried forward and taken into account in any subsequent adjustment.
In case of certain consolidations or mergers of the Company, or the sale of
all or substantially all of the assets of the Company to another corporation,
each Warrant shall thereafter be exercisable for the right to receive the kind
and amount of shares of stock or other securities or property to which such
holder would have been entitled as a result of such consolidation, merger or
sale had the Warrant been exercised immediately prior thereto.
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RESERVATION OF SHARES
The Company has authorized and reserved for issuance such number of shares
of Common Stock as will be issuable upon the exercise of all outstanding
Warrants. Such shares of Common Stock, when paid for and issued, will be duly
and validly issued, fully paid and non-assessable, free of preemptive rights
and free from all taxes, liens, charges and security interests with respect to
the issue thereof.
AMENDMENT
From time to time, the Company and the Warrant Agent, without consent of the
holders of the Warrants, may amend or supplement the Warrant Agreement for
certain purposes, including curing defects or inconsistencies or making change
that do not materially adversely affect the rights of any holder. Any
amendment or supplement to the Warrant Agreement that has a material adverse
effect on the interests of the holders of the Warrants requires the written
consent of the holders of a majority of the then outstanding Warrants. The
consent of each holder of the Warrants affected is required for any amendment
pursuant to which the Exercise Price would be increased or the number of
Warrant Shares purchasable upon exercisable of Warrants would be decreased
(other than pursuant to adjustments provided for in the Warrant Agreement as
generally described above).
REPORTS
Whether or not required by the rules and regulations of the Commission, so
long as any of the Warrants remain outstanding, the Company shall cause copies
of the SEC Reports described under "--Certain Covenants--Reports" to be filed
with the Warrant Agent and mailed to the holders at their addresses appearing
in the register of Warrants maintained by the Warrant Agent.
REGISTRATION RIGHTS
After the earlier to occur of June 1, 2003 or the occurrence of a Triggering
Event, the holders of one-quarter or more of the Warrants and the Warrant
Shares will be entitled to require the Company to effect one registration (a
"Demand Registration") under the Securities Act of the Warrant Shares, subject
to certain limitations. Upon a demand, the Company will (a) notify the holders
of all Warrants and Warrant Shares that a demand registration has been
requested, (b) prepare, file and use its best efforts to cause to become
effective within 120 days of such demand a registration statement in respect
of all of the Warrant Shares which holders request, no later than 30 days
after the date of such notice, to have included therein (the "Included
Securities"); provided, that if such demand occurs during the "lock up" or
"black out" period (not to exceed 180 days) imposed on the Company pursuant to
any underwriting or purchase agreement relating to an underwritten Rule 144A
or registered public offering of Common Stock or securities convertible into
or exchangeable or exercisable for Common Stock, the Company shall not be
required to so notify holders of Warrants and Warrant Shares and file such
demand registration statement prior to the end of such "lock up" or "black
out" period, in which event the Company will use its best efforts to cause
such Demand Registration statement to become effective no later than 30 days
after the end of such "lock up" or "black out" period and (c) keep such
registration statement continuously effective for the shorter of (i) 180 days
(the "Effectiveness Period") and (ii) such period of time as all of the
Warrant Shares included in such registration statement shall have been sold
thereunder; provided, that the Company may postpone the filing period, suspend
the effectiveness of any registration statement, suspend the use of any
prospectus and shall not be required to amend or supplement the registration
statement, any related prospectus or any document incorporated therein by
reference (other than an effective registration statement being used for an
underwritten offering) in the event that, and for a period (a "Black Out
Period") not to exceed an aggregate of 45 days with respect to a Demand
Registration, (i) an event or circumstance occurs and is continuing as a
result of which the registration statement, any related prospectus or any
document incorporated therein by reference as then amended or supplemented
would, in the Company's good faith judgment, contain an untrue statement of a
material fact or omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, and (ii)(A) the Company
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determines in its good faith judgment that the disclosure of such an event at
such time would have a material adverse effect on the business, operations or
prospects of the Company or (B) the disclosure otherwise relates to a material
business transaction which has not yet been publicly disclosed; provided
further, that the Effectiveness Period shall be extended by the number of days
in any Black Out Period. In the event of any "lock up" or "black out" period
in any underwriting or purchase agreement, the Company will so notify the
holders of Warrants and Warrant Shares.
Holders of Warrants and Warrant Shares will also have the right to include
the Warrant Shares in any registration statement under the Securities Act
filed by the Company for its own account or for the account of any of its
security holders covering the sale of Common Stock (other than (a) a
registration statement on Form S-4 or S-8 or (b) a registration statement
filed in connection with an offer of securities solely to existing security
holders or (c) a Demand Registration) for sale on the same terms and
conditions as the securities of the Company or any other selling security
holder included therein (a "Piggy-Back Registration") if and whenever any such
registration statement is filed under the Securities Act, except that the
Piggy-Back Registration right of holders of Warrants and Warrant Shares shall
not apply to any Equity Offering that is the initial Equity Offering of the
Company unless the securities of other selling security holders are to be
included therein. In the case of a Piggy-Back Registration, the number of
Warrant Shares requested to be included therein is subject to pro rata
reduction (a "Cut Back") based upon the number of Warrant Shares and other
securities requested to be registered by each holder of Warrants and Warrant
Shares and any other security holders exercising piggy-back registration
rights to the extent that the Company is advised by the managing underwriter,
if any, therefor that the total number or type of Warrant Shares or other
securities to be included therein is such as to materially and adversely
affect the success of the offering.
If the Company has complied with all its obligations with respect to a
Demand Registration or a Piggy-Back Registration relating to an underwritten
public offering, all holders of Warrants and Warrant Shares, upon request of
the lead managing underwriter with respect to such underwritten public
offering, will be required not to sell or otherwise dispose of any Warrants
and Warrant Shares owned by them for a period not to exceed 180 days from the
consummation of such underwritten public offering, provided, that such
requirement shall apply to Warrant Shares not sold in a Demand Registration or
Piggy-Back Registration due to a Cut Back for a period not to exceed 90 days
from such date of consummation.
As used herein, "Triggering Event" means the occurrence of any of the
following events: (i) the day immediately prior to a Change of Control, (ii)
the 180th day (or such earlier date as determined by the Company in its sole
discretion) following the initial Equity Offering of the Company or (iii)
other than as a result of the initial Equity Offering of the Company, the day
on which a class of common equity securities of the Company is listed on a
national securities exchange or authorized for quotation on the Nasdaq
National Market System or is otherwise subject to registration under the
Exchange Act.
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DESCRIPTION OF CAPITAL STOCK
The following summary of the terms of the Company's capital stock does not
purport to be complete and it is qualified in its entirety by reference to the
actual terms of the capital stock contained in the Company's Certificate of
Incorporation and Bylaws and by the provisions of applicable law.
The Company's authorized capital stock consists of 2,000,000 shares of
Common Stock, par value $0.01 per share and 35,000 shares of Preferred Stock,
par value $1.00 per share (the "Preferred Stock"). At September 15, 1998,
there were 1,000,000 shares of Common Stock and 35,000 shares of Preferred
Stock outstanding.
COMMON STOCK
The issued and outstanding shares of Common Stock are validly issued, fully
paid and nonassessable. Subject to the prior rights of the holders of
Preferred Stock, the holders of outstanding shares of Common Stock are
entitled to receive dividends out of assets legally available therefor at such
time and in such amounts as the Board of Directors may from time to time
determine. The Indenture will restrict the ability of the Company to pay
dividends on the Common Stock. The shares of Common Stock are not redeemable
or convertible, and the holders thereof have no preemptive or subscription
rights to purchase any securities of the Company. Upon liquidation,
dissolution or winding up of the Company, the holders of Common Stock are
entitled to receive pro rata the assets of the Company which are legally
available for distribution, after payment of all debts and other liabilities
and subject to the prior rights of any holders of Preferred Stock then
outstanding. Each outstanding share of Common Stock is entitled to vote on all
matters submitted to a vote of stockholders. At present, there is no
established trading market for the Common Stock.
PREFERRED STOCK
Upon any liquidation, dissolution or winding up of the Company (whether
voluntary or involuntary), each holder of Preferred Stock is entitled to be
paid before any distribution or payment is made with respect to any other
class of the Company's capital stock, an amount in cash equal to the aggregate
of all shares held by such holder. "Liquidation Value" for any share of
Preferred Stock is equal to the initial price paid to the Company for such
share on its date of issuance. The Preferred Stock does not accrue dividends,
and is not convertible into any other class of capital stock of the Company.
The Preferred Stock may be redeemed by the Company, in whole or in part, at
any time, but is not subject to mandatory redemption.
CERTAIN PROVISIONS OF DELAWARE LAW
The Company has elected not to be governed by the provisions of Section 203
of the Delaware General Corporation Law. In general, the law prohibits a
public Delaware corporation from engaging in a "business combination" with an
"interested stockholder" for a period of three years after the date of the
transaction in which the person became an interested stockholder, unless the
business combination is approved in a prescribed manner. "Business
combination" includes mergers, asset sales and other transactions resulting in
a financial benefit to the stockholder. An "interested stockholder" is a
person who, together with affiliates and associates, owns (or within three
years, did own) 15% or more of the corporation's voting stock.
LIMITATIONS ON LIABILITY AND INDEMNIFICATION OF OFFICERS AND DIRECTORS
The Company's Certificate of Incorporation will limit the liability of
directors to the fullest extent permitted by Delaware law. Delaware law
provides that directors of a corporation will not be personally liable for
monetary damages for breach of their fiduciary duties as directors, including
gross negligence, except liability for: (i) breach of the director's duty of
loyalty; (ii) acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of the law; (iii) the unlawful payment of a
dividend or unlawful stock purchase or redemption; and (iv) any transaction
from which the director derives an improper personal benefit. This provision
of the Company's Certificate of Incorporation has no effect on the
availability of equitable remedies such as injunction or rescission.
Additionally, this provision will not limit liability under state or federal
securities laws. The Certificate of Incorporation also provides that the
Company shall indemnify directors and officers of the Company to the fullest
extent permitted by such law. The Company believes that these provisions will
assist the Company in attracting and retaining qualified individuals to serve
as directors.
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CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following general discussion summarizes certain of the material United
States federal income tax consequences of an exchange of Old Notes for
Exchange Notes and the ownership, and disposition of the Exchange Notes to
initial purchasers thereof. This discussion is a summary for general
information only and does not consider all aspects of United States federal
income taxation that may be relevant to a prospective investor in light of
that investor's particular circumstances. This discussion also deals only with
Notes held by a holder as capital assets within the meaning of Section 1221 of
the United States Internal Revenue Code of 1986, as amended to the date hereof
(the "Code"). This summary does not address all of the tax consequences that
may be relevant to a holder of Notes, nor does it address the federal income
tax consequences to holders subject to special treatment under the federal
income tax laws, such as brokers or dealers in securities or currencies,
certain securities traders, tax-exempt entities, banks, thrifts, insurance
companies, other financial institutions, persons that hold the Notes, Warrants
or Common Stock as a position in a "straddle" or as part of a "synthetic
security," "hedging," "conversion" or other integrated instrument, persons
that have a "functional currency" other than the United States dollar, persons
that acquire Notes in connection with the performance of services, investors
in pass-through entities and certain United States expatriates. Further, this
summary does not address (i) the income tax consequences to shareholders in,
or partners or beneficiaries of, a holder of the Notes (ii) the United States
federal alternative minimum tax consequences of the purchase, ownership or
disposition of the Notes, or (iii) any state, local or foreign tax
consequences of the purchase, ownership or disposition of the Notes.
The Company recommends that each holder consult such holder's own tax
advisor as to the particular tax consequences of exchanging such holder's Old
Notes for Exchange Notes, including the applicability and effect of any state,
local or foreign tax laws.
The Company believes that the exchange of Old Notes for Exchange Notes
pursuant to the Exchange Offer will not be treated as an "exchange" for
federal income tax purposes because the Exchange Notes will not be considered
to differ materially in kind or extent from the Old Notes. Rather, the
Exchange Notes received by a holder will be treated as a continuation of the
Old Notes in the hands of such holder. As a result, there will be no federal
income tax consequences to holders exchanging Old Notes for Exchange Notes
pursuant to the Exchange Offer.
PERSONS CONSIDERING THE PURCHASE OF UNITS SHOULD CONSULT THEIR OWN TAX
ADVISORS CONCERNING THE APPLICATION OF FEDERAL INCOME TAXES LAWS, AS WELL AS
THE LAWS OF ANY STATE, LOCAL, OR FOREIGN TAXING JURISDICTION, TO THEIR
PARTICULAR SITUATIONS.
U.S. HOLDERS
For purposes of this discussion, "U.S. Holder" generally means (i) a citizen
or resident of the United States, (ii) a corporation or partnership created or
organized in the United States or under the laws of the United States or any
state, (iii) an estate the income of which is includible in its gross income
for United States federal income tax purposes without regard to its source, or
(iv) a trust if a court within the United States is able to exercise primary
supervision over its administration and one or more United States persons have
the authority to control all substantial decisions of the trust. Certain
United States federal income consequences relevant to a holder other than a
U.S. Holder (a "Non-U.S. Holder") are discussed separately below.
Payments of Interest
Stated interest paid or accrued on the Notes will constitute qualified
stated interest and will be taxable to a U.S. Holder as ordinary income in
accordance with the holder's method of accounting for federal income tax
purposes. Alternatively, a U.S. Holder may elect to include stated interest on
the Notes (as well as original issue discount ("OID") and, if any, market
discount, de minimis market discount and unstated interest on the Notes, as
adjusted by any amortizable bond premium or acquisition premium) in gross
income on a constant-yield basis. The mechanics and implications of such an
election are beyond the scope of this discussion and, as a result, U.S.
Holders should consult their own tax advisors regarding the advisability of
making such an election.
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Original Issue Discount
The Old Notes have OID for federal tax purposes, and accordingly U.S.
Holders of Old Notes and Exchange Notes (which for tax purposes are treated as
a continuation of the Old Notes) will be subject to special tax accounting
rules, as described in greater detail below. U.S. Holders of Notes should be
aware that they generally must include OID in gross income for U.S. federal
income tax purposes on an annual basis under a constant yield accrual method
regardless of their regular method of tax accounting. As a result, U.S.
Holders will include OID in income in advance of the receipt of cash
attributable to such income. However, U.S. Holders of the Notes generally will
not be required to include separately in income cash payments received on such
Notes, even if denominated as interest, to the extent such payments constitute
payments of previously accrued OID.
The Notes will be treated as issued with OID equal to the excess of the
"stated redemption price at maturity" of a Note over its "issue price." The
stated redemption price at maturity of a Note is the total of all payments on
the Note that are not payments of "qualified stated interest." A qualified
stated interest payment is a payment of stated interest unconditionally
payable, in cash or property (other than debt instruments of the issuer), at
least annually at a single fixed rate during the entire term of the Note that
appropriately takes into account the length of intervals between payments.
Stated interest on the Notes will be treated as qualified stated interest.
The amount of OID includible in income by an initial U.S. Holder of a Note
is the sum of the "daily portions" of OID with respect to the Note for each
day during the taxable year or portion thereof in which such U.S. Holder holds
such Note ("accrued OID"). The daily portion is determined by allocating to
each day in any "accrual period" a pro-rata portion of the OID that accrued in
such period. The "accrual period" of a Note may be of any length and may vary
in length over the term of an OID note, provided that each accrual period is
no longer than one year and each scheduled payment of principal or interest
occurs either on the first or last day of an accrual period. The amount of OID
that accrues with respect to any accrual period is the excess of (a) the
product of the Note's adjusted issue price at the beginning of such accrual
period and its yield to maturity, determined on the basis of compounding at
the close of each accrual period and properly adjusted for the length of such
period, over (b) the amount of qualified stated interest allocable to such
accrual period. The "adjusted issue price" of a Note at the start of any
accrual period is equal to its issue price increased by the accrued OID for
each prior accrual period and reduced by any prior payments made on such Note
(other than payments of qualified stated interest).
If the Company is required to pay Liquidated Damages with respect to the
Notes as described under "Description of Notes--Registration Rights;
Liquidated Damages," such payment would result in ordinary income to a U.S.
Holder. Although not free from doubt, the Company believes that, as of the
date the Old Notes were originally issued, the likelihood that Liquidated
Damages would be paid was "remote" for purposes of Treasury Regulation 1.1275-
2(h)(2) and intends to treat any such payments as additional interest payable
on the Notes which should be taxable to a U.S. Holder at the time it accrues
or is received in accordance with such holder's regular method of accounting.
If such treatment is not respected, in the event of a Registration Default the
Notes may be treated as reissued for OID purposes, which may affect the
calculation of OID and the timing of income inclusion for a U.S. Holder.
Impact of Applicable High Yield Discount Obligation Rules
The "yield to maturity" on the Notes exceeds the sum of 5% and the
"applicable federal rate" (for May 1998, the "applicable federal rate" is
5.85% assuming semi-annual compounding) in effect for the month in which the
Old Notes were originally issued. Accordingly, if the Notes have "significant"
OID, the Notes will be considered "applicable high yield discount obligations"
("AHYDOs"). A debt instrument has "significant" OID if the aggregate amount of
unpaid interest (including OID) as of the close of any accrual period ending
after the date five years after the date of issue exceeds the product of the
issue price of such instrument and its yield to maturity.
140
<PAGE>
If the Notes are AHYDOs, the Company will not be permitted to deduct for
United States federal income tax purposes OID accrued on the Notes until such
time as the Company actually pays such OID in cash or in property other than
stock or debt of the Company (or persons related to the Company). Moreover, to
the extent that the yield to maturity of the Notes exceeds the sum of 6% and
the applicable federal rate, such excess (the "Dividend-Equivalent Interest")
will not be deductible at any time by the Company for United States federal
income tax purposes (regardless of whether the Company actually pays such
Dividend-Equivalent Interest in cash or in other property). Such Dividend-
Equivalent Interest would be treated as a dividend to the extent it is deemed
to have been paid out of the Company's current or accumulated earnings and
profits. Accordingly, a U.S. Holder that is a domestic corporation may be
entitled to take a dividends-received deduction with respect to any Dividend-
Equivalent Interest received by such corporate U.S. Holder on the Note.
Sale or Redemption of the Notes
Upon the disposition of a Note by sale, exchange or redemption, a U.S.
Holder generally will recognize gain or loss equal to the difference, if any,
between (i) the amount realized on the disposition (other than amounts
attributable to accrued and unpaid interest) and (ii) the U.S. Holder's tax
basis in the Note. A U.S. Holder's tax basis in a Note generally will equal
the cost of the Note to the U.S. Holder, increased by OID previously included
(or currently includible) in such holder's gross income to the date of
disposition, and reduced by any payments other than payments of qualified
stated interest made on such Note. When a Note is sold, disposed of or
redeemed between interest payment dates, the portion of the amount realized on
the disposition that is attributable to interest accrued to the date of sale
must be reported as interest income by a cash method investor and an accrual
method investor that has not included the interest in income as it accrued.
Assuming the Note is held as a capital asset, such gain or loss will
generally constitute capital gain or loss and will be long-term capital gain
or loss if the U.S. Holder has held such Note for longer than one year. The
maximum Federal income tax rate on long-term capital gain received by
noncorporate taxpayers is currently 20%.
NON-U.S. HOLDERS
The following discussion summarizes certain United States federal income tax
consequences relevant to a Non-U.S. Holder of a Note.
This discussion does not deal with all aspects of United States federal
income taxation that may be relevant to any particular Non-U.S. Holder in
light of that holder's personal circumstances with respect to such holder's
purchase, ownership or disposition of the Notes, including such holder holding
the Notes through a partnership. For example, persons who are partners in
foreign partnerships and beneficiaries of foreign trusts or estates who are
subject to United States federal income tax because of their own status, such
as United States residents or foreign persons engaged in a trade or business
in the United States, may be subject to United States federal income tax even
though the entity which holds the Note is not subject to such tax.
Stated Interest and OID on the Notes
Under current United States federal income tax law, payments of stated
interest or OID on a Note by the Company or any paying agent to a holder that
is a Non-U.S. Holder will not be subject to withholding of United States
federal income tax if (i) such payment is effectively connected with a trade
or business within the United States by such Non-U.S. Holder, or (ii) both (a)
the holder does not actually or constructively own 10 percent or more of the
combined voting power of all classes of stock of the Company and is not a
controlled foreign corporation related to the Company through stock ownership
and (b) the beneficial owner provides a statement signed under penalties of
perjury that includes its name and address and certifies (on an IRS Form W-8
or a substantially similar substitute form) that it is a Non-U.S. Holder in
compliance with applicable requirements.
141
<PAGE>
Interest on a Note that is effectively connected with the conduct of a trade
or business in the United States by a Non-U.S. Holder, although exempt from
the withholding tax (assuming appropriate certification is provided), may be
subject to graduated United States federal income tax on a net income basis
and, in the case of a corporation, also an additional branch profits tax of
30% (or a lower rate provided in an applicable treaty) as if such amounts were
earned by a U.S. Holder.
Sale or Redemption of Notes
Except as described below and subject to the discussion concerning backup
withholding, a Non-U.S. Holder generally will not be subject to withholding of
United States federal income tax with respect to any gain realized upon the
sale or redemption of Notes. Further, a Non-U.S. Holder generally will not be
subject to United States federal income tax with respect to any such gain
unless (i) the gain is effectively connected with a United States trade or
business of such Non-U.S. Holder, (ii) subject to certain exceptions, the Non-
U.S. Holder is an individual who holds such Notes as a capital asset and is
present in the United States for 183 days or more in the taxable year of the
disposition, or (iii) the Non-U.S. Holder is subject to tax pursuant to the
provisions of United States tax law applicable to certain United States
expatriates.
INFORMATION REPORTING AND BACKUP WITHHOLDING
In general, information reporting requirements will apply to payments made
on, and proceeds from the sale of, the Notes held by a noncorporate U.S.
Holder within the United States. In addition, payments made on, and payments
of proceeds from the sale of, such Notes to or through the United States
office of a broker are subject to information reporting unless the holder
thereof certifies as to its non-U.S. status or otherwise establishes an
exemption from information reporting and backup withholding.
Payments made on, and proceeds from the sale of the Notes may be subject to
a "backup" withholding tax of 31% unless the holder complies with certain
identification or exemption requirements. Any amounts so withheld will be
allowed as a credit against the holder's income tax liability, or refunded,
provided the required information is provided to the IRS.
In October 1997, the IRS issued final regulations relating to withholding,
backup withholding and information reporting with respect to payments made to
Non-U.S. Holders. The regulations generally apply to payments made after
December 31, 1999.
When effective, the new regulations will streamline and, in some cases,
alter the type of statements and information that must be furnished to claim a
reduced rate of withholding. While various IRS forms (such as IRS Forms 1001
and 4224) currently are used to claim exemption from withholding or a reduced
withholding rate, the preamble to the regulations states that the IRS intends
most certifications to be made on revised Form W-8. The regulations also
clarify the duties of United States payors making payments to foreign persons
and modify the rules concerning withholding on payments made to Non-U.S.
Holders through foreign intermediaries. With some exceptions, the new
regulations treat a payment to a foreign partnership as a payment directly to
the partners. The regulations also eliminate the address rule under which
dividends paid to a foreign address were presumed to be paid to a resident at
that address and therefore eligible for the benefit of any applicable tax
treaty and require a foreign holder who wishes to claim the benefit of an
applicable treaty rate to satisfy certain certification and other
requirements.
142
<PAGE>
PLAN OF DISTRIBUTION
Each Participating Broker-Dealer that receives Exchange Notes for its own
account pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. This
Prospectus, as it may be amended or supplemented from time to time, may be
used by a Participating Broker-Dealer in connection with resales of Exchange
Notes received in exchange for Old Notes where such Old Notes were acquired as
a result of market-making activities or other trading activities. The Company
has agreed that for a period of 180 days after the Expiration Date, it will
make this Prospectus, as amended or supplemented, available to any
Participating Broker-Dealer for use in connection with any such resale. In
addition, until , 1998 (90 days after the commencement of the Exchange Offer),
all dealers effecting transactions in the Exchange Notes may be required to
deliver a prospectus.
The Company will not receive any proceeds from any sales of the Exchange
Notes by Participating Broker Dealers. Exchange Notes received by
Participating Broker-Dealers for their own account pursuant to the Exchange
Offer may be sold from time to time in one or more transactions in the over-
the-counter market, in negotiated transactions, through the writing of options
on the Exchange Notes or a combination of such methods of resale, at market
prices prevailing at the time of resale, at prices related to such prevailing
market prices or negotiated prices. Any such resale may be made directly to
purchasers or to or through brokers or dealers who may receive compensation in
the form of commissions or concessions from any such Participating Broker-
Dealer and/or the purchasers of any such Exchange Notes. Any Participating
Broker-Dealer that resells the Exchange Notes that were received by it for its
own account pursuant to the Exchange Offer and any broker or dealer that
participates in a distribution of such Exchange Notes may be deemed to be an
"underwriter" within the meaning of the Securities Act and any profit on any
such resale of Exchange Notes and any commissions or concessions received by
any such persons may be deemed to be underwriting compensation under the
Securities Act. The Letter of Transmittal states that by acknowledging that it
will deliver and by delivering a prospectus, a Participating Broker-Dealer
will not be deemed to admit that it is an "underwriter" within the meaning of
the Securities Act.
For a period of 180 days after the Expiration Date the Company will promptly
send additional copies of this Prospectus and any amendment or supplement to
this Prospectus to any Participating Broker-Dealer that requests such
documents in the Letter of Transmittal.
EXPERTS
The Consolidated Financial Statements of OnePoint Communications, LLC as of
December 31, 1997 and 1996, and the related consolidated statements of
operations, unitholders' equity and cash flows for the year ended December 31,
1997, and the period from May 14, 1996 (inception) to December 31, 1996
appearing in this Registration Statement have been audited by Ernst & Young
LLP, independent auditors, as stated in their report thereon appearing
elsewhere herein, and are included in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.
The financial statements of Mid-Atlantic Telcom Plus, LLC as of December 31,
1997, and for the year then ended, and the consolidated and combined financial
statements of Mid-Atlantic Cable Companies as of December 31, 1996, and for
the year then ended, appearing in this Prospectus have been audited by Beers &
Cutler PLLC, independent auditors, as set forth in their report thereon
appearing elsewhere herein, and are included in reliance upon such report
given upon the authority of such firm as experts in accounting and auditing.
The statements of certain assets and liabilities of Preferred Entertainment,
Inc. as of December 31, 1997 and 1996 and the statements of related revenues
and expenses for the years ended December 31, 1997 and 1996 included in this
Prospectus have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their reports with respect thereto, and are
included herein in reliance upon the authority of said firm as experts in
accounting and auditing in giving said reports.
LEGAL MATTERS
The validity of the Exchange Notes offered hereby will be passed upon for
the Company by Kirkland & Ellis (partnerships including professional
corporations), Chicago, Illinois.
143
<PAGE>
AVAILABLE INFORMATION
The Company is not currently subject to the periodic reporting and other
informational requirements of the Exchange Act. The Company has agreed that,
whether or not its is required to do so by the rules and regulations of the
Commission, for so long as any Notes remain outstanding, they will furnish to
the holders of the Notes (i) all quarterly and annual financial information
that would be required to be contained in a filing with the Commission on
Forms 10-Q and 10-K if the Company were required to file such Forms,
including, with respect to the annual information only, a report thereon by
the Company's independent certified public accountants and (ii) all reports
that would be required to be filed on Form 8-K if it were required to file
such reports. In addition, for so long as any of the Notes remain outstanding
and prior to the consummation of an exchange offer registered with the
Commission, the Company has agreed to make available to any prospective
purchaser of the Notes or beneficial owner of the Notes in connection with any
sale thereof, the information required by Rule 144A(d)(4) under the Securities
Act.
Any periodic reports and other information filed by the Company with the
Commission may be inspected at the public reference facilities maintained by
the Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549,
or its regional offices located at the Northwestern Atrium Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661-2511 and 7 World Trade
Center, Suite 1300, New York, New York 10048. Copies of such material can be
obtained form the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates. The Commission
maintains a Web site that contains reports, proxy and information statements
and other information regarding registrants that file electronically with the
Commission. The address of such site is http://www.sec.com.
The Company has its principal executive offices located at 2201 Waukegan
Road, Suite E200, Bannockburn, Illinois 60015; its telephone number is (847)
374-3700.
144
<PAGE>
INDEX TO FINANCIAL STATEMENTS
ONEPOINT COMMUNICATIONS, LLC
<TABLE>
<S> <C>
Report of Independent Auditors............................................. F-2
Consolidated Balance Sheets at December 31, 1997 and 1996.................. F-3
Consolidated Statements of Operations for the year ended December 31, 1997
and the period from March 14, 1996 to December 31, 1996................... F-4
Consolidated Statements of Unitholders' Equity at December 31, 1997........ F-5
Consolidated Statements of Cash Flows for the year ended December 31, 1997
and the period from March 14, 1996 to December 31, 1996................... F-6
Notes to the Consolidated Financial Statements............................. F-7
</TABLE>
ONEPOINT COMMUNICATIONS CORP.
<TABLE>
<S> <C>
Consolidated Balance Sheets at June 30, 1998.............................. F-12
Condensed Consolidated Statement of Operations for the three months and
six months ended June 30, 1998........................................... F-13
Condensed Consolidated Statements of Cash Flows for the six months ended
June 30, 1998 and 1997................................................... F-14
Notes to Condensed Consolidated Financial Statements...................... F-15
</TABLE>
MID-ATLANTIC TELCOM PLUS, LLC
<TABLE>
<S> <C>
Independent Auditors' Report............................................. F-18
Balance Sheet............................................................ F-19
Statement of Operations.................................................. F-20
Statement of Changes in Members' Equity.................................. F-21
Statement of Cash Flows.................................................. F-22
Notes to Financial Statements............................................ F-23
MID-ATLANTIC CABLE COMPANIES
Independent Auditors' Report............................................. F-28
Consolidated and Combined Balance Sheet.................................. F-29
Consolidated and Combined Statement of Operations........................ F-30
Consolidated and Combined Statement of Changes in Owners' Equity
(Deficit)............................................................... F-31
Consolidated and Combined Statement of Cash Flows........................ F-32
Notes to the Consolidated and Combined Financial Statements.............. F-33
PEOPLE'S CHOICE TV CORP.
Report of Independent Public Accountants................................. F-39
Statements of Certain Assets and Liabilities of Preferred Entertainment,
Inc. to be Sold......................................................... F-40
Statements of Revenues and Expenses Related to Certain Assets and
Liabilities of Preferred Entertainment, Inc. to be Sold................. F-41
Notes to Statements of Certain Assets and Liabilities and Related
Revenues and Expenses of Preferred Entertainment, Inc................... F-42
</TABLE>
The Company has not provided individual financial statements for its
subsidiary guarantors, as in accordance with Staff Accounting Bulletin Topic
1. H. The Company has provided the Audited Consolidated Financial Statements
of OnePoint Communication, LLC. which include all guarantors.
F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Unitholders
OnePoint Communications, LLC
We have audited the accompanying consolidated balance sheets of OnePoint
Communications, LLC as of December 31, 1997 and 1996, and the related
consolidated statements of operations, unitholders' equity and cash flows for
the year ended December 31, 1997, and the period from March 14, 1996
(inception) to December 31, 1996. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits. We did not audit
the financial statements of Mid-Atlantic Telcom Plus, LLC, an investment in a
50% owned unconsolidated subsidiary, which statements reflect $3.1 million in
equity in losses of such unconsolidated investments for the year ended
December 31, 1997. Those statements were audited by other auditors whose
report has been furnished to us, and our opinion, insofar as it relates to
data included for Mid-Atlantic Telcom Plus, LLC, is based solely on the report
of the other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits and the report of other
auditors provide a reasonable basis for our opinion.
In our opinion, based on our audits and the report of other auditors, the
financial statements referred to above present fairly, in all material
respects, the consolidated financial position of OnePoint Communications, LLC
at December 31, 1997 and 1996, and the results of its operations and its cash
flows for the year ended December 31, 1997, and the period from March 14, 1996
(inception) to December 31, 1996, in conformity with generally accepted
accounting principles.
Ernst & Young LLP
February 19, 1998, except for Note 8,
as to which the date is August 6, 1998
Vienna, Virginia
F-2
<PAGE>
ONEPOINT COMMUNICATIONS, LLC
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1997 1996
----------- -----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.......................... $ 5,462,565 $ 102,888
Restricted cash.................................... -- 13,000,000
Accounts receivable, net of allowance of $7,207 and
$0 at December 31, 1997 and 1996, respectively.... 31,840 200
Affiliate receivable............................... 112,715 83,568
Prepaid expenses................................... 1,132,127 10,542
----------- -----------
Total current assets............................. 6,739,247 13,197,198
Investments in 50% owned unconsolidated investments.. 10,060,835 --
Property and equipment, net of accumulated
depreciation........................................ 2,703,986 497,553
Other assets......................................... 256,996 335,829
----------- -----------
Total assets..................................... $19,761,064 $14,030,580
=========== ===========
LIABILITIES AND UNITHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expense............... $ 2,796,341 $ 426,466
Accrued interest................................... 11,286 --
----------- -----------
Total current liabilities........................ 2,807,627 426,466
Long term debt--affiliate............................ 1,500,000 --
Unitholders' equity:
Redeemable units................................... 33,500,000 --
Founders units..................................... 80,100 15,640,000
Accumulated deficit................................ (18,126,663) (2,035,886)
----------- -----------
Total unitholders' equity........................ 15,453,437 13,604,114
----------- -----------
Total liabilities and unitholders' equity........ $19,761,064 $14,030,580
=========== ===========
</TABLE>
See accompanying notes.
F-3
<PAGE>
ONEPOINT COMMUNICATIONS, LLC
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
PERIOD FROM
MARCH 14,
1996
YEAR ENDED (INCEPTION)
DECEMBER 31, TO DECEMBER
1997 31, 1996
------------ ------------
<S> <C> <C>
Revenue............................................ $ 42,669 $ --
Cost of revenue.................................... 82,288 --
------------ ------------
(39,619) --
Expenses:
Selling, general and administrative.............. 12,788,422 2,021,079
Depreciation and amortization.................... 234,554 19,229
------------ ------------
Loss from operations............................... (13,062,595) (2,040,308)
Other income (expense)
Interest income.................................. 71,595 4,422
Interest expense................................. (11,286) --
Miscellaneous.................................... (17,376) --
------------ ------------
42,933 4,422
------------ ------------
Loss before equity in losses of 50% owned
unconsolidated investments........................ (13,019,662) (2,035,886)
Equity in losses of investments in 50% owned
unconsolidated investments........................ (3,071,115) --
------------ ------------
Net loss........................................... $(16,090,777) $ (2,035,886)
============ ============
</TABLE>
See accompanying notes.
F-4
<PAGE>
ONEPOINT COMMUNICATIONS, LLC
CONSOLIDATED STATEMENTS OF UNITHOLDERS' EQUITY
<TABLE>
<CAPTION>
MEMBER UNITS
----------------------------------------
REDEEMABLE UNITS FOUNDERS UNITS TOTAL
------------------- -------------------- ACCUMULATED UNITHOLDERS'
UNITS AMOUNT UNITS AMOUNT DEFICIT EQUITY
------- ----------- ------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Initial capitalization.. -- $ -- 10,000 $ 1,640,000 $ -- $ 1,640,000
Unitholder additional
contributions.......... -- -- -- 14,000,000 -- 14,000,000
Net loss................ -- -- -- -- (2,035,886) (2,035,886)
------- ----------- ------- ------------ ------------ ------------
Balance, December 31,
1996................... -- -- 10,000 15,640,000 (2,035,886) 13,604,114
Unitholder additional
contributions.......... -- -- -- 12,000,000 -- 12,000,000
1997 Restructuring
(see Note 6)........... 199,000 33,500,000 791,000 (27,559,900) -- 5,940,100
Net loss................ -- -- -- -- (16,090,777) (16,090,777)
------- ----------- ------- ------------ ------------ ------------
Balance, December 31,
1997................... 199,000 $33,500,000 801,000 $ 80,100 $(18,126,663) $ 15,453,437
======= =========== ======= ============ ============ ============
</TABLE>
See accompanying notes.
F-5
<PAGE>
ONEPOINT COMMUNICATIONS, LLC
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
PERIOD FROM
MARCH 14, 1996
YEAR ENDED (INCEPTION)
DECEMBER 31, DECEMBER 31,
1997 1996
------------ --------------
<S> <C> <C>
OPERATING ACTIVITIES
Net loss......................................... $(16,090,777) $ (2,035,886)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization.................. 234,554 19,229
Equity in losses of unconsolidated investments. 3,071,115 --
Changes in operating assets and liabilities:
Accounts receivable.......................... (31,640) (200)
Prepaid expenses............................. (1,121,585) (10,542)
Other assets................................. 78,833 (335,829)
Affiliates receivable........................ (29,147) (83,568)
Accounts payable and accrued expenses........ 2,369,875 426,466
Accrued interest............................. 11,286 --
------------ ------------
Net cash used in operating activities...... (11,507,486) (2,020,330)
INVESTING ACTIVITIES
Restricted cash.................................. 13,000,000 (13,000,000)
Purchase of equity investments................... (13,131,950) --
Acquisition of property and equipment............ (2,440,987) (516,782)
------------ ------------
Net cash used in investing activities...... (2,572,937) (13,516,782)
FINANCING ACTIVITIES
Unitholder contributions......................... 19,440,100 15,640,000
------------ ------------
Net cash provided by financing activities........ 19,440,100 15,640,000
------------ ------------
Net increase (decrease) in cash.................. 5,359,677 102,888
Cash at the beginning of period.................. 102,888 --
------------ ------------
Cash at the end of period........................ $ 5,462,565 $ 102,888
============ ============
</TABLE>
See accompanying notes.
F-6
<PAGE>
ONEPOINT COMMUNICATIONS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Organization
OnePoint Communications, LLC, (the "Company") was formed to provide bundled
communications services including telephone service, cellular service, cable
TV and Internet access to residents of apartments and condominiums. The
Company was formed as Ventures in Communications--RMTS, LLC and changed its
name to OnePoint Communications, LLC on February 25, 1997. The Company has
operations in a number of major markets. OnePoint Communications, LLC will
terminate on December 31, 2025. The Company entered into several significant
contracts and began to generate revenue during the second half of 1997, and
was no longer considered to be in the development stage at that time.
The Company consists of OnePoint Communications, LLC, the parent; and its
wholly owned subsidiaries which consist of OnePoint Communications--Colorado,
LLC, OnePoint Communications--Illinois, LLC, and OnePoint Communications--
Georgia, LLC. In addition, through the Company's wholly owned subsidiary
OnePoint Communications Holdings, LLC, the Company maintains (i) a 75%
interest in VIC-RMTS-DC, LLC, which has been consolidated in the Company's
financial statements and (ii) a 50% investment in Mid-Atlantic Telcom Plus,
LLC, Mid-Atlantic Telcom Plus Interactive, LLC and Mid-Atlantic RMTS Holdings,
LLC which are accounted for under the equity method. The Company's units are
held by two unitholders with one unitholder holding a 80.1% ownership (see
Note 6).
Cash and Cash Equivalents
The Company considers all highly liquid investments with an original
maturity of three months or less to be cash equivalents.
Property and Equipment
Property and equipment are stated at cost and depreciated on the straight-
line method over their estimated useful lives, ranging from 3 to 5 years.
Leasehold improvements are depreciated over the shorter of their useful lives
or the lease term, not to exceed 15 years. The Company classifies installed
wiring and hardware costs as construction in process until the installation is
completed at which time the balances are classified as leasehold improvements.
Research and Development
All research and development costs are charged to operations as incurred.
Revenue Recognition
The Company recognizes revenue as services are provided.
Fair Value of Financial Instruments
The Company considers the recorded value of its financial assets and
liabilities, to approximate the fair value of the respective assets and
liabilities at December 31, 1997 and 1996, respectively.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
F-7
<PAGE>
ONEPOINT COMMUNICATIONS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Income Taxes
The Company is treated as a partnership for income tax purposes.
Accordingly, no provision for income taxes has been included in these
financial statements, as taxable income or loss passes through to, and is
reported by, unitholders individually.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiaries. All significant intercompany accounts and
transactions have been eliminated in consolidation.
Year 2000 (Unaudited)
The Company is aware of the implications associated with the "Year 2000" as
it relates to software information systems and other outside implications on
the Company's operations. The "Year 2000" is not expected to have a material
impact on the Company's current information systems because current software
is either already "Year 2000" compliant or required changes will be
insignificant. As a result, the Company does not anticipate that incremental
expenditures to ensure that its information systems are "Year 2000" compliant
will be material to the Company's liquidity, financial position or results of
operations over the next few years. Any costs that may arise will be expensed
as incurred.
2. RESTRICTED CASH
At December 31, 1996 the Company had restricted cash of $13,000,000
designated for the purchase of an equity interest in Mid-Atlantic Telcom Plus,
LLC and purchase related costs. The Company completed this transaction during
1997 (see Note 4).
3. PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1997 1996
---------- --------
<S> <C> <C>
Furniture and equipment............................. $ 461,534 $ 51,694
Computer equipment.................................. 737,553 75,261
Vehicles............................................ 139,415 --
Leasehold improvements.............................. 815,880 125,769
---------- --------
2,154,382 252,724
Construction in progress............................ 803,386 264,058
---------- --------
2,957,768 516,782
Less accumulated depreciation....................... (253,782) (19,229)
---------- --------
$2,703,986 $497,553
========== ========
</TABLE>
4. EQUITY INVESTMENTS
The Company accounts for its 50% investment in Mid-Atlantic RMTS Holdings,
LLC, Mid-Atlantic Telcom Plus Interactive, LLC and Mid-Atlantic Telcom Plus,
LLC, under the equity method.
F-8
<PAGE>
ONEPOINT COMMUNICATIONS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Mid-Atlantic RMTS Holdings, LLC had no material operations, assets or
liabilities as of and for the year ended December 31, 1997.
During 1997, the Company entered into a joint venture with the ownership
interest in Mid-Atlantic Telcom Plus, LLC to form Mid-Atlantic Telcom Plus
Interactive, LLC. The initial capitalization of the joint venture was used to
purchase certain assets and marketing rights. The daily operations of the
joint venture are substantially controlled by the other 50% owner, however,
the Company maintains certain veto and other rights related to certain
transactions and other significant matters of the company as defined in the
operating agreement.
Mid-Atlantic Telcom Plus, LLC daily operations are managed by an entity
which owns the other 50% interest in the company. The Company maintains
certain veto rights on significant transactions and as defined in the
operating agreement between the unitholders.
Investments in net assets of companies accounted for under the equity method
was approximately $10.0 million.
The combined results of operations and financial position of the Company's
equity-basis affiliates are summarized below for the year ended December 31,
1997 (in thousands):
<TABLE>
<S> <C>
Condensed Operating Information
Net sales...................................................... $14,040
Loss from operations........................................... (3,367)
Net loss....................................................... (6,142)
Condensed Balance Sheet Information
Current assets................................................. $ 1,402
Non-current assets............................................. 47,380
Current liabilities............................................ 29,461
Non-current liabilities........................................ 713
Net worth...................................................... 18,608
</TABLE>
5. RELATED PARTY TRANSACTIONS
Affiliate Receivable
As of December 31, 1997 and 1996, the Company had receivable balances from
Mid-Atlantic Telcom Plus, LLC and Ventures in Communications, L.L.C. ("VIC"),
a unitholder of the Company.
Long-Term Debt--Affiliate
The Company has a $1,500,000 note payable to Ventures in Communications,
L.L.C., a unitholder of the Company. The debt accrues interest at a rate of
10% per year and all interest and principal is due on or before the maturity
date of October 15, 2007. The Company paid no interest for the periods ended
December 31, 1997 and 1996.
Other
Certain officers and employees of the Company are employees and officers of
VIC or certain subsidiaries of SBC Communications Inc. ("SBC"). At December
31, 1997 the Company had accrued $203,000 in accounts payable related to
services provided by SBC.
The Company shares certain billing and collections systems with a company in
which the Company holds a 50% interest. The Company paid $250,000 for services
provided by this company in 1997.
SBC has guaranteed certain leases and other obligations of the Company. If
and when payments related to such guarantees are made on behalf of the Company
they will be treated as equity contributions.
SBC and VIC provided other employment and operating services on behalf of
the Company for which the Company has not recorded expenses. The Company
believes that value of unreimbursed services provided by
F-9
<PAGE>
ONEPOINT COMMUNICATIONS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SBC and VIC for the period ended December 31, 1997 and 1996 are not material
to its financial position or results of operations.
6. UNITHOLDERS' EQUITY
Redeemable and founders units
At its inception, VIC, an affiliate of SBC, purchased 9,900 common units and
AMI-VCOM2, Inc., a subsidiary of Southwestern Bell, purchased 100 common units
of the Company. During 1997, AMI-VCOM2, Inc. transferred its ownership
interest to VIC. On October 15, 1997, the Company restructured its ownership
under the Amended and Restated Operating Agreement, the Members Agreement and
the Registration Agreement collectively called the operating agreements. Under
the operating agreements, the Company issued 199,000 redeemable units to VIC
in exchange for all of its common units and a $1,500,000 note payable (see
Note 5). In addition, the Company issued 801,000 founders units to an
individual, who is the Manager of VIC and the Chairman and Chief Executive
Officer of the Company, in exchange for $80,100 and the guarantee of certain
indebtedness. The $80,100 was not received by the Company as of December 31,
1997 and is accrued in Affiliate Receivables.
The redeemable units, which are owned by VIC, are entitled to a preferred
return equal to 10% per annum on its unreturned preferred capital plus any
accumulated unpaid preferred returns. Unreturned preferred capital is defined
as any amount in excess of $33.5 million in capital contributions. Non-
preferred distributions to the redeemable unitholder will result in the
redemption of these units at approximately $176 per share, with fractional
units redeemed at a proportional rate. At the time of redemption the
redeemable unitholder will also receive a reload warrant for the purchase of
the equivalent number of member units (subject to limitation as the equity
value of the Company reaches certain levels). The redeemable units have
certain anti-dilutive rights as defined in the operating agreements.
Member units (redeemable and founders units) vote on a per unit basis
related to the management and operations of the Company. Certain restrictions
on the sale and transfer of units exist as provided by the operating
agreements. The member units have certain SEC registration rights as defined
in the operating agreements. VIC maintains certain preferences related to the
sale of units, including the ability to require all other unit holders to sell
their units under the same terms and in equal proportion to VIC, as defined in
the operating agreements. The member unitholders liabilities are limited to
their respective capital contributions.
The Company's member units (redeemable and founders units) are entitled to
quarterly tax distributions in amounts equal to the member unitholders income
tax liabilities resulting from income and gains of the Company. Additional
distributions of income are distributed first to the redeemable units in
amounts equal to their unpaid accumulated preferred return. Income is then
distributed as a reduction to the unreturned preferred capital of VIC.
Finally, income is distributed as a reduction to the equity accounts of the
members units in proportion to their respective ownership percentages. Certain
other modifications to the members equity accounts resulting from non-recourse
debt, certain gains and other events are provided as defined in the operating
agreements.
Warrants
As described above redeemable unit holders are entitled to reload warrants
to purchase an equivalent number of member units upon redemption of their
preferred units. The reload warrants have an initial exercise price of $176
per unit and fractional units at a proportional rate which may be adjusted as
a result of certain events as defined in the operating agreements. The reload
warrants have certain anti-dilutive and SEC registration rights as defined in
the operating agreements. The reload warrants expire five years after the date
of issuance.
As part of the restructuring, VIC received a restructuring warrant which
allows for the purchase of an additional five percent of the common units of
the Company on a fully diluted basis. The warrant has an initial exercise
price of $1,750,000, which may be adjusted as a result of certain events as
defined in the operating agreements. The restructuring warrant has certain SEC
registration rights as defined in the operating agreements. This warrant
expires five years after the date of issuance.
F-10
<PAGE>
ONEPOINT COMMUNICATIONS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
7. LEASES
The Company currently leases office space and equipment under non-cancelable
operating leases. The future minimum lease payments under non-cancelable
operating leases at December 31, 1997, are as follows:
<TABLE>
<CAPTION>
FISCAL YEAR
-----------
<S> <C>
1998.......................... $1,053,688
1999.......................... 1,199,821
2000.......................... 1,228,545
2001.......................... 1,294,848
2002.......................... 1,258,989
Thereafter.................... 3,881,179
----------
Total....................... $9,917,070
==========
</TABLE>
Rent expense for 1997 and 1996 was approximately $629,454 and $78,976,
respectively.
8. SUBSEQUENT EVENTS
On March 25, 1998, the Company entered into a term note with a bank. Under
the terms of the Call On Term--Term Note agreement the Company may borrow up
to $9 million as defined in the agreement. Principal payments on amounts
borrowed begin on January 1, 1999 with all balances payable on or before
January 1, 2003. The note has mandatory repayment provisions upon certain
events as defined in the agreement. The note is secured by certain of the
Company's assets and is guaranteed by SBC.
On June 9, 1998, the Company entered into a definitive agreement to acquire
certain cable television ROE contracts and microwave cable television
equipment of People's Choice-TV Corp., a private cable television provider. On
July 1, 1998, the Company purchased certain cable television ROE contracts and
microwave cable television equipment of People's Choice-TV Corp. for $11.2
million. On August 10, 1998, the Company purchased certain additional cable
television ROE contracts and related equipment from People's Choice-TV Corp.
for approximately $1.2 million.
On June 23, 1998, the Company entered into letters of intent to acquire
certain cable television ROE contracts and related equipment of three
companies in North Carolina.
On August 6, 1998 OnePoint made a demand for arbitration of certain disputes
under the Mid-Atlantic Operating Agreement. The arbitration demand seeks
resolution of the following questions: (i) whether OnePoint is entitled to
obtain and disclose Mid-Atlantic's results in connection with the Exchange
Offer; (ii) whether the Mid-Atlantic Holdings, the other owner of membership
interests in Mid-Atlantic, and Norcutt, the Business Manager of Mid-Atlantic
and a principal of Mid-Atlantic Holdings, breached their contractual and
fiduciary obligations to OnePoint by delaying and then conditioning the
release of Mid-Atlantic's 1997 audited financial statements on a grant of
business concessions from OnePoint; (iii) whether the Mid-Atlantic Holdings
and Norcutt breached their contractual and fiduciary obligations to Mid-
Atlantic and OnePoint by rejecting an offer of financing from OnePoint in
favor of an inferior offer from an unaffiliated financing source; (iv) whether
Mid-Atlantic Holdings and Norcutt violated their contractual and fiduciary
duties to OnePoint by imposing on OnePoint a four-day deadline to meet a June
1998 capital call for Mid-Atlantic; and (v) whether Mid-Atlantic Holdings and
Norcutt are liable for damages to OnePoint resulting from the breaches of
contractual and fiduciary duties described above. On August 27, 1998, Mid-
Atlantic Holdings filed a motion in Circuit Court in Lake County, Illinois
seeking an injunction staying the arbitration with respect to the first
question on the grounds that because OnePoint is not a party to the Mid-
Atlantic Operating Agreement, the dispute is not arbitrable. Management
believes that the outcome of this arbitration will not have a material impact
on the Company's financial position and results from operations.
F-11
<PAGE>
ONEPOINT COMMUNICATIONS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
On February 23, 1998, the Company acquired certain contracts and equipment
of a company for approximately $400,000.
In April 1998, the Company chose not to make an additional equity
contribution to Mid-Atlantic Telcom Plus, LLC, which resulted in its ownership
interest being diluted from 50% to 45%.
In April 1998, the Company's Chairman and Chief Executive Officer
transferred his equity interest in the Company to VenCom, L.L.C., of which he
is the sole member.
In April 1998, in order to convert the Company into a corporation, VIC and
VenCom, L.L.C. contributed their membership interests in the Company and a
$1,500,000 promissory note payable by the Company to VIC to Ventures in
Communications II, LLC ("VIC2") in exchange for membership interests of VIC2.
Subsequently, the Company merged with and into OnePoint Communications Corp.
("OnePoint Corp."), with the Company's outstanding membership interests and
its $1,500,000 promissory note payable to VIC exchanged for shares of OnePoint
Corp.'s common stock and preferred stock. As a result of the merger
transactions, the Company became a Delaware corporation which is wholly owned
by VIC2.
F-12
<PAGE>
ONEPOINT COMMUNICATIONS CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
JUNE 30, 1998
(UNAUDITED)
-------------
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents...................................... $ 436
Restricted cash................................................ 126
Investment in government securities, current ($24,009
restricted)................................................... 81,809
Accounts receivable, net....................................... 398
Affiliate receivable........................................... 552
Prepaid expenses............................................... 976
--------
Total current assets......................................... 84,297
Investments in government securities, noncurrent ($56,395
restricted)..................................................... 79,813
Investments in unconsolidated investments........................ 8,562
Property and equipment, net of accumulated depreciation.......... 3,931
Other assets..................................................... 10,298
--------
Total assets................................................. $186,901
========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expense........................... $ 6,250
Accrued interest payable....................................... 2,977
--------
Total current liabilities.................................... 9,227
Notes payable, non-current....................................... 175,000
Stockholders' equity
Common stock, $0.01 par value, 2,000,000 shares authorized,
1,000,000 shares issued and outstanding at June 30, 1998...... 10
Preferred stock, $1.00 par value; 35,000 shares authorized,
35,000 shares issued and outstanding at June 30, 1998......... 35
Additional capital............................................. 35,035
Accumulated deficit............................................ (32,406)
--------
Total stockholders' equity................................... 2,674
--------
Total liabilities and stockholders' equity................... $186,901
========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-13
<PAGE>
ONEPOINT COMMUNICATIONS CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
------------------
1998 1997
--------- -------
<S> <C> <C>
Revenue.................................................... $ 675 $ --
Cost of Revenue............................................ 1,906 --
--------- -------
Gross Margin Loss.......................................... (1,231) --
Expenses:
Selling, general and administrative...................... 8,865 5,464
Depreciation and amortization............................ 310 84
--------- -------
Loss from operations....................................... (10,406) (5,548)
Other income (expense):
Interest income.......................................... 586 34
Interest expense......................................... (2,977) --
Miscellaneous............................................ 17 --
--------- -------
Loss before equity in losses of unconsolidated investments. 12,780 5,514
Equity in losses of unconsolidated investments............. 1,499 1,125
--------- -------
Loss before taxes.......................................... (14,279) (6,639)
Income tax................................................. -- --
--------- -------
Net loss................................................... $ (14,279) $(6,639)
========= =======
Net (loss) per common share--Basic......................... $ (14.28)
---------
Net (loss) per common share--Diluted....................... $ (14.28)
=========
Shares used in computing loss per share:
Weighted average common shares--Basic.................... 1,000,000
=========
Weighted average common shares--Diluted.................. 1,000,000
=========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-14
<PAGE>
ONEPOINT COMMUNICATIONS CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
------------------
1998 1997
-------- --------
<S> <C> <C>
Net cash (used) in operating activities:
Net Loss.................................................. $(14,279) $ (6,639)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization........................... 310 84
Equity in losses of unconsolidated investments.......... 1,499 1,123
Changes in operating assets and liabilities:
Accounts receivable................................... (367) (2)
Prepaid expenses...................................... 155 (133)
Other assets.......................................... (701) (12)
Affiliates receivable................................. (439) (30)
Accounts payable and accrued expenses................. 3,454 1,406
Accrued interest...................................... 2,965 --
-------- --------
Net cash used in operating activities............... (7,403) (4,203)
Cash flows from investing activities:
Restricted cash......................................... (126) 13,000
Purchase of equity investments.......................... -- (12,046)
Proceeds from sale of marketable securities............. 3,591 --
Purchase of marketable securities....................... (165,125) --
Acquisition of property and equipment................... (1,496) (511)
-------- --------
Net cash provided by (used in) investing activities. (163,156) 443
Cash flows from financing activities:
Net proceeds from debt offering......................... 175,000 --
Other debt issuance costs............................... (9,468) --
Other long term debt.................................... 4,300 --
Repayment of long term debt............................. (4,300) --
Unitholder contribution................................. -- 4,000
-------- --------
Net cash provided by financing activities........... 165,532 4,000
-------- --------
Net (decrease) increase in cash........................... (5,027) 240
Cash at the beginning of period........................... 5,463 103
-------- --------
Cash at the end of period................................. $ 436 $ 343
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-15
<PAGE>
ONEPOINT COMMUNICATIONS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
NOTE 1 BASIS OF PRESENTATION
The interim financial statements as of June 30, 1998 and for the six months
ended June 30, 1998, and June 30, 1997 and the related footnote information
are unaudited and have been prepared on a basis consistent with the audited
consolidated financial statements of OnePoint Communications, LLC, (the
"Predecessor Company") as of and for the year ended December 31, 1997 included
in this Prospectus. These financial statements should be read in conjunction
with the audited consolidated financial statements and the related notes to
consolidated financial statements of the Predecessor Company as of and for the
year ended December 31, 1997. In the opinion of management, the accompanying
unaudited financial statements contain all adjustments (consisting of normal
recurring adjustments) which management considers necessary to present fairly
the consolidated financial position of OnePoint Communications Corp. and
subsidiaries ("the Company") at June 30, 1998 and the results of their
operations and cash flows for the six month periods ended June 30, 1998, and
June 30, 1997.
In April 1998, in order to convert the Predecessor Company into a
corporation, VenCom, L.L.C. and Ventures in Communications, L.L.C. ("VIC")
contributed their membership interests in the Predecessor Company and a $1,500
promissory note payable by the Predecessor Company to VIC to Ventures in
Communications II, LLC ("VIC2") in exchange for membership interest of VIC2.
Subsequently, the Predecessor Company merged with and into the Company, with
the Predecessor Company's outstanding membership interests and its $1,500
promissory note payable to VIC exchanged for shares of the Company's common
stock and preferred stock. As a result of the merger transactions, the Company
became a Delaware corporation which is wholly owned by VIC2.
As of the date on which the Notes and the Warrants become separable, the
Company will recognize a discount on the book value of the Notes relating to
the Warrants and amortize this amount over the life of the Notes. Accordingly,
no amortization of the discount of the Notes resulting from the issuance of
the Warrants has been recorded.
NOTE 2 ACQUISITIONS
On February 23, 1998, the Company purchased certain cable television right-
of-entry ("ROE") contracts and satellite cable television equipment from U.S.
Online Communications, LLC. The purchase resulted in the addition of 964 video
or telephony passings at two properties in Atlanta, Georgia. The purchase
price was approximately $0.4 million in cash.
On June 9, 1998, the Company entered into a definitive agreement to acquire
certain cable television ROE contracts and microwave cable television
equipment of People's Choice-TV Corp., a private cable television provider. On
July 1, 1998, the Company purchased certain cable television ROE contracts and
microwave cable television equipment of People's Choice-TV Corp. for $11,200.
On August 10, 1998, the Company purchased certain additional cable television
ROE contracts and related equipment from People's Choice-TV Corp. for
approximately $1,200. The purchases resulted in the addition of approximately
27,800 video passings located in 159 properties in the Chicago market.
F-16
<PAGE>
ONEPOINT COMMUNICATIONS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
On June 23, 1998, the Company entered into letters of intent to acquire
certain cable television ROE contracts and related equipment of three
companies in North Carolina. The purchases would result in the addition of
approximately 4,300 video passings in 14 properties. The Company anticipates
closing these transactions during 1998.
The assets associated with the above transactions were recorded at their
respective fair market values.
NOTE 3 SUMMARIZED INCOME STATEMENT INFORMATION OF AFFILIATES
The Company has investments ranging from 45-50% in three companies and
accounts for those investments using the equity method. The combined results
of operations of the Company's equity-basis affiliates are summarized below
(in thousands):
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED ENDED
JUNE 30, JUNE 30,
1998 1998
------------ ----------
<S> <C> <C>
Condensed Operating Information
Net sales....................................... $ 3,905 $ 7,445
Loss from operations............................ (1,155) (2,030)
Net loss........................................ (1,932) (3,485)
</TABLE>
NOTE 4 DEBT OFFERING
During May 1998, the Company sold 175,000 Units consisting of 14 1/2% Senior
Notes due 2008 (the "Notes") and Warrants to purchase 111,125 shares of Common
Stock (the "Warrants") for gross proceeds of $175,000. Each of the 175,000
Warrants entitles the holder to purchase 0.635 shares of Common Stock of the
Company at an exercise price of $0.01 per share. Unless exercised, the
Warrants expire on June 1, 2008. The Warrants are exercisable at any time upon
the earlier of the date on which the Notes and Warrants become separable (as
described below) or Change in Control.
The Notes and Warrants will not be separable until the earlier of (i)
November 15, 1998, (ii) commencement of the Exchange Offer, (iii) the date of
a Shelf Registration Statement, (iv) a Change of Control, or (v) at such date
as Bear, Stearns & Co. Inc. deems appropriate.
The Notes bear interest annually at 14 1/2% from the date of issuance.
Interest payments are due on June 1 and December 1 of each year, commencing on
December 1, 1998. The Company is not required to make mandatory redemption or
sinking fund payments under the Notes. The Notes generally are not redeemable
at the option of the Company at any time prior to June 1, 2003. Thereafter,
the Notes will be subject to redemption at any time at the option of the
Company, in whole or in part, at the redemption prices (expressed as
percentages of principal amount) set forth below, plus any unpaid interest and
Liquidated Damages, if any.
<TABLE>
<CAPTION>
PERCENTAGE
----------
<S> <C>
June 1, 2003 to May 31, 2004................................... 107.250%
June 1, 2004 to May 31, 2005................................... 104.833%
June 1, 2005 to May 31, 2006................................... 102.417%
June 1, 2006 and thereafter.................................... 100.000%
</TABLE>
In addition, the Company may redeem up to 35% of the aggregate principal
amount of issued Notes at a redemption price of 114.5% of the principal
amount, plus unpaid interest and Liquidated Damages, if any, with the net cash
proceeds of one or more public or private offerings of Common Stock generating
net cash proceeds to the Company of at least $20,000, provided at least 65% of
the aggregate principal amount of Notes issued on the Closing Date remain
outstanding immediately after such redemption.
F-17
<PAGE>
ONEPOINT COMMUNICATIONS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONCLUDED)
In connection with the debt offering, the Company purchased $80,500 of
Government securities. These investments will be used to fund the first seven
scheduled interest payments on the Notes. These
securities are pledged to the Trustee for the benefit of the holders of the
Notes, and secure a portion of the Company's obligations under the Indenture
with respect to the Notes (the "Indenture").
Pursuant to a Change in Control, as defined in the Indenture, the Company
will be required to make an offer to each Note holder to repurchase all or any
part of the Notes at 101% of the aggregate principal amount, plus unpaid
interest and Liquidated Damages, if any.
Amounts outstanding under the Notes were $175,000 at June 30, 1998. Interest
accrued under the Notes at June 30, 1998 was $2,977.
In connection with the debt offering, the Company is required to comply with
specified debt covenants. These covenants include limitations on sales of
subsidiaries and certain assets, mergers, and other activities.
NOTE 5 TERM NOTE
On March 25, 1998, the Company entered into a term note with a bank (the
"Bank Facility"). Under the terms of the Bank Facility, the Company may borrow
up to $9,000. Principal payments on amounts borrowed begin on January 1, 1999
with all balances payable on or before January 1, 2003. The Bank Facility has
mandatory repayment provisions upon certain events. The Bank Facility is
secured by certain of the Company's assets and is guaranteed by SBC
Communications Inc.
NOTE 6 EQUITY
Pursuant to the Company's Recapitalization as described in Note 1, the
Company authorized 2,000,000 shares of $0.01 par value Common Stock, and
35,000 shares of $1.00 par value Preferred Stock.
Upon liquidation, dissolution or winding up of the Company, the holders of
Common Stock are entitled to receive pro rata the assets of the Company which
are legally available for distribution, after payment of all debts and other
liabilities and subject to the prior rights of any holders of Preferred Stock.
Each outstanding share of Common Stock is entitled to vote on all matters
submitted to a vote of stockholders. Subject to the prior rights of the
holders of Preferred Stock, the holders of outstanding shares of Common Stock
are entitled to receive dividends as determined, from time to time, by the
Board of Directors. The Indenture restricts the ability of the Company to pay
dividends on the Common Stock.
Upon liquidation, dissolution or winding up of the Company, each holder of
Preferred Stock is entitled to be paid before any distribution or payment is
made with respect to any other class of the Company's capital stock, an amount
in cash equal to the aggregate of all shares held by such holder. "Liquidation
Value" for any share of Preferred Stock is equal to $1,000. The Preferred
Stock does not accrue dividends, and is not convertible into any other class
of capital stock. The Preferred Stock may be redeemed by the Company, in whole
or in part, at any time, but is not subject to mandatory redemption.
NOTE 7 SUBSEQUENT EVENTS
On July 1, 1998, the Company purchased certain Chicago-based cable
television ROE contracts and microwave cable television equipment of People's
Choice-TV Corp. for $11,200. On August 10, 1998, the Company purchased certain
additional cable television contracts and equipment from People's Choice TV
for approximately $1,200. The purchases resulted in the addition of
approximately 27,800 cable television passings, in 159 properties.
F-18
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Members of
the Mid-Atlantic Telcom Plus, LLC
Washington, D.C.
We have audited the balance sheet of Mid-Atlantic Telcom Plus, LLC as of
December 31, 1997, and the related statements of operations, changes in
members' equity and cash flows for the year then ended. These financial
statements are the responsibility of management. Our responsibility is to
express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Mid-Atlantic Telcom Plus,
LLC as of December 31, 1997, and the results of its operations and its cash
flows for the year then ended, in conformity with generally accepted
accounting principles.
Beers & Cutler PLLC
Washington, D.C.
March 27, 1998, except for Note 10, as to which the date is August 6, 1998.
F-19
<PAGE>
MID-ATLANTIC TELCOM PLUS, LLC
BALANCE SHEET
DECEMBER 31, 1997
ASSETS
<TABLE>
<S> <C>
Current Assets
Cash............................................................ $ 154,102
Accounts receivable--trade, net of allowance for doubtful
accounts of $248,287........................................... 1,038,763
Accounts receivable--other...................................... 117,293
Prepaid expenses and other assets............................... 91,943
-----------
Total current assets.......................................... 1,402,101
-----------
Fixed Assets
Cable TV systems, net of accumulated depreciation of $2,423,216. 13,223,221
Other property and equipment, net of accumulated depreciation of
$419,133....................................................... 1,784,735
-----------
Total fixed assets............................................ 15,007,956
-----------
Intangible Assets
Goodwill........................................................ 33,827,273
Other intangible assets......................................... 1,634,769
Accumulated amortization........................................ (3,840,159)
-----------
Total intangible assets....................................... 31,621,883
-----------
Total Assets................................................ $48,031,940
===========
LIABILITIES AND MEMBERS' EQUITY
Current Liabilities
Accounts payable--trade......................................... $ 2,168,064
Accrued expenses................................................ 1,259,253
Accrued interest--CIBC.......................................... 312,222
Due to affiliates............................................... 181,443
Deferred revenue................................................ 784,764
Current maturities of notes payable--financial institution...... 24,197,296
Current maturities of notes payable--other...................... 265,811
Current maturities of leases payable............................ 115,061
Deferred rent................................................... 177,470
-----------
Total current liabilities..................................... 29,461,384
-----------
Long-Term Debt
Notes payable and accrued interest--other....................... 457,017
Leases payable.................................................. 255,770
-----------
Total long-term debt.......................................... 712,787
-----------
Total liabilities........................................... 30,174,171
Members' Equity................................................... 17,857,769
-----------
Total Liabilities and Members' Equity....................... $48,031,940
===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-20
<PAGE>
MID-ATLANTIC TELCOM PLUS, LLC
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997
<TABLE>
<S> <C>
Revenue
Cable TV revenue................................................ $14,039,818
-----------
Operating Expenses
Operating....................................................... 15,520,106
Selling and G&A................................................. 1,886,599
-----------
Total operating expenses...................................... 17,406,705
-----------
Loss from operations............................................ (3,366,887)
-----------
Other Income (Expense)
Interest income................................................. 186,129
Interest expense................................................ (3,001,174)
Gain on disposal of assets...................................... 39,701
-----------
Total other income (expense).................................. (2,775,344)
-----------
Net loss.................................................... $(6,142,231)
===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-21
<PAGE>
MID-ATLANTIC TELCOM PLUS, LLC
STATEMENT OF CHANGES IN MEMBERS' EQUITY
YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
MEMBERS'
EQUITY
-----------
<S> <C>
Balance, January 1, 1997........................................... $ --
Contributions.................................................... 24,000,000
Net Loss......................................................... (6,142,231)
-----------
Balance, December 31, 1997......................................... $17,857,769
===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-22
<PAGE>
MID-ATLANTIC TELCOM PLUS, LLC
STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1997
<TABLE>
<S> <C>
Cash Flows from Operating Activities
Net loss........................................................ $(6,142,231)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation and amortization................................. 6,682,508
Gain on disposal of assets.................................... (39,701)
Changes in current assets and liabilities, net of contributed
amounts
Accounts receivable......................................... (69,468)
Prepaid and other assets.................................... 179,126
Accounts payable and accrued expenses....................... (1,119,579)
Due to affiliates, net...................................... (3,469,490)
Deferred revenue............................................ (45,688)
Deferred rent............................................... 177,469
-----------
Net cash used in operating activities..................... (3,847,054)
-----------
Cash Flows from Investing Activities
Capital expenditures............................................ (5,210,216)
Proceeds from sale of fixed assets.............................. 193,139
Acquisition of intangible assets................................ (2,601,597)
-----------
Net cash used in investing activities..................... (7,618,674)
-----------
Cash Flows from Financing Activities
Capital contribution--OPC....................................... 12,000,000
Capital contribution--Holdings, net of non-cash contribution of
assets and liabilities......................................... 184,702
Repayments of leases payable.................................... (125,277)
Proceeds from issuance of long-term debt........................ 809,569
Repayments of debt.............................................. (1,249,164)
-----------
Net cash provided by financing activities................. 11,619,830
-----------
Net Decrease in Cash and Cash Equivalents......................... 154,102
Cash and Cash Equivalents, Beginning of Year...................... --
-----------
Cash and Cash Equivalents, End of Year............................ $ 154,102
===========
Supplemental Disclosure of Cash Flow Information:
Cash paid for interest.......................................... $ 2,553,752
===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-23
<PAGE>
MID-ATLANTIC TELCOM PLUS, LLC
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1997
1. ORGANIZATION
Mid-Atlantic Telcom Plus, LLC (the Company) was formed as of January 1, 1997
under the laws of Delaware as a limited liability company. The Company was
formed when Mid-Atlantic Cable Development Company Limited Partnership, a
Maryland Limited Partnership (DevCo), Mid-Atlantic CATV Limited Partnership, a
Maryland Limited Partnership (NewCo) and Mid-Atlantic Cable Service Company,
Inc., a Virginia Corporation (MCSC), collectively referred to as the Mid-
Atlantic Cable Companies, contributed all of their assets and liabilities to
Mid-Atlantic Cable Holdings, LLC (Holdings). Holdings simultaneously
contributed these assets and liabilities to the Company for a 50% ownership
interest. The remaining 50% ownership interest is owned by OnePoint
Communications Holdings LLC (OPC), formerly known as VIC RMTS Holdco, LLC.
Except for certain matters specified in the Operating Agreement between
Holdings and OPC, which require a supermajority vote of 80%, voting control is
held by Holdings.
Holdings contributed tangible and intangible assets with a fair value of
$48,020,000 (including cash of $184,702 and goodwill of $21,966,000 created at
the time of contribution), liabilities with a fair value of $36,020,000, and
received ownership in the Company with a fair value of $12,000,000.
OPC contributed $12,000,000 in cash for its ownership interest.
The Company has joined together with an OPC affiliate to do business under
the name OnePoint Communications providing bundled cable and telephone
services in Washington DC, Maryland, Virginia, Pennsylvania, New Jersey and
Delaware.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash and Cash Equivalents--The term cash, as used in the accompanying
financial statements, includes cash on deposit with financial institutions and
cash on hand.
The Company maintains its cash in bank deposit accounts that, at times,
exceed federally insured limits. The Company has not experienced any losses in
such accounts. The Company believes it is not exposed to any significant
credit risk on cash equivalents.
Fixed Assets--Cable TV systems and other property and equipment are recorded
at cost and depreciated using the straight-line method over their estimated
useful lives of 10 and 5 years, respectively. Total 1997 depreciation expense
was $2,842,349.
Intangible Assets--Intangible assets are amortized using the straight-line
method over their estimated useful lives ranging from 3 to 15 years. Total
1997 amortization expense was $3,840,159.
The Company has classified as goodwill the cost in excess of fair value of
net assets of companies acquired that were accounted for as purchase
transactions. At each balance sheet date, the Company evaluates the
realizability of goodwill based on the related cable system contracts.
Deferred Revenue--Deferred revenue is reported on the balance sheet for
amounts which have been billed to customers in advance and therefore not yet
earned. These advance charges are also included in accounts receivable.
Use of Estimates--The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets, liabilities,
revenues and expenses and the disclosure of contingent assets and liabilities.
F-24
<PAGE>
MID-ATLANTIC CABLE COMPANIES
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Income Taxes--No provision for federal and state income taxes has been made
in the accompanying financial statements of the limited liability company as
profits and losses of the Company are reported by the members on their
respective income tax returns.
3. CABLE TV SYSTEMS ACQUISITIONS
In February 1997 the Company acquired four cable TV franchises located in
Cecil and Kent County Maryland from Cecilton CATV, Inc. for $2.8 million. The
accompanying statement of operations includes the results of operations for
Cecilton CATV from the date of acquisition. The acquisition has been accounted
for using the purchase method. The purchase price has been allocated to the
tangible cable TV and other assets acquired based on their estimated fair
value of $800,000. The excess of the purchase price over tangible assets
received has been allocated to goodwill.
In February 1998 the Company acquired a cable TV system located in
Mechanicsburg, Pennsylvania for $280,000. In addition, an acquisition of two
cable systems in the Washington DC metropolitan area was completed in March
1998 for $1,920,000. These financial statements do not reflect these 1998
acquisitions.
4. LONG-TERM DEBT
Notes Payable to Financial Institutions
<TABLE>
<S> <C>
CIBC (As Agent) Term Loan (including Expansion) in the original
amount of $23,125,000 bearing interest based on either CIBC's
base rate plus 4% or LIBOR plus 5% (10.94% at December 31,
1997). Interest payments are paid monthly. The entire balance is
due at loan maturity, May 30, 1998.............................. $21,636,296
CIBC Revolving Line of Credit in the amount of $5,500,000 bearing
interest based on either CIBC's base rate plus 4% or LIBOR plus
5% (10.94% at December 31, 1997). Interest payments are paid
monthly. The line of credit expires May 30, 1998................ 2,561,000
</TABLE>
Notes payable--Other
<TABLE>
<S> <C>
Promissory note payable to Cecilton CATV, Inc. dated February 1,
1997 in the original amount of $800,000. The note bears interest
at 8.5% per annum. The note requires quarterly principal
payments of $50,000 plus accrued interest. The note matures in
February 2001................................................... 659,318
Promissory note payable to former owners of an acquired business,
dated November 15, 1996, in the original amount of $100,000. The
note bears interest at 8% per annum. Eight quarterly principal
payments of $125,500 plus interest are due. The note matures on
November 30, 1998............................................... 50,340
Note payable bearing interest at 10.50%. Monthly principal and
interest payments of $611 are required. The note matures in
December 1999................................................... 13,170
-----------
Total notes payable............................................ $24,920,124
===========
</TABLE>
The Company has entered into an interest rate swap agreement with CIBC,
Toronto to reduce the impact of changes in interest rates on its debt. The
swap agreement effectively converts a portion of the variable rate debt to
fixed rate debt to reduce the risk of incurring higher interest costs. At
December 31, 1997, the notional amount was $9,000,000 with an average receive
rate of 6.07%.
F-25
<PAGE>
MID-ATLANTIC TELCOM PLUS, LLC
NOTES TO THE FINANCIAL STATEMENTS--(CONTINUED)
The CIBC Term Loan and Line of Credit are collateralized by all of the
assets, the assignment of all franchise agreements, SMATV agreements and other
material agreements owned by the Company and the assignment of all general and
limited partnership interests in NewCo and Devco, the outstanding stock in
MCSC, the members' equity interests in the Company and Holdings, a $1.4
million guaranty by the President of the Company and an assignment of the
proceeds of a $1 million life insurance policy of the president of the
Company.
The maturities of the above loans are as follows:
<TABLE>
<S> <C>
December 31, 1998............ $24,463,107
1999......................... 207,017
2000......................... 200,000
2001......................... 50,000
-----------
$24,920,124
===========
</TABLE>
The CIBC loans are subject to certain restrictive covenants with respect to
maintaining certain ratios of operating cash flows to total debt, principal
and interest payments. During 1997, the Company was not in compliance with
certain of the financial covenants related to the CIBC debt. Waivers of
default have been received from the lender related to these covenants.
The CIBC Term Loan and Revolving Line of Credit were amended in 1997 to
modify certain 1997 payment due dates and the maturity from September 1998 to
May 1998.
The Company and CIBC are currently in discussions regarding a new loan
facility to replace the Term Loan and the Revolving Line of Credit, which both
mature in May 1998. The Term Loan and the Revolving Line of Credit have been
classified as a current liability in the accompanying balance sheet. While no
definitive agreement to extend these loans beyond May 1998 is in place, based
on the status of the discussions, Management expects these loans to be
extended or replaced with long-term financing by the end of May 1998.
5. LEASE COMMITMENTS
The Company is obligated under operating leases for premises occupied with
minimum lease terms expiring at various times through 2008. Certain of these
loans contain escalation clauses for increases based upon increases in
operating expenses and real estate taxes. The Company has also entered into
several operating leases for other operating equipment. Total rent expense for
the year was $391,233. The following future minimum rental payments are
required under noncancellable operating leases with terms in excess of one
year:
<TABLE>
<S> <C>
December 31, 1998............. $ 652,233
1999.......................... 639,365
2000.......................... 655,360
2001.......................... 672,555
2002.......................... 469,717
Thereafter.................... 2,704,451
----------
$5,793,681
==========
</TABLE>
F-26
<PAGE>
MID-ATLANTIC TELCOM PLUS, LLC
NOTES TO THE FINANCIAL STATEMENTS--(CONTINUED)
Lease commitments do not reflect payments to be made by an OPC affiliate who
is jointly obligated with the Company on certain lease agreements. Expected
lease payments by the OPC affiliate are as follows:
<TABLE>
<S> <C>
December 31, 1998............. $ 278,798
1999.......................... 390,296
2000.......................... 400,613
2001.......................... 411,057
2002.......................... 418,979
Thereafter.................... 2,648,403
----------
$4,548,146
==========
</TABLE>
The Company has also entered into several capital leases for vehicles and
other operating equipment. The amounts of leased equipment, net of accumulated
depreciation reflected in other property and equipment is $477,000. The
following future lease payments are required as of December 31, 1997.
<TABLE>
<S> <C>
December 31, 1998.............. $182,154
1999........................... 178,463
2000........................... 102,897
2001........................... 14,450
--------
$477,964
Less: amounts representing
interest...................... (107,133)
--------
Total leases payable......... $370,831
========
</TABLE>
6. RELATED PARTY TRANSACTIONS
The Company has entered into several cost sharing agreements with an OPC
affiliate. The cost sharing agreements are generally based on usage or
specific identification. At December 31, 1997, the Company owed the OPC
affiliate $55,882. During 1997, the OPC affiliate paid the company $221,186 in
accordance with these cost sharing agreements.
In accordance with the Contribution Agreement between and among DevCo.,
NewCo, MCSC, Holdings and OPC, the Company made a payment of $2,250,000 to
DevCo in February 1997. The liability for payment was included in liabilities
contributed by Holdings.
In February 1997, the Company paid $1,093,000 to an entity affiliated with
Holdings to satisfy a note obligation that was included in liabilities
contributed by Holdings.
During 1997, the Company paid $434,310 to its chief executive officer to
satisfy a liability contributed by Holdings.
7. PENSION PLAN
The Company sponsors a 401(k) and Profit Sharing Plan covering all
employees. Contributions to the plan are at the discretion of management. For
the year ended December 31, 1997, no matching contribution was made.
8. NON-CASH INVESTING AND FINANCING ACTIVITIES
On January 1, 1997, Holdings contributed substantially non-cash assets with
a fair market value of $48,020,000 including goodwill of $21,966,000 and
liabilities with a fair market value of $36,020,000 and received a 50%
ownership interest in the Company valued at $12,000,000.
F-27
<PAGE>
MID-ATLANTIC TELCOM PLUS, LLC
NOTES TO THE FINANCIAL STATEMENTS--(CONTINUED)
During 1997, the Company purchased $232,181 in property and equipment
through issuance of capital lease obligations.
During 1997, the Company satisfied a $160,000 note payable by returning
certain property, equipment and intangible assets to the seller.
9. FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company has the following financial instruments: cash, trade receivables
and payables and notes payable (including the swap agreement). Based on the
floating rate nature of the debt and the short-term nature of cash, trade
receivables and payables, carrying values of the financial instruments
approximate fair value.
10. SUBSEQUENT EVENT
In January 1998, Holdings contributed $2.5 million of additional equity to
the Company to be used for cable TV system acquisitions, capital construction
and general corporate purposes.
On August 6, 1998, OPC made a demand for arbitration of certain disputes
under the Operating Agreement. Management believes that the outcome of this
arbitration will not have a material impact on the Company's financial
position and results from operations.
F-28
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Partners and Shareholders of
the Mid-Atlantic Cable Companies
Washington, D.C.
We have audited the consolidated and combined balance sheet of Mid-Atlantic
Cable Service Company, Inc., its Subsidiaries and Mid-Atlantic CATV Limited
Partnership, collectively referred to as the Mid-Atlantic Cable Companies as
of December 31, 1996 and the related consolidated and combined statements of
operations, changes in owners' equity (deficit) and cash flows for the year
then ended. These consolidated and combined financial statements are the
responsibility of management. Our responsibility is to express an opinion on
these consolidated and combined financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated and combined financial position of
Mid-Atlantic Cable Service Company, Inc., its Subsidiaries and Mid-Atlantic
CATV Limited Partnership as of December 31, 1996 and the consolidated and
combined results of their operations and their consolidated and combined cash
flows for the year then ended, in conformity with generally accepted
accounting principles.
Beers & Cutler PLLC
Washington, D.C. April 4, 1997
F-29
<PAGE>
MID-ATLANTIC CABLE COMPANIES
CONSOLIDATED AND COMBINED BALANCE SHEET
DECEMBER 31, 1996
<TABLE>
<CAPTION>
ASSETS
<S> <C> <C>
Current Assets
Cash........................................................ $ 184,702
Accounts receivable, net of allowance for doubtful accounts
of $216,271................................................ 1,086,589
Prepaid expenses and other assets........................... 291,545
Investment in and advances to affiliates.................... 986,139
-----------
Total current assets...................................... 2,548,975
-----------
Fixed Assets
Cable TV systems, net of accumulated depreciation of
$10,995,040................................................ 11,716,022
Other property and equipment, net of accumulated
depreciation of $1,823,085................................. 790,855
-----------
Total fixed assets........................................ 12,506,877
-----------
Intangible Assets
Goodwill.................................................... 10,755,829
Other intangible assets..................................... 2,505,573
Accumulated amortization.................................... (2,152,137)
-----------
Total intangible assets................................... 11,109,265
-----------
Deferred Income Taxes..................................... 563,147
-----------
Total Assets............................................ $26,728,264
===========
<CAPTION>
LIABILITIES AND OWNERS' EQUITY (DEFICIT)
<S> <C> <C>
Current Liabilities
Accounts payable--trade..................................... $ 2,929,191
Accrued interest and success fee--financial institution..... 852,392
Accrued expenses............................................ 643,222
Deferred compensation....................................... 434,310
Deferred revenue............................................ 830,452
Current maturities of notes payable--financial institution.. 5,556,000
Current maturities of notes payable and interest payable--
partners................................................... 1,093,820
Current maturities of notes payable--other.................. 224,163
Current maturities of leases payable........................ 98,608
-----------
Total current liabilities................................. 12,662,158
-----------
Long-Term Debt
Notes payable--financial institution........................ 19,536,296
Notes payable and accrued interest--partner................. 1,203,348
Notes payable and accrued interest--other................... 203,170
Leases payable.............................................. 165,320
-----------
Total long-term debt...................................... 21,108,134
-----------
Total liabilities....................................... 33,770,292
Owners' Equity (Deficit)
Common stock................................................ 245
Additional paid-in capital.................................. 1,355
Retained deficit............................................ (962,093)
Partners' deficit........................................... (6,081,535)
-----------
Total owners' equity (deficit)............................ (7,042,028)
-----------
Total Liabilities and Owners' Equity (Deficit).......... $26,728,264
===========
</TABLE>
The accompanying notes are an integral part of these consolidated and combined
financial statements.
F-30
<PAGE>
MID-ATLANTIC CABLE COMPANIES
CONSOLIDATED AND COMBINED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<S> <C>
Revenue
Cable TV revenue................................................ $12,605,721
-----------
Operating Expenses
Operating....................................................... 11,210,652
Selling, general and administrative............................. 1,490,184
-----------
Total operating expenses...................................... 12,700,836
-----------
Loss from operations............................................ (95,115)
-----------
Other Income (Expense)
Interest expense................................................ (2,772,087)
CIBC success fee................................................ (835,439)
Equity in loss of affiliate..................................... (279,297)
-----------
Total other income (expense).................................. (3,886,823)
-----------
Loss before income tax and extraordinary item................... (3,981,938)
Income tax benefit--deferred.................................... 320,748
-----------
Net loss before extraordinary item.............................. (3,661,190)
Extraordinary item--debt restructuring gain..................... 414,474
-----------
Net loss.................................................... $(3,246,716)
===========
</TABLE>
The accompanying notes are an integral part of these consolidated and combined
financial statements.
F-31
<PAGE>
MID-ATLANTIC CABLE COMPANIES
CONSOLIDATED AND COMBINED STATEMENT OF CHANGES
IN OWNERS' EQUITY (DEFICIT)
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
COMMON STOCK--1,000
SHARES AUTHORIZED,
$1 PAR VALUE
--------------------
SHARES ISSUED ADDITIONAL TOTAL
PARTNERS' AND PAID-IN RETAINED OWNERS'
CAPITAL OUTSTANDING AMOUNT CAPITAL DEFICIT DEFICIT
----------- ------------- ------ ---------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance, January 1,
1996................... $(3,651,330) 245 $ 245 $1,355 $(483,302) $(4,133,032)
Distributions......... -- -- -- -- -- --
Purchase of Partners'
Interest............. 337,720 -- -- -- -- 337,720
Net Loss.............. (2,767,925) -- -- -- (478,791) (3,246,716)
----------- ------ ------ ------ --------- -----------
Balance, December 31,
1996................... $(6,081,535) 245 $ 245 $1,355 $(962,093) $(7,042,028)
=========== ====== ====== ====== ========= ===========
</TABLE>
The accompanying notes are an integral part of these consolidated and combined
financial statements.
F-32
<PAGE>
MID-ATLANTIC CABLE COMPANIES
CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<S> <C>
Cash Flows from Operating Activities
Net loss........................................................ $(3,246,716)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation and amortization................................. 3,826,136
Noncash interest expense...................................... 101,485
Extraordinary time--debt restructuring gain................... (414,474)
Income tax benefit--deferred.................................. (320,748)
Changes in:
Accounts receivable......................................... (89,503)
Prepaid and other assets.................................... 127,967
Investments in and advances to affiliates................... (135,298)
Accounts payable and accrued expenses....................... 1,506,785
Deferred revenue............................................ 130,096
-----------
Net cash provided by operating activities................. 1,485,730
-----------
Cash Flows from Investing Activities
Capital expenditures............................................ (3,235,848)
Acquisition of intangible assets................................ (2,054,256)
-----------
Net cash used in investing activities..................... (5,290,104)
-----------
Cash Flows from Financing Activities
Proceeds from issuance of long-term debt........................ 8,925,630
Repayments of debt.............................................. (5,388,088)
-----------
Net cash provided by financing activities................. 3,537,542
Net Decrease in Cash and Cash Equivalents......................... (266,832)
Cash and Cash Equivalents, Beginning of Year...................... 451,534
-----------
Cash and Cash Equivalents, End of Year............................ $ 184,702
===========
Supplemental Disclosure of Cash Flow Information:
Cash paid for interest.......................................... $ 2,846,704
===========
Supplemental Disclosure of Noncash Investing and Financing
Activities
Additions to property and equipment from issuance of capital
Lease obligations.............................................. $ 263,928
===========
Additions to goodwill through issuance of a note payable........ $ 1,093,820
===========
Goodwill arising from repurchase of a partners' interests....... $ 337,720
===========
</TABLE>
The accompanying notes are an integral part of these consolidated and combined
financial statements.
F-33
<PAGE>
MID-ATLANTIC CABLE COMPANIES
NOTES TO THE CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1996
1. CONSOLIDATION, COMBINATION AND ORGANIZATION
The consolidated and combined financial statements include the accounts of
Mid-Atlantic Cable Service Company, Inc., a Virginia corporation, ("MCSC") and
its subsidiaries, Mid-Atlantic Cable Development Company Limited Partnership,
a Maryland limited partnership ("DevCo"), Chesapeake Private Cablevision
Limited Partnership, a Maryland limited partnership (Chessie) combined with
its affiliate, Mid-Atlantic CATV Limited Partnership, a Maryland limited
partnership, ("NewCo"). All material intercompany transactions have been
eliminated.
The primary purpose of these entities, collectively referred to as the Mid-
Atlantic Cable Companies (the Company), is to acquire, construct, operate and
otherwise deal in and with franchise and private cable TV systems and other
forms of communication in the Mid-Atlantic region.
MCSC
MCSC is a wholly-owned subsidiary of South Central Development Company
Limited Partnership, a Maryland limited partnership ("South Central"). John C.
Norcutt, an individual ("Norcutt"), is the sole general partner of South
Central with a 1% general partnership interest as well as a 12.74% limited
partnership interest in South Central. MCSC exists solely to manage the
interests and investments of South Central and to provide management services
to the cable operating limited partnerships it owns and controls.
DevCo
MCSC is the 1% general partner in DevCo. The remaining 99% limited
partnership interest is held by South Central.
NewCo
Norcutt holds the sole general partnership interest in NewCo. As of December
31, 1996, the limited partners are South Central, Chessie and Mid-Atlantic
Cable Limited Partnership of Caroline County, a Virginia limited partnership
("Caroline").
Norcutt, South Central and MCSC collectively own 98.4% of Chessie. An
individual owns a 1.6% limited partnership interest in Chessie. This
individual also holds a 6.13% limited partnership interest in South Central.
Norcutt and South Central own 100% of Caroline; Norcutt has a 1% general
partnership interest and South Central has a 99% limited partnership interest.
Subsequent Events
Effective as of January 1, 1997, MCSC, NewCo, and DevCo (referred to in this
paragraph as the "Transferors") contributed all of their assets and
substantially all of their liabilities to a newly formed entity, Mid-Atlantic
Holdings, LLC ("Holdings") and Holdings simultaneously contributed the assets
and liabilities of the transferors to a newly formed entity, Mid-Atlantic
Telcom Plus, LLC ("CableCo"). In connection with the contribution of the
assets through Holdings to CableCo, VIC RMTS HoldCo, LLC ("VIC") purchased a
50% interest in CableCo for $12,000,000, also effective as of January 1, 1997.
The transfer of a portion of the assets from the Transferors and a portion of
the cash from VIC to CableCo remain subject to certain closing conditions
which reasonably should occur on or before June 30, 1997. In connection with
the organization of CableCo,
F-34
<PAGE>
MID-ATLANTIC CABLE COMPANIES
NOTES TO THE CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS--(CONTINUED)
South Central Development Company Limited Partnership (the owner directly or
indirectly of substantially all of the equity of the Transferors and Holdings)
and VIC organized Mid-Atlantic RMTS, LLC ("Telco") each owning a 50%
membership interest therein. Thus, South Central initially is indirectly a 25%
equity owner of Telco. CableCo and Telco have joined together and are doing
business under the name OnePoint Communications with CableCo owning the cable
television assets and Telco owning the telephone assets and together will sell
bundled cable and telephony services in Washington, D.C., Maryland, Virginia,
Pennsylvania, New Jersey and Delaware.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash and Cash Equivalents--The term cash, as used in the accompanying
financial statements, includes cash on deposit with financial institutions and
cash on hand.
The Company maintains its cash in bank deposit accounts which, at times,
exceed federally insured limits. The Company has not experienced any losses in
such accounts. The Company believes it is not exposed to any significant
credit risk on cash equivalents.
Investments--MCSC is 1% general partner in Mid-Atlantic Cable Operating
Limited Partnership No. 1 of Prince William County. The investment is
accounted for using the equity method and has a credit balance of $279,297 at
December 31, 1996.
Fixed Assets--Cable TV systems and other property and equipment are recorded
at cost and depreciated using the straight-line method over their estimated
useful lives of 10 and 5 years, respectively. Total 1996 depreciation expense
was $2,413,641.
Intangible Assets--Intangible assets are amortized using the straight-line
method over their estimated useful lives ranging from 5 to 15 years. The
Company has classified as goodwill the cost in excess of fair value of net
assets of companies acquired accounted for as purchase transactions. At each
balance sheet date, the Company evaluates the realizeability of goodwill based
on the related cable system contracts.
As a result of the PPCLP transaction (Note 6) and the purchase of Howard's
preferred partnership interest in NewCo (Note 9), $2.3 million was added to
goodwill during 1996 which represents the excess of the purchase prices over
the carrying value of the partners' interests.
Deferred Revenue--Deferred revenue is reported on the balance sheet for
amounts which have been billed to customers in advance and therefore not yet
earned. These advance charges are also included in accounts receivable.
Use of Estimates--The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of consolidated and combined
assets, liabilities, revenues and expenses and the disclosure of contingent
assets and liabilities.
Income Taxes--No provision for federal and state income taxes has been made
in the accompanying financial statements of the limited partnerships as the
profits and losses of the partnerships are reported by the individual partners
on their respective income tax returns. In addition, no current provision for
federal and state income taxes has been made for MCSC as MCSC had cumulative
net operating losses of $2.3 million available as of December 31, 1996 for
carryforward to reduce taxable income of future periods. The availability of
the losses expires at various times through 2011.
F-35
<PAGE>
MID-ATLANTIC CABLE COMPANIES
NOTES TO THE CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS--(CONTINUED)
3. CABLE TV SYSTEMS ACQUISITIONS
In August and November 1996, DevCo acquired the assets of Delaware Valley
Cablevision and Satleasco, LLC for $350,000 and $476,000, respectively. In
addition, DevCo entered into an agreement with Cecilton CATV, Inc. on November
26, 1996 to purchase for $2.8 million four cable TV franchises located in
Cecil and Kent County, Maryland. A $50,000 deposit was placed in escrow until
closing by CableCo which occurred on February 8, 1997. These financial
statements do not reflect this acquisition.
The accompanying statement of operations includes the results of operations
for Delaware Valley and the Satleasco Properties from the date of their
acquisition as stated above. The aforementioned acquisitions were accounted
for using the purchase method.
4. DEBT RESTRUCTURING
On January 31, 1996, Canadian Imperial Bank of Commerce (CIBC) provided Mid-
Atlantic with the CIBC Expansion Term Loan in the amount of $5,125,000. The
proceeds of the loan were used to refinance and repay certain notes, pay
success fees to CIBC related to the transaction and provide Mid-Atlantic with
working capital. This transaction generated a restructuring gain in the amount
of $414,474.
5. LONG-TERM DEBT
Notes Payable to Financial Institutions
<TABLE>
<S> <C>
NewCo and DevCo
CIBC (As Agent) Term Loan (including Expansion) in the original
amount of $23,125,000 bearing interest based on either CIBC's
base rate plus 4% or LIBOR plus 5%. Interest payments are paid
quarterly. A balloon payment of $14,375,000 is due at loan
maturity, September 30, 1998..................................... $21,636,296
CIBC Revolving Line of Credit in the amount of $5,500,000 bearing
interest based on either CIBC's base rate plus 4% or LIBOR plus
5% (10.5% at December 31, 1996). Interest payments are made
quarterly. The line of credit expires June 30, 1997. Negotiations
for restructuring the Term Loan and the Revolving Line of Credit
into one long-term self liquidating loan are currently underway.. 3,456,000
DevCo
Promissory note payable to Delaware Valley Cablevision, dated
August 1, 1996, in the original amount of $190,000. Interest
accrues at 8% and is payable quarterly. Beginning April 1997,
quarterly principal installments of $15,000 are also due. In
October 1997, quarterly principal installments increase to
$20,000 and are payable with interest until the note is paid in
full on July 31, 1999............................................ 192,541
Promissory note payable to Satleasco, dated November 15, 1996, in
the original amount of $115,000. The note was non-interest
bearing and was paid in full February 28, 1997................... 115,000
Promissory note payable to Satleasco, dated November 15, 1996, in
the original amount of $100,000. The note bears interest at 8%
per annum. Eight quarterly principal payments of $12,500 plus
interest are due. The note matures on November 30, 1997.......... 101,000
MSCS
Note payable to Ditch Witch bearing interest at 10.50%. Monthly
principal and interest payments of $611 are required. The note
matures in December 1999......................................... 18,784
-----------
Total notes payable............................................ $25,519,629
===========
</TABLE>
F-36
<PAGE>
MID-ATLANTIC CABLE COMPANIES
NOTES TO THE CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS--(CONTINUED)
The maturities of the above loans are as follows:
<TABLE>
<S> <C>
December 31, 1997............ $ 5,780,163
1998......................... 19,672,534
1999......................... 66,932
-----------
$25,519,629
===========
</TABLE>
Mid-Atlantic has entered into an interest rate swap agreement with CIBC,
Toronto to reduce the impact of changes in interest rates on its debt. The
swap agreement effectively converts a portion of the variable rate debt to
fixed rate debt to reduce the risk of incurring higher interest costs. At
December 31, 1996, the notional amount was $9,000,000 with an average receive
rate of 5.75%.
The CIBC loan is collateralized by all of the assets of NewCo and DevCo and
PW East #1, the assignment of all franchise agreements, SMATV agreements and
other material agreements owned by MCSC, NewCo, DevCo and PW East #1, the
assignment of all general and limited partnership interests in NewCo, DevCo,
and PW East #1, outstanding stock in MCSC, a $1 million guaranty by Norcutt
and an assignment of the proceeds of a $1 million life insurance policy on
Norcutt. Subsequent to year end, the assets of PW East #1 were released from
the loan.
The CIBC loans are subject to certain restrictive covenants with respect to
maintaining certain ratios of operating cash flows to total debt, principal
and interest payments and limits on capital expenditures. During 1996, the
Company was not in compliance with certain of the financial covenants related
to the CIBC debt. Waivers of default have been received from the lender
related to these covenants. Also, during 1996, the Company agreed to pay CIBC
$835,000 as additional consideration associated with the Term Loan. The fee
was paid in February 1997 and is classified as a success fee in the
accompanying consolidated and combined statement of operations.
6. NOTES PAYABLE TO PARTNERS
NewCo is indebted to South Central for two loans made to NewCo by South
Central. The first South Central Note bears simple interest at prime plus 1%
on the outstanding principal balance of $130,000. Interest is deferred until
the maturity of the loan on December 31, 1998.
The second South Central Note in the original amount of $700,000, bears
simple interest at the rate of 2% over that rate charged by NewCo's primary
lender (12.78% at December 31, 1996). Interest is deferred until the maturity
of the loan on December 31, 1998.
Payment of principal or interest on the South Central Notes is prohibited
according to the provisions of the CIBC Initial Term Loan. However, Norcutt,
general partner of South Central, represents that upon repayment of these
notes, the proceeds will be used to repay monies owed to MCSC (see Note 1).
On December 26, 1996 Newco entered into an agreement to purchase all of
Potomac Private Cablevision Limited Partnership's (PPCLP) interest in Newco
for $1,592,000. A $500,000 principal payment was made at closing. The
remaining balance was converted to a promissory note with interest of 10% per
annum. The note was paid in full on February 28, 1997 by CableCo.
F-37
<PAGE>
MID-ATLANTIC CABLE COMPANIES
NOTES TO THE CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS--(CONTINUED)
7. DEFERRED INCOME TAXES
The net deferred income tax asset in the accompanying balance sheet as of
December 31, 1996 consists of the following components:
<TABLE>
<S> <C>
Deferred tax assets--federal.................................... $342,000
Deferred tax assets--state...................................... 239,400
Deferred tax liabilities--federal............................... (10,010)
Deferred tax liabilities--state................................. (8,243)
--------
Net deferred tax benefit........................................ $563,147
========
</TABLE>
The income tax benefit in the accompanying income statement consist of the
following components:
<TABLE>
<S> <C>
Current benefit:
Federal....................................................... $ --
State......................................................... --
Deferred benefit:
Federal....................................................... 184,621
State......................................................... 136,127
--------
Total deferred tax benefit.................................. $320,748
========
</TABLE>
A reconciliation of income tax benefit as statutory rates to recorded
benefit is as follows:
<TABLE>
<S> <C>
Federal income tax benefit at statutory rate (34%)........... $1,353,859
Net loss attributable to entities whose tax attributes pass
through to partners......................................... (941,094)
Difference in graduated tax rates............................ (218,319)
Other........................................................ 126,302
----------
Deferred tax benefit....................................... $ 320,748
==========
</TABLE>
Deferred income taxes reflected in the accompanying financial statement are
primarily attributable to temporary differences between financial statement
reporting and income tax reporting for depreciation methods of the equity
investees of MCSC and MCSC net operating loss carryforwards totaling $2.3
million.
8. LEASE COMMITMENTS
The Company is obligated under operating leases for premises occupied with
minimum lease terms expiring at various times through 2004. Certain of these
leases contain escalation clauses for increases based upon increases in
operating expenses and real estate taxes. The Company has also entered into
several operating leases for vehicles and other operating equipment. Total
rent expense for the year was $288,330. The following future minimum rental
payments are required under noncancellable operating leases with terms in
excess of one year as of December 31, 1996:
<TABLE>
<S> <C>
December 31, 1997............. $ 309,786
1998.......................... 296,837
1999.......................... 294,929
2000.......................... 279,274
2001.......................... 55,064
Thereafter.................... 65,087
----------
$1,300,977
==========
</TABLE>
F-38
<PAGE>
MID-ATLANTIC CABLE COMPANIES
NOTES TO THE CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS--(CONTINUED)
The Company also has entered into several capital leases for vehicles and
other operating equipment. The amounts of leased equipment, net of accumulated
depreciation reflected in other property and equipment is $293,003. The
following future lease payments are required as of December 31, 1996.
<TABLE>
<S> <C>
December 31, 1997............... $100,346
1998............................ 100,346
1999............................ 100,346
--------
Total......................... 301,038
--------
Less: Amounts representing
interest....................... (37,110)
--------
$263,928
========
</TABLE>
9. RELATED PARTY TRANSACTIONS
Included in deferred compensation on the balance sheet of MCSC is $434,310
owed to Norcutt, consisting of unpaid compensation and unreimbursed advances
to Mid-Atlantic. Payment of these amounts was subordinated to restrictions
established in the CIBC Initial Term Loan. The Term Loan was amended on
December 26, 1996 to allow for repayment of the amount due Norcutt.
Subsequently, the balance due Norcutt at February 28, 1997 was paid in full by
CableCo.
As of December 31, 1996, MCSC is owed $690,263 by South Central, its owner,
for cumulative development and operating costs. As of December 31, 1996 MCSC
is owed $575,212 from affiliates for management fees and reimbursement of
operating expenses.
On November 30, 1996, NewCo entered into an agreement with Howard County
CATV (Howard) and Gerald Vento (Vento) to purchase Howard's preferred
partnership interest in NewCo for $595,000. In addition, it was agreed that
upon receipt of the closing payment that Vento would release Norcutt, South
Central and Mid-Atlantic from the payment of any and all fees outstanding. On
December 27, 1996 the closing payment was made.
10. PENSION PLAN
In November, 1996 Mid-Atlantic adopted a 401(k) and Profit Sharing Plan
covering all employees. Contributions to the plan are at the discretion of
management. For the year ended December 31, 1996, a matching contribution of
50% of all employee contributions, up to $3,000, totaling $27,869 was made.
11. FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company has the following financial instruments: cash, trade receivables
and payables and long-term debt (including the interest rate swap). Based on
the nature and terms of the long-term debt and the interest rate swap and the
short-term nature of cash, trade receivables and payables, carrying values of
the financial instruments approximate fair value.
F-39
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To People's Choice TV Corp.:
We have audited the accompanying statements of certain assets and
liabilities of Preferred Entertainment, Inc. as of December 31, 1997 and 1996
and the statements of related revenues and expenses for the years ended
December 31, 1997 and 1996. These financial statements are the responsibility
of People's Choice TV Corp.'s management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
The statements have been prepared pursuant to the Asset Purchase and Sale
Agreement described in Note 2 between People's Choice TV Corp. and OnePoint
Communications LLC dated June 8, 1998 and is not intended to be a complete
presentation of People's Choice TV Corp.'s or Preferred Entertainment, Inc.'s
assets, liabilities, revenues and expenses.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the assets and liabilities of Preferred
Entertainment, Inc. as of December 31, 1997 and 1996 pursuant to the Asset
Purchase and Sale Agreement referred to in Note 2 and the related revenues and
expenses for the years ending December 31, 1997 and 1996 in conformity with
generally accepted accounting principles.
Arthur Andersen LLP
Stamford, Connecticut
June 15, 1998
F-40
<PAGE>
PEOPLE'S CHOICE TV CORP.
STATEMENTS OF CERTAIN ASSETS AND LIABILITIES
OF PREFERRED ENTERTAINMENT, INC. TO BE SOLD
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
ASSETS 1996 1997
------ ---------- ----------
<S> <C> <C>
Accounts receivable, net................................. $ 439,743 $ 442,849
Prepaid expenses......................................... 100,111 77,272
Other assets............................................. 141,283 130,900
Investment in wireless system and equipment, net......... 5,061,576 4,141,398
---------- ----------
$5,742,713 $4,792,419
========== ==========
<CAPTION>
LIABILITIES AND EQUITY
----------------------
<S> <C> <C>
Liabilities:
Accounts payable....................................... $ 110,104 $ 97,829
Accrued expenses....................................... 232,631 163,289
Subscriber advance payments and deposits............... 507,629 573,536
---------- ----------
Total................................................ 850,364 834,654
---------- ----------
Commitments and contingencies
PCTV equity in operations to be sold..................... 4,892,349 3,957,765
---------- ----------
$5,742,713 $4,792,419
========== ==========
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
F-41
<PAGE>
PEOPLE'S CHOICE TV CORP.
STATEMENTS OF REVENUES AND EXPENSES RELATED TO CERTAIN
ASSETS AND LIABILITIES OF PREFERRED ENTERTAINMENT, INC.
TO BE SOLD
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
------------------------
1996 1997
----------- -----------
<S> <C> <C>
Revenues............................................. $ 4,685,385 $ 5,208,471
Costs and expenses:
Service costs...................................... 2,881,774 2,994,226
Selling, general and administrative................ 2,323,034 1,838,249
Depreciation and amortization...................... 1,138,177 1,722,216
----------- -----------
Total............................................ 6,342,985 6,554,691
----------- -----------
Net loss............................................. $(1,657,600) $(1,346,220)
=========== ===========
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
F-42
<PAGE>
PEOPLE'S CHOICE TV CORP.
NOTES TO STATEMENTS OF CERTAIN ASSETS AND LIABILITIES AND
RELATED REVENUES AND EXPENSES OF PREFERRED ENTERTAINMENT, INC.
(1) COMPANY OPERATIONS:
People's Choice TV Corp. (the "Company" or "PCTV") was incorporated in
Delaware on April 22, 1993. The Company and its predecessors have been engaged
in wireless communications since 1988.
The Company's strategy is to own, develop and operate wireless
communications systems, and provide wireless cable and high-speed data
communication services in large markets. PCTV's operating and targeted markets
are concentrated in the midwestern and southwestern regions of the United
States. Currently, the Company operates six wireless cable systems located in
Houston, Tucson, Chicago, Phoenix, St. Louis and Detroit. The Company operates
a high-speed data communication service in the Detroit and Phoenix markets. In
addition, the Company controls wireless frequency rights in Indianapolis, Salt
Lake City, and Milwaukee.
On September 8, 1995, PCTV and Preferred Entertainment, Inc. ("PEI") closed
on a merger transaction pursuant to which PCTV acquired each share of PEI
common stock that it did not already own for consideration of approximately
$65 million through a merger in which PEI became an indirect wholly owned
subsidiary of PCTV. The acquisition was accounted for as a purchase
transaction and accordingly, the purchase price was allocated to the fair
value of assets acquired and liabilities assumed. Substantially all of the
excess of purchase price over the net assets acquired has been allocated to
frequency rights acquired from PEI.
The Company offers 44 channels (including 12 off-air VHF/UHF channels) in
the Chicago market and controls the rights to 32 wireless channels and
transmits at 50 watts from the Sears Tower, the tallest building in Chicago.
PCTV leases approximately 14,000 square feet of office and warehouse space in
Chicago. At December 31, 1997 and 1996 PCTV's Chicago market had approximately
18,100 and 19,000 customers, respectively.
(2) ASSET PURCHASE AND SALE AGREEMENT:
On June 8, 1998, PCTV and PEI ("the Sellers") and OnePoint Communications-
Illinois LLC ("OnePoint" or "the Buyer") entered into an Asset Purchase and
Sale Agreement ("the Agreement") to sell certain Assets and Assumed
Liabilities as stipulated in the Agreement. Under the Agreement, PCTV agrees
to sell to OnePoint the Assets and Assumed Liabilities, as defined related to
video programming services to its subscribers at multiple dwelling units
(MDUs) in Chicago, Illinois. The assets sold to OnePoint do not include the
MMDS, MDS or ITFS licenses currently controlled by the Company and certain AML
licenses not related to the MDU segment of the business. OnePoint shall not
assume any Excluded Liabilities, as defined.
The consideration for the Assets and Assumed Liabilities is $444 times the
units of the properties covered by the right of entry agreements included in
the transaction. The Agreement contemplates that there are a maximum of twenty
nine thousand two hundred fifty (29,250) of such units. Payment of the
consideration will be a $500,000 cash deposit paid to PCTV prior to the
execution of the Agreement and a $12,500,000 cash payment upon execution of
the Agreement.
Approximately $2.85 million of the consideration will be held in escrow
until transfer of certain AML licenses are approved and the final units of
property sold are confirmed. The Agreement also provides for purchase price
reductions of up to $260,000 for failure to meet service and system standards
specified in the Agreement.
Assets, as defined in the Agreement, constitutes all rights of PCTV and PEI
under certain contracts, AML licenses, AML applications, equipment, Accounts
Receivable, subscribers and customer lists related to the assets, permits, all
data, books and records related to the Assets, inventory and vehicles but
excludes the Excluded Assets, as defined. Excluded Assets include such items
as cash and cash equivalents, video programming
F-43
<PAGE>
PEOPLE'S CHOICE TV CORP.
NOTES TO STATEMENTS OF CERTAIN ASSETS AND LIABILITIES AND
RELATED REVENUES AND EXPENSES OF PREFERRED ENTERTAINMENT, INC.--(CONTINUED)
contracts, insurance policies, licenses and contract rights (unless
specifically cited in the Agreement), any tax refunds or claims and Federal
Communications Commissions (FCC) frequencies (unless specifically indicated in
the Agreement).
Assumed Liabilities as defined in the agreement include (i) all obligations
of PCTV assigned to OnePoint for any contract or permit assigned to the Buyer
under the Agreement (ii) all obligations of the Buyer arising out of the
Buyers' ownership of assets sold to the Buyer under the Agreement and (iii)
customer deposits and advances. The accompanying financial statements include
an allocation of accrued programming costs and access fees paid to landlords
of MDUs. Deposits received from MDU customers and the advance payments by
subscribers for video services are also included in liabilities.
Accounts Receivable represents all accounts receivable of PCTV related to
the subscribers being sold as of the closing date. The accompanying financial
statements include a reserve of 3% of such receivables to reflect possible
losses from nonpayment. Customer deposits and advances represents all deposits
and advanced billings related to the subscribers being sold as of the closing
date.
(3) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
The accompanying financial statements include the historical cost of the
assets and liabilities of PCTV that have been sold to OnePoint pursuant to the
Agreement and the allocated historical revenues and expenses of such
operations using generally accepted accounting principles.
Subscribers are determined through the use of an equivalent basic unit (EBU)
calculation for customers receiving basic video programming service on a bulk
basis. The number of subscribers on a bulk basis is determined by dividing the
monthly revenue for such bulk subscribers by the weighted average rate that
single family home (SFH) subscribers pay per month for basic service. This
number is then added to those customers receiving basic video programming
service on an individual basis to arrive at the total subscriber count.
The assets and liabilities included in the financial statements are those to
be assumed by OnePoint pursuant to the Agreement and allocations of certain
assets or liabilities used by PCTV to provide services to the subscribers
covered by the Agreement. The assets assumed by OnePoint pursuant to the
agreement are Accounts Receivable and the investment in the wireless system
and equipment. The liabilities assumed by OnePoint are subscriber advance
payments and deposits. The assets allocated to the operations included in the
accompanying financial statements (prepaid expenses and other assets) are
generally based on the relative subscribers sold to the total subscribers of
PEI at the end of each period presented. The liabilities allocated (accounts
payable and accrued expenses) include programming and franchise taxes and
excludes accrued payroll and related amounts.
Revenue represents the amounts billed to the specific MDU subscribers
covered by the Agreement. Allocations have been made of certain minor
revenues, such as late fees.
Service costs and selling, general, and administrative expenses for the
years ended December 31, 1996 and 1997 are generally based upon allocation of
such costs of PEI based upon the relative number of subscribers sold to the
total number of subscribers of PEI. Certain expenses have been specifically
identified as related directly to MDU operations and have been assigned to
those operations included in these financial statements. Also included in
selling, general, and administrative expenses are management fees of $140,562
and $156,254 for the years ended December 31, 1996 and 1997, respectively.
These management fees represent a portion of the historical allocation of
costs by PCTV to its various subsidiaries. The portion allocated in these
financial statements are based on the relative subscribers sold to the total
subscribers of PEI for each period.
F-44
<PAGE>
PEOPLE'S CHOICE TV CORP.
NOTES TO STATEMENTS OF CERTAIN ASSETS AND LIABILITIES AND
RELATED REVENUES AND EXPENSES OF PREFERRED ENTERTAINMENT, INC.--(CONTINUED)
Depreciation and amortization are based upon the specific assets included in
the statements of assets and liabilities to be sold.
Under the terms of the Agreement, the debt of PEI (which consists of various
capital lease obligations on equipment not being sold to OnePoint and a bank
line of credit) is not being assumed by OnePoint. Accordingly, the
accompanying financial statements do not include any allocation of interest
expense incurred by PEI in 1996 and 1997.
Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
PCTV management believes the allocation of revenues and expenses included in
the accompanying financial statements is reasonable.
Long-lived assets
The Company periodically reviews the carrying value of the investment in
wireless systems and equipment, for each wireless communication system in
order to determine whether an impairment may exist. The Company considers
relevant cash flow, estimated future operating results, trends and other
available information including the fair value of frequency rights owned, in
assessing whether the carrying value of the assets can be recovered. An
impairment would be measured as any deficiency in estimated discounted cash
flows of the wireless communication system to recover the carrying value
related to the assets.
Revenue recognition
Subscription revenues are recognized in the period of service. The Company
charges customers an installation fee that is billed in installments for up to
six months. The Company records installment revenue billed in installments
when received. Customer related acquisition costs, including direct
commissions, exceeded installation revenues in 1996.
F-45
<PAGE>
PEOPLE'S CHOICE TV CORP.
NOTES TO STATEMENTS OF CERTAIN ASSETS AND LIABILITIES AND
RELATED REVENUES AND EXPENSES OF PREFERRED ENTERTAINMENT, INC.--(CONTINUED)
System launch expenses
Administrative and marketing expenses incurred by systems during their
launch period are expensed as incurred.
(4) INVESTMENT IN WIRELESS SYSTEM AND EQUIPMENT:
The investment in wireless systems and equipment is as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1996 1997
---------- ----------
<S> <C> <C>
Right of entry fees............................... $ 36,562 $ 44,287
Headend equipment................................. 754,821 747,503
Systems........................................... 965,600 965,600
Installations..................................... 4,929,477 5,731,108
Less--accumulated depreciation and amortization... (1,624,884) (3,347,100)
---------- ----------
$5,061,576 $4,141,398
========== ==========
</TABLE>
Depreciation and amortization is calculated on a straight-line basis over 3-
10 years.
Wireless systems and equipment include the cost of initial customer
installations. These costs include reception equipment on customer premises,
related labor and the excess of direct commission costs over installation
revenues to be realized. The excess of direct commission costs over
installation revenues are deferred and amortized over a three year period, the
estimated useful life of customers. Amortization is accelerated upon the
disconnection of specific customers. Sat-Tel, a subsidiary of PCTV and
affiliate of PEI, provided customer installation and other services to PEI.
(5) EMPLOYEE BENEFITS:
The Company maintains a 401(k) employee benefit plan pursuant to which
participants can defer a certain percent of their annual compensation in order
to receive certain benefits upon retirement, death, disability or termination
of employment. For the years ended December 31, 1996 and 1997 PEI incurred
expense of $4,230 and $6,050, respectively, of which $2,661 and $4,223,
respectively, have been allocated to the operations being sold.
(6) INCOME TAXES:
PCTV and PEI account for income taxes in accordance with Statement of
Financial Accounting Standards ("SFAS") No. 109--Accounting for Income Taxes.
SFAS No. 109 requires, among other things, recognition of future tax benefits,
measured by enacted tax rates, attributable to deductible temporary
differences between financial and income tax basis of assets and liabilities
and to net operating loss carryforwards, to the extent that realization of
such benefits is more likely than not.
PCTV and PEI have net operating loss carryforwards ("NOL's") for financial
and tax reporting purposes. SFAS 109 requires that the tax benefit of
financial reporting NOL's be recorded as an asset to the extent that
management assesses the utilization of such NOL's to be "more likely than
not". PCTV and PEI recorded a valuation allowance against the entire deferred
asset attributable to the NOL's since PCTV and PEI have incurred operating
losses since inception.
F-46
<PAGE>
PEOPLE'S CHOICE TV CORP.
NOTES TO STATEMENTS OF CERTAIN ASSETS AND LIABILITIES AND
RELATED REVENUES AND EXPENSES OF PREFERRED ENTERTAINMENT, INC.--(CONCLUDED)
(7) COMMITMENTS AND CONTINGENCIES:
There are certain claims against the PCTV and PEI which are incidental to the
ordinary course of business. In the opinion of management, the ultimate
resolution of these claims will not have a material effect on the financial
statements of PCTV or PEI.
(8) SERVICE COSTS AND SELLING, GENERAL AND ADMINISTRATIVE EXPENSES:
Service costs and selling, general and administrative expenses included in
the accompanying financial statements for the years ended December 31, 1996 and
1997 are comprised of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1996 1997
---------- ----------
<S> <C> <C>
Service Costs:
Programming...................................... $1,648,359 $1,777,260
Channel lease and access fees.................... 501,558 591,009
Transmitter site rental.......................... 211,169 319,230
Service calls.................................... 420,287 176,750
Other............................................ 100,401 129,977
---------- ----------
$2,881,774 $2,994,226
========== ==========
Selling, General and Administrative:
Salaries and wages, net.......................... $1,000,644 $ 736,638
Payroll taxes.................................... 90,908 83,192
Employee health and life, net.................... 99,701 117,728
Rent and occupancy............................... 167,026 173,050
Telephone........................................ 143,281 135,848
Billing.......................................... 93,869 59,780
Management fee................................... 140,562 156,254
Other............................................ 587,043 375,759
---------- ----------
$2,323,034 $1,838,249
========== ==========
</TABLE>
F-47
<PAGE>
ANNEX A
ONEPOINT COMMUNICATIONS CORP.
GLOSSARY
CAP (Competitive Access Provider)--A name for a category of local service
provider that competes with incumbent local telephony companies in providing
originating and/or terminating access to IXCs.
CLEC (Competitive Local Exchange Carrier)--A category of local telephony
service provider (carrier) that offers services similar to the former monopoly
local telephony company, as recently allowed by changes in telecommunications
law and regulation. A CLEC may also provide other types of communications
services (long distance, Internet access, entertainment etc.).
CLEC certification--Granted by a state public service commission or public
utility commission, this certification provides a telecommunications services
provider with the legal standing to offer local exchange telephony services in
direct competition with ILECs and other CLECs. Such certifications are granted
on a state by state basis.
Communications Act of 1934--Federal legislation that established rules for
broadcast and non-broadcast communications, including both wireless and wired
telephony service and created the FCC.
DBS--Direct broadcast satellite television.
FCC (Federal Communications Commission)--The US Government agency charged
with regulating interstate and international communications by radio,
television, wire, satellite and cable.
facilities-based carrier/provider--A telecommunications provider that
delivers a significant amount of its services to the end-user via owned and/or
leased network equipment.
ILEC (Incumbent Local Exchange Carrier)--The local exchange carrier that was
the monopoly carrier prior to the opening of local exchange services to
competition.
interconnection agreement--A contract between and ILEC and a CLEC for the
interconnection of the two networks, for the purpose of mutual passing of
traffic between the networks, allowing customers of one of the networks to
call users served by the other network. These agreements set out the financial
and operational aspects of such interconnection.
interexchange services--Telecommunications services that are provided
between two exchange areas, i.e., long distance.
IXC (Interexchange Carrier)--A provider of telecommunications services that
extend between LATAs or cities.
LATA (Local Access and Transport Area)--A geographic area inside of which a
RBOC can offer long distance service (known as local toll). There are 196
LATAs in the U.S.
local exchange--An area inside of which telephone calls are generally
completed without any toll, or long distance charges. Local exchange areas are
defined by the state regulator of telephony services.
local exchange services--Telephony services that are provided within a local
exchange. These usually refer to local calling services (dial tone services).
Business local exchange services include Centrex, access lines and trunks and
customer owned, coin operated telephone lines.
A-1
<PAGE>
Right of Entry--Contractual rights providing preferential rights for on-site
marketing of telephony, video and other services.
RBOC (Regional Bell Operating Company)--One of the remaining ILECs created
by the divestiture by AT&T of its local exchange business. These include
BellSouth, Bell Atlantic (which acquired NYNEX in 1997), Ameritech, US West
Inc. and SBC (which acquired Pacific Telesis in 1997).
UNEs--Unbundled network elements including switches, local loops, and
transmission facilities.
A-2
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRE-
SENTATION OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AU-
THORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR SOLICITA-
TION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO WHICH IT
RELATES, NOR DOES IT CONSTITUTE AND OFFER TO SELL OR THE SOLICITATION OF AN
OFFER TO BUY SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SO-
LICITATION IS UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE
MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT
THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF
OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT
TO ITS DATE.
---------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary........................................................ 1
Risk Factors.............................................................. 15
The Recapitalization...................................................... 47
Use of Proceeds........................................................... 48
Dividend Policy........................................................... 48
Capitalization............................................................ 49
Selected Historical Financial Data........................................ 50
Pro Forma Unaudited Condensed Financial Data.............................. 52
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 55
Business.................................................................. 62
Management................................................................ 91
Certain Relationships and Related Transactions............................ 94
Security Ownership of Certain Beneficial Owners and Management............ 97
Description of Certain Indebtedness....................................... 98
The Exchange Offer........................................................ 99
Description of Notes...................................................... 107
Description of Warrants................................................... 133
Description of Capital Stock.............................................. 137
Certain United States Federal Income Tax Considerations................... 138
Plan of Distribution...................................................... 142
Experts................................................................... 142
Legal Matters............................................................. 142
Available Information..................................................... 143
Index to Financial Statements............................................. F-1
Glossary.................................................................. A-1
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
$175,000,000
LOGO
ONEPOINT COMMUNICATIONS CORP.
OFFER TO EXCHANGE ITS
14 1/2% SENIOR NOTES DUE 2008,
SERIES B, FOR ANY AND ALL
OUTSTANDING 14 1/2% SENIOR NOTES DUE 2008
---------------
PRELIMINARY PROSPECTUS
---------------
, 1998
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II: INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 15: INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company is incorporated under the laws of the State of Delaware. Section
145 of the General Corporation Law of the State of Delaware ("Section 145")
provides that a Delaware corporation may indemnify any persons who are, or are
threatened to be made, parties to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of such corporation), by reason of
the fact that such person is or was an officer, director, employee or agent of
such corporation, or is or was serving at the request of such corporation as a
director, officer, employee or agent of another corporation or enterprise. The
indemnity may include expenses (including attorneys' fees), judgments, fines
and amounts paid in settlement actually and reasonably incurred by such person
in connection with such action, suit or proceeding, provided such person acted
in good faith and in a manner he reasonably believed to be in or not opposed
to the corporation's best interests and, with respect to any criminal action
or proceeding, had no reasonable cause to believe that his conduct was
illegal. A Delaware corporation may indemnify any persons who are, or are
threatened to be made, a party to any threatened, pending or completed action
or suit by or in the right of the corporation by reason of the fact that such
person was a director, officer, employee or agent of such corporation, or is
or was serving at the request of such corporation as a director, officer,
employee or agent of another corporation or enterprise. The indemnity may
include expenses (including attorneys' fees) actually and reasonably incurred
by such person in connection with the defense or settlement of such action or
suit, provided such person acted in good faith and in a manner he reasonably
believed to be in or not opposed to the corporation's best interests except
that no indemnification is permitted without judicial approval if the officer
or director is adjudged to be liable to the corporation. Where an officer or
director is successful on the merits or otherwise in the defense of any action
referred to above, the corporation must indemnify him against the expenses
which such officer or director has actually and reasonably incurred.
The Company's Certificate of Incorporation and By-laws provide for the
indemnification of officers and directors to the fullest extent permitted by
the Delaware General Corporation Law.
Section 145 further authorizes a corporation to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee
or agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation
or enterprise, against any liability asserted against him and incurred by him
in any such capacity, arising out of his status as such, whether or not the
corporation would otherwise have the power to indemnify him under Section 145.
All of the directors and officers of the Company are covered by insurance
policies maintained and held in effect by such corporation against certain
liabilities for actions taken in such capacities, including liabilities under
the Securities Act of 1933.
Each Subsidiary Guarantor is a limited liability company organized under the
laws of the State of Delaware. Section 18-108 of the Delaware Limited
Liability Company Act provides that, subject to such standards and
restrictions, if any, as are set forth in its limited liability company
agreement, a limited liability company may, and shall have the power to,
indemnify and hold harmless any member or manager or other person from and
against any and all claims and demands whatsoever.
The limited liability company agreements of each of the Subsidiary
Guarantors provide for broad indemnification of their respective members,
managers and persons controlling their managers for losses, claims, damages
and liabilities incurred by such persons in connection with the conduct of the
business of the Company, except for such persons' fraud, gross negligence or
willful misconduct.
Each of the Subsidiary Guarantors may carry insurance protecting it and
potential indemnitees from liabilities to third parties, to the extent
practicable.
II-1
<PAGE>
ITEM 16. EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<S> <C>
2.1 Agreement and Plan of Merger dated April 29, 1998 of OnePoint
Communications, LLC with and into the Company
3.1 Amended and Restated Certificate of Incorporation of the Registrant, as of
April 29, 1998
3.2 Bylaws of the Registrant, as amended
3.3 Operating Agreement of OnePoint Communications--Georgia, LLC dated as of
April 7, 1997, as amended
3.4 Operating Agreement of OnePoint Communications--Colorado, LLC dated as of
April 23, 1997, as amended
3.5 Operating Agreement of OnePoint Communications--Illinois, LLC, dated as of
April 23, 1997, as amended
3.6 Operating Agreement of OnePoint Communications Holdings, LLC, dated as of
January 30, 1997, as amended
3.7 Operating Agreement of VIC-RMTS-DC, LLC between Mid-Atlantic RMTS
Holdings, LLC and OnePoint Communications Holdings, LLC dated as of
February 6, 1997
4.1 Purchase Agreement, dated as of May 15, 1998 by and between the Company,
the Subsidiary Guarantors, Bear, Stearns and Co., Inc. and NationsBank
Montgomery Securities LLC
4.2 Indenture dated as of May 21, 1998, by and between the Company, the
Subsidiary Guarantors and Harris Trust and Savings Bank
4.3 Form of 14 1/2% Senior Notes due 2008
4.4 Registration Rights Agreement dated as of May 21, 1998 by and between the
Company, Bear, Stearns & Co. Inc. and NationsBank Montgomery Securities,
as Initial Purchasers relating to the Notes
4.5 Warrant Agreement dated as of May 21, 1998 by and between the Company and
Harris Trust and Savings Bank, as Warrant Agent relating to the warrants
to purchase Common Stock of the Company (the "Warrants")
4.6 Specimen Certificate for the Warrants of the Company
4.7 Warrant Registration Rights Agreement dated as of May 21, 1998 by and
between the Company and Harris Trust and Savings Bank
4.8 Pledge & Security Agreement, dated May 21, 1998, between the Company and
Harris Trust and Savings Bank as Collateral Agent and Trustee, relating to
the interest reserve account for the Notes
4.9 Guarantee of the Subsidiary Guarantors dated May 21, 1998
4.10 Registration Agreement dated April 29, 1998 between the Company and
Ventures in Communications II, LLC
5.1* Opinion and Consent of Kirkland & Ellis
10.1 Professional Services Agreement dated May 15, 1998 by and between the
Company and The VenCom Group, Inc.
10.2 Letter Agreement by and between the Company and Sprint Communications
dated April 23, 1998 electing renewal of the Affiliate Services Agreement
10.3 Affiliate Services Agreement by and between the Company and Sprint
Communications dated April 4, 1997
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<S> <C>
10.4*+ Master Agreement dated February 3, 1997 by and between Pacific Bell
Communications and Sprint Communications
10.5*+ Asset Purchase and Sale Agreement dated June 8, 1988 by and between the
Company and People's Choice TV Corp. and Preferred Entertainment, Inc.
10.6 Amended and Restated Security Agreement dated April 29, 1998 by and
between the Company and The Northern Trust Company
10.7 Amended and Restated Call on Term-Term Note dated April 29, 1998
evidencing the Company's indebtedness to The Northern Trust Company
10.8* Deed of Lease Agreement dated July 3, 1996 between Mid-Atlantic Cable
Service Company and LEP/Largo Limited Partnership relating to the property
at 1200 Mercantile Lane, Largo, Maryland, as amended
10.9 Stock Appreciation Rights program of the Company, effective as of January
1, 1998
10.10*+ CSG Master Subscriber Management Agreement dated September 27, 1998 by and
between the Company and CSG Systems, Inc.
10.11*+ End User License Agreement dated March 7, 1997 by and between the Company
and BDSI, Inc. D/B/A Beechwood Data Systems
10.12 Resale Agreement dated as of May 28, 1997 by and between VIC-RMTS-DC, LLC
and Bell Atlantic--Virginia, Inc., as amended
10.13* Resale Agreement dated as of August 1, 1997 by and between VIC-RMTS-DC,
LLC and Bell Atlantic--Washington, D.C., Inc., as amended
10.14 Resale Agreement dated as of August 1, 1997 by and between VIC-RMTS-DC,
LLC and Bell Atlantic--Pennsylvania, Inc., as amended
10.15 Resale Agreement dated as of May 7, 1997 by and between VIC-RMTS-DC, LLC
and Bell Atlantic--Maryland, Inc., as amended
10.16 Resale Agreement dated as of March 25, 1998 by and between VIC-RMTS-DC,
LLC and Bell Atlantic--Delaware, Inc., as amended
10.17 Agreement for Sale of Telecommunications Services dated July 21, 1997 by
and between OnePoint Communications--Georgia, LLC and BellSouth
Telecommunications, Inc.
10.18 Agreement for Sale of Telecommunications Services dated February 6, 1998
by and between OnePoint Communications--Colorado, LLC and US WEST
Communications, Inc.
21.1 Subsidiaries of the Registrant
23.1* Consent of Ernst & Young LLP
23.2* Consent of Beers & Cutler PLLC
23.3* Consent of Arthur Andersen LLP
23.4* Consent of Kirkland & Ellis (included in Exhibit 5.1)
24.1 Powers of Attorney of Directors and Officers of the Company and each
Subsidiary Guarantor (contained in signature pages)
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<S> <C>
25.1 Statement of Eligibility of Note Trustee
27.1 Financial Data Schedule
99.1 Form of Letter of Transmittal
99.2 Form of Notice of Guaranteed Delivery
99.3 Form of Tender Instructions
</TABLE>
- --------
*To be filed by Amendment
+Confidential treatment requested
ITEM 22. UNDERTAKINGS.
(a) The undersigned registrants hereby undertake:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933.
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement.
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at the time shall be deemed to
be the initial bona fide offering thereof;
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned registrants hereby undertake that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement 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.
(c) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the provisions, or otherwise, the registrants have
been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities
Act of 1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a directors, 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-4
<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 of 1933 and will be
governed by the final adjudication of such issue.
(d) The undersigned registrants hereby undertake to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11, or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through
the date of responding to the request.
(e) The undersigned registrants hereby undertake to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-5
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE COMPANY DULY
CAUSED THIS REGISTRATION STATEMENT ON FORM S-4 TO BE SIGNED ON ITS BEHALF BY
THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN CITY OF BANNOCKBURN, STATE OF
ILLINOIS, ON THE 17TH DAY OF SEPTEMBER, 1998.
Onepoint Communications Corp.
/s/ James A. Otterbeck
By: _________________________________
James A. Otterbeck
Chairman and Chief Executive
Officer
KNOW ALL MEN BY THESE PRESENTS, THAT EACH PERSON WHOSE SIGNATURE APPEARS
BELOW CONSTITUTES AND APPOINTS JAMES A. OTTERBECK AND JOHN D. STAVIG, AND EACH
OF THEM, HIS OR HER TRUE AND LAWFUL ATTORNEYS-IN-FACT AND AGENTS, WITH FULL
POWER OF SUBSTITUTION AND RESUBSTITUTION, FOR HIM OR HER AND IN HIS OR HER
PLACE AND STEAD, IN ANY AND ALL CAPACITIES, TO SIGN ANY OR ALL AMENDMENTS
(INCLUDING POST-EFFECTIVE AMENDMENTS) TO THIS REGISTRATION STATEMENT, AND TO
FILE THE SAME, WITH ALL EXHIBITS THERETO, AND OTHER DOCUMENTS IN CONNECTION
THEREWITH, WITH THE SECURITIES AND EXCHANGE COMMISSION, GRANTED UNTO SAID
ATTORNEYS-IN-FACT AND AGENTS, AND EACH OF THEM, FULL POWER AND AUTHORITY TO DO
AND PERFORM EACH AND EVERY ACT AND THING REQUISITE AND NECESSARY TO BE DONE IN
AND ABOUT THE PREMISES, AS FULLY AND TO ALL INTENTS AND PURPOSES AS HE OR SHE
MIGHT OR COULD DO IN PERSON, HEREBY RATIFYING AND CONFIRMING ALL THAT SAID
ATTORNEYS-IN-FACT AND AGENTS OR ANY OF THEM, OR THEIR OR HIS SUBSTITUTE OR
SUBSTITUTES, MAY LAWFULLY DO OR CAUSE TO BE DONE BY VIRTUE HEREOF.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN THE
CAPACITIES INDICATED ON THE 17TH DAY OF SEPTEMBER, 1998.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
/s/ James A. Otterbeck Chairman, Chief Executive Officer and
___________________________________________ Director (Principal Executive Officer)
James A. Otterbeck
/s/ William F. Wallace President, Chief Operating Officer and
___________________________________________ Director (Principal Operating Officer)
William F. Wallace
/s/ John D. Stavig Chief Financial Officer and Director
___________________________________________ (Principal Financial Officer)
John D. Stavig
/s/ William McMoil Controller (Principal Accounting Officer)
___________________________________________
William McMoil
/s/ Linda L. Pace Director
___________________________________________
Linda L. Pace
</TABLE>
II-6
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, ONEPOINT
COMMUNICATIONS HOLDINGS, LLC DULY CAUSED THIS REGISTRATION STATEMENT ON FORM
S-4 TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED,
IN CITY OF BANNOCKBURN, STATE OF ILLINOIS, ON THE 17TH DAY OF SEPTEMBER, 1998.
OnePoint Communications Holdings,
LLC
/s/ James A. Otterbeck
By: _________________________________
James A. Otterbeck
Chief Executive Officer of
OnePoint Communications Holdings,
LLC and Chairman and Chief
Executive Officer of OnePoint
Communications Corp., its manager
KNOW ALL MEN BY THESE PRESENTS, THAT EACH PERSON WHOSE SIGNATURE APPEARS
BELOW CONSTITUTES AND APPOINTS JAMES A. OTTERBECK AND JOHN D. STAVIG, AND EACH
OF THEM, HIS OR HER TRUE AND LAWFUL ATTORNEYS-IN-FACT AND AGENTS, WITH FULL
POWER OF SUBSTITUTION AND RESUBSTITUTION, FOR HIM OR HER AND IN HIS OR HER
PLACE AND STEAD, IN ANY AND ALL CAPACITIES, TO SIGN ANY OR ALL AMENDMENTS
(INCLUDING POST-EFFECTIVE AMENDMENTS) TO THIS REGISTRATION STATEMENT, AND TO
FILE THE SAME, WITH ALL EXHIBITS THERETO, AND OTHER DOCUMENTS IN CONNECTION
THEREWITH, WITH THE SECURITIES AND EXCHANGE COMMISSION, GRANTED UNTO SAID
ATTORNEYS-IN-FACT AND AGENTS, AND EACH OF THEM, FULL POWER AND AUTHORITY TO DO
AND PERFORM EACH AND EVERY ACT AND THING REQUISITE AND NECESSARY TO BE DONE IN
AND ABOUT THE PREMISES, AS FULLY AND TO ALL INTENTS AND PURPOSES AS HE OR SHE
MIGHT OR COULD DO IN PERSON, HEREBY RATIFYING AND CONFIRMING ALL THAT SAID
ATTORNEYS-IN-FACT AND AGENTS OR ANY OF THEM, OR THEIR OR HIS SUBSTITUTE OR
SUBSTITUTES, MAY LAWFULLY DO OR CAUSE TO BE DONE BY VIRTUE HEREOF.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN THE
CAPACITIES INDICATED ON THE 17TH DAY OF SEPTEMBER, 1998.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
/s/ James A. Otterbeck Chief Executive Officer
___________________________________________ (Principal Executive Officer)
James A. Otterbeck
/s/ William F. Wallace President (Principal Operating Officer)
___________________________________________
William F. Wallace
/s/ John D. Stavig Treasurer (Principal Financial Officer)
___________________________________________
John D. Stavig
/s/ William McMoil Vice President (Principal Accounting
___________________________________________ Officer)
William McMoil
</TABLE>
II-7
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, ONEPOINT
COMMUNICATIONS--GEORGIA, LLC DULY CAUSED THIS REGISTRATION STATEMENT ON FORM
S-4 TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED,
IN CITY OF BANNOCKBURN, STATE OF ILLINOIS, ON THE 17TH DAY OF SEPTEMBER, 1998.
OnePoint Communications--Georgia,
LLC
/s/ James A. Otterbeck
By: _________________________________
James A. Otterbeck
Chief Executive Officer of
OnePoint Communications--Georgia,
LLC and Chairman and Chief
Executive Officer of OnePoint
Communications Corp., its manager
KNOW ALL MEN BY THESE PRESENTS, THAT EACH PERSON WHOSE SIGNATURE APPEARS
BELOW CONSTITUTES AND APPOINTS JAMES A. OTTERBECK AND JOHN D. STAVIG, AND EACH
OF THEM, HIS OR HER TRUE AND LAWFUL ATTORNEYS-IN-FACT AND AGENTS, WITH FULL
POWER OF SUBSTITUTION AND RESUBSTITUTION, FOR HIM OR HER AND IN HIS OR HER
PLACE AND STEAD, IN ANY AND ALL CAPACITIES, TO SIGN ANY OR ALL AMENDMENTS
(INCLUDING POST-EFFECTIVE AMENDMENTS) TO THIS REGISTRATION STATEMENT, AND TO
FILE THE SAME, WITH ALL EXHIBITS THERETO, AND OTHER DOCUMENTS IN CONNECTION
THEREWITH, WITH THE SECURITIES AND EXCHANGE COMMISSION, GRANTED UNTO SAID
ATTORNEYS-IN-FACT AND AGENTS, AND EACH OF THEM, FULL POWER AND AUTHORITY TO DO
AND PERFORM EACH AND EVERY ACT AND THING REQUISITE AND NECESSARY TO BE DONE IN
AND ABOUT THE PREMISES, AS FULLY AND TO ALL INTENTS AND PURPOSES AS HE OR SHE
MIGHT OR COULD DO IN PERSON, HEREBY RATIFYING AND CONFIRMING ALL THAT SAID
ATTORNEYS-IN-FACT AND AGENTS OR ANY OF THEM, OR THEIR OR HIS SUBSTITUTE OR
SUBSTITUTES, MAY LAWFULLY DO OR CAUSE TO BE DONE BY VIRTUE HEREOF.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN THE
CAPACITIES INDICATED ON THE 17TH DAY OF SEPTEMBER, 1998.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
/s/ James A. Otterbeck Chief Executive Officer
___________________________________________ (Principal Executive Officer)
James A. Otterbeck
/s/ William F. Wallace President (Principal Operating Officer)
___________________________________________
William F. Wallace
/s/ John D. Stavig Treasurer (Principal Financial Officer)
___________________________________________
John D. Stavig
/s/ William McMoil Vice President (Principal Accounting
___________________________________________ Officer)
William McMoil
</TABLE>
II-8
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, ONEPOINT
COMMUNICATIONS--ILLINOIS, LLC DULY CAUSED THIS REGISTRATION STATEMENT ON FORM
S-4 TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED,
IN CITY OF BANNOCKBURN, STATE OF ILLINOIS, ON THE 17TH DAY OF SEPTEMBER, 1998.
OnePoint Communications--Illinois,
LLC
/s/ James A. Otterbeck
By: _________________________________
James A. Otterbeck
Chief Executive Officer of
OnePoint Communications--Illinois,
LLC and Chairman and Chief
Executive Officer of OnePoint
Communications Corp., its manager
KNOW ALL MEN BY THESE PRESENTS, THAT EACH PERSON WHOSE SIGNATURE APPEARS
BELOW CONSTITUTES AND APPOINTS JAMES A. OTTERBECK AND JOHN D. STAVIG, AND EACH
OF THEM, HIS OR HER TRUE AND LAWFUL ATTORNEYS-IN-FACT AND AGENTS, WITH FULL
POWER OF SUBSTITUTION AND RESUBSTITUTION, FOR HIM OR HER AND IN HIS OR HER
PLACE AND STEAD, IN ANY AND ALL CAPACITIES, TO SIGN ANY OR ALL AMENDMENTS
(INCLUDING POST-EFFECTIVE AMENDMENTS) TO THIS REGISTRATION STATEMENT, AND TO
FILE THE SAME, WITH ALL EXHIBITS THERETO, AND OTHER DOCUMENTS IN CONNECTION
THEREWITH, WITH THE SECURITIES AND EXCHANGE COMMISSION, GRANTED UNTO SAID
ATTORNEYS-IN-FACT AND AGENTS, AND EACH OF THEM, FULL POWER AND AUTHORITY TO DO
AND PERFORM EACH AND EVERY ACT AND THING REQUISITE AND NECESSARY TO BE DONE IN
AND ABOUT THE PREMISES, AS FULLY AND TO ALL INTENTS AND PURPOSES AS HE OR SHE
MIGHT OR COULD DO IN PERSON, HEREBY RATIFYING AND CONFIRMING ALL THAT SAID
ATTORNEYS-IN-FACT AND AGENTS OR ANY OF THEM, OR THEIR OR HIS SUBSTITUTE OR
SUBSTITUTES, MAY LAWFULLY DO OR CAUSE TO BE DONE BY VIRTUE HEREOF.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN THE
CAPACITIES INDICATED ON THE 17TH DAY OF SEPTEMBER, 1998.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
/s/ James A. Otterbeck Chief Executive Officer
___________________________________________ (Principal Executive Officer)
James A. Otterbeck
/s/ William F. Wallace President (Principal Operating Officer)
___________________________________________
William F. Wallace
/s/ John D. Stavig Treasurer (Principal Financial Officer)
___________________________________________
John D. Stavig
/s/ William McMoil Vice President (Principal Accounting
___________________________________________ Officer)
William McMoil
</TABLE>
II-9
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, ONEPOINT
COMMUNICATIONS--COLORADO, LLC DULY CAUSED THIS REGISTRATION STATEMENT ON FORM
S-4 TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED,
IN CITY OF BANNOCKBURN, STATE OF ILLINOIS, ON THE 17TH DAY OF SEPTEMBER, 1998.
OnePoint Communications--Colorado,
LLC
/s/ James A. Otterbeck
By: _________________________________
James A. Otterbeck
Chief Executive Officer of
OnePoint Communications--Colorado,
LLC and Chairman and Chief
Executive Officer of OnePoint
Communications Corp., its manager
KNOW ALL MEN BY THESE PRESENTS, THAT EACH PERSON WHOSE SIGNATURE APPEARS
BELOW CONSTITUTES AND APPOINTS JAMES A. OTTERBECK AND JOHN D. STAVIG, AND EACH
OF THEM, HIS OR HER TRUE AND LAWFUL ATTORNEYS-IN-FACT AND AGENTS, WITH FULL
POWER OF SUBSTITUTION AND RESUBSTITUTION, FOR HIM OR HER AND IN HIS OR HER
PLACE AND STEAD, IN ANY AND ALL CAPACITIES, TO SIGN ANY OR ALL AMENDMENTS
(INCLUDING POST-EFFECTIVE AMENDMENTS) TO THIS REGISTRATION STATEMENT, AND TO
FILE THE SAME, WITH ALL EXHIBITS THERETO, AND OTHER DOCUMENTS IN CONNECTION
THEREWITH, WITH THE SECURITIES AND EXCHANGE COMMISSION, GRANTED UNTO SAID
ATTORNEYS-IN-FACT AND AGENTS, AND EACH OF THEM, FULL POWER AND AUTHORITY TO DO
AND PERFORM EACH AND EVERY ACT AND THING REQUISITE AND NECESSARY TO BE DONE IN
AND ABOUT THE PREMISES, AS FULLY AND TO ALL INTENTS AND PURPOSES AS HE OR SHE
MIGHT OR COULD DO IN PERSON, HEREBY RATIFYING AND CONFIRMING ALL THAT SAID
ATTORNEYS-IN-FACT AND AGENTS OR ANY OF THEM, OR THEIR OR HIS SUBSTITUTE OR
SUBSTITUTES, MAY LAWFULLY DO OR CAUSE TO BE DONE BY VIRTUE HEREOF.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN THE
CAPACITIES INDICATED ON THE 17TH DAY OF SEPTEMBER, 1998.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
/s/ James A. Otterbeck Chief Executive Officer
___________________________________________ (Principal Executive Officer)
James A. Otterbeck
/s/ William F. Wallace President (Principal Operating Officer)
___________________________________________
William F. Wallace
/s/ John D. Stavig Treasurer (Principal Financial Officer)
___________________________________________
John D. Stavig
/s/ William McMoil Vice President (Principal Accounting
___________________________________________ Officer)
William McMoil
</TABLE>
II-10
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, VIC-RMTS-DC, LLC
DULY CAUSED THIS REGISTRATION STATEMENT ON FORM S-4 TO BE SIGNED ON ITS BEHALF
BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN CITY OF BANNOCKBURN, STATE
OF ILLINOIS, ON THE 17TH DAY OF SEPTEMBER, 1998.
VIC-RMTS-DC, LLC
/s/ James A. Otterbeck
By: _________________________________
James A. Otterbeck
Chief Executive Officer of VIC-
RMTS-DC, LLC and Chairman and
Chief Executive Officer of
OnePoint Communications Corp., the
manager of its manager
KNOW ALL MEN BY THESE PRESENTS, THAT EACH PERSON WHOSE SIGNATURE APPEARS
BELOW CONSTITUTES AND APPOINTS JAMES A. OTTERBECK AND JOHN D. STAVIG, AND EACH
OF THEM, HIS OR HER TRUE AND LAWFUL ATTORNEYS-IN-FACT AND AGENTS, WITH FULL
POWER OF SUBSTITUTION AND RESUBSTITUTION, FOR HIM OR HER AND IN HIS OR HER
PLACE AND STEAD, IN ANY AND ALL CAPACITIES, TO SIGN ANY OR ALL AMENDMENTS
(INCLUDING POST-EFFECTIVE AMENDMENTS) TO THIS REGISTRATION STATEMENT, AND TO
FILE THE SAME, WITH ALL EXHIBITS THERETO, AND OTHER DOCUMENTS IN CONNECTION
THEREWITH, WITH THE SECURITIES AND EXCHANGE COMMISSION, GRANTED UNTO SAID
ATTORNEYS-IN-FACT AND AGENTS, AND EACH OF THEM, FULL POWER AND AUTHORITY TO DO
AND PERFORM EACH AND EVERY ACT AND THING REQUISITE AND NECESSARY TO BE DONE IN
AND ABOUT THE PREMISES, AS FULLY AND TO ALL INTENTS AND PURPOSES AS HE OR SHE
MIGHT OR COULD DO IN PERSON, HEREBY RATIFYING AND CONFIRMING ALL THAT SAID
ATTORNEYS-IN-FACT AND AGENTS OR ANY OF THEM, OR THEIR OR HIS SUBSTITUTE OR
SUBSTITUTES, MAY LAWFULLY DO OR CAUSE TO BE DONE BY VIRTUE HEREOF.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN THE
CAPACITIES INDICATED ON THE 17TH DAY OF SEPTEMBER, 1998.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
/s/ James A. Otterbeck Chief Executive Officer
___________________________________________ (Principal Executive Officer)
James A. Otterbeck
/s/ William F. Wallace President (Principal Operating Officer)
___________________________________________
William F. Wallace
/s/ John D. Stavig Treasurer (Principal Financial Officer)
___________________________________________
John D. Stavig
/s/ William McMoil Vice President (Principal Accounting
___________________________________________ Officer)
William McMoil
</TABLE>
II-11
<PAGE>
EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER dated as of April 29, 1998 (the "Merger
Agreement"), by and among OnePoint Communications Corp., a Delaware corporation
("OnePoint Corp.") and OnePoint Communications, LLC, a Delaware limited
liability company ("OnePoint, LLC").
WITNESSETH:
WHEREAS, OnePoint Corp. is a corporation duly organized and validly
existing under and by virtue of the laws of the State of Delaware, having
authorized capital stock consisting of: 35,000 shares of Preferred Stock, par
value $1.00 per share (the "OnePoint Corp. Preferred Stock"), none of which are
issued and outstanding; and 2,000,000 shares of Common Stock, par value $0.01
per share (the "OnePoint Corp. Common Stock"), none of which are issued and
outstanding;
WHEREAS, OnePoint, LLC is a limited liability company duly organized and
validly existing under the laws of the state of Delaware, having issued and
outstanding equity interests consisting of 1,000,000 Common Membership Units
(the "OnePoint, LLC Common Units");
WHEREAS, the Board of Directors of OnePoint Corp. and the Manager of
OnePoint, LLC deem it advisable that OnePoint, LLC merge with and into OnePoint
Corp., upon the terms and subject to the conditions set forth herein and in
accordance with the laws of the State of Delaware (the "Merger"), and that the
Common Membership Units of OnePoint, LLC be canceled upon consummation of the
Merger as set forth herein;
WHEREAS, the parties hereto intend that the Merger qualify as tax-free
reorganization for federal income tax purposes; and
WHEREAS, the Board of Directors of OnePoint Corp. and the Manager of
OnePoint, LLC have, by resolutions, duly approved and adopted the provisions of
this Merger Agreement as the agreement of merger required by Section 264 of the
General Corporation Law of the State of Delaware (the "Delaware Corporation
Law") and by Section 18-209 of the Delaware Limited Liability Company Act (the
"Delaware LLC Act"), as the foregoing may be applicable to OnePoint Corp.,
OnePoint, LLC, and the Merger.
NOW, THEREFORE, the parties hereto agree as follows:
SECTION 1. Effect of the Merger; Manner and Basis of Converting and
--------------------------------------------------------
Canceling Units.
- ---------------
<PAGE>
1.1 At the Effective Time (as hereinafter defined), OnePoint, LLC shall be
merged with and into OnePoint Corp., the separate corporate existence of
OnePoint, LLC shall cease (except as may be continued by operation of law), and
OnePoint Corp. shall continue as the surviving corporation, all with the effects
provided by applicable law. OnePoint Corp., in its capacity as the surviving
corporation of the Merger, is hereinafter sometimes referred to as the
"Surviving Corporation."
1.2 At the Effective Time, by virtue of the Merger and without any action
by OnePoint, LLC, the equityholders of OnePoint, LLC, the shareholders OnePoint
Corp. or any other person, all of the issued and outstanding Membership Units of
OnePoint, LLC, together with the promissory note of OnePoint, LLC dated December
3, 1997 made in favor of Ventures in Communications, L.L.C. in the aggregate
principal amount of $1,500,000, shall be cancelled and converted into the right
to receive 35,000 shares of OnePoint Corp. Preferred Stock and 1,000,000 shares
of OnePoint Common Stock, with 1 share of OnePoint Corp. Common Stock and .035
shares of OnePoint Corp. Preferrred Stock issuable for each issued and
outstanding OnePoint, LLC Membership Unit.
1.3 At and after the Effective Time, the Surviving Corporation shall
possess all the rights, privileges, immunities and franchises, of both a public
and private nature, and be subject to all the duties and liabilities, of
OnePoint, LLC; and all rights, privileges immunities and franchises of OnePoint,
LLC, and all property, real, personal and mixed, and all debts due on whatever
account, including subscriptions to shares, and all other choses in action, and
all and every other interest, of or belonging to OnePoint, LLC shall be taken
and deemed to be transferred to and vested in the Surviving Corporation without
further act or deed; and title to any real estate, or any interest therein,
vested in OnePoint, LLC shall not revert or be in any way impaired by reason of
the Merger; and the Surviving Corporation shall thenceforth be responsible and
liable for all liabilities and obligations of OnePoint, LLC; and any claim
existing or action or proceeding pending by or against OnePoint, LLC may be
prosecuted to judgment as if the Merger had not taken place or the Surviving
Corporation may be substituted in its place; all with the effect set forth in
Section 264 of the Delaware Corporation Law and Section 18-209 of the Delaware
LLC Act. The authority of the officers of OnePoint, LLC shall continue with
respect to the due execution in the name of OnePoint, LLC of tax returns,
instruments of transfer or conveyance and other documents where the execution
thereof is required or convenient to comply with any provision of the Delaware
Corporation Law, any contract to which OnePoint, LLC is or was a party or this
Merger Agreement.
1.4 The name of the Surviving Corporation shall be "OnePoint
Communications Corp.".
2
<PAGE>
SECTION 2. Effective Time.
--------------
2.1 Upon the fulfillment or waiver of the conditions specified in Section
5 hereof and provided that this Merger Agreement has not been terminated and
abandoned pursuant to Section 6.2 hereof, OnePoint Corp. and OnePoint, LLC shall
cause a Certificate of Merger to be executed, acknowledged and filed with the
Secretary of State of the State of Delaware, all as provided for in and in
accordance with Section 264 of the Delaware Corporation Law and Section 18-209
of the Delaware LLC Act.
2.2 The Merger shall become effective at the time and date as provided by
applicable law (the "Effective Time").
SECTION 3. Additional Agreements.
---------------------
3.1 Each of the parties hereto shall (subject to any qualifications
specified in this Section 3, the conditions specified in Section 5 and the
fiduciary obligations of their respective boards of directors) diligently use
their respective best efforts to cause the Merger to be consummated and to be
consummated at the earliest practicable date. Such best efforts shall include
the vigorous defense of any suit or proceeding instituted against it in
connection with the transactions contemplated by this Merger Agreement.
3.2 OnePoint, LLC shall submit this Merger Agreement and the Merger to its
Members for adoption and approval and shall use its best efforts to solicit from
its Members votes in favor of such adoption and approval and shall take all
other action necessary or helpful to secure a vote of its Members in favor of
the Merger.
3.3 Prior to the Effective Time, each party hereto shall use its best
efforts to obtain the consent of all private third parties and governmental
authorities necessary to its consummation of the Merger.
3.4 Each party hereto shall give prompt notice to the other parties hereto
of the occurrence or failure to occur of any event, which occurrence or failure
would cause or would be likely to cause a condition to the obligation of another
party hereto to effect the Merger not to be satisfied.
SECTION 4. Certificate of Incorporation and By-laws; Board of Directors.
------------------------------------------------------------
4.1 The Certificate of Incorporation and By-laws of OnePoint Corp. as in
effect at the Effective Time shall govern the Surviving Corporation.
3
<PAGE>
4.2 The members of the Board of Directors and the officers of OnePoint
Corp. holding office immediately prior to the Effective Time shall be the
members of the Board of Directors and the officers (holding the same positions
as they held with OnePoint Corp. immediately prior to the Effective Time) of the
Surviving Corporation and shall hold such offices until the expiration of their
current terms, or until their earlier death, resignation or removal.
SECTION 5. Conditions.
----------
5.1 The respective obligation of OnePoint, LLC and OnePoint Corp. to
consummate the Merger under this Merger Agreement is subject to the fulfillment
of the following conditions:
(a) At the option of OnePoint, LLC or OnePoint Corp., any third party
consents which are required in order to avoid a breach, violation, conflict or
default under any agreement, contract, statute, rule or regulation shall have
been obtained;
(b) This Merger Agreement and the Merger shall have been approved and
adopted by the Members of OnePoint, LLC;
(c) There shall have been no law, statute, rule or regulation,
domestic or foreign, enacted or promulgated which would make consummation of the
Merger illegal and no such law, statute, rule or regulation shall be in effect;
and
(d) No preliminary or permanent injunction or other order by any
federal or state court of competent jurisdiction that makes illegal or otherwise
prevents the consummation of the Merger shall be in effect.
SECTION 6. Amendment and Termination.
-------------------------
6.1 OnePoint, LLC and OnePoint Corp., by mutual consent of OnePoint, LLC's
Manager and OnePoint Corp.'s Board of Directors, may amend, modify or supplement
this Merger Agreement in such manner as may be agreed upon by them in writing.
6.2 This Merger Agreement may be terminated and the Merger may be
abandoned for any reason by a resolution adopted jointly by the Board of
Directors of OnePoint Corp. and the Manager of OnePoint, LLC or at any time
prior to the Effective Time. In the event of the termination of this Merger
Agreement as provided herein, this Merger Agreement shall forthwith become void
and there shall be no liability hereunder on the part of OnePoint, LLC, OnePoint
Corp. or their respective officers, directors or managers, except liability for
intentional breach or misrepresentation or common law fraud.
SECTION 7. Service of Process.
------------------
4
<PAGE>
7.1 The Surviving Corporation hereby agrees that it may be served with
process in the State of Delaware in any proceeding for the enforcement of any
obligation of OnePoint Communications, LLC or OnePoint Communications Corp. and
hereby irrevocably appoints the Secretary of State of the State of Delaware as
its agent to accept service of process in any such proceeding.
7.2 A copy of any service of process received in connection with Section
7.1 above should be mailed to:
OnePoint Communications Corp.
2201 Waukegan Road, Suite E-200
Bannockburn, IL 60015
Attn: President
SECTION 8. Miscellaneous.
-------------
8.1 This Merger Agreement may be executed in one or more counterparts, all
of which taken together shall constitute one and the same instrument.
8.2 The internal law, not the law of conflicts, of the State of Delaware
will govern all questions concerning the construction, validity and
interpretation of this Merger Agreement.
8.3 This Merger Agreement is not intended to confer upon any person (other
than the parties hereto and their respective successors and assigns) any rights
or remedies hereunder or by reason hereof.
* * * * *
5
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Merger Agreement to
be signed by their respective officers thereunto duly authorized and their
respective corporate seals affixed, all as of the day and year first written
above.
ONEPOINT COMMUNICATIONS CORP.,
a Delaware corporation
By: /s/ James A. Otterbeck
----------------------------
James A. Otterbeck
Its: President
ONEPOINT COMMUNICATIONS, LLC, a
Delaware limited liability
company
By: /s/ James A. Otterbeck
----------------------------
James A. Otterbeck
Its: Manager
6
<PAGE>
Exhibit 3.1
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
ONEPOINT COMMUNICATIONS CORP.
ARTICLE ONE
-----------
The name of the Corporation is OnePoint Communications Corp.
ARTICLE TWO
-----------
The address of the Corporation's registered office in the State of Delaware
is 9 Loockerman Street, in the City of Dover, County of Kent, 19901. The name
of its registered agent at such address is National Registered Agents, Inc.
ARTICLE THREE
-------------
The nature of the business or purposes to be conducted or promoted is to
engage in any lawful act or activity for which corporations may be organized
under the General Corporation Law of the State of Delaware (the "Delaware
General Corporation Law") either alone or with others through wholly or
partially owned subsidiaries, as a partner (limited or general) in any
partnership, as member in any limited liability company, as a joint venturer in
any joint venture, or otherwise.
ARTICLE FOUR
------------
SECTION 1. The aggregate number of shares of stock which the Corporation
has authority to issue is 2,035,000, consisting of 35,000 shares of Preferred
Stock, $1.00 par value (the "Preferred Stock") and 2,000,000 shares of Common
Stock, par value $.01 per share (the "Common Stock"). All of such shares shall
be issued as fully paid and non-assessable shares, and the holder thereof shall
not be liable for any further payments in respect thereof.
SECTION 2. The preferences, limitations, designations and relative rights
of the shares of each class and the qualifications, limitations or restrictions
thereof shall be as follows:
I. Preferred Stock
A. Dividends.
1. No General Obligation. The holders of the Preferred Stock shall
not be entitled to receive any Dividends with respect to the Preferred Stock.
The date on which the Corporation initially issues any Preferred Share shall be
deemed to be its "date of issuance"
<PAGE>
regardless of the number of times transfer of such Preferred Share is made on
the stock records maintained by or for the Corporation and regardless of the
number of certificates which may be issued to evidence such Preferred Share.
B. Liquidation.
1. Liquidation Payments. Upon any liquidation, dissolution or
winding up of the Corporation (whether voluntary or involuntary), each holder of
Preferred Stock shall be entitled to be paid, before any distribution or payment
is made upon any Junior Securities, an amount in cash equal to the aggregate
Liquidation Value of all Preferred Shares held by such holder, and the holders
of Preferred Stock shall not be entitled to any further payment. If upon any
such liquidation, dissolution or winding up of the Corporation the Corporation's
assets to be distributed among the holders of the Preferred Stock are
insufficient to permit payment to such holders of the aggregate amount which
they are entitled to be paid under this Section 2.I.B. of Article Four, then the
entire assets available to be distributed to the holders of the Preferred Stock
shall be distributed pro rata among such holders based upon the aggregate
Liquidation Value of the Preferred Stock held by each such holder. Not less than
60 days prior to the payment date stated therein, the Corporation shall mail
written notice of any such liquidation, dissolution or winding up to each record
holder of Preferred Stock, setting forth in reasonable detail the amount of
proceeds to be paid with respect to each Preferred Share, each share of Common
Equivalent Stock and each other equity security of the Corporation in connection
with such liquidation, dissolution or winding up.
2. Distribution Other Than Cash. Whenever the distribution provided
for in this Section 2.I.B. of Article Four shall be payable in property other
than cash, the value of such distribution shall be the fair market value of such
property as determined in good faith by the Board of Directors; provided,
however, that if the holders of a majority of the then outstanding share of
Preferred Stock (the "Contesting Preferred Holders") notify the Board of
Directors within five business days after receiving written notification of such
determination of fair market value that they disagree with such determination,
then the Board of Directors and the Contesting Preferred Holders shall have 30
days to agree upon a fair market value of the relevant property. If, by the end
of such 30-day period, they are unable to agree on a fair market value, the fair
market value shall be determined by an appraisal, the cost of which shall be
shared equally by the Corporation, on one hand, and the Contesting Preferred
Holders, on the other hand. All appraisals shall be undertaken by two
appraisers, one selected by the Corporation and one selected by the Contesting
Preferred Holders, which selections must be made within 10 days after the
expiration of the 30-day period described above. If one selecting party fails to
timely select its appraiser, the other selecting party shall select both
appraisers. The fair market value shall be the fair market value arrived at by
those appraisers within 60 days following the appointment of the last appraiser
to be appointed. In the event that the two appraisers cannot agree on such fair
market value within such a period of time, (a) if the appraisers' valuations are
within 10% of each other, the fair market value shall be the average of the two
valuations, and (b) if the differences in the valuations are greater, the
appraisers shall elect a third appraiser who will calculate fair market value
independently, and, except as provided in the next sentence, the fair market
value of the property shall in each case be the average of the two fair market
values arrived at by the appraisers who are closest in amount. If one
appraiser's valuation is the average of the other two valuations, the average
valuation shall be the fair
2
<PAGE>
market value. In the event that the two original appraisers cannot agree upon a
third appraiser within 30 days following the end of the 60-day period referred
to above, the third appraiser shall be appointed by the American Arbitration
Association.
C. Priority of Preferred Stock on Dividends and Redemptions. So long as
any Preferred Stock remains outstanding, without the prior written consent of
the holders of a majority of the outstanding shares of Preferred Stock, the
Corporation shall not, nor shall it permit any Subsidiary to, redeem, purchase
or otherwise acquire directly or indirectly any Junior Securities, nor shall the
Corporation directly or indirectly pay or declare any dividend or make any
distribution upon any Junior Securities;
D. Redemptions.
1. Optional Redemption. The Corporation may, at its option, at any
time and from time to time, redeem all or any portion of the shares of Preferred
Stock then outstanding (an "Optional Preferred Redemption"). Upon an Optional
Preferred Redemption, the Corporation shall pay a price per share equal to the
Base Amount (as defined below). The "Base Amount" shall mean an amount equal to
$1,000 per share.
2. Redemption Payments. For each Preferred Share which is to be
redeemed hereunder, the Corporation shall be obligated on the Preferred
Redemption Date to pay to the holder thereof (upon surrender by such holder at
the Corporation's principal office of the certificate representing such share)
an amount in immediately available funds equal to the redemption price described
in Section 2.I.D.1. of Article Four. If the funds of the Corporation legally
available for redemption of Preferred Shares on any Preferred Redemption Date
are insufficient to redeem the total number of Preferred Shares to be redeemed
on such date, those funds which are legally available shall be used to redeem
the maximum possible number of Preferred Shares pro rata among the holders of
the Preferred Shares to be redeemed based upon the aggregate redemption price
pursuant to Section 2.I.D.1. of Article Four of such Preferred Shares held by
each such holder. At any time thereafter when additional funds of the
Corporation are legally available for the redemption of Preferred Shares, such
funds shall immediately be used to redeem the balance of the Preferred Shares
which the Corporation has become obligated to redeem on any Preferred Redemption
Date but which it has not redeemed.
3. Notice of Redemption. Except as otherwise provided herein, the
Corporation shall mail written notice of each redemption of any Preferred Stock
to each record holder thereof not more than 60 nor less than 30 days prior to
the date on which such redemption is to be made. In case fewer than the total
number of Preferred Shares represented by any certificate are redeemed, a new
certificate representing the number of unredeemed Preferred Shares shall be
issued to the holder thereof without cost to such holder within five business
days after surrender of the certificate representing the redeemed Preferred
Shares.
4. Determination of the Number of Each Holder's Preferred Shares to
be Redeemed. The number of shares of Preferred Stock to be redeemed from each
holder thereof in any Optional Preferred Redemption hereunder shall be the
number of shares determined by multiplying
3
<PAGE>
the total number of Preferred Shares to be redeemed by a fraction, the numerator
of which shall be the total number of Preferred Shares then held by such holder
and the denominator of which shall be the total number of Preferred Shares then
outstanding.
5. No Rights After Preferred Redemption Date. After the date on
which the redemption price of such share pursuant to Section 2.I.D.1. of Article
Four is paid to the holder of such share, all rights of the holder of such share
shall cease, and such share shall no longer be deemed to be issued and
outstanding.
6. Redeemed or Otherwise Acquired Preferred Shares. Any Preferred
Shares which are redeemed or otherwise acquired by the Corporation shall be
canceled and retired to authorized but unissued shares and shall not be
reissued, sold or transferred.
7. Other Redemptions or Acquisitions. The Corporation shall not, nor
shall it permit any Subsidiary to, redeem or otherwise acquire any shares of
Preferred Stock, except as expressly authorized herein.
8. Priority in Redemptions. So long as any Preferred Stock remains
outstanding, the Corporation shall not, without the prior written consent of a
majority of the holders of the Preferred Stock, redeem any Junior Securities.
E. Voting and Other Rights.
Except as otherwise provided herein and as otherwise required by
applicable law, the Preferred Stock shall have no voting rights; provided that
each holder of Preferred Stock shall be entitled to notice of all stockholders
meetings at the same time and in the same manner as notice is given to all
stockholders entitled to vote at such meetings. The number of shares of
Preferred Stock entitled to vote on any matter shall be determined as of the
record date for the determination of shareholders entitled to vote on such
matter or, if no such record date is established, at the date such vote is taken
or any written consent of shareholders is solicited. Except as otherwise
expressly provided for herein or as required by law, the holders of Preferred
Stock shall vote together as a single class on all matters.
F. Events of Noncompliance.
1. Definition. An Event of Noncompliance shall have occurred if:
a. the Corporation fails to make any redemption payment with respect
to the Preferred Stock which it is required to make hereunder, whether or
not such payment is legally permissible or is prohibited by any agreement
to which the Corporation is subject;
b. the Corporation breaches or otherwise fails to perform or observe
any other covenant or agreement set forth herein.;
4
<PAGE>
c. the Corporation or any Subsidiary makes an assignment for the
benefit of creditors or admits in writing its inability to pay its debts
generally as they become due; or an order, judgment or decree is entered
adjudicating the Corporation or any Subsidiary bankrupt or insolvent; or
any order for relief with respect to the Corporation or any Subsidiary is
entered under the Federal Bankruptcy Code; or the Corporation or any
Subsidiary petitions or applies to any tribunal for the appointment of a
custodian, trustee, receiver or liquidator of the Corporation or any
Subsidiary or of any substantial part of the assets of the Corporation or
any Subsidiary, or commences any proceeding (other than a proceeding for
the voluntary liquidation and dissolution of a Subsidiary) relating to the
Corporation or any Subsidiary under any bankruptcy, reorganization,
arrangement, insolvency, readjustment of debt, dissolution or liquidation
law of any jurisdiction; or any such petition or application is filed, or
any such proceeding is commenced, against the Corporation or any Subsidiary
and either (i) the Corporation or any such Subsidiary by any act indicates
its approval thereof, consent thereto or acquiescence therein or (ii) such
petition, application or proceeding is not dismissed within 60 days;
d. a judgment in excess of $3,000,000] is rendered against the
Corporation or any Subsidiary and, within 60 days after entry thereof, such
judgment is not discharged or execution thereof stayed pending appeal, or
within 60 days after the expiration of any such stay, such judgment is not
discharged; or
e. the Corporation or any Subsidiary defaults in the performance of
any obligation or agreement if the effect of such default is to cause an
amount exceeding $1,500,000 to become due prior to its stated maturity or
to permit the holder or holders of any obligation to cause an amount
exceeding $1,500,000 to become due prior to its stated maturity.
2. Consequences of Events of Noncompliance.
a. If an Event of Noncompliance, other than an Event of Noncompliance
of the type described in Section 2.I.F.1.c. of Article Four, has occurred
and is continuing, the holder or holders of a majority of the Preferred
Stock then outstanding may demand (by written notice delivered to the
Corporation) immediate redemption of all or any portion of the Preferred
Stock owned by such holder or holders at a price per share equal to the
Liquidation Value thereof. The Corporation shall give prompt written
notice of such election to the other holders of Preferred Stock (but in any
event within five days after receipt of the initial demand for redemption),
and each such other holder may demand immediate redemption of all or any
portion of such holder's Preferred Stock by giving written notice thereof
to the Corporation within seven days after receipt of the Corporation's
notice. The Corporation shall redeem all Preferred Stock as to which
rights under this paragraph have been exercised within 15 days after
receipt of the initial demand for redemption.
b. If an Event of Noncompliance of the type described in Section
2.I.F.1.c. of Article Four has occurred, all of the Preferred Stock then
outstanding shall be subject to immediate redemption by the Corporation
(without any action on the part of the holders of the Preferred Stock) at a
price per share equal to the Liquidation Value thereof. The
5
<PAGE>
Corporation shall immediately redeem all Preferred Stock upon the
occurrence of such Event of Noncompliance.
c. If any Event of Noncompliance has occurred and is continuing, the
number of directors constituting the Corporation's Board of Directors
shall, at the request of the holders of a majority of the Preferred Stock
then outstanding, be increased by one member, and the holders of Preferred
Stock shall have the special right, voting separately as a single class
(with each Preferred Share being entitled to one vote) and to the exclusion
of all other classes of the Corporation's stock, to elect an individual to
fill such newly created directorship, to fill any vacancy of such
directorship and to remove any individual elected to such directorship.
The newly created directorship shall constitute a separate class of
directors, and the director elected by the holders of the Preferred Stock
shall be entitled to cast a number of votes on each matter considered by
the Board of Directors (including for purposes of determining the existence
of a quorum) equal to the sum of the number of votes entitled to be cast by
all of the other directors plus one. The special right of the holders of
Preferred Stock to elect members of the Board of Directors may be exercised
at the special meeting called pursuant to this subparagraph, at any annual
or other special meeting of stockholders and, to the extent and in the
manner permitted by applicable law, pursuant to a written consent in lieu
of a stockholders meeting. Such special right shall continue until such
time as there is no longer any Event of Noncompliance in existence, at
which time such special right shall terminate subject to revesting upon the
occurrence and continuation of any Event of Noncompliance which gives rise
to such special right hereunder.
At any time when such special right has vested in the holders of
Preferred Stock, a proper officer of the Corporation shall, upon the
written request of the holder of at least 10% of the Preferred Stock then
outstanding, addressed to the secretary of the Corporation, call a special
meeting of the holders of Preferred Stock for the purpose of electing a
director pursuant to this subparagraph. Such meeting shall be held at the
earliest legally permissible date at the principal office of the
Corporation, or at such other place designated by the holders of at least
10% of the Preferred Stock then outstanding. If such meeting has not been
called by a proper officer of the Corporation within 10 days after personal
service of such written request upon the secretary of the Corporation or
within 20 days after mailing the same to the secretary of the Corporation
at its principal office, then the holders of at least 10% of the Preferred
Stock then outstanding may designate in writing one of their number to call
such meeting at the expense of the Corporation, and such meeting may be
called by such Person so designated upon the notice required for annual
meetings of stockholders and shall be held at the Corporation's principal
office, or at such other place designated by the holders of at least 10% of
the Preferred Stock then outstanding. Any holder of Preferred Stock so
designated shall be given access to the stock record books of the
Corporation for the purpose of causing a meeting of stockholders to be
called pursuant to this subparagraph.
At any meeting or at any adjournment thereof at which the holders of
Senior Preferred Stock have the special right to elect directors, the
presence, in person or by proxy, of the holders of a majority of the
Preferred Stock then outstanding shall be required to constitute a quorum
for the election or removal of any director by the holders of the Preferred
6
<PAGE>
Stock exercising such special right. The vote of a majority of such quorum
shall be required to elect or remove any such director.
Any director so elected by the holders of Preferred Stock shall
continue to serve as a director until the expiration of the lesser of (i) a
period of six months following the date on which there is not longer any
Event of Noncompliance in existence or (ii) the remaining period of the
full term for which such director has been elected. After the expiration of
such six-month period or when the full term for which such director has
been elected ceases (provided that the special right to elect directors has
terminated), as the case may be, the number of directors constituting the
board of directors of the Corporation shall decrease to such number as
constituted the whole board of directors of the Corporation immediately
prior to the occurrence of the Event or Events of Noncompliance giving rise
to the special right to elect directors.
d. If any Event of Noncompliance exists, each holder of Preferred
Stock shall also have any other rights which such holder is entitled to
under any contract or agreement at any time and any other rights which such
holder may have pursuant to applicable law.
G. Registration of Transfer. The Corporation shall keep at its principal
office a register for the registration of Preferred Stock. Upon the surrender
of any certificate representing Preferred Stock at such place, the Corporation
shall, at the request of the record holder of such certificate, execute and
deliver (at the Corporation's expense) a new certificate or certificates in
exchange therefor representing in the aggregate the number of Preferred Shares
represented by the surrendered certificate. Each such new certificate shall be
registered in such name and shall represent such number of Preferred Shares as
is requested by the holder of the surrendered certificate and shall be
substantially identical in form to the surrendered certificate, and dividends
shall accrue on the Preferred Stock represented by such new certificate from the
date to which dividends have been fully paid on such Preferred Stock represented
by the surrendered certificate.
H. Replacement. Upon receipt of evidence reasonably satisfactory to the
Corporation (an affidavit of the registered holder shall be satisfactory) of the
ownership and the loss, theft, destruction or mutilation of any certificate
evidencing shares of Preferred Stock, and in the case of any such loss, theft or
destruction, upon receipt of indemnity reasonably satisfactory to the
Corporation (provided that if the holder is a financial institution or other
institutional investor its own agreement shall be satisfactory), or, in the case
of any such mutilation upon surrender of such certificate, the Corporation shall
(at its expense) execute and deliver in lieu of such certificate a new
certificate of like kind representing the number of shares of such class
represented by such lost, stolen, destroyed or mutilated certificate and dated
the date of such lost, stolen, destroyed or mutilated certificate, and dividends
shall accrue on the Preferred Stock represented by such new certificate from the
date to which dividends have been fully paid on such lost, stolen, destroyed or
mutilated certificate.
I. Amendment and Waiver. No amendment, modification or waiver shall be
binding or effective with respect to any provision relating to the rights of the
Preferred Stock hereof without the prior written consent of the holders of a
majority of the Preferred Stock outstanding at the time such action is taken;
provided that no such action shall change (i) the rate at which or the manner
7
<PAGE>
in which dividends on the Preferred Stock accrue or the times at which such
dividends become payable or the amount payable on redemption of the Preferred
Stock or the times at which redemption of Preferred Stock is to occur or (ii)
the percentage required to approve any change described in clause (i) above,
without the prior written consent of the holders of at least 80% of the
Preferred Stock then outstanding; and provided further that no change in the
terms relating to the rights of the Preferred Stock hereof may be accomplished
by merger or consolidation of the Corporation with another corporation or entity
unless the Corporation has obtained the prior written consent of the holders of
the applicable percentage of the Preferred Stock then outstanding.
J. Notices. Except as otherwise expressly provided hereunder, all
notices referred to herein shall be in writing and shall be delivered by
registered or certified mail, return receipt requested and postage prepaid, or
by reputable overnight courier service, charges prepaid, and shall be deemed to
have been given when so mailed or sent (i) to the Corporation, at its principal
executive offices and (ii) to any stockholder, at such holder's address as it
appears in the stock records of the Corporation (unless otherwise indicated by
any such holder).
K. Adjustment. All numbers and amounts set forth herein which refer to
share prices or amounts shall be appropriately adjusted to reflect stock splits,
stock dividends, combinations of shares and other recapitalizations affecting
the Preferred Stock.
II. Common Securities.
A. Rights Identical. Except as otherwise provided in this Section 2.II.
of Article Four or as otherwise required by applicable law, all shares of Common
Stock shall be identical in all respects and shall entitle the holders thereof
to the same rights and privileges, subject to the same qualifications,
limitations and restrictions.
B. Voting Rights. Except as otherwise provided in this Section 2.II. of
Article Four or as otherwise required by applicable law, holders of Common Stock
shall be entitled to one vote per share on all matters to be voted on by the
stockholders of the Corporation.
C. Dividends. Subject to the rights of the Preferred Stock, dividends
may be declared and paid or set apart for payment upon the Common Stock out of
any assets or funds of the Corporation legally available for the payment of
dividends, and the holders of Common Stock shall be entitled to participate in
such dividends ratably on a per share basis.
D. Liquidation. Upon any liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, and after the holders of the
Preferred Stock shall have been paid in full the amounts to which they shall be
entitled in accordance with Section 2.I.of Article Four, the terms of any
outstanding Preferred Stock and applicable law, or an amount sufficient to pay
the aggregate amount to which the holders of the Preferred Stock, shall be
entitled, shall have been deposited with a bank or trust company as a trust fund
for the benefit of the holders of such Preferred Stock, the remaining net assets
of the Corporation shall be distributed pro rata to the holders of the Common
Stock, to the exclusion of the holders of such Preferred Stock.
III. General Provisions
8
<PAGE>
A. Nonliquidating Events. A consolidation or merger of the Corporation
with or into another corporation or corporations or a sale, whether for cash,
shares of stock, securities or properties, or any combination thereof, of all or
substantially all of the assets of the Corporation shall not be deemed or
construed to be a liquidation, dissolution or winding up of the Corporation
within the meaning of this Article Four.
B. No Preemptive Rights. No holder of Preferred Stock or Common Stock of
the Corporation shall be entitled, as such, as a matter of right, to subscribe
for or purchase any part of any new or additional issue of stock of any class or
series whatsoever or of securities convertible into stock of any class
whatsoever, whether now or hereafter authorized and whether issued for cash or
other consideration, or by way of dividend.
C. Definitions.
"Common Equivalent Stock" means, collectively, the Corporation's
Common Stock and any capital stock of any class of the Corporation hereafter
authorized which is not limited to a fixed sum or percentage of par or stated
value in respect to the rights of the holders thereof to participate in
dividends or in the distribution of assets upon any liquidation, dissolution or
winding up of the Corporation.
"Junior Securities" means any capital stock or other equity securities
of the Corporation, except for the Preferred Stock of the Corporation.
"Liquidation Value" of any Preferred Share as of any particular date
shall be equal to $1,000 per share.
"Person" means an individual, a partnership, a corporation, a limited
liability company, a limited liability, an association, a joint stock company, a
trust, a joint venture, an unincorporated organization and a governmental entity
or any department, agency or political subdivision thereof.
"Preferred Redemption Date" as to any share of Preferred Stock means
the date specified in the notice of any redemption at the Corporation's option
or at the holder's option; provided that no such date shall be a Preferred
Redemption Date unless the redemption price provided in Section 2.I.D.1. of
Article Four of such share of Preferred Stock is actually paid in full on such
date, and if not so paid in full, the Preferred Redemption Date shall be the
date on which such amount is fully paid.
"Subsidiary" means, with respect to any Person, any corporation,
limited liability company, partnership, association or other business entity of
which (i) if a corporation, a majority of the total voting power of shares of
stock entitled (without regard to the occurrence of any contingency) to vote in
the election of directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by that Person or one or more of the other
Subsidiaries of that Person or a combination thereof, or (ii) if a limited
liability company, partnership, association or other business entity, a majority
of the partnership or other similar ownership interest thereof is at
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<PAGE>
the time owned or controlled, directly or indirectly, by any Person or one or
more Subsidiaries of that person or a combination thereof. For purposes hereof,
a Person or Persons shall be deemed to have a majority ownership interest in a
limited liability company, partnership, association or other business entity if
such Person or Persons shall be allocated a majority of limited liability
company, partnership, association or other business entity gains or losses or
shall be or control the managing general partner of such limited liability
company, partnership, association or other business entity.
ARTICLE FIVE
------------
The Corporation is to have perpetual existence.
ARTICLE SIX
-----------
The business and affairs of the Corporation shall be managed by or under
the direction of the Board of Directors, and the directors need not be elected
by ballot unless required by the By-laws of the Corporation. In furtherance and
not in limitation of the powers conferred by statute, the Board of Directors of
the Corporation is expressly authorized to make, alter, amend, change, add to or
repeal the By-laws of the Corporation.
ARTICLE SEVEN
-------------
Meetings of stockholders may be held within or outside of the State of
Delaware, as the By-laws of the Corporation may provide. The books of the
Corporation may be kept outside the State of Delaware at such place or places as
may be designated from time to time by the Board of Directors or in the By-laws
of the Corporation. The Board of Directors shall from time to time decide
whether and to what extent and at what times and under what conditions and
requirements the accounts and books of the Corporation, or any of them, except
the stock book, shall be open to the inspection of the stockholders, and no
stockholder shall have any right to inspect any books or documents of the
Corporation except as conferred by the laws of the State of Delaware or as
authorized by the Board of Directors.
ARTICLE EIGHT
-------------
The number of directors which shall constitute the whole board shall be
such as from time to time shall be fixed by resolution adopted by affirmative
vote of a majority of the Board of Directors except that such number shall not
be less than one (1) nor more than nine (9), the exact number to be determined
by resolution adopted by affirmative vote of a majority of the Board of
Directors.
Vacancies and newly created directorships resulting from any increase in
the number of directors may be filled only by the affirmative vote of the
majority of the Board of Directors then in office, although less than quorum, or
by a sole remaining director. Any director elected to fill a vacancy not
resulting from an increase in the number of directors shall have the same
remaining term as that of his predecessor.
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Notwithstanding the foregoing, whenever the holders of any one or more
classes or series of preferred stock issued by the Corporation shall have the
right, voting separately by class or series, to elect directors at an annual or
special meeting of stockholders, the election, term of office, filing of
vacancies and other features of such directorships shall be governed by the
terms of this Certificate of Incorporation applicable thereto.
Except to the extent prohibited by law, the Board of Directors shall have
the right (which, to the extent exercised, shall be exclusive) to establish the
rights, powers, duties, rules and procedures that from time to time shall govern
the Board of Directors and each of its members, including without limitation the
vote required for any action by the Board of Directors, and that from time to
time shall affect the directors' power to manage the business and affairs of the
Corporation; and no by-law shall be adopted by stockholders which shall impair
or impede the implementation of the foregoing.
ARTICLE NINE
------------
To the fullest extent permitted by the Delaware General Corporation Law as
it now exists or may hereafter be amended (but, in the case of any such
amendment, only to the extent that such amendment permits the Corporation to
provide broader indemnification rights than permitted prior thereto), no
director of the Corporation shall be liable to the Corporation or its
stockholders for monetary damages arising from a breach of fiduciary duty owed
to the Corporation or its stockholders.
Any repeal or modification of the foregoing paragraph by the stockholders
of the Corporation shall not adversely affect any right or protection of a
director of the Corporation existing at the time of such repeal or modification.
ARTICLE TEN
-----------
The Corporation expressly elects not to be governed by Section 203 of the
Delaware General Corporation Law.
ARTICLE ELEVEN
--------------
The Corporation reserves the right to amend, alter, change or repeal any
provision contained in this Amended and Restated Certificate of Incorporation in
the manner now or hereafter prescribed herein and by the laws of the State of
Delaware, and all rights conferred upon stockholders herein are granted subject
to this reservation.
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Exhibit 3.2
BY-LAWS
OF
ONEPOINT COMMUNICATIONS CORP.
A Delaware Corporation
ARTICLE I
---------
OFFICES
-------
Section 1. Registered Office. The registered office of the Corporation in
the State of Delaware shall be located at 9 Loockerman Street, Dover, Delaware,
County of Kent, 19901. The name of its registered agent at such address is
National Registered Agents, Inc.. The registered office and/or registered agent
of the Corporation may be changed from time to time by action of the board of
directors.
Section 2. Other Offices. The Corporation may also have offices at such
other places, both within and outside of the State of Delaware, as the board of
directors may from time to time determine or the business of the Corporation may
require.
ARTICLE II
----------
MEETINGS OF STOCKHOLDERS
------------------------
Section 1. Place and Time of Meetings. An annual meeting of the
stockholders shall be held each year within one hundred twenty (120) days after
the close of the immediately preceding fiscal year of the Corporation for the
purpose of electing directors and conducting such other proper business as may
come before the meeting. The date, time and place of the annual meeting shall be
determined by the board of directors.
Section 2. Special Meetings. Special meetings of stockholders may be called
for any purpose and may be held at such time and place, within or outside of the
State of Delaware, as shall be stated in a notice of meeting or in a duly
executed waiver of notice thereof. Such meetings may be called at any time by
the chairman of the board, the chief executive officer, the president, or
pursuant to a resolution adopted by the affirmative vote of at least two members
then in office. The
<PAGE>
only matters that may be considered at any special meeting of the stockholders
are the matters specified in the notice of the meeting.
Section 3. Place of Meetings. The board of directors may designate any
place, either within or outside of the State of Delaware, as the place of
meeting for any annual meeting or for any special meeting called by the board of
directors. If no designation is made, or if a special meeting be otherwise
called, the place of meeting shall be the principal executive office of the
Corporation.
Section 4. Notice. Whenever stockholders are required or permitted to take
action at a meeting, written or printed notice stating the place, date, time,
and, in the case of special meetings, the purpose or purposes, of such meeting,
shall be given to each stockholder entitled to vote at such meeting not less
than ten (10) nor more than sixty (60) days before the date of the meeting. All
such notices shall be delivered, either personally or by mail, by or at the
direction of the board of directors, the chairman of the board, the president or
the secretary, and if mailed, such notice shall be deemed to be delivered when
deposited in the United States mail, postage prepaid, addressed to the
stockholder at his, her or its address as the same appears on the records of the
Corporation. Attendance of a person at a meeting shall constitute a waiver of
notice of such meeting, except when the person attends for the express purpose
of objecting at the beginning of the meeting to the transaction of any business
because the meeting is not lawfully called or convened.
Section 5. Stockholders List. The officer having charge of the stock ledger
of the Corporation shall make, at least 10 days before every meeting of the
stockholders, a complete list of the stockholders entitled to vote at such
meeting arranged in alphabetical order, showing the address of each stockholder
and the number of shares registered in the name of each stockholder. Such list
shall be open to the examination of any stockholder, for any purpose germane to
the meeting, during ordinary business hours, for a period of at least 10 days
prior to the meeting, either at a place within the city where the meeting is to
be held, which place shall be specified in the notice of the meeting or, if not
so specified, at the place where the meeting is to be held. The list shall also
be produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder who is present.
Section 6. Quorum. The holders of a majority of the outstanding shares of
capital stock entitled to vote, present in person or represented by proxy, shall
constitute a quorum at all meetings of the stockholders, except as otherwise
provided by statute or by the certificate of incorporation. If a quorum is not
present, the holders of a majority of the shares present in person or
represented by proxy at the meeting, and entitled to vote at the meeting, may
adjourn the meeting to another time and/or place. When a specified item of
business requires a vote by a class or series (if the Corporation shall then
have outstanding shares of more than one class or series) voting as a class, the
holders of a majority of the shares of such class or series shall constitute a
quorum (as to such class or series) for the transaction of such item of
business.
Section 7. Adjourned Meetings. When a meeting is adjourned to another time
and place, notice need not be given of the adjourned meeting if the time and
place thereof are announced at the meeting at which the adjournment is taken. At
the adjourned meeting the Corporation may transact
<PAGE>
any business which might have been transacted at the original meeting. If the
adjournment is for more than thirty days, or if after the adjournment a new
record date is fixed for the adjourned meeting, a notice of the adjourned
meeting shall be given to each stockholder of record entitled to vote at the
meeting.
Section 8. Vote Required. When a quorum is present, the affirmative vote of
the majority of shares present in person or represented by proxy at the meeting
and entitled to vote on the subject matter shall be the act of the stockholders,
unless (i) by express provisions of an applicable law or of the certificate of
incorporation a different vote is required, in which case such express provision
shall govern and control the decision of such question, or (ii) the subject
matter is the election of directors, in which case Section 2 of Article III
hereof shall govern and control the approval of such subject matter, or the
amendment of any provision listed in Article VIII, in which case Article VIII
hereof shall govern and control the approval of such subject matter.
Section 9. Voting Rights. Except as otherwise provided by the General
Corporation Law of the State of Delaware or by the certificate of incorporation
of the Corporation or any amendments thereto and subject to Section 3 of Article
VI hereof, every stockholder shall at every meeting of the stockholders be
entitled to one vote in person or by proxy for each share of common stock held
by such stockholder.
Section 10. Proxies. Each stockholder entitled to vote at a meeting of
stockholders may authorize another person or persons to act for him or her by
proxy, but no such proxy shall be voted or acted upon after three years from its
date, unless the proxy provides for a longer period. A duly executed proxy shall
be irrevocable if it states that it is irrevocable and if, and only as long as,
it is coupled with an interest sufficient in law to support an irrevocable
power. A proxy may be made irrevocable regardless of whether the interest with
which it is coupled is an interest in the stock itself or an interest in the
Corporation generally. Any proxy is suspended when the person executing the
proxy is present at a meeting of stockholders and elects to vote, except that
when such proxy is coupled with an interest and the fact of the interest appears
on the face of the proxy, the agent named in the proxy shall have all voting and
other rights referred to in the proxy, notwithstanding the presence of the
person executing the proxy. At each meeting of the stockholders, and before any
voting commences, all proxies filed at or before the meeting shall be submitted
to and examined by the secretary or a person designated by the secretary, and no
shares may be represented or voted under a proxy that has been found to be
invalid or irregular.
Section 11. Action by Written Consent. Unless otherwise provided in the
certificate of incorporation, any action required to be taken at any annual or
special meeting of stockholders of the Corporation, or any action which may be
taken at any annual or special meeting of such stockholders, may be taken
without a meeting, without prior notice and without a vote, if a consent or
consents in writing, setting forth the action so taken and bearing the dates of
signature of the stockholders who signed the consent or consents, shall be
signed by the holders of outstanding stock having not less than the minimum
number of votes that would be necessary to authorize or take such action at a
meeting at which all shares entitled to vote thereon were present and voted and
shall be
-3-
<PAGE>
delivered to the Corporation by delivery to its registered office in the State
of Delaware, or the Corporation's principal place of business, or an officer or
agent of the Corporation having custody of the book or books in which
proceedings of meetings of the stockholders are recorded. Delivery made to the
Corporation's registered office shall be by hand, or by certified or registered
mail, return receipt requested provided, however, that no consent or consents
delivered by certified or registered mail shall be deemed delivered until such
consent or consents are actually received at the registered office. All consents
properly delivered in accordance with this section shall be deemed to be
recorded when so delivered. No written consent shall be effective to take the
corporate action referred therein unless, within sixty (60) days of the earliest
dated consent delivered to the Corporation as required by this section, written
consents signed by the holders of a sufficient number of shares to take such
corporate action are so recorded. Prompt notice of the taking of the corporate
action without a meeting by less than unanimous written consent shall be given
to those stockholders who have not consented in writing. Any action taken
pursuant to such written consent or consents of the stockholders shall have the
same force and effect as if taken by the stockholders at a meeting thereof.
ARTICLE III
-----------
DIRECTORS
---------
Section 1. General Powers. The business and affairs of the Corporation
shall be managed by or under the direction of the board of directors. In
addition to such powers as are herein and in the certificate of incorporation
expressly conferred upon it, the board of directors shall have and may exercise
all the powers of the Corporation, subject to the provisions of the laws of
Delaware, the certificate of incorporation and these by-laws.
Section 2. Number, Election and Term of Office. The number of directors
which shall constitute the board shall initially be one (1), but the number of
directors may be changed and established from time to time by resolution of the
board. The directors shall be elected by a plurality of the votes of the shares
present in person or represented by proxy at the meeting and entitled to vote in
the election of directors; provided that, whenever the holders of any class or
series of capital stock of the Corporation are entitled to elect one or more
directors pursuant to the provisions of the certificate of incorporation of the
Corporation (including, but not limited to, for purposes of these by-laws,
pursuant to any duly authorized certificate of designation), such directors
shall be elected by a plurality of the votes of such class or series present in
person or represented by proxy at the meeting and entitled to vote in the
election of such directors. The directors shall be elected in this manner at the
annual meeting of the stockholders, except as provided in Section 4 of this
Article III. Each director elected shall hold office until a successor is duly
elected and qualified or until his or her earlier death, resignation or removal
as hereinafter provided.
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Section 3. Removal and Resignation. Any director or the entire board of
directors may be removed at any time, with or without cause, by the holders of a
majority of the shares then entitled to vote at an election of directors.
Whenever the holders of a majority of the shares are entitled to elect one or
more directors by the provisions of the Corporation's certificate of
incorporation, the provisions of this section shall apply, in respect to the
removal without cause of a director or directors so elected, to the vote of the
holders of the outstanding shares of that class or series and not to the vote of
the outstanding shares as a whole. Any director may resign at any time upon
written notice to the Corporation.
Section 4. Vacancies. Vacancies and newly created directorships resulting
from any increase in the authorized number of directors may be filled by a
majority of the directors then in office, though less than a quorum, or by a
sole remaining director. Each director so chosen shall hold office until a
successor is duly elected and qualified or until his or her earlier death,
resignation or removal as herein provided.
Section 5. Annual Meetings. The annual meeting of the board of directors
shall be held without other notice than this by-law immediately after, and at
the same place as, the annual meeting of stockholders.
Section 6. Other Meetings and Notice. Regular meetings, other than the
annual meeting, of the board of directors may be held without notice at such
time and at such place as shall from time to time be determined by resolution of
the board. Special meetings of the board of directors may be called by the
chairman of the board or, upon the written request of at least a majority of the
directors then in office, by the secretary of the Corporation on at least 24
hours notice to each director, either personally, by telephone, by mail, or by
telecopy.
Section 7. Chairman, Quorum, Required Vote and Adjournment. The chairman,
shall preside at all meetings of the stockholders and board of directors at
which he or she is present. If the chairman is not present at a meeting of the
stockholders or the board of directors, the chief executive officer (if the
chief executive officer is a director and is not also the chairman) shall
preside at such meeting, and, if the chief executive officer is not present at
such meeting, a majority of the directors present at such meeting shall elect
one of their members to so preside. A majority of the total number of directors
then in office shall constitute a quorum for the transaction of business. Unless
by express provision of an applicable law, the Corporation's certificate of
incorporation or these by-laws a different vote is required, the vote of a
majority of directors present at a meeting at which a quorum is present shall be
the act of the board of directors. If a quorum shall not be present at any
meeting of the board of directors, the directors present thereat may adjourn the
meeting from time to time, without notice other than announcement at the
meeting, until a quorum shall be present.
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Section 8. Committees. The board of directors may, by resolution passed by
a majority of the total number of directors then in office, designate one or
more committees, each committee to consist of one or more of the directors of
the Corporation, which to the extent provided in such resolution or these by-
laws shall have, and may exercise, the powers of the board of directors in the
management and affairs of the Corporation, except as otherwise limited by law.
The board of directors may designate one or more directors as alternate members
of any committee, who may replace any absent or disqualified member at any
meeting of the committee. Such committee or committees shall have such name or
names as may be determined from time to time by resolution adopted by the board
of directors. Each committee shall keep regular minutes of its meetings and
report the same to the board of directors when required.
Section 9. Committee Rules. Each committee of the board of directors may
fix its own rules of procedure and shall hold its meetings as provided by such
rules, except as may otherwise be provided by a resolution of the board of
directors designating such committee. Unless otherwise provided in such a
resolution, the presence of at least a majority of the members of the committee
shall be necessary to constitute a quorum. Unless otherwise provided in such a
resolution, in the event that a member and that member's alternate, if
alternates are designated by the board of directors as provided in Section 8 of
this Article III, of such committee is or are absent or disqualified, the member
or members thereof present at any meeting and not disqualified from voting,
whether or not such member or members constitute a quorum, may unanimously
appoint another member of the board of directors to act at the meeting in place
of any such absent or disqualified member.
Section 10. Communications Equipment. Members of the board of directors or
any committee thereof may participate in and act at any meeting of such board or
committee through the use of a conference telephone or other communications
equipment by means of which all persons participating in the meeting can hear
and speak with each other, and participation in the meeting pursuant to this
Section 10 shall constitute presence in person at the meeting.
Section 11. Waiver of Notice and Presumption of Assent. Any member of the
board of directors or any committee thereof who is present at a meeting shall be
conclusively presumed to have waived notice of such meeting except when such
member attends for the express purpose of objecting at the beginning of the
meeting to the transaction of any business because the meeting is not lawfully
called or convened. Such member shall be conclusively presumed to have assented
to any action taken unless his or her dissent shall be entered in the minutes of
the meeting or unless his or her written dissent to such action shall be filed
with the person acting as the secretary of the meeting before the adjournment
thereof or shall be forwarded by registered mail to the secretary of the
Corporation immediately after the adjournment of the meeting. Such right to
dissent shall not apply to any member who voted in favor of such action. Any
member of the board of directors or any committee thereof may also waive notice
of any meeting by providing a written statement of such waiver.
Section 12. Action by Written Consent. Unless otherwise restricted by the
certificate of
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incorporation, any action required or permitted to be taken at any meeting of
the board of directors, or of any committee thereof, may be taken without a
meeting if all members of the board or committee, as the case may be, consent
thereto in writing, and the writing or writings are filed with the minutes of
proceedings of the board or committee.
ARTICLE IV
OFFICERS
Section 1. Number. The officers of the Corporation shall be elected by the
board of directors and shall consist of a chairman, chief executive officer,
president, one or more executive vice-presidents or vice-presidents, a chief
operating officer, a chief financial officer, a secretary, a treasurer and such
other officers and assistant officers as may be deemed necessary or desirable by
the board of directors. Any number of offices may be held by the same person. In
its discretion, the board of directors may choose not to fill any office for any
period as it may deem advisable, except that the offices of president and
secretary shall be filled as expeditiously as possible.
Section 2. Election and Term of Office. The officers of the Corporation
shall be elected annually by the board of directors at its first meeting held
after each annual meeting of stockholders or as soon thereafter as convenient.
Vacancies may be filled or new offices created and filled at any meeting of the
board of directors. Each officer shall hold office until a successor is duly
elected and qualified or until his or her earlier death, resignation or removal
as hereinafter provided.
Section 3. Removal. Any officer or agent elected by the board of directors
may be removed by the board of directors at its discretion, but such removal
shall be without prejudice to the contract rights, if any, of the person so
removed.
Section 4. Vacancies. Any vacancy occurring in any office because of death,
resignation, removal, disqualification or otherwise, may be filled by the board
of directors.
Section 5. Compensation. Compensation of all officers shall be fixed by the
board of directors, and no officer shall be prevented from receiving such
compensation by virtue of his or her also being a director of the Corporation.
Section 6. Chairman. The chairman shall have such powers and perform such
other duties as may be prescribed by the board of directors or provided in these
by-laws. The chairman is authorized to execute bonds, mortgages and other
contracts requiring a seal, under the seal of the Corporation, except where
required or permitted by law to be otherwise signed and executed and except
where the signing and execution thereof shall be expressly delegated by the
board of directors to some other officer or agent of the Corporation. Whenever
the chief executive officer or the president is unable to serve, by reason of
sickness, absence or otherwise, the chairman shall perform all the duties and
responsibilities and exercise all the powers of the chief executive officer or
the
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president.
Section 7. Chief Executive Officer. The chief executive officer shall have
the powers and perform the duties incident to that position. Subject to the
powers of the board of directors, he or she shall be in the general and active
charge of the entire business and affairs of the Corporation, and shall be its
chief policy-making officer. The chief executive officer is authorized to
execute bonds, mortgages and other contracts requiring a seal, under the seal of
the Corporation, except where required or permitted by law to be otherwise
signed and executed and except where the signing and execution thereof shall be
expressly delegated by the board of directors to some other officer or agent of
the Corporation. The chief executive officer shall, in the absence or disability
of the chairman, act with all of the powers, perform all duties and be subject
to all the restrictions of the chairman. The chief executive officer shall have
such other powers and perform such other duties as may be prescribed by the
chairman or the board of directors or as may be provided in these by-laws.
Section 8. The President. The president of the Corporation shall, subject
to the powers of the board of directors, the chairman and the chief executive
officer, shall have general charge of the business, affairs and property of the
Corporation, and control over its officers, agents and employees; and shall see
that all orders and resolutions of the board of directors and the chief
executive officer are carried into effect. The president shall, in the absence
or disability of the chief executive officer, act with all of the powers and be
subject to all the restrictions of the chief executive officer. The president is
authorized to execute bonds, mortgages and other contracts requiring a seal,
under the seal of the Corporation, except where required or permitted by law to
be otherwise signed and executed and except where the signing and execution
thereof shall be expressly delegated by the board of directors to some other
officer or agent of the Corporation. The president shall have such other powers
and perform such other duties as may be prescribed by the chairman, the chief
executive officer or the board of directors or as may be provided in these by-
laws.
Section 9. Chief Operating Officer. The chief operating officer of the
Corporation, subject to the powers of the board of directors, the chairman and
the chief executive officer, shall have general and active management of the
business of the Corporation; and shall see that all orders and resolutions of
the board of directors are carried into effect. The chief operating officer
shall have such other powers and perform such other duties as may be prescribed
by the chairman, the chief executive officer or the board of directors or as may
be provided in these by-laws.
Section 10. Chief Financial Officer. The chief financial officer of the
Corporation shall, under the direction of the chairman, the chief executive
officer and the president, be responsible for all financial and accounting
matters and for the direction of the offices of treasurer and controller. The
chief financial officer shall have such other powers and perform such other
duties as may be prescribed by the chairman, the chief executive officer or the
board of directors or as may be provided in these by-laws.
Section 11. Vice-presidents. The vice-president, or if there shall be more
than one, the vice-presidents in the order determined by the board of directors
or the chairman, shall, in the absence or
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disability of the president, act with all of the powers and be subject to all
the restrictions of the president. The vice-presidents shall also perform such
other duties and have such other powers as the board of directors, the chairman,
the chief executive officer, the president or these by-laws may, from time to
time, prescribe. The vice-presidents may also be designated as executive vice-
presidents or senior vice-presidents, as the board of directors may from time to
time prescribe.
Section 12. The Secretary and Assistant Secretaries. The secretary shall
attend all meetings of the board of directors, all meetings of the committees
thereof and all meetings of the stockholders and record all the proceedings of
the meetings in a book or books to be kept for that purpose or shall ensure that
his or her designee attends each such meeting to act in such capacity. Under the
chairman's supervision, the secretary shall give, or cause to be given, all
notices required to be given by these by-laws or by law; shall have such powers
and perform such duties as the board of directors, the chairman, the chief
executive officer, the president or these by-laws may, from time to time,
prescribe; and shall have custody of the corporate seal of the Corporation. The
secretary, or an assistant secretary, shall have authority to affix the
corporate seal to any instrument requiring it and when so affixed, it may be
attested by his or her signature or by the signature of such assistant
secretary. The board of directors may give general authority to any other
officer to affix the seal of the Corporation and to attest the affixing by his
or her signature. The assistant secretary, or if there be more than one, any of
the assistant secretaries in the order determined by the board of directors,
shall, in the absence or disability of the secretary, perform the duties and
exercise the powers of the secretary and shall perform such other duties and
have such other powers as the board of directors, the chairman, the chief
executive officer, the president, or secretary may, from time to time,
prescribe.
Section 13. The Treasurer and Assistant Treasurer. The treasurer shall have
the custody of the corporate funds and securities; shall keep full and accurate
accounts of receipts and disbursements in books belonging to the Corporation;
shall deposit all monies and other valuable effects in the name and to the
credit of the Corporation as may be ordered by the chairman, the chief executive
officer, the chief financial officer or the board of directors; shall cause the
funds of the Corporation to be disbursed when such disbursements have been duly
authorized, taking proper vouchers for such disbursements; and shall render to
the chairman, the chief financial officer and the board of directors, at its
regular meeting or when the board of directors so requires, an account of the
Corporation; shall have such powers and perform such duties as the board of
directors, the chairman, the chief executive officer, the president, chief
financial officer or these by-laws may, from time to time, prescribe. If
required by the board of directors, the treasurer shall give the Corporation a
bond (which shall be rendered every six years) in such sums and with such surety
or sureties as shall be satisfactory to the board of directors for the faithful
performance of the duties of the office of treasurer and for the restoration to
the Corporation, in case of death, resignation, retirement, or removal from
office, of all books, papers, vouchers, money, and other property of whatever
kind in the possession or under the control of the treasurer belonging to the
Corporation. The assistant treasurer, or if there are more than one, the
assistant treasurers in the order determined by the board of directors shall, in
the absence or disability of the treasurer, perform the duties and exercise the
powers of the treasurer. The assistant treasurers shall perform such other
duties and have such other powers as the board of directors, the chairman, the
chief executive officer, the
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president, the chief financial officer, treasurer or these by-laws may, from
time to time, prescribe.
Section 14. Other Officers, Assistant Officers and Agents. Officers,
assistant officers and agents, if any, other than those whose duties are
provided for in these by-laws, shall have such authority and perform such duties
as may from time to time be prescribed by resolution of the board of directors.
Section 15. Absence or Disability of Officers. In the case of the absence
or disability of any officer of the Corporation and of any person hereby
authorized to act in such officer's place during such officer's absence or
disability, the board of directors may by resolution delegate the powers and
duties of such officer to any other officer or to any director, or to any other
person selected by it.
ARTICLE V
INDEMNIFICATION OF OFFICERS, DIRECTORS AND OTHERS
Section 1. Right to Indemnification. Each person who was or is made a party
or is threatened to be made a party to or is otherwise involved (including
involvement as a witness) in any action, suit or proceeding, whether civil,
criminal, administrative or investigative (hereinafter a "proceeding"), by
reason of the fact that he or she is or was a director or officer of the
Corporation or, while a director or officer of the Corporation, is or was
serving at the request of the Corporation as a director, officer, employee or
agent of another corporation or of a partnership, joint venture, trust or other
enterprise, including service with respect to an employee benefit plan
(hereinafter, an "indemnitee"), whether the basis of such proceeding is alleged
action in an official capacity as a director or officer or in any other capacity
while serving as a director or officer, shall be indemnified and held harmless
by the Corporation to the fullest extent authorized by the Delaware General
Corporation Law, as the same exists or may hereafter be amended (but, in the
case of any such amendment, only to the extent that such amendment permits the
Corporation to provide broader indemnification rights than permitted prior
thereto), against all expense, liability and loss (including attorneys' fees,
judgments, fines, ERISA exercise taxes or penalties and amounts paid in
settlement) reasonably incurred or suffered by such indemnitee in connection
therewith and such indemnification shall continue as to an indemnitee who has
ceased to be a director, officer, employee or agent and shall inure to the
benefit of the indemnitee's heirs, executors and administrators; provided,
however, that, except as provided in Section 2 of Article V with respect to
proceedings to enforce rights to indemnification, the Corporation shall
indemnify any such indemnitee in connection with a proceeding (or part thereof)
initiated by such indemnitee only if such proceeding (or part thereof) was
authorized by the board of directors of the Corporation. The right to
indemnification conferred in this Section 1 of Article V shall be a contract
right and shall include the right to be paid by the Corporation the expenses
incurred in defending any such proceeding in advance of its final disposition
(hereinafter an "advance of expenses"); provided, however, that, if and to the
extent that the Delaware General Corporation Law requires, an advance of
expenses incurred by an indemnitee in his or her capacity as a director or
officer (and not in any other capacity
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in which service was or is rendered by such indemnitee, including, without
limitation, service to an employee benefit plan) shall be made only upon
delivery to the Corporation of an undertaking (hereinafter an "undertaking"), by
or on behalf of such indemnitee, to repay all amounts so advanced if it shall
ultimately be determined by final judicial decision from which there is no
further right to appeal (hereinafter a "final adjudication") that such
indemnitee is not entitled to be indemnified for such expenses under this
Section 1 of Article V or otherwise. The Corporation may, by action of its board
of directors, provide indemnification to employees and agents of the Corporation
with the same scope and effect as the foregoing indemnification of directors and
officers.
Section 2. Procedure for Indemnification. Any indemnification of a director
or officer of the Corporation or advance of expenses under Section 1 of this
Article V shall be made promptly, and in any event within forty-five (45) days
(or, in the case of an advance of expenses, twenty (20) days), upon the written
request of the director or officer. If a determination by the Corporation that
the director or officer is entitled to indemnification pursuant to this Article
V is required, and the Corporation fails to respond within sixty (60) days to a
written request for indemnity, the Corporation shall be deemed to have approved
the request. If the Corporation denies a written request for indemnification or
advance of expenses, in whole or in part, or if payment in full pursuant to such
request is not made within forty-five (45) days (or, in the case of an advance
of expenses, twenty (20) days), the right to indemnification or advances as
granted by this Article V shall be enforceable by the director or officer in any
court of competent jurisdiction. Such person's costs and expenses incurred in
connection with successfully establishing his or her right to indemnification,
in whole or in part, in any such action shall also be indemnified by the
Corporation. It shall be a defense to any such action (other than an action
brought to enforce a claim for the advance of expenses where the undertaking
required pursuant to Section 1 of this Article V, if any, has been tendered to
the Corporation) that the claimant has not met the standards of conduct which
make it permissible under the Delaware General Corporation Law for the
Corporation to indemnify the claimant for the amount claimed, but the burden of
such defense shall be on the Corporation. Neither the failure of the Corporation
(including its board of directors, independent legal counsel, or its
stockholders) to have made a determination prior to the commencement of such
action that indemnification of the claimant is proper in the circumstances
because he or she has met the applicable standard of conduct set forth in the
Delaware General Corporation Law, nor an actual determination by the Corporation
(including its board of directors, independent legal counsel, or its
stockholders) that the claimant has not met such applicable standard of conduct,
shall be a defense to the action or create a presumption that the claimant has
not met the applicable standard of conduct. The procedure for indemnification of
other employees and agents for whom indemnification is provided pursuant to
Section 1 of this Article V shall be the same procedure set forth in this
Section 2 for directors or officers, unless otherwise set forth in the action of
the board of directors providing indemnification for such employee or agent.
Section 3. Service for Subsidiaries. Any person serving as a director,
officer, employee or agent of a Subsidiary shall be conclusively presumed to be
serving in such capacity at the request of the Corporation.
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Section 4. Reliance. Persons who after the date of the adoption of this
provision become or remain directors or officers of the Corporation or who,
while a director or officer of the Corporation, become or remain a director,
officer, employee or agent of a Subsidiary, shall be conclusively presumed to
have relied on the rights to indemnity, advance of expenses and other rights
contained in this Article V in entering into or continuing such service. The
rights to indemnification and to the advance of expenses conferred in this
Article V shall apply to claims made against an indemnitee arising out of acts
or omissions which occurred or occur both prior and subsequent to the adoption
hereof.
Section 5. Non-Exclusivity of Rights. The rights to indemnification and to
the advance of expenses conferred in this Article V shall not be exclusive of
any other right which any person may have or hereafter acquire under this
Certificate of Incorporation or under any statute, by-law, agreement, vote of
stockholders or disinterested directors or otherwise.
Section 6. Insurance. The Corporation may purchase and maintain insurance
on its own behalf and on behalf of any person who is or was a director, officer,
employee or agent of the Corporation or was serving at the request of the
Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against any expense,
liability or loss asserted against him or her and incurred by him or her in any
such capacity, whether or not the Corporation would have the power to indemnify
such person against such expenses, liability or loss under the Delaware General
Corporation Law.
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ARTICLE VI
CERTIFICATES OF STOCK
Section 1. Form. Every holder of stock in the Corporation shall be entitled
to have a certificate, signed by, or in the name of the Corporation by the
chairman, the president or a vice-president and the secretary or an assistant
secretary of the Corporation, certifying the number of shares owned by such
holder in the Corporation. If such a certificate is countersigned (1) by a
transfer agent or an assistant transfer agent other than the Corporation or its
employee or (2) by a registrar, other than the Corporation or its employee, the
signature of any such chairman, president, vice-president, secretary, or
assistant secretary may be facsimiles. In case any officer or officers who have
signed, or whose facsimile signature or signatures have been used on, any such
certificate or certificates shall cease to be such officer or officers of the
Corporation whether because of death, resignation or otherwise before such
certificate or certificates have been delivered by the Corporation, such
certificate or certificates may nevertheless be issued and delivered as though
the person or persons who signed such certificate or certificates or whose
facsimile signature or signatures have been used thereon had not ceased to be
such officer or officers of the Corporation. All certificates for shares shall
be consecutively numbered or otherwise identified. The name of the person to
whom the shares represented thereby are issued, with the number of shares and
date of issue, shall be entered on the books of the Corporation. Shares of stock
of the Corporation shall only be transferred on the books of the Corporation by
the holder of record thereof or by such holder's attorney duly authorized in
writing, upon surrender to the Corporation of the certificate or certificates
for such shares endorsed by the appropriate person or persons, with such
evidence of the authenticity of such endorsement, transfer, authorization, and
other matters as the Corporation may reasonably require, and accompanied by all
necessary stock transfer stamps. In that event, it shall be the duty of the
Corporation to issue a new certificate to the person entitled thereto, cancel
the old certificate or certificates, and record the transaction on its books.
The board of directors may appoint a bank or trust company organized under the
laws of the United States or any state thereof to act as its transfer agent or
registrar, or both in connection with the transfer of any class or series of
securities of the Corporation.
Section 2. Lost Certificates. The board of directors may direct a new
certificate or certificates to be issued in place of any certificate or
certificates previously issued by the Corporation alleged to have been lost,
stolen, or destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate of stock to be lost, stolen, or destroyed. When
authorizing such issue of a new certificate or certificates, the Corporation
may, in its discretion and as a condition precedent to the issuance thereof,
require the owner of such lost, stolen, or destroyed certificate or
certificates, or his or her legal representative, to give the Corporation a bond
sufficient to indemnify the Corporation against any claim that may be made
against the Corporation on account of the loss, theft or destruction of any such
certificate or the issuance of such new certificate.
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Section 3. Fixing a Record Date for Stockholder Meetings. In order that the
Corporation may determine the stockholders entitled to notice of or to vote at
any meeting of stockholders or any adjournment thereof, the board of directors
may fix a record date, which record date shall not precede the date upon which
the resolution fixing the record date is adopted by the board of directors, and
which record date shall not be more than sixty (60) nor less than ten (10) days
before the date of such meeting. If no record date is fixed by the board of
directors, the record date for determining stockholders entitled to notice of or
to vote at a meeting of stockholders shall be the close of business on the next
day preceding the day on which notice is first given. A determination of
stockholders of record entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of the meeting; provided, however,
that the board of directors may fix a new record date for the adjourned meeting.
Section 4. Fixing a Record Date for Other Purposes. In order that the
Corporation may determine the stockholders entitled to receive payment of any
dividend or other distribution or allotment or any rights or the stockholders
entitled to exercise any rights in respect of any change, conversion or exchange
of stock, or for the purposes of any other lawful action, the board of directors
may fix a record date, which record date shall not precede the date upon which
the resolution fixing the record date is adopted, and which record date shall be
not more than sixty (60) days prior to such action. If no record date is fixed,
the record date for determining stockholders for any such purpose shall be at
the close of business on the day on which the board of directors adopts the
resolution relating thereto.
Section 5. Registered Stockholders. Prior to the surrender to the
Corporation of the certificate or certificates for a share or shares of stock
with a request to record the transfer of such share or shares, the Corporation
may treat the registered owner as the person entitled to receive dividends, to
vote, to receive notifications, and otherwise to exercise all the rights and
powers of an owner. The Corporation shall not be bound to recognize any
equitable or other claim to or interest in such share or shares on the part of
any other person, whether or not it shall have express or other notice thereof.
Section 6. Subscriptions for Stock. Unless otherwise provided for in the
subscription agreement, subscriptions for shares shall be paid in full at such
time, or in such installments and at such times, as shall be determined by the
board of directors. Any call made by the board of directors for payment on
subscriptions shall be uniform as to all shares of the same class or as to all
shares of the same series. In case of default in the payment of any installment
or call when such payment is due, the Corporation may proceed to collect the
amount due in the same manner as any debt due the Corporation.
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ARTICLE VII
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GENERAL PROVISIONS
------------------
Section 1. Dividends. Dividends upon the capital stock of the Corporation,
subject to the provisions of the certificate of incorporation, if any, may be
declared by the board of directors at any regular or special meeting, in
accordance with applicable law. Dividends may be paid in cash, in property, or
in shares of the capital stock, subject to the provisions of the certificate of
incorporation. Before payment of any dividend, there may be set aside out of any
funds of the Corporation available for dividends such sum or sums as the
directors from time to time, in their absolute discretion, think proper as a
reserve or reserves to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the Corporation, or any other purpose
and the directors may modify or abolish any such reserve in the manner in which
it was created.
Section 2. Checks, Drafts or Orders. All checks, drafts, or other orders
for the payment of money by or to the Corporation and all notes and other
evidences of indebtedness issued in the name of the Corporation shall be signed
by such officer or officers, agent or agents of the Corporation, and in such
manner, as shall be determined by resolution of the board of directors or a duly
authorized committee thereof.
Section 3. Contracts. In addition to the powers otherwise granted to
officers pursuant to Article IV hereof, the board of directors may authorize any
officer or officers, or any agent or agents, of the Corporation to enter into
any contract or to execute and deliver any instrument in the name of and on
behalf of the Corporation, and such authority may be general or confined to
specific instances.
Section 4. Loans. The Corporation may lend money to, or guarantee any
obligation of, or otherwise assist any officer or other employee of the
Corporation or of its subsidiaries, including any officer or employee who is a
director of the Corporation or its subsidiaries, whenever, in the judgment of
the directors, such loan, guaranty or assistance may reasonably be expected to
benefit the Corporation. The loan, guaranty or other assistance may be with or
without interest, and may be unsecured, or secured in such manner as the board
of directors shall approve, including, without limitation, a pledge of shares of
stock of the Corporation. Nothing in this section contained shall be deemed to
deny, limit or restrict the powers of guaranty or warranty of the Corporation at
common law or under any statute.
Section 5. Fiscal Year. The fiscal year of the Corporation shall be fixed
by resolution of the board of directors.
Section 6. Corporate Seal. The board of directors shall provide a corporate
seal which shall be in the form of a circle and shall have inscribed thereon the
name of the Corporation and the words "Corporate Seal, Delaware." The seal may
be used by causing it or a facsimile thereof to be impressed or affixed or
reproduced or otherwise.
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<PAGE>
Section 7. Voting Securities Owned By Corporation. Voting securities in any
other corporation held by the Corporation shall be voted by the chairman, the
chief executive officer, the president or a vice-president, unless the board of
directors specifically confers authority to vote with respect thereto, which
authority may be general or confined to specific instances, upon some other
person or officer. Any person authorized to vote securities shall have the power
to appoint proxies, with general power of substitution.
Section 8. Inspection of Books and Records. Any stockholder of record, in
person or by attorney or other agent, shall, upon written demand under oath
stating the purpose thereof, have the right during the usual hours for business
to inspect for any proper purpose the Corporation's stock ledger, a list of its
stockholders, and its other books and records, and to make copies or extracts
therefrom. A proper purpose shall mean any purpose reasonably related to such
person's interest as a stockholder. In every instance where an attorney or other
agent shall be the person who seeks the right to inspection, the demand under
oath shall be accompanied by a power of attorney or such other writing which
authorizes the attorney or other agent to so act on behalf of the stockholder.
The demand under oath shall be directed to the Corporation at its registered
office in the State of Delaware or at its principal place of business. The
Corporation shall have a reasonable amount of time to respond to any such
request.
Section 9. Section Headings. Section headings in these by-laws are for
convenience of reference only and shall not be given any substantive effect in
limiting or otherwise construing any provision herein.
Section 10. Inconsistent Provisions. In the event that any provision of
these by-laws is or becomes inconsistent with any provision of the certificate
of incorporation, the General Corporation Law of the State of Delaware or any
other applicable law, the provision of these by-laws shall not be given any
effect to the extent of such inconsistency but shall otherwise be given full
force and effect.
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<PAGE>
ARTICLE VIII
------------
AMENDMENTS
----------
These by-laws may be amended, altered, or repealed and new by-laws adopted
at any meeting of the board of directors by the affirmative vote of the majority
of the total number of directors then in office. The fact that the power to
adopt, amend, alter, or repeal the by-laws has been conferred upon the board of
directors shall not divest the stockholders of such powers as set forth in the
certificate of incorporation; provided, that Sections 2 and 11 of Article II,
Sections 2, 3, and 4 of Article III and Article V of these By-laws of the
Corporation shall not be altered, amended or repealed by, and no provision
inconsistent therewith shall be adopted by, the stockholders without the
affirmative vote of the holders of at least 80% of the Common Stock, voting
together as a single class.
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<PAGE>
EXHIBIT 3.3
ONEPOINT COMMUNICATIONS-GEORGIA, LLC
OPERATING AGREEMENT
BETWEEN
ONEPOINT COMMUNICATIONS, LLC
AND
AMI-VCOM2, INC.
DATED AS OF
APRIL 7, 1997
<PAGE>
TABLE OF CONTENTS
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<TABLE>
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I. Definitions............................................................ 1
1.1 "Act"............................................................ 1
1.2 "Affiliate"...................................................... 1
1.3 "Agreement"...................................................... 1
1.4 "AMI"............................................................ 1
1.5 "Assets"......................................................... 1
1.6 "Business Days".................................................. 2
1.7 "Capital Contribution"........................................... 2
1.8 "Certificate".................................................... 2
1.9 "Code"........................................................... 2
1.10 "Company"........................................................ 2
1.11 "Distributable Cash"............................................. 2
1.12 "Fiscal Year".................................................... 2
1.13 "Initial Capital Contribution"................................... 2
1.14 "Majority Vote".................................................. 2
1.15 "Members"........................................................ 2
1.16 "Membership Unit"................................................ 3
1.17 "Net Profits" and "Net Losses"................................... 3
1.18 "Ownership Percentage"........................................... 3
1.19 "Onepoint"....................................................... 3
1.20 "Person"......................................................... 3
1.21 "Securities Act"................................................. 4
1.22 "Termination Date"............................................... 4
1.23 "Treasury Regulations"........................................... 4
II. The Company............................................................ 4
2.1 Formation of the Company......................................... 4
2.2 Company Name and Office.......................................... 4
2.3 Purposes of the Company.......................................... 4
2.4 Term of the Company.............................................. 4
2.5 Title to Property................................................ 4
2.6 Certificates of Interest......................................... 5
III. Capital; Capital Contributions......................................... 5
3.1 Capital.......................................................... 5
3.2 Names of Members; Initial Capital Contributions of the Members... 5
3.3 No Further Contributions or Loans................................ 5
3.4 Additional Members............................................... 5
3.5 Preemptive Rights................................................ 5
</TABLE>
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<TABLE>
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<S> <C>
3.6 Resignation....................................................... 6
3.7 Nondisclosure Agreements.......................................... 6
3.8 Other Employee Incentive Plans.................................... 6
IV. Maintenance of Capital Accounts; Allocations and Distributions......... 6
4.1 Capital Accounts.................................................. 6
4.2 Allocations of Net Profits and Net Losses......................... 7
(a) Net Loss............................................ 7
(b) Net Profits......................................... 7
4.3 Qualified Income Offset........................................... 7
4.4 Code Section 704(c) Allocations................................... 8
4.5 Distribution...................................................... 8
V. Management and Operation of the Company................................ 9
5.1 Management Generally.............................................. 9
5.2 Election, Tenure and Removal of Managers.......................... 9
5.3 Limitations on Powers of the Manager.............................. 10
5.4 Duties and Obligations of the Manager............................. 11
5.5 Expenses.......................................................... 11
5.6 Officers.......................................................... 11
5.7 The Chief Executive Officer....................................... 12
5.8 The President..................................................... 12
5.9 The Executive Vice President...................................... 12
5.10 The Treasurer..................................................... 12
5.11 The Secretary..................................................... 13
VI. Powers, Rights and Obligations of Members; Meetings of Members......... 13
6.1 Powers of the Members............................................. 13
6.2 Examination of Company Records.................................... 13
6.3 Priority and Return of Capital.................................... 13
6.4 Meetings of Members............................................... 14
6.5 Rights of Legal Representatives................................... 15
VII. Accounting Procedures.................................................. 15
7.1 Fiscal Year....................................................... 15
7.2 Books of Account.................................................. 15
7.3 Preparation and Filing of Income Tax Returns and Other Writings... 15
7.4 Tax Matters Partner............................................... 16
VIII. Transfer of Member Membership Units.................................... 16
8.1 Limitation on Transfer of Membership Unit......................... 16
</TABLE>
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<TABLE>
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<S> <C>
8.2 Certain Documents.............................................. 16
8.3 Right of First Refusal......................................... 17
8.4 Legal Capacity of Transferee; Tax Effects...................... 18
8.5 Securities Laws Matters........................................ 18
8.6 Indemnification................................................ 18
IX. Limitations on Liabilities; Indemnification; Right to Conduct Other
Business............................................................ 18
9.1 Liability of Members........................................... 18
9.2 Liability and Indemnification of Managers and Authorized
Persons...................................................... 19
9.3 Indemnification Rights Cumulative.............................. 19
9.4 Right to Conduct Other Business................................ 20
X. Power of Attorney..................................................... 20
10.1 Authority to Execute Documents................................. 20
10.2 Survival of Power.............................................. 21
XI. Dissolution and Termination........................................... 21
11.1 Dissolution.................................................... 21
11.2 Winding Up, Liquidation and Distribution of Assets............. 22
11.3 Certificate of Cancellation.................................... 23
11.4 Effect of Filing of Certificate of Cancellation................ 23
11.5 Return of Contribution Nonrecourse to Other Members............ 24
XII. Rules of Convention................................................... 24
12.1 Notice......................................................... 24
12.2 Amendment...................................................... 24
12.3 Governing Law.................................................. 25
12.4 Entire Agreement............................................... 25
12.5 Severability................................................... 25
12.6 Construction................................................... 25
12.7 Captions....................................................... 25
12.8 Counterparts and Execution..................................... 25
12.9 Consents and Waivers........................................... 25
12.10 Rights and Remedies Cumulative................................. 26
12.11 Assigns........................................................ 26
12.12 Waiver of Action for Partition................................. 26
12.13 Execution of Additional Instruments............................ 26
</TABLE>
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<PAGE>
ONEPOINT COMMUNICATIONS-GEORGIA, LLC
OPERATING AGREEMENT
This OPERATING AGREEMENT (this "AGREEMENT") is entered into as of the ___
day of April 1997, between OnePoint Communications, LLC, a Delaware limited
liability company ("ONEPOINT"), and AMI-VCom2, Inc., a Delaware corporation
("AMI," together with "ONEPOINT", the "MEMBERS").
RECITALS
A. AMI and OnePoint desire to form a Delaware limited liability company,
under the name "ONEPOINT COMMUNICATIONS-GEORGIA, LLC" (the "COMPANY"), pursuant
to the provisions of the Act by filing a Certificate with the Secretary of State
of the State of Delaware and entering into this Agreement.
B. AMI and OnePoint desire that OnePoint manage the Company in accordance
with, and subject to, the terms and conditions hereinafter set forth, and in its
capacity as manager, OnePoint is hereinafter referred to as the "Manager".
NOW, THEREFORE, for good and valuable consideration, the sufficiency of
which is hereby acknowledged, the parties hereto hereby agree as follows:
ARTICLE I. DEFINITIONS. The following words and phrases, unless the context
-----------
clearly indicates otherwise, shall have the meanings set forth below:
I.1 "ACT" shall mean the Limited Liability Company Act, Delaware Code
Annotated, Title 6, (S)(S)18-101 et seq., as from time to time amended.
-- ----
I.2 "AFFILIATE" with respect to any person, shall mean any person,
directly or indirectly, controlling, controlled by, or under common control with
such Person, whether such control is effected pursuant to contract or otherwise;
provided, however, that the Company shall not be considered to be an Affiliate
of any Member for purposes of this Agreement.
I.3 "AGREEMENT" shall have the meaning ascribed to such term in the
preamble hereto, as the same may be amended from time to time in accordance
herewith.
1.4 "AMI" shall have the meaning ascribed to such term in the introductory
paragraph hereof.
I.5 "ASSETS" shall mean any real or personal property, whether tangible or
intangible, acquired by the Company on or after the date of this Agreement.
<PAGE>
I.6 "BUSINESS DAYS" shall mean any day except Saturday, Sunday or any
other day on which commercial banks located in the City of Chicago are
authorized by law to be closed for business.
I.7 "CAPITAL CONTRIBUTION" shall mean, with respect to any Member, all
contributions to the capital (whether in cash or otherwise) of the Company made
by such Member pursuant to this Agreement.
I.8 "CERTIFICATE" shall mean that certain Certificate of Formation of the
Company filed with the Office of the Secretary of State of Delaware, as the same
may be amended from time to time.
I.9 "CODE" shall mean the Internal Revenue Code of 1986, as amended, or
any corresponding provision of subsequent superseding federal revenue laws.
I.10 "COMPANY" shall have the meaning ascribed to such term in the recitals
hereto.
I.11 "DISTRIBUTABLE CASH" shall mean all cash, revenues and funds received
by the Company from Company operations, less the sum of the following to the
extent paid or set aside by the Company: (a) all principal and interest payments
on indebtedness of the Company and all other sums paid to lenders; (b) all cash
expenditures incurred in the normal operation of the Company's business; and (c)
such reserves as the Manager shall deem reasonably necessary for the proper
operation and financing of the Company's business.
I.12 "FISCAL YEAR" shall mean the Company's fiscal year, which shall be the
calendar year.
I.13 "INITIAL CAPITAL CONTRIBUTION" shall mean, with respect to any Member,
the initial contribution to the capital (whether in cash or otherwise) of the
Company made by such Member pursuant to this Agreement in the amount set forth
on Schedule 3.2 attached hereto.
I.14 "MAJORITY VOTE" shall mean an affirmative vote by the Members holding
more than fifty percent (50%) of the aggregate issued and outstanding Membership
Units of the Company.
I.15 "MEMBERS" shall have the meaning ascribed to such term in the preamble
hereto, and shall include each Person hereafter admitted to the Company as a
Member as provided in this Agreement.
I.16 "MEMBERSHIP UNIT" shall mean, with respect to each Member, all of
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<PAGE>
such Member's rights, interests, proceeds and profits which it may own whether
now existing or contingent, in the Company, including the right of such Member
to any and all benefits to which the member may be entitled and the obligations
of such Member, as provided in this Agreement and the Act.
I.17 "NET PROFITS" AND "NET LOSSES" shall mean for each Fiscal Year or
other period, an amount equal to the Company's taxable income or tax loss for
such year or period, determined in accordance with Code Section 703(a). For
this purpose all items of income, gain, loss or deduction required to be stated
separately pursuant to Code Section 703(a)(1) shall be included in taxable
income or loss, with the following adjustments:
a. Any income of the Company that is exempt from federal income
tax and not otherwise taken into account in computing Net Profits or Net
Losses shall be added to such taxable income or tax loss;
b. Any expenditures of the Company described in Code Section
705(a)(2)(B) or treated as Code Section expenditures pursuant to
Regulations Section 1.704-l(b)(2)(iv)(i), and not otherwise taken into
account in computing Net Profits or Net Losses, shall be subtracted from
such taxable income or tax loss; and
c. If property other than cash has been contributed to the Company
or the Capital Accounts of the Members have been adjusted pursuant to
Treasury Regulations Section 1.704-l(b)(2)(iv)(f), depreciation,
amortization, gain or loss with respect to assets of the Company shall
be computed in accordance with Regulations section 1.704-1(b)(2)(iv)(g).
I.18 "OWNERSHIP PERCENTAGE" shall mean, as to each Member, the
percentage reflecting the ratio which its Membership Unit bears to the aggregate
issued and outstanding Membership Units of all Members. The Ownership
Percentages are initially as shown on Schedule 3.2 attached hereto. For purposes
of this Agreement, each Member will be deemed to hold the Ownership Percentage
in the Company actually held by such Member plus any Ownership Percentage in the
Company which could be obtained by such Member upon the exercise or conversion
of all other convertible securities held by such Member.
I.19 "ONEPOINT" shall have the meaning ascribed to such term in the
introductory paragraph hereof.
I.20 "PERSON" shall mean any individual, association, corporation,trust,
partnership, joint venture, limited liability company or other entity.
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<PAGE>
I.21 "SECURITIES ACT" shall mean the Securities Act of 1933, as amended.
I.22 "TERMINATION DATE" shall mean December 31, 2025.
I.23 "TREASURY REGULATIONS" shall mean the income tax regulations
promulgated under the Code, as such regulations may be amended from time to time
(including corresponding provisions of succeeding regulations).
ARTICLE II. THE COMPANY.
II.1 FORMATION OF THE COMPANY. The Company has been organized as a Delaware
limited liability company by executing and delivering the Certificate to the
Delaware Secretary of State in accordance with and pursuant to the Act.
II.2 COMPANY NAME AND OFFICE. The name of the Company shall be "ONEPOINT
COMMUNICATIONS-GEORGIA, LLC." The Company shall conduct its business under such
name or names as the Manager with the approval by a Majority Vote of the Members
shall determine from time to time and the Company shall file all statements and
applications with appropriate governmental authorities required in order to
conduct its business under such name or names. The Company shall maintain a
registered office in the State of Delaware and the name and address of the
Company's registered agent in the State of Delaware shall be as set forth in the
Certificate. Such office and such agent may be changed from time to time by the
Manager. The principal office of the Company shall be 2201 Waukegan Road, Suite
E-200, Bannockburn, Illinois 60015. The Company may maintain such additional
offices as may be designated from time to time by the Manager for the purpose of
carrying out the business of the Company.
II.3 PURPOSES OF THE COMPANY. The purpose of the Company shall be (a) to
invest in and operate businesses in the field of telecommunications and such
other fields of business as may be approved by the Manager, (b) to engage in and
carry on any other lawful business or activity in connection with the foregoing
or otherwise, and (c) to have and exercise all of the powers, rights and
privileges which a limited liability company organized pursuant to the Act may
have and exercise.
II.4 TERM OF THE COMPANY. The term of the Company shall commence on the
date of the filing of the Certificate as required by Section 18-201 of the Act
and shall continue in existence until the Termination Date, unless its existence
is sooner terminated upon dissolution (and subsequent termination of the Company
after the winding up of its affairs) as provided in this Agreement or the Act,
or unless the term shall otherwise be extended by amendment to this Agreement.
II.5 TITLE TO PROPERTY. Legal title to all Assets of the Company shall be
taken and at all times held in the name of the Company.
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<PAGE>
II.6 CERTIFICATES OF INTEREST. The Manager may make such rules and
regulations as he may deem appropriate concerning the issuance and registration
of Membership Units. The Manager may authorize the issuance of any Membership
Units without certificates. Such authorization shall not affect Membership Units
already represented by certificates until they are surrendered to the Company.
ARTICLE III. CAPITAL; CAPITAL CONTRIBUTIONS.
------------------------------
III.1 CAPITAL. The names and addresses of the initial Members are set
forth on Schedule 3.2 attached hereto.
III.2 NAMES OF MEMBERS; INITIAL CAPITAL CONTRIBUTIONS. As of the date of
this Agreement, each Member has contributed in cash to the capital of the
Company the full amount of its Initial Capital Contribution as specified in
Schedule 3.2 attached hereto, in return for which the Member shall receive the
number of Membership Units indicated opposite such Member's name on Schedule 3.2
attached hereto.
III.3 NO FURTHER CONTRIBUTIONS OR LOANS. The liability of the Members to
the Company is limited to their Capital Contributions as specified in Schedule
3.2 attached hereto, as it may be amended from time to time pursuant to Section
12.2. No additional Capital Contributions, or other funds, whether by way of
contribution of capital, loan or otherwise, shall be required of any Member
except by Majority Vote of the Members. No interest shall accrue on any Capital
Contribution and no Member shall have the right to withdraw or be repaid any
Capital Contribution except as provided in this Agreement.
III.4 ADDITIONAL MEMBERS. Additional Persons may be admitted to the
Company as Members from time to time and Membership Units may be created and
issued to those Persons and to existing Members in the sole discretion of the
Manager, subject to the provisions and restrictions contained herein. Any person
admitted to the Company as a Member after the date of this Agreement, shall
agree to be bound by the terms of this Agreement and shall execute a counterpart
signature page hereto. No new Member shall be entitled to any retroactive
allocation of any item of income, gain, loss, deduction or credit of a Company.
The Manager may, at his option, at the time a Member is admitted, close the
Company books (as though the Company's tax year has ended) when making pro rata
allocations of items of income, gain, loss, deduction or credit to a new Member
for that portion of the Company's tax year in which a new Member was admitted in
accordance with the provisions of Code Section 706(d) and the Treasury
Regulations promulgated thereunder.
III.5 PREEMPTIVE RIGHTS. Each Member shall have a preemptive or
preferential right (but not the obligation) to purchase his or its pro rata
share, based on his
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<PAGE>
or its Ownership Percentage, of all or any part of any New Securities (as
defined below in this Section 3.5) which the Company may, from time to time,
propose to sell or issue, including any such right with respect to additional
Capital contributions.
The term "New Securities" shall mean (a) Membership Units of the Company,
whether unissued or hereafter created; (b) any obligations, evidences of
indebtedness or other securities of the Company convertible into or exchangeable
for, or carrying or accompanied by any rights to receive, purchase or subscribe
to, any such unissued Membership Units; (c) any right of, subscription to or
right to receive, or any warrant or option for the purchase of, any of the
foregoing securities; and (d) any other securities that may be issued or sold by
the Company.
III.6 RESIGNATION. Except in connection with the sale or gift of
Membership Units in accordance with Article VIII, no Member may voluntarily
resign or withdraw as a Member of the Company without the prior written consent
of the Members owning a Majority Vote. A Member who attempts to resign or
withdraw as a Member in violation of this Section 3.6 shall not be entitled to
receive any distribution prior to the dissolution and liquidation of the
Company.
III.7 NONDISCLOSURE AGREEMENTS. Each Member of the Company agrees to
execute a nondisclosure agreement with the Company in a form agreed upon by the
Members.
III.8 OTHER EMPLOYEE INCENTIVE PLANS. From time to time, the Company
may establish one or more incentive plans for employees, officers, directors and
consultants of the Company pursuant to which cash payments tied to the value of
the Membership units of the Company would be made to such Persons.
ARTICLE IV. MAINTENANCE OF CAPITAL ACCOUNTS; ALLOCATIONS AND
------------------------------------------------
DISTRIBUTIONS.
- -------------
IV.1 CAPITAL ACCOUNTS.
A Capital Account (a "Capital Account") shall be maintained for each
Member in accordance with the capital account maintenance rules set forth in
Treasury Regulations Section 1.704-1(b)(2)(iv). Without limiting the generality
of the foregoing, a Member's Capital Account shall be increased by (i) the
amount of money contributed by the Member to the Company, (ii) the fair market
value of property contributed by the Member to the Company as determined by the
contributing Member and the Company (net of liabilities that the Company is
considered to assume or take subject to pursuant to Section 752 of the Code),
and (iii) allocations to the Member of Company net profits and other items of
income and gain, including income and gain exempt from tax, but excluding items
of income and gain described in Treasury Regulations Section 1.704-
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<PAGE>
1(b)(4)(i); and which shall be decreased by (w) the amount of money distributed
to the Member, (x) the fair market value of any property distributed to the
Member as determined by the distributee Member and the Company (net of any
liabilities that such Member is considered to assume or take subject to pursuant
to Section 752 of the Code), (y) expenditures described, or treated under
Section 704(b) of the Code as described in Section 705(a)(2)(b) of the Code, and
(z) the Member's share of net losses and other items of loss and deduction, but
excluding items of loss or deduction described in Treasury Regulations Section
1.704-1(b)(4)(i). The Members' Capital Accounts shall be appropriately adjusted
for income, gain, loss and deduction as required by Treasury Regulations Section
1.704-1(b)(2)(iv)(g) (relating to allocations and adjustments resulting from the
reflection of property on the books of the Partnership at book value, or a
revaluation thereof, rather that at adjusted tax basis). If a Member transfers
all or a part of its Membership unit in accordance with this Agreement, such
Member's Capital Account Attributable to the transferred Membership Unit shall
carry over to the new owner of such Membership Unit pursuant to Treasury
Regulations Section 1.704-l(b)(2)(iv)(l).
IV.2 ALLOCATIONS OF NET PROFITS AND NET LOSSES
(a) Net Losses. Shall be allocated to the Members in proportion to
----------
their respective Ownership Percentages.
(b) Net Profits. Net Profits shall be allocated to the Members
-----------
in proportion to their respective Ownership Percentages.
IV.3 QUALIFIED INCOME OFFSET. Notwithstanding Section 4.2, no Member shall
be allocated any item of loss or deduction to the extent such allocation would
cause or increase a deficit balance in such Member's Capital Account (in excess
of any limited dollar amount of such deficit balance that such Member is
obligated to restore or is deemed obligated to restore under Treasury
Regulations Sections 1.704-2(g) and 1.704-2(i)(5)) as of the end of the taxable
year to which such allocation relates. In the event any Member unexpectedly
receives any adjustments, allocations, or distributions described in Treasury
Regulations Sections 1.704-1(b)(2)(ii)(d)(4), (5) or (6), items of Company
income and gain shall be specially allocated to such Member in an amount and
manner sufficient to eliminate, to the extent required by the Treasury
Regulations, such adjusted Capital Account deficit of such Member as quickly as
possible, provided that an allocation pursuant to this Section 4.3 shall be made
only if and to the extent that such Member would have a Capital Account deficit
(determined after reducing such Member's Capital Account for the items set forth
in Treasury Regulations Section 1.704-1(b)(2)(ii)(d) and after adjusting such
Member's Capital Account upward for any amounts such Member is obligated to
restore or is deemed obligated to restore pursuant to Treasury Regulations
Sections 1.704-2(g) and 1.704-2(i)(5)) after all other allocations provided for
in this Article IV have been tentatively made as if this Section 4.3 were not
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<PAGE>
in the Agreement. Any special allocations of items of income and gain pursuant
to this Section 4.3 shall be taken into account in computing subsequent
allocations of income and gain pursuant to this Article IV so that the net
amount of any item so allocated and the income, gain, and losses allocated to
each Member pursuant to this Article IV to the extent possible, shall be equal
to the net amount that would have been allocated to each such Member pursuant to
the provisions of this Section 4.3 if such unexpected adjustments, allocations,
or distributions had not occurred.
IV.4 CODE SECTION 704(C) ALLOCATIONS. Notwithstanding any other
provision in this Article IV, in accordance with Code Section 704(c) and the
Treasury Regulations promulgated thereunder, income, gain, loss, and deduction
with respect to any property contributed to the capital of the Company shall,
solely for tax purposes, be allocated among the Members so as to take account of
any variation between the adjusted basis of such property to the Company for
federal income tax purposes and its fair market value on the date of
contribution. Allocations pursuant to this Section 4.4 are solely for purposes
of federal, state and local taxes. As such, they shall not affect or in any way
be taken into account in computing a Member's Capital Account or share of
profits, losses, or other items of distributions pursuant to any provision of
this Agreement.
IV.5 DISTRIBUTIONS.
(a) Except as provided in Section 11.2, and subject to Section 18-
607 of the Act, the Manager:
(i) shall cause the Company to distribute to each Member
an amount of Distributable Cash as shall be sufficient to enable
such Member to fund its federal, state and local income tax
liabilities attributable to such Member's distributive share of
Company taxable income and gain (the "Actual Tax Amount").
Estimated tax distributions shall be made in four cash
installments not later than fifteen (15) days before taxes are
due, based upon the Manager's good faith estimate of the
Company's Net Profits (the "Estimated Tax Amount"). The Estimated
Tax Amounts and the Actual Tax Amounts shall be calculated taking
into account the character of such income and gain and
calculating such tax as if each Member were an individual
resident in Lake County, Illinois, subject to tax at the highest
marginal rate applicable to income of such character. The Manager
shall distribute to each Member, not later than April 10th of the
year following the close of each taxable year of the Company, the
amount by which the Actual Tax Amount for such taxable year
exceeds the Estimated Tax Amount distributed to such Member for
such taxable year. If the Estimated Tax Amount distributed by the
Company to a Member exceeds the Actual Tax Amount, then the
amount of the next distribution the Manager would otherwise be
required to make to such Member(s) under this Section 4.5 shall
be reduced by the amount of
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such excess until the remaining balance of such excess is reduced
to zero; and
(ii) may make distributions of Distributable Cash and other property
at such time and in such aggregate amounts as determined by the Manager to
the Members (A) first, to the Members in proportion to their respective
unreturned Capital Contributions until each Member has recovered its Capital
Contributions in full, (B) second, to the Members in proportion to their
respective Ownership Percentages.
(b) Upon the liquidation of the Company, liquidating distributions
shall be made in accordance with Section 11.2.
(c) A Member shall have no right to demand and receive any
distribution in a form other than cash.
(d) All amounts withheld pursuant to the Code or any provision of any
state or local tax law with respect to any payment, distribution or allocation
to the Company or the Members may be treated as amounts distributed to the
Members pursuant to this Section 4.5 for all purposes under the Agreement. The
Manager is authorized to withhold from distributions, or with respect to
allocations, to the Members and pay over to any federal, state or local
government any amounts required to be so withheld pursuant to the Code or any
provisions of any other federal, state or local law and may allocate such
amounts to the Members with respect to which such amount was withheld.
ARTICLE V. MANAGEMENT AND OPERATION OF THE COMPANY.
---------------------------------------
V.1 MANAGEMENT GENERALLY. Subject to the provisions of this Agreement and
the Act, the business and affairs of the Company shall be managed by and under
the direction of the Manager. The Manager shall have full and complete
authority, power and discretion to manage and control the business of the
Company, to make all decisions regarding those matters and to perform any and
all other acts or activities customary or incident to the management of the
Company's business and objectives. All powers of the Company may be exercised by
the Manager, except as conferred on or reserved to the Members by the Act or by
this Agreement. The exercise by a member of any or all of its rights of approval
or consent under this Agreement shall not in any event affect the Member's
status or limited liability as a limited liability member.
V.2 ELECTION, TENURE AND REMOVAL OF MANAGERS. The Company shall initially
have one manager. Thereafter, the number of managers of the Company shall be
fixed from time to time by Majority Vote. In no instance shall there be less
than one manager. The manager(s) shall be elected or removed with or without
cause by Majority Vote. The manager shall continue to hold office until his
successor shall have been elected and qualified.
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V.3 LIMITATIONS ON POWERS OF THE MANAGER. Notwithstanding the generality
of Section 5.1, the Manager shall not have the authority to do any of the
following acts without the approval of the Members by Majority Vote:
(a) Cause or permit the Company to engage in any activity that is not
consistent with the purposes of the Company set forth in Section 2.3;
(b) Knowingly do any act in contravention of this Agreement;
(c) Knowingly do any act which would make it impossible to carry on the
ordinary business of the Company, except as otherwise provided in this
Agreement;
(d) Confess a judgment against the Company in an amount in excess of
$50,000;
(e) Possess Company Assets, or assign rights in specific Company
Assets, for other than a Company purpose;
(f) Knowingly and willingly perform any act that would cause the
Members to incur personal liability, for example, as a result of the Company
conducting business in a state which has neither enacted legislation which
permits limited liability companies to organize in such state nor permits the
Company to register to do business in such state as a foreign limited liability
Company;
(g) Cause the Company to declare or file bankruptcy or make any
assignment for the benefit of creditors or take any similar action;
(h) Cause the Company to acquire any equity or debt securities of any
Person, or to otherwise make loans to any Member or Person;
(i) Cause the Company to incur any contractual liability in any single
transaction or series of related transactions in excess of $2,500,000 or in any
event in excess of the overall budget of the Company;
(j) Sell or otherwise dispose of all or substantially all of the
Company's Assets in a single transaction or series of related transactions,
except for a liquidating sale in connection with the dissolution of the Company;
(k) Permit the Company to enter into any merger, consolidation,
reorganization or similar transaction;
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(l) Cause the Company to make any distribution except as
otherwise set forth in this Agreement; or
(m) Cause or permit the Company to offer or sell any equity
securities of the Company in a public offering or pursuant to a registration
statement under the Securities Act of 1933, as amended.
V.4 DUTIES AND OBLIGATIONS OF THE MANAGER
(a) The Manager shall not be required to manage the Company as
his sole and exclusive function and he may have other business interests and
engage in activities in addition to those relating to the Company. Neither the
Company nor the Members shall have any right, by virtue of this Agreement, to
share or participate in such other investments or activities of the Manager or
in the income or proceeds derived therefrom.
(b) The Manager shall take all reasonable action that may be
necessary or appropriate for the continuation of the Company's valid existence
as a limited liability company under the laws of the State of Delaware and of
each other jurisdiction in which such existence is necessary to protect the
limited liability of the Members or to enable the Company to conduct the
business in which it is engaged or proposes to engage.
V.5 EXPENSES. The Manager shall be entitled to reimbursement from the
Company for the reasonable expenses that such Manager pays for or incurs on
behalf of the Company.
V.6 OFFICERS.
(a) The officers of the Company shall consist of a Chief
Executive Officer, a President, a Treasurer and a Secretary and such Executive
Vice Presidents, assistant secretaries or other officers or agents as may be
elected or appointed by the Manager from time to time (collectively, the
"Officers"). The Officers shall be appointed by, and shall exercise such powers
and perform such duties as are prescribed by, the Manager under the direction
and management of the Manager. Any number of offices may be held by the same
Person, as the Manager may determine.
(b) The Officers shall hold office for the term for which they
were appointed and until their successors are elected and qualified; provided,
however, that, any Officer may be removed with or without cause at any time by
the Manager.
(c) A vacancy in any office because of death, resignation,
removal, disqualification or otherwise may be filled by the Manager for the
unexpired portion of
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the term.
(d) The Company may pay an Officer compensation for such Officer's
services to or on behalf of the Company in such amounts as determined by the
Manager.
V.7 THE CHIEF EXECUTIVE OFFICER. The Chief Executive Officer shall have
general supervision, direction and control of the business and affairs of the
Company and shall have the power to sign any deeds, mortgages, bonds, contracts
or other instruments which the manager has authorized to be executed. The Chief
Executive Officer shall preside at all meetings of the Members. The Chief
Executive Officer shall have the general powers and duties of management
generally vested in the chief executive officer of a business entity, and shall
have such other powers and duties with respect to the administration of the
business and affairs of the Company as may be prescribed by the Manager from
time to time.
V.8 THE PRESIDENT. The President shall be the chief operating officer of
the Company and shall have power to sign any deeds, mortgages, bonds, contracts
or other instruments which the Manager has authorized to be executed, except in
cases where the signing and execution thereof shall be expressly delegated by
the Manager or by this Agreement to some other officer or agent of the Company,
or shall be required by law to be otherwise signed or executed. In general, the
President shall see that all orders and resolutions of the Manager are carried
into effect and shall perform all duties incident to the office of the President
and such other duties as may be prescribed by the Manager from time to time.
V.9 THE EXECUTIVE VICE PRESIDENT(S). In the absence of (or at the request
of) the president in the event of his or her inability or refusal to act, an
executive vice president (or in the event there be more than one executive vice
president, the executive vice presidents in the order designated, or in the
absence of any designation, then in the order of their election) if one shall be
appointed, shall perform the duties of the President, and when so acting, shall
have all the powers of and be subject to all the restrictions upon the
President. Any executive vice president shall perform such other duties as from
time to time may be assigned to him by the Chief Executive Officer, the
President or the Manager.
V.10 THE TREASURER. The Treasurer shall be the chief financial officer of
the Company. The Treasurer shall not be required to give a bond for the faithful
discharge of his or her duties. He or she shall: (a) have charge and custody of
and be responsible for all funds and securities of the company; (b) be charged
with primary responsibility for dealing with national securities exchanges or
other exchanges in which the Company may hold a membership or on which the
Company may trade; (c) receive and give receipts for moneys due and Payable to
the Company from any source
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whatsoever, and deposit all such moneys in the name of the Company in such
banks, trust companies or other depositaries as shall be selected by the
Manager; and (d) in general perform all the duties incident to the office of
treasurer and such other duties as from time to time may be assigned to him or
her by the President or by the Manager.
V.11 THE SECRETARY. THE SECRETARY SHALL: (a) keep the minutes of all
Members' meetings in one or more books provided for that purpose; (b) see that
all notices are duly given in accordance with the provisions of this agreement
or as required by law; (c) be custodian of company records; (d) keep a register
of the post office address of each Member which shall be furnished to the
Secretary by such Member; (e) certify the resolutions of the Members, and other
documents to the Company, as true and correct; and (f) in general, perform all
duties incident to the office of Secretary and such other duties as from time to
time may be assigned to him or her by the President or the Manager.
ARTICLE VI. POWERS, RIGHTS AND OBLIGATIONS OF MEMBERS; MEETINGS OF
------------------------------------------------------
MEMBERS.
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VI.1 POWERS OF THE MEMBERS. Except as expressly provided in this agreement,
the Members shall take no part in the management of the business or transact any
business for the Company and shall have no power to sign for or bind the Company
solely in their capacity as members; provided, however, that, the members shall
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have the approval and consent rights as described in this Agreement and provided
under the Act.
VI.2 EXAMINATION OF COMPANY RECORDS. Each Member or its authorized
representative shall have the right, during regular business hours and upon
reasonable advance written notice (which shall state the reason therefor), to
examine and copy (at the requesting Member's expense), for a proper purpose as
determined by the Manager, the records (where such records are maintained) of
the Company and otherwise make reasonable inquiry as to the affairs of the
Company. A proper purpose shall mean a purpose reasonably related to such
Person's interest as a Member. Upon the written request of any Member, the
Manager shall provide a list showing the names, addresses and Ownership
Percentages of all Members.
VI.3 PRIORITY AND RETURN OF CAPITAL. Except as may be expressly provided
in Article IV or Article VIII, no member shall have priority over any other
Member, either as to return of capital contributions or as to net profits, net
losses or distributions; provided, however, that, this section shall not apply
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to the repayment by the Company of loans (as distinguished from capital
contributions) which a member has made to the Company .
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<PAGE>
VI.4 MEETINGS OF MEMBERS
(a) Meetings of the Members may be called by the Manager or by
Members holding in the aggregate not less than five percent (5%) of the issued
and outstanding Membership Units. The meeting shall be held at the principal
place of business of the Company or as designated in the notice or waivers of
notice of the meeting.
(b) Notice of any meeting of the Members shall be given no fewer than
ten (10) days and no more than thirty (30) days prior to the date of the
meeting. Notices shall be delivered in the manner set forth in Section 12.1 and
shall specify the purpose or purposes for which the meeting is called. The
attendance of a member at any meeting shall constitute a waiver of notice of
such meeting, except where a Member attends a meeting for the express purpose of
objecting to the transaction of any business because the meeting is not lawfully
called or convened.
(c) Members owning a Majority Vote, present in person or represented
by proxy, shall constitute a quorum for the transaction of business at any
meeting of the members; provided, that, if members owning less than a majority
vote are present at said meeting, Members owning a majority of the Membership
Units present may adjourn the meeting at any time and without further notice.
The act of the Members holding a majority of the Membership Units present at
such meeting at which a quorum is present shall be the act of the members,
unless the vote of a greater or lesser proportion or number is otherwise
required by the Act, the Certificate or by this Agreement.
(d) Unless specifically prohibited by the Certificate or the Act, any
action required to be taken at a meeting of the Members or any other action
which may be taken at a meeting of the Members, may be taken without a meeting
if a consent in writing, setting forth the action so taken, shall be signed by
the Members holding Membership Units having not less than the minimum number of
votes that would be necessary to authorize or take such action at a meeting at
which all Members were present and voting. Prompt notice of any action taken
without a meeting by less than unanimous consent shall be given in writing to
those Members who were entitled to vote but did not consent in writing.
(e) The Members may participate in and act at any meeting of Members
through the use of a conference telephone or other communications equipment by
means of which all Persons participating in the meeting can hear each other.
Participation in such meeting shall constitute attendance and presence in person
at such meeting of the Person or Persons so participating.
(f) Each Member entitled to vote at a meeting of Members or to
express consent or dissent to action in writing without a meeting may authorize
another
<PAGE>
Person or Persons to act for him by proxy. Such proxy shall be deposited at the
principal offices of the Company not less than 48 hours before a meeting is held
or action is taken, but no proxy shall be valid after eleven months from the
date of its execution, unless otherwise provided in the proxy.
(g) Each Member shall vote in proportion to its Ownership Percentage.
VI.5 RIGHTS OF LEGAL REPRESENTATIVES. If a Member who is an individuaL
dies or is adjudged by a court of competent jurisdiction to be incompetent to
manage the Member's person or property, the Member's executor, administrator,
guardian, conservator, or other legal representative may exercise all of the
Member's rights for the purpose of settling the Member's estate or administering
the Member's property, including any power the Member has under the Certificate
or this Agreement to give an assignee the right to become a Member. If a Member
is a corporation, trust, or other entity and is dissolved or terminated, the
powers of that Member may be exercised by its legal representative or successor.
ARTICLE VII. ACCOUNTING PROCEDURES.
---------------------
VII.1 FISCAL YEAR. The fiscal year of the Company shall begin on January
1 and shall end on December 31 of each year; provided that the fiscal year
ending December 31, 1997 shall commence on the date of this Agreement.
VII.2 BOOKS OF ACCOUNT. At all times during the existence and continuance
of the Company, the Manager shall cause to be kept accurate, complete and proper
books, records and accounts pertaining to the Company's affairs, including (a) a
list of all Members and their addresses and their Capital Contributions,
Membership Units and Ownership Percentages, (b) a copy of the Certificate and
all amendments thereto and all powers of attorney pursuant to which any
Certificate has been executed, (c) an original copy of the Agreement and all
amendments thereto, (d) copies of the Company's federal and state tax returns
and financial statements and (e) the Company's books and records. Such books and
records shall be kept on the accrual basis of accounting in conformity with
generally accepted accounting principles. The method of accounting followed by
the Company for federal income tax purposes shall be the accrual method. All
books, records and accounts of the Company shall be kept at its principal office
or at such other office as the Manager may designate for such purpose.
VII.3 PREPARATION AND FILING OF INCOME TAX RETURNS AND OTHER WRITINGS. The
Company's treasurer shall cause the preparation and timely filing of all Company
tax returns, shall, on behalf of the Company, make such tax elections
(including, without limitation, any election under Section 754 of the Code),
determinations and allocations which he or she, in his or her sole and absolute
discretion,
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deems to be appropriate and shall timely make all other filings required by any
governmental authority having jurisdiction to require such filing, the cost of
which shall be borne by the Company. Copies of such returns shall be furnished
to the Members within a reasonable period of time after the end of each Fiscal
Year of the Company. A Form K-1, prepared by the Company's Accountants, shall be
delivered to the Members within ninety (90) days after the expiration of each
Fiscal year of the Company. This form shall show the allocation of profit or
loss of the Company for federal income tax purposes, including all separately
stated items, to each Member. No election shall be made by the Company or any
Member to be excluded from the application of the provisions of subchapter K of
the Code or from any similar provision of state tax laws.
VII.4 TAX MATTERS PARTNER. OnePoint is hereby designated the "Tax Matters
Partner" (as defined in Code Section 6231), and is authorized and required to
represent the Company (at the Company's expense) in connection with all
examinations of the Company's affairs by tax authorities, including, without
limitation, administrative and judicial proceedings, and to expend Company funds
for professional services and costs associated therewith. The Members agree to
cooperate with each other and to do or refrain from doing any and all things
reasonably required to conduct such proceedings.
ARTICLE VIII. TRANSFER OF MEMBER MEMBERSHIP UNITS.
-----------------------------------
VIII.1 LIMITATION ON TRANSFER OF MEMBERSHIP UNIT. For so long as this
Agreement shall remain in effect, no Member shall sell, assign, pledge,
hypothecate, transfer exchange or otherwise transfer for consideration (a
"Transfer"), its Membership Unit, in whole or in part, and a transferee shall
not have a right to become a "Substitute Member," except in strict compliance
with the provisions of this Agreement. Any Transfer will be effective on the
first day following receipt by the Members from the Manager of written notice
that all of the requirements of this Article VIII have been met.
VIII.2 CERTAIN DOCUMENTS. The Company and the Members agree to use their
best efforts to cause the Company not to issue any Membership Units without
obtaining from each prospective Substitute Member, prior to the issuance of the
Membership Units, (a) a counterpart of this Agreement as then in effect, duly
executed by the prospective Substitute Member, (b) any reasonable fees and
expenses in connection with the admission of the prospective Substitute Member
as an assignee or transferee and (c) all representations and all such
certificates, evidences or assurance reasonably requested by the Company and the
existing Members.
VIII.3 RIGHT OF FIRST REFUSAL.
(a) If at any time a Member (the "Selling Member") receives a
bona fide offer in writing from any Person who is not a Member (a "Bona Fide
Offer") which the Selling Member desires to accept, to purchase any or all of
the Membership Units
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<PAGE>
owned by the Selling Member (the "Offered Units"), then the Selling Member shall
give the non-transferring Members (the "Offeree Members") (i) written notice
(the "Selling Member Notice") of the name and address of the Person who made the
Bona Fide Offer (the "Proposed Acquiror") and (ii) a copy of the Bona Fide
Offer, containing all of the material terms and conditions thereof. Subject to
the provisions of this Section 8.3, each Offeree Member shall have the
irrevocable right of first refusal for a period of thirty (30) days after its
receipt of the Selling Member Notice (the "Acceptance Period") to purchase a
portion of the Offered Units in the proportion that the Ownership Percentage of
such Member bears to the Ownership Percentages of all the Offeree Members
electing to so purchase the Offered Units.
(b) An Offeree Member may exercise its right of first refusal by
notifying the Company and each Offeree Member in writing (the "Acceptance
Notice") within the Acceptance Period of its intention to purchase all or any
portion of its pro rata portion of the Offered Interest, for the price and upon
the terms and conditions of the Bona Fide Offer. If any Offeree Member (a
"Declining Member") declines to purchase all or any part of its pro rata portion
of the Offered Units, the non-Declining Members may purchase the declined
Offered Units on a pro rata basis. Failure to deliver an Acceptance Notice shall
be deemed conclusive evidence of an Offeree Member's intent to decline the
opportunity to purchase any of the Offered Units.
(c) The closing of the purchase of the Offered Interest by the
Offeree Members shall be consummated no later than sixty (60) days after the
date of the Selling Member Notice. At the closing, the Selling Member shall sell
to the Offeree Members full right, title and interest in and to the Offered
Units, free and clear of all liens, claims and encumbrances (other than those
created pursuant to this Agreement) and shall deliver or cause to be delivered
to the Offeree Members the certificate(s), if any, representing the Membership
Units purchased by the Offeree Members.
(d) In the event the Offeree Members in the aggregate have not
agreed to purchase all of the Offered Units, the Selling Member shall have the
right for a period of eighty (80) days after the date of the Selling Member
Notice to sell to the Proposed Acquiror, all, but not less than all, of the
Offered Units, at a price and upon terms and conditions specified in the Selling
Member notice. In the event the Selling Member (i) proposes to sell the Offered
Units other than in accordance with the preceding sentence or (ii) does not sell
all of the Offered Units to the Proposed Acquiror within such 80-day period,
then, in each such case, prior to any Transfer of such Offered Units, the
Selling Member shall be required to first offer such Offered Units to the
Offeree Members in the manner provided in this Section.
VIII.4 LEGAL CAPACITY OF TRANSFEREE; TAX EFFECTS. Anything in this
Article VIII or elsewhere in this Agreement to the contrary notwithstanding, no
Transfer of all or any part of any Member's Membership Unit shall be made or
shall be effective if
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such Transfer would (in the opinion of the Company's legal counsel, which shall
be conclusive for this purpose) jeopardize the limited liability status of the
Company or result in any substantial adverse effect upon the Company or the
Members for federal income tax purposes (including, without limitation, a
termination of the Company or loss of tax treatment as a partnership).
VIII.5 SECURITIES LAWS MATTERS. Anything in this Article VIII or
elsewhere in this Agreement to the contrary notwithstanding, no Transfer of all
or any part of any Member's Membership Unit shall be made or shall be effective
unless (a) prior to the consummation thereof, all assignees and transferees with
respect thereto shall have made to the Company in writing all of the
representations required, in the sole judgment of the Manager, to ensure
compliance with applicable securities laws, and (b) if required in the
discretion of the Manager, the Company is provided with an opinion of its legal
counsel, or other legal counsel satisfactory to the Company's counsel, stating
that such Transfer is exempt from the Securities Act, and is permissible under
all other applicable federal and state securities laws without registration or
qualification of any security or consent or approval of any Person.
VIII.6 INDEMNIFICATION. To the fullest extent permitted by applicable
law, each Member and each assignee or transferee of any Membership Unit (or
portion thereof) shall indemnify and hold harmless the Company, the Manager,
every Member or Officer who was or is a party or is threatened to be made a
party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative by reason of or arising
from any actual or alleged misrepresentation, misstatement of facts or omission
to state facts made (or omitted to be made) by such Member or any assignee or
transferee of any Membership Unit (or portion thereof) in connection with any
Transfer of all or any part of any Membership Unit by such Member, against
expenses for which the Company or such other Person has not otherwise been
reimbursed (including attorneys' fees, judgments, fines and amounts paid in
settlement) actually and reasonably incurred by any of them in connection with
such action, suit or proceeding.
ARTICLE IX LIMITATIONS ON LIABILITIES; INDEMNIFICATION; RIGHT TO CONDUCT
-------------------------------------------------------------------------
OTHER BUSINESS
--------------
IX.1 LIABILITY OF MEMBERS. No Member shall have personal liability for the
obligations, debts, liabilities or losses of the Company, whether to the
Company, to the Manager, to any other Member, to any Officer or to the creditors
of the Company, whether in contract, tort or otherwise, in excess of, in the
aggregate, the amount of such Member's Capital Contributions to the Company,
except as otherwise required by law. No creditor shall have the right to attach
or garnish or compel the contribution by any Member of any capital. Except as
may otherwise be required by the Act, no Member shall be liable for a return of
the Assets delivered or distributed to such Member.
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IX.2 LIABILITY AND INDEMNIFICATION OF MANAGERS AND AUTHORIZED PERSONS.
(a) No Manager shall be liable to any Member or to the Company by
reason of the actions or inactions of such Person in the conduct of the business
of the Company, except for such Person's fraud, gross negligence or willful
misconduct. No amendment of this Agreement or repeal of any of its provisions
shall limit or eliminate the benefits provided to the Manager under this
provision with respect to any act or omission which occurred prior to such
amendment or repeal.
(b) The Company shall, to the fullest extent permitted by applicable
law, indemnify and hold harmless, the Manager and each director, manager, agent,
officer, representative and employee thereof or Person who is deemed to control
the Manager (hereinafter collectively referred to as the "Indemnitees") from and
against any losses, claims, damages, liabilities or actions, joint or several,
to which such Indemnitees may be subject by virtue of any act performed by such
Indemnitee, or omitted to be performed by any such Indemnitee, in connection
with the business of the Company or its formation and shall reimburse each such
Indemnitee for any legal or other expenses reasonably incurred by such Person in
connection with investigating, defending or preparing to defend any such loss,
claim, damage, liability or action; provided, however, that, the Company shall
-------- ------- ----
not be liable to any Indemnitee to the extent that in the final non-appealable
judgment of a court of competent jurisdiction such loss, claim, damage,
liability or action is found to arise from such Indemnitee's gross negligence or
willful misconduct. Expenses incurred by an Indemnitee in defending a civil or
criminal action, suit or proceeding arising out of or in connection with this
Agreement or the Company's business or affairs shall be paid by the Company in
advance of the final disposition of such action, suit or proceeding upon receipt
of an undertaking by the Indemnitee to repay such amount plus reasonable
interest in the event that it shall ultimately be determined that the Indemnitee
was not entitled to be indemnified by the Company in connection with such
action. No amendment of this Agreement shall limit or eliminate the right to
indemnification provided hereunder with respect to acts or omissions occurring
prior to such amendment or repeal. The Company may carry insurance protecting
it and potential Indemnitees from liabilities to third parties, to the extent
practicable.
IX.3 INDEMNIFICATION RIGHTS CUMULATIVE. The indemnification rights
contained in this Article IX shall be cumulative of, and in addition to, any and
all rights, remedies and other recourse to which the Indemnitee shall be
entitled, whether pursuant to the provisions of this Agreement, at law or in
equity. Indemnification shall be made solely and entirely from the Assets of the
Company, and no Member shall be personally liable to the Indemnitees under this
Article IX.
IX.4 RIGHT TO CONDUCT OTHER BUSINESS. Nothing contained in this
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Agreement shall be deemed to restrict in any way the freedom of each Member, the
Manager and their respective Affiliates, including any director, officer or
employee of such Person, to conduct any other business or any other activity
whatsoever (subject to any restriction, limitation or qualification thereon
arising by virtue of any understanding, arrangement or agreement, other than
this Agreement, or arising under law or otherwise), including, without
limitation, the investment in or operation of any business in the
telecommunications field, without having or incurring any obligation to offer
any interest therein to the Company or any other Member.
ARTICLE X. POWER OF ATTORNEY.
-----------------
X.1 AUTHORITY TO EXECUTE DOCUMENTS. During the life of the Company and
during any additional period authorized in accordance with this Agreement to
dissolve, liquidate and wind up the affairs of the Company, each of the Members
hereby irrevocably designates and appoints the Manager and any duly appointed
agent of the Manager, with full power of substitution, to be the Member's true
and lawful attorney-in-fact with the power, from time to time, in the name,
place and stead of the Member to do any ministerial act necessary to qualify the
Company to do business under the laws of any jurisdiction in which it is
necessary to file any instrument in writing in connection with such
qualification and to make, execute, swear to and acknowledge, amend, file,
record, deliver and publish in conformance with the provisions of this Agreement
(a) the Certificate, (b) a counterpart of this Agreement or of any amendment
hereto for the purpose of filing or recording such counterpart in any
jurisdiction in which the Company may own property or transact business, (c) all
certificates and other instruments necessary to qualify or continue the Company
as a limited liability company in the State of Delaware or in any jurisdiction
where the Company may own property or be doing business, (d) any fictitious or
assumed name certificate required or permitted to be filed by or on behalf of
the Company, including, without limitation, to enable the Company to conduct its
business under such name or names as the Manager may determine from time to
time, (e) any other instrument that is now or may hereafter be required by law
to be filed for or on behalf of the Company, (f) any other instruments or
documents that the Manager deems necessary to conduct the operation of the
Company, (g) any amendment to this Agreement pursuant to Section 12.2 hereof and
(h) a certificate or other instrument evidencing the dissolution or termination
of the Company when such shall be appropriate in each jurisdiction in which the
Company shall own property or do business.
X.2 SURVIVAL OF POWER. The power of attorney referenced in Section 10.1
hereof shall not be revoked and shall survive the Transfer by a Member of all or
part of its Membership Unit and it shall be coupled with such Membership Unit
and shall survive the death, incapacity or dissolution of any Member. Any Person
dealing with the Company may conclusively presume and rely upon the fact that
any instrument executed by the Manager is authorized, regular and binding
without further inquiry. The power of attorney referenced in Section 10.1 hereof
may be exercised for each Member
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by the signature of the Manager or by listing the names of all the Members and
executing any instrument with the signature of the Manager acting as
attorney-in-fact for all of them.
ARTICLE XI. DISSOLUTION AND TERMINATION.
---------------------------
XI.1 DISSOLUTION.
(a) the Company shall be dissolved upon the earlier to occur of:
(i) The Termination Date;
(ii) The date on which all of the Assets of the Company have been
disposed of or the Company is merged with or into another Person;
(iii) The date of entry of a decree of judicial dissolution under
Section 18-202 of the Act;
(iv) Upon the date of the death, bankruptcy, or dissolution of, a
Member or upon the occurrence of any other event that terminates the
continued membership of a Member in the Company other than by transfer of
all of the Member's Membership Units to another person (a "Withdrawal
Event"), unless, within ninety (90) days following the Withdrawal Event, the
business of the Company is continued by the affirmative vote of all of the
remaining Members and there are at least two remaining Members; or
(v) The date on which all of the Members agree to in writing to
terminate the Company.
(b) Notwithstanding the dissolution of the Company, the Company shall
not terminate until a certificate of cancellation shall be filed with the
Secretary of State of the State of Delaware and the assets of the Company are
distributed as provided in Section 11.2 below. Upon the dissolution of the
Company, prior to the termination of the Company, the business of the Company
and the affairs of the Members shall continue to be governed by this Agreement.
(c) If there is a Withdrawal Event and all of the remaining Members
consent to continue the business of the Company in accordance with Section
11.1(a)(iv), the Company shall pay to the withdrawing Member any positive
balance in the withdrawing Member's Capital Account within ninety (90) days from
the date of the Withdrawal Event. The remaining Members shall have the right in
their sole discretion at any time within sixty (60) days of the Withdrawal Event
to determine all Net Profits and Net Losses of the Company as of the date of
such determination and to make appropriate
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<PAGE>
credits and debits to the Members' Capital Accounts. The Capital Account of the
withdrawing Member as of the date of determination shall be conclusively deemed
to be the fair value of all of its Membership Units and the payment provided for
in this Section 11.1(c) shall be the full and only consideration for the
redemption of the withdrawing Member's Membership Units.
XI.2 WINDING UP, LIQUIDATION AND DISTRIBUTION OF ASSETS.
(a) Upon dissolution, an accounting shall be made of the Company's
assets, liabilities and operations, from the date of the last previous
accounting until the date of dissolution. The Manager shall immediately proceed
to wind up the affairs of the Company.
(b) If the Company is dissolved and its affairs are to be wound up,
the Manager shall:
(i) Sell or otherwise liquidate all of the Company's assets as
promptly as practicable;
(ii) Allocate any Net Profit or Net Loss resulting from such sales to
the Member's Capital Accounts in accordance with Article IV hereof;
(iii) Discharge all liabilities of the Company, including liabilities
to Members who are creditors of the Company to the extent permitted by law,
excluding liabilities for distributions to Members under Section 4.5; and
(iv) Distribute the remaining assets to Members in accordance with,
and to the extent of, the positive balance (if any) of each Member's Capital
Account (as determined after taking into account all Capital Account
adjustments for the Company's taxable year during which the liquidation
occurs), and thereafter to the Members in accordance with, and in proportion
to, each Member's Ownership Percentage. Any such distributions to the
Members in respect of their Capital Accounts shall be made within the time
specified in Section 1.704-1(b)(2)(ii)(b)(2) of the Treasury Regulations.
(c) The Manager shall determine the fair market value of each non-
cash asset distributed to one or more Members to determine the Net Profit or Net
Loss that would have resulted if such asset were sold for such value. Such Net
Profit or Net Loss shall then be allocated pursuant to Article IV, and the
Members' Capital Accounts shall be adjusted to reflect such allocations. The
amount distributed and charged to the Capital Account of each Member receiving
an interest in such distributed asset shall be the fair market value of such
interest (net of any liability secured by such asset that such
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<PAGE>
Member assumes or takes subject to).
(d) Notwithstanding anything to the contrary in this Agreement, if
any Member has a deficit balance in its Capital Account (after giving effect to
all contributions, distributions, allocations and other Capital Account
adjustments for all taxable years, including the year during which such
liquidation occurs), such Member shall have no obligation to make any Capital
Contribution to restore such deficit balance, and the deficit balance shall not
be considered a debt owed by such Member to the Company or to any other Person
for any purpose whatsoever.
(e) Upon the completion of the winding up, liquidation and
distribution of the assets of the Company, the Company shall be deemed
terminated.
(f) The Manager shall comply with all requirements of applicable law
pertaining to the winding up of the affairs of the Company and the final
distribution of its assets. The Manager shall be under no liability with
respect to the Assets held by the Company upon the termination of the Company
except to hold and maintain the same in the name of the Company until disposed
of in accordance with the terms of this Agreement.
XI.3 CERTIFICATE OF CANCELLATION. When all debts, liabilities and
obligations of the Company have been paid and discharged or adequate provisions
have been made therefor and all of the remaining property and assets of the
Company have been distributed, a certificate of cancellation shall be executed
by one or more authorized persons, which certificate shall set forth the
information required by the Act. A certificate of cancellation shall be filed
with the Delaware Secretary of State to accomplish the cancellation of the
Certificate of the Company upon the dissolution and completion of the winding up
of the Company.
XI.4 EFFECT OF FILING OF CERTIFICATE OF CANCELLATION. Upon the filing of
the certificate of cancellation with the Delaware Secretary of state, the
existence of the Company shall cease, except that the Manager may, in the name
of, and for and on behalf of the Company, prosecute and defend suit, gradually
settle and close the Company's business, dispose of and convey the Company's
property, discharge or make reasonable provision for the Company's liabilities,
and distribute to the Members any remaining assets, and take such other
appropriate action as provided in the Act. The Manager shall have authority to
distribute any Company property discovered after dissolution, convey real estate
and take such other act as may be necessary on behalf of and in the name of the
Company.
XI.5 RETURN OF CONTRIBUTION NONRECOURSE TO OTHER MEMBERS. Except as
provided by law or as expressly provided in this Agreement, upon dissolution,
each Member shall look solely to the assets of the Company for the return of its
Capital
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<PAGE>
Contributions. If the property remaining after the payment or discharge of the
debts and liabilities of the Company is insufficient to return the Capital
Contributions of one or more Members, such Member or Members shall have no
recourse against any other Member, except as otherwise provided by law.
ARTICLE XII. RULES OF CONVENTION.
-------------------
XII.1 NOTICE. All notices, reports and other communications given
pursuant to this Agreement shall be in writing and shall either be mailed by
first class mail, postage prepaid, certified or registered with return receipt
requested, delivered in person or by nationally recognized overnight courier or
sent by facsimile or prepaid telegram followed by confirmatory letter. Notice
sent by mail in the foregoing manner shall be deemed served or given three (3)
Business Days after deposit in the United States Postal Service. Notice
delivered by nationally recognized overnight courier shall be deemed served or
given one (1) Business Day after delivery to the courier, charges prepaid.
Notice given to the Company, the Manager or a Member in any other manner shall
be effective only if and when received by the addressee. For purposes of notice,
the address of each Member shall be the address as stated below the Member's
name on the signature page of this Agreement; provided, however, that, each
-------- ------- ----
Member shall have the continuing right to change its address for notice
hereunder to any other location by giving thirty (30) days' prior notice of such
change to the Company in the manner set forth above. For the purposes of all
notices to the Company or the Manager, the Company's and the Manager's address
shall be the same as the Company's address as set forth in Section 2.2 hereof.
XII.2 AMENDMENT. Any provision of this Agreement may be amended by
Majority Vote; provided, that, no amendment of this Agreement shall, without the
-------- ----
consent of the affected member (a) increase the liability of such Member beyond
the liability of such Member expressly set forth in this Agreement or otherwise
modify or affect the limited liability of such Member, (b) change the maximum
Capital Contribution required of such Member (other than as provided in this
Agreement) or (c) change the method of allocations made under the provisions of
Articles IV, VII and XI hereof to any Member (except as otherwise provided in
this Agreement). For any such amendment, the Manager shall deliver to each
Member written notice requesting such Member's consent and upon receipt of the
required consents and execution of the documents setting forth the amendment,
such amendment shall become effective.
XII.3 GOVERNING LAW. This Agreement is made pursuant to and shall be
construed in accordance with the internal laws of the State of Delaware, without
regard to the principles of the conflicts of laws thereof. In the event of a
direct conflict between the provisions of this Agreement and the provisions of
the Act or the Certificate, such provisions of the Act or the Certificate, as
the case may be, shall be controlling.
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<PAGE>
XII.4 ENTIRE AGREEMENT. This agreement, together with the schedules and
exhibits attached hereto, contains the entire agreement among the members
relating to the subject matter hereof and there are no other or further
agreements outstanding not specifically mentioned herein; provided, however,
-------- -------
that, the members may by agreement amend and supplement this agreement in
- ----
writing from time to time as provided in section 12.2 hereof.
XII.5 SEVERABILITY. If any term or provision of this Agreement or the
performance thereof shall be invalid or unenforceable to any extent, such
invalidity or unenforceability shall not affect or render invalid or
unenforceable any other provision of this Agreement and this Agreement shall be
valid and enforced to the fullest extent permitted by law.
XII.6 CONSTRUCTION. Whenever required by the context, as used in this
Agreement, the singular number shall include the plural, the neuter shall
include the masculine or the feminine gender and the masculine gender shall
include the neuter or the feminine gender. All references to days in this
Agreement mean calendar days unless otherwise provided. Any day or deadline or
time period hereunder which falls on a Saturday, Sunday or a non-Business Day
shall be deemed to refer to the first Business Day following.
XII.7 CAPTIONS. The Article and Section headings appearing in this
Agreement are for convenience of reference only and are not intended, to any
extent and for any purpose, to limit or define the text of any Article or
Section hereof.
XII.8 COUNTERPARTS AND EXECUTION. This Agreement may be executed in
multiple counterparts, each of which shall be deemed an original Agreement and
all of which shall constitute one Agreement between each of the parties hereto,
notwithstanding that all of the parties are not signatories to the original or
the same counterpart, to be effective as of the day and year first set forth
above.
XII.9 CONSENTS AND WAIVERS. A member's waiver, consent, failure to object,
failure to seek redress, course of conduct or failure to insist upon the strict
performance of any covenant or condition of this Agreement shall not be
considered or construed as a waiver or consent for subsequent matters or other
obligations or rights of the Member.
XII.10 RIGHTS AND REMEDIES CUMULATIVE. The rights and remedies provided by
this Agreement are cumulative and the use of any one right or remedy by any
party shall not preclude or waive its right to use any or all other remedies.
such rights and remedies are given in addition to any other rights the parties
may have by law, statute, ordinance or otherwise.
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<PAGE>
XII.11 ASSIGNS. Each and all of the covenants, terms, provisions and
agreements herein contained shall be binding upon and inure to the benefit of
the parties hereto and, to the extent permitted by this Agreement, their
respective assigns.
XII.12 WAIVER OF ACTION FOR PARTITION. Each Member irrevocably waives
during the term of the Company any right that it may have to maintain an action
for partition with respect to the property of the Company.
XII.13 EXECUTION OF ADDITIONAL INSTRUMENTS. Each Member hereby agrees to
execute such other and further statements of interest and holdings,
designations, powers of attorney and other instruments necessary to comply with
any laws, rules or regulations.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
day and year first above written.
ONEPOINT COMMUNICATIONS, LLC
By: /s/ William F Wallace
------------------------------
Name: William F Wallace
----------------------------
Title: President
-------------------------
AMI-VCOM2, INC.
By: /s/ James A. Otterbeck
----------------------------
Name: James A. Otterbeck
----------------------------
Title: President
-------------------------
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<PAGE>
SCHEDULE 3.2
INITIAL CAPITAL CONTRIBUTION
<TABLE>
<CAPTION>
Members Initial Capital Initial Initial
Contribution Membership Ownership
Units Percentage
<S> <C> <C> <C>
OnePoint Communications, LLC $990.00 99 99%
Address for Notices
2201 Waukegan Road
Suite E-200
Bannockburn, Illinois 60015
Facsimile: (847) 374-1070
AMI-VCom2, Inc. $ 10.00 1 1%
Address for Notice
2201 Waukegan Road
Suite E-200
Bannockburn, Illinois 60015
Facsimile: (847) 374-1070
</TABLE>
<PAGE>
ONEPOINT COMMUNICATIONS-GEORGIA, LLC
AMENDMENT TO OPERATING AGREEMENT
This Amendment to Operating Agreement is entered into as of October 15,
1997, between OnePoint Communications, LLC, a Delaware limited liability company
("OnePoint") and AMI-VCOM2, Inc., a Delaware corporation ("AMI" and, together
with OnePoint, the "Members").
RECITALS
A. AMI and OnePoint are parties to an Operating Agreement (the "Operating
Agreement"), dated as of April 7, 1997 with respect to OnePoint Communications-
Georgia, LLC (the "Company"). Capitalized terms used herein and not otherwise
defined shall have the respective meanings assigned such terms in the Operating
Agreement.
B. AMI desires to sell its membership units in the Company to OnePoint,
and OnePoint desires to purchase such membership units (the "Unit Transfer"),
and the Members have entered into a Securities Purchase Agreement pursuant to
which such membership interests, among others, would be transferred from AMI to
the Company.
C. Following the Unit Transfer, OnePoint will be the sole member of the
Company.
D. AMI and OnePoint desire to amend the Operating Agreement to reflect
the Unit Transfer.
NOW, THEREFORE, for good and valuable consideration, the sufficiency of
which is hereby acknowledged, the parties hereto agree as follows:
1. Consent to Transfer. The Members hereby consent to the Unit Transfer
-------------------
and waive all other requirements of Article VII of the Operating
Agreement with respect to the Unit Transfer.
2. Resignation of AMI. Effective upon the transfer of its membership
------------------
units of the Company, AMI resigns as a member of the Company, and
OnePoint accepts such resignation.
3. References Replaced. All references to AMI in the Operating Agreement
-------------------
shall be deleted, and OnePoint shall be the sole member of the
Company.
4. Full Force and Effect. All other provisions of the Operating Agreement
---------------------
shall remain in full force and effect.
<PAGE>
5. Governing Law. This Agreement is made pursuant to, and shall be construed
-------------
in accordance with the internal laws of the State of Delaware, without
regard to the principles of the conflicts of laws thereof. In the event of
a direct conflict between the provisions of this Agreement and the
provisions of the Act or the Certificate, such provisions of the Act or the
Certificate, as the case may be, shall be controlling.
6. Counterparts and Execution. This Agreement may be executed in multiple
--------------------------
counterparts, each of which shall be deemed an original Agreement and all
of which shall constitute one Agreement between each of the parties hereto,
notwithstanding that all of the parties are not signatories to the original
or same counterpart, to be effective as of the day and year first set
forth above.
7. Execution of Additional Instruments. Each of the parties hereby agrees to
-----------------------------------
execute such other and further statements of interest and holdings,
designations, powers of attorney and other instruments necessary to comply
with any laws, rules or regulations.
* * * *
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Amendment to
Operating Agreement as of the day and year first above written.
ONEPOINT COMMUNICATIONS, LLC
By: James A. Otterbeck
-----------------------
Name: _____________________
Title: CEO
---------------------
AMI-VCOM2, INC.
By: James A. Otterbeck
-----------------------
Name: _____________________
Title: President
---------------------
<PAGE>
EXHIBIT 3.4
ONEPOINT COMMUNICATIONS-COLORADO, LLC
OPERATING AGREEMENT
BETWEEN
ONEPOINT COMMUNICATIONS, LLC
AND
AMI-VCOM2, INC.
DATED AS OF
APRIL 23, 1997
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
I. Definitions........................................................... 1
1.1 "Act"........................................................... 1
1.2 "Affiliate"..................................................... 1
1.3 "Agreement"..................................................... 1
1.4 "AMI"........................................................... 1
1.5 "Assets"........................................................ 1
1.6 "Business Days"................................................. 2
1.7 "Capital Contribution".......................................... 2
1.8 "Certificate"................................................... 2
1.9 "Code".......................................................... 2
1.10 "Company"....................................................... 2
1.11 "Distributable Cash"............................................ 2
1.12 "Fiscal Year"................................................... 2
1.13 "Initial Capital Contribution".................................. 2
1.14 "Majority Vote"................................................. 2
1.15 "Members"....................................................... 2
1.16 "Membership Unit"............................................... 3
1.17 "Net Profits" and "Net Losses".................................. 3
1.18 "Ownership Percentage".......................................... 3
1.19 "Onepoint"...................................................... 3
1.20 "Person"........................................................ 3
1.21 "Securities Act"................................................ 4
1.22 "Termination Date".............................................. 4
1.23 "Treasury Regulations".......................................... 4
II. The Company........................................................... 4
2.1 Formation of the Company........................................ 4
2.2 Company Name and Office......................................... 4
2.3 Purposes of the Company......................................... 4
2.4 Term of the Company............................................. 4
2.5 Title to Property............................................... 4
2.6 Certificates of Interest........................................ 5
III. Capital; Capital Contributions........................................ 5
3.1 Capital......................................................... 5
3.2 Names of Members; Initial Capital Contributions of the Members.. 5
3.3 No Further Contributions or Loans............................... 5
3.4 Additional Members.............................................. 5
3.5 Preemptive Rights............................................... 5
</TABLE>
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<PAGE>
<TABLE>
Page
----
<S> <C>
3.6 Resignation.............................................. 6
3.7 Nondisclosure Agreements................................. 6
3.8 Other Employee Incentive Plans........................... 6
IV. Maintenance of Capital Accounts; Allocations and Distributions... 6
4.1 Capital Accounts......................................... 6
4.2 Allocations of Net Profits and Net Losses................ 7
(a) Net Loss............................................. 7
(b) Net Profits.......................................... 7
4.3 Qualified Income Offset.................................. 7
4.4 Code Section 704(c) Allocations.......................... 8
4.5 Distribution............................................. 8
V. Management and Operation of the Company.......................... 9
5.1 Management Generally..................................... 9
5.2 Election, Tenure and Removal of Managers................. 9
5.3 Limitations on Powers of the Manager..................... 10
5.4 Duties and Obligations of the Manager.................... 11
5.5 Expenses................................................. 11
5.6 Officers................................................. 11
5.7 The Chief Executive Officer.............................. 12
5.8 The President............................................ 12
5.9 The Executive Vice President............................. 12
5.10 The Treasurer............................................ 12
5.11 The Secretary............................................ 13
VI. Powers, Rights and Obligations of Members; Meetings of Members... 13
6.1 Powers of the Members.................................... 13
6.2 Examination of Company Records........................... 13
6.3 Priority and Return of Capital........................... 13
6.4 Meetings of Members...................................... 14
6.5 Rights of Legal Representatives.......................... 15
VII. Accounting Procedures............................................ 15
7.1 Fiscal Year.............................................. 15
7.2 Books of Account......................................... 15
7.3 Preparation and Filing of Income Tax Returns
and Other Writings..................................... 15
7.4 Tax Matters Partner...................................... 16
VIII. Transfer of Member Membership Units.............................. 16
8.1 Limitation on Transfer of Membership Unit................ 16
</TABLE>
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<PAGE>
<TABLE>
Page
----
<S> <C>
8.2 Certain Documents.......................................... 16
8.3 Right of First Refusal..................................... 17
8.4 Legal Capacity of Transferee; Tax Effects.................. 18
8.5 Securities Laws Matters.................................... 18
8.6 Indemnification............................................ 18
IX. Limitations on Liabilities; Indemnification; Right to Conduct
Other Business................................................... 18
9.1 Liability of Members....................................... 18
9.2 Liability and Indemnification of Managers and
Authorized Persons
9.3 Indemnification Rights Cumulative.......................... 19
9.4 Right to Conduct Other Business............................ 20
X. Power of Attorney.................................................. 20
10.1 Authority to Execute Documents............................. 20
10.2 Survival of Power.......................................... 21
XI. Dissolution and Termination........................................ 21
11.1 Dissolution................................................ 21
11.2 Winding Up, Liquidation and Distribution of Assets......... 22
11.3 Certificate of Cancellation................................ 23
11.4 Effect of Filing of Certificate of Cancellation............ 23
11.5 Return of Contribution Nonrecourse to Other Members........ 24
XII. Rules of Convention................................................ 24
12.1 Notice..................................................... 24
12.2 Amendment.................................................. 24
12.3 Governing Law.............................................. 25
12.4 Entire Agreement........................................... 25
12.5 Severability............................................... 25
12.6 Construction............................................... 25
12.7 Captions................................................... 25
12.8 Counterparts and Execution................................. 25
12.9 Consents and Waivers....................................... 25
12.10 Rights and Remedies Cumulative............................. 26
12.11 Assigns.................................................... 26
12.12 Waiver of Action for Partition............................. 26
12.13 Execution of Additional Instruments........................ 26
</TABLE>
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<PAGE>
ONEPOINT COMMUNICATIONS-COLORADO, LLC
OPERATING AGREEMENT
This OPERATING AGREEMENT (this "AGREEMENT") is entered into as of the 23rd
day of April 1997, between OnePoint Communications, LLC, a Delaware limited
liability company ("ONEPOINT"), and AMI-VCom2, Inc., a Delaware corporation
("AMI," together with "ONEPOINT", the "MEMBERS").
RECITALS
A. AMI and OnePoint desire to form a Delaware limited liability company,
under the name "ONEPOINT COMMUNICATIONS-COLORADO, LLC" (the "COMPANY"), pursuant
to the provisions of the Act by filing a Certificate with the Secretary of State
of the State of Delaware and entering into this Agreement.
B. AMI and OnePoint desire that OnePoint manage the Company in accordance
with, and subject to, the terms and conditions hereinafter set forth, and in its
capacity as manager, OnePoint is hereinafter referred to as the "Manager".
NOW, THEREFORE, for good and valuable consideration, the sufficiency of
which is hereby acknowledged, the parties hereto hereby agree as follows:
ARTICLE I. DEFINITIONS. The following words and phrases, unless the
-----------
context clearly indicates otherwise, shall have the meanings set forth below:
1.1 "ACT" shall mean the Limited Liability Company Act, Delaware Code
Annotated, Title 6, (S)(S)18-101 et seq., as from time to time amended.
-- ----
1.2 "AFFILIATE" with respect to any person, shall mean any Person,
directly or indirectly, controlling, controlled by, or under common control with
such Person, whether such control is effected pursuant to contract or otherwise;
provided, however, that the Company shall not be considered to be an Affiliate
of any Member for purposes of this Agreement.
1.3 "AGREEMENT" shall have the meaning ascribed to such term in the
preamble hereto, as the same may be amended from time to time in accordance
herewith.
1.4 "AMI" shall have the meaning ascribed to such term in the introductory
paragraph hereof.
1.5 "ASSETS" shall mean any real or personal property, whether tangible or
intangible, acquired by the Company on or after the date of this Agreement.
<PAGE>
1.6 "BUSINESS DAYS" shall mean any day except Saturday, Sunday or any
other day on which commercial banks located in the City of Chicago are
authorized by law to be closed for business.
1.7 "CAPITAL CONTRIBUTION" shall mean, with respect to any Member, all
contributions to the capital (whether in cash or otherwise) of the Company made
by such Member pursuant to this Agreement.
1.8 "CERTIFICATE" shall mean that certain Certificate of Formation of the
Company filed with the Office of the Secretary of State of Delaware, as the same
may be amended from time to time.
1.9 "CODE" shall mean the Internal Revenue Code of 1986, as amended, or
any corresponding provision of subsequent superseding federal revenue laws.
1.10 "COMPANY" shall have the meaning ascribed to such term in the recitals
hereto.
1.11 "DISTRIBUTABLE CASH shall mean all cash, revenues and funds received
by the Company from Company operations, less the sum of the following to the
extent paid or set aside by the Company: (a) all principal and interest payments
on indebtedness of the Company and all other sums paid to lenders; (b) all cash
expenditures incurred in the normal operation of the Company's business; and (c)
such reserves as the Manager shall deem reasonably necessary for the proper
operation and financing of the Company's business.
1.12 "FISCAL YEAR" shall mean the Company's fiscal year, which shall be the
calendar year.
1.13 "INITIAL CAPITAL CONTRIBUTION" shall mean, with respect to any Member,
the initial contribution to the capital (whether in cash or otherwise) of the
Company made by such Member pursuant to this Agreement in the amount set forth
on Schedule 3.2 attached hereto.
1.14 "MAJORITY VOTE" shall mean an affirmative vote by the Members holding
more than fifty percent (50%) of the aggregate issued and outstanding Membership
Units of the Company.
1.15 "MEMBERS" shall have the meaning ascribed to such term in the preamble
hereto, and shall include each Person hereafter admitted to the Company as a
Member as provided in this Agreement.
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<PAGE>
1.16 "MEMBERSHIP UNIT" shall mean, with respect to each Member, all of
such Member's rights, interests, proceeds and profits which it may own whether
now existing or contingent, in the Company, including the right of such Member
to any and all benefits to which the Member may be entitled and the obligations
of such Member, as provided in this Agreement and the Act.
1.17 "NET PROFITS" AND "NET LOSSES" shall mean for each Fiscal Year or
other period, an amount equal to the Company's taxable income or tax loss for
such year or period, determined in accordance with Code Section 703(a). For
this purpose all items of income, gain, loss or deduction required to be stated
separately pursuant to Code Section 703(a)(1) shall be included in taxable
income or loss, with the following adjustments:
a. Any income of the Company that is exempt from federal income tax
and not otherwise taken into account in computing Net Profits or Net Losses
shall be added to such taxable income or tax loss;
b. Any expenditures of the Company described in Code Section
705(a)(2)(B) or treated as Code Section expenditures pursuant to
Regulations Section 1.704-l(b)(2)(iv)(i), and not otherwise taken into
account in computing Net Profits or Net Losses, shall be subtracted from
such taxable income or tax loss; and
c. If property other than cash has been contributed to the Company
or the Capital Accounts of the Members have been adjusted pursuant to
Treasury Regulations Section 1.704-l(b)(2)(iv)(f), depreciation,
amortization, gain or loss with respect to assets of the Company shall be
computed in accordance with Regulations Section 1.704-1(b)(2)(iv)(g).
1.18 "OWNERSHIP PERCENTAGE" shall mean, as to each Member, the percentage
reflecting the ratio which its Membership Unit bears to the aggregate issued and
outstanding Membership Units of all Members. The Ownership Percentages are
initially as shown on Schedule 3.2 attached hereto. For purposes of this
Agreement, each Member will be deemed to hold the Ownership Percentage in the
Company actually held by such Member plus any Ownership Percentage in the
Company which could be obtained by such Member upon the exercise or conversion
of all other convertible securities held by such Member.
1.19 "ONEPOINT" shall have the meaning ascribed to such term in the
introductory paragraph hereof.
1.20 "PERSON" shall mean any individual, association, corporation, trust,
partnership, joint venture, limited liability company or other entity.
-3-
<PAGE>
1.21 "SECURITIES ACT" shall mean the Securities Act of 1933, as amended.
1.22 "TERMINATION DATE" shall mean December 31, 2025.
1.23 "TREASURY REGULATIONS" shall mean the income tax regulations
promulgated under the Code, as such regulations may be amended from time to time
(including corresponding provisions of succeeding regulations).
ARTICLE II. THE COMPANY.
-----------
2.1 FORMATION OF THE COMPANY. The Company has been organized as a
Delaware limited liability company by executing and delivering the Certificate
to the Delaware Secretary of State in accordance with and pursuant to the Act.
2.2 COMPANY NAME AND OFFICE. The name of the Company shall be "ONEPOINT
COMMUNICATIONS-COLORADO, LLC." The Company shall conduct its business under such
name or names as the Manager with the approval by a Majority Vote of the Members
shall determine from time to time and the Company shall file all statements and
applications with appropriate governmental authorities required in order to
conduct its business under such name or names. The Company shall maintain a
registered office in the State of Delaware and the name and address of the
Company's registered agent in the State of Delaware shall be as set forth in the
Certificate. Such office and such agent may be changed from time to time by the
Manager. The principal office of the Company shall be 2201 Waukegan Road, Suite
E-200, Bannockburn, Illinois 60015. The Company may maintain such additional
offices as may be designated from time to time by the Manager for the purpose of
carrying out the business of the Company.
2.3 PURPOSES OF THE COMPANY. The purpose of the Company shall be (a) to
invest in and operate businesses in the field of telecommunications and such
other fields of business as may be approved by the Manager, (b) to engage in and
carry on any other lawful business or activity in connection with the foregoing
or otherwise, and (c) to have and exercise all of the powers, rights and
privileges which a limited liability company organized pursuant to the Act may
have and exercise.
2.4 TERM OF THE COMPANY. The term of the Company shall commence on the
date of the filing of the Certificate as required by Section 18-201 of the Act
and shall continue in existence until the Termination Date, unless its existence
is sooner terminated upon dissolution (and subsequent termination of the Company
after the winding up of its affairs) as provided in this Agreement or the Act,
or unless the term shall otherwise be extended by amendment to this Agreement.
2.5 TITLE TO PROPERTY. Legal title to all Assets of the Company shall be
taken and at all times held in the name of the Company.
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2.6 CERTIFICATES OF INTEREST. The Manager may make such rules and
regulations as he may deem appropriate concerning the issuance and registration
of Membership Units. The Manager may authorize the issuance of any Membership
Units without certificates. Such authorization shall not affect Membership Units
already represented by certificates until they are surrendered to the Company.
ARTICLE III. CAPITAL; CAPITAL CONTRIBUTIONS
------------------------------
3.1 CAPITAL.The names and addresses of the initial Members are set forth
on Schedule 3.2 attached hereto.
3.2 NAMES OF MEMBERS; INITIAL CAPITAL CONTRIBUTIONS. As of the date of
this Agreement, each Member has contributed in cash to the capital of the
Company the full amount of its Initial Capital Contribution as specified in
Schedule 3.2 attached hereto, in return for which the Member shall receive the
number of Membership Units indicated opposite such Member's name on Schedule 3.2
attached hereto.
3.3 NO FURTHER CONTRIBUTIONS OR LOANS. The liability of the Members to the
Company is limited to their Capital Contributions as specified in Schedule 3.2
attached hereto, as it may be amended from time to time pursuant to Section
12.2. No additional Capital Contributions, or other funds, whether by way of
contribution of capital, loan or otherwise, shall be required of any Member
except by Majority Vote of the Members. No interest shall accrue on any Capital
Contribution and no Member shall have the right to withdraw or be repaid any
Capital Contribution except as provided in this Agreement.
3.4 ADDITIONAL MEMBERS. Additional Persons may be admitted to the Company
as Members from time to time and Membership Units may be created and issued to
those Persons and to existing Members in the sole discretion of the Manager,
subject to the provisions and restrictions contained herein. Any person admitted
to the Company as a Member after the date of this Agreement, shall agree to be
bound by the terms of this Agreement and shall execute a counterpart signature
page hereto. No new Member shall be entitled to any retroactive allocation of
any item of income, gain, loss, deduction or credit of a Company. The Manager
may, at his option, at the time a Member is admitted, close the Company books
(as though the Company's tax year has ended) when making pro rata allocations of
items of income, gain, loss, deduction or credit to a new Member for that
portion of the Company's tax year in which a new Member was admitted in
accordance with the provisions of Code Section 706(d) and the Treasury
Regulations promulgated thereunder.
3.5 PREEMPTIVE RIGHTS. Each Member shall have a preemptive or preferential
right (but not the obligation) to purchase his or its pro rata share, based on
his or its Ownership Percentage, of all or any part of any New Securities (as
defined
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below in this Section 3.5) which the Company may, from time to time, propose to
sell or issue, including any such right with respect to additional Capital
Contributions.
The term "New Securities" shall mean (a) Membership Units of the Company,
whether unissued or hereafter created; (b) any obligations, evidences of
indebtedness or other securities of the Company convertible into or exchangeable
for, or carrying or accompanied by any rights to receive, purchase or subscribe
to, any such unissued Membership Units; (c) any right of, subscription to or
right to receive, or any warrant or option for the purchase of, any of the
foregoing securities; and (d) any other securities that may be issued or sold by
the Company.
3.6 RESIGNATION. Except in connection with the sale or gift of Membership
Units in accordance with Article VIII, no Member may voluntarily resign or
withdraw as a Member of the Company without the prior written consent of the
Members owning a Majority Vote. A Member who attempts to resign or withdraw as a
Member in violation of this Section 3.6 shall not be entitled to receive any
distribution prior to the dissolution and liquidation of the Company.
3.7 NONDISCLOSURE AGREEMENTS. Each Member of the Company agrees to execute
a nondisclosure agreement with the Company in a form agreed upon by the Members.
3.8 OTHER EMPLOYEE INCENTIVE PLANS. From time to time, the Company may
establish one or more incentive plans for employees, officers, directors and
consultants of the Company pursuant to which cash payments tied to the value of
the Membership Units of the Company would be made to such Persons.
ARTICLE IV. MAINTENANCE OF CAPITAL ACCOUNTS; ALLOCATIONS AND DISTRIBUTIONS
--------------------------------------------------------------
4.1 CAPITAL ACCOUNTS
A Capital Account (a "Capital Account") shall be maintained for each Member
in accordance with the capital account maintenance rules set forth in Treasury
Regulations Section 1.704-1(b)(2)(iv). Without limiting the generality of the
foregoing, a Member's Capital Account shall be increased by (i) the amount of
money contributed by the Member to the Company, (ii) the fair market value of
property contributed by the Member to the Company as determined by the
contributing Member and the Company (net of liabilities that the Company is
considered to assume or take subject to pursuant to Section 752 of the Code),
and (iii) allocations to the Member of Company Net Profits and other items of
income and gain, including income and gain exempt from tax, but excluding items
of income and gain described in Treasury Regulations Section 1.704-1(b)(4)(i);
and which shall be decreased by (w) the amount of money distributed to the
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Member, (x) the fair market value of any property distributed to the Member as
determined by the distributee Member and the Company (net of any liabilities
that such Member is considered to assume or take subject to pursuant to Section
752 of the Code), (y) expenditures described, or treated under Section 704(b) of
the Code as described in Section 705(a)(2)(B) of the Code, and (z) the Member's
share of Net Losses and other items of loss and deduction, but excluding items
of loss or deduction described in Treasury Regulations Section 1.704-1(b)(4)(i).
The Members' Capital Accounts shall be appropriately adjusted for income, gain,
loss and deduction as required by Treasury Regulations Section 1.704-
1(b)(2)(iv)(g) (relating to allocations and adjustments resulting from the
-
reflection of property on the books of the Partnership at book value, or a
revaluation thereof, rather that at adjusted tax basis). If a Member transfers
all or a part of its Membership Unit in accordance with this Agreement, such
Member's Capital Account attributable to the transferred Membership Unit shall
carry over to the new owner of such Membership Unit pursuant to Treasury
Regulations Section 1.704-l(b)(2)(iv)(l).
-
4.2 ALLOCATIONS OF NET PROFITS AND NET LOSSES
(a) Net Losses. Net Losses shall be allocated to the Members in
----------
proportion to their respective Ownership Percentages.
(b) Net Profits. Net Profits shall be allocated to the Members in
-----------
proportion to their respective Ownership Percentages.
4.3 QUALIFIED INCOME OFFSET. Notwithstanding Section 4.2, no Member shall
be allocated any item of loss or deduction to the extent such allocation would
cause or increase a deficit balance in such Member's Capital Account (in excess
of any limited dollar amount of such deficit balance that such Member is
obligated to restore or is deemed obligated to restore under Treasury
Regulations Sections 1.704-2(g) and 1.704-2(i)(5)) as of the end of the taxable
year to which such allocation relates. In the event any Member unexpectedly
receives any adjustments, allocations, or distributions described in Treasury
Regulations Sections 1.704-1(b)(2)(ii)(d)(4), (5) or (6), items of Company
- - - -
income and gain shall be specially allocated to such Member in an amount and
manner sufficient to eliminate, to the extent required by the Treasury
Regulations, such adjusted Capital Account deficit of such Member as quickly as
possible, provided that an allocation pursuant to this Section 4.3 shall be made
only if and to the extent that such Member would have a Capital Account deficit
(determined after reducing such Member's Capital Account for the items set forth
in Treasury Regulations Section 1.704-1(b)(2)(ii)(d) and after adjusting such
-
Member's Capital Account upward for any amounts such Member is obligated to
restore or is deemed obligated to restore pursuant to Treasury Regulations
Sections 1.704-2(g) and 1.704-2(i)(5)) after all other allocations provided for
in this Article IV have been tentatively made as if this Section 4.3 were not in
the Agreement. Any special allocations of items of income and gain pursuant to
this
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<PAGE>
Section 4.3 shall be taken into account in computing subsequent allocations of
income and gain pursuant to this Article IV so that the net amount of any item
so allocated and the income, gain, and losses allocated to each Member pursuant
to this Article IV to the extent possible, shall be equal to the net amount that
would have been allocated to each such Member pursuant to the provisions of this
Section 4.3 if such unexpected adjustments, allocations, or distributions had
not occurred.
4.4 CODE SECTION 704(C) ALLOCATIONS. Notwithstanding any other
provision in this Article IV, in accordance with Code Section 704(c) and the
Treasury Regulations promulgated thereunder, income, gain, loss, and deduction
with respect to any property contributed to the capital of the Company shall,
solely for tax purposes, be allocated among the Members so as to take account of
any variation between the adjusted basis of such property to the Company for
federal income tax purposes and its fair market value on the date of
contribution. Allocations pursuant to this Section 4.4 are solely for purposes
of federal, state and local taxes. As such, they shall not affect or in any way
be taken into account in computing a Member's Capital Account or share of
profits, losses, or other items of distributions pursuant to any provision of
this Agreement.
4.5 DISTRIBUTIONS.
(a) Except as provided in Section 11.2, and subject to Section
18-607 of the Act, the Manager:
(i) shall cause the Company to distribute to each Member an
amount of Distributable Cash as shall be sufficient to enable such Member
to fund its federal, state and local income tax liabilities attributable to
such Member's distributive share of Company taxable income and gain (the
"Actual Tax Amount"). Estimated tax distributions shall be made in four
cash installments not later than fifteen (15) days before taxes are due,
based upon the Manager's good faith estimate of the Company's Net Profits
(the "Estimated Tax Amount"). The Estimated Tax Amounts and the Actual Tax
Amounts shall be calculated taking into account the character of such
income and gain and calculating such tax as if each Member were an
individual resident in Lake County, Illinois, subject to tax at the highest
marginal rate applicable to income of such character. The Manager shall
distribute to each Member, not later than April 10th of the year following
the close of each taxable year of the Company, the amount by which the
Actual Tax Amount for such taxable year exceeds the Estimated Tax Amount
distributed to such Member for such taxable year. If the Estimated Tax
Amount distributed by the Company to a Member exceeds the Actual Tax
Amount, then the amount of the next distribution the Manager would
otherwise be required to make to such Member(s) under this Section 4.5
shall be reduced by the amount of
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such excess until the remaining balance of such excess is reduced to zero;
and
(ii) may make distributions of Distributable Cash and other
property at such time and in such aggregate amounts as determined by the
Manager to the Members (A) first, to the Members in proportion to their
respective unreturned Capital Contributions until each Member has recovered
its Capital Contributions in full, (B) second, to the Members in proportion
to their respective Ownership Percentages.
(b) Upon the liquidation of the Company, liquidating
distributions shall be made in accordance with Section 11.2.
(c) A Member shall have no right to demand and receive any
distribution in a form other than cash.
(d) All amounts withheld pursuant to the Code or any provision
of any state or local tax law with respect to any payment, distribution or
allocation to the Company or the Members may be treated as amounts distributed
to the Members pursuant to this Section 4.5 for all purposes under the
Agreement. The Manager is authorized to withhold from distributions, or with
respect to allocations, to the Members and pay over to any federal, state or
local government any amounts required to be so withheld pursuant to the Code or
any provisions of any other federal, state or local law and may allocate such
amounts to the Members with respect to which such amount was withheld.
ARTICLE V. MANAGEMENT AND OPERATION OF THE COMPANY.
---------------------------------------
5.1 MANAGEMENT GENERALLY. Subject to the provisions of this Agreement
and the Act, the business and affairs of the Company shall be managed by and
under the direction of the Manager. The Manager shall have full and complete
authority, power and discretion to manage and control the business of the
Company, to make all decisions regarding those matters and to perform any and
all other acts or activities customary or incident to the management of the
Company's business and objectives. All powers of the Company may be exercised by
the Manager, except as conferred on or reserved to the Members by the Act or by
this Agreement. The exercise by a Member of any or all of its rights of approval
or consent under this Agreement shall not in any event affect the Member's
status or limited liability as a limited liability member.
5.2 ELECTION, TENURE AND REMOVAL OF MANAGERS. The Company shall
initially have one manager. Thereafter, the number of managers of the Company
shall be fixed from time to time by Majority Vote. In no instance shall there be
less than one manager. The manager(s) shall be elected or removed with or
without cause by Majority
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<PAGE>
Vote. The Manager shall continue to hold office until his successor shall have
been elected and qualified.
5.3 LIMITATIONS ON POWERS OF THE MANAGER. Notwithstanding the generality
of Section 5.1, the Manager shall not have the authority to do any of the
following acts without the approval of the Members by Majority Vote:
(a) Cause or permit the Company to engage in any activity that is not
consistent with the purposes of the Company set forth in Section 2.3;
(b) Knowingly do any act in contravention of this Agreement;
(c) Knowingly do any act which would make it impossible to carry on
the ordinary business of the Company, except as otherwise provided in this
Agreement;
(d) Confess a judgment against the Company in an amount in excess of
$50,000;
(e) Possess Company Assets, or assign rights in specific Company
Assets, for other than a Company purpose;
(f) Knowingly and willingly perform any act that would cause the
Members to incur personal liability, for example, as a result of the Company
conducting business in a state which has neither enacted legislation which
permits limited liability companies to organize in such state nor permits the
Company to register to do business in such state as a foreign limited liability
Company;
(g) Cause the Company to declare or file bankruptcy or make any
assignment for the benefit of creditors or take any similar action;
(h) Cause the Company to acquire any equity or debt securities of any
Person, or to otherwise make loans to any Member or Person;
(i) Cause the Company to incur any contractual liability in any single
transaction or series of related transactions in excess of $2,500,000 or in any
event in excess of the overall budget of the Company;
(j) Sell or otherwise dispose of all or substantially all of the
Company's Assets in a single transaction or series of related transactions,
except for a liquidating sale in connection with the dissolution of the Company;
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<PAGE>
(k) Permit the Company to enter into any merger, consolidation,
reorganization or similar transaction;
(l) Cause the Company to make any distribution except as otherwise set
forth in this Agreement; or
(m) Cause or permit the Company to offer or sell any equity securities
of the Company in a public offering or pursuant to a registration statement
under the Securities Act of 1933, as amended.
5.4 DUTIES AND OBLIGATIONS OF THE MANAGER.
(a) The Manager shall not be required to manage the Company as his
sole and exclusive function and he may have other business interests and engage
in activities in addition to those relating to the Company. Neither the Company
nor the Members shall have any right, by virtue of this Agreement, to share or
participate in such other investments or activities of the Manager or in the
income or proceeds derived therefrom.
(b) The Manager shall take all reasonable action that may be necessary
or appropriate for the continuation of the Company's valid existence as a
limited liability company under the laws of the State of Delaware and of each
other jurisdiction in which such existence is necessary to protect the limited
liability of the Members or to enable the Company to conduct the business in
which it is engaged or proposes to engage.
5.5 EXPENSES. The Manager shall be entitled to reimbursement from the
Company for the reasonable expenses that such Manager pays for or incurs on
behalf of the Company.
5.6 OFFICERS.
(a) The officers of the Company shall consist of a Chief Executive
Officer, a President, a Treasurer and a Secretary and such Executive Vice
Presidents, assistant secretaries or other officers or agents as may be elected
or appointed by the Manager from time to time (collectively, the "Officers").
The Officers shall be appointed by, and shall exercise such powers and perform
such duties as are prescribed by, the Manager under the direction and management
of the Manager. Any number of offices may be held by the same Person, as the
Manager may determine.
(b) The Officers shall hold office for the term for which they were
appointed and until their successors are elected and qualified; provided,
--------
however, that, any Officer may be removed with or without cause at any time by
- ------- ----
the Manager.
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<PAGE>
(c) A vacancy in any office because of death, resignation, removal,
disqualification or otherwise may be filled by the Manager for the unexpired
portion of the term.
(d) The Company may pay an Officer compensation for such Officer's
services to or on behalf of the Company in such amounts as determined by the
Manager.
5.7 THE CHIEF EXECUTIVE OFFICER. The Chief Executive Officer shall have
general supervision, direction and control of the business and affairs of the
Company and shall have the power to sign any deeds, mortgages, bonds, contracts
or other instruments which the Manager has authorized to be executed. The Chief
Executive Officer shall preside at all meetings of the Members. The Chief
Executive Officer shall have the general powers and duties of management
generally vested in the chief executive officer of a business entity, and shall
have such other powers and duties with respect to the administration of the
business and affairs of the Company as may be prescribed by the Manager from
time to time.
5.8 THE PRESIDENT. The President shall be the chief operating officer of
the Company and shall have power to sign any deeds, mortgages, bonds, contracts
or other instruments which the Manager has authorized to be executed, except in
cases where the signing and execution thereof shall be expressly delegated by
the Manager or by this Agreement to some other officer or agent of the Company,
or shall be required by law to be otherwise signed or executed. In general, the
President shall see that all orders and resolutions of the Manager are carried
into effect and shall perform all duties incident to the office of the President
and such other duties as may be prescribed by the Manager from time to time.
5.9 THE EXECUTIVE VICE PRESIDENT(S). In the absence of (or at the request
of) the President in the event of his or her inability or refusal to act, an
executive vice president (or in the event there be more than one executive vice
president, the executive vice presidents in the order designated, or in the
absence of any designation, then in the order of their election) if one shall be
appointed, shall perform the duties of the President, and when so acting, shall
have all the powers of and be subject to all the restrictions upon the
President. Any executive vice president shall perform such other duties as from
time to time may be assigned to him by the Chief Executive Officer, the
President or the Manager.
5.10 THE TREASURER. The Treasurer shall be the chief financial officer of
the Company. The Treasurer shall not be required to give a bond for the faithful
discharge of his or her duties. He or she shall: (a) have charge and custody of
and be responsible for all funds and securities of the Company; (b) be charged
with primary responsibility for dealing with national securities exchanges or
other exchanges in which the Company may hold a membership or on which the
Company may trade; (c) receive
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and give receipts for moneys due and payable to the Company from any source
whatsoever, and deposit all such moneys in the name of the Company in such
banks, trust companies or other depositaries as shall be selected by the
Manager; and (d) in general perform all the duties incident to the office of
treasurer and such other duties as from time to time may be assigned to him or
her by the President or by the Manager.
5.11 THE SECRETARY. The Secretary shall: (a) keep the minutes of all
Members' meetings in one or more books provided for that purpose; (b) see that
all notices are duly given in accordance with the provisions of this Agreement
or as required by law; (c) be custodian of Company records; (d) keep a register
of the post office address of each Member which shall be furnished to the
Secretary by such Member; (e) certify the resolutions of the Members, and other
documents to the Company, as true and correct; and (f) in general, perform all
duties incident to the office of Secretary and such other duties as from time to
time may be assigned to him or her by the President or the Manager.
ARTICLE VI. POWERS, RIGHTS AND OBLIGATIONS OF MEMBERS; MEETINGS OF
------------------------------------------------------
MEMBERS.
- -------
6.1 POWERS OF THE MEMBERS. Except as expressly provided in this Agreement,
the Members shall take no part in the management of the business or transact any
business for the Company and shall have no power to sign for or bind the Company
solely in their capacity as Members; provided, however, that, the Members shall
-------- ------- ----
have the approval and consent rights as described in this Agreement and provided
under the Act.
6.2 EXAMINATION OF COMPANY RECORDS. Each Member or its authorized
representative shall have the right, during regular business hours and upon
reasonable advance written notice (which shall state the reason therefor), to
examine and copy (at the requesting Member's expense), for a proper purpose as
determined by the Manager, the records (where such records are maintained) of
the Company and otherwise make reasonable inquiry as to the affairs of the
Company. A proper purpose shall mean a purpose reasonably related to such
Person's interest as a Member. Upon the written request of any Member, the
Manager shall provide a list showing the names, addresses and Ownership
Percentages of all Members.
6.3 PRIORITY AND RETURN OF CAPITAL. Except as may be expressly provided in
Article IV or Article VIII, no Member shall have priority over any other Member,
either as to return of Capital Contributions or as to Net Profits, Net Losses or
distributions; provided, however, that, this Section shall not apply to the
-------- ------- ----
repayment by the Company of loans (as distinguished from Capital Contributions)
which a Member has made to the Company.
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6.4 MEETINGS OF MEMBERS.
(a) Meetings of the Members may be called by the Manager or by Members
holding in the aggregate not less than five percent (5%) of the issued and
outstanding Membership Units. The meeting shall be held at the principal place
of business of the Company or as designated in the notice or waivers of notice
of the meeting.
(b) Notice of any meeting of the Members shall be given no fewer than
ten (10) days and no more than thirty (30) days prior to the date of the
meeting. Notices shall be delivered in the manner set forth in Section 12.1 and
shall specify the purpose or purposes for which the meeting is called. The
attendance of a Member at any meeting shall constitute a waiver of notice of
such meeting, except where a Member attends a meeting for the express purpose of
objecting to the transaction of any business because the meeting is not lawfully
called or convened.
(c) Members owning a Majority Vote, present in person or represented
by proxy, shall constitute a quorum for the transaction of business at any
meeting of the Members; provided, that, if Members owning less than a Majority
-------- ----
Vote are present at said meeting, Members owning a majority of the Membership
Units present may adjourn the meeting at any time and without further notice.
The act of the Members holding a majority of the Membership Units present at
such meeting at which a quorum is present shall be the act of the Members,
unless the vote of a greater or lesser proportion or number is otherwise
required by the Act, the Certificate or by this Agreement.
(d) Unless specifically prohibited by the Certificate or the Act, any
action required to be taken at a meeting of the Members or any other action
which may be taken at a meeting of the Members, may be taken without a meeting
if a consent in writing, setting forth the action so taken, shall be signed by
the Members holding Membership Units having not less than the minimum number of
votes that would be necessary to authorize or take such action at a meeting at
which all Members were present and voting. Prompt notice of any action taken
without a meeting by less than unanimous consent shall be given in writing to
those Members who were entitled to vote but did not consent in writing.
(e) The Members may participate in and act at any meeting of Members
through the use of a conference telephone or other communications equipment by
means of which all Persons participating in the meeting can hear each other.
Participation in such meeting shall constitute attendance and presence in person
at such meeting of the Person or Persons so participating.
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(f) Each Member entitled to vote at a meeting of Members or to express
consent or dissent to action in writing without a meeting may authorize another
Person or Persons to act for him by proxy. Such proxy shall be deposited at the
principal offices of the Company not less than 48 hours before a meeting is held
or action is taken, but no proxy shall be valid after eleven months from the
date of its execution, unless otherwise provided in the proxy.
(g) Each Member shall vote in proportion to its Ownership Percentage.
6.5 RIGHTS OF LEGAL REPRESENTATIVES. If a Member who is an individual dies
or is adjudged by a court of competent jurisdiction to be incompetent to manage
the Member's person or property, the Member's executor, administrator, guardian,
conservator, or other legal representative may exercise all of the Member's
rights for the purpose of settling the Member's estate or administering the
Member's property, including any power the Member has under the Certificate or
this Agreement to give an assignee the right to become a Member. If a Member is
a corporation, trust, or other entity and is dissolved or terminated, the powers
of that Member may be exercised by its legal representative or successor.
ARTICLE VII. ACCOUNTING PROCEDURES.
---------------------
7.1 FISCAL YEAR. The fiscal year of the Company shall begin on January 1
and shall end on December 31 of each year; provided that the fiscal year ending
December 31, 1997 shall commence on the date of this Agreement.
7.2 BOOKS OF ACCOUNT. At all times during the existence and continuance of
the Company, the Manager shall cause to be kept accurate, complete and proper
books, records and accounts pertaining to the Company's affairs, including (a) a
list of all Members and their addresses and their Capital Contributions,
Membership Units and Ownership Percentages, (b) a copy of the Certificate and
all amendments thereto and all powers of attorney pursuant to which any
Certificate has been executed, (c) an original copy of the Agreement and all
amendments thereto, (d) copies of the Company's federal and state tax returns
and financial statements and (e) the Company's books and records. Such books and
records shall be kept on the accrual basis of accounting in conformity with
generally accepted accounting principles. The method of accounting followed by
the Company for federal income tax purposes shall be the accrual method. All
books, records and accounts of the Company shall be kept at its principal office
or at such other office as the Manager may designate for such purpose.
7.3 PREPARATION AND FILING OF INCOME TAX RETURNS AND OTHER WRITINGS. The
Company's treasurer shall cause the preparation and timely filing of all Company
tax returns, shall, on behalf of the Company, make such tax elections
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(including, without limitation, any election under Section 754 of the Code),
determinations and allocations which he or she, in his or her sole and absolute
discretion, deems to be appropriate and shall timely make all other filings
required by any governmental authority having jurisdiction to require such
filing, the cost of which shall be borne by the Company. Copies of such returns
shall be furnished to the Members within a reasonable period of time after the
end of each Fiscal Year of the Company. A Form K-1, prepared by the Company's
accountants, shall be delivered to the Members within ninety (90) days after the
expiration of each Fiscal Year of the Company. This form shall show the
allocation of profit or loss of the Company for federal income tax purposes,
including all separately stated items, to each Member. No election shall be
made by the Company or any Member to be excluded from the application of the
provisions of subchapter K of the Code or from any similar provision of state
tax laws.
7.4 TAX MATTERS PARTNER. OnePoint is hereby designated the "Tax Matters
Partner" (as defined in Code Section 6231), and is authorized and required to
represent the Company (at the Company's expense) in connection with all
examinations of the Company's affairs by tax authorities, including, without
limitation, administrative and judicial proceedings, and to expend Company funds
for professional services and costs associated therewith. The Members agree to
cooperate with each other and to do or refrain from doing any and all things
reasonably required to conduct such proceedings.
ARTICLE VIII. TRANSFER OF MEMBER MEMBERSHIP UNITS.
-----------------------------------
8.1 LIMITATION ON TRANSFER OF MEMBERSHIP UNIT. For so long as this
Agreement shall remain in effect, no Member shall sell, assign, pledge,
hypothecate, transfer exchange or otherwise transfer for consideration (a
"Transfer"), its Membership Unit, in whole or in part, and a transferee shall
not have a right to become a "Substitute Member," except in strict compliance
with the provisions of this Agreement. Any Transfer will be effective on the
first day following receipt by the Members from the Manager of written notice
that all of the requirements of this Article VIII have been met.
8.2 CERTAIN DOCUMENTS. The Company and the Members agree to use their best
efforts to cause the Company not to issue any Membership Units without obtaining
from each prospective Substitute Member, prior to the issuance of the Membership
Units, (a) a counterpart of this Agreement as then in effect, duly executed by
the prospective Substitute Member, (b) any reasonable fees and expenses in
connection with the admission of the prospective Substitute Member as an
assignee or transferee and (c) all representations and all such certificates,
evidences or assurance reasonably requested by the Company and the existing
Members.
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8.3 RIGHT OF FIRST REFUSAL.
(a) If at any time a Member (the "Selling Member") receives a bona
fide offer in writing from any Person who is not a Member (a "Bona Fide Offer")
which the Selling Member desires to accept, to purchase any or all of the
Membership Units owned by the Selling Member (the "Offered Units"), then the
Selling Member shall give the non-transferring Members (the "Offeree Members")
(i) written notice (the "Selling Member Notice") of the name and address of the
Person who made the Bona Fide Offer (the "Proposed Acquiror") and (ii) a copy of
the Bona Fide Offer, containing all of the material terms and conditions
thereof. Subject to the provisions of this Section 8.3, each Offeree Member
shall have the irrevocable right of first refusal for a period of thirty (30)
days after its receipt of the Selling Member Notice (the "Acceptance Period") to
purchase a portion of the Offered Units in the proportion that the Ownership
Percentage of such Member bears to the Ownership Percentages of all the Offeree
Members electing to so purchase the Offered Units.
(b) An Offeree Member may exercise its right of first refusal by
notifying the Company and each Offeree Member in writing (the "Acceptance
Notice") within the Acceptance Period of its intention to purchase all or any
portion of its pro rata portion of the Offered Interest, for the price and upon
the terms and conditions of the Bona Fide Offer. If any Offeree Member (a
"Declining Member") declines to purchase all or any part of its pro rata portion
of the Offered Units, the non-Declining Members may purchase the declined
Offered Units on a pro rata basis. Failure to deliver an Acceptance Notice shall
be deemed conclusive evidence of an Offeree Member's intent to decline the
opportunity to purchase any of the Offered Units.
(c) The closing of the purchase of the Offered Interest by the Offeree
Members shall be consummated no later than sixty (60) days after the date of the
Selling Member Notice. At the closing, the Selling Member shall sell to the
Offeree Members full right, title and interest in and to the Offered Units, free
and clear of all liens, claims and encumbrances (other than those created
pursuant to this Agreement) and shall deliver or cause to be delivered to the
Offeree Members the certificate(s), if any, representing the Membership Units
purchased by the Offeree Members.
(d) In the event the Offeree Members in the aggregate have not agreed
to purchase all of the Offered Units, the Selling Member shall have the right
for a period of eighty (80) days after the date of the Selling Member Notice to
sell to the Proposed Acquiror, all, but not less than all, of the Offered Units,
at a price and upon terms and conditions specified in the Selling Member notice.
In the event the Selling Member (i) proposes to sell the Offered Units other
than in accordance with the preceding sentence or (ii) does not sell all of the
Offered Units to the Proposed Acquiror within such 80-day period, then, in each
such case, prior to any Transfer of such Offered
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<PAGE>
Units, the Selling Member shall be required to first offer such Offered Units to
the Offeree Members in the manner provided in this Section.
8.4 LEGAL CAPACITY OF TRANSFEREE; TAX EFFECTS. Anything in this Article
VIII or elsewhere in this Agreement to the contrary notwithstanding, no Transfer
of all or any part of any Member's Membership Unit shall be made or shall be
effective if such Transfer would (in the opinion of the Company's legal counsel,
which shall be conclusive for this purpose) jeopardize the limited liability
status of the Company or result in any substantial adverse effect upon the
Company or the Members for federal income tax purposes (including, without
limitation, a termination of the Company or loss of tax treatment as a
partnership).
8.5 SECURITIES LAWS MATTERS. Anything in this Article VIII or elsewhere in
this Agreement to the contrary notwithstanding, no Transfer of all or any part
of any Member's Membership Unit shall be made or shall be effective unless (a)
prior to the consummation thereof, all assignees and transferees with respect
thereto shall have made to the Company in writing all of the representations
required, in the sole judgment of the Manager, to ensure compliance with
applicable securities laws, and (b) if required in the discretion of the
Manager, the Company is provided with an opinion of its legal counsel, or other
legal counsel satisfactory to the Company's counsel, stating that such Transfer
is exempt from the Securities Act, and is permissible under all other applicable
federal and state securities laws without registration or qualification of any
security or consent or approval of any Person.
8.6 INDEMNIFICATION. To the fullest extent permitted by applicable law,
each Member and each assignee or transferee of any Membership Unit (or portion
thereof) shall indemnify and hold harmless the Company, the Manager, every
Member or Officer who was or is a party or is threatened to be made a party to
any threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative by reason of or arising from any
actual or alleged misrepresentation, misstatement of facts or omission to state
facts made (or omitted to be made) by such Member or any assignee or transferee
of any Membership Unit (or portion thereof) in connection with any Transfer of
all or any part of any Membership Unit by such Member, against expenses for
which the Company or such other Person has not otherwise been reimbursed
(including attorneys' fees, judgments, fines and amounts paid in settlement)
actually and reasonably incurred by any of them in connection with such action,
suit or proceeding.
ARTICLE IX. LIMITATIONS ON LIABILITIES; INDEMNIFICATION;
--------------------------------------------
RIGHT TO CONDUCT OTHER BUSINESS
-------------------------------
9.1 LIABILITY OF MEMBERS. No Member shall have personal liability for the
obligations, debts, liabilities or losses of the Company, whether to the
Company, to
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<PAGE>
the Manager, to any other Member, to any Officer or to the creditors of the
Company, whether in contract, tort or otherwise, in excess of, in the aggregate,
the amount of such Member's Capital Contributions to the Company, except as
otherwise required by law. No creditor shall have the right to attach or garnish
or compel the contribution by any Member of any capital. Except as may otherwise
be required by the Act, no Member shall be liable for a return of the Assets
delivered or distributed to such Member.
9.2 LIABILITY AND INDEMNIFICATION OF MANAGERS AND AUTHORIZED PERSONS
(a) No Manager shall be liable to any Member or to the Company by
reason of the actions or inactions of such Person in the conduct of the business
of the Company, except for such Person's fraud, gross negligence or willful
misconduct. No amendment of this Agreement or repeal of any of its provisions
shall limit or eliminate the benefits provided to the Manager under this
provision with respect to any act or omission which occurred prior to such
amendment or repeal.
(b) The Company shall, to the fullest extent permitted by
applicable law, indemnify and hold harmless, the Manager and each director,
manager, agent, officer, representative and employee thereof or Person who is
deemed to control the Manager (hereinafter collectively referred to as the
"Indemnitees") from and against any losses, claims, damages, liabilities or
actions, joint or several, to which such Indemnitees may be subject by virtue of
any act performed by such Indemnitee, or omitted to be performed by any such
Indemnitee, in connection with the business of the Company or its formation and
shall reimburse each such Indemnitee for any legal or other expenses reasonably
incurred by such Person in connection with investigating, defending or preparing
to defend any such loss, claim, damage, liability or action; provided, however,
-------- -------
that, the Company shall not be liable to any Indemnitee to the extent that in
the final non-appealable judgment of a court of competent jurisdiction such
loss, claim, damage, liability or action is found to arise from such
Indemnitee's gross negligence or willful misconduct. Expenses incurred by an
Indemnitee in defending a civil or criminal action, suit or proceeding arising
out of or in connection with this Agreement or the Company's business or affairs
shall be paid by the Company in advance of the final disposition of such action,
suit or proceeding upon receipt of an undertaking by the Indemnitee to repay
such amount plus reasonable interest in the event that it shall ultimately be
determined that the Indemnitee was not entitled to be indemnified by the Company
in connection with such action. No amendment of this Agreement shall limit or
eliminate the right to indemnification provided hereunder with respect to acts
or omissions occurring prior to such amendment or repeal. The Company may carry
insurance protecting it and potential Indemnitees from liabilities to third
parties, to the extent practicable.
9.3 INDEMNIFICATION RIGHTS CUMULATIVE. The indemnification rights
contained in this Article IX shall be cumulative of, and in addition to, any and
all rights,
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<PAGE>
remedies and other recourse to which the Indemnitee shall be entitled, whether
pursuant to the provisions of this Agreement, at law or in equity.
Indemnification shall be made solely and entirely from the Assets of the
Company, and no Member shall be personally liable to the Indemnitees under this
Article IX.
9.4 RIGHT TO CONDUCT OTHER BUSINESS. Nothing contained in this
Agreement shall be deemed to restrict in any way the freedom of each Member, the
Manager and their respective Affiliates, including any director, officer or
employee of such Person, to conduct any other business or any other activity
whatsoever (subject to any restriction, limitation or qualification thereon
arising by virtue of any understanding, arrangement or agreement, other than
this Agreement, or arising under law or otherwise), including, without
limitation, the investment in or operation of any business in the
telecommunications field, without having or incurring any obligation to offer
any interest therein to the Company or any other Member.
ARTICLE X. POWER OF ATTORNEY.
-----------------
10.1 AUTHORITY TO EXECUTE DOCUMENTS. During the life of the Company
and during any additional period authorized in accordance with this Agreement to
dissolve, liquidate and wind up the affairs of the Company, each of the Members
hereby irrevocably designates and appoints the Manager and any duly appointed
agent of the Manager, with full power of substitution, to be the Member's true
and lawful attorney-in-fact with the power, from time to time, in the name,
place and stead of the Member to do any ministerial act necessary to qualify the
Company to do business under the laws of any jurisdiction in which it is
necessary to file any instrument in writing in connection with such
qualification and to make, execute, swear to and acknowledge, amend, file,
record, deliver and publish in conformance with the provisions of this Agreement
(a) the Certificate, (b) a counterpart of this Agreement or of any amendment
hereto for the purpose of filing or recording such counterpart in any
jurisdiction in which the Company may own property or transact business, (c) all
certificates and other instruments necessary to qualify or continue the Company
as a limited liability company in the State of Delaware or in any jurisdiction
where the Company may own property or be doing business, (d) any fictitious or
assumed name certificate required or permitted to be filed by or on behalf of
the Company, including, without limitation, to enable the Company to conduct its
business under such name or names as the Manager may determine from time to
time, (e) any other instrument that is now or may hereafter be required by law
to be filed for or on behalf of the Company, (f) any other instruments or
documents that the Manager deems necessary to conduct the operation of the
Company, (g) any amendment to this Agreement pursuant to Section 12.2 hereof and
(h) a certificate or other instrument evidencing the dissolution or termination
of the Company when such shall be appropriate in each jurisdiction in which the
Company shall own property or do business.
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<PAGE>
10.2 SURVIVAL OF POWER. The power of attorney referenced in Section
10.1 hereof shall not be revoked and shall survive the Transfer by a Member of
all or part of its Membership Unit and it shall be coupled with such Membership
Unit and shall survive the death, incapacity or dissolution of any Member. Any
Person dealing with the Company may conclusively presume and rely upon the fact
that any instrument executed by the Manager is authorized, regular and binding
without further inquiry. The power of attorney referenced in Section 10.1 hereof
may be exercised for each Member by the signature of the Manager or by listing
the names of all the Members and executing any instrument with the signature of
the Manager acting as attorney-in-fact for all of them.
ARTICLE XI DISSOLUTION AND TERMINATION.
---------------------------
11.1 DISSOLUTION.
(a) The Company shall be dissolved upon the earlier to occur of:
(i) The Termination Date;
(ii) The date on which all of the Assets of the Company have been
disposed of or the Company is merged with or into another Person;
(iii) The date of entry of a decree of judicial dissolution under
Section 18-202 of the Act;
(iv) Upon the date of the death, bankruptcy, or dissolution of, a
Member or upon the occurrence of any other event that terminates the
continued membership of a Member in the Company other than by transfer of
all of the Member's Membership Units to another person (a "Withdrawal
Event"), unless, within ninety (90) days following the Withdrawal Event, the
business of the Company is continued by the affirmative vote of all of the
remaining Members and there are at least two remaining Members; or
(v) The date on which all of the Members agree to in writing to
terminate the Company.
(b) Notwithstanding the dissolution of the Company, the Company
shall not terminate until a certificate of cancellation shall be filed with the
Secretary of State of the State of Delaware and the assets of the Company are
distributed as provided in Section 11.2 below. Upon the dissolution of the
Company, prior to the termination of the Company, the business of the Company
and the affairs of the Members shall continue to be governed by this Agreement.
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<PAGE>
(c) If there is a Withdrawal Event and all of the remaining Members
consent to continue the business of the Company in accordance with Section
11.1(a)(iv), the Company shall pay to the withdrawing Member any positive
balance in the withdrawing Member's Capital Account within ninety (90) days from
the date of the Withdrawal Event. The remaining Members shall have the right in
their sole discretion at any time within sixty (60) days of the Withdrawal Event
to determine all Net Profits and Net Losses of the Company as of the date of
such determination and to make appropriate credits and debits to the Members'
Capital Accounts. The Capital Account of the withdrawing Member as of the date
of determination shall be conclusively deemed to be the fair value of all of its
Membership Units and the payment provided for in this Section 11.1(c) shall be
the full and only consideration for the redemption of the withdrawing Member's
Membership Units.
11.2 WINDING UP, LIQUIDATION AND DISTRIBUTION OF ASSETS.
(a) Upon dissolution, an accounting shall be made of the
Company's assets, liabilities and operations, from the date of the last previous
accounting until the date of dissolution. The Manager shall immediately proceed
to wind up the affairs of the Company.
(b) If the Company is dissolved and its affairs are to be wound
up, the Manager shall:
(i) Sell or otherwise liquidate all of the Company's assets as
promptly as practicable;
(ii) Allocate any Net Profit or Net Loss resulting from such
sales to the Member's Capital Accounts in accordance with Article IV hereof;
(iii) Discharge all liabilities of the Company, including
liabilities to Members who are creditors of the Company to the extent
permitted by law, excluding liabilities for distributions to Members under
Section 4.5; and
(iv) Distribute the remaining assets to Members in accordance
with, and to the extent of, the positive balance (if any) of each Member's
Capital Account (as determined after taking into account all Capital Account
adjustments for the Company's taxable year during which the liquidation
occurs), and thereafter to the Members in accordance with, and in proportion
to, each Member's Ownership Percentage. Any such distributions to the
Members in respect of their Capital Accounts shall be made within the time
specified in Section 1.704-1(b)(2)(ii)(b)(2) of the Treasury Regulations.
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<PAGE>
(c) The Manager shall determine the fair market value of each non-
cash asset distributed to one or more Members to determine the Net Profit or Net
Loss that would have resulted if such asset were sold for such value. Such Net
Profit or Net Loss shall then be allocated pursuant to Article IV, and the
Members' Capital Accounts shall be adjusted to reflect such allocations. The
amount distributed and charged to the Capital Account of each Member receiving
an interest in such distributed asset shall be the fair market value of such
interest (net of any liability secured by such asset that such Member assumes or
takes subject to).
(d) Notwithstanding anything to the contrary in this Agreement, if
any Member has a deficit balance in its Capital Account (after giving effect to
all contributions, distributions, allocations and other Capital Account
adjustments for all taxable years, including the year during which such
liquidation occurs), such Member shall have no obligation to make any Capital
Contribution to restore such deficit balance, and the deficit balance shall not
be considered a debt owed by such Member to the Company or to any other Person
for any purpose whatsoever.
(e) Upon the completion of the winding up, liquidation and
distribution of the assets of the Company, the Company shall be deemed
terminated.
(f) The Manager shall comply with all requirements of applicable law
pertaining to the winding up of the affairs of the Company and the final
distribution of its assets. The Manager shall be under no liability with respect
to the Assets held by the Company upon the termination of the Company except to
hold and maintain the same in the name of the Company until disposed of in
accordance with the terms of this Agreement.
11.3 CERTIFICATE OF CANCELLATION. When all debts, liabilities and
obligations of the Company have been paid and discharged or adequate provisions
have been made therefor and all of the remaining property and assets of the
Company have been distributed, a certificate of cancellation shall be executed
by one or more authorized persons, which certificate shall set forth the
information required by the Act. A certificate of cancellation shall be filed
with the Delaware Secretary of State to accomplish the cancellation of the
Certificate of the Company upon the dissolution and completion of the winding up
of the Company.
11.4 EFFECT OF FILING OF CERTIFICATE OF CANCELLATION. Upon the filing of
the certificate of cancellation with the Delaware Secretary of State, the
existence of the Company shall cease, except that the Manager may, in the name
of, and for and on behalf of the Company, prosecute and defend suit, gradually
settle and close the Company's business, dispose of and convey the Company's
property, discharge or make reasonable provision for the Company's liabilities,
and distribute to the Members any remaining assets, and take such other
appropriate action as provided in the Act. The
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<PAGE>
Manager shall have authority to distribute any Company property discovered after
dissolution, convey real estate and take such other act as may be necessary on
behalf of and in the name of the Company.
11.5 RETURN OF CONTRIBUTION NONRECOURSE TO OTHER MEMBERS. Except as
provided by law or as expressly provided in this Agreement, upon dissolution,
each Member shall look solely to the assets of the Company for the return of its
Capital Contributions. If the property remaining after the payment or discharge
of the debts and liabilities of the Company is insufficient to return the
Capital Contributions of one or more Members, such Member or Members shall have
no recourse against any other Member, except as otherwise provided by law.
ARTICLE XII. RULES OF CONVENTION.
-------------------
12.1 NOTICE. All notices, reports and other communications given
pursuant to this Agreement shall be in writing and shall either be mailed by
first class mail, postage prepaid, certified or registered with return receipt
requested, delivered in person or by nationally recognized overnight courier or
sent by facsimile or prepaid telegram followed by confirmatory letter. Notice
sent by mail in the foregoing manner shall be deemed served or given three (3)
Business Days after deposit in the United States Postal Service. Notice
delivered by nationally recognized overnight courier shall be deemed served or
given one (1) Business Day after delivery to the courier, charges prepaid.
Notice given to the Company, the Manager or a Member in any other manner shall
be effective only if and when received by the addressee. For purposes of notice,
the address of each Member shall be the address as stated below the Member's
name on the signature page of this Agreement; provided, however, that, each
--------- ------- ----
Member shall have the continuing right to change its address for notice
hereunder to any other location by giving thirty (30) days' prior notice of such
change to the Company in the manner set forth above. For the purposes of all
notices to the Company or the Manager, the Company's and the Manager's address
shall be the same as the Company's address as set forth in Section 2.2 hereof.
12.2 AMENDMENT. Any provision of this Agreement may be amended by
Majority Vote; provided, that, no amendment of this Agreement shall, without the
-------- ----
consent of the affected Member (a) increase the liability of such Member beyond
the liability of such Member expressly set forth in this Agreement or otherwise
modify or affect the limited liability of such Member, (b) change the maximum
Capital Contribution required of such Member (other than as provided in this
Agreement) or (c) change the method of allocations made under the provisions of
Articles IV, VII and XI hereof to any Member (except as otherwise provided in
this Agreement). For any such amendment, the Manager shall deliver to each
Member written notice requesting such Member's consent and upon receipt of the
required consents and execution of the documents setting forth the amendment,
such amendment shall become effective.
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<PAGE>
12.3 GOVERNING LAW. This Agreement is made pursuant to and shall be
construed in accordance with the internal laws of the State of Delaware, without
regard to the principles of the conflicts of laws thereof. In the event of a
direct conflict between the provisions of this Agreement and the provisions of
the Act or the Certificate, such provisions of the Act or the Certificate, as
the case may be, shall be controlling.
12.4 ENTIRE AGREEMENT. This Agreement, together with the schedules
and exhibits attached hereto, contains the entire agreement among the Members
relating to the subject matter hereof and there are no other or further
agreements outstanding not specifically mentioned herein; provided, however,
that, the Members may by agreement amend and supplement this Agreement in
writing from time to time as provided in Section 12.2 hereof.
12.5 SEVERABILITY. If any term or provision of this Agreement or the
performance thereof shall be invalid or unenforceable to any extent, such
invalidity or unenforceability shall not affect or render invalid or
unenforceable any other provision of this Agreement and this Agreement shall be
valid and enforced to the fullest extent permitted by law.
12.6 CONSTRUCTION. Whenever required by the context, as used in this
Agreement, the singular number shall include the plural, the neuter shall
include the masculine or the feminine gender and the masculine gender shall
include the neuter or the feminine gender. All references to days in this
Agreement mean calendar days unless otherwise provided. Any day or deadline or
time period hereunder which falls on a Saturday, Sunday or a non-Business Day
shall be deemed to refer to the first Business Day following.
12.7 CAPTIONS. The Article and Section headings appearing in this
Agreement are for convenience of reference only and are not intended, to any
extent and for any purpose, to limit or define the text of any Article or
Section hereof.
12.8 COUNTERPARTS AND EXECUTION. This Agreement may be executed in
multiple counterparts, each of which shall be deemed an original Agreement and
all of which shall constitute one Agreement between each of the parties hereto,
notwithstanding that all of the parties are not signatories to the original or
the same counterpart, to be effective as of the day and year first set forth
above.
12.9 CONSENTS AND WAIVERS. A Member's waiver, consent, failure to
object, failure to seek redress, course of conduct or failure to insist upon the
strict performance of any covenant or condition of this Agreement shall not be
considered or construed as a waiver or consent for subsequent matters or other
obligations or rights of the Member.
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<PAGE>
12.10 RIGHTS AND REMEDIES CUMULATIVE. The rights and remedies provided
by this Agreement are cumulative and the use of any one right or remedy by any
party shall not preclude or waive its right to use any or all other remedies.
Such rights and remedies are given in addition to any other rights the parties
may have by law, statute, ordinance or otherwise.
12.11 ASSIGNS. Each and all of the covenants, terms, provisions and
agreements herein contained shall be binding upon and inure to the benefit of
the parties hereto and, to the extent permitted by this Agreement, their
respective assigns.
12.12 WAIVER OF ACTION FOR PARTITION. Each Member irrevocably waives
during the term of the Company any right that it may have to maintain an action
for partition with respect to the property of the Company.
12.13 EXECUTION OF ADDITIONAL INSTRUMENTS. Each Member hereby agrees
to execute such other and further statements of interest and holdings,
designations, powers of attorney and other instruments necessary to comply with
any laws, rules or regulations.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the day and year first above written.
ONEPOINT COMMUNICATIONS, LLC
By: /s/ James A. Otterbeck
---------------------------
Name: James A. Otterbeck
-------------------------
Title: Chairman/ Ceo
------------------------
AMI-VCOM2, INC.
By: /s/ James A. Otterbeck
---------------------------
Name: James A. Otterbeck
--------------------------
Title: Member Manager
------------------------
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SCHEDULE 3.2
INITIAL CAPITAL CONTRIBUTION
<TABLE>
<CAPTION>
Members Initial Capital Initial Initial
Contribution Membership Ownership
Units Percentage
<S> <C> <C> <C>
OnePoint Communications, LLC $990.00 99 99%
Address for Notices
2201 Waukegan Road
Suite E-200
Bannockburn, Illinois 60015
Facsimile: (847) 374-1070
AMI-VCom2, Inc. $ 10.00 1 1%
Address for Notice
2201 Waukegan Road
Suite E-200
Bannockburn, Illinois 60015
Facsimile: (847) 374-1070
</TABLE>
<PAGE>
ONEPOINT COMMUNICATIONS-COLORADO, LLC
AMENDMENT TO OPERATING AGREEMENT
This Amendment to Operating Agreement is entered into as of October 15,
1997, between OnePoint Communications, LLC, a Delaware limited liability company
("OnePoint") and AMI-VCOM2, Inc., a Delaware corporation ("AMI" and, together
with OnePoint, the "Members").
RECITALS
A. AMI and OnePoint are parties to an Operating Agreement (the "Operating
Agreement"), dated as of April 23, 1997 with respect to OnePoint
Communications-Colorado, LLC (the "Company"). Capitalized terms used herein and
not otherwise defined shall have the respective meanings assigned such terms in
the Operating Agreement.
B. AMI desires to sell its membership units in the Company to OnePoint, and
OnePoint desires to purchase such membership units (the "Unit Transfer"), and
the Members have entered into a Securities Purchase Agreement pursuant to which
such membership interests, among others, would be transferred from AMI to the
Company.
C. Following the Unit Transfer, OnePoint will be sole member of the
Company.
D. AMI and OnePoint desire to amend the Operating Agreement to reflect the
Unit Transfer.
NOW, THEREFORE, for good and valuable consideration, the sufficiency of
which is hereby acknowledged, the parties hereto agree as follows:
1. Consent to Transfer. The Members hereby consent to the Unit Transfer and
-------------------
waive all other requirements of Article VII of the Operating Agreement
with respect to the Unit Transfer.
2. Resignation of AMI. Effective upon the transfer of its membership units
------------------
of the Company, AMI resigns as a member of the Company, and OnePoint
accepts such resignation.
3. References Replaced. All references to AMI in the Operating Agreement
-------------------
shall be deleted, and OnePoint shall be the sole member of the Company.
4. Full Force and Effect. All other provisions of the Operating Agreement
---------------------
shall remain in full force and effect.
5. Governing Law. This Agreement is made pursuant to, and shall be
-------------
construed in accordance with the internal laws of the State of Delaware,
without regard to the principals of the conflicts of laws thereof. In
the event of a direct conflict between
<PAGE>
the provisions of this Agreement and the provisions of the Act or the
Certificate, such provisions of the Act or the Certificate, as the
case may be, shall be controlling.
6. Counterparts and Execution. This Agreement may be executed in multiple
--------------------------
counterparts, each of which shall be deemed an original Agreement and
all of which shall constitute one Agreement between each of the
parties hereto, notwithstanding that all of the parties are not
signatories to the original or same counterpart, to be effective as of
the day and year first set forth above.
7. Execution of Additional Instruments. Each of the parties hereby agrees
-----------------------------------
to execute such other and further statements of interest and holdings,
designations, powers of attorney and other instruments necessary to
comply with any laws, rules or regulations.
* * * *
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Amendment to
Operating Agreement as of the day and year first above written.
ONEPOINT COMMUNICATIONS, LLC
By: /s/ James A. Otterbeck
------------------------
_______
Name: _____________________ _______
Title: CEO _______
---------------------
AMI-VCOM2, INC.
By: /s/ James A. Otterbeck
------------------------
_______
Name: _____________________ _______
Title: President _______
---------------------
<PAGE>
EXHIBIT 3.5
ONEPOINT COMMUNICATIONS-ILLINOIS, LLC
OPERATING AGREEMENT
BETWEEN
ONEPOINT COMMUNICATIONS, LLC
AND
AMI-VCOM2, INC.
DATED AS OF
APRIL 23, 1997
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
I. Definitions............................................................ 1
1.1 "Act"............................................................. 1
1.2 "Affiliate"....................................................... 1
1.3 "Agreement"....................................................... 1
1.4 "AMI"............................................................. 1
1.5 "Assets".......................................................... 1
1.6 "Business Days"................................................... 2
1.7 "Capital Contribution"............................................ 2
1.8 "Certificate"..................................................... 2
1.9 "Code"............................................................ 2
1.10 "Company"......................................................... 2
1.11 "Distributable Cash".............................................. 2
1.12 "Fiscal Year"..................................................... 2
1.13 "Initial Capital Contribution".................................... 2
1.14 "Majority Vote"................................................... 2
1.15 "Members"......................................................... 2
1.16 "Membership Unit"................................................. 3
1.17 "Net Profits" and "Net Losses".................................... 3
1.18 "Ownership Percentage"............................................ 3
1.19 "OnePoint"........................................................ 3
1.20 "Person".......................................................... 3
1.21 "Securities Act".................................................. 4
1.22 "Termination Date"................................................ 4
1.23 "Treasury Regulations"............................................ 4
II. The Company............................................................ 4
2.1 Formation of the Company.......................................... 4
2.2 Company Name and Office........................................... 4
2.3 Purposes of the Company........................................... 4
2.4 Term of the Company............................................... 4
2.5 Title to Property................................................. 4
2.6 Certificates of Interest.......................................... 5
III. Capital; Capital Contributions......................................... 5
3.1 Capital........................................................... 5
3.2 Names of Members; Initial Capital Contributions of the Members... 5
3.3 No Further Contributions or Loans................................. 5
3.4 Additional Members................................................ 5
3.5 Preemptive Rights................................................. 5
</TABLE>
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<TABLE>
<CAPTION>
Page
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3.6 Resignation...................................................... 6
3.7 Nondisclosure Agreements......................................... 6
3.8 Other Employee Incentive Plans................................... 6
IV. Maintenance of Capital Accounts; Allocations and Distributions......... 6
4.1 Capital Accounts................................................. 6
4.2 Allocations of Net Profits and Net Losses........................ 7
(a) Net Loss................................................. 7
(b) Net Profits.............................................. 7
4.3 Qualified Income Offset.......................................... 7
4.4 Code Section 704(c) Allocations.................................. 8
4.5 Distribution..................................................... 8
V. Management and Operation of the Company................................ 9
5.1 Management Generally............................................. 9
5.2 Election, Tenure and Removal of Managers......................... 9
5.3 Limitations on Powers of the Manager............................. 10
5.4 Duties and Obligations of the Manager............................ 11
5.5 Expenses......................................................... 11
5.6 Officers......................................................... 11
5.7 The Chief Executive Officer...................................... 12
5.8 The President.................................................... 12
5.9 The Executive Vice President..................................... 12
5.10 The Treasurer.................................................... 12
5.11 The Secretary.................................................... 13
VI. Powers, Rights and Obligations of Members; Meetings of Members......... 13
6.1 Powers of the Members............................................ 13
6.2 Examination of Company Records................................... 13
6.3 Priority and Return of Capital................................... 13
6.4 Meetings of Members.............................................. 14
6.5 Rights of Legal Representatives.................................. 15
VII. Accounting Procedures.................................................. 15
7.1 Fiscal Year...................................................... 15
7.2 Books of Account................................................. 15
7.3 Preparation and Filing of Income Tax Returns and Other Writings.. 15
7.4 Tax Matters Partner.............................................. 16
VIII. Transfer of Member Membership Units.................................... 16
8.1 Limitation on Transfer of Membership Unit........................ 16
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8.2 Certain Documents.................................................. 16
8.3 Right of First Refusal............................................. 17
8.4 Legal Capacity of Transferee; Tax Effects.......................... 18
8.5 Securities Laws Matters............................................ 18
8.6 Indemnification.................................................... 18
IX. Limitations on Liabilities; Indemnification; Right to Conduct Other
Business................................................................ 18
9.1 Liability of Members............................................... 18
9.2 Liability and Indemnification of Managers and Authorized Persons .. 19
9.3 Indemnification Rights Cumulative
9.4 Right to Conduct Other Business.................................... 20
X. Power of Attorney........................................................ 20
10.1 Authority to Execute Documents..................................... 20
10.2 Survival of Power.................................................. 21
XI. Dissolution and Termination.............................................. 21
11.1 Dissolution........................................................ 21
11.2 Winding Up, Liquidation and Distribution of Assets................. 22
11.3 Certificate of Cancellation........................................ 23
11.4 Effect of Filing of Certificate of Cancellation.................... 23
11.5 Return of Contribution Nonrecourse to Other Members................ 24
XII. Rules of Convention...................................................... 24
12.1 Notice............................................................. 24
12.2 Amendment.......................................................... 24
12.3 Governing Law...................................................... 25
12.4 Entire Agreement................................................... 25
12.5 Severability....................................................... 25
12.6 Construction....................................................... 25
12.7 Captions........................................................... 25
12.8 Counterparts and Execution......................................... 25
12.9 Consents and Waivers............................................... 25
12.10 Rights and Remedies Cumulative..................................... 26
12.11 Assigns............................................................ 26
12.12 Waiver of Action for Partition..................................... 26
12.13 Execution of Additional Instruments................................ 26
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<PAGE>
THIS PAGE MUST BE KEPT AS THE LAST PAGE OF THE DOCUMENT.
SoftSolution Network ID: LA-BLD-B66078.1 Type: AGR
04/16/97 5:07 pm
<PAGE>
ONEPOINT COMMUNICATIONS-ILLINOIS, LLC
OPERATING AGREEMENT
This OPERATING AGREEMENT (this "AGREEMENT") is entered into as of the 23rd
day of April 1997, between OnePoint Communications, LLC, a Delaware limited
liability company ("ONEPOINT"), and AMI-VCom2, Inc., a Delaware corporation
("AMI," together with "ONEPOINT", the "MEMBERS").
RECITALS
A. AMI and OnePoint desire to form a Delaware limited liability company,
under the name "ONEPOINT COMMUNICATIONS-ILLINOIS, LLC" (the "COMPANY"), pursuant
to the provisions of the Act by filing a Certificate with the Secretary of State
of the State of Delaware and entering into this Agreement.
B. AMI and OnePoint desire that OnePoint manage the Company in accordance
with, and subject to, the terms and conditions hereinafter set forth, and in its
capacity as manager, OnePoint is hereinafter referred to as the "Manager".
NOW, THEREFORE, for good and valuable consideration, the sufficiency of which
is hereby acknowledged, the parties hereto hereby agree as follows:
ARTICLE I. DEFINITIONS. The following words and phrases, unless the
-----------
context clearly indicates otherwise, shall have the meanings set forth below:
1.1 "ACT" shall mean the Limited Liability Company Act, Delaware
Code Annotated, Title 6, (S)(S)18-101 et seq., as from time to time amended.
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1.2 "AFFILIATE" with respect to any person, shall mean any Person, directly
or indirectly, controlling, controlled by, or under common control with such
Person, whether such control is effective pursuant to contract or otherwise;
provided, however, that the Company shall not be considered to be an Affiliate
of any Member for purposes of this Agreement.
1.3 "AGREEMENT" shall have the meaning ascribed to such term in the preamble
hereto, as the same may be amended from time to time in accordance herewith.
1.4 "AMI" shall have the meaning ascribed to such term in the introductory
paragraph hereof.
1.5 "ASSETS" shall mean any real or personal property, whether tangible
or intangible, acquired by the Company on or after the date of this Agreement.
<PAGE>
1.6 "BUSINESS DAYS" shall mean any day except Saturday, Sunday or any other
day on which commercial banks located in the City of Chicago are authorized by
law to be closed for business.
1.7 "CAPITAL CONTRIBUTION" shall mean, with respect to any Member, all
contributions to the capital (whether in cash or otherwise) of the Company made
by such Member pursuant to this Agreement.
1.8 "CERTIFICATE" shall mean that certain Certificate of Formation of the
Company filed with the Office of the Secretary of State of Delaware, as the same
may be amended from time to time.
1.9 "CODE" shall mean the Internal Revenue Code of 1986, as amended, or any
corresponding provision of subsequent superseding federal revenue laws.
1.10 "COMPANY" shall have the meaning ascribed to such term in the recitals
hereto.
1.11 "DISTRIBUTABLE CASH" shall mean all cash, revenues and funds received by
the Company from Company operations, less the sum of the following to the extent
paid or set aside by the Company: (a) all principal and interest payments on
indebtedness of the Company and all other sums paid to lenders; (b) all cash
expenditures incurred in the normal operation of the Company's business; and (c)
such reserves as the Manager shall deem reasonably necessary for the proper
operation and financing of the Company's business.
1.12 "FISCAL YEAR" shall mean the Company's fiscal year, which shall be the
calendar year.
1.13 "INITIAL CAPITAL CONTRIBUTION" shall mean, with respect to any Member,
the initial contribution to the capital (whether in cash or otherwise) of the
Company made by such Member pursuant to this Agreement in the amount set forth
on Schedule 3.2 attached hereto.
1.14 "MAJORITY VOTE" shall mean an affirmative vote by the Members holding
more than fifty percent (50%) of the aggregate issued and outstanding Membership
Units of the Company.
1.15 "MEMBERS" shall have the meaning ascribed to such term in the preamble
hereto, and shall include each Person hereafter admitted to the Company as a
Member as provided in this Agreement.
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<PAGE>
1.16 "MEMBERSHIP UNIT" shall mean, with respect to each Member, all of such
Member's rights, interests, proceeds and profits which it may own whether now
existing or contingent, in the Company, including the right of such Member to
any and all benefits to which the Member may be entitled and the obligations of
such Member, as provided in this Agreement and the Act.
1.17 "NET PROFITS" AND "NET LOSSES" shall mean for each Fiscal Year or other
period, an amount equal to the Company's taxable income or tax loss for such
year or period, determined in accordance with Code Section 703(a). For this
purpose all items of income, gain, loss or deduction required to be stated
separately pursuant to Code Section 703(a)(1) shall be included in taxable
income or loss, with the following adjustments:
a. Any income of the Company that is exempt from federal income tax and
not otherwise taken into account in computing Net Profits or Net Losses shall
be added to such taxable income or tax loss;
b. Any expenditures of the Company described in Code Section
705(a)(2)(B) or treated as Code Section expenditures pursuant to Regulations
Section 1.704-l(b)(2)(iv)(i), and not otherwise taken into account in
computing Net Profits or Net Losses, shall be subtracted from such taxable
income or tax loss; and
c. If property other than cash has been contributed to the Company or
the Capital Accounts of the Members have been adjusted pursuant to Treasury
Regulations Section 1.704-l(b)(2)(iv)(f), depreciation, amortization, gain or
loss with respect to assets of the Company shall be computed in accordance
with Regulations Section 1.704-1(b)(2)(iv)(g).
1.18 "OWNERSHIP PERCENTAGE" shall mean, as to each Member, the percentage
reflecting the ratio which its Membership Unit bears to the aggregate issued and
outstanding Membership Units of all Members. The Ownership Percentages are
initially as shown on Schedule 3.2 attached hereto. For purposes of this
Agreement, each Member will be deemed to hold the Ownership Percentage in the
Company actually held by such Member plus any Ownership Percentage in the
Company which could be obtained by such Member upon the exercise or conversion
of all other convertible securities held by such Member.
1.19 "ONEPOINT" shall have the meaning ascribed to such term in the
introductory paragraph hereof.
1.20 "PERSON" shall mean any individual, association, corporation, trust,
partnership, joint venture, limited liability company or other entity.
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<PAGE>
1.21 "SECURITIES ACT" shall mean the Securities Act of 1933, as amended.
1.23 "TERMINATION DATE" shall mean December 31, 2025.
1.23 "TREASURY REGULATIONS" shall mean the income tax regulations promulgated
under the Code, as such regulations may be amended from time to time (including
corresponding provisions of succeeding regulations).
ARTICLE II. THE COMPANY.
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2.1 FORMATION OF THE COMPANY. The Company has been organized as a Delaware
limited liability company by executing and delivering the Certificate to the
Delaware Secretary of State in accordance with and pursuant to the Act.
2.2 COMPANY NAME AND OFFICE. The name of the Company shall be "ONEPOINT
COMMUNICATIONS-ILLINOIS, LLC." The Company shall conduct its business under such
name or names as the Manager with the approval by a Majority Vote of the Members
shall determine from time to time and the Company shall file all statements and
applications with appropriate governmental authorities required in order to
conduct its business under such name or names. The Company shall maintain a
registered office in the State of Delaware and the name and address of the
Company's registered agent in the State of Delaware shall be as set forth in the
Certificate. Such office and such agent may be changed from time to time by the
Manager. The Principal office of the Company shall be 2201 Waukegan Road, Suite
E-200, Bannockburn, Illinois 60015. The Company may maintain such additional
offices as may be designated from time to time by the Manager for the purpose of
carrying out the business of the Company.
2.3 PURPOSES OF THE COMPANY. The purpose of the Company shall be (a) to
invest in and operate businesses in the field of telecommunications and such
other fields of business as may be approved by the Manager, (b) to engage in and
carry on any other lawful business or activity in connection with the foregoing
or otherwise, and (c) to have and exercise all of the powers, rights and
privileges which a limited liability company organized pursuant to the Act may
have and exercise.
2.4 TERM OF THE COMPANY .The term of the Company shall commence on the date
of the filing of the Certificate as required by Section 18-201 of the Act and
shall continue in existence until the Termination Date, unless its existence is
sooner terminated upon dissolution (and subsequent termination of the Company
after the winding up of its affairs) as provided in this Agreement or the Act,
or unless the term shall otherwise be extended by amendment to this Agreement.
2.5 TITLE TO PROPERTY .Legal title to all Assets of the Company shall be
taken and at all times held in the name of the Company.
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<PAGE>
2.6 CERTIFICATES OF INTEREST. The Manager may make such rules and
regulations as he may deem appropriate concerning the issuance and registration
of Membership Units. The Manager may authorize the issuance of any Membership
Units without certificates. Such authorization shall not affect Membership Units
already represented by certificates until they are surrendered to the Company.
ARTICLE III. CAPITAL; CAPITAL CONTRIBUTIONS
------------------------------
3.1 CAPITAL. The names and addresses of the initiaL Members are set forth on
Schedule 3.2 attached hereto.
3.2 NAMES OF MEMBERS; INITIAL CAPITAL CONTRIBUTIONS. As of the date of this
Agreement, each Member has contributed in cash to the capital of the Company the
full amount of its Initial Capital Contribution as specified in Schedule 3.2
attached hereto, in return for which the Member shall receive the number of
Membership Units indicated opposite such Member's name on Schedule 3.2 attached
hereto.
3.3 NO FURTHER CONTRIBUTIONS OR LOANS. The liability of the Members to the
Company is limited to their Capital Contributions as specified in Schedule 3.2
attached hereto, as it may be amended from time to time pursuant to Section
12.2. No additional Capital Contributions, or other funds, whether by way of
contribution of capital, loan or otherwise, shall be required of any Member
except by Majority Vote of the Members. No interest shall accrue on any Capital
Contribution and no Member shall have the right to withdraw or be repaid any
Capital Contribution except as provided in this Agreement.
3.4 ADDITIONAL MEMBERS. Additional Persons may be admitted to the Company as
Members from time to time and Membership Units may be created and issued to
those Persons and to existing Members in the sole discretion of the Manager,
subject to the provisions and restrictions contained herein. Any person admitted
to the Company as a Member after the date of this Agreement, shall agree to be
bound by the terms of this Agreement and shall execute a counterpart signature
page hereto. No new Member shall be entitled to any retroactive allocation of
any item of income, gain, loss, deduction or credit of a Company. The Manager
may, at his option, at the time a Member is admitted, close the Company books
(as though the Company's tax year has ended) when making pro rata allocations of
items of income, gain, loss, deduction or credit to a new Member for that
portion of the Company's tax year in which a new Member was admitted in
accordance with the provisions of Code Section 706(d) and the Treasury
Regulations promulgated thereunder.
3.5 PREEMPTIVE RIGHTS. Each Member shall have a preemptive or preferential
right (but not the obligation) to purchase his or its pro rata share, based on
his or its Ownership Percentage, of all or any part of any New Securities (as
defined
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<PAGE>
below in this Section 3.5) which the Company may, from time to time, propose to
sell or issue, including any such right with respect to additional Capital
Contributions.
The term "New Securities" shall mean (a) Membership Units of the Company,
whether unissued or hereafter created; (b) any obligations, evidences of
indebtedness or other securities of the Company convertible into or exchangeable
for, or carrying or accompanied by any rights to receive, purchase or subscribe
to, any such unissued Membership Units; (c) any right of, subscription to or
right to receive, or any warrant or option for the purchase of, any of the
foregoing securities; and (d) any other securities that may be issued or sold by
the Company.
3.6 RESIGNATION. Except in connection with the sale or gift of
Membership Units in accordance with Article VIII, no Member may voluntarily
resign or withdraw as a Member of the Company without the prior written consent
of the Members owning a Majority Vote. A Member who attempts to resign or
withdraw as a Member in violation of this Section 3.6 shall not be entitled to
receive any distribution prior to the dissolution and liquidation of the
Company.
3.7 NONDISCLOSURE AGREEMENTS .Each Member of the Company agrees to
execute a nondisclosure agreement with the Company in a form agreed upon by the
Members.
3.8 OTHER EMPLOYEE INCENTIVE PLANS. From time to time, the Company
May establish one or more incentive plans for employees, officers, directors and
consultants of the Company pursuant to which cash payments tied to the value of
the Membership Units of the Company would be made to such Persons.
ARTICLE IV. MAINTENANCE OF CAPITAL ACCOUNTS; ALLOCATIONS AND
--------------------------------------------------------------
DISTRIBUTIONS.
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4.1 CAPITAL ACCOUNTS.
A Capital Account (a "Capital Account") shall be maintained for each
MEMBER IN accordance with the capital account maintenance rules set forth in
Treasury Regulations Section 1.704-1(b)(2)(iv). Without limiting the generality
of the foregoing, a Member's Capital Account shall be increased by (i) the
amount of money contributed by the Member to the Company, (ii) the fair market
value of property contributed by the Member to the company as determined by the
contributing Member and the Company (net of liabilities that the Company is
considered to assume or take subject to pursuant to Section 752 of the Code),
and (iii) allocations to the Member of Company Net Profits and other items of
income and gain, including income and gain exempt from tax, but excluding items
of income and gain described in Treasury Regulations Section 1.704-1(b)(4)(i);
and which shall be decreased by (w) the amount of money distributed to the
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<PAGE>
Member, (x) the fair market value of any property distributed to the Member as
determined by the distributee Member and the Company (net of any liabilities
that such Member is considered to assume or take subject to pursuant to Section
752 of the Code), (y) expenditures described, or treated under Section 704(b) of
the Code as described in Section 705(a)(2)(b) of the Code, and (z) the Member's
share of Net Losses and other items of loss and deduction, but excluding items
of loss or deduction described in Treasury Regulations Section 1.704-1(b)(4)(i).
The Members' Capital Accounts shall be appropriately adjusted for income, gain,
loss and deduction as required by Treasury Regulations Section 1.704-
1(b)(2)(iv)(g) (relating to allocations and adjustments resulting from the
reflection of property on the books of the Partnership at book value, or a
revaluation thereof, rather that at adjusted tax basis). if a Member transfers
all or a part of its Membership Unit in accordance with this Agreement, such
Member's Capital Account attributable to the transferred Membership Unit shall
carry over to the new owner of such Membership Unit pursuant to Treasury
Regulations Section 1.704-l(b)(2)(iv)(l).
-
4.2 ALLOCATIONS OF NET PROFITS AND NET LOSSES.
(a) Net Losses. Net Losses shall be allocated to the Members in
----------
proportion to their respective Ownership Percentages.
(b) Net Losses. Net Losses shall be allocated to the Members in
----------
proportion to their respective Ownership Percentages.
4.3 QUALIFIED INCOME OFFSET. Notwithstanding Section 4.2, no Member
shall be allocated any item of loss or deduction to the extent such allocation
would cause or increase a deficit balance in such Member's Capital Account (in
excess of any limited dollar amount of such deficit balance that such Member is
obligated to restore or is deemed obligated to restore under Treasury
Regulations Sections 1.704-2(g) and 1.704-2(i)(5)) as of the end of the taxable
year to which such allocation relates. In the event any Member unexpectedly
receives any adjustments, allocations, or distributions described in Treasury
Regulations Sections 1.704-1(b)(2)(ii)(d)(4), (5) or (6), items of Company
- - -
income and gain shall be specially allocated to such Member in an amount and
manner sufficient to eliminate, to the extent required by the Treasury
Regulations, such adjusted Capital Account deficit of such Member as quickly as
possible, provided that an allocation pursuant to this Section 4.3 shall be made
only if and to the extent that such Member would have a Capital Account deficit
(determined after reducing such Member's Capital Account for the items set forth
in Treasury Regulations Section 1.704-1(b)(2)(ii)(d) and after adjusting such
-
Member's Capital Account upward for any amounts such Member is obligated to
restore or is deemed obligated to restore pursuant to Treasury Regulations
Sections 1.704-2(g) and 1.704-2(i)(5)) after all other allocations provided for
in this Article IV have been tentatively made as if this Section 4.3 were not in
the Agreement. Any special allocations of items of income and gain pursuant to
this
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<PAGE>
Section 4.3 shall be taken into account in computing subsequent allocations of
income and gain pursuant to this Article IV so that the net amount of any item
so allocated and the income, gain, and losses allocated to each Member pursuant
to this Article IV to the extent possible, shall be equal to the net amount that
would have been allocated to each such Member pursuant to the provisions of this
Section 4.3 if such unexpected adjustments, allocations, or distributions had
not occurred.
4.4 CODE SECTION 704(C) ALLOCATIONS. Notwithstanding any other
provision in this Article IV, in accordance with code Section 704(c) and the
Treasury Regulations promulgated thereunder, income, gain, loss, and deduction
with respect to any property contributed to the capital of the Company shall,
solely for tax purposes, be allocated among the Members so as to take account of
any variation between the adjusted basis of such property to the Company for
federal income tax purposes and its fair market value on the date of
contribution. Allocations pursuant to this Section 4.4 are solely for purposes
of federal, state and local taxes. As such, they shall not affect or in any way
be taken into account in computing a Member's Capital Account or share of
profits, losses, or other items of distributions pursuant to any provision of
this Agreement.
4.5 DISTRIBUTIONS.
(A) Except as provided in Section 11.2, and subject to Section 18-
607 OF THE Act, the Manager:
(i) shall cause the Company to distribute to each Member
an amount of Distributable Cash as shall be sufficient to enable
such Member to fund its federal, state and local income tax
liabilities attributable to such Member's distributive share of
Company taxable income and gain (the "Actual Tax Amount").
Estimated tax distributions shall be made in four cash installments
not later than fifteen (15) days before taxes are due, based upon
the Manager's good faith estimate of the Company's Net Profits (the
"Estimated Tax Amount"). The Estimated Tax Amounts and the Actual
Tax Amounts shall be calculated taking into account the character
of such income and gain and calculating such tax as if each Member
were an individual resident in Lake County, Illinois, subject to
tax at the highest marginal rate applicable to income of such
character. The Manager shall distribute to each Member, not later
than April 10th of the year following the close of each taxable
year of the Company, the amount by which the Actual Tax Amount for
such taxable year exceeds the Estimated Tax Amount distributed to
such Member for such taxable year. If the Estimated Tax Amount
distributed by the Company to a Member exceeds the Actual Tax
Amount, then the amount of the next distribution the Manager would
otherwise be required to make to such Member(s) under this Section
4.5 shall be reduced by the amount of
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<PAGE>
such excess until the remaining balance of such excess is reduced
to zero; and
(ii) may make distributions of Distributable Cash and other
property at such time and in such aggregate amounts as determined
by the Manager to the Members (A) first, to the Members in
proportion to their respective unreturned Capital Contributions
until each Member has recovered its Capital Contributions in full,
(B) second, to the Members in proportion to their respective
Ownership Percentages.
(b) Upon the liquidation of the Company, liquidating distributions
shall be made in accordance with Section 11.2.
(c) A Member shall have no right to demand and receive any
distribution in a form other than cash.
(d) All amounts withheld pursuant to the Code or any provision of any
state or local tax law with respect to any payment, distribution or allocation
to the Company or the Members may be treated as amounts distributed to the
Members pursuant to this Section 4.5 for all purposes under the Agreement. The
Manager is authorized to withhold from distributions, or with respect to
allocations, to the Members and pay over to any federal, state or local
government any amounts required to be so withheld pursuant to the Code or any
provisions of any other federal, state or local law and may allocate such
amounts to the Members with respect to which such amount was withheld.
ARTICLE V. MANAGEMENT AND OPERATION OF THE COMPANY.
---------------------------------------
5.1 MANAGEMENT GENERALLY. Subject to the provisions of this Agreement
and the Act, the business and affairs of the Company shall be managed by and
under the direction of the Manager. The Manager shall have full and complete
authority, power and discretion to manage and control the business of the
Company, to make all decisions regarding those matters and to perform any and
all other acts or activities customary or incident to the management of the
Company's business and objectives. All powers of the Company may be exercised by
the Manager, except as conferred on or reserved to the Members by the Act or by
this Agreement. The exercise by a Member of any or all of its rights of approval
or consent under this Agreement shall not in any event affect the Member's
status or limited liability as a limited liability member.
5.2 ELECTION, TENURE AND REMOVAL OF MANAGERS. The Company shall
initially have one manager. Thereafter, the number of managers of the Company
shall be fixed from time to time by Majority Vote. In no instance shall there be
less than one manager. The manager(s) shall be elected or removed with or
without cause by Majority
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<PAGE>
Vote. The Manager shall continue to hold office until his successor shall have
been elected and qualified.
5.3 LIMITATIONS ON POWERS OF THE MANAGER. Notwithstanding the
generality of Section 5.1, the Manager shall not have the authority to do any of
the following acts without the approval of the Members by Majority Vote:
(a) Cause or permit the Company to engage in any activity that
is not consistent with the purposes of the Company set forth in Section 2.3;
(b) Knowingly do any act in contravention of this Agreement;
(c) Knowingly do any act which would make it impossible to carry
on the ordinary business of the Company, except as otherwise provided in this
Agreement;
(d) Confess a judgment against the Company in an amount in
excess of $50,000;
(e) Possess Company Assets, or assign rights in specific Company
Assets, for other than a Company purpose;
(f) Knowingly and willingly perform any act that would cause the
Members to incur personal liability, for example, as a result of the Company
conducting business in a state which has neither enacted legislation which
permits limited liability companies to organize in such state nor permits the
Company to register to do business in such state as a foreign limited liability
Company;
(g) Cause the Company to declare or file bankruptcy or make any
assignment for the benefit of creditors or take any similar action;
(h) Cause the Company to acquire any equity or debt securities
of any Person, or to otherwise make loans to any Member or Person;
(i) Cause the Company to incur any contractual liability in any
single transaction or series of related transactions in excess of $2,500,000 or
in any event in excess of the overall budget of the Company;
(j) Sell or otherwise dispose of all or substantially all of the
Company's Assets in a single transaction or series of related transactions,
except for a liquidating sale in connection with the dissolution of the Company;
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(k) Permit the Company to enter into any merger, consolidation,
reorganization or similar transaction;
(l) Cause the Company to make any distribution except as
otherwise set forth in this Agreement; or
(m) Cause or permit the Company to offer or sell any equity
securities of the Company in a public offering or pursuant to a registration
statement under the Securities Act of 1933, as amended.
5.4 DUTIES AND OBLIGATIONS OF THE MANAGER.
(a) The Manager shall not be required to manage the Company as
his sole and exclusive function and he may have other business interests and
engage in activities in addition to those relating to the Company. Neither the
Company nor the Members shall have any right, by virtue of this Agreement, to
share or participate in such other investments or activities of thE Manager or
in the income or proceeds derived therefrom.
(b) The Manager shall take all reasonable action that may be
necessary or appropriate for the continuation of the Company's valid existence
as a limited liability company under the laws of the State of Delaware and of
each other jurisdiction in which such existence is necessary to protect the
limited liability of the Members or to enable the Company to conduct the
business in which it is engaged or proposes to engage.
5.5 EXPENSES. The Manager shall be entitled to reimbursement from the
Company for the reasonable expenses that such Manager pays for or incurs on
behalf of the Company.
5.6 OFFICERS.
(a) The officers of the Company shall consist of a Chief Executive
Officer, a President, a Treasurer and a Secretary and such Executive Vice
Presidents, assistant secretaries or other officers or agents as may be elected
or appointed by the Manager from time to time (collectively, the "Officers").
The Officers shall be appointed by, and shall exercise such powers and perform
such duties as are prescribed by, the Manager under the direction and management
of the Manager. Any number of offices may be held by the same Person, as the
Manager may determine.
(b) The Officers shall hold office for the term for which they were
appointed and until their successors are elected and qualified; provided,
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however, that, any Officer may be removed with or without cause at any time by
- ------- ----
the Manager.
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(c) A vacancy in any office because of death, resignation, removal,
disqualification or otherwise may be filled by the Manager for the unexpired
portion of the term.
(d) The Company may pay an Officer compensation for such Officer's
services to or on behalf of the Company in such amounts as determined by the
Manager.
5.7 THE CHIEF EXECUTIVE OFFICER. The Chief Executive Officer shall have
general supervision, direction and control of the business and affairs of the
Company and shall have the power to sign any deeds, mortgages, bonds, contracts
or other instruments which the Manager has authorized to be executed. The Chief
Executive Officer shall preside at all meetings of the Members. The Chief
Executive Officer shall have the general powers and duties of Management
generally vested in the chief executive officer of a business entity, and shall
have such other powers and duties with respect to the administration of the
business and affairs of the Company as may be prescribed by the manager from
time to time.
5.8 THE PRESIDENT. The President shall be the chief operating officer of
the Company and shall have power to sign any deeds, mortgages, bonds, contracts
or other instruments which the Manager has authorized to be executed, except in
cases where the signing and execution thereof shall be expressly delegated by
the Manager or by this Agreement to some other officer or agent of the Company,
or shall be required by law to be otherwise signed or executed. In general, the
President shall see that all orders and resolutions of the Manager are carried
into effect and shall perform all duties incident to the office of the President
and such other duties as may be prescribed by the Manager from time to time.
5.9 THE EXECUTIVE VICE PRESIDENT(S). In the absence of (or at the request
of) the President in the event of his or her inability or refusal to act, an
Executive Vice President (or in the event there be more than one Executive Vice
President, the Executive Vice Presidents in the order designated, or in the
absence of any designation, then in the order of their election) if one shall be
appointed, shall perform the duties of the President, and when so acting, shall
have all the powers of and be subject to all the restrictions upon the
President. Any Executive Vice President shall perform such other duties as from
time to time may be assigned to him by the Chief Executive Officer, the
President or the Manager.
5.10 THE TREASURER. The Treasurer shall be the Chief Financial Officer of
the Company. The Treasurer shall not be required to give a bond for the faithful
discharge of his or her duties. He or she shall: (a) have charge and custody of
and be responsible for all funds and securities of the company; (b) be charged
with primary responsibility for dealing with national securities exchanges or
other exchanges in which the Company may hold a membership or on which the
Company may trade; (c) receive
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and give receipts for moneys due and payable to the Company from any source
whatsoever, and deposit all such moneys in the name of the Company in such
banks, trust companies or other depositaries as shall be selected by the
Manager; and (d) in general perform all the duties incident to the Office of
treasurer and such other duties as from time to time may be assigned to him or
her by the President or by the Manager.
V.11 THE SECRETARY. The Secretary shall: (a) keep the minutes of all
Members' meetings in one or more books provided for that purpose; (b) see that
all notices are duly given in accordance with the provisions of this Agreement
or as required by law; (c) be custodian of Company records; (d) keep a register
of the post office address of each Member which shall be furnished to the
Secretary by such Member; (e) certify the resolutions of the Members, and other
documents to the Company, as true and correct; and (f) in general, perform all
duties incident to the office of secretary and such other duties as from time to
time may be assigned to him or her by the President or the Manager.
ARTICLE VI. POWERS, RIGHTS AND OBLIGATIONS OF MEMBERS; MEETINGS OF
------------------------------------------------------
MEMBERS.
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VI.1 POWERS OF THE MEMBERS. Except as expressly provided in this
agreement, the Members shall take no part in the Management of the Business or
transact any business for the company and shall have no power to sign for or
bind the Company solely in their capacity as members; provided, however, that,
-------- ------- ----
the Members shall have the approval and consent rights as described in this
agreement and provided under the act.
VI.2 EXAMINATION OF COMPANY RECORDS. Each Member or its authorized
representative shall have the right, during regular business hours and upon
reasonable advance written notice (which shall state the reason therefor), to
examine and copy (at the requesting Member's expense), for a proper purpose as
determined by the Manager, the records (where such records are maintained) of
the Company and otherwise make reasonable inquiry as to the affairs of the
Company. A proper purpose shall mean a purpose reasonably related to such
Person's interest as a Member. Upon the written request of any Member, the
Manager shall provide a list showing the names, addresses and Ownership
Percentages of all Members.
VI.3 PRIORITY AND RETURN OF CAPITAL. Except as may be expressly
provided in Article IV or Article VIII, no Member shall have priority over any
other Member, either as to return of Capital Contributions or as to Net Profits,
Net Losses or distributions; provided, however, that, this section shall not
-------- ------- ----
apply to the repayment by the company of loans (as distinguished from Capital
Contributions) which a Member has made to the Company.
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VI.4 MEETINGS OF MEMBERS.
(a) Meetings of the Members may be called by the Manager or by
Members holding in the aggregate not less than five percent (5%) of the issued
and outstanding Membership units. The meeting shall be held at the principal
place of business of the Company or as designated in the notice or waivers of
notice of the meeting.
(b) Notice of any meeting of the Members shall be given no fewer than
ten (10) days and no more than thirty (30) days prior to the date of the
meeting. Notices shall be delivered in the manner set forth in Section 12.1 and
shall specify the purpose or purposes for which the meeting is called. the
attendance of a member at any meeting shall constitute a waiver of notice of
such meeting, except where a Member attends a meeting for the express purpose of
objecting to the transaction of any business because the meeting is not lawfully
called or convened.
(c) Members owning a Majority Vote, present in person or represented
by proxy, shall constitute a quorum for the transaction of business at any
meeting of the Members; provided, that, if Members owning less than a Majority
-------- ----
Vote are present at said meeting, Members owning a majority of the Membership
Units present may adjourn the meeting at any time and without further notice.
The act of the Members holding a majority of the Membership Units present at
such meeting at which a quorum is present shall be the act of the Members,
unless the vote of a greater or lesser proportion or number is otherwise
required by the Act, the Certificate or by this Agreement.
(d) Unless specifically prohibited by the Certificate or the Act, any
action required to be taken at a meeting of the Members or any other action
which may be taken at a meeting of the Members, may be taken without a meeting
if a consent in writing, setting forth the action so taken, shall be signed by
the Members holding Membership Units having not less than the minimum number of
votes that would be necessary to authorize or take such action at a meeting at
which all Members were present and voting. Prompt notice of any action taken
without a meeting by less than unanimous consent shall be given in writing to
those Members who were entitled to vote but did not consent in writing.
(e) The Members may participate in and act at any meeting of Members
through the use of a conference telephone or other communications equipment by
means of which all Persons participating in the meeting can hear each other.
Participation in such meeting shall constitute attendance and presence in person
at such meeting of the Person or Persons so participating.
(f) Each Member entitled to vote at a meeting of Members or to
express consent or dissent to action in writing without a meeting may authorize
another
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(f) Each Member entitled to vote at a meeting of Members or to
express consent or dissent to action in writing without a meeting may authorize
another Person or Persons to act for him by proxy. Such proxy shall be deposited
at the principal offices of the Company not less than 48 hours before a meeting
is held or action is taken, but no proxy shall be valid after eleven months
from the date of its execution, unless otherwise provided in the proxy.
(g) Each Member shall vote in proportion to its Ownership Percentage.
6.5 RIGHTS OF LEGAL REPRESENTATIVES. If a Member who is an individual dies
or is adjudged by a court of competent jurisdiction to be incompetent to manage
the Member's person or property, the Member's executor, administrator, guardian,
conservator, or other legal representative may exercise all of the Member's
rights for the purpose of settling the Member's estate or administering the
Member's property, including any power the Member has under the certificate or
this agreement to give an assignee the right to become a Member. If a Member is
a corporation, trust, or other entity and is dissolved or terminated, the powers
of that Member may be exercised by its legal representative or successor.
ARTICLE VII. ACCOUNTING PROCEDURES.
---------------------
7.1 FISCAL YEAR. The fiscal year of the Company shall begin on January 1
and shall end on December 31 of each year; provided that the fiscal year ending
December 31, 1997 shall commence on the date of this Agreement.
7.2 BOOKS OF ACCOUNT. At all times during the existence and continuance of
the Company, the Manager shall cause to be kept accurate, complete and proper
books, records and accounts pertaining to the Company's affairs, including (a) a
list of all Members and their addresses and their Capital Contributions,
Membership Units and Ownership Percentages, (b) a copy of the Certificate and
all amendments thereto and all powers of attorney pursuant to which any
Certificate has been executed, (c) an original copy of the Agreement and all
amendments thereto, (d) copies of the Company's federal and state tax returns
and financial statements and (e) the Company's books and records. Such books and
records shall be kept on the accrual basis of accounting in conformity with
generally accepted accounting principles. The method of accounting followed by
the Company for federal income tax purposes shall be the accrual method. All
books, records and accounts of the Company shall be kept at its principal office
or at such other office as the Manager may designate for such purpose.
7.3 PREPARATION AND FILING OF INCOME TAX RETURNS AND OTHER WRITINGS. The
Company's treasurer shall cause the preparation and timely filing of all Company
tax returns, shall, on behalf of the Company, make such tax elections
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(including, without limitation, any election under Section 754 of the Code),
determinations and allocations which he or she, in his or her sole and absolute
discretion, deems to be appropriate and shall timely make all other filings
required by any governmental authority having jurisdiction to require such
filing, the cost of which shall be borne by the Company. Copies of such returns
shall be furnished to the Members within a reasonable period of time after the
end of each Fiscal Year of the Company. A Form K-1, prepared by the Company's
accountants, shall be delivered to the Members within ninety (90) days after the
expiration of each Fiscal Year of the Company. This form shall show the
allocation of profit or loss of the Company for federal income tax purposes,
including all separately stated items, to each Member. No election shall be
made by the Company or any Member to be excluded from the application of the
provisions of subchapter K of the Code or from any similar provision of state
tax laws.
7.4 TAX MATTERS PARTNER. OnePoint is hereby designated the "Tax Matters
Partner" (as defined in Code Section 6231), and is authorized and required to
represent the Company (at the Company's expense) in connection with all
examinations of the Company's affairs by tax authorities, including, without
limitation, administrative and judicial proceedings, and to expend Company funds
for professional services and costs associated therewith. The Members agree to
cooperate with each other and to do or refrain from doing any and all things
reasonably required to conduct such proceedings.
ARTICLE VIII. TRANSFER OF MEMBER MEMBERSHIP UNITS.
-----------------------------------
8.1 LIMITATION ON TRANSFER OF MEMBERSHIP UNIT. For so long as this
Agreement shall remain in effect, no Member shall sell, assign, pledge,
hypothecate, transfer exchange or otherwise transfer for consideration (a
"Transfer"), its Membership Unit, in whole or in part, and a transferee shall
not have a right to become a "Substitute Member," except in strict compliance
with the provisions of this Agreement. Any Transfer will be effective on the
first day following receipt by the Members from the Manager of written notice
that all of the requirements of this Article VIII have been met.
8.2 CERTAIN DOCUMENTS. The Company and the Members agree to use their
best efforts to cause the Company not to issue any Membership Units without
obtaining from each prospective Substitute Member, prior to the issuance of the
Membership Units, (a) a counterpart of this Agreement as then in effect, duly
executed by the prospective Substitute Member, (b) any reasonable fees and
expenses in connection with the admission of the prospective Substitute Member
as an assignee or transferee and (c) all representations and all such
certificates, evidences or assurance reasonably requested by the Company and the
existing Members.
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8.3 RIGHT OF FIRST REFUSAL.
(a) If at any time a Member (the "Selling Member") receives a bona fide
offer in writing from any Person who is not a Member (a "Bona Fide Offer") which
the Selling Member desires to accept, to purchase any or all of the Membership
Units owned by the Selling Member (the "Offered Units"), then the Selling Member
shall give the non-transferring Members (the "Offeree Members") (i) written
notice (the "Selling Member Notice") of the name and address of the Person who
made the Bona Fide Offer (the "Proposed Acquiror") and (ii) a copy of the Bona
Fide Offer, containing all of the material terms and conditions thereof.
Subject to the provisions of this Section 8.3, each Offeree Member shall have
the irrevocable right of first refusal for a period of thirty (30) days after
its receipt of the Selling Member Notice (the "Acceptance Period") to purchase a
portion of the Offered Units in the proportion that the Ownership Percentage of
such Member bears to the Ownership Percentages of all the Offeree Members
electing to so purchase the Offered Units.
(b) An Offeree Member may exercise its right of first refusal by
notifying the Company and each Offeree Member in writing (the "Acceptance
Notice") within the Acceptance Period of its intention to purchase all or any
portion of its pro rata portion of the Offered Interest, for the price and upon
the terms and conditions of the Bona Fide Offer. If any Offeree Member (a
"Declining Member") declines to purchase all or any part of its pro rata portion
of the Offered Units, the non-Declining Members may purchase the declined
Offered Units on a pro rata basis. Failure to deliver an Acceptance Notice shall
be deemed conclusive evidence of an Offeree Member's intent to decline the
opportunity to purchase any of the Offered Units.
(c) The closing of the purchase of the Offered Interest by the Offeree
Members shall be consummated no later than sixty (60) days after the date of the
Selling Member Notice. At the closing, the Selling Member shall sell to the
Offeree Members full right, title and interest in and to the Offered Units, free
and clear of all liens, claims and encumbrances (other than those created
pursuant to this Agreement) and shall deliver or cause to be delivered to the
Offeree Members the certificate(s), if any, representing the Membership Units
purchased by the Offeree Members.
(d) In the event the Offeree Members in the aggregate have not agreed to
purchase all of the Offered Units, the Selling Member shall have the right for a
period of eighty (80) days after the date of the Selling Member Notice to sell
to the Proposed Acquiror, all, but not less than all, of the Offered Units, at a
price and upon terms and conditions specified in the Selling Member notice. In
the event the Selling Member (i) proposes to sell the Offered Units other than
in accordance with the preceding sentence or (ii) does not sell all of the
Offered Units to the Proposed Acquiror within such 80-day period, then, in each
such case, prior to any Transfer of such Offered
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Units, the Selling Member shall be required to first offer such Offered Units to
the Offeree Members in the manner provided in this Section.
8.4 LEGAL CAPACITY OF TRANSFEREE; TAX EFFECTS. Anything in this Article
VIII or elsewhere in this Agreement to the contrary notwithstanding, no Transfer
of all or any part of any Member's Membership Unit shall be made or shall be
effective if such Transfer would (in the opinion of the Company's legal counsel,
which shall be conclusive for this purpose) jeopardize the limited liability
status of the Company or result in any substantial adverse effect upon the
Company or the Members for federal income tax purposes (including, without
limitation, a termination of the Company or loss of tax treatment as a
partnership).
8.5 SECURITIES LAWS MATTERS. Anything in this Article VIII or elsewhere
in this Agreement to the contrary notwithstanding, no Transfer of all or any
part of any Member's Membership Unit shall be made or shall be effective unless
(a) prior to the consummation thereof, all assignees and transferees with
respect thereto shall have made to the Company in writing all of the
representations required, in the sole judgment of the Manager, to ensure
compliance with applicable securities laws, and (b) if required in the
discretion of the Manager, the Company is provided with an opinion of its legal
counsel, or other legal counsel satisfactory to the Company's counsel, stating
that such Transfer is exempt from the Securities Act, and is permissible under
all other applicable federal and state securities laws without registration or
qualification of any security or consent or approval of any Person.
8.6 INDEMNIFICATION. To the fullest extent permitted by applicable law,
each Member and each assignee or transferee of any Membership Unit (or portion
thereof) shall indemnify and hold harmless the Company, the Manager, every
Member or Officer who was or is a party or is threatened to be made a party to
any threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative by reason of or arising from any
actual or alleged misrepresentation, misstatement of facts or omission to state
facts made (or omitted to be made) by such Member or any assignee or transferee
of any Membership Unit (or portion thereof) in connection with any Transfer of
all or any part of any Membership Unit by such Member, against expenses for
which the Company or such other Person has not otherwise been reimbursed
(including attorneys' fees, judgments, fines and amounts paid in settlement)
actually and reasonably incurred by any of them in connection with such action,
suit or proceeding.
ARTICLE IX. LIMITATIONS ON LIABILITIES; INDEMNIFICATION; RIGHT TO
-----------------------------------------------------
CONDUCT OTHER BUSINESS
----------------------
9.1 LIABILITY OF MEMBERS. No Member shall have personal liability for the
obligations, debts, liabilities or losses of the Company, whether to the
Company, to
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the Manager, to any other Member, to any Officer or to the creditors of the
Company, whether in contract, tort or otherwise, in excess of, in the aggregate,
the amount of such Member's Capital Contributions to the Company, except as
otherwise required by law. No creditor shall have the right to attach or garnish
or compel the contribution by any Member of any capital. Except as may otherwise
be required by the Act, no Member shall be liable for a return of the Assets
delivered or distributed to such Member.
9.2 LIABILITY AND INDEMNIFICATION OF MANAGERS AND AUTHORIZED PERSONS.
(a) No Manager shall be liable to any Member or to the Company by reason
of the actions or inactions of such Person in the conduct of the business of the
Company, except for such Person's fraud, gross negligence or willful misconduct.
No amendment of this Agreement or repeal of any of its provisions shall limit or
eliminate the benefits provided to the Manager under this provision with respect
to any act or omission which occurred prior to such amendment or repeal.
(b) The Company shall, to the fullest extent permitted by applicable law,
indemnify and hold harmless, the Manager and each director, manager, agent,
officer, representative and employee thereof or Person who is deemed to control
the Manager (hereinafter collectively referred to as the "Indemnitees") from and
against any losses, claims, damages, liabilities or actions, joint or several,
to which such Indemnitees may be subject by virtue of any act performed by such
Indemnitee, or omitted to be performed by any such Indemnitee, in connection
with the business of the Company or its formation and shall reimburse each such
Indemnitee for any legal or other expenses reasonably incurred by such Person in
connection with investigating, defending or preparing to defend any such loss,
claim, damage, liability or action; provided, however, that, the Company shall
-------- ------- ----
not be liable to any Indemnitee to the extent that in the final non-appealable
judgment of a court of competent jurisdiction such loss, claim, damage,
liability or action is found to arise from such Indemnitee's gross negligence or
willful misconduct. Expenses incurred by an Indemnitee in defending a civil or
criminal action, suit or proceeding arising out of or in connection with this
Agreement or the Company's business or affairs shall be paid by the Company in
advance of the final disposition of such action, suit or proceeding upon receipt
of an undertaking by the Indemnitee to repay such amount plus reasonable
interest in the event that it shall ultimately be determined that the Indemnitee
was not entitled to be indemnified by the Company in connection with such
action. No amendment of this Agreement shall limit or eliminate the right to
indemnification provided hereunder with respect to acts or omissions occurring
prior to such amendment or repeal. The Company may carry insurance protecting
it and potential Indemnitees from liabilities to third parties, to the extent
practicable.
9.3 INDEMNIFICATION RIGHTS CUMULATIVE. The indemnification rights
contained in this Article IX shall be cumulative of, and in addition to, any and
all rights,
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remedies and other recourse to which the Indemnitee shall be entitled, whether
pursuant to the provisions of this Agreement, at law or in equity.
Indemnification shall be made solely and entirely from the Assets of the
Company, and no Member shall be personally liable to the Indemnitees under this
Article IX.
9.4 RIGHT TO CONDUCT OTHER BUSINESS. Nothing contained in this Agreement
shall be deemed to restrict in any way the freedom of each Member, the Manager
and their respective Affiliates, including any director, officer or employee of
such Person, to conduct any other business or any other activity whatsoever
(subject to any restriction, limitation or qualification thereon arising by
virtue of any understanding, arrangement or agreement, other than this
Agreement, or arising under law or otherwise), including, without limitation,
the investment in or operation of any business in the telecommunications field,
without having or incurring any obligation to offer any interest therein to the
Company or any other Member.
ARTICLE X. POWER OF ATTORNEY.
-----------------
10.1 AUTHORITY TO EXECUTE DOCUMENTS. During the life of the Company and
during any additional period authorized in accordance with this Agreement to
dissolve, liquidate and wind up the affairs of the Company, each of the Members
hereby irrevocably designates and appoints the Manager and any duly appointed
agent of the Manager, with full power of substitution, to be the Member's true
and lawful attorney-in-fact with the power, from time to time, in the name,
place and stead of the Member to do any ministerial act necessary to qualify the
Company to do business under the laws of any jurisdiction in which it is
necessary to file any instrument in writing in connection with such
qualification and to make, execute, swear to and acknowledge, amend, file,
record, deliver and publish in conformance with the provisions of this Agreement
(a) the Certificate, (b) a counterpart of this Agreement or of any amendment
hereto for the purpose of filing or recording such counterpart in any
jurisdiction in which the Company may own property or transact business, (c) all
certificates and other instruments necessary to qualify or continue the Company
as a limited liability company in the State of Delaware or in any jurisdiction
where the Company may own property or be doing business, (d) any fictitious or
assumed name certificate required or permitted to be filed by or on behalf of
the Company, including, without limitation, to enable the company to conduct its
business under such name or names as the Manager may determine from time to
time, (e) any other instrument that is now or may hereafter be required by law
to be filed for or on behalf of the Company, (f) any other instruments or
documents that the Manager deems necessary to conduct the operation of the
Company, (g) any amendment to this Agreement pursuant to Section 12.2 hereof and
(h) a certificate or other instrument evidencing the dissolution or termination
of the Company when such shall be appropriate in each jurisdiction in which the
Company shall own property or do business.
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10.2 SURVIVAL OF POWER. The power of attorney referenced in Section 10.1
hereof shall not be revoked and shall survive the Transfer by a Member of all or
part of its Membership Unit and it shall be coupled with such Membership Unit
and shall survive the death, incapacity or dissolution of any Member. Any Person
dealing with the Company may conclusively presume and rely upon the fact that
any instrument executed by the Manager is authorized, regular and binding
without further inquiry. The power of attorney referenced in Section 10.1 hereof
may be exercised for each Member by the signature of the Manager or by listing
the names of all the Members and executing any instrument with the signature of
the Manager acting as attorney-in-fact for all of them.
ARTICLE XI. DISSOLUTION AND TERMINATION.
---------------------------
11.1 DISSOLUTION.
(a) The Company shall be dissolved upon the earlier to occur of:
(i) The Termination Date;
(ii) The date on which all of the Assets of the Company have been
disposed of or the Company is merged with or into another person;
(iii) The date of entry of a decree of judicial dissolution under
Section 18-202 of the Act;
(iv) Upon the date of the death, bankruptcy, or dissolution of, a
Member or upon the occurrence of any other event that terminates the
continued membership of a Member in the Company other than by transfer of all
of the Member's Membership Units to another person (a "Withdrawal Event"),
unless, within ninety (90) days following the Withdrawal Event, the business
of the Company is continued by the affirmative vote of all of the remaining
Members and there are at least two remaining Members; or
(v) The date on which all of the Members agree to in writing to
terminate the Company.
(b) Notwithstanding the dissolution of the Company, the Company
shall not terminate until a certificate of cancellation shall be filed with the
Secretary of State of the State of Delaware and the assets of the Company are
distributed as provided in Section 11.2 below. Upon the dissolution of the
Company, prior to the termination of the Company, the business of the Company
and the affairs of the Members shall continue to be governed by this Agreement.
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(c) If there is a Withdrawal Event and all of the remaining Members
consent to continue the business of the Company in accordance with Section
11.1(a)(iv), the Company shall pay to the withdrawing Member any positive
balance in the withdrawing Member's Capital Account within ninety (90) days from
the date of the Withdrawal Event. The remaining Members shall have the right in
their sole discretion at any time within sixty (60) days of the Withdrawal Event
to determine all Net Profits and Net Losses of the Company as of the date of
such determination and to make appropriate credits and debits to the Members'
Capital Accounts. The Capital Account of the withdrawing Member as of the date
of determination shall be conclusively deemed to be the fair value of all of its
Membership Units and the payment provided for in this Section 11.1(c) shall be
the full and only consideration for the redemption of the withdrawing Member's
Membership Units.
11.2 WINDING UP, LIQUIDATION AND DISTRIBUTION OF ASSETS.
(a) Upon dissolution, an accounting shall be made of the Company's
assets, liabilities and operations, from the date of the last previous
accounting until the date of dissolution. The Manager shall immediately proceed
to wind up the affairs of the Company.
(b) If the Company is dissolved and its affairs are to be wound up,
the Manager shall:
(i) Sell or otherwise liquidate all of the Company's assets as
promptly as practicable;
(ii) Allocate any Net Profit or Net Loss resulting from such sales
to the Member's Capital Accounts in accordance with Article IV hereof;
(iii) Discharge all liabilities of the Company, including
liabilities to Members who are creditors of the Company to the extent
permitted by law, excluding liabilities for distributions to Members under
Section 4.5; and
(iv) Distribute the remaining assets to Members in accordance with,
and to the extent of, the positive balance (if any) of each Member's Capital
Account (as determined after taking into account all Capital Account
adjustments for the Company's taxable year during which the liquidation
occurs), and thereafter to the Members in accordance with, and in proportion
to, each Member's Ownership Percentage. Any such distributions to the
Members in respect of their Capital Accounts shall be made within the time
specified in Section 1.704-1(b)(2)(ii)(b)(2) of the Treasury Regulations.
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(c) The Manager shall determine the fair market value of each non-cash
asset distributed to one or more Members to determine the Net Profit or Net Loss
that would have resulted if such asset were sold for such value. Such Net Profit
or Net Loss shall then be allocated pursuant to Article IV, and the Members'
Capital Accounts shall be adjusted to reflect such allocations. The amount
distributed and charged to the Capital Account of each Member receiving an
interest in such distributed asset shall be the fair market value of such
interest (net of any liability secured by such asset that such Member assumes or
takes subject to).
(d) Notwithstanding anything to the contrary in this Agreement, if any
Member has a deficit balance in its Capital Account (after giving effect to all
contributions, distributions, allocations and other Capital Account adjustments
for all taxable years, including the year during which such liquidation occurs),
such Member shall have no obligation to make any Capital Contribution to restore
such deficit balance, and the deficit balance shall not be considered a debt
owed by such Member to the Company or to any other Person for any purpose
whatsoever.
(e) Upon the completion of the winding up, liquidation and
distribution of the assets of the Company, the Company shall be deemed
terminated.
(f) The Manager shall comply with all requirements of applicable law
pertaining to the winding up of the affairs of the Company and the final
distribution of its assets. The Manager shall be under no liability with
respect to the Assets held by the Company upon the termination of the Company
except to hold and maintain the same in the name of the Company until disposed
of in accordance with the terms of this Agreement.
11.3 CERTIFICATE OF CANCELLATION. When all debts, liabilities and
obligations of the Company have been paid and discharged or adequate provisions
have been made therefor and all of the remaining property and assets of the
Company have been distributed, a certificate of cancellation shall be executed
by one or more authorized persons, which certificate shall set forth the
information required by the Act. A certificate of cancellation shall be filed
with the Delaware Secretary of State to accomplish the cancellation of the
Certificate of the Company upon the dissolution and completion of the winding up
of the Company.
11.4 EFFECT OF FILING OF CERTIFICATE OF CANCELLATION. Upon the filing of
the certificate of cancellation with the Delaware Secretary of State, the
existence of the Company shall cease, except that the Manager may, in the name
of, and for and on behalf of the Company, prosecute and defend suit, gradually
settle and close the Company's business, dispose of and convey the Company's
property, discharge or make reasonable provision for the Company's liabilities,
and distribute to the Members any remaining assets, and take such other
appropriate action as provided in the Act. The
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Manager shall have authority to distribute any Company property discovered after
dissolution, convey real estate and take such other act as may be necessary on
behalf of and in the name of the Company.
11.5 RETURN OF CONTRIBUTION NONRECOURSE TO OTHER MEMBERS. Except as
provided by law or as expressly provided in this Agreement, upon dissolution,
each Member shall look solely to the assets of the Company for the return of its
Capital Contributions. If the property remaining after the payment or discharge
of the debts and liabilities of the Company is insufficient to return the
Capital Contributions of one or more Members, such Member or Members shall have
no recourse against any other Member, except as otherwise provided by law.
ARTICLE XII. RULES OF CONVENTION.
-------------------
12.1 NOTICE. All notices, reports and other communications given pursuant
to this Agreement shall be in writing and shall either be mailed by first class
mail, postage prepaid, certified or registered with return receipt requested,
delivered in person or by nationally recognized overnight courier or sent by
facsimile or prepaid telegram followed by confirmatory letter. Notice sent by
mail in the foregoing manner shall be deemed served or given three (3) Business
Days after deposit in the United States Postal Service. Notice delivered by
nationally recognized overnight courier shall be deemed served or given one (1)
Business Day after delivery to the courier, charges prepaid. Notice given to the
Company, the Manager or a Member in any other manner shall be effective only if
and when received by the addressee. For purposes of notice, the address of each
Member shall be the address as stated below the Member's name on the signature
page of this Agreement; provided, however, that, each Member shall have the
-------- ------- ----
continuing right to change its address for notice hereunder to any other
location by giving thirty (30) days' prior notice of such change to the Company
in the manner set forth above. For the purposes of all notices to the Company or
the Manager, the Company's and the Manager's address shall be the same as the
Company's address as set forth in Section 2.2 hereof.
12.2 AMENDMENT. Any provision of this Agreement may be amended by Majority
Vote; provided, that, no amendment of this Agreement shall, without the consent
-------- ----
of the affected Member (a) increase the liability of such Member beyond the
liability of such Member expressly set forth in this Agreement or otherwise
modify or affect the limited liability of such Member, (b) change the maximum
Capital Contribution required of such Member (other than as provided in this
Agreement) or (c) change the method of allocations made under the provisions of
Articles IV, VII and XI hereof to any Member (except as otherwise provided in
this Agreement). For any such amendment, the Manager shall deliver to each
Member written notice requesting such Member's consent and upon receipt of the
required consents and execution of the documents setting forth the amendment,
such amendment shall become effective.
-24-
<PAGE>
12.3 GOVERNING LAW. This Agreement is made pursuant to and shall be
construed in accordance with the internal laws of the State of Delaware, without
regard to the principles of the conflicts of laws thereof. In the event of a
direct conflict between the provisions of this Agreement and the provisions of
the Act or the Certificate, such provisions of the Act or the Certificate, as
the case may be, shall be controlling.
12.4 ENTIRE AGREEMENT. This Agreement, together with the schedules and
exhibits attached hereto, contains the entire agreement among the Members
relating to the subject matter hereof and there are no other or further
agreements outstanding not specifically mentioned herein; provided,
--------
however, that, the Members may by agreement amend and supplement this Agreement
- ------- ----
in writing from time to time as provided in Section 12.2 hereof.
12.5 SEVERABILITY. If any term or provision of this Agreement or the
performance thereof shall be invalid or unenforceable to any extent, such
invalidity or unenforceability shall not affect or render invalid or
unenforceable any other provision of this Agreement and this Agreement shall be
valid and enforced to the fullest extent permitted by law.
12.6 CONSTRUCTION. Whenever required by the context, as used in this
Agreement, the singular number shall include the plural, the neuter shall
include the masculine or the feminine gender and the masculine gender shall
include the neuter or the feminine gender. All references to days in this
Agreement mean calendar days unless otherwise provided. Any day or deadline or
time period hereunder which falls on a Saturday, Sunday or a non-Business Day
shall be deemed to refer to the first Business Day following.
12.7 CAPTIONS. The Article and Section headings appearing in this Agreement
are for convenience of reference only and are not intended, to any extent and
for any purpose, to limit or define the text of any Article or Section hereof.
12.8 COUNTERPARTS AND EXECUTION. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original Agreement and all of
which shall constitute one Agreement between each of the parties hereto,
notwithstanding that all of the parties are not signatories to the original or
the same counterpart, to be effective as of the day and year first set forth
above.
12.9 CONSENTS AND WAIVERS. A Member's waiver, consent, failure to object,
failure to seek redress, course of conduct or failure to insist upon the strict
performance of any covenant or condition of this Agreement shall not be
considered or construed as a waiver or consent for subsequent matters or other
obligations or rights of the Member.
-25-
<PAGE>
12.10 RIGHTS AND REMEDIES CUMULATIVE. The rights and remedies provided by
this Agreement are cumulative and the use of any one right or remedy by any
party shall not preclude or waive its right to use any or all other remedies.
Such rights and remedies are given in addition to any other rights the parties
may have by law, statute, ordinance or otherwise.
12.11 ASSIGNS. Each and all of the covenants, terms, provisions and
agreements herein contained shall be binding upon and inure to the benefit of
the parties hereto and, to the extent permitted by this Agreement, their
respective assigns.
12.12 WAIVER OF ACTION FOR PARTITION. Each Member irrevocably waives during
the term of the Company any right that it may have to maintain an action for
partition with respect to the property of the Company.
12.13 EXECUTION OF ADDITIONAL INSTRUMENTS. Each Member hereby agrees to
execute such other and further statements of interest and holdings,
designations, powers of attorney and other instruments necessary to comply with
any laws, rules or regulations.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
day and year first above written.
ONEPOINT COMMUNICATIONS, LLC
By: /s/ James A. Otterbeck
------------------------------
Name: James A. Otterbeck
----------------------------
Title: Chairman/CEO
---------------------------
AMI-VCOM2, INC.
By: /s/ James A. Otterbeck
------------------------------
Name: JAMES A. OTTERBECK
----------------------------
Title: Member Manager
---------------------------
-26-
<PAGE>
SCHEDULE 3.2
INITIAL CAPITAL CONTRIBUTION
Members Initial Capital Initial Initial
Contribution Membership Ownership
Units Percentage
OnePoint Communications, LLC $990.00 99 99%
Address for Notices
2201 Waukegan Road
Suite E-200
Bannockburn, Illinois 60015
Facsimile: (847) 374-1070
AMI-VCom2, Inc. $ 10.00 1 1%
Address for Notice
2201 Waukegan Road
Suite E-200
Bannockburn, Illinois 60015
Facsimile: (847) 374-1070
<PAGE>
ONEPOINT COMMUNICATIONS-ILLINOIS, LLC
AMENDMENT TO OPERATING AGREEMENT
This Amendment to Operating Agreement is entered into as of October 15,
1997, between OnePoint Communications, LLC, a Delaware limited liability company
("OnePoint") and AMI-VCOM2, Inc., a Delaware corporation ("AMI" and, together
with OnePoint, the "Members").
RECITALS
A. AMI and OnePoint are parties to an Operating Agreement (the "Operating
Agreement"), dated as of April 23, 1997 with respect to OnePoint
Communications-Illinois, LLC (the "Company"). Capitalized terms used herein and
not otherwise defined shall have the respective meanings assigned such terms in
the Operating Agreement.
B. AMI desires to sell its membership units in the Company to OnePoint,
and OnePoint desires to purchase such membership units (the "Unit Transfer"),
and the Members have entered into a Securities Purchase Agreement pursuant to
which such membership interests, among others, would be transferred from AMI to
the Company.
C. Following the Unit Transfer, OnePoint will be the sole member of the
Company.
D. AMI and OnePoint desire to amend the Operating Agreement to reflect the
Unit Transfer.
NOW, THEREFORE, for good and valuable consideration, the sufficiency of
which is hereby acknowledged, the parties hereto agree as follows:
1. Consent to Transfer. The Members hereby consent to the Unit Transfer
-------------------
and waive all other requirements of Article VII of the Operating
Agreement with respect to the Unit Transfer.
2. Registration of AMI. Effective upon the transfer of its membership
-------------------
units of the Company, AMI resigns as a member of the Company, and
OnePoint accepts such resignation.
3. References Replaced. All references to AMI in the Operating Agreement
-------------------
shall be deleted, and OnePoint shall be the sole member of the Company.
4. Full Force and Effect. All other provisions of the Operating Agreement
---------------------
shall remain in full force and effect.
<PAGE>
5. Governing Law. This Agreement is made pursuant to, and shall be
-------------
construed in accordance with the internal laws of the State of
Delaware, without regard to the principals of the conflicts of laws
thereof. In the event of a direct conflict between the provisions of
this Agreement and the provisions of the Act or the Certificate, such
provisions of the Act or the Certificate, as the case may be, shall be
controlling.
6. Counterparts and Execution. This Agreement may be executed in multiple
--------------------------
counterparts, each of which shall be deemed an original Agreement and
all of which shall constitute one Agreement between each of the parties
hereto, notwithstanding that all of the parties are not signatories to
the original or same counterpart, to be effective as of the day and
year first set forth above.
7. Execution of Additional Instruments. Each of the parties hereby agree
-----------------------------------
to execute such other and further statements of interest and holdings,
designations, powers of attorney and other instruments necessary to
comply with any laws, rules or regulations.
* * * *
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Amendment to
Operating Agreement as of the day and year first above written.
ONEPOINT COMMUNICATIONS, LLC
By: /s/ James A. Otterbeck
-------------------------------
Name: ____________________________
Title: CEO
----------------------------
AMI-VCOM2, INC.
By: /s/ James A. Otterbeck
-------------------------------
Name:_____________________________
Title: President
----------------------------
<PAGE>
EXHIBIT 3.6
VIC-RMTS HOLDCO, LLC
OPERATING AGREEMENT
BETWEEN
VENTURES IN COMMUNICATIONS RMTS, LLC
AND
AMI-VCOM2, INC.
DATED AS OF
JANUARY 30, 1997
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
I. Definitions................................................................. 1
1.1 "Act"................................................................. 1
1.2 "Affiliate"........................................................... 1
1.3 "Agreement"........................................................... 1
1.4 "AMI"................................................................. 1
1.5 "Assets".............................................................. 1
1.6 "Business Days"....................................................... 2
1.7 "Capital Contribution"................................................ 2
1.8 "Certificate"......................................................... 2
1.9 "Code"................................................................ 2
1.10 "Company"............................................................. 2
1.11 "Distributable Cash".................................................. 2
1.12 "Fiscal Year"......................................................... 2
1.13 "Initial Capital Contribution"........................................ 2
1.14 "Majority Vote"....................................................... 2
1.15 "Members"............................................................. 2
1.16 "Membership Unit"..................................................... 3
1.17 "Net Profits" and "Net Losses"........................................ 3
1.18 "Ownership Percentage"................................................ 3
1.19 "Person".............................................................. 3
1.20 "Securities Act"...................................................... 3
1.21 "Termination Date".................................................... 4
1.22 "Treasury Regulations"................................................ 4
1.23 "VIC"................................................................. 4
II. The Company................................................................. 4
2.1 Formation of the Company.............................................. 4
2.2 Company Name and Office............................................... 4
2.3 Purposes of the Company............................................... 4
2.4 Term of the Company................................................... 4
2.5 Title to Property..................................................... 5
2.6 Certificates of Interest.............................................. 5
III. Capital; Capital Contributions.............................................. 5
3.1 Capital............................................................... 5
3.2 Names of Members; Initial Capital Contributions of the Members........ 5
3.3 No Further Contributions or Loans..................................... 5
3.4 Additional Members.................................................... 5
3.5 Preemptive Rights..................................................... 6
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
3.6 Resignation................................................................... 6
3.7 Nondisclosure Agreements...................................................... 6
3.8 Other Employee Incentive Plans................................................ 6
IV. Maintenance of Capital Accounts; Allocations and Distributions..................... 6
4.1 Capital Accounts.............................................................. 6
4.2 Allocations of Net Profits and Net Losses..................................... 7
(a) Net Loss............................................................... 7
(b) Net Profits............................................................ 7
4.3 Qualified Income Offset....................................................... 7
4.4 Code Section 704(c) Allocations............................................... 8
4.5 Distribution.................................................................. 8
V. Management and Operation of the Company............................................ 9
5.1 Management Generally.......................................................... 9
5.2 Election, Tenure and Removal of Managers...................................... 10
5.3 Limitations on Powers of the Manager.......................................... 10
5.4 Duties and Obligations of the Manager......................................... 11
5.5 Expenses...................................................................... 11
5.6 Officers...................................................................... 11
5.7 The Chief Executive Officer................................................... 12
5.8 The President................................................................. 12
5.9 The Executive Vice President.................................................. 12
5.10 The Treasurer................................................................. 13
5.11 The Secretary................................................................. 13
VI. Powers, Rights and Obligations of Members; Meetings of Members..................... 13
6.1 Powers of the Members......................................................... 13
6.2 Examination of Company Records................................................ 13
6.3 Priority and Return of Capital................................................ 14
6.4 Meetings of Members........................................................... 14
6.5 Rights of Legal Representatives............................................... 15
VII. Accounting Procedures.............................................................. 15
7.1 Fiscal Year................................................................... 15
7.2 Books of Account.............................................................. 15
7.3 Preparation and Filing of Income Tax Returns and Other Writings............... 16
7.4 Tax Matters Partner........................................................... 16
VIII. Transfer of Member Membership Units................................................ 16
8.1 Limitation on Transfer of Membership Unit..................................... 16
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
8.2 Certain Documents.............................................................. 16
8.3 Right of First Refusal......................................................... 17
8.4 Legal Capacity of Transferee; Tax Effects...................................... 18
8.5 Securities Laws Matters........................................................ 18
8.6 Indemnification................................................................ 18
IX. Limitations on Liabilities; Indemnification; Right to Conduct Other Business.......... 19
9.1 Liability of Members........................................................... 19
9.2 Liability and Indemnification of Managers and Authorized Person................. 19
9.3 Indemnification Rights Cumulative.............................................. 20
9.4 Right to Conduct Other Business................................................ 20
X. Power of Attorney..................................................................... 20
10.1 Authority to Execute Documents................................................. 20
10.2 Survival of Power.............................................................. 21
XI. Dissolution and Termination........................................................... 21
11.1 Dissolution.................................................................... 21
11.2 Winding Up, Liquidation and Distribution of Assets............................. 22
11.3 Certificate of Cancellation.................................................... . 23
11.4 Effect of Filing of Certificate of Cancellation................................ 23
11.5 Return of Contribution Nonrecourse to Other Members............................ 24
XII. Rules of Convention................................................................... 24
12.1 Notice......................................................................... 24
12.2 Amendment...................................................................... 24
12.3 Governing Law.................................................................. 25
12.4 Entire Agreement............................................................... 25
12.5 Severability................................................................... 25
12.6 Construction................................................................... 25
12.7 Captions....................................................................... 25
12.8 Counterparts and Execution..................................................... 25
12.9 Consents and Waivers........................................................... 26
12.10 Rights and Remedies Cumulative................................................. 26
12.11 Assigns........................................................................ 26
12.12 Waiver of Action for Partition................................................. 26
12.13 Execution of Additional Instruments............................................ 26
</TABLE>
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<PAGE>
VIC-RMTS HOLDCO, LLC
OPERATING AGREEMENT
This OPERATING AGREEMENT (this "AGREEMENT") is entered into as of the 30th
day of January 1997, between Ventures in Communications RMTS, LLC, a Delaware
limited liability company ("VIC"), and AMI-VCom2, Inc., a Delaware corporation
("AMI," together with VIC, the "MEMBERS").
RECITALS
A. AMI and VIC desire to form a Delaware limited liability company, under
the name "VIC-RMTS HOLDCO, LLC" (the "COMPANY"), pursuant to the provisions of
the Act by filing a Certificate with the Secretary of State of the State of
Delaware and entering into this Agreement.
B. AMI and VIC desire that VIC manage the Company in accordance with, and
subject to, the terms and conditions hereinafter set forth.
NOW, THEREFORE, for good and valuable consideration, the sufficiency of which
is hereby acknowledged, the parties hereto hereby agree as follows:
ARTICLE I. DEFINITIONS. The following words and phrases, unless the context
-----------
clearly indicates otherwise, shall have the meanings set forth below:
1.1 "ACT" Act shall mean the Limited Liability Company Act, Delaware Code
Annotated, Title 6, (S)(S)18-101 et seq., as from time to time amended.
-- ----
1.2 "AFFILIATE" with respect to any person, shall mean any Person, directly
or indirectly, controlling, controlled by, or under common control with such
Person, whether such control is effected pursuant to contract or otherwise;
provided, however, that the Company shall not be considered to be an Affiliate
of any Member for purposes of this Agreement.
1.3 "AGREEMENT" shall have the meaning ascribed to such term in the preamble
hereto, as the same may be amended from time to time in accordance herewith.
1.4 "AMI" shall have the meaning ascribed to such term in the introductory
paragraph hereof.
1.5 "ASSETS" shall mean any real or personal property, whether tangible or
intangible, acquired by the Company on or after the date of this Agreement.
<PAGE>
1.6 "BUSINESS DAYS" shall mean any day except Saturday, Sunday or any other
day on which commercial banks located in the City of Chicago are authorized by
law to be closed for business.
1.7 "CAPITAL CONTRIBUTION" shall mean, with respect to any Member, all
contributions to the capital (whether in cash or otherwise) of the Company made
by such Member pursuant to this Agreement.
1.8 "CERTIFICATE" shall mean that certain Certificate of Formation of the
Company filed with the Office of the Secretary of State of Delaware, as the same
may be amended from time to time.
1.9 "CODE" shall mean the Internal Revenue Code of 1986, as amended, or any
corresponding provision of subsequent superseding federal revenue laws.
1.10 "COMPANY" shall have the meaning ascribed to such term in the recitals
hereto.
1.11 "DISTRIBUTABLE CASH" shall mean all cash, revenues and funds received by
the Company from Company operations, less the sum of the following to the extent
paid or set aside by the Company: (a) all principal and interest payments on
indebtedness of the Company and all other sums paid to lenders; (b) all cash
expenditures incurred in the normal operation of the Company's business; and (c)
such reserves as the Manager shall deem reasonably necessary for the proper
operation and financing of the Company's business.
1.12 "FISCAL YEAR" shall mean the Company's fiscal year, which shall be the
calendar year.
1.13 "INITIAL CAPITAL CONTRIBUTION" shall mean, with respect to any Member,
the initial contribution to the capital (whether in cash or otherwise) of the
Company made by such Member pursuant to this Agreement in the amount set forth
on Schedule 3.2 attached hereto.
1.14 "MAJORITY VOTE" shall mean an affirmative vote by the Members holding
more than fifty percent (50%) of the aggregate issued and outstanding Membership
Units of the Company.
1.15 "MEMBERS" shall have the meaning ascribed to such term in the preamble
hereto, and shall include each Person hereafter admitted to the Company as a
Member as provided in this Agreement.
-2-
<PAGE>
1.16 "MEMBERSHIP UNIT" shall mean, with respect to each Member, all of such
Member's rights, interests, proceeds and profits which it may own whether now
existing or contingent, in the Company, including the right of such Member to
any and all benefits to which the Member may be entitled and the obligations of
such Member, as provided in this Agreement and the Act.
1.17 "NET PROFITS" AND "NET LOSSES" shall mean for each Fiscal Year or other
period, an amount equal to the Company's taxable income or tax loss for such
year or period, determined in accordance with Code Section 703(a). For this
purpose all items of income, gain, loss or deduction required to be stated
separately pursuant to Code Section 703(a)(1) shall be included in taxable
income or loss, with the following adjustments:
a. Any income of the Company that is exempt from federal income tax and
not otherwise taken into account in computing Net Profits or Net Losses shall
be added to such taxable income or tax loss;
b. Any expenditures of the Company described in Code Section
705(a)(2)(B) or treated as Code Section expenditures pursuant to Regulations
Section 1.704-l(b)(2)(iv)(i), and not otherwise taken into account in
computing Net Profits or Net Losses, shall be subtracted from such taxable
income or tax loss; and
c. If property other than cash has been contributed to the Company or
the Capital Accounts of the Members have been adjusted pursuant to Treasury
Regulations Section 1.704-l(b)(2)(iv)(f), depreciation, amortization, gain or
loss with respect to assets of the Company shall be computed in accordance
with Regulations Section 1.704-1(b)(2)(iv)(g).
1.18 "OWNERSHIP PERCENTAGE" shall mean, as to each Member, the percentage
reflecting the ratio which its Membership Unit bears to the aggregate issued and
outstanding Membership Units of all Members. The Ownership Percentages are
initially as shown on Schedule 3.2 attached hereto. For purposes of this
Agreement, each Member will be deemed to hold the Ownership Percentage in the
Company actually held by such Member plus any Ownership Percentage in the
Company which could be obtained by such Member upon the exercise or conversion
of all other convertible securities held by such Member.
1.19 "PERSON" shall mean any individual, association, corporation, trust,
partnership, joint venture, limited liability company or other entity.
1.20 "SECURITIES ACT" shall mean the Securities Act of 1933, as amended.
-3-
<PAGE>
1.21 "TERMINATION DATE" shall mean December 31, 2025.
1.22 "TREASURY REGULATIONS" shall mean the income tax regulations promulgated
under the Code, as such regulations may be amended from time to time (including
corresponding provisions of succeeding regulations).
1.23 "VIC" shall have the meaning ascribed to such term in the introductory
paragraph hereof.
ARTICLE II. THE COMPANY.
-----------
2.1 FORMATION OF THE COMPANY. The Company has been organized as a Delaware
limited liability company by executing and delivering the Certificate to the
Delaware Secretary of State in accordance with and pursuant to the Act.
2.2 COMPANY NAME AND OFFICE. The name of the Company shall be "VIC-RMTS
HOLDCO, LLC." The Company shall conduct its business under the name "Telcom
Plus" (or such other name or names as the Manager with the approval by a
Majority Vote of the Members shall determine from time to time) and the Company
shall file all statements and applications with appropriate governmental
authorities required in order to conduct its business under such name (or such
other names). The Company shall maintain a registered office in the State of
Delaware and the name and address of the Company's registered agent in the State
of Delaware shall be as set forth in the Certificate. Such office and such agent
may be changed from time to time by the Manager. The principal office of the
Company shall be 2201 Waukegan Road, Suite E-200, Bannockburn, Illinois 60015.
The Company may maintain such additional offices as may be designated from time
to time by the Manager for the purpose of carrying out the business of the
Company.
2.3 PURPOSES OF THE COMPANY. The purpose of the Company shall be (a) to invest
in and operate businesses in the field of telecommunications and such other
fields of business as may be approved by the Manager, (b) to engage in and carry
on any other lawful business or activity in connection with the foregoing or
otherwise, and (c) to have and exercise all of the powers, rights and privileges
which a limited liability company organized pursuant to the Act may have and
exercise.
2.4 TERM OF THE COMPANY. The term of the Company shall commence on the date of
the filing of the Certificate as required by Section 18-201 of the Act and shall
continue in existence until the Termination Date, unless its existence is sooner
terminated upon dissolution (and subsequent termination of the Company after the
winding up of its affairs) as provided in this Agreement or the Act, or unless
the term shall otherwise be extended by amendment to this Agreement.
-4-
<PAGE>
2.5 TITLE TO PROPERTY. Legal title to all Assets of the Company shall be
taken and at all times held in the name of the Company.
2.6 CERTIFICATES OF INTEREST. The Manager may make such rules and regulations
as he may deem appropriate concerning the issuance and registration of
Membership Units. The Manager may authorize the issuance of any Membership Units
without certificates. Such authorization shall not affect Membership Units
already represented by certificates until they are surrendered to the Company.
ARTICLE III. CAPITAL; CAPITAL CONTRIBUTIONS.
------------------------------
3.1 CAPITAL. The names and addresses of the initial Members are set forth on
Schedule 3.2 attached hereto.
3.2 NAMES OF MEMBERS; INITIAL CAPITAL CONTRIBUTIONS. As of the date of this
Agreement, each Member has contributed in cash to the capital of the Company the
full amount of its Initial Capital Contribution as specified in Schedule 3.2
attached hereto, in return for which the Member shall receive the number of
Membership Units indicated opposite such Member's name on Schedule 3.2 attached
hereto.
3.3 NO FURTHER CONTRIBUTIONS OR LOANS. The liability of the Members to the
Company is limited to their Capital Contributions as specified in Schedule 3.2
attached hereto, as it may be amended from time to time pursuant to Section
12.2. No additional Capital Contributions, or other funds, whether by way of
contribution of capital, loan or otherwise, shall be required of any Member
except by Majority Vote of the Members. No interest shall accrue on any Capital
Contribution and no Member shall have the right to withdraw or be repaid any
Capital Contribution except as provided in this Agreement.
3.4 ADDITIONAL MEMBERS. Additional Persons may be admitted to the Company as
Members from time to time and Membership Units may be created and issued to
those Persons and to existing Members in the sole discretion of the Manager,
subject to the provisions and restrictions contained herein. Any person admitted
to the Company as a Member after the date of this Agreement, shall agree to be
bound by the terms of this Agreement and shall execute a counterpart signature
page hereto. No new Member shall be entitled to any retroactive allocation of
any item of income, gain, loss, deduction or credit of a Company. The Manager
may, at his option, at the time a Member is admitted, close the Company books
(as though the Company's tax year has ended) when making pro rata allocations of
items of income, gain, loss, deduction or credit to a new Member for that
portion of the Company's tax year in which a new Member was admitted in
accordance with the provisions of Code Section 706(d) and the Treasury
Regulations promulgated thereunder.
-5-
<PAGE>
3.5 PREEMPTIVE RIGHTS. Each Member shall have a preemptive or preferential
right (but not the obligation) to purchase his or its pro rata share, based on
his or its Ownership Percentage, of all or any part of any New Securities (as
defined below in this Section 3.5) which the Company may, from time to time,
propose to sell or issue, including any such right with respect to additional
Capital Contributions.
The term "New Securities" shall mean (a) Membership Units of the Company,
whether unissued or hereafter created; (b) any obligations, evidences of
indebtedness or other securities of the Company convertible into or exchangeable
for, or carrying or accompanied by any rights to receive, purchase or subscribe
to, any such unissued Membership Units; (c) any right of, subscription to or
right to receive, or any warrant or option for the purchase of, any of the
foregoing securities; and (d) any other securities that may be issued or sold by
the Company.
3.6 RESIGNATION. Except in connection with the sale or gift of Membership
Units in accordance with Article VIII, no Member may voluntarily resign or
withdraw as a Member of the Company without the prior written consent of the
Members owning a Majority Vote. A Member who attempts to resign or withdraw as a
Member in violation of this Section 3.6 shall not be entitled to receive any
distribution prior to the dissolution and liquidation of the Company.
3.7 NONDISCLOSURE AGREEMENTS. Each Member of the Company agrees to execute a
nondisclosure agreement with the Company in a form agreed upon by the Members.
3.8 OTHER EMPLOYEE INCENTIVE PLANS. From time to time, the Company may
establish one or more incentive plans for employees, officers, directors and
consultants of the Company pursuant to which cash payments tied to the value of
the Membership Units of the Company would be made to such Persons.
ARTICLE IV. MAINTENANCE OF CAPITAL ACCOUNTS; ALLOCATIONS AND DISTRIBUTIONS
--------------------------------------------------------------
4.1 CAPITAL ACCOUNTS.
A Capital Account (a "Capital Account") shall be maintained for each Member in
accordance with the capital account maintenance rules set forth in Treasury
Regulations Section 1.704-1(b)(2)(iv). Without limiting the generality of the
foregoing, a Member's Capital Account shall be increased by (i) the amount of
money contributed by the Member to the Company, (ii) the fair market value of
property contributed by the Member to the Company as determined by the
contributing Member and the Company (net of liabilities that the Company is
considered to assume or take subject to pursuant to Section 752 of the Code),
and (iii) allocations to the Member of Company Net Profits
-6-
<PAGE>
and other items of income and gain, including income and gain exempt from tax,
but excluding items of income and gain described in Treasury Regulations Section
1.704-1(b)(4)(i); and which shall be decreased by (w) the amount of money
distributed to the Member, (x) the fair market value of any property distributed
to the Member as determined by the distributee Member and the Company (net of
any liabilities that such Member is considered to assume or take subject to
pursuant to Section 752 of the Code), (y) expenditures described, or treated
under Section 704(b) of the Code as described in Section 705(a)(2)(B) of the
Code, and (z) the Member's share of Net Losses and other items of loss and
deduction, but excluding items of loss or deduction described in Treasury
Regulations Section 1.704-1(b)(4)(i). The Members' Capital Accounts shall be
appropriately adjusted for income, gain, loss and deduction as required by
Treasury Regulations Section 1.704-1(b)(2)(iv)(g) (relating to allocations and
-
adjustments resulting from the reflection of property on the books of the
Partnership at book value, or a revaluation thereof, rather that at adjusted tax
basis). If a Member transfers all or a part of its Membership Unit in accordance
with this Agreement, such Member's Capital Account attributable to the
transferred Membership Unit shall carry over to the new owner of such Membership
Unit pursuant to Treasury Regulations Section 1.704-l(b)(2)(iv)(l).
-
4.2 ALLOCATIONS OF NET PROFITS AND NET LOSSES.
(a) Net Losses. Net Losses shall be allocated to the Members in proportion to
----------
their respective Ownership Percentages.
(b) Net Profits. Net Profits shall be allocated to the Members in proportion
-----------
to their respective Ownership Percentages.
4.3 QUALIFIED INCOME OFFSET. Notwithstanding Section 4.2, no Member shall be
allocated any item of loss or deduction to the extent such allocation would
cause or increase a deficit balance in such Member's Capital Account (in excess
of any limited dollar amount of such deficit balance that such Member is
obligated to restore or is deemed obligated to restore under Treasury
Regulations Sections 1.704-2(g) and 1.704-2(i)(5)) as of the end of the taxable
year to which such allocation relates. In the event any Member unexpectedly
receives any adjustments, allocations, or distributions described in Treasury
Regulations Sections 1.704-1(b)(2)(ii)(d)(4), (5) or (6), items of Company
- - - -
income and gain shall be specially allocated to such Member in an amount and
manner sufficient to eliminate, to the extent required by the Treasury
Regulations, such adjusted Capital Account deficit of such Member as quickly as
possible, provided that an allocation pursuant to this Section 4.3 shall be made
only if and to the extent that such Member would have a Capital Account deficit
(determined after reducing such Member's Capital Account for the items set forth
in Treasury Regulations Section 1.704-1(b)(2)(ii)(d) and after adjusting such
-
Member's Capital Account upward for any amounts such Member is obligated to
restore or is deemed obligated to restore pursuant
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<PAGE>
to Treasury Regulations Sections 1.704-2(g) and 1.704-2(i)(5)) after all other
allocations provided for in this Article IV have been tentatively made as if
this Section 4.3 were not in the Agreement. Any special allocations of items of
income and gain pursuant to this Section 4.3 shall be taken into account in
computing subsequent allocations of income and gain pursuant to this Article IV
so that the net amount of any item so allocated and the income, gain, and losses
allocated to each Member pursuant to this Article IV to the extent possible,
shall be equal to the net amount that would have been allocated to each such
Member pursuant to the provisions of this Section 4.3 if such unexpected
adjustments, allocations, or distributions had not occurred.
4.4 CODE SECTION 704(C) ALLOCATIONS. Notwithstanding any other provision in
this Article IV, in accordance with Code Section 704(c) and the Treasury
Regulations promulgated thereunder, income, gain, loss, and deduction with
respect to any property contributed to the capital of the Company shall, solely
for tax purposes, be allocated among the Members so as to take account of any
variation between the adjusted basis of such property to the Company for federal
income tax purposes and its fair market value on the date of contribution.
Allocations pursuant to this Section 4.4 are solely for purposes of federal,
state and local taxes. As such, they shall not affect or in any way be taken
into account in computing a Member's Capital Account or share of profits,
losses, or other items of distributions pursuant to any provision of this
Agreement.
4.5 DISTRIBUTION.
(a) Except as provided in Section 11.2, and subject to Section 18-607
of the Act, the Manager:
(i) shall cause the Company to distribute to each Member an amount of
Distributable Cash as shall be sufficient to enable such Member to fund its
federal, state and local income tax liabilities attributable to such
Member's distributive share of Company taxable income and gain (the "Actual
Tax Amount"). Estimated tax distributions shall be made in four cash
installments not later than fifteen (15) days before taxes are due, based
upon the Manager's good faith estimate of the Company's Net Profits (the
"Estimated Tax Amount"). The Estimated Tax Amounts and the Actual Tax
Amounts shall be calculated taking into account the character of such income
and gain and calculating such tax as if each Member were an individual
resident in Lake County, Illinois, subject to tax at the highest marginal
rate applicable to income of such character. The Manager shall distribute
to each Member, not later than April 10th of the year following the close of
each taxable year of the Company, the amount by which the Actual Tax Amount
for such taxable year exceeds the Estimated Tax Amount distributed to such
Member for such taxable year. If the Estimated Tax Amount distributed by
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the Company to a Member exceeds the Actual Tax Amount, then the amount of
the next distribution the Manager would otherwise be required to make to
such Member(s) under this Section 4.5 shall be reduced by the amount of such
excess until the remaining balance of such excess is reduced to zero; and
(ii) may make distributions of Distributable Cash and other property
at such time and in such aggregate amounts as determined by the Manager to
the Members (A) first, to the Members in proportion to their respective
unreturned Capital Contributions until each Member has recovered its Capital
Contributions in full, (B) second, to the Members in proportion to their
respective Ownership Percentages.
(b) Upon the liquidation of the Company, liquidating distributions
shall be made in accordance with Section 11.2.
(c) A Member shall have no right to demand and receive any
distribution in a form other than cash.
(d) All amounts withheld pursuant to the Code or any provision of
any state or local tax law with respect to any payment, distribution or
allocation to the Company or the Members may be treated as amounts distributed
to the Members pursuant to this Section 4.5 for all purposes under the
Agreement. The Manager is authorized to withhold from distributions, or with
respect to allocations, to the Members and pay over to any federal, state or
local government any amounts required to be so withheld pursuant to the Code or
any provisions of any other federal, state or local law and may allocate such
amounts to the Members with respect to which such amount was withheld.
ARTICLE V. MANAGEMENT AND OPERATION OF THE COMPANY.
---------------------------------------
5.1 MANAGEMENT GENERALLY. Subject to the provisions of this Agreement and
the Act, the business and affairs of the Company shall be managed by and under
the direction of the Manager. The Manager shall have full and complete
authority, power and discretion to manage and control the business of the
Company, to make all decisions regarding those matters and to perform any and
all other acts or activities customary or incident to the management of the
Company's business and objectives. All powers of the Company may be exercised by
the Manager, except as conferred on or reserved to the Members by the Act or by
this Agreement. The exercise by a Member of any or all of its rights of approval
or consent under this Agreement shall not in any event affect the Member's
status or limited liability as a limited liability member.
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<PAGE>
5.2 ELECTION, TENURE AND REMOVAL OF MANAGERS. The Company shall initially
have one manager. Thereafter, the number of managers of the Company shall be
fixed from time to time by Majority Vote. In no instance shall there be less
than one manager. The manager(s) shall be elected or removed with or without
cause by Majority Vote. The Manager shall continue to hold office until his
successor shall have been elected and qualified.
5.3 LIMITATIONS ON POWERS OF THE MANAGER. Notwithstanding the generality of
Section 5.1, the Manager shall not have the authority to do any of the following
acts without the approval of the Members by Majority Vote:
(a) Cause or permit the Company to engage in any activity that is not
consistent with the purposes of the Company set forth in Section 2.3;
(b) Knowingly do any act in contravention of this Agreement;
(c) Knowingly do any act which would make it impossible to carry on the
ordinary business of the Company, except as otherwise provided in this
Agreement;
(d) Confess a judgment against the Company in an amount in excess of $50,000;
(e) Possess Company Assets, or assign rights in specific Company Assets, for
other than a Company purpose;
(f) Knowingly and willingly perform any act that would cause the Members to
incur personal liability, for example, as a result of the Company conducting
business in a state which has neither enacted legislation which permits limited
liability companies to organize in such state nor permits the Company to
register to do business in such state as a foreign limited liability Company;
(g) Cause the Company to declare or file bankruptcy or make any assignment
for the benefit of creditors or take any similar action;
(h) Cause the Company to acquire any equity or debt securities of any Person,
or to otherwise make loans to any Member or Person;
(i) Cause the Company to incur any contractual liability in any single
transaction or series of related transactions in excess of $2,500,000 or in any
event in excess of the overall budget of the Company;
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<PAGE>
(j) Sell or otherwise dispose of all or substantially all of the Company's
Assets in a single transaction or series of related transactions, except for a
liquidating sale in connection with the dissolution of the Company;
(k) Permit the Company to enter into any merger, consolidation,
reorganization or similar transaction;
(l) Cause the Company to make any distribution except as otherwise set forth
in this Agreement; or
(m) Cause or permit the Company to offer or sell any equity securities of the
Company in a public offering or pursuant to a registration statement under the
Securities Act of 1933, as amended.
5.4 DUTIES AND OBLIGATIONS OF THE MANAGER.
(a) The Manager shall not be required to manage the Company as his sole and
exclusive function and he may have other business interests and engage in
activities in addition to those relating to the Company. Neither the Company
nor the Members shall have any right, by virtue of this Agreement, to share or
participate in such other investments or activities of the Manager or in the
income or proceeds derived therefrom.
(b) The Manager shall take all reasonable action that may be necessary or
appropriate for the continuation of the Company's valid existence as a limited
liability company under the laws of the State of Delaware and of each other
jurisdiction in which such existence is necessary to protect the limited
liability of the Members or to enable the Company to conduct the business in
which it is engaged or proposes to engage.
5.5 EXPENSES. The Manager shall be entitled to reimbursement from the
Company for the reasonable expenses that such Manager pays for or incurs on
behalf of the Company.
5.6 OFFICERS.
(a) The officers of the Company shall consist of a Chief Executive Officer, a
President, a Treasurer and a Secretary and such Executive Vice Presidents,
assistant secretaries or other officers or agents as may be elected or appointed
by the Manager from time to time (collectively, the "Officers"). The Officers
shall be appointed by, and shall exercise such powers and perform such duties as
are prescribed by, the Manager under the direction and management of the
Manager. Any number of offices may be held by the same Person, as the Manager
may determine.
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<PAGE>
(b) The Officers shall hold office for the term for which they were appointed
and until their successors are elected and qualified; provided, however, that,
-------- ------- ----
any Officer may be removed with or without cause at any time by the Manager.
(c) A vacancy in any office because of death, resignation, removal,
disqualification or otherwise may be filled by the Manager for the unexpired
portion of the term.
(d) The Company may pay an Officer compensation for such Officer's services
to or on behalf of the Company in such amounts as determined by the Manager.
5.7 THE CHIEF EXECUTIVE OFFICER. The Chief Executive Officer shall have
general supervision, direction and control of the business and affairs of the
Company and shall have the power to sign any deeds, mortgages, bonds, contracts
or other instruments which the Manager has authorized to be executed. The Chief
Executive Officer shall preside at all meetings of the Members. The Chief
Executive Officer shall have the general powers and duties of management
generally vested in the chief executive officer of a business entity, and shall
have such other powers and duties with respect to the administration of the
business and affairs of the Company as may be prescribed by the Manager from
time to time.
5.8 THE PRESIDENT. The President shall be the chief operating officer of the
Company and shall have power to sign any deeds, mortgages, bonds, contracts or
other instruments which the Manager has authorized to be executed, except in
cases where the signing and execution thereof shall be expressly delegated by
the Manager or by this Agreement to some other officer or agent of the Company,
or shall be required by law to be otherwise signed or executed. In general, the
President shall see that all orders and resolutions of the Manager are carried
into effect and shall perform all duties incident to the office of the President
and such other duties as may be prescribed by the Manager from time to time.
5.9 THE EXECUTIVE VICE PRESIDENT(S). In the absence of (or at the request of)
the President in the event of his or her inability or refusal to act, an
executive vice president (or in the event there be more than one executive vice
president, the executive vice presidents in the order designated, or in the
absence of any designation, then in the order of their election) if one shall be
appointed, shall perform the duties of the President, and when so acting, shall
have all the powers of and be subject to all the restrictions upon the
President. Any executive vice president shall perform such other duties as from
time to time may be assigned to him by the Chief Executive Officer, the
President or the Manager.
5.10 THE TREASURER. The Treasurer shall be the chief financial officer of the
Company. The Treasurer shall not be required to give a bond for the faithful
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<PAGE>
discharge of his or her duties. He or she shall: (a) have charge and custody of
and be responsible for all funds and securities of the Company; (b) be charged
with primary responsibility for dealing with national securities exchanges or
other exchanges in which the Company may hold a membership or on which the
Company may trade; (c) receive and give receipts for moneys due and payable to
the Company from any source whatsoever, and deposit all such moneys in the name
of the Company in such banks, trust companies or other depositaries as shall be
selected by the Manager; and (d) in general perform all the duties incident to
the office of treasurer and such other duties as from time to time may be
assigned to him or her by the President or by the Manager.
5.11 THE SECRETARY. The Secretary shall: (a) keep the minutes of all Members'
meetings in one or more books provided for that purpose; (b) see that all
notices are duly given in accordance with the provisions of this Agreement or as
required by law; (c) be custodian of Company records; (d) keep a register of the
post office address of each Member which shall be furnished to the Secretary by
such Member; (e) certify the resolutions of the Members, and other documents to
the Company, as true and correct; and (f) in general, perform all duties
incident to the office of Secretary and such other duties as from time to time
may be assigned to him or her by the President or the Manager.
ARTICLE VI. POWERS, RIGHTS AND OBLIGATIONS OF MEMBERS; MEETINGS OF MEMBERS.
--------------------------------------------------------------
6.1 POWERS OF THE MEMBERS. Except as expressly provided in this Agreement,
the Members shall take no part in the management of the business or transact any
business for the Company and shall have no power to sign for or bind the Company
solely in their capacity as Members; provided, however, that, the Members shall
-------- -------
have the approval and consent rights as described in this Agreement and provided
under the Act.
6.2 EXAMINATION OF COMPANY RECORDS. Each Member or its authorized
representative shall have the right, during regular business hours and upon
reasonable advance written notice (which shall state the reason therefor), to
examine and copy (at the requesting Member's expense), for a proper purpose as
determined by the Manager, the records (where such records are maintained) of
the Company and otherwise make reasonable inquiry as to the affairs of the
Company. A proper purpose shall mean a purpose reasonably related to such
Person's interest as a Member. Upon the written request of any Member, the
Manager shall provide a list showing the names, addresses and Ownership
Percentages of all Members.
6.3 PRIORITY AND RETURN OF CAPITAL. Except as may be expressly provided in
Article IV or Article VIII, no Member shall have priority over any other Member,
either as to return of Capital Contributions or as to Net Profits, Net Losses or
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distributions; provided, however, that, this Section shall not apply to the
-------- -------
repayment by the Company of loans (as distinguished from Capital Contributions)
which a Member has made to the Company.
6.4 MEETINGS OF MEMBERS.
(a) Meetings of the Members may be called by the Manager or by Members
holding in the aggregate not less than five percent (5%) of the issued and
outstanding Membership Units. The meeting shall be held at the principal place
of business of the Company or as designated in the notice or waivers of notice
of the meeting.
(b) Notice of any meeting of the Members shall be given no fewer than ten
(10) days and no more than thirty (30) days prior to the date of the meeting.
Notices shall be delivered in the manner set forth in Section 12.1 and shall
specify the purpose or purposes for which the meeting is called. The attendance
of a Member at any meeting shall constitute a waiver of notice of such meeting,
except where a Member attends a meeting for the express purpose of objecting to
the transaction of any business because the meeting is not lawfully called or
convened.
(c) Members owning a Majority Vote, present in person or represented by
proxy, shall constitute a quorum for the transaction of business at any meeting
of the Members; provided, that, if Members owning less than a Majority Vote are
-------- ----
present at said meeting, Members owning a majority of the Membership Units
present may adjourn the meeting at any time and without further notice. The act
of the Members holding a majority of the Membership Units present at such
meeting at which a quorum is present shall be the act of the Members, unless the
vote of a greater or lesser proportion or number is otherwise required by the
Act, the Certificate or by this Agreement.
(d) Unless specifically prohibited by the Certificate or the Act, any action
required to be taken at a meeting of the Members or any other action which may
be taken at a meeting of the Members, may be taken without a meeting if a
consent in writing, setting forth the action so taken, shall be signed by the
Members holding Membership Units having not less than the minimum number of
votes that would be necessary to authorize or take such action at a meeting at
which all Members were present and voting. Prompt notice of any action taken
without a meeting by less than unanimous consent shall be given in writing to
those Members who were entitled to vote but did not consent in writing.
(e) The Members may participate in and act at any meeting of Members through
the use of a conference telephone or other communications equipment by means of
which all Persons participating in the meeting can hear each other.
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Participation in such meeting shall constitute attendance and presence in person
at such meeting of the Person or Persons so participating.
(f) Each Member entitled to vote at a meeting of Members or to express
consent or dissent to action in writing without a meeting may authorize another
Person or Persons to act for him by proxy. Such proxy shall be deposited at the
principal offices of the Company not less than 48 hours before a meeting is held
or action is taken, but no proxy shall be valid after eleven months from the
date of its execution, unless otherwise provided in the proxy.
(g) Each Member shall vote in proportion to its Ownership Percentage.
6.5 RIGHTS OF LEGAL REPRESENTATIVES. If a Member who is an individual dies or
is adjudged by a court of competent jurisdiction to be incompetent to manage the
Member's person or property, the Member's executor, administrator, guardian,
conservator, or other legal representative may exercise all of the Member's
rights for the purpose of settling the Member's estate or administering the
Member's property, including any power the Member has under the Certificate or
this Agreement to give an assignee the right to become a Member. If a Member is
a corporation, trust, or other entity and is dissolved or terminated, the powers
of that Member may be exercised by its legal representative or successor.
ARTICLE VII. ACCOUNTING PROCEDURES.
---------------------
7.1 FISCAL YEAR VII. The fiscal year of the Company shall begin on January 1
and shall end on December 31 of each year; provided that the fiscal year ending
December 31, 1996 shall commence on the date of this Agreement.
7.2 BOOKS OF ACCOUNT. At all times during the existence and continuance of
the Company, the Manager shall cause to be kept accurate, complete and proper
books, records and accounts pertaining to the Company's affairs, including (a) a
list of all Members and their addresses and their Capital Contributions,
Membership Units and Ownership Percentages, (b) a copy of the Certificate and
all amendments thereto and all powers of attorney pursuant to which any
Certificate has been executed, (c) an original copy of the Agreement and all
amendments thereto, (d) copies of the Company's federal and state tax returns
and financial statements and (e) the Company's books and records. Such books and
records shall be kept on the accrual basis of accounting in conformity with
generally accepted accounting principles. The method of accounting followed by
the Company for federal income tax purposes shall be the accrual method. All
books, records and accounts of the Company shall be kept at its principal office
or at such other office as the Manager may designate for such purpose.
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7.3 PREPARATION AND FILING OF INCOME TAX RETURNS AND OTHER WRITINGS. The
Company's treasurer shall cause the preparation and timely filing of all Company
tax returns, shall, on behalf of the Company, make such tax elections
(including, without limitation, any election under Section 754 of the Code),
determinations and allocations which he or she, in his or her sole and absolute
discretion, deems to be appropriate and shall timely make all other filings
required by any governmental authority having jurisdiction to require such
filing, the cost of which shall be borne by the Company. Copies of such returns
shall be furnished to the Members within a reasonable period of time after the
end of each Fiscal Year of the Company. A Form K-1, prepared by the Company's
accountants, shall be delivered to the Members within ninety (90) days after the
expiration of each Fiscal Year of the Company. This form shall show the
allocation of profit or loss of the Company for federal income tax purposes,
including all separately stated items, to each Member. No election shall be made
by the Company or any Member to be excluded from the application of the
provisions of subchapter K of the Code or from any similar provision of state
tax laws.
7.4 TAX MATTERS PARTNER. VIC is hereby designated the "Tax Matters Partner"
(as defined in Code Section 6231), and is authorized and required to represent
the Company (at the Company's expense) in connection with all examinations of
the Company's affairs by tax authorities, including, without limitation,
administrative and judicial proceedings, and to expend Company funds for
professional services and costs associated therewith. The Members agree to
cooperate with each other and to do or refrain from doing any and all things
reasonably required to conduct such proceedings.
ARTICLE VIII. TRANSFER OF MEMBER MEMBERSHIP UNITS.
-----------------------------------
8.1 LIMITATION ON TRANSFER OF MEMBERSHIP UNIT. For so long as this Agreement
shall remain in effect, no Member shall sell, assign, pledge, hypothecate,
transfer exchange or otherwise transfer for consideration (a "Transfer"), its
Membership Unit, in whole or in part, and a transferee shall not have a right to
become a "Substitute Member," except in strict compliance with the provisions of
this Agreement. Any Transfer will be effective on the first day following
receipt by the Members from the Manager of written notice that all of the
requirements of this Article VIII have been met.
8.2 CERTAIN DOCUMENTS. The Company and the Members agree to use their best
efforts to cause the Company not to issue any Membership Units without obtaining
from each prospective Substitute Member, prior to the issuance of the Membership
Units, (a) a counterpart of this Agreement as then in effect, duly executed by
the prospective Substitute Member, (b) any reasonable fees and expenses in
connection with the admission of the prospective Substitute Member as an
assignee or transferee and (c) all representations and all such certificates,
evidences or assurance reasonably requested by the Company and the existing
Members.
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<PAGE>
8.3 RIGHT OF FIRST REFUSAL.
(a) If at any time a Member (the "Selling Member") receives a bona fide offer
in writing from any Person who is not a Member (a "Bona Fide Offer") which the
Selling Member desires to accept, to purchase any or all of the Membership Units
owned by the Selling Member (the "Offered Units"), then the Selling Member shall
give the non-transferring Members (the "Offeree Members") (i) written notice
(the "Selling Member Notice") of the name and address of the Person who made the
Bona Fide Offer (the "Proposed Acquiror") and (ii) a copy of the Bona Fide
Offer, containing all of the material terms and conditions thereof. Subject to
the provisions of this Section 8.3, each Offeree Member shall have the
irrevocable right of first refusal for a period of thirty (30) days after its
receipt of the Selling Member Notice (the "Acceptance Period") to purchase a
portion of the Offered Units in the proportion that the Ownership Percentage of
such Member bears to the Ownership Percentages of all the Offeree Members
electing to so purchase the Offered Units.
(b) An Offeree Member may exercise its right of first refusal by notifying
the Company and each Offeree Member in writing (the "Acceptance Notice") within
the Acceptance Period of its intention to purchase all or any portion of its pro
rata portion of the Offered Interest, for the price and upon the terms and
conditions of the Bona Fide Offer. If any Offeree Member (a "Declining Member")
declines to purchase all or any part of its pro rata portion of the Offered
Units, the non-Declining Members may purchase the declined Offered Units on a
pro rata basis. Failure to deliver an Acceptance Notice shall be deemed
conclusive evidence of an Offeree Member's intent to decline the opportunity to
purchase any of the Offered Units.
(c) The closing of the purchase of the Offered Interest by the Offeree
Members shall be consummated no later than sixty (60) days after the date of the
Selling Member Notice. At the closing, the Selling Member shall sell to the
Offeree Members full right, title and interest in and to the Offered Units, free
and clear of all liens, claims and encumbrances (other than those created
pursuant to this Agreement) and shall deliver or cause to be delivered to the
Offeree Members the certificate(s), if any, representing the Membership Units
purchased by the Offeree Members.
(d) In the event the Offeree Members in the aggregate have not agreed to
purchase all of the Offered Units, the Selling Member shall have the right for a
period of eighty (80) days after the date of the Selling Member Notice to sell
to the Proposed Acquiror, all, but not less than all, of the Offered Units, at a
price and upon terms and conditions specified in the Selling Member notice. In
the event the Selling Member (i) proposes to sell the Offered Units other than
in accordance with the preceding sentence or (ii) does not sell all of the
Offered Units to the Proposed Acquiror within such 80-day period, then, in each
such case, prior to any Transfer of such Offered
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Units, the Selling Member shall be required to first offer such Offered Units to
the Offeree Members in the manner provided in this Section.
8.4 LEGAL CAPACITY OF TRANSFEREE; TAX EFFECTS. Anything in this Article VIII
or elsewhere in this Agreement to the contrary notwithstanding, no Transfer of
all or any part of any Member's Membership Unit shall be made or shall be
effective if such Transfer would (in the opinion of the Company's legal counsel,
which shall be conclusive for this purpose) jeopardize the limited liability
status of the Company or result in any substantial adverse effect upon the
Company or the Members for federal income tax purposes (including, without
limitation, a termination of the Company or loss of tax treatment as a
partnership).
8.5 SECURITIES LAWS MATTERS. Anything in this Article VIII or elsewhere in
this Agreement to the contrary notwithstanding, no Transfer of all or any part
of any Member's Membership Unit shall be made or shall be effective unless (a)
prior to the consummation thereof, all assignees and transferees with respect
thereto shall have made to the Company in writing all of the representations
required, in the sole judgment of the Manager, to ensure compliance with
applicable securities laws, and (b) if required in the discretion of the
Manager, the Company is provided with an opinion of its legal counsel, or other
legal counsel satisfactory to the Company's counsel, stating that such Transfer
is exempt from the Securities Act, and is permissible under all other applicable
federal and state securities laws without registration or qualification of any
security or consent or approval of any Person.
8.6 INDEMNIFICATION. To the fullest extent permitted by applicable law, each
Member and each assignee or transferee of any Membership Unit (or portion
thereof) shall indemnify and hold harmless the Company, the Manager, every
Member or Officer who was or is a party or is threatened to be made a party to
any threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative by reason of or arising from any
actual or alleged misrepresentation, misstatement of facts or omission to state
facts made (or omitted to be made) by such Member or any assignee or transferee
of any Membership Unit (or portion thereof) in connection with any Transfer of
all or any part of any Membership Unit by such Member, against expenses for
which the Company or such other Person has not otherwise been reimbursed
(including attorneys' fees, judgments, fines and amounts paid in settlement)
actually and reasonably incurred by any of them in connection with such action,
suit or proceeding.
ARTICLE IX. LIMITATIONS ON LIABILITIES; INDEMNIFICATION;
--------------------------------------------
RIGHT TO CONDUCT OTHER BUSINESS
-------------------------------
9.1 LIABILITY OF MEMBERS. No Member shall have personal liability for the
obligations, debts, liabilities or losses of the Company, whether to the
Company, to
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the Manager, to any other Member, to any Officer or to the creditors of the
Company, whether in contract, tort or otherwise, in excess of, in the aggregate,
the amount of such Member's Capital Contributions to the Company, except as
otherwise required by law. No creditor shall have the right to attach or garnish
or compel the contribution by any Member of any capital. Except as may otherwise
be required by the Act, no Member shall be liable for a return of the Assets
delivered or distributed to such Member.
9.2 LIABILITY AND INDEMNIFICATION OF MANAGERS AND AUTHORIZED PERSONS.
(a) No Manager shall be liable to any Member or to the Company by reason of
the actions or inactions of such Person in the conduct of the business of the
Company, except for such Person's fraud, gross negligence or willful misconduct.
No amendment of this Agreement or repeal of any of its provisions shall limit or
eliminate the benefits provided to the Manager under this provision with respect
to any act or omission which occurred prior to such amendment or repeal.
(b) The Company shall, to the fullest extent permitted by applicable law,
indemnify and hold harmless, the Manager and each director, manager, agent,
officer, representative and employee thereof or Person who is deemed to control
the Manager (hereinafter collectively referred to as the "Indemnitees") from and
against any losses, claims, damages, liabilities or actions, joint or several,
to which such Indemnitees may be subject by virtue of any act performed by such
Indemnitee, or omitted to be performed by any such Indemnitee, in connection
with the business of the Company or its formation and shall reimburse each such
Indemnitee for any legal or other expenses reasonably incurred by such Person in
connection with investigating, defending or preparing to defend any such loss,
claim, damage, liability or action; provided, however, that, the Company shall
-------- ------- ----
not be liable to any Indemnitee to the extent that in the final non-appealable
judgment of a court of competent jurisdiction such loss, claim, damage,
liability or action is found to arise from such Indemnitee's gross negligence or
willful misconduct. Expenses incurred by an Indemnitee in defending a civil or
criminal action, suit or proceeding arising out of or in connection with this
Agreement or the Company's business or affairs shall be paid by the Company in
advance of the final disposition of such action, suit or proceeding upon receipt
of an undertaking by the Indemnitee to repay such amount plus reasonable
interest in the event that it shall ultimately be determined that the Indemnitee
was not entitled to be indemnified by the Company in connection with such
action. No amendment of this Agreement shall limit or eliminate the right to
indemnification provided hereunder with respect to acts or omissions occurring
prior to such amendment or repeal. The Company may carry insurance protecting it
and potential Indemnitees from liabilities to third parties, to the extent
practicable.
9.3 INDEMNIFICATION RIGHTS CUMULATIVE. The indemnification rights contained in
this Article IX shall be cumulative of, and in addition to, any and all rights,
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<PAGE>
remedies and other recourse to which the Indemnitee shall be entitled, whether
pursuant to the provisions of this Agreement, at law or in equity.
Indemnification shall be made solely and entirely from the Assets of the
Company, and no Member shall be personally liable to the Indemnitees under this
Article IX.
9.4 RIGHT TO CONDUCT OTHER BUSINESS. Nothing contained in this Agreement
shall be deemed to restrict in any way the freedom of each Member, the Manager
and their respective Affiliates, including any director, officer or employee of
such Person, to conduct any other business or any other activity whatsoever
(subject to any restriction, limitation or qualification thereon arising by
virtue of any understanding, arrangement or agreement, other than this
Agreement, or arising under law or otherwise), including, without limitation,
the investment in or operation of any business in the telecommunications field,
without having or incurring any obligation to offer any interest therein to the
Company or any other Member.
ARTICLE X. POWER OF ATTORNEY.
-----------------
10.1 AUTHORITY TO EXECUTE DOCUMENTS. During the life of the Company and
during any additional period authorized in accordance with this Agreement to
dissolve, liquidate and wind up the affairs of the Company, each of the Members
hereby irrevocably designates and appoints the Manager and any duly appointed
agent of the Manager, with full power of substitution, to be the Member's true
and lawful attorney-in-fact with the power, from time to time, in the name,
place and stead of the Member to do any ministerial act necessary to qualify the
Company to do business under the laws of any jurisdiction in which it is
necessary to file any instrument in writing in connection with such
qualification and to make, execute, swear to and acknowledge, amend, file,
record, deliver and publish in conformance with the provisions of this Agreement
(a) the Certificate, (b) a counterpart of this Agreement or of any amendment
hereto for the purpose of filing or recording such counterpart in any
jurisdiction in which the Company may own property or transact business, (c) all
certificates and other instruments necessary to qualify or continue the Company
as a limited liability company in the State of Delaware or in any jurisdiction
where the Company may own property or be doing business, (d) any fictitious or
assumed name certificate required or permitted to be filed by or on behalf of
the Company, including, without limitation, to enable the Company to conduct its
business under the name "Telcom Plus" or such other name or names as the Manager
may determine from time to time, (e) any other instrument that is now or may
hereafter be required by law to be filed for or on behalf of the Company, (f)
any other instruments or documents that the Manger deems necessary to conduct
the operation of the Company, (g) any amendment to this Agreement pursuant to
Section 12.2 hereof and (h) a certificate or other instrument evidencing the
dissolution or termination of the Company when such shall be appropriate in each
jurisdiction in which the Company shall own property or do business.
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<PAGE>
10.2 SURVIVAL OF POWER. The power of attorney referenced in Section 10.1
hereof shall not be revoked and shall survive the Transfer by a Member of all or
part of its Membership Unit and it shall be coupled with such Membership Unit
and shall survive the death, incapacity or dissolution of any Member. Any Person
dealing with the Company may conclusively presume and rely upon the fact that
any instrument executed by the Manager is authorized, regular and binding
without further inquiry. The power of attorney referenced in Section 10.1 hereof
may be exercised for each Member by the signature of the Manager or by listing
the names of all the Members and executing any instrument with the signature of
the Manager acting as attorney-in-fact for all of them.
ARTICLE XI. DISSOLUTION AND TERMINATION.
---------------------------
11.1 DISSOLUTION.
(a) The Company shall be dissolved upon the earlier to occur of:
(i) The Termination Date;
(ii) The date on which all of the Assets of the Company have been
disposed of or the Company is merged with or into another Person;
(iii) The date of entry of a decree of judicial dissolution under
Section 18-202 of the Act;
(iv) Upon the date of the death, bankruptcy, or dissolution of, a
Member or upon the occurrence of any other event that terminates the
continued membership of a Member in the Company other than by transfer of
all of the Member's Membership Units to another person (a "Withdrawal
Event"), unless, within ninety (90) days following the Withdrawal Event, the
business of the Company is continued by the affirmative vote of all of the
remaining Members and there are at least two remaining Members; or
(v) The date on which all of the Members agree to in writing to
terminate the Company.
(b) Notwithstanding the dissolution of the Company, the Company
shall not terminate until a certificate of cancellation shall be filed with the
Secretary of State of the State of Delaware and the assets of the Company are
distributed as provided in Section 11.2 below. Upon the dissolution of the
Company, prior to the termination of the Company, the business of the Company
and the affairs of the Members shall continue to be governed by this Agreement.
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<PAGE>
(c) If there is a Withdrawal Event and all of the remaining Members consent
to continue the business of the Company in accordance with Section 11.1(a)(iv),
the Company shall pay to the withdrawing Member any positive balance in the
withdrawing Member's Capital Account within ninety (90) days from the date of
the Withdrawal Event. The remaining Members shall have the right in their sole
discretion at any time within sixty (60) days of the Withdrawal Event to
determine all Net Profits and Net Losses of the Company as of the date of such
determination and to make appropriate credits and debits to the Members' Capital
Accounts. The Capital Account of the withdrawing Member as of the date of
determination shall be conclusively deemed to be the fair value of all of its
Membership Units and the payment provided for in this Section 11.1(c) shall be
the full and only consideration for the redemption of the withdrawing Member's
Membership Units.
11.2 WINDING UP, LIQUIDATION AND DISTRIBUTION OF ASSETS.
(a) Upon dissolution, an accounting shall be made of the Company's assets,
liabilities and operations, from the date of the last previous accounting until
the date of dissolution. The Manager shall immediately proceed to wind up the
affairs of the Company.
(b) If the Company is dissolved and its affairs are to be wound up, the
Manager shall:
(i) Sell or otherwise liquidate all of the Company's assets as
promptly as practicable;
(ii) Allocate any Net Profit or Net Loss resulting from such sales
to the Member's Capital Accounts in accordance with Article IV hereof;
(iii) Discharge all liabilities of the Company, including
liabilities to Members who are creditors of the Company to the extent
permitted by law, excluding liabilities for distributions to Members under
Section 4.5; and
(iv) Distribute the remaining assets to Members in accordance with,
and to the extent of, the positive balance (if any) of each Member's Capital
Account (as determined after taking into account all Capital Account
adjustments for the Company's taxable year during which the liquidation
occurs), and thereafter to the Members in accordance with, and in proportion
to, each Member's Ownership Percentage. Any such distributions to the
Members in respect of their Capital Accounts shall be made within the time
specified in Section 1.704-1(b)(2)(ii)(b)(2) of the Treasury Regulations.
<PAGE>
(c) The Manager shall determine the fair market value of each non-cash asset
distributed to one or more Members to determine the Net Profit or Net Loss that
would have resulted if such asset were sold for such value. Such Net Profit or
Net Loss shall then be allocated pursuant to Article IV, and the Members'
Capital Accounts shall be adjusted to reflect such allocations. The amount
distributed and charged to the Capital Account of each Member receiving an
interest in such distributed asset shall be the fair market value of such
interest (net of any liability secured by such asset that such Member assumes or
takes subject to).
(d) Notwithstanding anything to the contrary in this Agreement, if any Member
has a deficit balance in its Capital Account (after giving effect to all
contributions, distributions, allocations and other Capital Account adjustments
for all taxable years, including the year during which such liquidation occurs),
such Member shall have no obligation to make any Capital Contribution to restore
such deficit balance, and the deficit balance shall not be considered a debt
owed by such Member to the Company or to any other Person for any purpose
whatsoever.
(e) Upon the completion of the winding up, liquidation and distribution of
the assets of the Company, the Company shall be deemed terminated.
(f) The Manager shall comply with all requirements of applicable law
pertaining to the winding up of the affairs of the Company and the final
distribution of its assets. The Manager shall be under no liability with
respect to the Assets held by the Company upon the termination of the Company
except to hold and maintain the same in the name of the Company until disposed
of in accordance with the terms of this Agreement.
11.3 CERTIFICATE OF CANCELLATION. When all debts, liabilities and obligations
of the Company have been paid and discharged or adequate provisions have been
made therefor and all of the remaining property and assets of the Company have
been distributed, a certificate of cancellation shall be executed by one or more
authorized persons, which certificate shall set forth the information required
by the Act. A certificate of cancellation shall be filed with the Delaware
Secretary of State to accomplish the cancellation of the Certificate of the
Company upon the dissolution and completion of the winding up of the Company.
11.4 EFFECT OF FILING OF CERTIFICATE OF CANCELLATION. Upon the filing of the
certificate of cancellation with the Delaware Secretary of State, the existence
of the Company shall cease, except that the Manager may, in the name of, and for
and on behalf of the Company, prosecute and defend suit, gradually settle and
close the Company's business, dispose of and convey the Company's property,
discharge or make reasonable provision for the Company's liabilities, and
distribute to the Members any remaining assets, and take such other appropriate
action as provided in the Act. The
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<PAGE>
Manager shall have authority to distribute any Company property discovered after
dissolution, convey real estate and take such other act as may be necessary on
behalf of and in the name of the Company.
11.5 RETURN OF CONTRIBUTION NONRECOURSE TO OTHER MEMBERS. Except as provided
by law or as expressly provided in this Agreement, upon dissolution, each Member
shall look solely to the assets of the Company for the return of its Capital
Contributions. If the property remaining after the payment or discharge of the
debts and liabilities of the Company is insufficient to return the Capital
Contributions of one or more Members, such Member or Members shall have no
recourse against any other Member, except as otherwise provided by law.
ARTICLE XII. RULES OF CONVENTION XII0RULES OF CONVENTION.
-------------------------------------------
12.1 NOTICE. All notices, reports and other communications given pursuant to
this Agreement shall be in writing and shall either be mailed by first class
mail, postage prepaid, certified or registered with return receipt requested,
delivered in person or by nationally recognized overnight courier or sent by
facsimile or prepaid telegram followed by confirmatory letter. Notice sent by
mail in the foregoing manner shall be deemed served or given three (3) Business
Days after deposit in the United States Postal Service. Notice delivered by
nationally recognized overnight courier shall be deemed served or given one (1)
Business Day after delivery to the courier, charges prepaid. Notice given to the
Company, the Manager or a Member in any other manner shall be effective only if
and when received by the addressee. For purposes of notice, the address of each
Member shall be the address as stated below the Member's name on the signature
page of this Agreement; provided, however, that, each Member shall have the
-------- -------
continuing right to change its address for notice hereunder to any other
location by giving thirty (30) days' prior notice of such change to the Company
in the manner set forth above. For the purposes of all notices to the Company or
the Manager, the Company's and the Manager's address shall be the same as the
Company's address as set forth in Section 2.2 hereof.
12.2 AMENDMENT. Any provision of this Agreement may be amended by Majority
Vote; provided, that, no amendment of this Agreement shall, without the consent
-------- ----
of the affected Member (a) increase the liability of such Member beyond the
liability of such Member expressly set forth in this Agreement or otherwise
modify or affect the limited liability of such Member, (b) change the maximum
Capital Contribution required of such Member (other than as provided in this
Agreement) or (c) change the method of allocations made under the provisions of
Articles IV, VII and XI hereof to any Member (except as otherwise provided in
this Agreement). For any such amendment, the Manager shall deliver to each
Member written notice requesting such Member's consent and upon receipt of the
required consents and execution of the documents setting forth the amendment,
such amendment shall become effective.
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<PAGE>
12.3 GOVERNING LAW. This Agreement is made pursuant to and shall be construed
in accordance with the internal laws of the State of Delaware, without regard to
the principles of the conflicts of laws thereof. In the event of a direct
conflict between the provisions of this Agreement and the provisions of the Act
or the Certificate, such provisions of the Act or the Certificate, as the case
may be, shall be controlling.
12.4 ENTIRE AGREEMENT. This Agreement, together with the schedules and
exhibits attached hereto, contains the entire agreement among the Members
relating to the subject matter hereof and there are no other or further
agreements outstanding not specifically mentioned herein; provided, however,
-------- -------
that, the Members may by agreement amend and supplement this Agreement in
writing from time to time as provided in Section 12.2 hereof.
12.5 SEVERABILITY. If any term or provision of this Agreement or the
performance thereof shall be invalid or unenforceable to any extent, such
invalidity or unenforceability shall not affect or render invalid or
unenforceable any other provision of this Agreement and this Agreement shall be
valid and enforced to the fullest extent permitted by law.
12.6 CONSTRUCTION. Whenever required by the context, as used in this
Agreement, the singular number shall include the plural, the neuter shall
include the masculine or the feminine gender and the masculine gender shall
include the neuter or the feminine gender. All references to days in this
Agreement mean calendar days unless otherwise provided. Any day or deadline or
time period hereunder which falls on a Saturday, Sunday or a non-Business Day
shall be deemed to refer to the first Business Day following.
12.7 CAPTIONS. The Article and Section headings appearing in this Agreement
are for convenience of reference only and are not intended, to any extent and
for any purpose, to limit or define the text of any Article or Section hereof.
12.8 COUNTERPARTS AND EXECUTION. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original Agreement and all of
which shall constitute one Agreement between each of the parties hereto,
notwithstanding that all of the parties are not signatories to the original or
the same counterpart, to be effective as of the day and year first set forth
above.
12.9 CONSENTS AND WAIVERS. A Member's waiver, consent, failure to object,
failure to seek redress, course of conduct or failure to insist upon the strict
performance of any covenant or condition of this Agreement shall not be
considered or construed as a waiver or consent for subsequent matters or other
obligations or rights of the Member.
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<PAGE>
12.10 RIGHTS AND REMEDIES CUMULATIVE. The rights and remedies provided by
this Agreement are cumulative and the use of any one right or remedy by any
party shall not preclude or waive its right to use any or all other remedies.
Such rights and remedies are given in addition to any other rights the parties
may have by law, statute, ordinance or otherwise.
12.11 ASSIGNS. Each and all of the covenants, terms, provisions and
agreements herein contained shall be binding upon and inure to the benefit of
the parties hereto and, to the extent permitted by this Agreement, their
respective assigns.
12.12 WAIVER OF ACTION FOR PARTITION. Each Member irrevocably waives during
the term of the Company any right that it may have to maintain an action for
partition with respect to the property of the Company.
12.13 EXECUTION OF ADDITIONAL INSTRUMENTS. Each Member hereby agrees to
execute such other and further statements of interest and holdings,
designations, powers of attorney and other instruments necessary to comply with
any laws, rules or regulations.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the day
and year first above written.
VENTURES IN COMMUNICATIONS RMTS, LLC
By: /s/ James A. Otterbeck
------------------------------
Name: James A. Otterbeck
------------------------------
Title: Managing Member
------------------------------
AMI-VCOM2, INC.
By: /s/ James A. Otterbeck
-----------------------------
Name: James A. Otterbeck
-----------------------------
Title: Managing Member
-----------------------------
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SCHEDULE 3.2
INITIAL CAPITAL CONTRIBUTION
Members Initial Capital Initial Initial
Contribution Membership Ownership
Units Percentage
Ventures in Communications $990,000.00 99 99%
RMTS, LLC
Address for Notices
2201 Waukegan Road
Suite E-200
Bannockburn, Illinos 60015
Facsimile: (708) 374-1070
AMI-VCom2, Inc. $ 10,000.00 1 1%
Address for Notice
2201 Waukegan Road
Suite E-200
Bannockburn, Illinos 60015
Facsimile: (708) 374-1070
<PAGE>
ONEPOINT COMMUNICATIONS HOLDINGS, LLC
AMENDMENT TO OPERATING AGREEMENT
This Amendment to Operating Agreement is entered into as of October 15, 1997,
between OnePoint Communications, LLC. a Delaware limited liability company
("ONEPOINT"), and AMI-VCom2, Inc., a Delaware corporation ("AMI," together with
OnePoint, the "MEMBERS").
RECITALS
A. AMI and OnePoint are parties to an Operating Agreement (the "OPERATING
AGREEMENT"), dated as of January 30, 1997, with respect to OnePoint
Communications Holdings, LLC (the "COMPANY"). Capitalized terms used herein and
not otherwise defined shall have the respective meanings assigned such terms
in the Operating Agreement.
B. AMI desires to sell its membership units in the Company to OnePoint,
and OnePoint desires to purchase such membership units (the "UNIT TRANSFER"),
and the Members have entered into a Securities Purchase Agreement pursuant to
which such membership interests, among others, would be transferred from AMI to
the Company.
C. Following the Unit Transfer, OnePoint will be the sole member of the
Company.
D. AMI and OnePoint desire to amend the Operating Agreement to reflect
the Unit Transfer.
NOW THEREFORE, for good and valuable consideration, the sufficiency of
which is hereby acknowledged, the parties hereto agree as follows:
1. Consent to Transfer. The Members hereby consent to the Unit Transfer
-------------------
and waive all other requirements of Article VII of the Operating
Agreement with respect to the Unit Transfer.
2. Resignation of AMI. Effective upon the transfer of its membership
------------------
units of the Company, AMI resigns as a member of the Company, and
OnePoint accepts such resignation.
3. References Replaced. All references to AMI in the Operating Agreement
-------------------
shall be deleted, and OnePoint shall be the sole member of the
Company.
4. Full Force and Effect. All other provisions of the Operating Agreement
---------------------
shall remain in full force and effect.
<PAGE>
5. Governing Law. This Agreement is made pursuant to, and shall be
-------------
construed in accordance with the internal laws of the State of
Delaware, without regard to the principals of the conflicts of laws
thereof. In the event of a direct conflict between the provisions of
this Agreement and the provisions of the Act or the Certificate, as
the case may be, shall be controlling.
6. Counterparts and Execution. This Agreement may be executed in multiple
--------------------------
counterparts, each of which shall be deemed an original Agreement and
all of which shall constitute one Agreement between each of the
parties hereto, notwithstanding that all of the parties are not
signatories to the original or same counterpart,to be effective as of
the day and year first set forth above.
7. Execution of Additional Instruments. each of the parties hereby agrees
-----------------------------------
to execute such other and further statements of interest and holdings,
designation, powers of attorney and other instruments necessary to
comply with any laws, rules or regulations.
* * * *
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Amendment to
Operating Agreement as of the day and year first above written.
ONEPOINT COMMUNICATIONS, LLC
By: /s/ James A. Otterbeck
-------------------------------
Name: ______________________________
Title: CEO
------------------------------
AMI-VCOM2, INC.
By: /s/ James A. Otterbeck
-------------------------------
Name: ______________________________
Title: President
------------------------------
<PAGE>
EXHIBIT 3.7
VIC-RMTS-DC, LLC
OPERATING AGREEMENT
BETWEEN
MID-ATLANTIC RMTS HOLDINGS, LLC
AND
VIC-RMTS HOLDCO, LLC
DATED AS OF
FEBRUARY 6, 1997
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
ARTICLE 1 DEFINITIONS ................................................ 1
"Act"....................................................... 2
"Actual Tax Amount"......................................... 2
"Adjusted Capital Account".................................. 2
"Affiliate"................................................. 2
"Agreement"................................................. 2
"Aggregate Contribution Value".............................. 2
"Assets".................................................... 2
"Board"..................................................... 2
"Business Days"............................................. 2
"Business Manager".......................................... 3
"Cableco"................................................... 3
"Cableco Designees"......................................... 3
"Capital Contribution"...................................... 3
"Certificate"............................................... 3
"Cessation Event"........................................... 3
"Code"...................................................... 3
"Company"................................................... 3
"Contribution Agreement".................................... 3
"Contribution Assets"....................................... 3
"Contribution Value"........................................ 4
"Distributable Cash"........................................ 4
"Estimated Tax Amount"...................................... 4
"Fiscal Year"............................................... 4
"GAAP"...................................................... 4
"Initial Capital Contribution".............................. 4
"MAC Telcom Plus"........................................... 4
"MAC Telcom Plus Operating Agreement"....................... 4
"Manager"................................................... 5
"Members"................................................... 5
"Member Designees".......................................... 5
"Membership Unit"........................................... 5
"Mid-Atlantic Holdco"....................................... 5
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Page
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"Net Profits" and "Net Losses".............................. 5
"New Securities"............................................ 6
"Operating Transferors"..................................... 6
"Ownership Percentage"...................................... 6
"Person".................................................... 6
"Requisite Number".......................................... 6
"Requisite Vote"............................................ 6
"RMTS Holdco"............................................... 6
"RMTS Holdco Designees"..................................... 6
"SBC"....................................................... 6
"Securities Act"............................................ 6
"Substitute Member"......................................... 7
"Supermajority Vote"........................................ 7
"Telcom DC Metro Companies"................................. 7
"Termination Date".......................................... 7
"Territory"................................................. 7
"Treasury Regulations"...................................... 7
"Unwind Transaction"........................................ 7
ARTICLE 2 THE COMPANY................................................. 7
2.1 Formation and Treatment of the Company................ 7
2.2 Company Name and Office .............................. 7
2.3 Purposes of the Company .............................. 8
2.4 Operations Through Affiliates ........................ 8
2.5 Term of the Company .................................. 8
2.6 Title to Property .................................... 9
2.7 Qualification as Limited Liability Company............ 9
2.8 Registration and Qualification in Other Jurisdictions. 9
ARTICLE 3 MEMBERS; CAPITAL CONTRIBUTIONS.............................. 9
3.1 Authorized Capitalization............................. 9
3.2 Initial Members....................................... 9
3.3 Initial Capital Contributions.........................10
3.4 Additional Capital Contributions......................13
3.5 Debt Financing........................................13
3.6 Additional Members....................................14
3.7 Preemptive Rights ....................................14
3.8 Resignation...........................................14
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Page
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3.9 No Interest...........................................14
3.10 No Withdrawal or Return of Capital Contributions......15
3.11 Limited Liability.....................................15
3.12 Creditors not Benefitted..............................15
ARTICLE 4 MAINTENANCE OF CAPITAL ACCOUNTS; ALLOCATIONS AND
DISTRIBUTIONS...............................................16
4.1 Capital Accounts......................................16
4.2 Allocations of Net Profits and Net Losses.............16
4.3 Regulatory Allocations................................17
4.4 Code Section 704(c) Allocations.......................19
4.5 Distributions.........................................19
ARTICLE 5 COVENANTS OF THE MEMBERS....................................20
5.1 Confidentiality.......................................20
5.2 Non-Competition.......................................21
5.3 Facilities and Cost Sharing Arrangement...............21
ARTICLE 6 MANAGEMENT AND OPERATION OF THE COMPANY.....................22
6.1 Management Generally..................................22
6.2 Election, Tenure and Removal of Business Manager......22
6.3 Successor Business Manager............................23
6.4 Authority of the Manager..............................24
6.5 Duties and Obligations of the Manager.................25
6.6 Limitations on Powers of the Manager..................25
6.7 Compensation..........................................27
6.8 Expenses..............................................27
6.9 Officers..............................................28
6.10 The Chief Executive Officer...........................28
6.11 The President.........................................29
6.12 The Vice President(s).................................29
6.13 The Treasurer.........................................29
6.14 The Secretary.........................................29
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Page
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ARTICLE 7 POWERS, RIGHTS AND OBLIGATIONS OF MEMBERS; MEETINGS
OF MEMBERS; MANAGEMENT BOARD; MEETINGS OF THE BOARD.........30
7.1 Powers of the Members..................................30
7.2 Access to Information..................................30
7.3 Priority and Return of Capital.........................30
7.4 Actions by Members.....................................30
7.5 Management Board.......................................31
7.6 Meetings and Action of the Board.......................31
7.7 Supermajority Vote.....................................33
7.8 No Dissolution or Termination of a Member..............34
ARTICLE 8 ACCOUNTING PROCEDURES.......................................34
8.1 Fiscal Year.............................................35
8.2 Books of Account........................................35
8.3 Other Records...........................................35
8.4 Preparation and Filing of Income Tax Returns............35
8.5 Tax Matters Partner.....................................36
8.6 Financial Statements....................................37
ARTICLE 9 TRANSFER OF MEMBERSHIP UNITS; SALE OF THE COMPANY...........37
9.1 Limitation on Transfer of Membership Units..............37
9.2 Certain Documents.......................................38
9.3 Right of First Refusal of any Member....................38
9.4 Sale of the Company or Units of RMTS Holdco.............40
9.5 Legal Capacity of Transferee; Tax Effects...............41
9.6 Securities Laws Matters.................................41
9.7 Indemnification.........................................42
ARTICLE 10 LIMITATIONS ON LIABILITIES; INDEMNIFICATION.................42
10.1 Limited Liability of Members..........................42
10.2 Liability and Indemnification of the Manager,
Business Manager and Member Designees.................42
10.3 Indemnification Rights Cumulative.....................44
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Page
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ARTICLE 11 POWER OF ATTORNEY...........................................44
11.1 Authority to Execute Documents ...................... 44
11.2 Survival of Power 44
ARTICLE 12 DISSOLUTION AND TERMINATION.................................45
12.1 Dissolution...........................................45
12.2 Winding Up, Liquidation and Distribution of Assets....46
12.3 Distributions and Allocations upon Unwind Transaction.48
12.4 Certificate of Cancellation...........................48
12.5 Effect of Filing of Certificate of Cancellation.......48
12.6 Return of Contribution Nonrecourse to Other Members...49
ARTICLE 13 RULES OF CONVENTION.........................................49
13.1 Notice................................................49
13.2 Amendment.............................................49
13.3 Arbitration...........................................50
13.4 Governing Law.........................................50
13.5 Entire Agreement......................................50
13.6 Severability..........................................51
13.7 Construction..........................................51
13.8 Captions..............................................51
13.9 Counterparts and Execution............................51
13.10 Consents and Waivers..................................51
13.11 Rights and Remedies Cumulative........................51
13.12 Assigns...............................................51
13.13 Waiver of Action for Partition........................52
13.14 No Publicity..........................................52
Schedule 3.2 Names, Addresses and Initial Ownership Percentages
Schedule 3.3(b) Contributed Assets and Properties
Schedule 5.2(a) RMTS Holdco Signatories of Non-Competition Agreements
Schedule 5.2(b) Cableco Signatories of Non-Competition Agreements
Schedule 7.5(a) Member Designee Replacements
Annex A Listing of Rural Service Areas and Metropolitan Service Areas
Annex B Map of Rural Service Areas and Metropolitan Service Areas
-v-
<PAGE>
Page
----
Exhibit A Contribution Agreement
Exhibit B Form of Management Agreement
Exhibit C Form of Bill of Sale
Exhibit D Form of RMTS Holdco Non-Competition Agreement
Exhibit E Form of Cableco Non-Competition Agreement
Exhibit F Form of Business Manager Non-Competition Agreement
Exhibit G Form of Promissory Note
-v-
<PAGE>
VIC-RMTS-DC, LLC
OPERATING AGREEMENT
This OPERATING AGREEMENT (this "Agreement") is entered into as of the ___
---------
day of February 1997 (the "Agreement Date"), effective as of 12:01 a.m. on
--------------
January 1, 1997 (the "Effective Date"), between VIC-RMTS Holdco, LLC, a Delaware
--------------
limited liability company ("RMTS Holdco"), and Mid-Atlantic RMTS Holdings, LLC,
-----------
a Delaware limited liability company ("Cableco").
-------
RECITALS
A. RMTS Holdco and Cableco desire to form a Delaware limited liability
company, under the name "VIC-RMTS-DC, LLC" (the "Company"), for the providing of
---------------- -------
telephone services (either by itself or through certain affiliated companies) to
single family homes and to the multiple dwelling unit marketplace either
separately within the territory described herein or in combination with cable
television services provided by Mid-Atlantic Telcom Plus, LLC within the service
area described herein, in each case on the terms and subject to the conditions
contained herein.
B. The formation of the Company and the execution of this Agreement are
conditions precedent to the First Closing (as defined in the Contribution
Agreement) under the Contribution Agreement.
C. RMTS Holdco and Cableco desire to adopt and approve an operating
agreement for the Company, on the terms and subject to the conditions contained
herein.
NOW, THEREFORE, in consideration of the premises and the respective
representations, warranties, covenants, agreements and conditions hereinafter
set forth, and for good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto hereby agree as follows:
ARTICLE 1
DEFINITIONS
-----------
Unless otherwise defined herein or the context otherwise requires, the
terms defined in this Article 1 shall have the meanings herein specified for all
purposes of this Agreement, applicable to both the singular and plural forms of
any of the terms herein defined. Unless otherwise indicated, any reference
herein to a "Section", "Article", "Annex", "Exhibit" or "Schedule" shall mean
the applicable Section, Article, Annex, Exhibit or Schedule of or to this
Agreement. All accounting terms used in this
<PAGE>
Agreement not defined in this Article 1 shall, except as otherwise provided for
herein, be construed in accordance with GAAP.
"Act" shall mean the Delaware Limited Liability Company Act, Delaware Code
---
Annotated, Title 6, (S)(S)18-101 et seq., as from time to time amended, and
-- ----
any successor to such statute.
"Actual Tax Amount" shall have the meaning ascribed to such term in Section
-----------------
4.5(a).
"Adjusted Capital Account" shall mean a Member's Capital Account after
------------------------
crediting to such Capital Account any amount which the Member is deemed to be
obligated to restore pursuant to Sections 1.704-2(g)(1) and 1.704-2(i)(5) of the
Treasury Regulations and debiting to such Capital Account the amount (whether
made or reasonably expected to be made) of any adjustment, allocation and
distribution described in Section 1.704-1(b)(2)(ii)(d)(4),(5) or (6) of the
- - - -
Treasury Regulations. This definition of Adjusted Capital Account is intended to
comply with the provisions of Section 1.704-1(b)(2)(ii)(d) of the Treasury
-
Regulations and shall be interpreted consistently therewith.
"Affiliate" with respect to any person, shall mean any Person, directly or
---------
indirectly, controlling, controlled by, or under common control with such
Person, whether such control is effected pursuant to contract or otherwise;
provided, however, that the Company shall not be considered to be an Affiliate
- -------- -------
of any Member for purposes of this Agreement.
"Agreement" shall have the meaning ascribed to such term in the preamble
---------
hereto, as the same may be amended from time to time in accordance herewith.
"Aggregate Contribution Value" shall have the meaning ascribed to such term
----------------------------
in the Contribution Agreement.
"Assets" shall mean all assets and properties, whether real, personal or
------
mixed, tangible or intangible, acquired by or contributed to the Company on or
after the Effective Date.
"Board" shall have the meaning ascribed to such term in Section 7.5.
-----
"Business Days" shall mean any day excluding Saturday, Sunday and any other
-------------
day which is a legal holiday under the laws of the State of Illinois or is a day
in which banking institutions located in such State are closed.
-2-
<PAGE>
"Business Manager" shall mean James A. Otterbeck and each individual that
----------------
succeeds him in that capacity in accordance with this Agreement and the
Management Agreement.
"Cableco" shall have the meaning ascribed to such term in the introductory
-------
paragraph hereof.
"Cableco Designees" shall mean the individuals designated,
-----------------
from time to time in accordance herewith, by Cableco to be members of the Board.
"Candidate" shall have the meaning ascribed to such term in Section 6.3.
---------
"Capital Contribution" shall mean, with respect to any Member, all
--------------------
contributions to the capital (whether in cash or otherwise) of the Company made
or deemed made by such Member pursuant to and in accordance with this Agreement.
"Certificate" shall mean that certain Certificate of Formation of the
-----------
Company filed with the Office of the Secretary of State of the State of
Delaware, as the same may be amended from time to time in accordance with the
terms hereof.
"Cessation Event" shall have the meaning ascribed to such term in Section
---------------
6.3.
"Code" shall mean the Internal Revenue Code of 1986, as amended, or any
----
corresponding provision of subsequent superseding federal revenue laws.
"Company" shall have the meaning ascribed to such term in the recitals
-------
hereto.
"Contribution Agreement" shall mean that certain Contribution Agreement
----------------------
dated as of December 31, 1996, as amended on the Agreement Date, among MAC
Telcom Plus, RMTS Holdco, Mid-Atlantic Holdco, Mid-Atlantic Cable Development
Company Limited Partnership, a Maryland limited partnership, Mid-Atlantic CATV
Limited Partnership, a Maryland limited partnership, Mid-Atlantic Cable Service
Company, a Virginia corporation, and the other parties identified therein,
attached hereto as Exhibit A, and the term "Contribution Agreement" as used in
this Agreement shall include all Transaction Documents (other than this
Agreement) as defined therein.
"Contribution Assets" shall have the meaning ascribed to the term "Assets"
-------------------
in the Contribution Agreement.
"Contribution Value" shall have the meaning ascribed to such term in the
------------------
Contribution Agreement.
-3-
<PAGE>
"DC Metro Service Area" shall mean the Rural Service Areas and the
---------------------
Metropolitan Service Areas listed on Annex A attached hereto and depicted on
Annex B attached hereto.
"Distributable Cash" as of any date shall mean all cash and cash
------------------
equivalents on hand derived by the Company from Company operations as of such
date (specifically not including any Capital Contribution made by a Member to
the Company), less the sum of the following to the extent paid or set aside by
the Company as of such date: (a) the amount of all principal and interest
payments on indebtedness of the Company and all other sums then due and payable
to lenders and, in the case of distributions under Section 4.5(b), to be paid to
lenders within the six (6)-month period following such date; (b) accounts
payable and accrued liabilities then due and payable and, in the case of
distributions under Section 4.5(b), expected to be satisfied in the Ordinary
Course of Business (as defined in the Contribution Agreement) of the Company
within the three (3)-month period following such date; and (c) such reserves as
the Manager shall deem reasonably necessary for the proper operation and
financing of the Company's business.
"Estimated Tax Amount" shall have the meaning ascribed to such term in
--------------------
Section 4.5(a).
"Final Closing Date" shall have the meaning ascribed to such term in the
------------------
Contribution Agreement.
"Fiscal Year" shall mean the Company's fiscal year, which shall be the
-----------
calendar year, or such other period as required by the Code.
"GAAP" shall mean generally accepted accounting principles, consistently
----
applied.
"Initial Capital Contribution" shall mean, with respect to any Member, the
----------------------------
initial contribution to the capital (whether in cash or otherwise) of the
Company made by such Member pursuant to Section 3.3.
"MAC Telcom Plus MAC Telcom Plus" shall mean Mid-Atlantic Telcom Plus, LLC,
-------------------------------
a Delaware limited liability company.
"MAC Telcom Plus Operating Agreement" shall mean that certain Mid-Atlantic
-----------------------------------
Telcom Plus, LLC Operating Agreement between Mid-Atlantic Holdco and RMTS
Holdco, dated as of the date hereof.
"Management Agreement" shall mean that certain Management Agreement, dated
--------------------
as of the Agreement Date, executed by and between James A. Otterbeck and the
-4-
<PAGE>
Company, or any Management Agreement executed after the Agreement Date in
accordance herewith and therewith between a successor Business Manager and the
Company, in each case substantially in the form attached hereto as Exhibit B.
"Manager" shall mean RMTS Holdco or any other Member that succeeds it in
-------
that capacity in accordance with this Agreement.
"Members" shall mean RMTS Holdco and Cableco and shall include each
-------
Person hereafter admitted to the Company as a Member as expressly provided in
this Agreement.
"Member Designees" shall mean the Business Manager, the Cableco Designees
----------------
and the RMTS Holdco Designees.
"Membership Unit" shall mean, with respect to each Member, all of such
---------------
Member's rights, interests, proceeds and profits which it may own, whether now
existing or contingent, in the Company, including the right of such Member to
any and all benefits to which the Member may be entitled and the obligations of
such Member, as provided in this Agreement and the Act.
"Mid-Atlantic Holdco" shall mean Mid-Atlantic Cable Holdings, LLC, a
---------------
Delaware limited liability company.
"Net Profits" and "Net Losses" shall mean for each Fiscal Year or other
----------- ----------
period, an amount equal to the Company's taxable income or tax loss for such
year or period, determined in accordance with Code Section 703(a). For this
purpose all items of income, gain, loss or deduction required to be stated
separately pursuant to Code Section 703(a)(1) shall be included in taxable
income or loss, with the following adjustments:
a. Any income of the Company that is exempt from federal income tax
and not otherwise taken into account in computing Net Profits or Net Losses
shall be added to such taxable income or tax loss;
b. Any expenditures of the Company described in Code Section
705(a)(2)(B) or treated as Code Section expenditures pursuant to Regulations
Section 1.704-l(b)(2)(iv)(i), and not otherwise taken into account in computing
-
Net Profits or Net Losses, shall be subtracted from such taxable income or tax
loss; and
c. If property other than cash has been contributed to the Company
or the Capital Accounts of the Members have been adjusted pursuant to Treasury
Regulations Section 1.704-l(b)(2)(iv)(f), depreciation, amortization, gain or
-
loss
-5-
<PAGE>
with respect to assets of the Company shall be computed in accordance with
Regulations Section 1.704-1(b)(2)(iv)(g).
-
d. Notwithstanding any other provision of this subsection, any items
of income, gain, loss or deduction which are specially allocated pursuant to
Section 4.3 shall not be taken into account in computing Net Profits or Net
Losses, but shall be separately allocated to the Members in accordance with
Section 4.3.
"New Securities" shall mean (a) Membership Units of the Company; (b) any
--------------
obligations, evidences of indebtedness or other securities of the Company
convertible into or exchangeable for, or carrying or accompanied by any rights
to receive, purchase or subscribe to, any such unissued Membership Units; (c)
any right of, subscription to or right to receive, or any warrant or option for
the purchase of, any of the foregoing securities; and (d) any other securities
that may be issued or sold by the Company.
"Operating Transferors" shall have the meaning ascribed to such term in the
---------------------
Contribution Agreement.
"Ownership Percentage" shall mean, as to each Member as of any date, the
--------------------
percentage reflecting the ratio which its Membership Units bears to the
aggregate issued and outstanding Membership Units of all Members. The Ownership
Percentages are initially as shown on Schedule 3.2 attached hereto.
"Person" shall mean any individual, association, corporation, trust,
------
partnership, joint venture, limited liability company or other entity.
"Requisite Number" shall mean not less than sixty percent (60%) of all of
----------------
the Member Designees.
"Requisite Vote" shall mean an affirmative vote or written consent of not
--------------
less than sixty percent (60%) of all of the Member Designees.
"RMTS Holdco" shall have the meaning ascribed to such term in the
-----------
introductory paragraph hereof.
"RMTS Holdco Designees" shall mean the individuals designated, from time to
---------------------
time in accordance herewith, by RMTS Holdco to be members of the Board.
"SBC" shall mean SBC Communications Inc., a Delaware corporation.
---
"Securities Act" shall mean the Securities Act of 1933, as amended.
--------------
-6-
<PAGE>
"Substitute Member" shall have the meaning ascribed to such term in Section
-----------------
9.1.
"Supermajority Vote" shall mean an affirmative vote or written consent of
------------------
not less than eighty percent (80%) of all of the Member Designees.
"Telcom DC Metro Companies" shall have the meaning
-------------------------
ascribed to such term in Section 2.4.
"Termination Date" shall mean January 31, 2017.
----------------
"Territory" shall mean the States of Virginia, Maryland, Pennsylvania,
---------
Delaware and New Jersey and the District of Columbia.
"Treasury Regulations" shall mean the income tax regulations promulgated
--------------------
under the Code, as such regulations may be amended from time to time (including
corresponding provisions of succeeding regulations).
"Unwind Transaction" shall mean the occurrence or non-occurrence of events
------------------
resulting in a rescission of transactions pursuant to Section 2.8 of the
Contribution Agreement.
ARTICLE 2
THE COMPANY
-----------
2.1 Formation and Treatment of the Company. The Company has been organized
--------------------------------------
as a Delaware Limited liability company by executing and delivering the
Certificate to the Delaware Secretary of State in accordance with and pursuant
to the act. The Members intend that the Company will be treated as a
partnership, rather than as an association taxable as a corporation, for Federal
income tax purposes.
2.2 Company Name and Office. The name of the Company shall be "VIC-RMTS-
-----------------------
DC, LLC". The Company shall conduct its business under the name "Telcom Plus"
(or such other name or names as the Manager shall determine from time to time
with the approval by Supermajority Vote of the Member Designees) and the Company
shall file all statements and applications with appropriate governmental
authorities required in order to conduct its business under such name (or such
other names). The Company shall maintain a registered office in the State of
Delaware and the name and address of the Company's registered agent in the State
of Delaware shall be as set forth in the Certificate. Such office and such agent
may be changed from time to time by the Manager. The principal office of the
Company shall be 5335 Wisconsin Avenue, Suite 750, Washington D.C. 20015. The
Company may maintain such
-7-
<PAGE>
additional offices as may be designated from time to time by the Manager for the
purpose of carrying out the business of the Company.
2.3 Purposes of the Company. The purposes of the Company shall be (a) to
-----------------------
provide telephone service to single family homes, multiple dwelling units,
marinas, hotels, military bases and prisons, in each case in the Territory, (b)
to provide telephone services to single family homes, multiple dwelling units,
marinas, hotels, military bases and prisons in combination with cable television
services provided by, and at the election of, Cableco in the DC Metro Service
Area, (c) to engage in and carry on any other lawful business or activity in
connection with the foregoing, subject to the approval by Supermajority Vote of
the Member Designees, including the provision of services to Affiliates of the
Company, and (d) subject to this Agreement, to have and exercise all of the
powers, rights and privileges which a limited liability company organized
pursuant to the Act may have and exercise.
2.4 Operations Through Affiliates. The Members acknowledge and agree that
-----------------------------
it may become necessary or desirable for the Company to engage in, operate,
maintain or conduct some or all of its business activities through one or more
Affiliates. In the event that the Manager, in its sole and absolute discretion,
determines that it is necessary or desirable to engage in, operate, maintain or
conduct some or all of the Company's business activities through one or more
Affiliates, then the Manager shall cause the Company to organize one or more
limited liability companies under the Act for the purpose of engaging in,
operating, maintaining or conducting such business activities (such entities are
collectively referred to herein as the "Telcom DC Metro Companies"). The members
-------------------------
of each Telcom DC Metro Company shall be the Company, Cableco and RMTS Holdco,
and each such member's interest in each Telcom DC Metro Company shall be 98%, 1%
and 1%, respectively. Each Telcom DC Metro Company shall be governed by an
operating agreement which shall be substantially similar in all material
respects to this Agreement. The manager of each Telcom DC Metro Company shall be
RMTS Holdco, and RMTS Holdco shall delegate its duties and responsibilities as
the manager of each Telcom DC Metro Company to the Business Manager, who shall
serve as business manager of each Telcom DC Metro Company in accordance with the
terms of a management agreement which shall be substantially similar in all
material respects to the Management Agreement. RMTS Holdco and Cableco hereby
covenant and agree that they shall execute the operating agreement of each
Telcom DC Metro Company and any other documents or instruments related to the
organization thereof, including, without limitation, any non-competition
agreement which shall be substantially similar in all material respects to the
Non-Competition Agreements described in Section 5.2, so long as such documents
and instruments comply with the terms of this Section 2.4.
2.5 Term of the Company. The term of the Company shall commence on the
-------------------
date of the filing of the Certificate as required by Section 18-201 of the Act
and shall continue in existence until the Termination Date, unless its existence
is sooner
-8-
<PAGE>
terminated upon dissolution (and subsequent termination of the Company after the
winding up of its affairs) as provided in this Agreement.
2.6 Title to Property. Legal title to all Assets of the Company shall be
-----------------
taken and at all times held in the name of the Company.
2.7 Qualification as Limited Liability Company. The Manager shall, at the
------------------------------------------
expense of the Company, use commercially reasonable efforts to do all acts and
things that may now or hereafter be required for (a) the maintenance of the
Company as a limited liability company under the laws of the State of Delaware,
(b) the protection of the limited liability status of the Members under the laws
of the State of Delaware and of the other states in which the Company does
business or owns property, and (c) the treatment of the Company as a partnership
and not as an association taxable as a corporation for United States Federal
income tax purposes.
2.8 Registration and Qualification in Other Jurisdictions. The Manager
-----------------------------------------------------
shall, at the expense of the Company, use commercially reasonable efforts to
cause the Company to be qualified or registered under an assumed or fictitious
name or foreign limited liability statutes or similar laws in any jurisdiction
in which the Company owns property or transacts business if such qualification
or registration is necessary in order to protect the limited liability of the
Members or to permit the Company lawfully to own property or transact business
in such jurisdiction or is otherwise deemed necessary or appropriate by the
Manager.
ARTICLE 3
MEMBERS; CAPITAL CONTRIBUTIONS
------------------------------
3.1 Authorized Capitalization. The Company shall have one class of
-------------------------
ownership interests in the Company which are referred to herein as "Membership
Units". There shall be an unlimited number of authorized Membership Units, but
such authorized membership units shall only be issued in accordance with terms
of this Agreement. The Membership Units shall not be certificated. Each Member
shall receive one full Membership Unit for each $1.0 million Capital
Contribution made by such Member to the Company or a proportionate fraction
thereof for each Capital Contribution in an amount less than $1.0 million.
3.2 Initial Members. RMTS Holdco and Cableco are the initial Members of
---------------
the Company. The addresses of the initial Members are set forth on Schedule 3.2
attached hereto. Notwithstanding anything to the contrary contained herein, the
Business Manager shall not be deemed a Member of the Company.
-9-
<PAGE>
3.3 Initial Capital Contributions. Each Member shall make initial
-----------------------------
contributions to the capital of the Company (the "Initial Capital
Contributions") in accordance with the terms and subject to the conditions of
this Section 3.3, in consideration for which the Member shall receive up to the
number of Membership Units set forth opposite its name on Schedule 3.2 attached
hereto.
(a) Initial Capital Contributions by RMTS Holdco. On the Agreement
--------------------------------------------
Date, effective as of the Effective Date, RMTS Holdco has contributed to the
Company the amount of $1.0 million. RMTS Holdco shall receive 1 Membership Unit
in exchange for such Initial Capital Contribution, and the Capital Account of
RMTS Holdco shall be credited for this Initial Capital Contribution in the
amount of $1.0 million. From and after the Agreement Date, RMTS Holdco shall be
obligated to make additional Initial Capital Contributions to the capital of the
Company, in the aggregate, up to $5.0 million (including the Initial Capital
Contribution made on the date of this Agreement), when and as called by the
Manager upon at least fifteen (15) days' prior written notice to RMTS Holdco.
Each Initial Capital Contribution to the Company by RMTS Holdco shall be made in
cash by means of wire transfer of funds to an account of the Company designated
by the Manager. Upon the making of each such Initial Capital Contribution to the
Company, the Capital Account of RMTS Holdco shall be credited in the amount of
cash so contributed to the Company, provided that each such amount shall be
equal to the amount credited to the Capital Account of Cableco for the Initial
Capital Contribution so made by Cableco on the same date, except as provided in
Section 3.3(c). In exchange for each such Initial Capital Contribution, RMTS
Holdco shall receive that number of full Membership Units equal to the quotient
obtained by dividing the amount of such Initial Capital Contribution by $1.0
million, with a proportionate fraction thereof being issued for any increment
thereof of less than $1.0 million. Notwithstanding anything to the contrary
contained herein, except as provided in Section 3.3(c) or except upon the
unanimous prior written consent of each Member, in no event shall the aggregate
amount credited to the Capital Account of RMTS Holdco in connection with RMTS
Holdco's Initial Capital Contributions made pursuant to this Section 3.3(a) be
greater than or less than the aggregate amount credited to the Capital Account
of Cableco in connection with Cableco's Initial Capital Contributions made
pursuant to Section 3.3(b). Notwithstanding anything contained herein to the
contrary, in no event shall RMTS Holdco be obligated to make Initial Capital
Contributions to the Company pursuant to this Section 3.3(a) in excess of, in
the aggregate, $5.0 million.
(b) Initial Capital Contributions by Cableco. On the Agree ment Date,
----------------------------------------
effective as of the Effective Date, Cableco has transferred, assigned, conveyed
and delivered to the Company good and marketable title, free and clear of all
liens, mortgages, assessments, security interests, easements, claims, pledges,
trusts, or other charges, encumbrances or restrictions (collectively, "Liens")
-----
and with all conditions to any such transfer satisfied in full, in each case
acceptable to the Company, the assets and properties related to the Business of
the Company as set forth on Schedule 3.3(b)
-10-
<PAGE>
attached hereto, as evidenced by a Bill of Sale in substantially the form of
Exhibit C hereto, and the Manager and the Members agree that such transferred
contracts have an aggregate fair market value of $1.0 million. The adjusted tax
basis and the fair market value of each such contributed asset and property are
set forth on Schedule 3.3(b) attached hereto. Cableco shall receive 1 Membership
Unit in exchange for such Initial Capital Contribution, and the Capital Account
of Cableco shall be credited for this Initial Capital Contribution in the amount
of $1.0 million. From and after the Agreement Date, Cableco shall be obligated
to make additional Initial Capital Contributions to the capital of the Company,
in the aggregate, up to $5.0 million (including the Initial Capital Contribution
made on the date of this Agreement), when and as called by the Manager upon at
least fifteen (15) days' prior written notice to Cableco. Each Initial Capital
Contribution to the Company by Cableco shall be made in the form of the transfer
to the Company of good and marketable title, free and clear of all Liens, and
with all conditions to such transfer satisfied in full, in each case acceptable
to the Company of assets and properties, including, without limitation,
agreements and contracts to sell or to make available to negotiate for the sale
of telephony services in the multiple dwelling unit marketplace (together with
full rights to technical support and marketing support for such contracts)
related to the Business of the Company, and each such transfer shall be
evidenced by a Bill of Sale in substantially the form of Exhibit C hereto. The
amount of each such Initial Capital Contribution credited to the Capital Account
of Cableco shall be the fair market value of the contributed assets and
properties as determined by the Manager subject to approval by Supermajority
Vote of the Member Designees, provided that each such amount shall be equal to
the amount credited to the Capital Account of RMTS Holdco for the Initial
Capital Contribution so made by RMTS Holdco on the same date, except as provided
in Section 3.3(c). The adjusted tax basis and the fair market value of each such
contributed asset and property shall be agreed upon by the Members and added to
Schedule 3.3(b) attached hereto. In exchange for each such Initial Capital
Contribution, Cableco shall receive that number of full Membership Units equal
to the quotient obtained by dividing the amount of such Initial Capital
Contribution by $1.0 million, with a proportionate fraction thereof being issued
for any increment thereof of less than $1.0 million. If an Unwind Transaction
has commenced pursuant to the Contribution Agreement, then from and after the
commencement of such Unwind Transaction, no amount shall be credited to the
Capital Account of Cableco. Notwith standing anything to the contrary contained
herein, except as provided in Section 3.3(c) or except upon the unanimous prior
written consent of each Member, in no event shall the aggregate amount credited
to the Capital Account of Cableco in connection with Cableco's Initial Capital
Contributions made pursuant to this Section 3.3(b) be greater than or less than
the aggregate amount credited to the Capital Account of RMTS Holdco in
connection with RMTS Holdco's Initial Capital Contributions made pursuant to
Section 3.3(a). Notwithstanding anything contained herein to the contrary, in no
event shall Cableco be obligated to make Initial Capital Contributions to the
Company pursuant to this Section 3.3(b) in excess of, in the aggregate, $5.0
million.
-11-
<PAGE>
(c) Adjustments to Initial Capital Contributions, Membership Units and
Capital Accounts upon Transfer to MAC Telcom Plus of More than 75% But Less Than
85% of the Aggregate Contribution Value of the Contribution Assets.
Notwithstanding anything to the contrary contained herein, if good and
marketable title to more than seventy-five percent (75%) but less than eighty-
five percent (85%) of the Aggregate Contribution Value of all Contribution
Assets has been transferred to MAC Telcom Plus on or before the Final Closing
Date, free and clear of all Liens, in accordance with the MAC Telcom Plus
Operating Agreement and the Contribution Agreement, then, in addition to other
remedies available to RMTS Holdco as contemplated by the MAC Telcom Plus
Operating Agreement and the Contribution Agreement, RMTS Holdco may, in its sole
and absolute discretion, elect to reduce the percentage (and corresponding
number) of Membership Units owned by Cableco in the Company and increase the
percentage (and corresponding number) of Membership Units owned by RMTS Holdco
in the Company (in each case, as a percentage and corresponding number) of the
total Membership Units of the Company outstanding as of the Final Closing Date),
in each case by an amount equal to the quotient obtained from (x) the aggregate
Contribution Value of the Contribution Assets not so transferred to MAC Telcom
Plus on or prior to the Final Closing Date, free and clear of all Liens, in
accordance with the Contribution Agreement, expressed as a percentage of the
Aggregate Contribution Value of all Contribution Assets, divided by (y) two (the
"Adjustment"). Upon such election by RMTS Holdco, the Capital Account of Cableco
----------
in the Company shall be reduced, and the Capital Account of RMTS Holdco in the
Company shall be increased, in each case, on a dollar-for-dollar basis, in an
amount equal to the amount of the Adjustment. Upon such election by RMTS Holdco,
the number of Membership Units owned by Cableco in the Company shall be reduced,
and the number of Membership Units owned by RMTS Holdco in the Company shall be
increased, in each case, by that number of full Membership Units equal to the
quotient obtained by dividing the amount of the Adjustment by $1.0 million, with
a proportionate fraction thereof for any increment thereof of less than $1.0
million.
(d) Adjustments to Initial Capital Contributions, Membership Units and
Capital Accounts Upon Transfer to MAC Telcom Plus of Less than 75% of the
Aggregate Contribution Value of Contribution Assets. Notwithstanding anything
contained herein to the contrary, if good and marketable title to Contribution
Assets comprising at least seventy-five percent (75%) of the Aggregate
Contribution Value of all of the Contribution Assets has not been transferred to
the Company on or prior to the Final Closing Date, free and clear of all Liens,
in accordance with the Contribution Agreement, then, in addition to other
remedies available to RMTS Holdco as contem plated by the MAC Telcom Plus
Operating Agreement and the Contribution Agreement, RMTS Holdco may elect, in
its sole and absolute discretion (i) to take the action described in Section
3.3(c) and, in connection therewith, RMTS Holdco and Cableco agree to cause such
action to be effected in accordance with Section 3.3(c), or (ii) to cancel the
Contribution Agreement and rescind and unwind all transactions completed
-12-
<PAGE>
thereunder in accordance with the Contribution Agreement and dissolve the
Company in accordance with Article 12.
(e) No Obligation Other than Initial Capital Contributions.
------------------------------------------------------
Notwithstanding anything contained herein to the contrary, no Member shall have
any obligation whatsoever to make any Capital Contribution in excess of the
Initial Capital Contribution provided for in this Section 3.3.
3.4 Additional Capital Contributions. After payment of the Initial Capital
--------------------------------
Contributions, the Manager shall determine the timing and amount of any
additional Capital Contributions. Each Member shall have the right, but not the
obligation, to make additional Capital Contributions to the capital of the
Company by contributing capital when and as called by the Manager upon at least
sixty (60) days' prior written notice. Each additional Capital Contribution to
the Company shall be made in cash by means of wire transfer of funds to an
account of the Company designated by the Manager; provided, however, that upon
-------- -------
the consent of the Manager and the unanimous prior written consent of the
Members, additional Capital Contributions to the Company may be made by means of
the contribution of property to the Company. Such property and the amount of the
credit to the contributing Member's Capital Account with respect thereto shall
be valued at the fair market value thereof as determined by the Manager, subject
to the approval by Supermajority Vote of the Member Designees. Upon the making
of any such additional Capital Contribution to the Company, the Company shall
issue to the Member making such additional Capital Contribution that number of
full Membership Units equal to the quotient obtained by dividing the amount of
such additional Capital Contribution by $1.0 million, with a proportionate
fraction thereof being issued for any increment thereof of less than $1.0
million, and the Capital Account of such Member shall be credited in accordance
with the provisions of Section 4.1. No Member shall have any obligation
whatsoever to make any additional Capital Contribution to the Company in excess
of such Member's Initial Capital Contribution in accordance with Section 3.3.
3.5 Debt Financing. If the Company has the ability, on a stand-alone basis
--------------
without regard to the creditworthiness or credit support of any equity holder,
direct or indirect, of the Company or any equity or equity-like enhancement of
or issuable by the Company, and taking into account normal, customary and
conservative equity to debt ratios for companies of comparable size and in the
similar business, to obtain debt financing from a financial institution on
commercially reasonable terms which are generally available in the commercial
market, the Company may seek such debt financing on such commercially reasonable
terms from commercial lenders or from SBC or its Affiliates to the extent
available therefrom. At any time that the Manager determines to call an
additional Capital Contribution from the Members pursuant to Section 3.4, if the
Company at such time has the ability to obtain such debt financing on
commercially reasonable terms as described in the preceding sentence and if the
Manager determines
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<PAGE>
that normal and conventional industry practice for companies comparable to the
Company (giving consideration to size, business, industry, financial condition,
equity-to-debt ratios and other relevant factors), then the Manager shall seek
to obtain such debt financing on such commercially reasonable terms to the
extent then available, in lieu of requesting that the Members make an additional
Capital Contribution to the Company under Section 3.4. Notwithstanding anything
to the contrary contained herein, at any time that the Manager determines to
call an additional Capital Contribution from the Members pursuant to Section 3.4
and the Company at such time does not have the ability to obtain such debt
financing on commercially reasonable terms or the Manager determines that
obtaining such debt financing would not be consistent with normal and
conventional industry practice for companies comparable to the Company, the
Manager may call such additional Capital Contribution from the Members pursuant
to Section 3.4.
3.6 Additional Members. No Person shall be admitted to the Company as a
------------------
Member after the Effective Date and no Membership Units shall be issued to any
such Person, except in accordance with the express provisions of Article 9 or
except with the approval by Supermajority Vote of the Member Designees. Any
Person admitted to the Company as a Member in accordance herewith after the
Effective Date shall agree to be bound by the terms of this Agreement and shall
execute a counterpart signature page hereto. No new Member shall be entitled to
any retroactive allocation of any item of income, gain, loss, deduction or
credit of the Company. The Manager shall, at the time a Member is admitted,
close the Company's books (as though the Company's tax year has ended) when
making pro rata allocations of items of income, gain, loss, deduction or credit
to a new Member for that portion of the Company's tax year in which a new Member
was admitted in accordance with the provisions of Code Section 706(d) and the
Treasury Regulations promulgated thereunder.
3.7 Preemptive Rights. Each Member shall have a preemptive or
-----------------
preferential right (but not the obligation) to purchase its pro rata share,
based on its Ownership Percentage, of all or any part of any New Securities
which the Company, with the approval by Supermajority Vote of the Member
Designees, may propose to sell or issue, from time to time, including any such
right with respect to additional Capital Contributions.
3.8 Resignation. Except in connection with the sale of Membership Units in
-----------
accordance with Article 9, no Member may voluntarily resign or withdraw as a
Member of the Company without the prior written consent of the other Members. A
Member who attempts to resign or withdraw as a Member in violation of this
Section 3.8 shall not be entitled to receive any distribution prior to the
dissolution and liquidation of the Company.
3.9 No Interest. No Member shall be entitled to receive any interest on
-----------
its Capital Contributions.
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<PAGE>
3.10 No Withdrawal or Return of Capital Contributions. No Member shall be
------------------------------------------------
entitled to withdraw or receive any return of, or demand a return of, its
Capital Contributions, or any other Assets or capital, from the Company,
including property other than cash, except (a) as provided in Section 2.8 of the
Contribution Agreement or Section 3.3, (b) as part of the purchase of a Member's
Membership Units in accordance with Section 9.3 or 9.4, or (c) upon the
dissolution and liquidation of the Company in accordance with Article 12. The
Company shall not redeem or repurchase any Member's Membership Units, except as
provided in Section 2.8 of the Contribution Agreement or Section 3.3 or to the
extent provided in Section 9.4.
3.11 Limited Liability.
-----------------
(a) The liability of the Members to the Company is limited to the
making of their respective Initial Capital Contributions in accordance with
Section 3.3. No Member shall be required to lend any funds to the Company or,
after its Initial Capital Contribution shall have been paid in accordance with
Section 3.3, to make any further Capital Contributions to the Company or to
repay to the Company, any Member or any creditor of the Company all or any
portion of any negative amount of such Member's Capital Account, except as
provided in the Act. The exercise by a Member of any or all of its rights of
approval or consent under this Agreement shall not in any event affect the
Member's status or limited liability as a limited liability member, and, except
as expressly provided in this Agreement, all such rights of approval or consent
may be exercised or not exercised in the sole and absolute discretion of such
Member.
(b) Any return or repayment of a Member's Capital Contribution or its
Capital Account shall be made only from the Company's Assets to the extent
available therefor.
(c) No distribution by the Company to any Member shall be recoverable
by the Company from such Member except to the extent: (i) distributed to a
Member in violation of Section 4.5, or (ii) specifically provided in Section 18-
607 of the Act or pursuant to provisions of applicable law.
3.12 Creditors not Benefitted. The provisions of this Article 3 are
------------------------
intended to benefit only the Company, the Members and their permitted successors
and assigns. It is not intended that these provisions benefit, and it shall not
be construed that such provisions benefit or are enforceable by, any creditors
of the Company, the trustee in bankruptcy of the Company or any other third
parties.
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<PAGE>
ARTICLE 4
MAINTENANCE OF CAPITAL ACCOUNTS;
--------------------------------
ALLOCATIONS AND DISTRIBUTIONS
--------------------------------
4.1 Capital Accounts. A capital account (a "Capital Acount") shall be
---------------- --------------
maintained for each Member in accordance with the capital account maintenance
rules set forth in Treasury Regulations Rection 1.704-1(b)(2)(iv). Without
limiting the generality of the foregoing, a Member's Capital Account shall be
increased by (i) the amount of money contributed by the Member to the Company,
(ii) the fair market value of property contributed by the Member to the Company
as determined by the Manager, subject to approval by Supermajority Vote of the
Member Designees (net of liabilities that the Company is considered to assume or
take subject to pursuant to Section 752 of the Code), and (iii) allocations to
the Member of Company Net Profits and other items of income and gain, including
income and gain exempt from tax, but excluding items of income and gain
described in Treasury Regulations Section 1.704-1(b)(4)(i); and which shall be
decreased by (w) the amount of money distributed to the Member, (x) the fair
market value of any property distributed to the Member as determined by the
Manager, subject to approval by Supermajority Vote of the Member Designees (net
of any liabilities that such Member is considered to assume or take subject to
pursuant to Section 752 of the Code), after adjusting each Member's Capital
Account by such Member's share of the unrealized income, gain, loss and
deduction inherent in such property and not previously reflected in such Capital
Account, as if the property had been sold for its then fair market value on the
date of distribution as determined by the Manager, subject to approval by
Supermajority Vote of the Member Designees, (y) expenditures described, or
treated under Section 704(b) of the Code as described in Section 705(a)(2)(b) of
the Code, and (z) the Member's share of Net Losses and other items of loss and
deduction, but excluding items of loss or deduction described in Treasury
Regulations Section 1.704-1(B)(4)(I). The Members' Capital Accounts shall be
appropriately adjusted for income, gain, loss and deduction as required by
Treasury Regulations Section 1.704-1(b)(2)(iv)(g) (relating to allocations and
adjustments resulting from the reflection of property on the books of the
Company at book value, or a revaluation thereof, rather that at adjusted tax
basis). The Capital Account of Cableco may be reduced pursuant to Section 3.3(c)
or (d). If a Member transfers all or a part of its Membership Units in
accordance with this Agreement, such Member's Capital Account attributable to
the transferred Membership Units shall carry over to the new owner of such
Membership Unit pursuant to Treasury Regulations Section 1.704-1(b)(2)(iv)(l).
4.2 Allocations of Net Profits and Net Losses.
-----------------------------------------
(a) Net Losses. Net Losses shall be allocated to the Members in
----------
proportion to their respective Ownership Percentages.
-16-
<PAGE>
(b) Net Profits. Net Profits shall be allocated to the Members in
-----------
proportion to their respective Ownership Percentages.
4.3 Regulatory Allocations.
----------------------
(a) Minimum Gain Chargeback. Notwithstanding any other provision of
-----------------------
this Article 4, if there is a net decrease in "Company Minimum Gain" as
defined in Treasury Regulations Section 1.704-2(d) for any Fiscal Year, each
Member shall, in the manner provided in Treasury Regulations Section 1.704-2(f),
be allocated items of Company income and gain for such year (and, if necessary,
for subsequent Fiscal Years) in an amount equal to such Member's share of the
net decrease in Company Minimum Gain, determined in accordance with Treasury
Regulations Section 1.704-2(g); provided, however, that this Section 4.3(a)
-------- -------
shall not apply to the extent the circumstances described in Treasury
Regulations Section 1.704-2(f)(2), 1.704-2(f)(3), 1.704-2(f)(4), or 1.704-
2(f)(5) exist. The items of Company income and gain to be allocated pursuant to
this Section 4.3(a) shall be determined in accordance with Treasury Regulations
Sections 1.704-2(f)(6) and 1.704-2(j)(2). This Section 4.3(a) is intended to
comply with the minimum gain chargeback requirement in Treasury Regulations
Section 1.704-2(f) and shall be interpreted consistently therewith.
(b) Member Minimum Gain Chargeback. Notwithstanding any other
------------------------------
provision of this Article 4 except Section 4.3(a), if during any Fiscal Year
there is a net decrease in "Member Nonrecourse Debt Minimum Gain" as defined in
Treasury Regulations Section 1.704-2(i)(2), any Member with a share of that
Member Nonrecourse Debt Minimum Gain (determined in accordance with Treasury
Regulations Section 1.704-2(i)(5)) as of the beginning of such Fiscal Year shall
be allocated items of Company income and gain for the Fiscal Year (and, if
necessary, for succeeding Fiscal Years) equal to that Member's share of the net
decrease in the Member Nonrecourse Debt Minimum Gain (determined in accordance
with Treasury Regulations Section 1.704-2(i)(4)); provided, however, that this
-------- -------
Section 4.3(b) shall not apply to the extent the circumstances described in the
third and fifth sentences of Treasury Regulations Section 1.704-2(i)(4) exist.
The items of Company income and gain to be allocated pursuant to this Section
4.3(b) shall be determined in accordance with Treasury Regulations Sections
1.704-2(i)(4) and 1.704-2(j)(2). This Section 4.3(b) is intended to comply with
the minimum gain chargeback requirement in Treasury Regulations Section 1.704-
2(i)(4) and shall be interpreted consistently therewith.
(c) Qualified Income Offset. No Member shall be allocated any item of
-----------------------
loss or deduction to the extent such allocation would cause or increase a
deficit balance in such Member's Adjusted Capital Account as of the end of the
taxable year to which such allocation relates. In the event any Member
unexpectedly receives any adjustments, allocations, or distributions described
in Treasury Regulations Sections 1.704-1(b)(2)(ii)(d)(4), (5) or (6), items of
- - - -
Company income and gain shall be specially
-17-
<PAGE>
allocated to such Member in an amount and manner sufficient to eliminate, to the
extent required by the Treasury Regulations, such Adjusted Capital Account
deficit of such Member as quickly as possible, provided that an allocation
pursuant to this Section 4.3(c) shall be made only if and to the extent that
such Member would have an Adjusted Capital Account deficit after all other
allocations provided for in this Section 4.3 have been tentatively made as if
this Section 4.3(c) were not in the Agreement. This Section 4.3(c) is intended
to comply with the qualified income offset requirement in Treasury Regulations
Section 1.704- 1(b)(2)(ii)(d)(3) and shall be interpreted consistently
- -
therewith.
(d) Gross Income Allocation. In the event any Member has a deficit
-----------------------
Adjusted Capital Account at the end of any Company Fiscal Year, such Member
shall be specially allocated items of Company income and gain in the amount of
such excess as quickly as possible, provided that an allocation pursuant to this
Section 4.3(d) shall be made only if and to the extent that such Member would
have an Adjusted Capital Account deficit in excess of such amount after all
other allocations provided for in this Section 4.3 have been tentatively made as
if Section 4.3(c) and this Section 4.3(d) were not in the Agreement.
(e) Nonrecourse Deductions. Any "Nonrecourse Deductions" as defined
----------------------
in Treasury Regulations Section 1.704-2(c) for any Fiscal Year or other period
shall be specially allocated as items of loss in the manner provided in Treasury
Regulations Section 1.704-2(j)(1)(ii).
(f) Member Nonrecourse Deductions. Any "Member Nonrecourse
-----------------------------
Deductions" as defined in Treasury Regulations Section 1.704-2(i)(2) for any
Fiscal Year or other period shall be specially allocated to the Member who bears
the economic risk of loss (within the meaning of Treasury Regulations Section
1.752-2) with respect to the Member Nonrecourse Debt to which such Member
Nonrecourse Deductions are attributable in accordance with Treasury Regulations
Section 1.704-2(i).
(g) Code Section 754 Adjustment. To the extent any adjust ment to the
---------------------------
adjusted tax basis of any asset of the Company pursuant to Code Section 734(b)
or Code Section 743(b) is required, pursuant to Treasury Regulations Section
1.704-1(b)(2)(iv)(m), to be taken into account in determining Capital Accounts,
-
the amount of such adjustment shall be treated as an item of gain (if the
adjustment increases the basis of the asset) or loss (if the adjustment
decreases such basis), and such gain or loss shall be specially allocated to the
Members in a manner consistent with the manner in which their Capital Accounts
are required to be adjusted pursuant to such Section of the Treasury
Regulations. Any election permitted under Code Section 754 may be made at the
request of any Member.
(h) Curative Allocations. The Company shall take into account any
--------------------
special allocations of items of income, gain, loss, or deduction pursuant to
Section 4.3
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<PAGE>
4.3 in computing subsequent allocations pursuant to the other provisions of
Article 4 so that the net amount of any items so allocated and all other items
allocated to each Member pursuant to Article 4 shall, to the extent possible, be
equal to the net amount that would have been allocated to each Member pursuant
to Section 4.2 if the special allocations in Section 4.3 had not been made.
4.4 Code Section 704(c) Allocations. Notwithstanding any other provision
-------------------------------
in this Article 4, in accordance with Code Section 704(c) and the Treasury
Regulations promulgated thereunder, income, gain, loss, and deduction with
respect to any property contributed to the capital of the Company shall, solely
for tax purposes, be allocated among the Members so as to take account of any
variation between the adjusted basis of such property to the Company for federal
income tax purposes and its fair market value on the date of contribution as
determined by the Manager, subject to approval by Supermajority Vote of the
Member Designees. Allocations pursuant to this Section 4.4 are solely for
purposes of federal, state and local taxes. As such, they shall not affect or in
any way be taken into account in computing a Member's Capital Account or share
of profits, losses, or other items of distributions pursuant to any provision of
this Agreement.
4.5 Distributions.
-------------
(a) Except as provided in Sections 12.2 and 12.3, and subject to
Section 18-607 of the Act, the Manager shall cause the Company to distribute to
each Member an amount of Distributable Cash as shall be sufficient to enable
such Member to fund its federal, state and local income tax liabilities
attributable to such Member's distributive share of Company taxable income and
gain (the "Actual Tax Amount") for periods from and after the Initial Closing
-----------------
Date (as defined in the Contribution Agreement). Estimated tax distributions of
a Member's Actual Tax Amount for any Fiscal Year of the Company shall be made in
four cash installments not later than fifteen (15) days before taxes are due,
based upon the Manager's good faith estimate of the Company's Net Profits and
such Member's distributive share thereof (the "Estimated Tax Amount"). The
--------------------
Estimated Tax Amounts and the Actual Tax Amounts shall be calculated (i) taking
into account the character of such income and gain, (ii) calculating such tax
using the highest of the marginal tax rates applicable to income of such
character for an individual resident in the States of Maryland, New York,
Virginia or Illinois or in the District of Columbia, and (iii) taking into
account the amount of net cumulative tax loss previously allocated to each
Member in prior Fiscal Years of the Company and not used in prior Fiscal Years
to reduce taxable income from the Company. The calculations shall be made on the
assumption that taxable income or tax loss from the Company is each Member's
only taxable income or tax loss. The Manager shall distribute to each Member,
not later than April 10th of the year following the close of each Fiscal Year of
the Company, the amount by which the Actual Tax Amount of such Member for such
Fiscal Year exceeds the aggregate Estimated Tax Amount distributed to such
Member for such Fiscal Year. If the aggregate Estimated Tax Amount distributed
by the Company to a Member for a Fiscal Year exceeds the Actual Tax Amount of
such Member
-19-
<PAGE>
for such Fiscal Year, then the amount of the next distribution the Manager would
otherwise be required to make to such Member(s) under this Section 4.5 shall be
reduced by the amount of such excess until the remaining balance of such excess
is reduced to zero; provided, however, that in connection with the dissolution
-------- -------
of the Company, if any excess remains unapplied, then the Member receiving such
excess tax distribution shall refund to the Company the full amount of such
excess unapplied tax distribution prior to the making of any liquidating
distribution to such Member. The Manager shall provide not less than five (5)
days advance written notice to each Member Designee of the amount and intended
recipient of each tax distribution made hereunder, together with information in
sufficient detail supporting the calculation with respect thereto.
(b) Except as provided in Sections 12.2 and 12.3, and subject to
Section 18-607 of the Act, from and after the third anniversary of the Agreement
Date, the Manager shall cause the Company to make distributions of Distributable
Cash to the Members in proportion to their respective Ownership Percentages, not
more frequently than on an annual basis, in such amounts and on such dates as
approved by the Requisite Vote of the Member Designees, provided that such
distribution is permissible under and not in violation of the terms and
conditions of the Company's credit facility with its principal lender.
(c) Upon the liquidation of the Company, liquidating distributions
shall be made in accordance with Section 12.2, subject to Section 12.3.
(d) Except as provided in Sections 4.5(a) and (b) and Sections 12.2
and 12.3, no distributions will be made, declared or set aside. No Member shall
have any right to demand or receive any distribution in a form other than cash,
except as specifically provided in Section 12.2 or in connection with an Unwind
Transaction as contemplated in the Contribution Agreement and Section 12.3.
(e) In no event shall the Company make distributions, including tax
distributions, to any Member with respect to any Fiscal Year to the extent that
after giving effect thereto such Member's Capital Account would be less than
zero as of the last day of such Fiscal Year or such distributions exceed
Distributable Cash.
ARTICLE 5
COVENANTS OF THE MEMBERS
------------------------
5.1 Confidentiality. Each Member shall hold in confidence, and shall use
---------------
reasonable efforts to ensure that its employees and representatives hold in
confidence,
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<PAGE>
all such information supplied to it by the Company concerning the Company and
shall not disclose such information to any third party except as may be required
by any Legal Requirement (as defined in the Contribution Agreement) and except
for information that (a) is or becomes generally available to the public other
than as a result of disclosure by such Member or its representatives, (b)
becomes available to such Member or its representatives from a third party, and
such Member or its representatives have no reason to believe that such third
party is not entitled to disclose such information, (c) is known to such Member
or its representatives on a non-confidential basis prior to its disclosure by
the Company, or (d) is made available by the Company to any other Person on a
non-restricted basis, provided, however, that none of the foregoing limitations
-------- -------
or restrictions shall apply with respect to any Affiliate of the
Company or any direct or indirect equity holder of any Member of the Company.
The obligations of each Member under the foregoing sentence shall expire on the
date of dissolution of the Company, notwithstanding any transfer, sale or
assignment of such Member's interest in the Company prior to such date. In the
event of any transfer, sale or assignment of a Member's interest in the Company,
the obligations of such Member under this Section 5.1 shall continue
indefinitely.
5.2 Non-Competition. Concurrent with the execution of this Agreement,
---------------
RMTS Holdco and certain direct and indirect equity holders of RMTS Holdco as
listed on Schedule 5.2(a) hereto have executed a Non-Competition Agreement, in
substantially the form attached hereto as Exhibit D, and Cableco and certain
direct and indirect equity holders and Affiliates of Cableco as listed on
Schedule 5.2(b) hereto have executed a Non-Competition Agreement, in
substantially the form attached hereto as Exhibit E. Except as provided in such
Non-Competition Agreements, this Agreement and the Management Agreement, each
Member and its respective Affiliates, including any director, officer or
employee of such Person, shall be free to conduct any other business or any
other activity (subject to any restriction, limitation or qualification thereon
arising by virtue of any other written understanding, arrangement or agreement
or arising under law or otherwise), including, without limitation, the
investment in or operation of any business in the telecommunications field,
without having or incurring any obligation to offer any interest therein to the
Company or any other Member.
5.3 Facilities and Cost Sharing Arrangement. Subject to the covenants and
---------------------------------------
agreements described in Sections 5.2 and 6.2(c), if any Member or its Affiliates
desire to pursue an activity or opportunity permissible by such covenants and
agreements, then such Member and its Affiliates shall be permitted to use the
facilities, employees and other assets of the Company (other than the name or
any trade name of the Company) in connection with the pursuit of such activity
or opportunity, in consideration for which the Member and its Affiliates shall
pay the Company for all costs and expenses, direct and indirect, in connection
with such arrangement, including, without limitation, an allocable portion of
the Company's overhead, salaries, rent, and clerical and administrative costs
and expenses. Any such facilities and cost sharing arrangement
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<PAGE>
shall be on terms and conditions mutually acceptable to such Member or its
Affiliate and the Company, subject, in the case of the Company, to the approval
not to be unreasonably withheld by the Member (which is not the Member or
Affiliated with the Person pursuing such activity or opportunity) in accordance
with the guidelines of this Section 5.3.
ARTICLE 6
MANAGEMENT AND OPERATION OF THE COMPANY
---------------------------------------
6.1 Management Generally. Subject to the provisions of this Agreement,
--------------------
the Management Agreement and the Act, the business and affairs of the Company
shall be managed by and under the direction of the Manager. The Company shall
have one Manager, which shall be RMTS Holdco for so long as RMTS Holdco owns not
less than twenty percent (20%) of the outstanding Membership Units and the
successor manager shall be a Member which acquires Membership Units owned by
RMTS Holdco or any successor manager hereunder in accordance with Article 9. The
Manager shall have, subject to its fiduciary duties and responsibilities and to
certain approval rights of the Members and the Board and to the terms and
conditions contained in this Agreement, full and complete authority, power and
discretion to manage and control the business of the Company, to make all
decisions regarding those matters and to perform any and all other acts or
activities customary or incident to the management of the Company's business and
objectives. All powers of the Company may be exercised by the Manager, except as
conferred on or reserved to the Board or the Members by the Act or by this
Agreement and subject to its fiduciary duties and responsibilities. Each Member
hereby acknowledges and agrees that the Manager owes fiduciary duties to the
Company and each Member, and shall be personally liable for the breach of such
duties.
6.2 Election, Tenure and Removal of Business Manager
------------------------------------------------
(a) The Company shall have one Business Manager, who shall be
appointed pursuant to, and who shall serve the Company in accordance with, the
terms of the Management Agreement. Pursuant to the Management Agreement, the
Manager shall delegate its duties and responsibilities hereunder, as the Manager
and not as a Member, to the Business Manager without relieving itself of its
duties and responsibilities hereunder.
(b) The Business Manager may be removed at any time with or without
cause upon the Requisite Vote of the Member Designees. For purposes of this
Agreement, the term "cause" shall mean: (a) any action materially and adversely
-----
affecting the best interests of the Company as determined by Requisite Vote of
the Member Designees; (b) the material breach of any provision of the Management
Agreement, including without limitation, the refusal or failure to perform, to
the
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<PAGE>
satisfaction of the Members, any duties assigned to the Business Manager or any
other legal obligation to the Company, which breach is not cured within thirty
(30) days after receipt of written notice of such failure from the Requisite
Number of the Member Designees; (c) a willful failure to carry out the
instructions of the Board, which failure is not cured within thirty (30) days
after receipt of written notice of such failure from the Requisite Number of the
Member Designees; (d) the misappropriation of Assets of the Company; (e) the
conviction or pleading nolo contendere to a felony or other serious crime; (f)
---- ----------
the commission or attempted commission of any act of willful misconduct or
dishonesty, moral turpitude, malfeasance, or gross negligence; (g) chronic
alcoholism or drug use (as determined by a licensed physician selected by the
Requisite Vote of the Member Designees); (h) the inability to discharge the
Business Manager's essential job duties by reason of permanent disability for a
period of twelve (12) consecutive months or as determined by a licensed
physician selected by the Requisite Vote of the Member Designees; or (i) the
engagement in business practices which, in the opinion of the Requisite Number
of the Member Designees, are unethical or reflect adversely on the Company.
(c) On the Agreement Date, the Business Manager has executed that
certain Non-Competition Agreement, in substantially the form of Exhibit F
hereto. The Business Manager shall devote such time to the management of the
Company as the Business Manager deems reasonable. Subject to the terms of this
Agreement, the Management Agreement, and the Non-Competition Agreement, the
Business Manager may conduct or remain active in other business activities and
pursuits, including those of RMTS Holdco and those business activities in which
the Business Manager is involved on the date hereof as well as business
activities in which the Business Manager may become involved after the date
hereof.
6.3 Successor Business Manager. If the Business Manager ceases to be the
--------------------------
Business Manager for any reason or no reason with or without cause (a "Cessation
---------
Event"), then a successor Business Manager shall be appointed by the Manager,
- -----
subject to the terms and conditions of this Section 6.3. Not later than five (5)
days following the occurrence of a Cessation Event, the Manager shall notify the
other Member of the occurrence of such Cessation Event. Not later than thirty
(30) days following the occurrence of a Cessation Event, the Manager shall
notify the other Member of the identity of a proposed successor Business Manager
(the "Candidate") and shall provide a summary of the qualifications and
---------
experience of the Candidate in managing and operating telephony businesses. The
appointment of the successor Business Manager shall be subject to the approval
of the Member which is not the Manager, which approval shall not be unreasonably
withheld, and which approval shall be given, if at all, within forty-five (45)
days of receipt of notice from the Manager of the identity and qualifications of
the Candidate. Within such 45-day period, the Member which is not the Manager
shall have the right to conduct an interview and ask such questions of the
Candidate as such Member shall reasonably request. The Manager shall have the
right
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<PAGE>
to appoint a temporary Business Manager to provide management services hereunder
pending the appointment of a successor Business Manager pursuant to this Section
6.3. Such temporary Business Manager may be the Candidate and shall have all of
the authority of the Business Manager under the Management Agreement; provided,
--------
however, that if a successor Business Manager is not appointed in accordance
- -------
with the terms of this Section 6.3 within three (3) months following the date of
the Cessation Event of the immediately preceding Business Manager, then the
authority of the temporary Business Manager shall be suspended until such
successor Business Manager is appointed in accordance herewith.
6.4 Authority of the Manager. Without limiting the generality of Section
------------------------
6.1 but subject in each case to Section 7.7 and the other terms and conditions
of this Agreement (including, without limitation, Sections 6.5 and 6.6) and
applicable law, the Manager shall have the authority to:
(a) take all reasonable action that may be necessary or appropriate
for the continuation of the Company's valid existence as a limited liability
company under the laws of the State of Delaware and of each other jurisdiction
in which such existence is necessary to protect the limited liability of the
Members or to enable the Company to conduct the business in which it is engaged
or proposes to engage pursuant to Section 2.3;
(b) acquire property, contracts or franchises on behalf of the Company
(except as otherwise provided herein);
(c) purchase insurance to protect the Company's property and business;
(d) hold and own real property in the Company's name;
(e) execute on behalf of the Company all instruments and documents,
including checks, drafts, leases and mortgages;
(f) borrow from a financial institution or other third party and, in
connection therewith, grant security interests in the property and assets of the
Company to such financial institution or third party;
(g) hire and fire any personnel, consultants or advisors required by
the Company in the ordinary course of the Company's business;
(h) appoint agents, officers and delegates as necessary;
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(i) keep the Members apprised of any material changes in the Company's
business on a current and regular basis through regular telephone calls, ad hoc
meetings and the circulation of monthly financial statements, as well as through
regular monthly meetings of the Members; and
(j) perform any other such acts or duties as are required to conduct
the Company's business pursuant to Section 2.3.
6.5 Duties and Obligations of the Manager.
-------------------------------------
(a) The Manager shall prepare an operating budget and capital
expenditure plan for each Fiscal Year of the Company and shall submit such
operating budget and capital expenditure plan to the Board for review and
approval by Requisite Vote not later than sixty (60) days prior to the
commencement of the Fiscal Year to which it relates or, in the case of the first
Fiscal Year of the Company, not later than thirty (30) days following the
execution of this Agreement or as soon thereafter as is reasonably practicable.
If an operating budget and capital expenditure plan of the Company for any
Fiscal Year is not approved by Requisite Vote of the Member Designees not later
than the commencement of the Fiscal Year of the Company to which it relates,
then the operating budget and capital expenditure plan of the Company in effect
for the immediately preceding Fiscal Year shall constitute the operating budget
and capital expenditure plan of the Company for such ensuing Fiscal Year until
such time as an operating budget and capital expenditure plan of the Company for
such Fiscal Year is approved in accordance herewith. The Manager shall not be
authorized to make expenditures in excess of the amounts authorized in any
operating budget and capital expenditure plan of the Company approved by
Requisite Vote of the Member Designees in accordance herewith, without the prior
approval by Requisite Vote of the Member Designees or Supermajority Vote of the
Member Designees as provided in Section 6.10(d).
(b) From and after the Agreement Date, the Manager shall retain
outside legal counsel to advise the Company with respect to relevant tax,
regulatory and other legal matters, which counsel shall cooperate on a regular
basis with legal counsel retained by MAC Telcom Plus. The Members acknowledge
and agree that the Manager may retain the law firm of Paul, Hastings, Janofsky &
Walker LLP.
6.6 Limitations on Powers of the Manager. Notwithstanding the generality
------------------------------------
of Section 6.1, the Manager shall not have the authority to do any of the
following acts without the Supermajority Vote of the Member Designees as set
forth in Section 7.7:
(a) Cause or permit the Company to engage in any activity or business
other than as expressly provided in Section 2.3;
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(b) Knowingly and willingly perform or participate in any illegal act
or be a party to any illegal act that would cause any Member to incur personal
liability, including, without limitation, causing or permitting the Company to
conduct business in a state which has neither enacted legislation which permits
limited liability companies to organize in such state nor permits the Company to
register to do business in such state as a foreign limited liability company;
(c) Cause or permit the Company to file a petition under the United
States Bankruptcy Code or any other applicable federal, state or foreign
bankruptcy or other similar law, consent to the institution of proceedings
thereunder or to the filing of such proceeding or to the appointment of or
taking possession by a custodian, receiver, liquidator, assignee, trustee or
sequestrator (or similar official) of the Company or of any substantial part of
its properties or assets, make any assignment for the benefit of creditors, or
take any action in furtherance of any such action;
(d) Cause or permit the Company to borrow (i) from a financial
institution in an amount and on terms other than such as may be commercially
available to the Company, on a stand-alone basis without regard to the
creditworthiness or credit support of any equity holder, direct or indirect, of
the Company or any equity or equity-like enhancement of or issuable by the
Company, and taking into account normal, customary and conservative equity to
debt ratios for companies of comparable size and in the similar business, or
(ii) from sources other than a financial institution as described in clause (i)
in an amount greater than $1.0 million (which, for purposes of financing an
acquisition or series of related acquisitions of a business, shall mean an
amount no greater than $1.0 million for such acquisition or series of related
acquisitions, in each case, otherwise permissible hereunder);
(e) Cause or permit the Company to enter into any agreement or
contract (or series of related agreements or contracts) or incur or assume any
liability or responsibility under any such agreement or contract (including,
without limitation, any settlement agreement), which, individually or in the
aggregate, exceeds $1.0 million (other than acquisitions of existing telephony
operations and other than any agreement or contract for the providing of
telephony services by the Company, in each case, otherwise permissible
hereunder);
(f) Cause or permit the Company to enter into any merger,
consolidation, or similar transaction or effect any reorganization,
recapitalization or other fundamental change in the capital structure of the
Company;
(g) Cause or permit the Company to redeem or repurchase any Membership
Unit or make, declare or pay any dividend or distribution of cash or property of
the Company to any Member, except as expressly set forth in this Agreement or
the Contribution Agreement;
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(h) Cause or permit the Company to offer or sell any New Securities of
the Company in any public or private transaction, other than the issuance of
Membership Units to the Members in connection with the making of Initial Capital
Contributions in accordance with Section 3.3 or additional Capital Contributions
in accordance with Section 3.4, or admit any Person as a Member of the Company
other than following the compliance by a Member of the procedure set forth in
Article 9;
(i) Sell or otherwise dispose of part or all of the Company's Assets
in a single transaction or series of related transactions, except for sales of
obsolete equipment in the ordinary course of business and other than strategic
sales of contracts of the Company, the fair market value of which do not exceed,
in the aggregate, $500,000 in any twelve-month period and with respect to which
no Affiliate of MAC Telcom Plus provides cable television services, except for
the sale of all or substantially all of the Assets in accordance with Section
9.4;
(j) Cause or permit the Company to enter into any agreement (or series
of related agreements) to provide services to the Manager, the Business Manager,
any Member or any of their respective Affiliates (other than MAC Telcom Plus),
other than any agreement which is on terms and conditions no less favorable to
the Company than then currently available fair market terms and conditions
obtained on an arms-length basis;
(k) Cause or permit the Company to change its name;
(l) Cause or permit the Company to change, modify or amend the
Certificate of the Company;
(m) Cause or permit the Company to liquidate or dissolve except as
provided in Section 12; or
(n) Cause or permit the Company to take or refrain from taking any
other action or activity which by the express terms of this Agreement or the
Contribution Agreement requires the approval by Supermajority Vote of the Member
Designees or the consent or approval of the Members.
6.7 Compensation. The Manager shall not be paid any compensation or
------------
remuneration for its services as manager hereunder. The Business Manager shall
not be paid any compensation or remuneration as business manager of the Company,
except as specifically agreed upon by the Business Manager and the business
manager of MAC Telcom Plus.
6.8 Expenses. The Business Manager shall be entitled to reimbursement from
--------
the Company for the reasonable expenses that the Business Manager
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pays for or incurs on behalf of the Company in accordance with the Management
Agreement.
6.9 Officers.
--------
(a) The officers of the Company shall consist of a Chief Executive
Officer, a President, a Treasurer and a Secretary and such Vice Presidents,
assistant secretaries or other officers or agents as may be elected or appointed
by the Business Manager from time to time (collectively, the "Officers"). The
--------
Officers (other than the Business Manager) shall be appointed by, and shall
exercise such powers and perform such duties as are prescribed by, the Business
Manager under the direction and management of the Business Manager, except as
provided in Section 6.10 with respect to the Chief Executive Officer. Any number
of offices may be held by the same Person, as the Business Manager may
determine.
(b) The Officers shall hold office for the term for which they were
appointed and until their successors are elected and qualified; provided,
--------
however, that any Officer may be removed with or without cause at any time by
- -------
the Business Manager or, in the case of all offices held by the Business
Manager, by the Requisite Vote of the Member Designees.
(c) A vacancy in any office (other than those held by the Business
Manager) because of death, resignation, removal, disqualification or otherwise
may be filled by the Business Manager for the unexpired portion of the term.
(d) Subject to Section 6.7, the Company may pay an Officer
compensation for such Officer's services to or on behalf of the Company in such
amounts as determined by the Business Manager in the ordinary course of the
business of the Company; provided, however, that the aggregate amount of all
-------- -------
compensation and benefits payable in any Fiscal Year of the Company to all
officers and employees of the Company shall not exceed, without approval by
Supermajority Vote of the Member Designees, the amount allocated therefor in the
budget of the Company for such Fiscal Year received and approved by the Board in
accordance with Section 6.5(a), and provided, further, that the Business Manager
-------- -------
shall not be permitted to allocate, award or issue to any Officer or employee of
the Company any New Securities.
6.10 The Chief Executive Officer. The Business Manager shall be the Chief
---------------------------
Executive Officer for so long as the Business Manager serves as business manager
of the Company. The Chief Executive Officer shall have general supervision,
direction and control of the business and affairs of the Company and shall have
the power to sign any deeds, mortgages, bonds, contracts or other instruments.
The Chief Executive Officer shall preside at all meetings of the Members. The
Chief Executive Officer shall have the general powers and duties of management
generally vested in the chief executive
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<PAGE>
officer of a business entity, and shall have such other powers and duties with
respect to the administration of the business and affairs of the Company as may
be prescribed by the Board from time to time.
6.11 The President. The President shall be the chief operating officer of
-------------
the Company and shall have power to sign any deeds, mortgages, bonds, contracts
or other instruments which the Business Manager has authorized to be executed,
except in cases where the signing and execution thereof shall be expressly
delegated by the Business Manager or by this Agreement to some other officer or
agent of the Company, or shall be required by law to be otherwise signed or
executed. The Business Manager may serve as the President of the Company, upon
the Requisite Vote of the Member Designees, for so long as the Business Manager
serves as business manager of the Company. In general, the President shall see
that all orders and resolutions of the Business Manager are carried into effect
and shall perform all duties incident to the office of the President and such
other duties as may be prescribed by the Business Manager from time to time.
6.12 The Vice President(s). In the absence of (or at the request of) the
---------------------
President in the event of his or her inability or refusal to act, a vice
president (or in the event there be more than one vice president, the vice
presidents in the order designated, or in the absence of any designation, then
in the order of their election) if one shall be appointed, shall perform the
duties of the President, and when so acting, shall have all the powers of and be
subject to all the restrictions upon the President. Any vice president shall
perform such other duties as from time to time may be assigned to him or her by
the President or the Business Manager.
6.13 The Treasurer. The Treasurer shall be the chief financial officer of
-------------
the Company. The Treasurer shall not be required to give a bond for the faithful
discharge of his or her duties. He or she shall: (a) have charge and custody of
and be responsible for all funds and securities of the Company; (b) be charged
with primary responsibility for dealing with national securities exchanges or
other exchanges in which the Company may hold a membership or on which the
Company may trade; (c) receive and give receipts for moneys due and payable to
the Company from any source whatsoever, and deposit all such moneys in the name
of the Company in such banks, trust companies or other depositaries as shall be
selected by the Business Manager; and (d) in general perform all the duties
incident to the office of treasurer and such other duties as from time to time
may be assigned to him or her by the President or the Business Manager.
6.14 The Secretary. The Secretary shall: (a) keep the minutes of all
-------------
Members' meetings in one or more books provided for that purpose; (b) see that
all notices are duly given in accordance with the provisions of this Agreement
or as required by law; (c) be custodian of Company records; (d) keep a register
of the post office
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address of each Member which shall be furnished to the Secretary by such Member;
(e) certify the resolutions of the Members, and other documents to the Company,
as true and correct; and (f) in general, perform all duties incident to the
office of Secretary and such other duties as from time to time may be assigned
to him or her by the President or the Business Manager.
ARTICLE 7
POWERS, RIGHTS AND OBLIGATIONS OF MEMBERS;
------------------------------------------
MEETINGS OF MEMBERS; MANAGEMENT BOARD;
--------------------------------------
MEETINGS OF THE BOARD
---------------------
7.1 Powers of the Members. Except as expressly provided in this Agreement
---------------------
and except for certain rights expressly provided in the Contribution Agreement,
the Members shall take no part in the management of the business or transact any
business for the Company and shall have no power to sign for or bind the Company
solely in their capacity as Member, except as the Manager may, from time to
time, request.
7.2 Access to Information. Each Member and its duly authorized
---------------------
representatives may visit the principal place of business of the Company,
examine its books of account, records, reports and other papers, make copies and
extracts therefrom, and discuss the affairs, finances and accounts of the
Company with the Business Manager during regular business hours and in a manner
not disruptive to the ordinary conduct of the Company's business. Additionally,
the Manager will deliver or cause the Business Manager to deliver, at the
Company's expense, such other information available to the Manager or the
Business Manager, including financial statements and computations, relating to
the business and affairs of the Company as any Member may from time to time
reasonably request.
7.3 Priority and Return of Capital. Except as may be expressly provided
------------------------------
in Article 4 or Article 12 or as contemplated in the Contribution Agreement in
connection with an Unwind Transaction, no Member shall have priority over any
other Member, either as to return of Capital Contributions or as to Net Profits,
Net Losses or distributions; provided, however, that this Section shall not
-------- -------
apply to the repayment by the Company of loans (as distinguished from Capital
Contributions) which a Member has made to the Company in accordance with this
Agreement.
7.4 Actions by Members. Except for all consent and approval rights
------------------
reserved to the Members as provided in this Agreement or the Contribution
Agreement, all actions or inactions taken by Members under this Agreement shall
be conducted through representatives of the Members described in Section 7.5.
Except as expressly provided herein, each Member shall have voting rights in
proportion to its Membership
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<PAGE>
Units (with each fraction of a Membership Unit rounded up to the next nearest
whole number) and shall vote together as one class.
7.5 Management Board.
----------------
(a) Certain powers of the Company are reserved to a management board
(the "Board") which shall be composed of five (5) individuals as follows: (a)
-----
the Business Manager, (b) two (2) Member Designees designated from time to time
by RMTS Holdco (the "RMTS Holdco Designees") and (c) two (2) Member Designees
---------------------
designated from time to time by Cableco (the "Cableco Designees"). The initial
-----------------
RMTS Holdco Designees shall be William F. Wallace and Laurel Dent, and the
initial Cableco Designees shall be John C. Norcutt and either Joan Miller or
John Long. Each of RMTS Holdco, on the one hand, and Cableco, on the other,
shall have the right to remove any Member Designee designated by it. Upon the
resignation or removal of any Member Designee, the Member(s) initially
designating such Member Designee shall have the right to designate a replacement
therefor; provided, however, that if such replacement is not selected from among
-------- -------
the potential replacements designated on Schedule 7.5(a) hereto, then such
replacement shall be subject to the prior written consent of the other Member,
which consent shall not be unreasonably withheld. The exercise by the Member
Designees of their voting rights pursuant to this Agreement shall not affect the
limited liability status of the Members. The Board shall have only the rights
and authorities set forth in this Agreement or expressly set forth in the
Contribution Agreement. Each Member hereby acknowledges and agrees that each
Member Designee owes fiduciary duties to the Company and each Member and shall
be personally liable for the breach of such duties. No Member Designee shall be
entitled to any compensation or benefits in connection with its service as a
Member Designee.
(b) The Board may designate one or more committees, each consisting
of the two (2) RMTS Holdco Designees and one (1) Cableco Designee, to serve at
the pleasure of the Board.
(c) Notwithstanding anything in this Agreement to the contrary, the
size of the Board shall not be increased or decreased without the prior written
consent of each Member.
7.6 Meetings and Action of the Board.
(a) Regular meetings of the Board shall be held at least once each
calendar month on such dates and at such times as agreed upon by the Board.
Regular meetings shall be held at the principal place of business of the Company
unless otherwise agreed upon by the Board.
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<PAGE>
(b) Special meetings of the Board may be called from time to time by
the Business Manager, by any Member or by any Member Designee, and shall be held
on such dates and at such times as determined by the Person(s) calling such
special meetings. Notice of any special meeting of the Board shall be given no
fewer than ten (10) days with respect to any special meeting to be conducted in
person and no fewer than forty-eight (48) hours with respect to any special
meeting to be conducted by telephone prior to the date of the special meeting.
Notices shall be delivered in the manner set forth in Section 13.1 and shall
specify the purpose or purposes for which the meeting is called. Any Member may,
by a writing signed by such Member, waive any requirement of notice under any
provision of this Agreement. The attendance of a Member Designee at any meeting
shall constitute a waiver of notice of such meeting, except where a Member
Designee attends a meeting for the express purpose of objecting to the
transaction of any business because the meeting is not lawfully called or
convened.
(c) Each Member Designee shall be entitled to one vote. The presence
of at least one Member Designee designated by each Member in person or
represented by proxy shall constitute a quorum for the transaction of business
at any meeting of the Board. The act by Requisite Vote of the Member Designees
at any such meeting at which a quorum is present shall be the act of the Board,
unless the vote of a greater proportion or number is otherwise required by the
Act, the Certificate, this Agreement (including but not limited to those items
set forth in Section 7.7 below) or by the Contribution Agreement.
(d) Unless specifically prohibited by the Certificate or the Act, any
action required to be taken at a meeting of the Board or any other action which
may be taken at a meeting of the Board, may be taken without a meeting if a
consent in writing, setting forth the action so taken, shall be signed by the
Member Designees having not less than the minimum number of votes that would be
necessary to authorize or take such action at a meeting at which all Member
Designees were present and voting. The Member Designees so executing such a
written consent shall provide promptly a copy of such written consent to the
Member Designees who have not so executed such consent.
(e) The Member Designees may participate in and act at any meeting
through the use of a conference telephone or other communications equipment by
means of which all Persons participating in the meeting can hear each other.
Participation in such meeting shall constitute attendance and presence in person
at such meeting of the Person or Persons so participating.
(f) Each RMTS Holdco Designee and each Cableco Designee entitled to
vote at a meeting of the Board may authorize another Person or Persons to act
for him at any meeting by written proxy. Such proxy shall be deposited at the
principal
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offices of the Company prior to the commencement of a meeting. Any
such proxy shall be valid for one (1) meeting.
7.7 Supermajority Vote. Notwithstanding anything to the contrary contained
------------------
herein, and in addition to all other actions or inactions which by the express
terms of this Agreement or the Contribution Agreement require approval by
Supermajority Vote of the Member Designees or the consent or approval of the
Members, the Company may take the following actions or engage in the following
transactions only with the approval by Supermajority Vote of the Member
Designees:
(a) Engage in any activity or business other than as expressly
provided in Section 2.3;
(b) Conduct business in a state which has neither enacted legislation
which permits limited liability companies to organize in such state nor permits
the Company to register to do business in such state as a foreign limited
liability company;
(c) File a petition under the United States Bankruptcy Code or any
other applicable federal, state or foreign bankruptcy or other similar law,
consent to the institution of proceedings thereunder or to the filing of such
proceeding or to the appointment of or taking possession by a custodian,
receiver, liquidator, assignee, trustee or sequestrator (or similar official) of
the Company or of any substantial part of its properties or assets, make any
assignment for the benefit of creditors, or take any action in furtherance of
any such action;
(d) Borrow (i) from a financial institution in an amount and on terms
other than such as may be commercially available to the Company, on a stand-
alone basis without regard to the creditworthiness or credit support of any
equity holder, direct or indirect, of the Company or any equity or equity-like
enhancement of or issuable by the Company, and taking into account normal,
customary and conservative equity to debt ratios for companies of comparable
size and in the similar business, or (ii) from sources other than a financial
institution as described in clause (i) in an amount greater than $1.0 million
(which, for purposes of financing an acquisition or series of related
acquisitions of a business, shall mean an amount no greater than $1.0 million
for such acquisition or series of related acquisitions, in each case, otherwise
permissible hereunder);
(e) Enter into any agreement or contract (or series of related
agreements or contracts) or incur or assume any liability or responsibility
under any such agreement or contract (including, without limitation, any
settlement agreement), which, individually or in the aggregate, exceeds $1.0
million (other than acquisitions of existing
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telephony operations and other than any agreement or contract for the providing
of telephony services by the Company, in each case, otherwise permissible
hereunder);
(f) Enter into any merger, consolidation, or similar transaction or
effect any reorganization, recapitalization or other fundamental change in the
capital structure of the Company;
(g) Redeem or repurchase any Membership Unit or make, declare or pay
any dividend or distribution of cash or property of the Company to any Member,
except as expressly set forth in this Agreement;
(h) Offer or sell any New Securities of the Company in any public or
private transaction, other than the issuance of Membership Units to the Members
in connection with the making of Initial Capital Contributions in accordance
with Section 3.3 or additional Capital Contributions in accordance with Section
3.4, or admit any Person as a Member of the Company, other than following the
compliance by a Member of the procedure set forth in Section 9.3;
(i) Sell or otherwise dispose of part or all of the Company's Assets
in a single transaction or series of related transactions, except for sales of
obsolete equipment in the ordinary course of business and other than strategic
sales of contracts of the Company, the fair market value of which do not exceed,
in the aggregate, $500,000 in any twelve-month period and with respect to which
no Affiliate of MAC Telcom Plus provides cable television services, except for
the sale of all or substantially all of the Assets in accordance with Section
9.4;
(j) Enter into any agreements (or series of related agreements) to
provide services to the Manager, the Business Manager, any Member or any of
their respective Affiliates (other than MAC Telcom Plus), other than any such
agreement which is on terms and conditions no less favorable to the Company than
then currently available fair market terms and conditions obtained on an arms-
length basis;
(k) Change the name of the Company;
(l) Change, modify or amend the Certificate of the Company; or
(m) Liquidate or dissolve the Company except as provided in Section
12.
7.8 No Dissolution or Termination of a Member. Each Member hereby
-----------------------------------------
covenants and agrees that it shall not voluntarily dissolve or terminate itself
or consent or acquiesce to any involuntary dissolution or termination of itself.
If a Member is dissolved or terminated, any successor or legal representative of
that Member shall
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<PAGE>
become a Substitute Member only upon the unanimous consent of the remaining
Members.
ARTICLE 8
ACCOUNTING PROCEDURES
---------------------
8.1 Fiscal Year. The Fiscal year of the Company shall begin on January 1
-----------
and shall end on December 31 of each year; provided that the fiscal year ending
December 31, 1997 shall commence on the Effective Date.
8.2 Books of Account. At all times during the existence and continuance
----------------
of the Company, the Manager shall cause to be kept accurate, complete and proper
books, records and accounts pertaining to the Company's affairs, including (a) a
list of all Members and their addresses and their Capital Contributions,
Membership Units and Ownership Percentages, (b) a copy of the Certificate and
all amendments thereto and all powers of attorney pursuant to which any
Certificate has been executed, (c) an original copy of the Agreement and all
amendments thereto, (d) copies of the Company's federal and state tax returns
and financial statements and (e) the Company's books and records. Such books and
records shall contain information sufficient for determining each category of
Net Income and Net Loss, for preparing the reports required under this Article 8
and for tax purposes, and in which shall be entered such information and matters
relative to the Company's business as would ordinarily be entered by Persons
engaged in a similar business. Such books and records shall be kept on the
accrual basis of accounting in conformity with GAAP. The method of accounting
followed by the Company for federal income tax purposes shall be the accrual
method. All books, records and accounts of the Company shall be kept at its
principal office or at such other office as the Manager may designate for such
purpose.
8.3 Other Records. At all times during the exist the Company, the Manager
-------------
shall cause to be kept accurate, complete and proper records pertaining to the
Company's affairs, including (a) insurance policies, (b) franchises, (c)
contracts and (d) other agreements.
8.4 Preparation and Filing of Income Tax Returns. The Manager shall cause
--------------------------------------------
the preparation and timely filing of all Company tax returns, shall, on behalf
of the Company, make such tax elections (including, without limitation, any
election under Section 754 of the Code), determinations and allocations which it
deems to be appropriate and shall timely make all other tax filings required by
any governmental authority having jurisdiction to require such tax filing, the
cost of which shall be borne by the Company, subject to the provisions of this
Section 8.4 and Section 8.5. The Manager shall prepare the returns described in
this Section 8.4 not later than seventy-five (75) days after the end of the
Fiscal Year covered by such returns. Not later than five
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(5) days after the preparation of such returns, the Manager shall deliver a copy
of such returns to each Member for its review. The Members may object to the
items and calculations contained in such returns by delivering written notice of
such objection to the Manager within fifteen (15) days after such Member's
receipt of such returns. If a Member so notifies the Manager of an objection to
such returns, then the Manager and such Member shall use their best efforts to
resolve such objection within ten (10) days following the Manager's receipt of
notice of such objection from such Member. If the Manager and such Member are
not able to resolve such objection within such ten (10)-day period, then such
objection shall be submitted for resolution in accordance herewith to a firm of
independent certified public accountants, which firm is retained from time to
time by the Company and which firm is one of the six largest firms of
independent certified public accountants practicing in the United States. The
costs and expenses of such firm of independent certified public accountants
shall be borne by the Company. Prior to the resolution of any such objection,
the Manager shall file all extensions to the filing of such returns which are
then available to the Company. A Form K-1, prepared by the Company's
accountants, shall be delivered to the Members within ninety (90) days after the
expiration of each Fiscal Year of the Company. This form shall show the
allocation of profit or loss of the Company for federal income tax purposes,
including all separately stated items, to each Member. No election shall be made
by the Company or any Member to be excluded from the application of the
provisions of subchapter K of the Code or from any similar provision of state
tax laws.
8.5 Tax Matters Partner. RMTS Holdco is hereby designated the "Tax Matters
-------------------
Partner" (as defined in Code Section 6231). Subject to the provisions of this
Section 8.5, the Tax Matters Partner is authorized and required to represent the
Company (at the Company's expense) in connection with all examinations of the
Company's affairs by tax authorities, including, without limitation,
administrative and judicial proceedings, and to expend Company funds for
professional services and costs associated therewith. The Members agree to
cooperate with each other and to do or refrain from doing any and all things
reasonably required to conduct such proceedings. In any material administrative
or judicial proceeding arising out of or in connection with any income tax audit
or tax return of the Company or the filing of any amended return or claim for
refund in connection with any items of income, gain, loss, deduction or credit
reflected on any income tax return of the Company, the Tax Matters Partner shall
not take any position with the relevant taxing authority without consultation
and discussion with the firm of independent certified public accountants
retained by the Company, which shall be one of the six largest firms of
independent certified public accountants practicing in the United States, and
the Tax Matters Partner shall furnish to each Member a copy of all material
notices or other written communications received by the Tax Matters Partner from
the Internal Revenue Service and shall notify each Member of all material
conversations it has with the relevant taxing authority and shall keep the
Members reasonably informed of all material matters which may come to its
attention in its capacity as Tax Matters Partner.
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8.6 Financial Statements.
--------------------
(a) Annual Reports. As soon as practicable, but in no event later
--------------
than one hundred twenty (120) days after the end of each Fiscal Year, the
Manager shall cause to be delivered to each Person who was a Member at any time
during such Fiscal Year an annual report containing the financial statements of
the Company, including a statement of assets and liabilities as of the end of
such Fiscal Year, a statement of profit or loss, a statement of changes in the
Member's Capital Accounts and a statement of cash flows for such Fiscal Year,
together with a supplementary schedule to the financial statements, showing in
reasonable detail the Capital Account of each Member as of the beginning and as
of the end of such Fiscal Year and showing the major components (including the
amount and method of calculation of any distributions) of the changes in the
Capital Account of each Member during such Fiscal Year, all of which shall be
prepared in accordance with GAAP and shall be examined in accordance with
generally accepted auditing standards by a firm of independent certified public
accountants as selected by the Manager, which firm shall be one of the six
largest firms of independent certified public accountants practicing in the
United States.
(b) Monthly Reports. As soon as practicable, but in no event later
---------------
than thirty (30) days (forty-five (45) days, in the case of each of the first
twelve (12) calendar months during the term of the Company) after the end of
each calendar month during the term of the Company or concurrently with the
delivery of the Company's annual financial statements pursuant to Section
8.6(a), as the case may be, the Manager shall cause to be delivered to each
Person who was a Member at any time during such period unaudited financial
statements for such calendar month and for the period commencing on the first
day of such Fiscal Year and ending on the last day of such month comparable in
form to the audited financial statements to be supplied annually hereunder.
ARTICLE 9
TRANSFER OF MEMBERSHIP UNITS; SALE OF THE COMPANY
-------------------------------------------------
9.1 Limitation on Transfer of Membership Units. For so long as this
------------------------------------------
Agreement shall remain in effect, no Member shall sell, assign, pledge,
hypothecate, transfer, exchange or otherwise transfer for consideration (a
"Transfer"), its Membership Units, in whole or in part, and a transferee shall
--------
not have a right to become a "Substitute Member", except in strict compliance
-----------------
with the provisions of this Agreement, including, without limitation, this
Article 9. Any Transfer will be effective on the first day following the
satisfaction in full of all of the requirements of this Article 9, the
satisfaction and payment in full of all obligations under any promissory note
issued in connection with such Transfer in accordance with such promissory note,
and the receipt of all regulatory approvals and consents necessary or required
by applicable law with respect
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to such Transfer. Until the date on which any Transfer hereunder is effective as
provided herein, the transferring Member shall have and be permitted to exercise
all rights, benefits and privileges with respect to such Membership Units as
provided herein and in the Act, including, without limitation, the right to
designate Member Designees in accordance herewith. Upon the date on which any
Transfer hereunder is effective, the transferee shall become a Substitute Member
with respect to such transferred Membership Units. Any Transfer of Membership
Units in contravention of this Article 9 shall be null and void and of no force
and effect whatsoever.
9.2 Certain Documents. The Company and the Members agree to use their best
-----------------
efforts to cause the Company not to issue any Membership Units without obtaining
from each prospective Substitute Member, prior to the issuance of the Membership
Units, (a) a counterpart of this Agreement as then in effect, duly executed by
the prospective Substitute Member, (b) any reasonable fees and expenses in
connection with the admission of the prospective Substitute Member as an
assignee or transferee and (c) all representations and all such certificates,
evidences or assurance reasonably requested by the Company and the existing
Members.
9.3 Right of First Refusal of any Member.
------------------------------------
(a) If at any time a Member (the "Selling Member") receives a bona
--------------
fide offer in writing from any Person who is not a Member (a "Member Offer") to
------------
purchase any or all of the Membership Units owned by the Selling Member (the
"Offered Units"), which the Selling Member desires to accept, then the Selling
-------------
Member shall give the non-transferring Members (the "Offeree Members") (i)
---------------
written notice (the "Selling Member Notice") of the name and address of the
---------------------
Person who made the Member Offer (the "Proposed Acquiror") and (ii) a copy of
-----------------
the Member Offer, containing all of the material terms and conditions thereof.
Subject to the provisions of this Section 9.3, each Offeree Member shall have
the right of first refusal for a period of sixty (60) days after its receipt of
the Selling Member Notice (the "Acceptance Period") to purchase a portion of the
-----------------
Offered Units in the proportion that the Ownership Percentage of such Member
bears to the Ownership Percentages of all the Offeree Members electing to so
purchase the Offered Units, provided that the exercise of such rights of first
refusal shall be conditioned on the purchase of all, and not less than all, of
the Offered Units in accordance herewith.
(b) An Offeree Member may exercise its right of first refusal by
notifying the Selling Member, the Company and each Offeree Member in writing
(the "Acceptance Notice") within the Acceptance Period of its intention to
-----------------
purchase all or any portion of its pro rata portion of the Offered Units, for
the price and upon the terms and conditions of the Member Offer. If any Offeree
Member (a "Declining Member") declines to purchase all or any part of its pro
----------------
rata portion of the Offered Units, the non-Declining Members shall have the
right to purchase the declined Offered Units on a pro
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<PAGE>
rata basis on the terms and conditions of the Member Offer (except as provided
in Section 9.3(c)), which right shall be exercised, if at all, by providing
written notice to the Selling Member, the Company and the other non-Declining
Members, within five (5) days following the conclusion of the Acceptance Period,
of its intention to purchase all or any portion of its pro rata portion of the
declined Offered Units. Failure to deliver an Acceptance Notice within the
Acceptance Period shall be deemed conclusive evidence of an Offeree Member's
intent to decline the opportunity to purchase any of the Offered Units.
(c) The closing of the purchase of all of the Offered Units by the Offeree
Members shall be conditioned on the purchase by all or any Offeree Member(s) of
all, but not less than all, Offered Units and shall be consummated no later than
ninety (90) days after the date of the Selling Member Notice. At the closing,
the Selling Member shall sell to the Offeree Members full right, title and
interest in and to the Offered Units, free and clear of all Liens (other than
those created pursuant to this Agreement) and shall deliver or cause to be
delivered to the Offeree Members the certificate(s), if any, representing the
Offered Units. The purchase price of the Offered Units shall be payable by
delivery to the Selling Member of cash in the full amount of the purchase price
of the Offered Units purchased by such Offeree Member or, at the election of
such Offeree Member, a promiss ory note of the Offeree Member, in substantially
the form of Exhibit G attached hereto (the "Promissory Note"), in the principal
---------------
amount equal to the purchase price of the Offered Units purchased by such
Offeree Member and dated as of the date of consummation of such sale (the "Sale
----
Date"). The principal amount of the Promissory Note shall be due and payable on
- ----
the first anniversary of the Sale Date. The principal amount of the Promissory
Note shall bear interest from the Sale Date at a rate of prime, as announced
from time to time by Boatman's Trust Company, plus five percent (5%) per annum.
The payment of the purchase price of the Offered Units by delivery of a
Promissory Note shall be subject to the following additional conditions: (i) the
repayment of all obligations under the Promissory Note of such Offeree Member
shall be secured by a priority security interest in such Offeree Member's
interest in the Company and all other property and assets of such Offeree Member
and shall be secured by a priority security interest in all of the Company's
property and assets, which priority security interests in each case shall be
second and subject only to the extent of any prior security interest in the
property and assets of the Offeree Member or the Company granted to and held by
the Company's senior lender as security for its credit facility with the
Company, each such security interest and all related documentation with respect
thereto on terms and conditions acceptable to the Selling Member and the
Company, subject to the approval by Supermajority Vote of the Member Designees
(such approval of the Member Designees of the Offeree Member not to be
unreasonably withheld); (ii) such Offeree Member, with the good faith reasonable
assistance of the Company, shall diligently pursue the acquisition of third
party financing in order to enable it to repay in full the obligations under its
Promissory Note on the first anniversary thereof, and such Offeree Member
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<PAGE>
shall provide written evidence to the Selling Member, reasonably acceptable to
the Selling Member, that such Offeree Member has made reasonable progress
towards the acquisition of such financing by the six-month anniversary of the
date of such Promissory Note; and (iii) the agreement of the individuals
comprising the senior management of the Company, as designated by the Selling
Member on the Sale Date, to remain employed by and to operate the business of
the Company in good faith pending the payment in full of all obligations under
such Promissory Note and such individuals remain employed by and operate the
business of the Company in good faith until the payment in full of all
obligations under such Promissory Note. In the event of the breach of any
covenant or failure of any condition provided in clause (i), (ii) or (iii)
above, all obligations under such Promissory Note shall immediately become due
and payable.
(d) In the event the Offeree Members in the aggregate have not agreed to
purchase all of the Offered Units in accordance with Section 9.3(b), the Selling
Member shall have the right for a period of one hundred eighty (180) days after
the date of the Selling Member Notice to sell to the Proposed Acquiror, all, but
not less than all, of the Offered Units, at the price specified in the Selling
Member Notice and upon terms and conditions which are the same, in all material
respects, as those terms and conditions specified in the Selling Member Notice.
In the event the Selling Member (i) proposes to sell the Offered Units other
than in accordance with the preceding sentence or (ii) does not sell all of the
Offered Units to the Proposed Acquiror within such 180-day period, then, in each
such case, prior to any Transfer of such Offered Units, the Selling Member shall
be required to first offer such Offered Units to the Offeree Members in the
manner provided in this Section.
9.4 Sale of the Company or Units of RMTS Holdco
-------------------------------------------
(a) The Manager may solicit, on behalf of the Members, the sale of all of the
outstanding Membership Units of the Company or the sale of all or substantially
all of the assets of the Company and, in connection therewith, the assump tion
of all of the obligations and liabilities of the Company, at any time and from
time to time, subject to the terms and conditions contained herein. If at any
time the Company receives a bona fide offer (the "Company Offer") in writing
-------------
from any Person who is not a Member or any Affiliate thereof for the purchase of
all of the outstanding Membership Units of the Company or the purchase of all or
substantially all of the assets of the Company, where the Company Offer contains
terms and conditions which are identical as applied to each Member, where the
consideration specified in the Company Offer does not consist of illiquid
securities, and where in the case of a proposed purchase of assets of the
Company the consideration distributable in connection therewith to each Member
is equivalent to the consideration that would be payable if the Company Offer
related to the purchase of all of the outstanding Membership Units of the
Company, then the Manager shall give the Members (i) written notice (the
"Company Notice") of the name and address the Person who made the Company Offer,
- ---------------
and (ii) a copy of the
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<PAGE>
Company Offer, containing all the material terms and conditions thereof. A sale
of all of the outstanding Membership Units of the Company or of all or
substantially all of the assets of the Company pursuant to the Company Offer
shall be subject to the written consent of each Member. Each Member's consent,
if given, shall be delivered not later than sixty (60) days following receipt of
the Company Notice from the Manager pursuant hereto (the "Offer Period").
-------------
(b) If the Members consent in writing to the sale of all of the outstanding
Membership Units of the Company or of all or substantially all of the assets of
the Company, pursuant to the Company Offer, such sale shall be consummated no
later than one hundred eighty (180) days after the date of the Company Notice.
If such sale is not consummated within such 180-day period, no Member shall be
obligated to sell any of its Membership Units pursuant to the Company Offer, and
the Company shall not sell all or substantially all of its assets pursuant to
the Company Offer.
(c) If Cableco does not so provide its written consent to the Company Offer
within the Offer Period, and if RMTS Holdco does so consent to the Company Offer
within the Offer Period, then Cableco shall have the right for thirty (30) days
following the expiration of the Offer Period to attempt to obtain a commitment
for the refinancing of the Company's secured indebtedness. In the event that
Cableco obtains such financing commitment within such thirty (30) day period,
and RMTS Holdco has consented to the Company Offer within the Offer Period,
Cableco shall be obligated to purchase all of the outstanding Membership Units
then held by RMTS Holdco at a purchase price equivalent to the purchase price
specified in the Company Offer for such Membership Units, multiplied by 1.25,
and the closing of the purchase by Cableco of all of the outstanding Membership
Units held by RMTS Holdco shall be consummated not later than one hundred fifty
(150) days after the date of the Company Notice. At the closing, RMTS Holdco
shall sell to Cableco full right, title and interest in and to the Membership
Units owned by RMTS Holdco, free and clear of all Liens (other than those
created pursuant to this Agreement) and shall deliver or cause to be delivered
to Cableco the certificate(s), if any, representing the Membership Units
purchased by Cableco. The purchase price for the Membership Units purchased by
Cableco shall be payable, at the election of Cableco, either (i) in cash on the
date of such closing, or (ii) on the terms and conditions specified in the
Company Offer.
9.5 Legal Capacity of Transferee; Tax Effects . Anything in this Article 9 or
-----------------------------------------
elsewhere in this Agreement to the contrary notwithstanding, no Transfer of all
or any part of any Member's Membership Units shall be made or shall be effective
if such Transfer would jeopardize the limited liability status of the Company or
result in any substantial adverse effect upon the Company or the Members for
federal income tax purposes (including, without limitation, a termination of the
Company or loss of tax treatment as a partnership).
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<PAGE>
9.6 Securities Laws Matters. Anything in this Article 9 or elsewhere in this
-----------------------
Agreement to the contrary notwithstanding, no Transfer of all or any part of any
Member's Membership Units shall be made or shall be effective unless (a) prior
to the consummation thereof, all assignees and transferees with respect thereto
shall have made to the Company in writing all of the representations required,
in the sole judgment of the Manager, to ensure compliance with applicable
securities laws, and (b) if required in the discretion of the Manager, the
Company is provided with an opinion of its legal counsel or other legal counsel
satisfactory to the Company's counsel, stating that such Transfer is exempt from
the Securities Act, and is permissible under all other applicable federal and
state securities laws without registration or qualification of any security or
consent or approval of any Person.
9.7 Indemnification. To the fullest extent permitted by applicable law, each
---------------
Member and each assignee or transferee of any Membership Unit (or portion
thereof) shall indemnify and hold harmless the Company, the Manager, every
Member or Officer who was or is a party or is threatened to be made a party to
any threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative by reason of or arising from any
actual or alleged misrepresentation, misstatement of facts or omission to state
facts made (or omitted to be made) by such Member or any assignee or transferee
of any Membership Unit (or portion thereof) in connection with any Transfer of
all or any part of any Membership Unit by such Member, against expenses for
which the Company or such other Person has not otherwise been reimbursed
(including attorneys' fees, judgments, fines and amounts paid in settlement)
actually and reasonably incurred by any of them in connection with such action,
suit or proceeding.
ARTICLE 10
LIMITATIONS ON LIABILITIES; INDEMNIFICATION
-------------------------------------------
10.1 Limited Liability of Members. No Member shall have personal liability for
----------------------------
the obligations, debts, liabilities or losses of the Company, whether to the
Company, to the Manager, to the Business Manager, to any other Member, to any
Officer or to the creditors of the Company, whether in contract, tort or
otherwise, in excess of, in the aggregate, the amount of such Member's Capital
Contributions to the Company, except as otherwise required by law. No creditor
shall have the right to attach or garnish or compel the contribution by any
Member of any capital. Except as may otherwise be required by the Act or Section
4.5, no Member shall be liable for a return of the Assets delivered or
distributed to such Member.
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<PAGE>
10.2 Liability and Indemnification of the Manager, Business Manager and
------------------------------------------------------------------
Member Designees
- ----------------
(a) Neither the Manager, the Business Manager, nor any Member Designee (each
an "Indemnitee") shall be liable to any Member or to the Company by reason of
----------
the actions or inactions of such Indemnitee in the conduct of the business of
the Company, but only to the extent that such Indemnitee (i) acted in good
faith, (ii) acted in a manner reasonably believed to be in or not opposed to the
best interests of the Company, and (iii) with respect to any criminal conduct or
proceeding, had no reasonable cause to believe that his or its conduct was
unlawful; provided, however, that the foregoing limitation on liability shall
-------- -------
not apply in the event of (v) a breach by an Indemnitee of any material
provision of this Agreement, (w) a breach by the Business Manager of the
Management Agreement, (x) a breach by the Business Manager or any Member
Designee of any Non-Competition Agreement executed by the Business Manager or
any Member Designee, (y) a violation of law or breach of fiduciary duty to the
Company by an Indemnitee, or (z) an Indemnitee's fraud, gross negligence or
willful misconduct. No amendment of this Agreement or repeal of any of its
provisions shall limit or eliminate the benefits provided to an Indemnitee under
this provision with respect to any act or omission which occurred prior to such
amendment or repeal.
(b) The Company shall, to the fullest extent permitted by applicable law,
indemnify and hold harmless, each Indemnitee from and against any losses,
claims, damages, liabilities or actions, joint or several, to which such
Indemnitees may be subject by virtue of any act performed by such Indemnitee, or
omitted to be performed by any such Indemnitee, in connection with the business
of the Company and shall reimburse each such Indemnitee for any legal or other
expenses reasonably incurred by such Person in connection with investigating,
defending or preparing to defend any such loss, claim, damage, liability or
action, but only to the extent that such Indemnitee (i) acted in good faith,
(ii) acted in a manner reasonably believed to be in or not opposed to the best
interests of the Company, and (iii) with respect to any criminal conduct or
proceeding, had no reasonable cause to believe that his or its conduct was
unlawful; provided, however, that the Company shall not be liable to any
-------- -------
Indemnitee to the extent that in the judgment of a court of competent
jurisdiction such loss, claim, damage, liability or action is found to arise
from any act of Indemnitee described in Section 10.2(a)(v)-(z). Expenses
incurred by an Indemnitee in defending a civil or criminal action, suit or
proceeding arising out of or in connection with this Agreement or the Company's
business or affairs shall be paid by the Company in advance of the final
disposition of such action, suit or proceeding upon receipt of an undertaking by
the Indemnitee to repay such amount plus reasonable interest in the event that
it shall ultimately be determined that the Indemnitee was not entitled to be
indemnified by the Company in connection with such action. Notwithstanding the
foregoing, expenses incurred by an Indemnitee shall not be paid by the Company
in advance of the final
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<PAGE>
disposition of any such action, suit or proceeding in the event that such
action, suit or proceeding is brought by any Member or the Company, whether on a
direct or a derivative basis. No amendment of this Agreement shall limit or
eliminate the right to indemnification provided hereunder with respect to acts
or omissions occurring prior to such amendment or repeal. The Company may carry
insurance, to the extent available on reasonable commercial terms, protecting it
and potential Indemnitees from liabilities to third parties, to the extent
practicable. No Indemnitee shall enter into any settlement for which it seeks to
be indemnified under this Agreement in excess of in the aggregate $100,000
without the approval by Supermajority Vote of the Member Designees of such
settlement.
10.3 Indemnification Rights Cumulative. The indemnification rights contained
---------------------------------
in this Article 10 shall be cumulative of, and in addition to, any and all
rights, remedies and other recourse to which the Indemnitee shall be entitled,
whether pursuant to the provisions of this Agreement, at law or in equity.
Indemnification shall be made solely and entirely from the Assets of the
Company, and no Member shall be personally liable to the Indemnitees under this
Article 10.
ARTICLE 11
POWER OF ATTORNEY
------------------
11.1 Authority to Execute Documents. During the life of the Company and
------------------------------
during any additional period authorized in accordance with this Agreement to
dissolve, liquidate and wind up the affairs of the Company, each of the Members
hereby irrevocably designates and appoints the Manager, for so long as it is
Manager of the Company hereunder, to be the Member's true and lawful attorney-
in-fact with the power, from time to time, in the name, place and stead of the
Member to do any ministerial act necessary to qualify the Company to do business
under the laws of any jurisdiction in which it is necessary to file any
instrument in writing in connection with such qualification and to make,
execute, swear to and acknowledge, amend, file, record, deliver and publish in
conformance with the provisions of this Agreement (a) the Certificate, (b) a
counterpart of this Agreement or of any amendment hereto for the purpose of
filing or recording such counterpart in any jurisdiction in which the Company
may own property or transact business, (c) all certificates and other
instruments necessary to qualify or continue the Company as a limited liability
company in the State of Delaware or in any jurisdiction where the Company may
own property or be doing business, (d) any fictitious or assumed name
certificate required or permitted to be filed by or on behalf of the Company,
including, without limitation, to enable the Company to conduct its business
under the name "Telcom Plus" or such other name or names as the Member Designees
may determine, from time to time, by Supermajority Vote, and (e) a certificate
or other instrument evidencing the dissolution or termination of the
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<PAGE>
Company in accordance with the Agreement when such shall be appropriate in each
jurisdiction in which the Company shall own property or do business.
11.2 Survival of Power. The grant of the power of attorney referenced in
-----------------
Section 11.1 shall not be revoked and shall survive the Transfer by a Member of
all or part of its Membership Units and it shall be coupled with an interest and
shall survive the death, incapacity or dissolution of any Member. Any Person
dealing with the Company may conclusively presume and rely upon the fact that
any instrument executed by the Manager is authorized, valid and binding without
further inquiry. The power of attorney referenced in Section 11.1 may be
exercised for each Member by the signature of the Manager or by listing the
names of all the Members and executing any instrument with the signature of the
Manager acting as attorney-in-fact for all of them.
ARTICLE 12
DISSOLUTION AND TERMINATION
---------------------------
12.1 Dissolution.
-----------
(a) The Company shall be dissolved only upon the earlier to occur of:
(i) The Termination Date;
(ii) The date on which all of the Assets of the Company have been
disposed of or the Company is merged with or into another Person and the Company
is not the surviving entity, in any such case, upon a Supermajority Vote of the
Member Designees;
(iii) at the written election of RMTS Holdco, upon the failure of
the operating transferors, on behalf of Mid-Atlantic Holdco, to transfer
collectively at least seventy-five percent (75%) of the Aggregate Contribution
Value of all Contribution Assets pursuant to and in accordance with the
Contribution Agreement within the time period specified therein, including any
extensions thereof in accordance therewith;
(iv) The date of entry of a decree of judicial dissolution under
Section 18-202 of the Act;
(v) Upon the date of the bankruptcy of any Member (a "Withdrawal
----------
Event"), unless, within ninety (90) days following the Withdrawal Event, the
- -----
business of the company is continued by the affirmative vote of all of the
remaining members and there are at least two remaining members; or
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<PAGE>
(vi) The date on which the Member Designees, by Supermajority
Vote, agree in writing to terminate the Company.
(b) Notwithstanding the dissolution of the Company, the Company shall
not terminate until a certificate of cancellation shall be filed with the
Secretary of State of the State of Delaware and the Assets of the Company are
distributed as provided in Section 12.2, subject to Section 12.3. Upon the
dissolution of the Company, prior to the termination of the Company, the
business of the Company and the affairs of the Members shall continue to be
governed by this Agreement.
(c) If there is a Withdrawal Event and all of the remaining Members
consent to continue the business of the Company in accordance with Section
12.1(a)(v), the Company shall pay to the withdrawing Member any positive balance
in the withdrawing Member's Capital Account within ninety (90) days from the
date of the Withdrawal Event. Such remaining balance shall be payable by
delivery to the Withdrawing Member of cash in the full amount of such remaining
balance or, at the election of the non-withdrawing Members, a promissory note of
the Company in the principal amount equal to such remaining balance and dated as
of the date of such withdrawal. Such promissory note shall be in substantially
the form of Exhibit G hereto, provided that such promissory note shall be due
and payable only at the time of the making of liquidating distributions to the
non-withdrawing Members upon the dissolution and liquidation of the Company. The
remaining Members shall at any time within sixty (60) days of the Withdrawal
Event determine all Net Profits and Net Losses of the Company as of the date of
such determination as if all Assets of the Company were sold for their fair
market value and make appropriate credits and debits to the Member's Capital
Accounts. The Capital Account of the withdrawing Member as of the date of
determination shall be conclusively deemed to be the fair value of all of its
Membership Units as of such date and the payment provided for in this Section
12.1(c) shall be the full and only consideration for the redemption of the
withdrawing Member's Membership Units.
12.2 Winding Up, Liquidation and Distribution of Assets
--------------------------------------------------
(a) Upon dissolution, an accounting shall be made of the Company's
Assets, liabilities and operations, from the date of the last previous
accounting until the date of dissolution. The Manager shall immediately proceed
to wind up the affairs of the Company. The Manager shall conduct such winding up
in a prompt and orderly manner.
(b) If the Company is dissolved and its affairs are to be wound up,
the Manager shall:
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(i) Sell or otherwise liquidate all of the Company's Assets as
promptly as practicable, except to the extent that the Manager receives written
notice from a Member of its desire to receive an in-kind distribution thereof;
(ii) Allocate any Net Profit or Net Loss resulting from such
sales or deemed sales in the case of Assets to be distributed in-kind to the
Members' Capital Accounts in accordance with Article 4;
(iii) Discharge all liabilities of the Company, including
liabilities to Members who are creditors of the Company to the extent permitted
by law, excluding liabilities for distributions to Members under Section 4.5;
and
(iv) Distribute the remaining Assets to Members in accordance
with, and to the extent of, the positive balance (if any) of each Member's
Capital Account (as determined after taking into account all Capital Account
adjustments for the Company's taxable year during which the liquidation occurs).
Any such distributions to the Members in respect of their Capital Accounts shall
be made within the time specified in Section 1.704-1(b)(2)(ii)(b)(2) of the
- -
Treasury Regulations.
(c) The Manager shall determine the fair market value of each non-cash
Asset distributed to one or more Members to determine the Net Profit or Net
Loss that would have resulted if such Asset were sold for such value, and such
determination shall be subject to approval by Supermajority Vote of the Member
Designees. Such Net Profit or Net Loss shall then be allocated pursuant to
Article 4, and the Members' Capital Accounts shall be adjusted to reflect such
allocations. The amount distributed and charged to the Capital Account of each
Member receiving an interest in such distributed Asset shall be the fair market
value of such interest (net of any liability secured by such Asset that such
Member assumes or takes subject to), as determined by the Manager and subject to
approval by Supermajority Vote of the Member Designees.
(d) Notwithstanding anything to the contrary in this Agreement, if any
Member has a deficit balance in its Capital Account (after giving effect to all
contributions, distributions, allocations and other Capital Account adjustments
for all taxable years, including the year during which such liquidation occurs),
such Member shall have no obligation to make any Capital Contribution to restore
such deficit balance, and the deficit balance shall not be considered a debt
owed by such Member to the Company or to any other Person for any purpose
whatsoever.
(e) Upon the completion of the winding up, liquidation and distribution
of the assets of the Company, the Company shall be deemed terminated.
-47-
<PAGE>
(f) The Manager shall comply with all requirements of applicable law
pertaining to the winding up of the affairs of the Company and the final
distribution of its Assets. The Manager shall be under no liability with
respect to the Assets held by the Company upon the termination of the Company
except to hold and maintain the same in the name of the Company until disposed
of in accordance with the terms of this Agreement.
12.3 Distributions and Allocations upon Unwind Transaction. Notwithstanding
-----------------------------------------------------
anything contained in this Agreement (including, without limitation, in Section
12.2 or Article 4) to the contrary, if RMTS Holdco elects to cancel the
Contribution Agreement, rescind and unwind transactions and dissolve the Company
pursuant to Section 3.3(d) and if the amounts returned to RMTS Holdco by the
Escrow Agent (as defined in the Contribution Agreement) from the Escrow Fund (as
defined in the Contribution Agreement) and by the Company as contemplated by
Section 2.8 of the Contribution Agreement, are, in the aggregate, less than the
Contribution Amount (as defined in the Contribution Agreement) plus the Initial
Capital Contribution made by RMTS Holdco hereunder, the Company shall, at the
election of RMTS Holdco, either (a) sell or otherwise liquidate, as promptly as
is reasonably practicable so as to effect an orderly liquidation, Assets which
are sufficient in amount and value to enable the Company to repay in full to
RMTS Holdco any such shortfall, or (b) transfer good and marketable title to
such Assets as RMTS Holdco shall identify, free and clear of all Liens, in
consideration of the fair market value of such Assets so transferred, as agreed
upon by RMTS Holdco and Cableco, which consideration shall be payable by offset
of amounts owed to RMTS Holdco in connection with the Unwind Transaction, and
the Company shall not return any Asset to Cableco until RMTS Holdco has been
repaid the full Contribution Amount plus the Initial Capital Contribution made
by RMTS Holdco hereunder. Notwithstanding anything contained in this Agreement
(including, without limitation, in Section 12.2 or Article 4) to the contrary,
all allocations of Net Profit, Net Loss, income, gain, loss and deduction of the
Company shall be made to effect the priority contemplated in this Section 12.3.
12.4 Certificate of Cancellation. When all debts, liabilities and obligations
---------------------------
of the Company have been paid and discharged or adequate provisions have been
made therefor and all of the remaining Assets of the Company have been
distributed, a certificate of cancellation shall be executed by one or more
authorized persons, which certificate shall set forth the information required
by the Act. A certificate of cancellation shall be filed with the Delaware
Secretary of State to accomplish the cancellation of the Certificate of the
Company upon the dissolution and completion of the winding up of the Company.
12.5 Effect of Filing of Certificate of Cancellation. Upon the filing of the
-----------------------------------------------
certificate of cancellation with the Delaware Secretary of State, the existence
of the Company shall cease, except that the Manager may, in the name of, and for
and on
-48-
<PAGE>
behalf of the Company, prosecute and defend suit, gradually settle and close
the Company's business, dispose of and convey the Company's property, discharge
or make reasonable provision for the Company's liabilities, and distribute to
the Members any remaining Assets, and take such other appropriate action as
provided in the Act and this Agreement. The Manager shall have authority to
distribute any Company property discovered after dissolution, convey real estate
and take such other act as may be necessary on behalf of and in the name of the
Company in accordance with this Agreement.
12.6 Return of Contribution Nonrecourse to Other Members. Except as
---------------------------------------------------
provided by law or as expressly provided in this Agreement, upon dissolution,
each Member shall look solely to the Assets of the Company for the return of its
Capital Contributions. If the property remaining after the payment or discharge
of the debts and liabilities of the Company is insufficient to return the
Capital Contributions of one or more Members, such Member or Members shall have
no recourse against any other Member, except as otherwise provided by law.
ARTICLE .13
RULES OF CONVENTION
-------------------
13.1 Notice. All notices, reports and other communications given pursuant
------
to this Agreement shall be in writing and shall either be mailed by first class
mail, postage prepaid, certified or registered with return receipt requested,
delivered in person or by nationally recognized overnight courier or sent by
facsimile or prepaid telegram followed by confirmatory letter. Notice sent by
mail in the foregoing manner shall be deemed served or given three (3) Business
Days after deposit in the United States Postal Service. Notice delivered by
nationally recognized overnight courier shall be deemed served or given one (1)
Business Day after delivery to the courier, charges prepaid. Notice given to the
Company, the Manager, the Business Manager or a Member in any other manner shall
be effective only if and when received by the addressee. For purposes of notice,
the address of each Member shall be the address as stated below the Member's
name on Schedule 3.2 hereto; provided, however, that each member shall have the
-------- -------
continuing right to change its address for notice hereunder to any other
location by giving ten (10) days' prior notice of such change to the Company in
the manner set forth above. For the purposes of all notices to the Manager or
the Business Manager, the Manager's and the Business Manager's address shall be
the same as RMTS holdco for so long as the Manager serves as Manager hereunder
and the Business Manager serves as the Business Manager hereunder, as the case
may be. For the purposes of all notices to the Company or the Business Manager,
the Company's and the Business Manager's address shall be the same as the
Company's address as set forth in Section 2.2.
-49-
<PAGE>
13.2 Amendment. Any provision of this Agreement may be amended,
---------
supplemented or modified only with the written consent of each Member.
13.3 Arbitration. Any controversy, dispute or claim of whatever nature
-----------
arising out of, or in connection with, or in relation to the interpretation,
performance or breach of this Agreement, including any claim based on contract,
tort or statute, shall be resolved at the written request of any party to this
Agreement by arbitration before a single arbitrator agreed upon by the parties.
In the event that a single arbitrator cannot be agreed upon by the parties
within thirty (30) days of written request for arbitration, each party shall
within ten (10) days thereafter choose an arbitrator and the arbitrators so
chosen shall choose an arbitrator who shall act a single arbitrator. If either
party shall fail to choose an arbitrator, the arbitrator(s) chosen by the other
parties shall choose the single arbitrator or, if only one arbitrator is chosen
by the other parties, such arbitrator shall act as a single arbitrator. The
arbitration shall be conducted at a location determined by the single arbitrator
in Chicago, Illinois, administered by and in accordance with the then existing
rules of practice and procedures of the American Arbitration Association, and
judgement upon any award rendered by the single arbitrator may be entered by any
state or federal court having jurisdiction thereof. The written decision of the
arbitrator shall be valid, binding, final and non-appealable; provided, however,
-------- -------
that the parties hereto agree that the arbitrator shall not be empowered to
award punitive damages against any party to such arbitration. The arbitrator
shall require the non-prevailing party to pay the fees and costs of the
arbitration procedure if the arbitrator determines that any claim so arbitrated
was frivolous or meritless; provided, however, that in the event that the
-------- ------
arbitrator determines that any claim of the non-prevailing party was frivolous
or meritless and awards fees and costs to the prevailing party, then the non-
prevailing party may appeal such determination, but only as to the sole issue of
the arbitrator's award of such fees and costs, to a court of competent
jurisdiction, which court shall reverse such award if it determines that the
arbitrator's decision was not supported by substantial evidence. If there is no
determination that any claim arbitrated by the non-prevailing party was
frivolous or meritless, such fees and costs shall be borne equally by the
parties incurring the same. Each party acknowledges that they are giving up
their right to have any such claim decided in a court of law before a judge or
jury, and hereby waives all rights to appeal (other than the appeal of an award
of fees and costs based on a determination by the arbitrator that a claim of the
non-prevailing party was frivolous or meritless).
13.4 Governing Law. This Agreement is made pursuant to and shall be
-------------
construed in accordance with the internal laws of the State of Delaware, without
regard to the principles of the conflicts of laws thereof.
13.5 Entire Agreement. This Agreement, together with the schedules,
----------------
annexes and exhibits attached hereto, contains the entire agreement among the
Members relating to the subject matter hereof. This Agreement, together with the
schedules,
-50-
<PAGE>
annexes and exhibits attached hereto, supersedes all prior written and all prior
and contemporaneous oral agreements, understandings and negotiations between the
parties with respect to such subject matter, including, without limitation, the
Letter of Intent dated June 13, 1996 and the Letter Agreement dated November
1996 and the Term Sheet attached thereto, but not including the Contribution
Agreement.
13.6 Severability. If any term or provision of this Agreement or the
------------
performance thereof shall be invalid or unenforceable to any extent, such
invalidity or unenforceability shall not affect or render invalid or
unenforceable any other provision of this Agreement and this Agreement shall be
valid and enforced to the fullest extent permitted by law.
13.7 Construction. Whenever required by the context, as used in this
------------
Agreement, the singular number shall include the plural, the neuter shall
include the masculine or the feminine gender and the masculine gender shall
include the neuter or the feminine gender. All references to days in this
Agreement mean calendar days unless otherwise provided. Any day or deadline or
time period hereunder which falls on a Saturday, Sunday or a non-Business Day
shall be deemed to refer to the first Business Day following.
13.8 Captions. The Article and Section headings appearing in this
--------
Agreement are for convenience of reference only and are not intended, to any
extent and for any purpose, to limit or define the text of any Article or
Section hereof.
13.9 Counterparts and Execution. This Agreement may be executed in
--------------------------
multiple counterparts, each of which shall be deemed an original Agreement and
all of which shall constitute one Agreement between each of the parties hereto,
notwithstanding that all of the parties are not signatories to the original or
the same counterpart, to be effective as of the day and year first set forth
above.
13.10 Consents and Waivers. No provision of this Agreement shall be deemed
--------------------
to have been waived, except if such waiver is contained in a written instrument
and executed by the party against which such waiver is to be enforced, and no
such waiver shall be deemed to be a waiver of any other or further obligation or
liability of the party or parties in whose favor the waiver was given.
13.11 Rights and Remedies Cumulative. The rights and remedies provided by
------------------------------
this Agreement are cumulative and the use of any one right or remedy by any
party shall not preclude or waive its right to use any or all other remedies.
Such rights and remedies are given in addition to any other rights the parties
may have by law, statute, ordinance or otherwise.
-51-
<PAGE>
13.12 Assigns. Each and all of the covenants, terms, provisions and
-------
agreements herein contained shall be binding upon and inure to the benefit of
the parties hereto and, to the extent expressly permitted by this Agreement,
their respective assigns. Subject to the immediately preceding sentence, this
Agreement is not intended to benefit, and shall not run to the benefit of or be
enforceable by, any other person or entity, other than the parties hereto and
their permitted assigns.
13.13 Waiver of Action for Partition. Each Member irrevocably waives
------------------------------
during the term of the Company any right that it may have to maintain an action
for partition with respect to the property of the Company.
13.14 No Publicity. No public announcements or releases regarding this
------------
Agreement or the matters covered hereby shall be made by any Member without the
prior oral consent of each other Member; provided, however, that no Member shall
-------- -------
be prohibited from supplying any information to any of its representatives,
agents, attorneys, advisors, financing sources and others to the extent
necessary to effect the transactions and actions contemplated hereby so long as
such representatives, agents, attorneys, advisors, financing sources and others
are made aware of and agree to be bound by the terms of this Section 13.14 and,
provided, further, that no Member shall be prohibited from disclosing the
- -------- -------
relationship among RMTS Holdco, Cableco and the Company created by this
Agreement or between the Company and MAC Telcom Plus in connection with the
marketing and promotion of services provided by the Company and MAC Telcom Plus.
Notwithstanding anything contained herein to the contrary, no Member shall issue
or disclose to the press or any third party (including, without limitation, any
professional advisor or employee or other representative of the Company or any
Member) the identity of any direct or indirect investor or equity holder of RMTS
Holdco without the prior oral consent of the Manager, Chief Executive Officer or
President of RMTS Holdco. Nothing contained in this Agreement shall prevent any
Member at any time from furnishing any required information to any governmental
entity, department, commission, board, agency or authority pursuant to any
applicable statute, law, ordinance, rule, regulation, permit, order, writ,
judgment, injunction, decree or award issued, enacted or promulgated by any such
governmental entity or authority or any arbitrator or from complying with its
legal obligations.
-52-
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this
Operating Agreement to be executed on its behalf by its duly authorized
representative, as of the day and year first above written.
VIC-RMTS HOLDCO, LLC
By: /s/ Laurel Dent
--------------------------------
Name: Laurel Dent
------------------------------
Title: Authorized Representative
-----------------------------
MID-ATLANTIC RMTS HOLDINGS, LLC.
By: /s/ John C. Norcott
--------------------------------
Name: John C. Norcott
------------------------------
Title: Business Manager
-----------------------------
<PAGE>
SCHEDULE 3.2
<TABLE>
<CAPTION>
Total
Initial Membership Initial Ownership
Members Units Percentage
-------- ------------------ ------------------
<S> <C> <C>
VIC-RMTS Holdco, LLC 5 50%
Address for Notices:
2201 Waukegan Road
Suite E-200
Bannockburn, Illinois 60015
Facsimile: (708) 374-1070
Mid-Atlantic RMTS Holdings, LLC 5 50%
Address for Notices:
5335 Wisconsin Avenue, Suite 750
Washington, D.C. 20015
Facsimile: (202) 364-3520
</TABLE>
<PAGE>
SCHEDULE 3.3 (b)
CONTRIBUTED ASSETS AND PROPERTIES
---------------------------------
Certain agreements, contracts, opportunities and rights to sell or
negotiate for the sae of telephony services in the multiple dwelling unit
marketplace.
<PAGE>
SCHEDULES 5.2 (a)
RMTS HOLDCO SIGNATORIES OF NON-COMPETITION AGREEMENTS
-----------------------------------------------------
Ventures In Communications RMTS, LLC
Ventures In Communications, LLC
VIC-RMTS Holdco, LLC
<PAGE>
SCHEULE 5.2 (b)
MID-ATLANTIC RMTS SIGNATORIES OF NON-COMPETITION AGREEMENTS
-----------------------------------------------------------
1. Chesapeake Private Cablevision Limited Partnership
2. Mid-Atlantic Cable Holdings, LLC
3. Mid-Atlantic RMTS Holdings, LLC
4. Mid-Atlantic Cable Service Company
5. Mid-Atllantic Cable Limited Partnership of Caroline County
6. Mid-Atlantic CATV Limited Partnership
7. Mid-Atlantic Development Company Limited Partnership
8. South Central Development Company Limited Partnership
9. John LOng
10. John Lubetkin
11. Jan Miller
<PAGE>
SCHEDULE 7.5 (a)
MEMBER DESIGNEE REPLACEMENTS
----------------------------
VIC-RMTS Holdco, LLC Replacements:
- ---------------------------------
None
Mid- Atlantic RMTS Holdings, LLC Replacements:
- ---------------------------------------------
Joan Miller or John Long, whoever is not an initial Mid- Atlantic
RMTS Designee.
<PAGE>
ANNEX A
LISTING ORF RURAL SERVICE AREAS AND
-----------------------------------
METROPOLITAN SERVICE AREAS
--------------------------
MSA 8 Washington, DC
MSA 14 Baltimore, MD
RSA 690 FRederick, VA - 10
RSA 691 Madison, VA - 11
RSA 692 Caroline, VA - 12
RSA 704 Grant, VA - 13
<PAGE>
ANNEX B
MAP OF RURAL SERVICE AREAS
AND
METROPOLITAN SERVICE AREAS
<PAGE>
[MAP OF MSAs AND RSAs FOR CELLULAR SERVICE APPEARS HERE]
<PAGE>
Exhibit 4.1
ONEPOINT COMMUNICATIONS CORP.
AND THE SUBSIDIARY GUARANTORS
LISTED ON EXHIBIT A HERETO
175,000 Units Consisting of
$175,000,000 of 14 1/2% Senior Notes
due 2008
and
Warrants to Purchase 111,125 Shares of Common Stock
Purchase Agreement
May 15, 1998
BEAR, STEARNS & CO. INC.
NATIONSBANC MONTGOMERY SECURITIES LLC
<PAGE>
ONEPOINT COMMUNICATIONS CORP.
175,000 Units Consisting of
$175,000,000 of 14 1/2% Senior Notes due 2008
and
Warrants to Purchase 111,125 Shares of Common Stock
PURCHASE AGREEMENT
May 15, 1998
Bear, Stearns & Co. Inc.
NationsBanc Montgomery Securities LLC
c/o Bear, Stearns & Co. Inc.
245 Park Avenue
New York, New York 10167
Ladies & Gentlemen:
OnePoint Communications Corp., a Delaware corporation (the "Company"),
proposes to issue and sell to Bear, Stearns & Co. Inc. and NationsBanc
Montgomery Securities LLC (together, the "Initial Purchasers") an aggregate of
175,000 units (the "Units") consisting in the aggregate of $175,000,000 of 14
1/2% Senior Notes due 2008 (the "Series A Notes") and Warrants (the "Warrants")
to purchase 111,125 shares of common stock, par value $0.01 per share (the
"Common Stock"), of the Company (the "Warrant Shares"), subject to the terms and
conditions set forth herein. Each Unit will consist of (a) $1,000 principal
amount of the Series A Notes and (b) one Warrant, to purchase .635 shares of
Common Stock. The Series A Notes will be issued pursuant to an indenture (the
"Indenture"), to be dated the Closing Date (as defined below), between the
Company, the Subsidiary Guarantors (as defined below) and Harris Trust and
Savings Bank, as trustee (the "Trustee"). The Company's payment obligations
under the Notes will be jointly and severally guaranteed (the "Subsidiary
Guarantees") by the entities listed on Exhibit A hereto (the "Subsidiary
Guarantors"). The Warrants will be issued pursuant to a warrant agreement (the
"Warrant Agreement") to be dated the Closing Date, between the Company and
Harris Trust and Savings Bank, as warrant agent (the "Warrant Agent"). The
Series A Notes and the Warrants comprising each Unit will not be separable until
the earlier of (i) the date that is six months following the initial sale of the
Units, (ii) the commencement of the Exchange Offer (as defined below), (iii) the
date on which the Shelf Registration Statement (as defined below) is declared
effective, (iv) a Change of Control (as defined below) or (v) such date as Bear
Stearns & Co. Inc. may, in its sole discretion, deem appropriate (such date, the
"Separation Date"). The Units, the Series A Notes and the Warrants are more
fully described in the Offering Memorandum referred to below.
1
<PAGE>
1. Issuance of Securities. The Company proposes to, upon the terms and
subject to the conditions set forth herein, issue and sell to the Initial
Purchasers the Units. The Series A Notes forming a part of the Units and the
Series B Notes (as defined below) issuable in exchange therefore are hereinafter
collectively referred to as the "Notes." The Units, the Notes and the Warrants
are collectively referred to herein as the "Securities." Capitalized terms used
but not otherwise defined herein shall have the meanings given to such terms in
the Indenture.
Upon original issuance thereof, and until such time as the same is no
longer required under the applicable requirements of the Securities Act of 1933,
as amended (the "Securities Act"), the Units, the Notes, the Warrants and the
Warrant Shares (and all securities issued in exchange or in substitution
therefor) shall bear the legends required by the Indenture.
2. Offering. The Units will be offered and sold to the Initial
Purchasers pursuant to an exemption from the registration requirements under the
Securities Act. The Company has prepared a preliminary offering memorandum,
dated April 29, 1998 (the "Preliminary Offering Memorandum"), and a final
offering memorandum, dated May 15, 1998 (the "Offering Memorandum"), relating to
the Company and the Units.
The Initial Purchasers have advised the Company that the Initial
Purchasers will make offers to resell (the "Exempt Resales") the Units on the
terms set forth in the Offering Memorandum, as amended or supplemented, solely
to persons whom any of the Initial Purchasers reasonably believe to be
"qualified institutional buyers," as defined in Rule 144A under the Securities
Act ("QIBs"). Such QIBs are also be referred to herein as the "Eligible
Purchasers." The Initial Purchasers will offer the Units to such Eligible
Purchasers initially at a purchase price equal to 100% of the amount thereof.
Holders (including subsequent transferees) of the Notes will have the
registration rights set forth in the registration rights agreement relating
thereto (the "Registration Rights Agreement"), and holders (including subsequent
transferees) of the Warrants and Warrant Shares will have the registration
rights set forth in the registration rights agreement relating thereto (the
"Warrant Registration Rights Agreement"), to be dated the Closing Date for so
long as such Notes, Warrants or any Warrant Shares constitute "Transfer
Restricted Securities" (as defined in such agreements). Pursuant to the
Registration Rights Agreement, the Company will agree to file with the
Securities and Exchange Commission (the "Commission"), under the circumstances
set forth therein, (i) a registration statement under the Securities Act (the
"Exchange Offer Registration Statement") with respect to an offer to exchange
(the "Exchange Offer") the Series A Notes for a new issue of debt securities of
the Company (the "Series B Notes") and (ii) under certain circumstances, a shelf
registration statement pursuant to Rule 415 under the Securities Act (the "Shelf
Registration Statement") relating to the resale by certain holders of the Series
A Notes, and to use its best efforts to cause such Registration Statements to be
declared effective and consummate the Exchange Offer. This Agreement, the
Securities, the Indenture, the Warrant Agreement, the Registration Rights
Agreement and the Warrant Registration Rights Agreement are hereinafter
sometimes referred to collectively as the "Operative Documents."
2
<PAGE>
3. Purchase, Sale and Delivery.
(a) On the basis of the representations, warranties and covenants
contained in this Agreement, and subject to its terms and conditions, the
Company agrees to issue and sell to each Initial Purchaser, and each Initial
Purchaser agrees severally and not jointly to purchase from the Company, that
number of Units set forth opposite such Initial Purchasers name on Schedule I
hereto. The purchase price for the Units shall be $970.00 per Unit.
(b) Delivery of, and payment of the purchase price for, the Units
shall be made at the offices of Latham & Watkins, 233 South Wacker Drive, Suite
5800, Chicago, Illinois 60606, or such other location as may be mutually
acceptable. Such delivery and payment shall be made at 10 a.m., New York City
time, on May 21, 1998 or at such other time as shall be agreed upon by the
Initial Purchasers and the Company. The time and date of such delivery and
payment are herein called the "Closing Date."
(c) Units sold to QIBs will be represented by one or more permanent
global Units in definitive, fully registered form without interest coupons (each
a "Global Unit") registered in the name of Cede & Co., as nominee of DTC, having
an aggregate amount corresponding to the aggregate amount of the Units sold to
QIBs. Each Global Unit will be comprised of one or more global certificates for
the Notes (the "Global Notes") and one or more global certificates for the
Warrants (the "Global Warrants" and, together with the Global Notes and Global
Units, the "Global Securities"). The Global Securities shall be delivered by the
Company to the Initial Purchasers (or as the Initial Purchasers direct), against
payment by the Initial Purchasers of the purchase price therefor, by wire
transfer of immediately available funds to an account specified by the Company
or as the Company may direct in writing; provided that the Company shall give at
least two business days' prior written notice to the Initial Purchasers of the
information required to effect such wire transfers. The Global Units, Global
Notes and Global Warrants shall be made available to the Initial Purchasers for
inspection not later than 10:00 a.m., New York City time, on the business day
immediately preceding the Closing Date.
4. Agreements of the Company and the Subsidiary Guarantors. The Company
and the Subsidiary Guarantors, jointly and severally, covenant and agree with
each of the Initial Purchasers as follows:
(a) Prior to the completion of the distribution of the Securities by
the Initial Purchasers to the Eligible Purchasers, to advise the Initial
Purchasers promptly and, if requested by the Initial Purchasers, confirm such
advice in writing, (i) of the issuance by any state securities commission of any
stop order suspending the qualification or exemption from qualification of any
Securities for offering or sale in any jurisdiction, or the initiation of any
proceeding for such purpose by any state securities commission or other
regulatory authority and (ii) of the happening of any event that makes any
statement of a material fact made in the Preliminary Offering Memorandum or the
Offering Memorandum untrue or that requires the making of any additions to or
changes in the Preliminary Offering Memorandum or the Offering Memorandum in
order to make the statements therein, in the light of the circumstances under
which they are made, not misleading. The Company and the Subsidiary Guarantors
shall use
3
<PAGE>
their reasonable best efforts to prevent the issuance of any stop order or order
suspending the qualification or exemption of any Securities under any state
securities or Blue Sky laws and, if at any time any state securities commission
or other regulatory authority shall issue an order suspending the qualification
or exemption of any Securities under any state securities or Blue Sky laws, the
Company and the Subsidiary Guarantors shall use their reasonable best efforts to
obtain the withdrawal or lifting of such order at the earliest possible time.
(b) To furnish the Initial Purchasers and those persons identified by
the Initial Purchasers to the Company, without charge, as many copies of the
Offering Memorandum, and any amendments or supplements thereto, as the Initial
Purchasers may reasonably request. The Company and the Subsidiary Guarantors
consent to the use, in accordance with the securities or Blue Sky laws of the
jurisdictions in which the Securities are offered, by the Initial Purchasers and
by dealers to whom the Securities may be sold (i) prior to the date of the
Offering Memorandum, of the Preliminary Offering Memorandum and (ii) of the
Offering Memorandum (and any amendments and supplements thereto), in each case
in connection with the offering and sale of the Securities.
(c) Not to amend or supplement the Preliminary Offering Memorandum or
the Offering Memorandum prior to the Closing Date unless the Initial Purchasers
shall previously have been advised thereof and shall not have objected thereto
within a reasonable time after being furnished a copy of the proposed amendment
or supplement. The Company and the Subsidiary Guarantors shall promptly prepare,
upon the Initial Purchasers' request, any amendment or supplement to the
Preliminary Offering Memorandum or the Offering Memorandum that may be necessary
or advisable in connection with Exempt Resales.
(d) If, after the date hereof and prior to consummation of any Exempt
Resale, any event shall occur as a result of which, in the judgment of the
Company and the Subsidiary Guarantors or in the reasonable opinion of either
counsel to the Company and the Subsidiary Guarantors or counsel to the Initial
Purchasers, it becomes necessary or advisable to amend or supplement the
Preliminary Offering Memorandum or Offering Memorandum in order to make the
statements therein, in the light of the circumstances under which such
statements were made, not misleading, or if it is necessary or advisable to
amend or supplement the Preliminary Offering Memorandum or Offering Memorandum
to comply with applicable law, (i) to notify the Initial Purchasers of such
occurrence and (ii) forthwith to prepare an appropriate amendment or supplement
to such document and furnish to the Initial Purchasers a reasonable number of
copies thereof.
(e) To cooperate with the Initial Purchasers and counsel to the
Initial Purchasers in connection with the qualification or registration of the
Units under the securities or Blue Sky laws of such jurisdictions as the Initial
Purchasers may reasonably request and to continue such qualification in effect
so long as required for the Exempt Resales; provided, however that neither the
Company nor any Subsidiary Guarantor shall be required in connection therewith
to register or qualify as a foreign corporation where it is not now so qualified
or to take any action that would subject it to service of process in suits or
taxation, in each case, other than
4
<PAGE>
as to matters and transactions relating to or arising out of the offering or
sale of the Units in any jurisdiction where it is not now so subject.
(f) Whether or not the transactions contemplated by this Agreement
are consummated or this Agreement becomes effective or is terminated, to pay all
costs, expenses, fees and taxes incident to the performance of the obligations
of the Company and the Subsidiary Guarantors hereunder, including in connection
with (i) the preparation, printing, filing and distribution of the Preliminary
Offering Memorandum and the Offering Memorandum (including, without limitation,
financial statements) and all amendments and supplements thereto required
pursuant hereto, (ii) the issuance, transfer and delivery by the Company of the
Securities to the Initial Purchasers, (iii) the qualification or registration of
the Securities for offer and sale under the securities or Blue Sky laws of the
several states (including, without limitation, the cost of preparing, printing
and mailing a preliminary and final Blue Sky Memorandum and the reasonable fees
and disbursements of counsel to the Initial Purchasers relating thereto), (iv)
furnishing such copies of the Preliminary Offering Memorandum and the Offering
Memorandum, and all amendments and supplements thereto, as may be requested by
the Initial Purchasers for use in connection with Exempt Resales, (v) the
preparation of certificates for the Securities, (vi) the fees, disbursements and
expenses of the Company's counsel and accountants, (vii) all expenses and
listing fees in connection with the application for quotation of the Securities
in the National Association of Securities Dealers, Inc. ("NASD") Automated
Quotation System - PORTAL ("PORTAL"), (viii) all fees and expenses (including
fees and expenses of counsel) of the Company in connection with the approval of
the Securities by DTC for "book-entry" transfer, (ix) rating the Securities by
rating agencies, (x) the reasonable fees and expenses of the Trustee and its
counsel in connection with the Indenture and the Notes, (xi) the reasonable fees
and expenses of the Warrant Agent and its counsel in connection with the Warrant
Agreement and the Warrants, (xii) the performance by the Company and the
Subsidiary Guarantors of their other obligations under this Agreement and the
other Operative Documents, rating the Securities by rating agencies and (xiii)
"roadshow" travel and other documented and reasonable expenses incurred in
connection with the marketing and sale of the Securities.
(g) To use the proceeds from the sale of the Units substantially in
the manner described in the Offering Memorandum under the caption "Use of
Proceeds."
(h) Not to voluntarily claim, and to resist actively any attempts to
claim, the benefit of any usury laws against the holders of any Securities.
(i) To do and perform all things required to be done and performed
under this Agreement by it prior to or after the Closing Date and to satisfy all
conditions precedent to the Initial Purchasers' obligations to purchase the
Units.
(j) Not to sell, offer for sale or solicit offers to buy or otherwise
negotiate in respect of any security (as defined in the Securities Act) that
would be integrated with the sale of the Units in a manner that would require
the registration under the Securities Act of the sale to the Initial Purchasers
or the Eligible Purchasers of the Units, the Notes or the Warrants or to take
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any other action that would result in the Exempt Resales not being exempt from
registration under the Securities Act.
(k) For so long as any of the Securities remain outstanding and
during any period in which the Company and the Subsidiary Guarantors are not
subject to Section 13 or 15(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), to make available upon request to any beneficial
owner of Securities in connection with any sale thereof and any prospective
purchaser of such Securities from such beneficial owner, the information
required by Rule 144A(d)(4) under the Securities Act.
(l) To cause the Exchange Offer to be made in the appropriate form to
permit registered Series B Notes to be offered in exchange for the Series A
Notes and to comply with all applicable federal and state securities laws in
connection with the Exchange Offer.
(m) To comply with all of their agreements set forth in the
Registration Rights Agreement, the Warrant Registration Rights Agreement and all
agreements set forth in the representation letters of the Company to DTC
relating to the approval of the Securities by DTC for "book-entry" transfer.
(n) To use commercially reasonable best efforts to cause the
securities to be designated as eligible for PORTAL and to obtain approval of the
Securities by DTC for "book-entry" transfer.
(o) For so long as any of the Securities remain outstanding, to
deliver without charge to each of the Initial Purchasers, promptly upon request,
copies of (i) all reports or other publicly available information that the
Company shall mail or otherwise make available to its security holders generally
and (ii) all reports, financial statements and proxy or information statements
filed by the Company with the Commission or any national securities exchange and
other information made publicly available by the Company, including without
limitation, press releases.
(p) Prior to the Closing Date, to furnish to each of the Initial
Purchasers, as soon as they have been prepared in the ordinary course by the
Company, copies of all available consolidated financial statements or any
unaudited interim financial statements of the Company for any period subsequent
to the periods covered by the financial statements appearing in the Offering
Memorandum.
(q) Not to take, directly or indirectly, any action designed to, or
that might reasonably be expected to, cause or result in stabilization or
manipulation of the price of any security of the Company or any of the
Subsidiary Guarantors to facilitate the sale or resale of the Securities.
(r) Not to distribute the Preliminary Offering Memorandum, the
Offering Memorandum or any other offering material in connection with the
offering and sale of the Securities, except as permitted by the Securities Act.
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(s) To reserve and continue to reserve as long as any Warrants remain
outstanding, a sufficient number of shares of Common Stock for issuance upon
exercise of the Warrants.
(t) To place $80,400,000 of net proceeds of the Offering of the Units
in an Escrow Account (as defined in the Offering Memorandum) to be held by the
Collateral Agent under the Pledge Agreement (as defined in the Offering
Memorandum).
(u) To cause each certificate for a Note to bear the legend contained
in the Indenture for the time period and upon the other terms stated in the
Indenture.
(v) To file with the Commission, not later than 15 days after the
Closing Date, five copies of a notice on Form D under the Securities Act (one of
which will be manually signed by a person duly authorized by the Company); to
otherwise comply with the requirements of Rule 503 under the Securities Act; and
to furnish promptly to the Initial Purchasers evidence of each such required
timely filing (including a copy thereof).
(w) During the period of 180 days following the date of the Offering
Memorandum, not to, without the prior written consent of Bear, Stearns & Co.
Inc. (which consent may be withheld at the sole discretion of Bear, Stearns, Co.
Inc.), directly or indirectly, sell, offer, contract or grant any option to
sell, pledge, transfer or establish an open "put equivalent position" within the
meaning of Rule 16a-1(h) under the Exchange Act, or otherwise dispose of or
transfer, or announce the offering of, or file any registration statement under
the Securities Act in respect of, any debt securities of the Company
substantially similar to the Notes or securities exchangeable for or convertible
into debt securities of the Company substantially similar to the Notes (other
than as contemplated by this Agreement and pursuant to the Registration Rights
Agreement and the Warrant Registration Rights Agreement).
5. Representations and Warranties of the Company and the Subsidiary
Guarantors. The Company and the Subsidiary Guarantors acknowledge that each of
the Initial Purchasers and, for purposes of the opinions to be delivered to the
Initial Purchasers pursuant to Section 9 hereof, counsel to the Company and the
Subsidiary Guarantors and counsel to the Initial Purchasers, will rely upon the
accuracy and truth of the following representations and hereby consent to such
reliance. In addition to the representations and warranties listed in this
Section 5, each certificate signed by any officer of the Company or any of the
Subsidiary Guarantors and delivered to the Initial Purchasers or counsel for the
Initial Purchasers pursuant to this Agreement shall be deemed to be a
representation and warranty by the Company or such Subsidiary Guarantor, as the
case may be, to the Initial Purchasers as to the matters covered thereby. The
Company represents and warrants to each of the Initial Purchasers that:
(a) The Preliminary Offering Memorandum and the Offering Memorandum
have been prepared for use in connection with the Exempt Resales. The
Preliminary Offering Memorandum and the Offering Memorandum do not, and any
supplement or amendment to them will not, as of their respective dates, contain
any untrue statement of a material fact or omit to
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<PAGE>
state any material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading,
except that the representations and warranties contained in this paragraph shall
not apply to statements in or omissions from the Preliminary Offering Memorandum
and the Offering Memorandum (or any supplement or amendment thereto) made in
reliance upon and in conformity with information relating to the Initial
Purchasers furnished to the Company in writing by the Initial Purchasers
expressly for use therein. No stop order preventing the use of the Preliminary
Offering Memorandum or the Offering Memorandum, or any amendment or supplement
thereto, or any order asserting that any of the transactions contemplated by
this Agreement are subject to the registration requirements of the Securities
Act, has been issued.
(b) When the Securities are issued and delivered pursuant to this
Agreement, none of the Securities will be of the same class (within the meaning
of Rule 144A under the Securities Act) as securities of the Company that are
listed on a national securities exchange registered under Section 6 of the
Exchange Act or that are quoted in a United States automated inter-dealer
quotation system.
(c) Each of the Company and each Subsidiary Guarantor has been duly
incorporated or formed and is validly existing as a corporation or limited
liability company, as the case may be, in good standing under the laws of the
jurisdiction of its incorporation or formation and has the power and authority
to own, lease and operate its properties and to conduct its business as
described in the Offering Memorandum. Each of the Company and each Subsidiary
Guarantor is duly qualified as a foreign corporation or limited liability
company, as the case may be, to transact business and is in good standing in
each jurisdiction in which such qualification is required, whether by reason of
the ownership or leasing of property or the conduct of business, except for such
jurisdictions where the failure to so qualify or to be in good standing would
not, individually or in the aggregate, result in a material adverse change, or
any development that could reasonably be expected to result in a material
adverse change, in the condition, financial or otherwise, or in the earnings,
business, operations or prospects, whether or not arising from transactions in
the ordinary course of business, of the Company and the Subsidiary Guarantors,
considered as one entity (any such change is called a "Material Adverse
Change").
(d) All of the outstanding shares of capital stock of the Company
have been duly authorized, validly issued, and are fully paid and nonassessable
and were not issued in violation of any preemptive or similar rights. At
December 31, 1997, after giving effect to the issuance and sale of the Units
pursuant hereto and the application of the net proceeds from the sale of the
Units, the Company had the pro forma consolidated capitalization as set forth in
the Offering Memorandum under the caption "Capitalization."
(e) The Company is the sole member of each Subsidiary Guarantor, with
the exception of VIC-RMTS-DC, LLC, and the Company's interest in each Subsidiary
Guarantor is free and clear of any security interest, claim, lien, limitation on
voting rights or encumbrance. The Company has no subsidiaries other than the
Subsidiary Guarantors. As used in this Agreement, "subsidiary" or "subsidiaries"
means, with respect to any Person, (i) any corporation,
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<PAGE>
association or other business entity of which more than 50% of the total voting
power of shares of Capital Stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
Person or one or more of the other subsidiaries of that Person (or a combination
thereof) and (ii) any partnership (a) the sole general partner or the managing
general partner of which is such Person or a subsidiary of such Person or (b)
the only general partners of which are such Person or of one or more
subsidiaries or such Person (or any combination thereof).
(f) All of the outstanding shares of capital stock of the Company
were issued in reliance on the exemption from registration pursuant to Section
4(2) of the Securities Act and in compliance with the requirements thereof and
any other statute, judgment, decree, order, rule or regulation of any court,
regulatory body or administrative agency or other governmental body, domestic or
foreign, having jurisdiction over the Company or such issuance.
(g) Except as disclosed in the Offering Memorandum and other than the
rights of the Company or any Subsidiary Guarantor in any Subsidiary Guarantor,
there are not currently, and will not be as a result of the Offering, any
outstanding subscriptions, acquisition rights, warrants, calls, commitments of
sale or options to acquire any capital stock or other equity interest of the
Company or any of the Subsidiary Guarantors, or instruments convertible into or
exchangeable for, any capital stock or other equity interest of the Company or
any of the Subsidiary Guarantors.
(h) The Company and the Subsidiary Guarantors have all requisite
power and authority to execute, deliver and perform their obligations under this
Agreement and the other Operative Documents and to consummate the transactions
contemplated hereby and thereby, including, without limitation, the power and
authority to issue, sell and deliver the Securities and to issue and deliver the
Subsidiary Guarantees as provided herein and therein and the power to effect the
Use of Proceeds as described in the Offering Memorandum.
(i) This Agreement has been duly and validly authorized, executed and
delivered by the Company and each Subsidiary Guarantor and is the legally valid
and binding agreement of the Company and each Subsidiary Guarantor, enforceable
against the Company and each Subsidiary Guarantor in accordance with its terms,
except insofar as indemnification and contribution provisions may be limited by
applicable law or equitable principles and subject to applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization or similar laws affecting the
rights of creditors generally and subject to general principles of equity.
(j) The Indenture has been duly and validly authorized by the Company
and each Subsidiary Guarantor (assuming due authorization, execution, delivery
and performance by the Trustee), and when duly executed and delivered by the
Company and each Subsidiary Guarantor, will be the legally valid and binding
obligation of the Company and each Subsidiary Guarantor, enforceable against the
Company and each Subsidiary Guarantor in accordance with its terms, subject to
(A) applicable bankruptcy, insolvency, fraudulent conveyance, reorganization or
similar laws affecting the rights of creditors generally, (B) general principles
of
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<PAGE>
equity (whether considered in a proceeding in equity or at law) or (C)
applicable public policy considerations. The Offering Memorandum contains a fair
summary of the principal terms of the Indenture.
(k) The Units have been duly and validly authorized by the Company
for issuance and sale to the Initial Purchasers pursuant to the terms of this
Agreement.
(l) The Series A Notes have been duly and validly authorized by the
Company for issuance and sale to the Initial Purchasers by the Company pursuant
to this Agreement and, when issued and authenticated in accordance with the
terms of the Indenture and delivered against payment therefor in accordance with
the terms hereof and thereof, will be the legally valid and binding obligations
of the Company, enforceable against the Company in accordance with their terms
and entitled to the benefits of the Indenture, subject to (A) applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization or similar laws
affecting the rights of creditors generally, (B) general principles of equity
(whether considered in a proceeding in equity or at law) or (C) applicable
public policy considerations. The Offering Memorandum contains a fair summary of
the terms of the Series A Notes.
(m) The Series B Notes have been duly and validly authorized for
issuance by the Company and, when issued and authenticated in accordance with
the terms of the Exchange Offer and the Indenture, will be the legally valid and
binding obligations of the Company, enforceable against the Company in
accordance with their terms and entitled to the benefits of the Indenture,
subject to (A) applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization or similar laws affecting the rights of creditors generally, (B)
general principles of equity (whether considered in a proceeding in equity or at
law) or (C) applicable public policy considerations. The Offering Memorandum
contains a fair summary of the terms of the Series B Notes.
(n) The Subsidiary Guarantees have been duly and validly authorized
for issuance by each of the Subsidiary Guarantors and, when executed and
delivered in accordance with the terms of the Indenture and when the Notes have
been issued and authenticated in accordance with the terms of the Indenture and
delivered against payment therefor in accordance with the terms hereof and
thereof, will be the legal, valid and binding obligations of each of the
Subsidiary Guarantors, enforceable against each of them in accordance with their
terms and entitled to the benefits of the Indenture, subject to (A) applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization or similar laws
affecting the rights of creditors generally, (B) general principles of equity
(whether considered in a proceeding in equity or at law) or (C) applicable
public policy considerations. The Offering Memorandum contains a fair summary of
the terms of the Subsidiary Guarantees.
(o) The Registration Rights Agreement has been duly and validly
authorized by the Company and each Subsidiary Guarantor and, when duly executed
and delivered by the Company and each Subsidiary Guarantor, will be the legally
valid and binding obligation of the Company and each Subsidiary Guarantor,
enforceable against the Company and each Subsidiary Guarantor in accordance with
its terms, subject to (A) applicable bankruptcy, insolvency,
10
<PAGE>
fraudulent conveyance, reorganization or similar laws affecting the rights of
creditors generally, (B) general principles of equity (whether considered in a
proceeding in equity or at law) or (C) applicable public policy considerations.
The Offering Memorandum contains a fair summary of the principal terms of the
Registration Rights Agreement.
(p) The Warrant Agreement has been duly and validly authorized by the
Company, and, when duly executed and delivered by the Company, will be the
legally valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms, subject to (A) applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization or similar laws affecting the
rights of creditors generally, (B) general principles of equity (whether
considered in a proceeding in equity or at law) or (C) applicable public policy
considerations. The Offering Memorandum contains a fair summary of the principal
terms of the Warrant Agreement.
(q) The Warrants have been duly and validly authorized for issuance
and sale to the Initial Purchasers by the Company pursuant to this Agreement
and, when issued and countersigned in accordance with the terms of the Warrant
Agreement and delivered against payment therefor in accordance with the terms
hereof and thereof, will be the legally valid and binding obligations of the
Company, enforceable against the Company in accordance with their terms and
entitled to the benefits of the Warrant Agreement, subject to (A) applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization or similar laws
affecting the rights of creditors generally, (B) general principles of equity
(whether considered in a proceeding in equity or at law) or (C) applicable
public policy considerations. The Offering Memorandum contains a fair summary of
the principal terms of the Warrants.
(r) The Warrants will be exercisable for Warrant Shares in accordance
with the terms of the Warrant Agreement. The Warrant Shares have been duly
authorized for issuance by the Company and, when issued and paid for upon
exercise of the Warrants in accordance with the terms thereof, will be validly
issued, fully paid and nonassessable, free of any preemptive or similar rights.
The Company has reserved sufficient shares of Common Stock for issuance upon the
exercise of the Warrants.
(s) The Warrant Registration Rights Agreement has been duly and
validly authorized by the Company and, when duly executed and delivered by the
Company, will be the legally valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, subject to (A)
applicable bankruptcy, insolvency, fraudulent conveyance, reorganization or
similar laws affecting the rights of creditors generally, (B) general principles
of equity (whether considered in a proceeding in equity or at law) or (C)
applicable public policy considerations. The Offering Memorandum contains a fair
summary of the principal terms of the Warrant Registration Rights Agreement.
(t) Neither the Company nor any of the Subsidiary Guarantors is, or,
after giving effect to the offering of the Securities, will be (A) in violation
of its organizational or governing documents, (B) in default in the performance
of any bond, debenture, note, indenture, mortgage, deed of trust or other
material agreement or instrument to which it is a party or by
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<PAGE>
which it is bound or to which any of its properties is subject, or (C) in
violation of any local, state or Federal law, statute, ordinance, rule,
regulation, requirement, judgment or court decree (including, without
limitation, the Communications Act and the rules and regulations of the FCC and
environmental laws, statutes, ordinances, rules, regulations, judgments or court
decrees) applicable to it or any of its subsidiaries or any of its or their
assets or properties (whether owned or leased) other than, in the case of
clauses (B) and (C), any default or violation, other than the status of the
Company's CLEC application in the District of Columbia as disclosed in the
Offering Memorandum, or any default or violation that could not reasonably be
expected to (x) individually or in the aggregate, result in a material adverse
effect on the properties, business, results of operations, condition (financial
or otherwise), affairs or prospects of the Company and its subsidiaries, taken
as a whole, (y) interfere with or adversely affect the issuance or marketability
of the Units pursuant hereto or (z) in any manner draw into question the
validity of this Agreement or any other Operative Document or the transactions
described in the Offering Memorandum under the caption "Use of Proceeds" (any of
the events set forth in clauses (x), (y) or (z), a "Material Adverse Effect").
There exists no condition that, with notice, the passage of time or otherwise,
would constitute a default under any such document or instrument, except as
disclosed in the Offering Memorandum, except for any such condition which would
not reasonably be expected to result in a Material Adverse Effect.
(u) None of (A) the execution, delivery or performance by the Company
or any of the Subsidiary Guarantors of this Agreement and the other Operative
Documents, (B) the issuance and sale of the Securities and (C) consummation by
the Company of the transactions contemplated hereby violate, conflict with or
constitute a breach of any of the terms or provisions of, or a default under (or
an event that with notice or the lapse of time, or both, would constitute a
default), or require consent which has not been obtained under, or result in the
imposition of a lien or encumbrance other than a "Permitted Lien," as defined in
the Indenture on any properties of the Company or any of its subsidiaries, or an
acceleration of any indebtedness of the Company or any of its subsidiaries
pursuant to, (i) the charter or bylaws or other organizational documents of the
Company or any of its subsidiaries, (ii) any bond, debenture, note, indenture,
mortgage, deed of trust or other agreement or instrument to which the Company or
any of its subsidiaries is a party or by which the Company or its subsidiaries
or their properties is or may be bound, (iii) any statute, rule or regulation
applicable to the Company or any of its subsidiaries or any of their assets or
properties or (iv) any judgment, order or decree of any court or governmental
agency or authority having jurisdiction over the Company or any of its
subsidiaries or any of their assets or properties, except in the case of clauses
(ii), (iii) and (iv) for such violations, conflicts, breaches, defaults,
consents, impositions of liens or accelerations that (x) would not singly, or in
the aggregate, have a Material Adverse Effect or (y) which are disclosed in the
Offering Memorandum. Other than as described in the Offering Memorandum, no
consent, approval, authorization or order of, or filing, registration,
qualification, license or permit of or with, (A) any court or governmental
agency, body or administrative agency (including, without limitation, the FCC)
or (B) any other person is required for (1) the execution, delivery and
performance by the Company or any of the Subsidiary Guarantors of this Agreement
and the other Operative Documents, (2) the issuance and sale of the Securities
and the transactions contemplated hereby and thereby, except (x) such as have
been obtained and made (or, in the case of the Registration
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Rights Agreement, will be obtained and made) under the Securities Act, the Trust
Indenture Act of 1939, as amended (the "Trust Indenture Act") and state
securities or Blue Sky laws and regulations or such as may be required by the
NASD or (y) where the failure to obtain any such consent, approval,
authorization or order of, or filing registration, qualification, license or
permit would not reasonably be expected to result in a Material Adverse Effect.
(v) There are no legal or governmental actions, suits or proceedings
pending or, to the knowledge of the Company or any Subsidiary Guarantor, overtly
threatened that are not disclosed in the Offering Memorandum (i) against or
affecting the Company or any of its subsidiaries, (ii) which has as the subject
thereof any officer or director (in any such capacity) of, or property owned or
leased by, the Company or any of its subsidiaries or (iii) relating to
environmental or discrimination matters, where in any such case (A) there is a
reasonable possibility that such action, suit or proceeding might be determined
adversely to the Company or such subsidiary and (B) any such action, suit or
proceeding, if so determined adversely, would reasonably be expected to result
in a Material Adverse Change or adversely affect the consummation of the
transactions contemplated by this Agreement. No material labor dispute with the
employees of the Company or any of its subsidiaries exists or, to the best of
the Company's knowledge, is threatened or imminent.
(w) To the best of the Company's knowledge, no action has been taken
and no statute, rule, regulation or order has been enacted, adopted or issued by
any governmental agency that prevents the issuance of the Securities or prevents
or suspends the use of the Offering Memorandum; no injunction, restraining order
or order of any nature by a federal or state court of competent jurisdiction has
been issued that prevents the issuance of the Securities, prevents or suspends
the sale of the Securities in any jurisdiction referred to in Section 4(e)
hereof or that could adversely affect the consummation of the transactions
contemplated by this Agreement, the Operative Documents or the Offering
Memorandum; and every request of any securities authority or agency of any
jurisdiction to the Company for additional information has been complied with in
all material respects.
(x) Except as would not, individually or in the aggregate, reasonably
be expected to result in a Material Adverse Change, (i) to the best of the
Company's knowledge, neither the Company nor any of its subsidiaries is in
violation of any federal, state, local or foreign law or regulation relating to
pollution or protection of human health or the environment (including, without
limitation, ambient air, surface water, groundwater, land surface or subsurface
strata) or wildlife, including without limitation, laws and regulations relating
to emissions, discharges, releases or threatened releases of chemicals,
pollutants, contaminants, wastes, toxic substances, hazardous substances,
petroleum and petroleum products (collectively, "Materials of Environmental
Concern"), or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of Materials of
Environmental Concern (collectively, "Environmental Laws"), which violation
includes, but is not limited to, noncompliance with any permits or other
governmental authorizations required for the operation of the business of the
Company or its subsidiaries under applicable Environmental Laws, or
noncompliance with the terms and conditions thereof, nor has the Company or any
of its subsidiaries received any written communication, whether from a
governmental authority,
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<PAGE>
citizens group, employee or otherwise, that alleges that the Company or any of
its subsidiaries is in violation of any Environmental Law; (ii) there is no
claim, action or cause of action filed with a court or governmental authority,
no investigation with respect to which the Company or any of its subsidiaries
has received written notice, and no written notice by any person or entity
alleging potential liability for investigatory costs, cleanup costs,
governmental response costs, natural resources damages, property damages,
personal injuries, attorneys' fees or penalties arising out of, based on or
resulting from the presence, or release into the environment, of any Material of
Environmental Concern at any location owned, leased or operated by the Company
or any of its subsidiaries, now or in the past (collectively, "Environmental
Claims"), pending or, to the best of the Company's knowledge, threatened against
the Company or any of its subsidiaries or any person or entity whose liability
for any Environmental Claim the Company or any of its subsidiaries has retained
or assumed either contractually or by operation of law; and (iii) to the best of
the Company's knowledge, there are no past or present actions, activities,
circumstances, conditions, events or incidents, including, without limitation,
the release, emission, discharge, presence or disposal of any Material of
Environmental Concern, that reasonably could result in a violation of any
Environmental Law or form the basis of a potential Environmental Claim against
the Company or any of its subsidiaries or against any person or entity whose
liability for any Environmental Claim the Company or any of its subsidiaries has
retained or assumed either contractually or by operation of law.
(y) The Company and each of its subsidiaries has (i) good and
marketable title to all of the properties and assets described in the Offering
Memorandum or the financial statements included in the Offering Memorandum as
owned by it, free and clear of all liens, charges, encumbrances and
restrictions, except such as are described in the Offering Memorandum (including
the liens imposed by the Company's Security Agreement with The Northern Trust
Company) or as would not have a Material Adverse Effect, (ii) peaceful and
undisturbed possession to the extent described in the Offering Memorandum under
all material leases to which it is a party as lessee, (iii) all licenses,
certificates, permits, authorizations, approvals, franchises and other rights
from, and has made all declarations and filings with, all federal, state and
local authorities (including, without limitation, the FCC), all self-regulatory
authorities and all courts and other tribunals (each an "Authorization")
necessary to engage in the business conducted by the Company and its
subsidiaries in the manner described in the Offering Memorandum, except as
described in the Offering Memorandum, and no such Authorization contains a
materially burdensome restriction that is not disclosed in the Offering
Memorandum and (iv) no reason to believe that any governmental body or agency is
considering limiting, suspending or revoking any such Authorization. Except
where the failure to be in full force and effect would not have a Material
Adverse Effect, all such Authorizations are valid and in full force and effect
and the Company and each of its subsidiaries is in compliance in all material
respects with the terms and conditions of all such Authorizations and with the
rules and regulations of the regulatory authorities having jurisdiction with
respect thereto. All material leases to which the Company and each of its
subsidiaries is a party are valid and binding and no default by the Company or
any of its subsidiaries has occurred and is continuing thereunder and, to the
best knowledge of the Company, no material defaults by the landlord are existing
under any such lease that could reasonably be expected to result in a Material
Adverse Effect.
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(z) The Company and its subsidiaries own, possess or have the right to
employ sufficient patents, patent rights, licenses (including all FCC, state,
local or other jurisdictional regulatory licenses), inventions, copyrights,
know-how (including trade secrets and other unpatented and/or unpatentable
proprietary or confidential information, software, systems or procedures),
trademarks, service marks and trade names, inventions, computer programs,
technical data and information (collectively, the "Intellectual Property
Rights") reasonably necessary to conduct their businesses as now conducted,
other than the status of the Company's CLEC application in the District of
Columbia as described in the Offering Memorandum; and the expected expiration of
any of such Intellectual Property Rights would not result in a Material Adverse
Change. The Intellectual Property Rights presently employed by the Company and
its subsidiaries in connection with the businesses now operated by them or which
are proposed to be operated by them are owned free and clear of and without
violating any right, claimed right, charge, encumbrance, pledge, security
interest, restriction or lien of any kind of any other person except such as are
described in the Offering Memorandum (including the liens imposed by the
Company's Security Agreement with the Northern Trust Company) and neither the
Company nor any of its subsidiaries has received any notice of infringement of
or conflict with asserted rights of others with respect to any of the foregoing
except as would not reasonably be expected to have a Material Adverse Effect.
The use of the Intellectual Property in connection with the business and
operations of the Company and its subsidiaries does not infringe on the rights
of any person, except as could not reasonably be expected to have a Material
Adverse Effect.
(aa) None of the Company or any of its subsidiaries, or, or to the
best knowledge of the Company, any of their respective officers, directors,
partners, employees, agents or affiliates or any other person acting on behalf
of the Company or any of its subsidiaries has, directly or indirectly, given or
agreed to give any money, gift or similar benefit (other than legal price
concessions to customers in the ordinary course of business) to any customer,
supplier, employee or agent of a customer or supplier, official or employee of
any governmental agency (domestic or foreign), instrumentality of any government
(domestic or foreign) or any political party or candidate for office (domestic
or foreign) or other person who was, is or may be in a position to help or
hinder the business of the Company or any of its subsidiaries (or assist the
Company or any of its subsidiaries in connection with any actual or proposed
transaction) which (i) might subject the Company, or any other individual or
entity to any damage or penalty in any civil, criminal or governmental
litigation or proceeding (domestic or foreign), (ii) if not given in the past,
might have had a Material Adverse Effect or (iii) if not continued in the
future, might have a Material Adverse Effect.
(bb) All material tax returns required to be filed by the Company and
its subsidiaries in all jurisdictions have been so filed. All taxes, including
withholding taxes, penalties and interest, assessments, fees and other charges
due or claimed to be due from such entities or that are due and payable have
been paid, other than those which would not, singularly or in the aggregate,
reasonably be expected to have a Material Adverse Effect and those being
contested in good faith and for which adequate reserves have been provided or
those currently payable without penalty or interest. To the knowledge of the
Company, there are no material proposed additional tax assessments against the
Company or any of its subsidiaries or the assets or property of the Company or
any of its subsidiaries. The Company has made adequate charges,
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accruals and reserves in the applicable financial statements included in the
Offering Memorandum in respect of all federal, state and foreign income and
franchise taxes for all periods as to which the tax liability of the Company or
any of its consolidated subsidiaries has not been finally determined.
(cc) The Company is not an "investment company" or a company
"controlled" by an "investment company" within the meaning of the Investment
Company Act of 1940, as amended (the "Investment Company Act").
(dd) Except as disclosed in the Offering Memorandum, there are no
holders of securities of the Company or any of its subsidiaries who, by reason
of the execution by the Company or any of the Subsidiary Guarantors of this
Agreement or any other Operative Document to which they are a party or the
consummation by the Company or any of the Subsidiary Guarantors of the
transactions contemplated hereby or thereby, have the right to request or demand
that the Company or any of the Subsidiary Guarantors register under the
Securities Act or analogous foreign laws and regulations securities held by
them, other than such that have been duly waived.
(ee) The Company and each of the Subsidiary Guarantors maintain a
system of internal accounting controls sufficient to provide reasonable
assurance that: (i) transactions are executed in accordance with management's
general or specific authorizations; (ii) transactions are recorded as necessary
to permit preparation of financial statements in conformity in all material
respects with generally accepted accounting principles and to maintain
accountability for assets; and (iii) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences.
(ff) Each of the Company and the Subsidiary Guarantors are insured by
insurers of recognized financial responsibility with policies in such amounts
and with such deductibles and covering such risks as are customary for similarly
situated businesses including, but not limited to, policies covering real and
personal property owned or leased by the Company and its subsidiaries against
theft, damage, destruction and acts of vandalism. The Company has no reason to
believe that it or any Subsidiary Guarantor will not be able (i) to renew its
existing insurance coverage as and when such policies expire or (ii) to obtain
comparable coverage from similar institutions as may be necessary or appropriate
to conduct its business as now conducted and at a cost that would not result in
a Material Adverse Change. Neither the Company nor any Subsidiary Guarantor has
been denied any insurance coverage which it has sought or for which it has
applied.
(gg) Neither the Company nor any Subsidiary Guarantor has (i) taken,
directly or indirectly, any action designed to, or that might reasonably be
expected to, cause or result in stabilization or manipulation of the price of
any security of the Company or any Subsidiary Guarantor to facilitate the sale
or resale of the Units, the Notes or the Warrants or (ii) since the date of the
Preliminary Offering Memorandum (A) sold, bid for, purchased or paid any person
any compensation for soliciting purchases of, the Securities or (B) paid or
agreed to pay to any
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person any compensation for soliciting another to purchase any other securities
of the Company or any Subsidiary Guarantor.
(hh) No registration under the Securities Act of the Securities is
required for the sale of the Units to the Initial Purchasers as contemplated
hereby or for the Exempt Resales assuming (i) that the purchasers who buy the
Units in the Exempt Resales are Eligible Purchasers and (ii) the accuracy of the
Initial Purchasers' representations contained herein. No form of general
solicitation or general advertising was used by the Company, any of the
Subsidiary Guarantors or any of their respective representatives (other than the
Initial Purchasers, their employees, agents or any other persons acting on their
behalf, as to which the Company and the Subsidiary Guarantors make no
representation or warranty) in connection with the offer and sale of any of the
Securities in connection with Exempt Resales, including, but not limited to,
articles, notices or other communications published in any newspaper, magazine,
or similar medium or broadcast over television or radio, or any seminar or
meeting whose attendees have been invited by any general solicitation or general
advertising. No securities of the same respective classes as the Securities have
been issued and sold by the Company or any Subsidiary Guarantors within the six-
month period immediately prior to the date hereof.
(ii) The Company and the Subsidiary Guarantors and any "employee
benefit plan" (as defined under the Employee Retirement Income Security Act of
1974, as amended, and the regulations and published interpretations thereunder
(collectively, "ERISA")) established or maintained by the Company, its
subsidiaries or their "ERISA Affiliates" (as defined below) are in compliance in
all material respects with ERISA. "ERISA Affiliate" means, with respect to the
Company or a Subsidiary Guarantor, any member of any group of organizations
described in Sections 414(b), (c), (m) or (o) of the Internal Revenue Code of
1986, as amended, and the regulations and published interpretations thereunder
(the "Code") of which the Company or such Subsidiary Guarantor is a member. No
"reportable event" (as defined under ERISA) has occurred or is reasonably
expected to occur with respect to any "employee benefit plan" established or
maintained by the Company, the Subsidiary Guarantors or any of their ERISA
Affiliates. No "employee benefit plan" established or maintained by the Company,
the Subsidiary Guarantors or any of their ERISA Affiliates, if such "employee
benefit plan" were terminated, would have any "amount of unfunded benefit
liabilities" (as defined under ERISA). Neither the Company, the Subsidiary
Guarantors nor any of their ERISA Affiliates has incurred or reasonably expects
to incur any liability under (i) Title IV of ERISA with respect to termination
of, or withdrawal from, any "employee benefit plan" or (ii) Sections 412, 4971,
4975 or 4980B of the Code. Each "employee benefit plan" established or
maintained by the Company, the Subsidiary Guarantors or any of their ERISA
Affiliates that is intended to be qualified under Section 401(a) of the Code is
so qualified and nothing has occurred, whether by action or failure to act,
which would cause the loss of such qualification.
(jj) Each of the Preliminary Offering Memorandum and the Offering
Memorandum, as of its date, and each amendment or supplement thereto read in
conjunction with the Preliminary Offering Memorandum or the Final Offering
Memorandum, as applicable, as of its date, contains the information specified
in, and meets the requirements of, Rule 144A(d)(4) under the Securities Act.
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(kk) Except as otherwise disclosed in the Offering Memorandum,
subsequent to the respective dates as of which information is given in the
Offering Memorandum: (i) there has been no Material Adverse Change; (ii) the
Company and its subsidiaries, considered as one entity, have not incurred any
material liability or obligation, indirect, direct or contingent, not in the
ordinary course of business nor entered into any material transaction or
agreement not in the ordinary course of business; (iii) there has been no
dividend or distribution of any kind declared, paid or made by the Company or,
except for dividends paid to the Company or other subsidiaries, any of its
subsidiaries on any class of capital stock or repurchase or redemption by the
Company or any of its subsidiaries of any class of capital stock; (iv) there has
been no capital expenditure or commitment by the Company or any of its
subsidiaries exceeding $100,000, either individually or in the aggregate except
in the ordinary course of business as generally contemplated by the Offering
Memorandum; (v) there has been no change in accounting methods or practices
(including any change in depreciation or amortization policies or rates) by the
Company or any of its subsidiaries; (vi) there has been no revaluation by the
Company or any of its subsidiaries of any of their assets; (vii) there has been
no increase in the salary or other compensation payable or to become payable by
the Company or any of its subsidiaries to any of their officers, directors,
employees or advisors, nor any declaration, payment or commitment or obligation
of any kind for the payment by the Company or any of its subsidiaries of a bonus
or other additional salary or compensation to any such person; (viii) there has
been no amendment or termination of any material contract, agreement or license
to which the Company or any subsidiary is a party or by which it is bound; (ix)
there has been no waiver or release of any material right or claim of the
Company or any subsidiary, including any write-off or other compromise of any
material account receivable of the Company or any subsidiary; and (x) there has
been no change in pricing or royalties set or charged by the Company or any
subsidiary to their respective customers or licensees or in pricing or royalties
set or charged by persons who have licensed Intellectual Property Rights to the
Company or any of its subsidiaries.
(ll) None of the execution, delivery and performance of this
Agreement, the issuance and sale of the Securities, the application of the
proceeds from the issuance and sale of the Securities and the consummation of
the transactions contemplated thereby as set forth in the Offering Memorandum,
will violate Regulations T, U or X promulgated by the Board of Governors of the
Federal Reserve System or analogous foreign laws and regulations.
(mm) Ernst & Young LLP and Beers & Cutler PLLC, who have expressed
their opinion with respect to the financial statements (which term as used in
this Agreement includes the related notes thereto) and supporting schedules
included in the Offering Memorandum, are independent public or certified public
accountants within the meaning of Regulation S-X under the Securities Act and
the Exchange Act.
(nn) The financial statements, together with the related notes,
included in the Offering Memorandum present fairly in all material respects the
consolidated financial position of OnePoint Communications, LLC and its
consolidated subsidiaries and, to the best knowledge of the Company, Mid-
Atlantic Telcom Plus, LLC, as of and at the dates indicated and the results of
their operations and cash flows for the periods specified. Such financial
statements of OnePoint Communications, LLC and its consolidated susidiaries, and
to the best knowledge of
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<PAGE>
the Company, of Mid-Atlantic Telcom Plus, LLC, have been prepared in
conformity with generally accepted accounting principles applied on a consistent
basis throughout the periods involved, except as may be expressly stated in the
related notes thereto. The financial data set forth in the Offering Memorandum
under the captions "Offering Memorandum Summary--Summary Financial Data,"
"Selected Financial Data" and "Capitalization" fairly present the information
set forth therein on a basis consistent with that of the audited financial
statements contained in the Offering Memorandum. The ratios of earnings to
fixed charges set forth in the Offering Memorandum under the captions "Offering
Memorandum Summary - Summary Financial Data" and "Selected Financial Data" have
been calculated in compliance with Item 503(d) of Regulation S-K under the
Securities Act.
(oo) Neither the Company nor any Subsidiary Guarantor intends to, nor
believes that it will, incur debts beyond its ability to pay such debts as they
mature. The present fair saleable value of the assets of each of the Company and
the Subsidiary Guarantors exceeds the amount that will be required to be paid on
or in respect of its existing debts and other liabilities (including contingent
liabilities) as they become absolute and matured. The assets of each of the
Company and the Subsidiary Guarantors do not constitute unreasonably small
capital to carry out its business as conducted or as proposed to be conducted.
Upon the issuance of the Units, the present fair saleable value of the assets of
each of the Company and the Subsidiary Guarantors will exceed the amount that
will be required to be paid on or in respect of existing debts and other
liabilities (including contingent liabilities) of the Company on a consolidated
basis as they become absolute and matured. Upon the issuance of the Units, the
assets of each of the Company and the Subsidiary Guarantors will not constitute
unreasonably small capital to carry out its businesses as now conducted,
including the capital needs of each of the Company and the Subsidiary
Guarantors.
(pp) Except pursuant to this Agreement and the Company's Professional
Services Agreement with the VenCom Group, Inc., there are no contracts,
agreements or understandings between the Company or the Subsidiary Guarantors
and any other person that would give rise to a valid claim against the Company
or any Subsidiary Guarantor or either of the Initial Purchasers for a brokerage
commission, finder's fee or like payment in connection with the issuance,
purchase and sale of the Securities.
(rr) There are no business relationships or related-party
transactions involving the Company or any Subsidiary Guarantor or any other
person that would be required to be described in the Offering Memorandum were it
to be filed as a part of a Registration Statement on Form S-1 under the
Securities Act, which have not been described as would have been so required.
The statements (including the assumptions described therein) included in the
Offering Memorandum under the headings "Business" and "Management's Discussion
and Analysis of Financial Condition and Results of Operations", to the extent
such data constitute forward looking statements as defined in Rule 175(c), were
made by the Company with a reasonable basis and reflect the Company's good faith
estimate of the matters described therein.
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6. Representations, Warranties and Covenants of the Initial Purchasers.
Each of the Initial Purchasers, severally and not jointly represents, warrants
and covenants to the Company and agrees that:
(a) Such Initial Purchaser is a QIB, with such knowledge and
experience in financial and business matters as are necessary in order to
evaluate the merits and risks of an investment in the Units.
(b) Such Initial Purchaser is not acquiring the Units with a view to
any distribution thereof that would violate the Securities Act or the securities
laws of any state of the United States or any other applicable jurisdiction.
(c) No form of general solicitation or general advertising has been
or will be used by either of the Initial Purchasers or any of their
representatives in connection with the offer and sale of any of the Units,
including, but not limited to, articles, notices or other communications
published in any newspaper, magazine, or similar medium or broadcast over
television or radio, or any seminar or meeting whose attendees have been invited
by any general solicitation or general advertising.
(d) Each of the Initial Purchasers agrees that (A) that they will
offer to sell the Units only to, and will solicit offers to buy the Units only
from QIBs who in purchasing such Units will be deemed to have represented and
agreed that they are purchasing the Units for their own accounts or accounts
with respect to which they exercise sole investment discretion and that they or
such accounts are QIBs and (B) that such QIBs will acknowledge and agree that
such Units will not have been registered under the Securities Act and may be
resold, pledged or otherwise transferred only (x)(I) to a person who the seller
reasonably believes is a QIB in a transaction meeting the requirements of Rule
144A, (II) in a transaction meeting the requirements of Rule 144, (III) outside
the United States to a person that is not a U.S. Person (as defined in Rule 902
under the Securities Act) in an offshore transaction meeting the requirements of
Rule 904 under the Securities Act, (IV) to an institutional "Accredited
Investor" (as defined in Rule 501(a)(1), (2), (3) or (7) of Regulation D under
the Securities Act) that, prior to such transfer, furnishes to the Trustee and
Warrant Agent a signed letter containing certain representations and agreements
relating to the Units, Notes and Warrants (the form of such letter can be
obtained from the Trustee or Warrant Agent), or (V) in accordance with another
exemption from the registration requirements of the Securities Act (in the case
of II, III, IV or V, based upon an opinion of counsel if the Company or Trustee,
or the "Registrar" or "Transfer Agent" (as such terms are defined in the
Indenture) for the Securities so requests), (y) to the Company or (z) pursuant
to an effective registration statement under the Securities Act and, in each
case, in accordance with any applicable securities laws of any state of the
United States and (C) that the holder and each subsequent holder will be
required to notify any purchaser of the security evidenced thereby of the resale
restrictions set forth in (B) above.
(e) Each of the Initial Purchasers understands that the Company and,
for purposes of the opinions to be delivered to the Initial Purchasers pursuant
to Section 9 hereof,
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<PAGE>
counsel to the Company and counsel to the Initial Purchasers will rely
upon the accuracy and truth of the foregoing representations and hereby consents
to such reliance.
7. Indemnification.
(a) The Company and the Subsidiary Guarantors, jointly and severally,
agree to indemnify and hold harmless (i) each of the Initial Purchasers, (ii)
each person, if any, who controls either of the Initial Purchasers within the
meaning of Section 15 of the Securities Act or Section 20(a) of the Exchange Act
and (iii) the respective officers, directors, partners, employees,
representatives and agents of any of the Initial Purchasers or any controlling
person to the fullest extent lawful, from and against any and all losses,
liabilities, claims, damages and expenses whatsoever (including but not limited
to reasonable attorneys' fees and any and all reasonable expenses whatsoever
incurred in investigating, preparing or defending against any investigation or
litigation, commenced or threatened, or any claim whatsoever, and any and all
amounts paid in settlement of any claim or litigation), joint or several, to
which they or any of them may become subject under the Securities Act, the
Exchange Act or otherwise, insofar as such losses, liabilities, claims, damages
or expenses (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of a material fact contained in the
Preliminary Offering Memorandum or the Offering Memorandum, or in any supplement
thereto or amendment thereof, or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading; provided, however, that the Company
will not be liable in any such case to the extent, but only to the extent, that
any such loss, liability, claim, damage or expense arises out of or is based
upon any such untrue statement or alleged untrue statement or omission or
alleged omission made therein in reliance upon and in conformity with written
information furnished to the Company by or on behalf of the Initial Purchasers
expressly for use therein and further provided, that the indemnity agreement
provided in this Section 7(a) with respect to any Preliminary Offering
Memorandum shall not inure to the benefit of any Initial Purchaser (or to the
benefit of any person controlling such Initial Purchaser or any officer,
director, partner, employee, representative or agent of such Initial Purchaser)
on account of any such loss, liability, claim, damage or expenses arising from
the sale of Units by such Initial Purchaser to any person if the untrue
statement of material fact or omission or alleged omission to state therein a
material fact contained in the Preliminary Offering Memorandum was corrected in
the Offering Memorandum and such Initial Purchaser sold Units to that person
without sending or giving at or prior to the written confirmation of such sale,
a copy of the Offering Memorandum (as then amended or supplemented) if the
Company or the Subsidiary Guarantors have previously furnished copies thereof to
the Initial Purchasers. This indemnity agreement will be in addition to any
liability which the Company may otherwise have, including under this Agreement.
(b) Each Initial Purchaser, severally and not jointly, agrees to
indemnify and hold harmless (i) the Company and the Subsidiary Guarantors, (ii)
each person, if any, who controls any of the Company and the Subsidiary
Guarantors within the meaning of Section 15 of the Securities Act or Section
20(a) of the Exchange Act, and (iii) the respective officers, directors,
partners, employees, representatives and agents of the Company, the Subsidiary
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Guarantors or any controlling person to the fullest extent lawful from and
against any and all losses, liabilities, claims, damages and expenses whatsoever
(including but not limited to reasonable attorneys' fees and any and all
reasonable expenses whatsoever incurred in investigating, preparing or defending
against any investigation or litigation, commenced or threatened, or any claim
whatsoever and any and all amounts paid in settlement of any claim or
litigation), joint or several, to which they or any of them may become subject
under the Securities Act, the Exchange Act or otherwise, insofar as such losses,
liabilities, claims, damages or expenses (or actions in respect thereof) arise
out of or are based upon any untrue statement or alleged untrue statement of a
material fact contained in the Preliminary Offering Memorandum or the Offering
Memorandum, or in any amendment thereof or supplement thereto, or arise out of
or are based upon the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading, in
each case to the extent, but only to the extent, that any such loss, liability,
claim, damage or expense arises out of or is based upon any untrue statement or
alleged untrue statement or omission or alleged omission made therein in
reliance upon and in conformity with written information furnished to the
Company by or on behalf of either Initial Purchaser expressly for use therein;
provided, however, that in no case shall either Initial Purchaser be liable or
responsible for any amount in excess of the discounts and commissions received
by such Initial Purchaser, as set forth on the cover page of the Offering
Memorandum. This indemnity will be in addition to any liability which either
Initial Purchaser may otherwise have, including under this Agreement.
(c) Promptly after receipt by an indemnified party under subsection
(a) or (b) above of notice of the commencement of any action, such indemnified
party shall, if a claim in respect thereof is to be made against the
indemnifying party under such subsection, notify each party against whom
indemnification is to be sought in writing of the commencement thereof (but the
failure so to notify an indemnifying party shall not relieve it from any
liability which it may have under this Section 7 except to the extent that it
has been prejudiced in any material respect by such failure or from any
liability which it may otherwise have). In case any such action is brought
against any indemnified party, and it notifies an indemnifying party of the
commencement thereof, the indemnifying party will be entitled to participate
therein, and to the extent it may elect by written notice delivered to the
indemnified party promptly after receiving the aforesaid notice from such
indemnified party, to assume the defense thereof with counsel reasonably
satisfactory to such indemnified party. Notwithstanding the foregoing, the
indemnified party or parties shall have the right to employ its or their own
counsel in any such case (and where the Initial Purchasers are the indemnified
parties, Bear, Stearns & Co. Inc. shall have the right to select such counsel
for the Initial Purchasers), but the fees and expenses of such counsel shall be
at the expense of such indemnified party or parties unless (i) the employment of
such counsel shall have been authorized in writing by the indemnifying parties
in connection with the defense of such action, (ii) the indemnifying parties
shall not have employed counsel to take charge of the defense of such action
within a reasonable time after notice of commencement of the action, or (iii)
such indemnified party or parties shall have reasonably concluded that there may
be defenses available to it or them which are different from or additional to
those available to one or all of the indemnifying parties (in which case the
indemnifying party or parties shall not
22
<PAGE>
have the right to direct the defense of such action on behalf of the indemnified
party or parties), in any of which events such fees and expenses of counsel
shall be borne by the indemnifying parties; provided, however, that the
indemnifying party under subsection (a) or (b) above, shall only be liable for
the legal expenses of one counsel (in addition to any local counsel) for all
indemnified parties in each jurisdiction in which any claim or action is
brought. Anything in this subsection to the contrary notwithstanding, an
indemnifying party shall not be liable for any settlement of any claim or action
effected without its prior written consent.
8. Contribution. In order to provide for contribution in circumstances in
which the indemnification provided for in Section 7 is for any reason held to be
unavailable or is insufficient to hold harmless a party indemnified thereunder,
the Company and the Subsidiary Guarantors, on the one hand, and the Initial
Purchasers, on the other hand, shall contribute to the aggregate losses, claims,
damages, liabilities and expenses of the nature contemplated by such
indemnification provision (including any reasonable investigation, legal and
other expenses incurred in connection with, and any amount paid in settlement
of, any action, suit or proceeding or any claims asserted, but after deducting
in the case of losses, claims, damages, liabilities and expenses suffered by the
Company and the Subsidiary Guarantors, any contribution received by the Company
and the Subsidiary Guarantors from persons, other than the Initial Purchasers,
who may also be liable for contribution, including persons who control the
Company and the Subsidiary Guarantors within the meaning of Section 15 of the
Securities Act or Section 20(a) of the Exchange Act) to which the Company, the
Subsidiary Guarantors and one or both of the Initial Purchasers may be subject,
in such proportion as is appropriate to reflect the relative benefits received
by the Company and the Subsidiary Guarantors, on the one hand, and the Initial
Purchasers, on the other hand, from the offering of the Units or, if such
allocation is not permitted by applicable law or indemnification is not
available as a result of the indemnifying party not having received notice as
provided in Section 7, in such proportion as is appropriate to reflect not only
the relative benefits referred to above but also the relative fault of the
Company and the Subsidiary Guarantors, on the one hand, and the Initial
Purchasers, on the other hand, in connection with the statements or omissions
which resulted in such losses, claims, damages, liabilities or expenses, as well
as any other relevant equitable considerations. The relative benefits received
by the Company and the Subsidiary Guarantors, on the one hand, and the Initial
Purchasers, on the other hand, shall be deemed to be in the same proportion as
(x) the total proceeds from the offering of Units (net of discounts but before
deducting expenses) received by the Company and the Subsidiary Guarantors and
(y) the discounts received by the Initial Purchasers in each case as set forth
in the table on the cover page of the Offering Memorandum. The relative fault of
the Company and the Subsidiary Guarantors, on the one hand, and of the Initial
Purchasers, on the other hand, shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company, the Subsidiary Guarantors or the Initial Purchasers and
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission.
The Company, the Subsidiary Guarantors and the Initial Purchasers
agree that it would not be just and equitable if contribution pursuant to this
Section 8 were determined by pro rata allocation or by any other method of
allocation which does not take into account the
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equitable considerations referred to above. Notwithstanding the provisions of
this Section 8, (i) in no case shall either of the Initial Purchasers be
required to contribute any amount in excess of the amount by which the discount
applicable to the Units purchased by such Initial Purchaser pursuant to this
Agreement exceeds the amount of any damages which such Initial Purchaser has
otherwise been required to pay by reason of any untrue or alleged untrue
statement or omission or alleged omission and (ii) no person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. For purposes of this Section 8, (A)
each person, if any, who controls either of the Initial Purchasers within the
meaning of Section 15 of the Securities Act or Section 20(a) of the Exchange
Act, (B) the respective officers, directors, partners, employees,
representatives and agents of any of the Initial Purchasers or any controlling
person shall have the same rights to contribution as such Initial Purchaser, (C)
each person, if any, who controls the Company and the Subsidiary Guarantors
within the meaning of Section 15 of the Securities Act or Section 20(a) of the
Exchange Act and (D) the respective officers, directors, partners, employees,
representatives and agents of the Company and the Subsidiary Guarantors shall
have the same rights to contribution as the Company and the Subsidiary
Guarantors, subject in each case to clauses (i) and (ii) of this Section 8. Any
party entitled to contribution will, promptly after receipt of notice of
commencement of any action, suit or proceeding against such party in respect of
which a claim for contribution may be made against another party or parties
under this Section , notify such party or parties from whom contribution may be
sought, but the failure to so notify such party or parties shall not relieve the
party or parties from whom contribution may be sought from any obligation it or
they may have under this Section 8 or otherwise. No party shall be liable for
contribution with respect to any action or claim settled without its prior
written consent.
9. Conditions of Initial Purchasers' Obligations. The several obligations
of the Initial Purchasers to purchase and pay for the Units, if any, as provided
herein, shall be subject to the satisfaction of the following conditions:
(a) All of the representations and warranties of the Company and the
Subsidiary Guarantors contained in this Agreement shall be true and correct on
the date hereof and on the Closing Date with the same force and effect as if
made on and as of the date hereof and the Closing Date, respectively. The
Company and the Subsidiary Guarantors shall have performed or complied with all
of the agreements herein contained and required to be performed or complied with
by it at or prior to the Closing Date.
(b) The Offering Memorandum shall have been printed and copies
distributed to the Initial Purchasers not later than 10:00 a.m., New York City
time, on the second business day following the date of this Agreement or at such
later date and time as to which the Initial Purchasers may agree, and no stop
order suspending the qualification or exemption from qualification of the Units,
the Notes or the Warrants in any jurisdiction referred to in Section 4(e) shall
have been issued and no proceeding for that purpose shall have been commenced or
shall be pending or threatened.
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(c) No action shall have been taken and no statute, rule, regulation
or order shall have been enacted, adopted or issued by any governmental agency
which would, as of the Closing Date, prevent the issuance of the Units, the
Notes or the Warrants; no action, suit or proceeding shall have been commenced
and be pending against or affecting or, to the best knowledge of the Company and
the Subsidiary Guarantors, threatened against, the Company or any of its
subsidiaries before any court or arbitrator or any governmental body, agency or
official that (1) could reasonably be expected to result in a Material Adverse
Effect and (2) has not been disclosed in the Offering Memorandum; and no stop
order shall have been issued preventing the use of the Offering Memorandum, or
any amendment or supplement thereto, or which could reasonably be expected to
have a Material Adverse Effect.
(d) Since the dates as of which information is given in the Offering
Memorandum, (i) there shall not have been any material adverse change, or any
development that is reasonably likely to result in a material adverse change, in
the capital stock or the long-term debt, or material increase in the short-term
debt, of the Company or any of its subsidiaries from that set forth in the
Offering Memorandum, (ii) no dividend or distribution of any kind shall have
been declared, paid or made by the Company or any of its subsidiaries on any
class of its capital stock, (iii) neither the Company nor any of its
subsidiaries shall have incurred any liabilities or obligations, direct or
contingent, that are material, individually or in the aggregate, to the Company
and its subsidiaries, taken as a whole, and that are required to be disclosed on
a balance sheet or notes thereto in accordance with generally accepted
accounting principles and are not disclosed on the latest balance sheet or notes
thereto included in the Offering Memorandum. Since the date hereof and since the
dates as of which information is given in the Offering Memorandum, there shall
not have occurred any Material Adverse Effect.
(e) The Initial Purchasers shall have received certificates, dated
the Closing Date, signed on behalf of the Company and each Subsidiary Guarantor
in form and substance reasonably satisfactory to the Initial Purchasers,
confirming, as of the Closing Date, the matters set forth in paragraphs (a),
(b), (c) and (d) of this Section 9.
(f) The Initial Purchasers shall have received on the Closing Date an
opinion, dated the Closing Date, in form and substance satisfactory to the
Initial Purchasers and counsel to the Initial Purchasers, of Kirkland & Ellis,
counsel for the Company and the Subsidiary Guarantors, to the effect set forth
in Exhibit B hereto.
(g) The Initial Purchasers shall have received an opinion, dated the
Closing Date, in form and substance reasonably satisfactory to the Initial
Purchasers, of Latham & Watkins, counsel to the Initial Purchasers, covering
such matters as are customarily covered in such opinions.
(h) The Initial Purchasers shall have received an opinion, dated the
Closing Date, in form and substance satisfactory to the Initial Purchasers and
counsel to the Initial Purchasers, of Wiley, Rein & Fielding, regulatory counsel
to the Company and the Subsidiary Guarantors, to the effect set forth in Exhibit
C hereto.
25
<PAGE>
(i) The Initial Purchasers shall have received opinions from the law
firms listed on Exhibit D hereto, dated the Closing Date, in the form of draft
opinions previously provided to the Initial Purchasers.
(j) At the time this Agreement is executed and at the Closing Date,
the Initial Purchasers shall have received from Ernst & Young LLP and Beers &
Cutler, PLLC, each independent public accountants, dated as of the date of this
Agreement and as of the Closing Date, customary comfort letters addressed to the
Initial Purchasers and in form and substance satisfactory to the Initial
Purchasers and counsel to the Initial Purchasers with respect to the financial
statements and certain financial information of the Company and the Subsidiary
Guarantors contained in the Offering Memorandum.
(k) Latham & Watkins shall have been furnished with such documents,
in addition to those set forth above, as they may reasonably require for the
purpose of enabling them to review or pass upon the matters referred to in this
Section 9 and in order to evidence the accuracy, completeness or satisfaction in
all material respects of any of the representations, warranties or conditions
herein contained.
(l) Prior to the Closing Date, the Company and the Subsidiary
Guarantors shall have furnished to the Initial Purchasers such further
information, certificates and documents as the Initial Purchasers may reasonably
request.
(m) The Company, the Subsidiary Guarantors and the Trustee shall have
entered into the Indenture and the Initial Purchasers shall have received
counterparts, conformed as executed, thereof.
(n) The Company and the Subsidiary Guarantors shall have entered into
the Registration Rights Agreement and the Initial Purchasers shall have received
counterparts, conformed as executed, thereof.
(o) The Company shall have entered into the Warrant Agreement and the
Initial Purchasers shall have received counterparts, conformed as executed,
thereof.
(p) The Company shall have entered into the Warrant Registration
Rights Agreement and the Initial Purchasers shall have received counterparts,
conformed as executed, thereof.
(q) The Company and the Trustee shall have entered into the Pledge
Agreement and the Initial Purchasers shall have received counterparts conformed
as executed thereof.
All opinions, certificates, letters and other documents required by
this Section 9 to be delivered by the Company and the Subsidiary Guarantors will
be in compliance with the provisions hereof only if they are reasonably
satisfactory in form and substance to the Initial Purchasers. The Company and
the Subsidiary Guarantors will furnish the Initial Purchasers with
26
<PAGE>
such conformed copies of such opinions, certificates, letters and other
documents as it shall reasonably request.
10. Initial Purchasers' Information. The Company, the Subsidiary
Guarantors and the Initial Purchasers severally acknowledge that the statements
with respect to the offering of the Units set forth in the third paragraph, the
fourth and fifth sentences of the fourth paragraph and the fifth paragraph under
the caption "Plan of Distribution" in the Offering Memorandum constitute the
only information furnished in writing by the Initial Purchasers expressly for
use in the Offering Memorandum.
11. Survival of Representations and Agreements. All representations and
warranties, covenants and agreements of the Initial Purchasers, the Company and
the Subsidiary Guarantors contained in this Agreement, including the agreements
contained in Sections 4(f) and 12(d), the indemnity agreements contained in
Section 7 and the contribution agreements contained in Section 8, shall remain
operative and in full force and effect regardless of any investigation made by
or on behalf of the Initial Purchasers or any controlling person thereof or by
or on behalf of the Company or any controlling person thereof, and shall survive
delivery of and payment for the Units to and by the Initial Purchasers. The
representations contained in Sections 5 and 6 and the agreements contained in
Sections 4(f), 7, 8 and 12(d) shall survive the termination of this Agreement,
including any termination pursuant to Section 12.
12. Effective Date of Agreement; Termination.
(a) This Agreement shall become effective upon execution and delivery
of a counterpart hereof by each of the parties hereto.
(b) The Initial Purchasers shall have the right to terminate this
Agreement at any time prior to the Closing Date by notice to the Company from
the Initial Purchasers, without liability (other than with respect to Sections 7
and 8) on the Initial Purchasers' part to the Company if, on or prior to such
date, (i) the Company or any Subsidiary Guarantor shall have failed, refused or
been unable to perform in any material respect any agreement on its part to be
performed hereunder, (ii) any other condition to the obligations of the Initial
Purchasers hereunder as provided in Section 9 is not fulfilled when and as
required in any material respect, (iii) in the reasonable judgment of the
Initial Purchasers any material adverse change shall have occurred since the
respective dates as of which information is given in the Offering Memorandum in
the condition (financial or otherwise), business, properties, assets,
liabilities, prospects, net worth, results of operations or cash flows of the
Company and the Subsidiary Guarantors taken as a whole, other than as set forth
in the Offering Memorandum, or (iv)(A) any domestic or international event or
act or occurrence has materially disrupted, or in the opinion of the Initial
Purchasers will in the immediate future materially disrupt, the market for the
Company's securities or for securities in general; or (B) trading in securities
generally on the New York or American Stock Exchanges shall have been suspended
or materially limited, or minimum or maximum prices for trading shall have been
established, or maximum ranges for prices for securities shall have been
required, on such exchange, or by such exchange or other regulatory body or
governmental authority having jurisdiction; or (C) a banking moratorium
27
<PAGE>
shall have been declared by Federal or state authorities, or a moratorium in
foreign exchange trading by major international banks or persons shall have been
declared; or (D) there is an outbreak or escalation of armed hostilities
involving the United States on or after the date hereof, or if there has been a
declaration by the United States of a national emergency or war, the effect of
which shall be, in the Initial Purchasers' judgment, to make it inadvisable or
impracticable to proceed with the offering or delivery of the Units on the terms
and in the manner contemplated in the Offering Memorandum; or (E) there shall
have been such a material adverse change in general economic, political or
financial conditions or if the effect of international conditions on the
financial markets in the United States shall be such as, in the Initial
Purchasers' judgment, makes it inadvisable or impracticable to proceed with the
delivery of the Units as contemplated hereby.
(c) Any notice of termination pursuant to this Section 12 shall be by
telephone, telex, telephonic facsimile, or telegraph, confirmed in writing by
letter.
(d) If this Agreement shall be terminated pursuant to any of the
provisions of Section 12(b)(i)-(iii) hereof, or if the sale of the Units
provided for herein is not consummated because any condition to the obligations
of the Initial Purchasers set forth herein is not satisfied or because of any
refusal, inability or failure on the part of the Company or any Subsidiary
Guarantor to perform any agreement herein or comply with any provision hereof,
the Company and the Subsidiary Guarantors will, subject to demand by the Initial
Purchasers, reimburse the Initial Purchasers for all out-of-pocket expenses
(including the reasonable fees and expenses of Initial Purchasers' counsel),
incurred by the Initial Purchasers in connection herewith.
13. Notice. All communications hereunder, except as may be otherwise
specifically provided herein, shall be in writing and, if sent to the Initial
Purchasers shall be mailed, delivered, or telexed, telegraphed or telecopied and
confirmed in writing to Bear, Stearns & Co. Inc. and NationsBanc Montgomery
Securities LLC, c/o Bear, Stearns & Co. Inc., 245 Park Avenue, New York, New
York 10167, Attention: Corporate Finance Department, telecopy number: (212) 272-
3092, with a copy, which shall not constitute notice, to Latham & Watkins, Attn:
Christopher D. Lueking, Sears Tower, Suite 5800, Chicago, Illinois 60606;
telecopy number: (312) 993-9767; and if sent to the Company or the Subsidiary
Guarantors, shall be mailed, delivered or telexed, telegraphed or telecopied and
confirmed in writing to OnePoint Communications Corp., 2201 Waukegan Road, Suite
E-200, Bannockburn, Illinois 60015, Attention: Chief Executive Officer, telecopy
number: (847) 374-1070, with a copy, which shall not constitute notice, to
Kirkland & Ellis, 200 East Randolph Drive, Chicago, Illinois 60601, Attn: Laurie
Gunther, telecopy number: (312) 861-2200.
14. Parties. This Agreement shall inure solely to the benefit of, and
shall be binding upon, the Initial Purchasers, the Company and the Subsidiary
Guarantors and the controlling persons and agents referred to in Sections 6 and
7, and their respective successors and assigns, and no other person shall have
or be construed to have any legal or equitable right, remedy or claim under or
in respect of or by virtue of this Agreement or any provision herein contained.
The term "successors and assigns" shall not include a purchaser, in its capacity
as such, of Units from the Initial Purchasers.
28
<PAGE>
15. Construction. This Agreement shall be construed in accordance with
the internal laws of the State of New York without giving any effect to any
provisions thereof relating to conflicts of law. TIME IS OF THE ESSENCE IN THIS
AGREEMENT.
16. Captions. The captions included in this Agreement are included solely
for convenience of reference and are not to be considered a part of this
Agreement.
17. Counterparts. This Agreement may be executed in various counterparts
which together shall constitute one and the same instrument.
[Signature page to follow]
29
<PAGE>
If the foregoing correctly sets forth the understanding among the Initial
Purchasers, the Company and the Subsidiary Guarantors, please so indicate in the
space provided below for that purpose, whereupon this letter shall constitute a
binding agreement among us.
Very truly yours,
ONEPOINT COMMUNICATIONS CORP.
By: /s/ James A. Otterbeck
---------------------------------
Name:
Title: Chairman and Chief Executive Officer
ONEPOINT COMMUNICATIONS HOLDINGS, LLC
By: ONEPOINT COMMUNICATIONS CORP.,
its Manager
By: /s/ James A. Otterbeck
---------------------------------
Name:
Title: Chairman and Chief Executive Officer
ONEPOINT COMMUNICATIONS - GEORGIA, LLC
By: ONEPOINT COMMUNICATIONS CORP.,
its Manager
By: /s/ James A. Otterbeck
---------------------------------
Name:
Title: Chairman and Chief Executive Officer
[SIGNATURE PAGE TO PURCHASE AGREEMENT]
<PAGE>
ONEPOINT COMMUNICATIONS - ILLINOIS, LLC
By: ONEPOINT COMMUNICATIONS CORP.,
its Manager
By: /s/ James A. Otterbeck
---------------------------------
Name:
Title: Chairman and Chief Executive Officer
ONEPOINT COMMUNICATIONS - COLORADO, LLC
By: ONEPOINT COMMUNICATIONS CORP.,
its Manager
By: /s/ James A. Otterbeck
---------------------------------
Name:
Title: Chairman and Chief Executive Officer
VIC-RMTS-DC, LLC
By: ONEPOINT COMMUNICATIONS
HOLDINGS, LLC, its Manager
By: ONEPOINT COMMUNICATIONS
CORP., its Manager
By: /s/ James A. Otterbeck
---------------------------------
Name:
Title: Chairman and Chief Executive Officer
[SIGNATURE PAGE TO PURCHASE AGREEMENT]
<PAGE>
Accepted and agreed to as of
the date first above written:
BEAR, STEARNS & CO. INC.,
on behalf of the Initial Purchasers
By: /s/ J. Andrew Bugas
---------------------------------
Name:
Title: Senior Managing Director
[SIGNATURE PAGE TO PURCHASE AGREEMENT]
<PAGE>
Schedule I
Number of
Units to
be Purchased
Initial Purchaser ------------
Bear, Stearns & Co. Inc.......................................... 113,750
NationsBanc Montgomery Securities LLC............................ 61,250
Total: 175,000
<PAGE>
Exhibit A
Subsidiary Guarantors
OnePoint Communications Holdings, LLC
OnePoint Communications - Georgia, LLC
OnePoint Communications - Illinois, LLC
OnePoint Communications - Colorado, LLC
VIC-RMTS-DC, LLC
<PAGE>
Exhibit B
Form of Opinion of Kirkland & Ellis
<PAGE>
Exhibit C
Form of Opinion of Wiley, Rein & Fielding,
regulatory counsel of the Company
<PAGE>
Exhibit D
Snell & Wilmer - Arizona
Meyer, Capel, Hirschfeld, Muncy, Jahn & Aldeen, P.C. - Illinois
Troutman Sanders LLP - Georgia
LeBouf, Lamb, Greene & MacRae, L.L.P. - Colorado
Holland & Knight LLP - Florida
Amos & Jeffries & Robinson, L.L.P. - North Carolina
Block, Schorn and Solis-Cohen LLP - Pennsylvania
Piper & Marbury L.L.P - Maryland, Delaware, District of Columbia
Mezzullo & McCandlish - Virginia
<PAGE>
Exhibit E
Forms of Opinions of
state regulatory counsel of the Company
<PAGE>
Exhibit 4.2
================================================================================
ONEPOINT COMMUNICATIONS CORP., as Issuer
and
THE SUBSIDIARY GUARANTORS, as defined herein
SERIES A AND SERIES B
14 1/2% SENIOR NOTES DUE 2008
INDENTURE
____________________________
Dated as of May 21, 1998
HARRIS TRUST AND SAVINGS BANK
Trustee
______________
================================================================================
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE 1. DEFINITIONS AND INCORPORATION BY REFERENCE......................... 1
Section 1.01. Definitions.................................................... 1
Section 1.02. TIA Definitions................................................16
Section 1.03. Rules of Construction..........................................16
ARTICLE 2. THE NOTES..........................................................17
Section 2.01. Form and Dating................................................17
Section 2.02. Execution and Authentication...................................17
Section 2.03. Registrar and Paying Agent.....................................18
Section 2.04. Paying Agent to Hold Money in Trust............................18
Section 2.05. Holder Lists...................................................19
Section 2.06. Transfer and Exchange..........................................19
Section 2.07. Replacement Notes..............................................30
Section 2.08. Outstanding Notes..............................................31
Section 2.09. Treasury Notes.................................................31
Section 2.10. Temporary Notes................................................31
Section 2.11. Cancellation...................................................31
Section 2.12. Defaulted Interest.............................................31
ARTICLE 3. REDEMPTION AND PREPAYMENT..........................................32
Section 3.01. Notices to Trustee.............................................32
Section 3.02. Selection of Notes to Be Redeemed..............................32
Section 3.03. Notice of Redemption...........................................32
Section 3.04. Effect of Notice of Redemption.................................33
Section 3.05. Deposit of Redemption Price....................................33
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
Section 3.06. Notes Redeemed in Part..............................................................................34
Section 3.07. Optional Redemption.................................................................................34
Section 3.08. Mandatory Redemption................................................................................34
Section 3.09. Offer to Purchase by Application of Excess Proceeds.................................................34
ARTICLE 4. COVENANTS...............................................................................................36
Section 4.01. Payment of Notes....................................................................................36
Section 4.02. Maintenance of Office or Agency.....................................................................36
Section 4.03. Reports.............................................................................................37
Section 4.04. Compliance Certificate..............................................................................37
Section 4.05. Taxes...............................................................................................38
Section 4.06. Stay, Extension and Usury Laws......................................................................38
Section 4.07. Restricted Payments.................................................................................38
Section 4.08. Dividend and Other Payment Restrictions Affecting Subsidiaries......................................41
Section 4.09. Incurrence of Indebtedness and Issuance of Disqualified Stock.......................................41
Section 4.10. Asset Sales.........................................................................................43
Section 4.11. Transactions with Affiliates........................................................................44
Section 4.12. Liens...............................................................................................45
Section 4.13. Business Activities.................................................................................45
Section 4.14. Corporate Existence.................................................................................45
Section 4.15. Offer to Repurchase Upon Change of Control..........................................................45
Section 4.16. Limitation on Sale and Leaseback Transactions.......................................................46
Section 4.17. Limitation on Issuances and Sales of Equity of Wholly Owned Restricted Subsidiaries.................46
Section 4.18. Payments for Consent................................................................................47
Section 4.19. Additional Subsidiary Guarantees....................................................................47
ARTICLE 5. SUCCESSORS..............................................................................................47
Section 5.01. Merger, Consolidation, or Sale of Assets............................................................47
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
Section 5.02. Successor Corporation Substituted..............................48
ARTICLE 6. DEFAULTS AND REMEDIES..............................................48
Section 6.01. Events of Default..............................................48
Section 6.02. Acceleration...................................................50
Section 6.03. Other Remedies.................................................51
Section 6.04. Waiver of Past Defaults........................................51
Section 6.05. Control by Majority............................................51
Section 6.06. Limitation on Suits............................................51
Section 6.07. Rights of Holders of Notes to Receive Payment..................52
Section 6.08. Collection Suit by Trustee.....................................52
Section 6.09. Trustee May File Proofs of Claim...............................52
Section 6.10. Priorities.....................................................52
Section 6.11. Undertaking for Costs..........................................53
ARTICLE 7. TRUSTEE............................................................53
Section 7.01. Duties of Trustee..............................................53
Section 7.02. Rights of Trustee..............................................54
Section 7.03. Individual Rights of Trustee...................................55
Section 7.04. Trustee's Disclaimer...........................................55
Section 7.05. Notice of Defaults.............................................55
Section 7.06. Reports by Trustee to Holders of the Notes.....................55
Section 7.07. Compensation and Indemnity.....................................56
Section 7.08. Replacement of Trustee.........................................56
Section 7.09. Successor Trustee by Merger, etc...............................57
Section 7.10. Eligibility; Disqualification..................................57
Section 7.11. Preferential Collection of Claims Against Company..............58
ARTICLE 8. LEGAL DEFEASANCE AND COVENANT DEFEASANCE...........................58
</TABLE>
iii
<PAGE>
<TABLE>
<S> <C>
Section 8.01. Option to Effect Legal Defeasance or Covenant Defeasance..................................................58
Section 8.02. Legal Defeasance and Discharge............................................................................58
Section 8.03. Covenant Defeasance.......................................................................................58
Section 8.04. Conditions to Legal or Covenant Defeasance................................................................59
Section 8.05. Deposited Money and Government Securities to be Held in Trust; Other Miscellaneous
Provisions..............................................................................................................60
Section 8.06. Repayment to Company......................................................................................61
Section 8.07. Reinstatement.............................................................................................61
ARTICLE 9. AMENDMENT, SUPPLEMENT AND WAIVER..............................................................................61
Section 9.01. Without Consent of Holders of Notes.......................................................................61
Section 9.02. With Consent of Holders of Notes..........................................................................62
Section 9.03. Compliance with Trust Indenture Act.......................................................................63
Section 9.04. Revocation and Effect of Consents.........................................................................63
Section 9.05. Notation on or Exchange of Notes..........................................................................64
Section 9.06. Trustee to Sign Amendments, etc...........................................................................64
ARTICLE 10. SUBSIDIARY GUARANTEES........................................................................................64
Section 10.01. Subsidiary Guarantees....................................................................................64
Section 10.02. Limitation on Subsidiary Guarantor Liability.............................................................65
Section 10.03. Execution and Delivery of Subsidiary Guarantee...........................................................65
Section 10.04. Subsidiary Guarantors May Consolidate, etc., on Certain Terms............................................66
Section 10.05. Releases Following Sale of Assets........................................................................67
ARTICLE 11. MISCELLANEOUS................................................................................................67
Section 11.01. Trust Indenture Act Controls.............................................................................67
Section 11.02. Notices..................................................................................................67
Section 11.03. Communication by Holders of Notes with Other Holders of Notes............................................68
Section 11.04. Certificate and Opinion as to Conditions Precedent.......................................................68
</TABLE>
iv
<PAGE>
<TABLE>
<S> <C>
Section 11.05. Statements Required in Certificate or Opinion.....................................................69
Section 11.06. Rules by Trustee and Agents.......................................................................69
Section 11.07. No Personal Liability of Directors, Officers, Employees and Stockholders..........................69
Section 11.08. Governing Law.....................................................................................69
Section 11.09. No Adverse Interpretation of Other Agreements.....................................................70
Section 11.10. Successors........................................................................................70
Section 11.11. Severability......................................................................................70
Section 11.12. Counterpart Originals.............................................................................70
Section 11.13. Table of Contents, Headings, etc..................................................................70
</TABLE>
v
<PAGE>
EXHIBITS
--------
Exhibit A FORM OF NOTE
Exhibit B FORM OF CERTIFICATE OF TRANSFER
Exhibit C FORM OF CERTIFICATE OF EXCHANGE
Exhibit D FORM OF CERTIFICATE OF ACQUIRING INSTITUTIONAL ACCREDITED
INVESTOR
Exhibit E FORM OF SUBSIDIARY GUARANTEE
Exhibit F FORM OF SUPPLEMENTAL INDENTURE
Exhibit G FORM OF PLEDGE AGREEMENT
vi
<PAGE>
CROSS-REFERENCE TABLE*
<TABLE>
<CAPTION>
Trust Indenture Act Section Indenture Section
<S> <C>
310 (a)(1)...................................................7.10
(a)(2).......................................................7.10
(a)(3).......................................................N.A.
(a)(4).......................................................N.A.
(a)(5).......................................................7.10
(b)..........................................................7.10
(c)..........................................................N.A.
311(a).......................................................7.11
(b)..........................................................7.11
(c)..........................................................N.A.
312 (a)......................................................2.05
(b)..........................................................11.03
(c)..........................................................11.03
313(a).......................................................7.06
(b)(1).......................................................10.03
(b)(2).......................................................7.07
(c)..........................................................7.06; 11.02
(d)..........................................................7.06
314(a).......................................................4.03; 11.02
(b)..........................................................10.02
(c)(1).......................................................11.04
(c)(2).......................................................11.04
(c)(3).......................................................N.A.
(d)..........................................................10.03, 10.04, 10.05
(e)..........................................................11.05
(f)..........................................................NA
315 (a)......................................................7.01
(b)..........................................................7.05, 11.02
(c)..........................................................7.01
(d)..........................................................7.01
(e)..........................................................6.11
316 (a)(last sentence).......................................2.09
(a)(1)(A)....................................................6.05
(a)(1)(B)....................................................6.04
(a)(2).......................................................N.A.
(b)..........................................................6.07
(c)..........................................................2.12
317 (a)(1)...................................................6.08
(a)(2).......................................................6.09
(b)..........................................................2.04
318 (a)......................................................11.01
(b)..........................................................N.A.
(c)..........................................................11.01
</TABLE>
N.A. means not applicable.
*This Cross-Reference Table is not part of the Indenture.
<PAGE>
INDENTURE
INDENTURE dated as of May 21, 1998 among OnePoint Communications
Corp., a Delaware corporation (the "Company"), the Subsidiary Guarantors (as
defined herein) and Harris Trust and Savings Bank, as trustee (the "Trustee").
The Company, the Subsidiary Guarantors and the Trustee agree as
follows for the benefit of each other and for the equal and ratable benefit of
the Holders of the 14 1/2% Series A Senior Notes due 2008 (the "Series A Notes")
and the 14 1/2% Series B Senior Notes due 2008 (the "Series B Notes" and,
together with the Series A Notes, the "Notes"):
ARTICLE 1.
DEFINITIONS AND INCORPORATION BY REFERENCE
Section 1.01. Definitions.
"144A Global Note" means a global note in the form of Exhibit A hereto
bearing the Global Note Legend and the Private Placement Legend and deposited
with or on behalf of, and registered in the name of, the Depositary or its
nominee that will be issued in a denomination equal to the outstanding principal
amount of the Notes sold in reliance on Rule 144A.
"Acquired Debt" means, with respect to any specified Person, (i)
Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Restricted Subsidiary of such specified Person,
including, without limitation, Indebtedness incurred in connection with, or in
contemplation of, such other Person merging with or into or becoming a
Restricted Subsidiary of such specified Person, and (ii) Indebtedness secured by
a Lien encumbering any asset acquired by such specified Person, in each case to
the extent not repaid within five days after the date of the acquisition.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise; provided that
beneficial ownership of 10% or more of the voting Equity Interests of a Person
shall be deemed to be control.
"Affiliate Transaction" shall have the meaning set forth in Section
4.11 hereof.
"Agent" means any Registrar, Paying Agent or co-registrar.
"Applicable Procedures" means, with respect to any transfer or
exchange of or for beneficial interests in any Global Note, the rules and
procedures of the Depositary, Euroclear and Cedel that apply to such transfer or
exchange.
"Asset Sale" means (i) the sale, lease, conveyance or other
disposition of any assets or rights (including, without limitation, by way of a
sale and leaseback) other than sales of services in the ordinary course of
business (provided that the sale, lease, conveyance or other disposition of all
or
<PAGE>
substantially all of the assets of the Company and its Restricted Subsidiaries
taken as a whole will be governed by the provisions of Section 4.15 and/or
Section 5.01 hereof and not by the provisions of Section 4.10 hereof), and (ii)
the issue or sale by the Company or any of its Restricted Subsidiaries of Equity
Interests of any of the Company's Restricted Subsidiaries, in the case of either
clause (i) or (ii), whether in a single transaction or a series of related
transactions (a) that have a fair market value in excess of $1.0 million or (b)
for net proceeds in excess of $1.0 million. Notwithstanding the foregoing, the
following shall not be deemed to be Asset Sales: (i) a transfer of assets by the
Company to a Restricted Subsidiary or by a Restricted Subsidiary to the Company
or to another Restricted Subsidiary; (ii) an issuance of Equity Interests by a
Restricted Subsidiary to the Company or to a Wholly Owned Restricted Subsidiary;
(iii) a Restricted Payment that is permitted by Section 4.07 hereof; (iv)
disposals or replacements of obsolete, uneconomical, negligible, worn-out or
surplus property in the ordinary course of business; (v) the creation of a Lien
not prohibited by Section 4.12 hereof and (vi) the conversion of Cash
Equivalents into cash.
"Asset Sale Offer" shall have the meaning set forth in Section 3.09
hereof.
"Attributable Debt" means, with respect to any Sale and Leaseback
Transaction, the present value of the time of determination (discounted at a
rate consistent with accounting guidelines, as determined in good faith by the
Company) of the payments during the remaining term of the lease (including any
period for which such lease has been extended or may, at the option of the
lessor, be extended) or until the earliest date on which the lessee may
terminate such lease without penalty or upon payment of a penalty (in which case
the rental payments shall include such penalty), after excluding all amounts
required to be paid on account of maintenance and repairs, insurance, taxes,
assessments, water, utilities and similar charges.
"Authentication Order" shall have the meaning set forth in Section
2.02 hereof.
"Bankruptcy Law" means Title 11, U.S. Code or any similar federal or
state law for the relief of debtors.
"Beneficial Owner" means a beneficial owner as defined in Rules 13d-3
and 13d-5 under the Exchange Act (or any successor rules), including the
provision of such Rules that a Person shall be deemed to have beneficial
ownership of all securities that such Person has a right to acquire within 60
days; provided that a Person will not be deemed a beneficial owner of, or to own
beneficially, any securities if such beneficial ownership (1) arises solely as a
result of a revocable proxy delivered in response to a proxy or consent
solicitation made pursuant to, and in accordance with, the Exchange Act and (2)
is not also then reportable on Schedule 13D or Schedule 13G (or any successor
schedule) under the Exchange Act.
"Board of Directors" means the Board of Directors of the Company, or
any authorized committee of the Board of Directors.
"Business Day" means any day other than a Legal Holiday.
"Capital Lease Obligation" means, at the time any determination
thereof is to be made, the amount of the liability in respect of a capital lease
that would at such time be required to be capitalized on a balance sheet in
accordance with GAAP.
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"Capital Stock" means (i) in the case of a corporation, corporate
stock, (ii) in the case of an association or business entity, any and all
shares, interests, participations, rights or other equivalents (however
designated) of corporate stock, (iii) in the case of a partnership or limited
liability company, partnership or membership interests (whether general or
limited) and (iv) any other interest or participation that confers on a Person
the right to receive a share of the profits and losses of, or distributions of
assets of, the issuing Person.
"Cash Equivalents" means (i) United States dollars, (ii) securities
issued or directly and fully guaranteed or insured by the United States
government or any agency or instrumentality thereof (provided that the full
faith and credit of the United States is pledged in support thereof) having
maturities of not more than six months from the date of acquisition, (iii)
certificates of deposit and eurodollar time deposits with maturities of six
months or less from the date of acquisition, bankers' acceptances with
maturities not exceeding six months and overnight bank deposits, in each case
with any domestic commercial bank having capital and surplus in excess of $500
million and a Thompson Bank Watch Rating of "B" or better, (iv) repurchase
obligations with a term of not more than seven days for underlying securities of
the types described in clauses (ii) and (iii) above entered into with any
financial institution meeting the qualifications specified in clause (iii)
above, (v) commercial paper having the highest rating obtainable from Moody's
Investors Service, Inc. or Standard & Poor's Corporation and in each case
maturing within six months after the date of acquisition and (vi) money market
funds at least 95% of the assets of which constitute Cash Equivalents of the
kinds described in clauses (i)(v) of this definition.
"Cedel Bank" means Cedel Bank, SA.
"Change of Control" means the occurrence of any of the following: (i)
the sale, lease, transfer, conveyance or other disposition, in one or a series
of related transactions, of all or substantially all of the assets of the
Company and its Restricted Subsidiaries, taken as a whole, to any Person or
group (as such term is used in Section 13(d)(3) and 14(d)(2) of the Exchange
Act) other than a Permitted Holder, (ii) the adoption of a plan relating to the
liquidation or dissolution of the Company, (iii) any Person or group (as defined
above) other than the Permitted Holders is or becomes the Beneficial Owner,
directly or indirectly, of more than 50% of the total Voting Stock of the
Company (measured by voting power rather than number of shares), including by
way of merger, consolidation or otherwise, (iv) the first day on which a
majority of the members of the Board of Directors of the Company are not
Continuing Directors, (v) the first day on which SBC Communications, Inc. fails
to hold, whether directly or indirectly, 9.9% or more of the total Voting Stock
(measured by voting power rather than the number of shares) of the Company or
(vi) the first day on which the Company's existing long distance telephony
contract (or any replacement thereof) terminates and is not replaced by a
contract having no less favorable economic terms than the Company's long
distance telephony contract in existence as of the Closing Date, and a term
(assuming exercise of any renewal options) ending after the final maturity date
of the Notes.
"Change of Control Offer" shall have the meaning set forth in Section
4.15 hereof.
"Change of Control Payment" shall have the meaning set forth in
Section 4.15 hereof.
"Change of Control Payment Date" shall have the meaning set forth in
Section 4.15 hereof.
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"Closing Date" shall mean the first date on which Notes are issued by
the Company.
"Collateral Agent" shall have the meaning set forth in the Pledge
Agreement.
"Company" means OnePoint Communications Corp., and any and all
successors thereto.
"Consolidated Cash Flow" means, with respect to any Person for any
period, the Consolidated Net Income of such Person for such period plus (i) an
amount equal to any extraordinary loss plus any net loss realized in connection
with an Asset Sale (to the extent such losses were deducted in computing
Consolidated Net Income) plus (ii) provision for taxes based on income or
profits of such Person and its Restricted Subsidiaries for such period, to the
extent that such provision for taxes was included in computing such Consolidated
Net Income, plus (iii) consolidated interest expense of such Person and its
Restricted Subsidiaries for such period, whether paid or accrued and whether or
not capitalized (including, without limitation, amortization of debt issuance
costs and original issue discount, non-cash interest payments, the interest
component of any deferred payment obligations, the interest component of all
payments associated with Capital Lease Obligations, commissions, discounts and
other fees and charges incurred in respect of letter of credit or bankers'
acceptance financings, and net payments (if any) pursuant to Hedging
Obligations), to the extent that any such expense was deducted in computing such
Consolidated Net Income, plus (iv) depreciation, amortization (including
amortization of goodwill and other intangibles but excluding amortization of
prepaid cash expenses that were paid in a prior period) and other non-cash
expenses (excluding any such non-cash expense to the extent that it represents
an accrual of or reserve for cash expenses in any future period or amortization
of a prepaid cash expense that was paid in a prior period) of such Person and
its Restricted Subsidiaries for such period to the extent that such
depreciation, amortization and other non-cash expenses were deducted in
computing such Consolidated Net Income, minus (v) non-cash items increasing such
Consolidated Net Income for such period, in each case, on a consolidated basis
and determined in accordance with GAAP. Notwithstanding the foregoing, the
provision for taxes on the income or profits of, and the depreciation and
amortization and other non-cash expenses of, a Restricted Subsidiary of the
Company shall be added to Consolidated Net Income to compute Consolidated Cash
Flow of the Company only to the extent that a corresponding amount would be
permitted at the date of determination to be dividended to the Company by such
Restricted Subsidiary without prior governmental approval (that has not been
obtained), and without direct or indirect restriction pursuant to the terms of
its charter and all agreements, instruments, judgments, decrees, orders,
statutes, rules and governmental regulations applicable to that Subsidiary or
its stockholders.
"Consolidated Indebtedness" means, with respect to any Person as of
any date of determination, the sum, without duplication, of (i) the total amount
of Indebtedness of such Person and its Restricted Subsidiaries, plus (ii) the
total amount of Indebtedness of any other Person, to the extent that such
Indebtedness has been Guaranteed by the referent Person or one or more of its
Restricted Subsidiaries, plus (iii) the aggregate liquidation value of all
preferred stock of Restricted Subsidiaries of such Person, in each case,
determined on a consolidated basis in accordance with GAAP.
"Consolidated Interest Expense" means, for any Person, for any period,
the aggregate of the following for such Person and its Restricted Subsidiaries
for such period determined on a consolidated basis in accordance with GAAP: (a)
the amount of interest in respect of Indebtedness (including amortization of
original issue discount, amortization of debt issuance costs, and non-cash
interest payments on any Indebtedness and the interest portion of any deferred
payment obligation), (b) the interest component of rentals in respect of any
Capital Lease Obligation paid, in each case whether
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accrued or scheduled to be paid or accrued by such Person during such period to
the extent such amounts were deducted in computing Consolidated Net Income,
determined on a consolidated basis in accordance with GAAP and (c) the product
of (i) all dividend payments, whether or not in cash, on any series of preferred
stock or Disqualified Stock of such Person or any of its Subsidiaries, other
than dividend payments on Equity Interests payable solely in Equity Interests of
the Company (other than Disqualified Stock) or to the Company or a Subsidiary of
the Company, times (ii) a fraction, the numerator of which is one and the
denominator of which is one minus the then current combined federal, state and
local statutory tax rate of such Person, expressed as a decimal, in each case,
on a consolidated basis and in accordance with GAAP. For purposes of this
definition, interest on a Capital Lease Obligation shall be deemed to accrue at
an interest rate reasonably determined by such Person to be the rate of interest
implicit in such Capital Lease Obligation in accordance with GAAP consistently
applied.
"Consolidated Net Income" means, with respect to any Person for any
period, the aggregate of the Net Income of such Person and its Restricted
Subsidiaries for such period, on a consolidated basis, determined in accordance
with GAAP; provided that (i) the Net Income (but not loss) of any Person that is
not a Restricted Subsidiary or that is accounted for by the equity method of
accounting shall be included only to the extent of the amount of dividends or
distributions paid in cash to the referent Person or a Wholly Owned Restricted
Subsidiary thereof, (ii) the Net Income of any Restricted Subsidiary shall be
excluded to the extent that the declaration or payment of dividends or similar
distributions by such Restricted Subsidiary of that Net Income is not at the
date of determination permitted without any prior governmental approval (that
has not been obtained) or, directly or indirectly, by operation of the terms of
its charter or any agreement, instrument, judgment, decree, order, statute, rule
or governmental regulation applicable to such Restricted Subsidiary or its
equity holders, (iii) the Net Income of any Person acquired in a pooling of
interests transaction for any period prior to the date of such acquisition shall
be excluded and (iv) the cumulative effect of a change in accounting principles
shall be excluded.
"Consolidated Net Worth" means, with respect to any Person as of any
date, the sum of (i) the consolidated equity of the common stockholders of such
Person and its consolidated Restricted Subsidiaries as of such date plus (ii)
the respective amounts reported on such Person's balance sheet as of such date
with respect to any series of preferred stock (other than Disqualified Stock)
that by its terms is not entitled to the payment of dividends unless such
dividends may be declared and paid only out of net earnings in respect of the
year of such declaration and payment, but only to the extent of any cash
received by such Person upon issuance of such preferred stock, less (a) all
write-ups (other than write-ups resulting from foreign currency translations and
write-ups of tangible assets of a going concern business made within 12 months
after the acquisition of such business) subsequent to the Closing Date in the
book value of any asset owned by such Person or a consolidated Restricted
Subsidiary of such Person, (b) all investments as of such date in unconsolidated
Subsidiaries and in Persons that are not Restricted Subsidiaries and (c) all
unamortized debt discount and expense and unamortized deferred charges as of
such date, all of the foregoing determined in accordance with GAAP.
"Continuing Director" means, as of any date of determination, any
member of the Board of Directors of the Company who (i) was a member of such
Board of Directors on the date of this Indenture or (ii) was nominated for
election or elected to such Board of Directors with the approval of a majority
of the Continuing Directors who were members of such Board at the time of such
nomination or election.
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"Corporate Trust Office of the Trustee" shall be at the address of the
Trustee specified in Section 11.02 hereof or such other address as to which the
Trustee may give notice to the Company.
"Covenant Defeasance" shall have the meaning set forth in Section 8.03
hereof.
"Cumulative Consolidated Cash Flow" means the cumulative Consolidated
Cash Flow of the Company from and after the first day of the first fiscal
quarter beginning after the date of this Indenture to the end of the fiscal
quarter immediately preceding the date of a proposed Restricted Payment, or, if
such cumulative Consolidated Cash Flow for such period is negative, minus the
amount by which such cumulative Consolidated Cash Flow is less than zero.
"Cumulative Interest Expense" means the aggregate amount of
Consolidated Interest Expense of the Company paid or accrued by the Company from
and after the first day of the first fiscal quarter beginning after the Closing
Date to the end of the fiscal quarter immediately preceding a proposed
Restricted Payment, determined on a consolidated basis in accordance with GAAP.
"Custodian" means the Trustee, as custodian with respect to the Notes
in global form, or any successor entity thereto.
"Debt to Cash Flow Ratio" means, as of any date of determination (the
"Calculation Date"), the ratio of (a) the Consolidated Indebtedness of the
Company as of such date to (b) the Consolidated Cash Flow of the Company for the
four most recent full fiscal quarters ending immediately prior to such date for
which internal financial statements are available, determined on a pro forma
basis after giving effect to all acquisitions or dispositions of assets made by
the Company and its Restricted Subsidiaries from the beginning of such four-
quarter period through and including such date of determination (including any
related financing transactions) as if such acquisitions and dispositions had
occurred at the beginning of such four-quarter period. In addition, for purposes
of making the computation referred to above, (i) acquisitions that have been
made by the Company or any of its Restricted Subsidiaries, including through
mergers or consolidations and including any related financing transactions,
during the four-quarter reference period or subsequent to such reference period
and on or prior to the Calculation Date shall be deemed to have occurred on the
first day of the four-quarter reference period and Consolidated Cash Flow for
such reference period shall be calculated without giving effect to clause (iii)
of the proviso set forth in the definition of Consolidated Net Income, and (ii)
the Consolidated Cash Flow attributable to discontinued operations, as
determined in accordance with GAAP, and operations or businesses disposed of
prior to the Calculation Date, shall be excluded.
"Default" means any event that is or with the passage of time or the
giving of notice or both would be an Event of Default.
"Definitive Note" means a certificated Note registered in the name of
the Holder thereof and issued in accordance with Section 2.06 hereof, in the
form of Exhibit A hereto except that such Note shall not bear the Global Note
Legend and shall not have the "Schedule of Exchanges of Interests in the Global
Note" attached thereto.
"Depositary" means, with respect to the Notes issuable or issued in
whole or in part in global form, the Person specified in Section 2.03 hereof as
the Depositary with respect to the Notes, and any and all successors thereto
appointed as depositary hereunder and having become such pursuant to the
applicable provision of this Indenture.
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"Disqualified Stock" means any Capital Stock that, by its terms (or by
the terms of any security into which it is convertible, or for which it is
exchangeable, at the option of the holder thereof), or upon the happening of any
event, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or redeemable at the option of the holder thereof, in
whole or in part, on or prior to the date that is 91 days after the date on
which the Notes mature; provided, however, that any Capital Stock that would
constitute Disqualified Stock solely because the holders thereof have the right
to require the Company to repurchase such Capital Stock upon the occurrence of a
Change of Control or an Asset Sale shall not constitute Disqualified Stock if
the terms of such Capital Stock provide that the Company may not repurchase or
redeem any such Capital Stock pursuant to such provisions unless such repurchase
or redemption complies with the provisions of Section 4.07 hereof.
"Equity Interests" means Capital Stock and all warrants, options or
other rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Escrow Account" means an account established with the Collateral
Agent (as defined in the Pledge Agreement) pursuant to the terms of the Pledge
Agreement for the deposit of the Pledged Securities purchased by the Company
with a portion of the proceeds from the sale of the Notes.
"Euroclear" means Morgan Guaranty Trust Company of New York, Brussels
office, as operator of the Euroclear system.
"Event of Default" shall have the meaning set forth in Section 6.01
hereof
"Excess Proceeds" shall have the meaning set forth in Section 4.10
hereof.
"Exchange Act" means the Securities Exchange Act of 1934, as amended
(or any successor act), and the rules and regulations thereunder.
"Exchange Notes" means the Series B Notes issued in the Exchange Offer
pursuant to Section 2.06(f) hereof.
"Exchange Offer" has the meaning set forth in the Registration Rights
Agreement.
"Exchange Offer Registration Statement" has the meaning set forth in
the Registration Rights Agreement.
"Existing Indebtedness" means Indebtedness of the Company and its
Restricted Subsidiaries in existence on the Closing Date, until such amounts are
repaid.
"Fair Market Value" means, with respect to any asset or property, the
sale value that would be obtained in an arm's length transaction between an
informed and willing seller under no compulsion to sell and an informed and
willing buyer under no compulsion to buy.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect on the date of this Indenture.
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"Global Notes" means, individually and collectively, each of the
Restricted Global Notes and the Unrestricted Global Notes, in the form of
Exhibit A hereto issued in accordance with Section 2.01, 2.06(b)(iv),
2.06(d)(ii) or 2.06(f) hereof.
"Global Note Legend" means the legend set forth in Section
2.06(g)(ii), which is required to be placed on all Global Notes issued under
this Indenture.
"Government Securities" means direct obligations of, or obligations
guaranteed by, the United States of America, and the payment for which the
United States pledges its full faith and credit.
"Guarantee" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, a pledge of assets
through letters of credit or reimbursement agreements in respect thereof), of
all or any part of any Indebtedness.
"Hedging Obligations" means, with respect to any Person, the
obligations of such Person under (i) interest rate swap agreements, interest
rate cap agreements and interest rate collar agreements and (ii) other
agreements or arrangements designed to protect such Person against fluctuations
in interest rates.
"Holder" means a Person in whose name a Note is registered.
"IAI Global Note" means the global Note in the form of Exhibit A
hereto bearing the Global Note Legend and the Private Placement Legend and
deposited with or on behalf of and registered in the name of the Depositary or
its nominee that will be issued in a denomination equal to the outstanding
principal amount of the Notes sold to Institutional Accredited Investors.
"incur" shall have the meaning set forth in Section 4.09 hereof.
"Indebtedness" means, with respect to any Person, any indebtedness of
such Person, whether or not contingent, in respect of borrowed money or
evidenced by bonds, notes, debentures or similar instruments or letters of
credit (or reimbursement agreements in respect thereof) or banker's acceptances
or representing Capital Lease Obligations or the balance deferred and unpaid of
the purchase price of any property or representing any Hedging Obligations,
except any such balance that constitutes an accrued expense or trade payable, if
and to the extent any of the foregoing (other than letters of credit and Hedging
Obligations) would appear as a liability upon a balance sheet of such Person
prepared in accordance with GAAP, as well as all Indebtedness of others secured
by a Lien on any asset of such Person (whether or not such Indebtedness is
assumed by such Person) and, to the extent not otherwise included, the Guarantee
by such Person of any indebtedness of any other Person. The amount of any
Indebtedness outstanding as of any date shall be (i) the accreted value thereof,
in the case of any Indebtedness issued with original issue discount and (ii) the
principal amount thereof, together with any interest thereon that is more than
30 days past due, in the case of any other Indebtedness.
"Indenture" means this Indenture, as amended or supplemented from time
to time.
"Indirect Participant" means a Person who holds a beneficial interest
in a Global Note through a Participant.
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"Institutional Accredited Investor" means an institution that is an
"accredited investor" as defined in Rule 501(a)(1), (2), (3) or (7) under the
Securities Act, who are not also QIBs.
"Investments" means, with respect to any Person, all investments by
such Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including guarantees of Indebtedness or other obligations),
advances or capital contributions (excluding commission, travel and similar
advances to officers and employees made in the ordinary course of business),
purchases or other acquisitions for consideration of Indebtedness, Equity
Interests or other securities, together with all items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP.
If the Company or any Restricted Subsidiary of the Company sells or otherwise
disposes of any Equity Interests of any direct or indirect Restricted Subsidiary
of the Company such that, after giving effect to any such sale or disposition,
such Person is no longer a Subsidiary of the Company, the Company shall be
deemed to have made an Investment on the date of any such sale or disposition
equal to the fair market value of the Equity Interests of such Subsidiary not
sold or disposed of in an amount determined as provided in the final paragraph
of Section 4.07 hereof.
"Legal Defesance" shall have the meaning set forth in Section 8.02
hereof.
"Legal Holiday" means a Saturday, a Sunday or a day on which banking
institutions in the City of New York, the City of Chicago, Illinois or at a
place of payment are authorized by law, regulation or executive order to remain
closed. If a payment date is a Legal Holiday at a place of payment, payment may
be made at that place on the next succeeding day that is not a Legal Holiday,
and no interest shall accrue on such payment for the intervening period.
"Letter of Transmittal" means the letter of transmittal to be prepared
by the Company and sent to all Holders of the Notes for use by such Holders in
connection with the Exchange Offer.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement under
the Uniform Commercial Code (or equivalent statutes) of any jurisdiction).
"Liquidated Damages" means all liquidated damages then owing pursuant
to Section 5 of the Registration Rights Agreement.
"Net Income" means, with respect to any Person, the net income (loss)
of such Person, determined in accordance with GAAP and before any reduction in
respect of preferred stock dividends, excluding, however, (i) any gain or loss,
together with any related provision for taxes on such gain or loss, realized in
connection with (a) any Asset Sale (including, without limitation, dispositions
pursuant to sale and leaseback transactions) or (b) the disposition of any
securities by such Person or any of its Restricted Subsidiaries or the
extinguishment of any Indebtedness of such Person or any of its Restricted
Subsidiaries and (ii) any extraordinary gain or loss, together with any related
provision for taxes on such extraordinary gain or loss.
"Net Proceeds" means the aggregate cash proceeds received by the
Company or any of its Restricted Subsidiaries in respect of any Asset Sale
(including, without limitation, any cash received upon the sale or other
disposition of any non-cash consideration received in any Asset Sale), net of
the
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direct costs relating to such Asset Sale (including, without limitation, legal,
accounting and investment banking fees, and sales commissions) and any
relocation expenses incurred as a result thereof, taxes paid or payable as a
result thereof (after taking into account any available tax credits or
deductions and any tax sharing arrangements), amounts required to be applied to
the repayment of Indebtedness secured by a Lien on the asset or assets that were
the subject of such Asset Sale, and any reserve for adjustment in respect of the
sale price of such asset or assets established in accordance with GAAP;
provided, however, that the reversal of any such reserve shall be deemed a
receipt of Net Proceeds by the Company in the amount and on the date of such
reversal.
"Non-Recourse Debt" means Indebtedness (i) as to which neither the
Company nor any of its Restricted Subsidiaries (a) provides credit support of
any kind (including any undertaking, agreement or instrument that would
constitute Indebtedness), (b) is directly or indirectly liable (as a guarantor
or otherwise) or (c) constitutes the lender; (ii) no default with respect to
which (including any rights that the holders thereof may have to take
enforcement action against an Unrestricted Subsidiary) would permit (upon
notice, lapse of time or both) any holder of any other Indebtedness of the
Company or any of its Restricted Subsidiaries to declare a default on such other
Indebtedness or cause the payment thereof to be accelerated or payable prior to
its stated maturity; and (iii) as to which the lenders have been notified in
writing that they will not have any recourse to the stock or assets of the
Company or any of its Restricted Subsidiaries.
"Non-U.S. Person" means a Person who is not a U.S. Person.
"Notes" has the meaning assigned to it in the preamble to this
Indenture.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Offer Amount" shall have the meaning set forth in Section 3.09
hereof.
"Offer Period" shall have the meaning set forth in Section 3.09
hereof.
"Offering" means the offering of the Series A Notes by the Company
pursuant to the Offering Memorandum, dated May 15, 1998.
"Officer" means, with respect to any Person, the Chairman of the
Board, the Chief Executive Officer, the President, the Chief Operating Officer,
the Chief Financial Officer, the Treasurer, any Assistant Treasurer, the
Controller, the Secretary or any Vice-President of such Person.
"Officers' Certificate" means a certificate signed by (i) the Chairman
of the Board, a Vice Chairman of the Board, the President, the Chief Executive
Officer or a Vice President, and (ii) the Chief Financial Officer, the Chief
Accounting Officer, the Treasurer, an Assistant Treasurer, the Secretary or an
Assistant Secretary of the Company and delivered to the Trustee, which shall
comply with Section 11.05 hereof.
"Opinion of Counsel" means an opinion from legal counsel who is
reasonably acceptable to the Trustee, that meets the requirements of Section
11.05 hereof. The counsel may be an employee of or counsel to the Company, any
Subsidiary of the Company or the Trustee.
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"Participant" means, with respect to the Depositary, Euroclear or
Cedel, a Person who has an account with the Depositary, Euroclear or Cedel,
respectively (and, with respect to The Depository Trust Company, shall include
Euroclear and Cedel).
"Participating Broker-Dealer" means any Broker-Dealer registered under
the Exchange Act that exchanges Series A Notes for Series B Notes pursuant to
the Exchange Offer and is required to deliver a prospectus in connection with a
resale of such Exchange Notes, as contemplated in the Registration Rights
Agreement.
"Paying Agent" shall have the meaning set forth in Section 2.03
hereof.
"Permitted Debt" shall have the meaning set forth in Section 4.09
hereof.
"Permitted Holder" means (i) SBC Communications, Inc., (ii) James
Otterbeck, or (iii) Ventures in Communications II, LLC; whether acting in their
own name or as a majority of persons having the power to exercise the voting
rights attached to, or having investment power over, equity interests held by
others, any trust principally for the benefit of one or more members of such
persons and any charitable foundation the majority of whose members, trustees or
directors, as the case may be, are any of such persons.
"Permitted Investments" means (i) any Investment in the Company or in
any Restricted Subsidiary of the Company; (ii) any Investment in Cash
Equivalents; (iii) any Investment by the Company or any Restricted Subsidiary of
the Company in a Person if, as a result of such Investment, (a) such Person
becomes a Restricted Subsidiary of the Company or (b) such Person is merged,
consolidated or amalgamated with or into, or transfers or conveys substantially
all of its assets to, or is liquidated into, the Company or a Restricted
Subsidiary of the Company, (iv) any Investment made as a result of the receipt
of non-cash consideration from an Asset Sale that was made pursuant to and in
compliance with Section 4.10 hereof, (v) any acquisition of assets to the extent
acquired in exchange for the issuance of Equity Interests (other than
Disqualified Stock) of the Company and (vi) any Investment by the Company in one
or more Permitted Telecommunications Joint Ventures, provided, however, that the
aggregate fair market value (measured on the date such Investment was made and
without giving effect to any subsequent changes in value) of outstanding
Investments made pursuant to this clause (vi) shall not at any time exceed $10.0
million.
"Permitted Liens" means (i) Liens in favor of the Company, Restricted
Subsidiaries or holders of the Notes; (ii) Liens on property of a Person
existing at the time such Person is merged into or consolidated with the Company
or any Restricted Subsidiary of the Company; provided that such Liens were in
existence prior to the contemplation of such merger or consolidation and do not
extend to any assets other than those of the Person merged into or consolidated
with the Company; (iii) Liens on property existing at the time of acquisition
thereof by the Company or any Restricted Subsidiary of the Company, provided
that such Liens were in existence prior to the contemplation of such
acquisition; (iv) Liens to secure the performance of statutory obligations,
surety or appeal bonds, performance bonds or other obligations of a like nature
incurred in the ordinary course of business; (v) Liens existing on the Closing
Date; (vi) Liens for taxes, assessments or governmental charges or claims that
are not yet delinquent or that are being contested in good faith by appropriate
proceedings promptly instituted and diligently concluded, provided that any
reserve or other appropriate provision as shall be required in conformity with
GAAP shall have been made therefor; (vii) Liens on accounts receivable owned by
the Company and securing Indebtedness permitted by this Indenture; (viii) Liens
securing Vendor Debt
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permitted by this Indenture on the acquired property together with proceeds,
product, accessions, substitutions and replacements thereof; (ix) Liens incurred
in the ordinary course of business of the Company or any Subsidiary of the
Company with respect to obligations that do not exceed $2.0 million at any one
time outstanding and that (a) are not incurred in connection with the borrowing
of money or the obtaining of advances or credit (other than trade credit in the
ordinary course of business) and (b) do not in the aggregate materially detract
from the value of the property or materially impair the use thereof in the
operation of business by the Company or such Restricted Subsidiary; and (x)
Liens to secure any refinancings, renewals, extensions, modifications or
replacements (collectively, "refinancings") or successive refinancings, in whole
or in part, of any Indebtedness secured by Liens referred to in clauses (ii),
(iii) and (v) above, so long as such Lien does not extend to any other property
(other than improvements thereto) and is otherwise no more burdensome than the
Lien it replaces.
"Permitted Refinancing Indebtedness" means any Indebtedness of the
Company or any of its Restricted Subsidiaries issued in exchange for, or the net
proceeds of which are used to extend, refinance, renew, replace, defease or
refund other Indebtedness of the Company or such Restricted Subsidiary (other
than intercompany Indebtedness); provided that: (i) the principal amount (or
accreted value, if applicable) of such Permitted Refinancing Indebtedness does
not exceed the principal amount of (or accreted value, if applicable), plus
accrued interest on, the Indebtedness so extended, refinanced, renewed,
replaced, defeased or refunded (plus the amount of reasonable expenses incurred
in connection therewith); (ii) such Permitted Refinancing Indebtedness has a
final maturity date later than the final maturity date of, and has a Weighted
Average Life to Maturity equal to or greater than the Weighted Average Life to
Maturity of, the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded; (iii) if the Indebtedness being extended, refinanced,
renewed, replaced, defeased or refunded is subordinated in right of payment to
the Notes, such Permitted Refinancing Indebtedness has a final maturity date
later than the final maturity date of, and is subordinated in right of payment
to, the Notes on terms at least as favorable to the holders of Notes as those
contained in the documentation governing the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded; and (iv) such Indebtedness
is incurred either by the Company or by the Restricted Subsidiary who is the
obligor on the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded.
"Permitted Telecommunications Joint Venture" means a corporation,
partnership, limited liability company or other entity engaged in one or more
Telecommunications Businesses in which the Company owns, directly or indirectly,
an equity interest.
"Person" means any individual, corporation, limited liability company,
partnership, joint venture, association, joint-stock company, trust, business
trust, unincorporated organization or government or any agency or political
subdivision thereof.
"Pledge Agreement" means the Pledge and Security Agreement dated as of
the date of this Indenture and substantially in the form attached as Exhibit G
hereto, as such agreement may be amended, modified or supplemented from time to
time.
"Pledged Securities" means the securities purchased by the Company
with a portion of the proceeds from the sale of the Notes, which shall consist
of Government Securities, to be pledged to the Trustee for the benefit of
holders of the Notes and deposited in the Escrow Account.
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"Private Placement Legend" means the legend set forth in Section
2.06(g)(i) to be placed on all Notes issued under this Indenture except where
otherwise permitted by the provisions of this Indenture.
"Purchase Date" shall have the meaning set forth in Section 3.09
hereof.
"QIB" means a "qualified institutional buyer" as defined in Rule 144A.
"Registrar" shall have the meaning set forth in Section 2.03 hereof.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of the date hereof, by and among the Company and the other
parties named on the signature pages thereof, as such agreement may be amended,
modified or supplemented from time to time.
"Regulation S" means Regulation S promulgated under the Securities
Act.
"Regulation S Global Note" means a global Note in the form of Exhibit
A hereto bearing the Global Note Legend and the Private Placement Legend and
deposited with or on behalf of and registered in the name of the Depositary or
its nominee, issued in a denomination equal to the outstanding principal amount
of the Notes sold in reliance on Regulation S.
"Responsible Officer," when used with respect to the Trustee, means
any officer within the Corporate Trust Administration of the Trustee (or any
successor group of the Trustee) or any other officer of the Trustee customarily
performing functions similar to those performed by any of the above designated
officers and also means, with respect to a particular corporate trust matter,
any other officer to whom such matter is referred because of his knowledge of
and familiarity with the particular subject.
"Restricted Definitive Note" means a Definitive Note bearing the
Private Placement Legend.
"Restricted Global Note" means a Global Note bearing the Private
Placement Legend.
"Restricted Investment" means any Investment other than a Permitted
Investment.
"Restricted Payments" shall have the meaning set forth in Section 4.07
hereof.
"Restricted Period" means the 40-day restricted period as defined in
Regulation S.
"Restricted Subsidiary" of a Person means any Subsidiary of the
referent Person that is not an Unrestricted Subsidiary.
"Rule 144" means Rule 144 promulgated under the Securities Act.
"Rule 144A" means Rule 144A promulgated under the Securities Act.
"Rule 903" means Rule 903 promulgated under the Securities Act.
"Rule 904" means Rule 904 promulgated the Securities Act.
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"Sale and Leaseback Transaction" means, with respect to any Person,
any direct or indirect arrangement pursuant to which any property (other than
Capital Stock) is sold by such Person or a Subsidiary, or, in the case of the
Company, a Restricted Subsidiary of such Person and is thereafter leased back
from the purchaser or transferee thereof by such Person or one of its
Subsidiaries or, in the case of the Company, one of its Restricted Subsidiaries.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Separation Date" means the earliest of (i) the date that is six
months following the Closing Date, (ii) the commencement of the Exchange Offer,
(iii) the date a Shelf Registration Statement with respect to the Notes is
declared effective, (iv) a Change of Control or (v) such date as Bear, Stearns &
Co. Inc. may, in its sole discretion, deem appropriate.
"Shelf Registration Statement" means the Shelf Registration Statement
as defined in the Registration Rights Agreement.
"Significant Subsidiary" means any Restricted Subsidiary that would be
a "significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X,
promulgated pursuant to the Act, as such Regulation is in effect on the Closing
Date.
"Stated Maturity" means, with respect to any installment of interest
or principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness, and shall not include any contingent obligations to
repay, redeem or repurchase any such interest or principal prior to the date
originally scheduled for the payment thereof.
"Subsidiary" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Capital Stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
Person or one or more of the other Subsidiaries of that Person (or a combination
thereof) and (ii) any partnership (a) the sole general partner or the managing
general partner of which is such Person or a Subsidiary of such Person or (b)
the only general partners of which are such Person or of one or more
Subsidiaries of such Person (or any combination thereof).
"Subsidiary Guarantee" means the Guarantee by each Subsidiary
Guarantor of the Company's payment obligations under this Indenture and the
Notes, executed pursuant to the provisions of this Indenture.
"Subsidiary Guarantors" means (i) each existing Subsidiary of the
Company and (ii) any other Subsidiary of the Company that executes a Subsidiary
Guarantee in accordance with the provisions of this Indenture, and their
respective successors and assigns.
"Telecommunications Business" means the business of (i) transmitting,
or providing services relating to the transmission of, voice, video or data
through owned or leased transmission facilities (ii) reselling voice, video or
data services and (iii) creating, developing or marketing
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communications related network equipment, software and other devices for use in
a Telecommunications Business.
"Telecommunications Equipment" means video reception, processing,
modulating, transmission and distribution equipment and telecommunication
switching, distribution and transmission equipment and inventory, including,
without limitation, all remote switching nodes, digital loop carriers, switches,
line cards and other equipment, software or hardware necessary to install,
monitor, operate and maintain a video and/or telecommunications network.
"Telecommunications Related Assets" means all assets, rights
(contractual or otherwise) and properties, whether tangible or intangible, real
or personal, used or to be used, in connection with a Telecommunications
Business.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. (S)(S) 77aaa-
77bbbb) as in effect on the date on which this Indenture is qualified under the
TIA.
"Trustee" means the party named as such above until a successor
replaces it in accordance with the applicable provisions of this Indenture and
thereafter means the successor serving hereunder.
"Unrestricted Global Note" means a permanent global Note in the form
of Exhibit A attached hereto that bears the Global Note Legend and that has the
"Schedule of Exchanges of Interests in the Global Note" attached thereto, and
that is deposited with or on behalf of and registered in the name of the
Depositary, representing a series of Notes that do not bear the Private
Placement Legend.
"Unrestricted Definitive Note" means one or more Definitive Notes that
do not bear and are not required to bear the Private Placement Legend.
"Unrestricted Subsidiary" means any Subsidiary that is designated by
the Board of Directors as an Unrestricted Subsidiary pursuant to a Board
Resolution, but only to the extent that such Subsidiary: (i) has no Indebtedness
other than Non-Recourse Debt; (ii) is not party to any agreement, contract,
arrangement or understanding with the Company or any Restricted Subsidiary of
the Company unless the terms of any such agreement, contract, arrangement or
understanding are no less favorable to the Company or such Restricted Subsidiary
than those that might be obtained at the time from Persons who are not
Affiliates of the Company; (iii) is a Person with respect to which neither the
Company nor any of its Restricted Subsidiaries has any direct or indirect
obligation (a) to subscribe for additional Equity Interests or (b) to maintain
or preserve such Person's financial condition or to cause such Person to achieve
any specified levels of operating results; (iv) has not guaranteed or otherwise
directly or indirectly provided credit support for any Indebtedness of the
Company or any of its Restricted Subsidiaries; and (v) has at least one director
on its board of directors (or one individual in an equivalent position if the
entity is not a corporation) that is not a director or executive officer of the
Company or any of its Restricted Subsidiaries and has at least one executive
officer that is not a director or executive officer of the Company or any of its
Restricted Subsidiaries.
"U.S. Person" means a U.S. person as defined in Rule 902(o) under the
Securities Act.
"Vendor Debt" means any Indebtedness of the Company or its Restricted
Subsidiaries incurred in connection with the acquisition or construction within
90 days of the incurrence of such Indebtedness of Telecommunications Equipment
or Telecommunications Related Assets.
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"Voting Stock" of any Person means Capital Stock of such Person which
ordinarily has voting power for the election of directors (or Persons performing
similar functions) of such Person, whether at all times or only so long as no
senior class of securities has such voting power by reason of any contingency.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (i) the sum
of the products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment, by (ii) the then outstanding principal
amount of such Indebtedness.
"Wholly Owned Restricted Subsidiary" of any Person means a Restricted
Subsidiary of such Person all of the outstanding Capital Stock or other
ownership interests of which (other than directors' qualifying shares) shall at
the time be owned by such Person or by one or more Wholly Owned Restricted
Subsidiaries of such Person or by such Person and one or more Wholly Owned
Restricted Subsidiaries of such Person.
Section 1.02. TIA Definitions.
Whenever this Indenture refers to a provision of the TIA, the
provision is incorporated by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the following
meanings:
"indenture securities" means the Notes;
"indenture security holder" means a Holder of a Note;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the Trustee; and
"obligor" on the Notes and the Subsidiary Guarantees means the Company
and the Subsidiary Guarantors, respectively, and any successor obligor upon the
Notes and the Guarantees, respectively.
All other terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by SEC rule under the TIA
have the meanings so assigned to them.
Section 1.03. Rules of Construction.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP;
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(3) "or" is not exclusive;
(4) words in the singular include the plural, and in the plural
include the singular;
(5) provisions apply to successive events and transactions; and
(6) references to sections of or rules under the Securities Act
shall be deemed to include substitute, replacement of successor sections or
rules adopted by the SEC from time to time.
ARTICLE 2.
THE NOTES
Section 2.01. Form and Dating.
(a) General. The Notes and the Trustee's certificate of authentication
shall be substantially in the form of Exhibit A hereto. The Notes may have
notations, legends or endorsements required by law, stock exchange rule or
usage. Each Note shall be dated the date of its authentication. The Notes
shall be in denominations of $1,000 and integral multiples thereof.
The terms and provisions contained in the Notes shall constitute, and
are hereby expressly made, a part of this Indenture and the Company, the
Subsidiary Guarantors and the Trustee, by their execution and delivery of this
Indenture, expressly agree to such terms and provisions and to be bound thereby.
However, to the extent any provision of any Note conflicts with the express
provisions of this Indenture, the provisions of this Indenture shall govern and
be controlling.
(b) Global Notes. Notes issued in global form shall be substantially in
the form of Exhibit A attached hereto (including the Global Note Legend thereon
and the "Schedule of Exchanges of Interests in the Global Note" attached
thereto). Notes issued in definitive form shall be substantially in the form of
Exhibit A attached hereto (but without the Global Note Legend thereon and
without the "Schedule of Exchanges of Interests in the Global Note" attached
thereto). Each Global Note shall represent such of the outstanding Notes as
shall be specified therein and each shall provide that it shall represent the
aggregate principal amount of outstanding Notes from time to time endorsed
thereon and that the aggregate principal amount of outstanding Notes represented
thereby may from time to time be reduced or increased, as appropriate, to
reflect exchanges and redemptions. Any endorsement of a Global Note to reflect
the amount of any increase or decrease in the aggregate principal amount of
outstanding Notes represented thereby shall be made by the Trustee or the Note
Custodian, at the direction of the Trustee, in accordance with instructions
given by the Holder thereof as required by Section 2.06 hereof.
(c) Euroclear and Cedel Procedures Applicable. The provisions of the
"Operating Procedures of the Euroclear System" and "Terms and Conditions
Governing Use of Euroclear" and the "General Terms and Conditions of Cedel Bank"
and "Customer Handbook" of Cedel Bank shall be applicable to transfers of
beneficial interests in the Regulation S Global Notes that are held by
Participants through Euroclear or Cedel Bank.
Section 2.02. Execution and Authentication.
One Officer shall sign the Notes for the Company by manual or
facsimile signature.
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If the Officer whose signature is on a Note no longer holds that
office at the time a Note is authenticated, the Note shall nevertheless be
valid.
A Note shall not be valid until authenticated by the manual signature
of the Trustee. The signature shall be conclusive evidence that the Note has
been authenticated under this Indenture.
The Trustee shall, upon a written order of the Company signed by two
Officers (an "Authentication Order"), authenticate Notes for original issue up
to the aggregate principal amount of $175,000,000. The aggregate principal
amount of Notes outstanding at any time may not exceed $175,000,000 except as
provided in Section 2.07 hereof.
The Trustee may appoint an authenticating agent acceptable to the
Company to authenticate Notes. An authenticating agent may authenticate Notes
whenever the Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by such agent. An
authenticating agent has the same rights as an Agent to deal with Holders or an
Affiliate of the Company.
Section 2.03. Registrar and Paying Agent.
The Company shall maintain an office or agency where Notes may be
presented for registration of transfer or for exchange ("Registrar") and an
office or agency where Notes may be presented for payment ("Paying Agent"). The
Registrar shall keep a register of the Notes and of their transfer and exchange.
The Company may appoint one or more co-registrars and one or more additional
paying agents. The term "Registrar" includes any co-registrar and the term
"Paying Agent" includes any additional paying agent. The Company may change any
Paying Agent or Registrar without notice to any Holder. The Company shall
notify the Trustee in writing of the name and address of any Agent not a party
to this Indenture. If the Company fails to appoint or maintain another entity
as Registrar or Paying Agent, the Trustee shall act as such. The Company or any
of its Subsidiaries may act as Paying Agent or Registrar.
The Company initially appoints The Depository Trust Company ("DTC") to
act as Depositary with respect to the Global Notes.
The Company initially appoints the Trustee to act as the Registrar and
Paying Agent and to act as Note Custodian with respect to the Global Notes.
Section 2.04. Paying Agent to Hold Money in Trust.
The Company shall require each Paying Agent other than the Trustee to
agree in writing that the Paying Agent will hold in trust for the benefit of
Holders or the Trustee all money held by the Paying Agent for the payment of
principal, premium or Liquidated Damages, if any, or interest on the Notes, and
will notify the Trustee of any default by the Company in making any such
payment. While any such default continues, the Trustee may require a Paying
Agent to pay all money held by it to the Trustee. The Company at any time may
require a Paying Agent to pay all money held by it to the Trustee. Upon payment
over to the Trustee, the Paying Agent (if other than the Company or a
Subsidiary) shall have no further liability for the money. If the Company or a
Subsidiary acts as Paying Agent, it shall segregate and hold in a separate trust
fund for the benefit of the Holders all money held by it as Paying Agent. Upon
any bankruptcy or reorganization proceedings relating to the Company, the
Trustee shall serve as Paying Agent for the Notes.
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Section 2.05. Holder Lists.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
all Holders and shall otherwise comply with TIA (S) 312(a). If the Trustee is
not the Registrar, the Company shall furnish to the Trustee at least seven
Business Days before each interest payment date and at such other times as the
Trustee may request in writing, a list in such form and as of such date as the
Trustee may reasonably require of the names and addresses of the Holders of
Notes and the Company shall otherwise comply with TIA (S) 312(a).
Section 2.06. Transfer and Exchange.
(a) Transfer and Exchange of Global Notes. A Global Note may not be
transferred as a whole except by the Depositary to a nominee of the Depositary,
by a nominee of the Depositary to the Depositary or to another nominee of the
Depositary, or by the Depositary or any such nominee to a successor Depositary
or a nominee of such successor Depositary. All Global Notes will be exchanged
by the Company for Definitive Notes if (i) the Company delivers to the Trustee
notice from the Depositary that it is unwilling or unable to continue to act as
Depositary or that it is no longer a clearing agency registered under the
Exchange Act and, in either case, a successor Depositary is not appointed by the
Company within 120 days after the date of such notice from the Depositary or
(ii) the Company in its sole discretion determines that the Global Notes (in
whole but not in part) should be exchanged for Definitive Notes and delivers a
written notice to such effect to the Trustee. Upon the occurrence of either of
the preceding events in (i) or (ii) above, Definitive Notes shall be issued in
such names as the Depositary shall instruct the Trustee. Global Notes also may
be exchanged or replaced, in whole or in part, as provided in Sections 2.07 and
2.10 hereof. Every Note authenticated and delivered in exchange for, or in lieu
of, a Global Note or any portion thereof, pursuant to this Section 2.06 or
Section 2.07 or 2.10 hereof, shall be authenticated and delivered in the form
of, and shall be, a Global Note. A Global Note may not be exchanged for another
Note other than as provided in this Section 2.06(a), however, beneficial
interests in a Global Note may be transferred and exchanged as provided in
Section 2.06(b), (c) or (f) hereof.
(b) Transfer and Exchange of Beneficial Interests in the Global Notes.
The transfer and exchange of beneficial interests in the Global Notes shall be
effected through the Depositary, in accordance with the provisions of this
Indenture and the Applicable Procedures. Beneficial interests in the Restricted
Global Notes shall be subject to restrictions on transfer comparable to those
set forth herein to the extent required by the Securities Act. Transfers of
beneficial interests in the Global Notes also shall require compliance with
either subparagraph (i) or (ii) below, as applicable, as well as one or more of
the other following subparagraphs, as applicable:
(i) Transfer of Beneficial Interests in the Same Global Note. Beneficial
interests in any Restricted Global Note may be transferred to Persons who take
delivery thereof in the form of a beneficial interest in the same Restricted
Global Note in accordance with the transfer restrictions set forth in the
Private Placement Legend. Beneficial interests in any Unrestricted Global
Note may be transferred to Persons who take delivery thereof in the form of a
beneficial interest in an Unrestricted Global Note. No written orders or
instructions shall be required to be delivered to the Registrar to effect the
transfers described in this Section 2.06(b)(i).
(ii) All Other Transfers and Exchanges of Beneficial Interests in Global
Notes. In connection with all transfers and exchanges of beneficial interests
that are not subject to Section
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2.06(b)(i) above, the transferor of such beneficial interest must deliver to
the Registrar either (A) (1) a written order from a Participant or an Indirect
Participant given to the Depositary in accordance with the Applicable
Procedures directing the Depositary to credit or cause to be credited a
beneficial interest in another Global Note in an amount equal to the
beneficial interest to be transferred or exchanged and (2) instructions given
in accordance with the Applicable Procedures containing information regarding
the Participant account to be credited with such increase or (B) (1) a written
order from a Participant or an Indirect Participant given to the Depositary in
accordance with the Applicable Procedures directing the Depositary to cause to
be issued a Definitive Note in an amount equal to the beneficial interest to
be transferred or exchanged and (2) instructions given by the Depositary to
the Registrar containing information regarding the Person in whose name such
Definitive Note shall be registered to effect the transfer or exchange
referred to in (1) above. Upon consummation of an Exchange Offer by the
Company in accordance with Section 2.06(f) hereof, the requirements of this
Section 2.06(b)(ii) shall be deemed to have been satisfied upon receipt by the
Registrar of the instructions contained in the Letter of Transmittal delivered
by the Holder of such beneficial interests in the Restricted Global Notes.
Upon satisfaction of all of the requirements for transfer or exchange of
beneficial interests in Global Notes contained in this Indenture and the Notes
or otherwise applicable under the Securities Act, the Trustee shall adjust the
principal amount of the relevant Global Note(s) pursuant to Section 2.06(h)
hereof.
(iii) Transfer of Beneficial Interests to Another Restricted Global Note.
A beneficial interest in any Restricted Global Note may be transferred to a
Person who takes delivery thereof in the form of a beneficial interest in
another Restricted Global Note if the transfer complies with the requirements
of Section 2.06(b)(ii) above and the Registrar receives the following:
(A) if the transferee will take delivery in the form of a beneficial
interest in the 144A Global Note, then the transferor must deliver a
certificate in the form of Exhibit B hereto, including the certifications
in item (1) thereof;
(B) if the transferee will take delivery in the form of a beneficial
interest in the Regulation S Global Note, then the transferor must deliver
a certificate in the form of Exhibit B hereto, including the certifications
in item (2) thereof; and
(C) if the transferee will take delivery in the form of a beneficial
interest in the IAI Global Note, then the transferor must deliver a
certificate in the form of Exhibit B hereto, including the certifications
and certificates and Opinion of Counsel required by item (3) thereof, if
applicable.
(iv) Transfer and Exchange of Beneficial Interests in a Restricted Global
Note for Beneficial Interests in the Unrestricted Global Note. A beneficial
interest in any Restricted Global Note may be exchanged by any holder thereof
for a beneficial interest in an Unrestricted Global Note or transferred to a
Person who takes delivery thereof in the form of a beneficial interest in an
Unrestricted Global Note if the exchange or transfer complies with the
requirements of Section 2.06(b)(ii) above and:
(A) such exchange or transfer is effected pursuant to the Exchange
Offer in accordance with the Registration Rights Agreement and the holder
of the beneficial interest to be transferred, in the case of an exchange,
or the transferee, in the case of a transfer, certifies in the applicable
Letter of Transmittal that it is not (1) a broker-dealer, (2) a Person
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participating in the distribution of the Exchange Notes or (3) a Person
who is an affiliate (as defined in Rule 144) of the Company;
(B) such transfer is effected pursuant to the Shelf Registration
Statement in accordance with the Registration Rights Agreement;
(C) such transfer is effected by a Participating Broker-Dealer
pursuant to the Exchange Offer Registration Statement in accordance with
the Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the holder of such beneficial interest in a Restricted
Global Note proposes to exchange such beneficial interest for a beneficial
interest in an Unrestricted Global Note, a certificate from such holder in
the form of Exhibit C hereto, including the certifications in item (1)(a)
thereof; or
(2) if the holder of such beneficial interest in a Restricted
Global Note proposes to transfer such beneficial interest to a Person who
shall take delivery thereof in the form of a beneficial interest in an
Unrestricted Global Note, a certificate from such holder in the form of
Exhibit B hereto, including the certifications in item (4) thereof;
and, in each such case set forth in this subparagraph (D), if the Registrar
so requests or if the Applicable Procedures so require, an Opinion of
Counsel in form reasonably acceptable to the Registrar to the effect that
such exchange or transfer is in compliance with the Securities Act and that
the restrictions on transfer contained herein and in the Private Placement
Legend are no longer required in order to maintain compliance with the
Securities Act.
If any such transfer is effected pursuant to subparagraph (B) or (D)
above at a time when an Unrestricted Global Note has not yet been issued, the
Company shall issue and, upon receipt of an Authentication Order in accordance
with Section 2.02 hereof, the Trustee shall authenticate one or more
Unrestricted Global Notes in an aggregate principal amount equal to the
aggregate principal amount of beneficial interests transferred pursuant to
subparagraph (B) or (D) above.
Beneficial interests in an Unrestricted Global Note cannot be
exchanged for, or transferred to Persons who take delivery thereof in the form
of, a beneficial interest in a Restricted Global Note.
(c) Transfer or Exchange of Beneficial Interests for Definitive Notes.
(i) Beneficial Interests in Restricted Global Notes to Restricted
Definitive Notes. If any holder of a beneficial interest in a Restricted
Global Note proposes to exchange such beneficial interest for a Restricted
Definitive Note or to transfer such beneficial interest to a Person who takes
delivery thereof in the form of a Restricted Definitive Note, then, upon
receipt by the Registrar of the following documentation:
(A) if the holder of such beneficial interest in a Restricted Global
Note proposes to exchange such beneficial interest for a Restricted
Definitive Note, a certificate from such holder in the form of Exhibit C
hereto, including the certifications in item (2)(a) thereof;
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(B) if such beneficial interest is being transferred to a QIB in
accordance with Rule 144A under the Securities Act, a certificate to the
effect set forth in Exhibit B hereto, including the certifications in
item (1) thereof;
(C) if such beneficial interest is being transferred to a Non-U.S.
Person in an offshore transaction in accordance with Rule 903 or Rule 904
under the Securities Act, a certificate to the effect set forth in Exhibit
B hereto, including the certifications in item (2) thereof;
(D) if such beneficial interest is being transferred pursuant to an
exemption from the registration requirements of the Securities Act in
accordance with Rule 144 under the Securities Act, a certificate to the
effect set forth in Exhibit B hereto, including the certifications in item
(3)(a) thereof;
(E) if such beneficial interest is being transferred to an
Institutional Accredited Investor in reliance on an exemption from the
registration requirements of the Securities Act other than those listed in
subparagraphs (B) through (D) above, a certificate to the effect set forth
in Exhibit B hereto, including the certifications, certificates and Opinion
of Counsel required by item (3) thereof, if applicable;
(F) if such beneficial interest is being transferred to the Company
or any of its Subsidiaries, a certificate to the effect set forth in
Exhibit B hereto, including the certifications in item (3)(b) thereof; or
(G) if such beneficial interest is being transferred pursuant to an
effective registration statement under the Securities Act, a certificate to
the effect set forth in Exhibit B hereto, including the certifications in
item (3)(c) thereof,
the Trustee shall cause the aggregate principal amount of the applicable
Global Note to be reduced accordingly pursuant to Section 2.06(h) hereof,
and the Company shall execute and the Trustee shall authenticate and
deliver to the Person designated in the instructions a Definitive Note in
the appropriate principal amount. Any Definitive Note issued in exchange
for a beneficial interest in a Restricted Global Note pursuant to this
Section 2.06(c) shall be registered in such name or names and in such
authorized denomination or denominations as the holder of such beneficial
interest shall instruct the Registrar through instructions from the
Depositary and the Participant or Indirect Participant. The Trustee shall
deliver such Definitive Notes to the Persons in whose names such Notes are
so registered. Any Definitive Note issued in exchange for a beneficial
interest in a Restricted Global Note pursuant to this Section 2.06(c)(i)
shall bear the Private Placement Legend and shall be subject to all
restrictions on transfer contained therein.
(ii) Beneficial Interests in Restricted Global Notes to Unrestricted
Definitive Notes. A holder of a beneficial interest in a Restricted Global
Note may exchange such beneficial interest for an Unrestricted Definitive Note
or may transfer such beneficial interest to a Person who takes delivery
thereof in the form of an Unrestricted Definitive Note only if:
(A) such exchange or transfer is effected pursuant to the Exchange
Offer in accordance with the Registration Rights Agreement and the holder
of such beneficial interest, in the case of an exchange, or the
transferee, in the case of a transfer, certifies in the
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applicable Letter of Transmittal that it is not (1) a broker-dealer, (2) a
Person participating in the distribution of the Exchange Notes or (3) a
Person who is an affiliate (as defined in Rule 144) of the Company;
(B) such transfer is effected pursuant to the Shelf Registration
Statement in accordance with the Registration Rights Agreement;
(C) such transfer is effected by a Participating Broker-Dealer
pursuant to the Exchange Offer Registration Statement in accordance with
the Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the holder of such beneficial interest in a Restricted
Global Note proposes to exchange such beneficial interest for a Definitive
Note that does not bear the Private Placement Legend, a certificate from
such holder in the form of Exhibit C hereto, including the certifications
in item (1)(b) thereof; or
(2) if the holder of such beneficial interest in a Restricted
Global Note proposes to transfer such beneficial interest to a Person who
shall take delivery thereof in the form of a Definitive Note that does not
bear the Private Placement Legend, a certificate from such holder in the
form of Exhibit B hereto, including the certifications in item (4) thereof;
and, in each such case set forth in this subparagraph (D), if the Registrar
so requests or if the Applicable Procedures so require, an Opinion of
Counsel in form reasonably acceptable to the Registrar to the effect that
such exchange or transfer is in compliance with the Securities Act and that
the restrictions on transfer contained herein and in the Private Placement
Legend are no longer required in order to maintain compliance with the
Securities Act.
(iii) Beneficial Interests in Unrestricted Global Notes to Unrestricted
Definitive Notes. If any holder of a beneficial interest in an Unrestricted
Global Note proposes to exchange such beneficial interest for a Definitive
Note or to transfer such beneficial interest to a Person who takes delivery
thereof in the form of a Definitive Note, then, upon satisfaction of the
conditions set forth in Section 2.06(b)(ii) hereof, the Trustee shall cause
the aggregate principal amount of the applicable Global Note to be reduced
accordingly pursuant to Section 2.06(h) hereof, and the Company shall execute
and the Trustee shall authenticate and deliver to the Person designated in the
instructions a Definitive Note in the appropriate principal amount. Any
Definitive Note issued in exchange for a beneficial interest pursuant to this
Section 2.06(c)(iii) shall be registered in such name or names and in such
authorized denomination or denominations as the holder of such beneficial
interest shall instruct the Registrar through instructions from the Depositary
and the Participant or Indirect Participant. The Trustee shall deliver such
Definitive Notes to the Persons in whose names such Notes are so registered.
Any Definitive Note issued in exchange for a beneficial interest pursuant to
this Section 2.06(c)(iii) shall not bear the Private Placement Legend.
(d) Transfer and Exchange of Definitive Notes for Beneficial Interests.
(i) Restricted Definitive Notes to Beneficial Interests in Restricted
Global Notes. If any Holder of a Restricted Definitive Note proposes to
exchange such Note for a beneficial interest in a Restricted Global Note or to
transfer such Restricted Definitive Notes to a Person who takes delivery
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thereof in the form of a beneficial interest in a Restricted Global Note,
then, upon receipt by the Registrar of the following documentation:
(A) if the Holder of such Restricted Definitive Note proposes to
exchange such Note for a beneficial interest in a Restricted Global Note, a
certificate from such Holder in the form of Exhibit C hereto, including the
certifications in item (2)(b) thereof;
(B) if such Restricted Definitive Note is being transferred to a QIB
in accordance with Rule 144A under the Securities Act, a certificate to the
effect set forth in Exhibit B hereto, including the certifications in item
(1) thereof;
(C) if such Restricted Definitive Note is being transferred to a Non-
U.S. Person in an offshore transaction in accordance with Rule 903 or Rule
904 under the Securities Act, a certificate to the effect set forth in
Exhibit B hereto, including the certifications in item (2) thereof;
(D) if such Restricted Definitive Note is being transferred pursuant
to an exemption from the registration requirements of the Securities Act in
accordance with Rule 144 under the Securities Act, a certificate to the
effect set forth in Exhibit B hereto, including the certifications in item
(3)(a) thereof;
(E) if such Restricted Definitive Note is being transferred to an
Institutional Accredited Investor in reliance on an exemption from the
registration requirements of the Securities Act other than those listed in
subparagraphs (B) through (D) above, a certificate to the effect set forth
in Exhibit B hereto, including the certifications, certificates and Opinion
of Counsel required by item (3) thereof, if applicable;
(F) if such Restricted Definitive Note is being transferred to the
Company or any of its Subsidiaries, a certificate to the effect set forth
in Exhibit B hereto, including the certifications in item (3)(b) thereof;
or
(G) if such Restricted Definitive Note is being transferred pursuant
to an effective registration statement under the Securities Act, a
certificate to the effect set forth in Exhibit B hereto, including the
certifications in item (3)(c) thereof,
the Trustee shall cancel the Restricted Definitive Note, increase or cause
to be increased the aggregate principal amount of, in the case of clause
(A) above, the appropriate Restricted Global Note, in the case of clause
(B) above, the 144A Global Note, in the case of clause (c) above, the
Regulation S Global Note, and in all other cases, the IAI Global Note.
(ii) Restricted Definitive Notes to Beneficial Interests in Unrestricted
Global Notes. A Holder of a Restricted Definitive Note may exchange such Note
for a beneficial interest in an Unrestricted Global Note or transfer such
Restricted Definitive Note to a Person who takes delivery thereof in the form
of a beneficial interest in an Unrestricted Global Note only if:
(A) such exchange or transfer is effected pursuant to the Exchange
Offer in accordance with the Registration Rights Agreement and the Holder,
in the case of an exchange, or the transferee, in the case of a transfer,
certifies in the applicable Letter of Transmittal that it is not (1) a
broker-dealer, (2) a Person participating in the distribution of
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the Exchange Notes or (3) a Person who is an affiliate (as defined in Rule
144) of the Company;
(B) such transfer is effected pursuant to the Shelf Registration
Statement in accordance with the Registration Rights Agreement;
(C) such transfer is effected by a Participating Broker-Dealer
pursuant to the Exchange Offer Registration Statement in accordance with
the Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the Holder of such Definitive Notes proposes to exchange
such Notes for a beneficial interest in the Unrestricted Global Note, a
certificate from such Holder in the form of Exhibit C hereto, including the
certifications in item (1)(c) thereof; or
(2) if the Holder of such Definitive Notes proposes to transfer
such Notes to a Person who shall take delivery thereof in the form of a
beneficial interest in the Unrestricted Global Note, a certificate from
such Holder in the form of Exhibit B hereto, including the certifications
in item (4) thereof;
and, in each such case set forth in this subparagraph (D), if the Registrar
so requests or if the Applicable Procedures so require, an Opinion of
Counsel in form reasonably acceptable to the Registrar to the effect that
such exchange or transfer is in compliance with the Securities Act and that
the restrictions on transfer contained herein and in the Private Placement
Legend are no longer required in order to maintain compliance with the
Securities Act.
Upon satisfaction of the conditions of any of the subparagraphs in this
Section 2.06(d)(ii), the Trustee shall cancel the Definitive Notes and
increase or cause to be increased the aggregate principal amount of the
Unrestricted Global Note.
(iii) Unrestricted Definitive Notes to Beneficial Interests in
Unrestricted Global Notes. A Holder of an Unrestricted Definitive Note may
exchange such Note for a beneficial interest in an Unrestricted Global Note or
transfer such Definitive Notes to a Person who takes delivery thereof in the
form of a beneficial interest in an Unrestricted Global Note at any time. Upon
receipt of a request for such an exchange or transfer, the Trustee shall
cancel the applicable Unrestricted Definitive Note and increase or cause to be
increased the aggregate principal amount of one of the Unrestricted Global
Notes.
If any such exchange or transfer from a Definitive Note to a
beneficial interest is effected pursuant to subparagraphs (ii)(B), (ii)(D) or
(iii) above at a time when an Unrestricted Global Note has not yet been issued,
the Company shall issue and, upon receipt of an Authentication Order in
accordance with Section 2.02 hereof, the Trustee shall authenticate one or more
Unrestricted Global Notes in an aggregate principal amount equal to the
principal amount of Definitive Notes so transferred.
(e) Transfer and Exchange of Definitive Notes for Definitive Notes. Upon
request by a Holder of Definitive Notes and such Holder's compliance with the
provisions of this Section 2.06(e), the Registrar shall register the transfer or
exchange of Definitive Notes. Prior to such registration of transfer or
exchange, the requesting Holder shall present or surrender to the Registrar the
Definitive Notes duly
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endorsed or accompanied by a written instruction of transfer in form
satisfactory to the Registrar duly executed by such Holder or by his attorney,
duly authorized in writing. In addition, the requesting Holder shall provide any
additional certifications, documents and information, as applicable, required
pursuant to the following provisions of this Section 2.06(e).
(i) Restricted Definitive Notes to Restricted Definitive Notes. Any
Restricted Definitive Note may be transferred to and registered in the name of
Persons who take delivery thereof in the form of a Restricted Definitive Note
if the Registrar receives the following:
(A) if the transfer will be made pursuant to Rule 144A under the
Securities Act, then the transferor must deliver a certificate in the form
of Exhibit B hereto, including the certifications in item (1) thereof;
(B) if the transfer will be made pursuant to Rule 903 or Rule 904,
then the transferor must deliver a certificate in the form of Exhibit B
hereto, including the certifications in item (2) thereof; and
(C) if the transfer will be made pursuant to any other exemption from
the registration requirements of the Securities Act, then the transferor
must deliver a certificate in the form of Exhibit B hereto, including the
certifications, certificates and Opinion of Counsel required by item (3)
thereof, if applicable.
(ii) Restricted Definitive Notes to Unrestricted Definitive Notes. Any
Restricted Definitive Note may be exchanged by the Holder thereof for an
Unrestricted Definitive Note or transferred to a Person or Persons who take
delivery thereof in the form of an Unrestricted Definitive Note if:
(A) such exchange or transfer is effected pursuant to the Exchange
Offer in accordance with the Registration Rights Agreement and the Holder,
in the case of an exchange, or the transferee, in the case of a transfer,
certifies in the applicable Letter of Transmittal that it is not (1) a
broker-dealer, (2) a Person participating in the distribution of the
Exchange Notes or (3) a Person who is an affiliate (as defined in Rule 144)
of the Company;
(B) any such transfer is effected pursuant to the Shelf Registration
Statement in accordance with the Registration Rights Agreement;
(C) any such transfer is effected by a Participating Broker-Dealer
pursuant to the Exchange Offer Registration Statement in accordance with
the Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the Holder of such Restricted Definitive Notes proposes to
exchange such Notes for an Unrestricted Definitive Note, a certificate from
such Holder in the form of Exhibit C hereto, including the certifications
in item (1)(d) thereof; or
(2) if the Holder of such Restricted Definitive Notes proposes to
transfer such Notes to a Person who shall take delivery thereof in the form
of an Unrestricted Definitive Note, a
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certificate from such Holder in the form of Exhibit B hereto, including the
certifications in item (4) thereof;
and, in each such case set forth in this subparagraph (D), if the Registrar
so requests, an Opinion of Counsel in form reasonably acceptable to the
Company to the effect that such exchange or transfer is in compliance with
the Securities Act and that the restrictions on transfer contained herein
and in the Private Placement Legend are no longer required in order to
maintain compliance with the Securities Act.
(iii) Unrestricted Definitive Notes to Unrestricted Definitive Notes. A
Holder of Unrestricted Definitive Notes may transfer such Notes to a Person
who takes delivery thereof in the form of an Unrestricted Definitive Note.
Upon receipt of a request to register such a transfer, the Registrar shall
register the Unrestricted Definitive Notes pursuant to the instructions from
the Holder thereof.
(f) Exchange Offer. Upon the occurrence of the Exchange Offer in
accordance with the Registration Rights Agreement, the Company shall issue and,
upon receipt of an Authentication Order in accordance with Section 2.02, the
Trustee shall authenticate (i) one or more Unrestricted Global Notes in an
aggregate principal amount equal to the principal amount of the beneficial
interests in the Restricted Global Notes tendered for acceptance by Persons that
certify in the applicable Letters of Transmittal that (x) they are not broker-
dealers, (y) they are not participating in a distribution of the Exchange Notes
and (z) they are not affiliates (as defined in Rule 144) of the Company, and
accepted for exchange in the Exchange Offer and (ii) Definitive Notes in an
aggregate principal amount equal to the principal amount of the Restricted
Definitive Notes accepted for exchange in the Exchange Offer. Concurrently with
the issuance of such Notes, the Trustee shall cause the aggregate principal
amount of the applicable Restricted Global Notes to be reduced accordingly, and
the Company shall execute and the Trustee shall authenticate and deliver to the
Persons designated by the Holders of Definitive Notes so accepted Definitive
Notes in the appropriate principal amount.
(g) Legends. The following legends shall appear on the face of all Global
Notes and Definitive Notes issued under this Indenture unless specifically
stated otherwise in the applicable provisions of this Indenture.
(i) Private Placement Legend.
(A) Except as permitted by subparagraph (B) below, each Global Note
and each Definitive Note (and all Notes issued in exchange therefor or
substitution thereof) shall bear the legend in substantially the
following form:
"THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY ISSUED
IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE UNITED
STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND THE
SECURITY EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED
IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM.
EACH PURCHASER OF THE SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE
SELLER MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF
THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF THE
SECURITY EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE COMPANY THAT (A)
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SUCH SECURITY MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (1)(a)
TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL
BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) (b) IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A UNDER THE SECURITIES ACT,
(c) OUTSIDE THE UNITED STATES TO A FOREIGN PERSON IN A TRANSACTION MEETING
THE REQUIREMENTS OF RULE 904 UNDER THE SECURITIES ACT, (d) TO AN
INSTITUTIONAL "ACCREDITED INVESTOR" AS DEFINED IN RULE 501(a)(1), (2), (3)
OR (7) OF THE SECURITIES ACT (AN "INSTITUTIONAL ACCREDITED INVESTOR") IN A
TRANSACTION EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT
OR (e) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT, (2) TO THE COMPANY OR (3) PURSUANT TO
AN EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH
ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY
OTHER APPLICABLE JURISDICTION AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT
HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER FROM IT OF THE SECURITY
EVIDENCED HEREBY OF THE RESALE RESTRICTIONS SET FORTH IN (A) ABOVE."
(B) Notwithstanding the foregoing, any Global Note or Definitive Note
issued pursuant to subparagraphs (b)(iv), (c)(ii), (c)(iii), (d)(ii),
(d)(iii), (e)(ii), (e)(iii) or (f) to this Section 2.06 (and all Notes
issued in exchange therefor or substitution thereof) shall not bear the
Private Placement Legend.
(ii) Global Note Legend. Each Global Note shall bear a legend in
substantially the following form:
"THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE
GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE
BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY
CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS
MAY BE REQUIRED PURSUANT TO SECTION 2.07 OF THE INDENTURE, (II) THIS GLOBAL
NOTE MAY BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.06(a)
OF THE INDENTURE, (III) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE
FOR CANCELLATION PURSUANT TO SECTION 2.11 OF THE INDENTURE AND (IV) THIS
GLOBAL NOTE MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR
WRITTEN CONSENT OF THE COMPANY."
(iii) Unit Legend. Each Note issued prior to the Separation Date shall
bear the following legend (the "Unit Legend") on the face thereof:
"THE NOTES EVIDENCED BY THIS CERTIFICATE ARE INITIALLY ISSUED AS PART OF AN
ISSUANCE OF UNITS, EACH OF WHICH CONSIST OF $1,000 PRINCIPAL AMOUNT OF THE
NOTES AND ONE WARRANT ("WARRANT") INITIALLY ENTITLING THE HOLDER THEREOF TO
PURCHASE 0.635 SHARES, PAR VALUE $0.01 PER SHARE, OF THE COMPANY. PRIOR TO
THE EARLIEST TO OCCUR OF (i) THE DATE THAT IS SIX MONTHS FOLLOWING THE
INITIAL SALE OF THE UNITS, (ii) THE
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COMMENCEMENT OF AN EXCHANGE OFFER WITH RESPECT TO THE NOTES, (iii) THE DATE
OF A SHELF REGISTRATION STATEMENT WITH RESPECT TO THE NOTES IS DECLARED
EFFECTIVE, (iv) A CHANGE OF CONTROL (AS DEFINED IN THE INDENTURE), OR (v)
SUCH DATE AS BEAR, STEARNS & CO. INC. MAY, IN ITS SOLE DISCRETION, DEEM
APPROPRIATE, THE NOTES EVIDENCED BY THIS CERTIFICATE MAY NOT BE TRANSFERRED
OR EXCHANGED SEPARATELY FROM, BUT MAY BE TRANSFERRED OR EXCHANGED ONLY
TOGETHER WITH, THE WARRANTS."
(h) Cancellation and/or Adjustment of Global Notes. At such time as all
beneficial interests in a particular Global Note have been exchanged for
Definitive Notes or a particular Global Note has been redeemed, repurchased or
cancelled in whole and not in part, each such Global Note shall be returned to
or retained and cancelled by the Trustee in accordance with Section 2.11 hereof.
At any time prior to such cancellation, if any beneficial interest in a Global
Note is exchanged for or transferred to a Person who will take delivery thereof
in the form of a beneficial interest in another Global Note or for Definitive
Notes, the principal amount of Notes represented by such Global Note shall be
reduced accordingly and an endorsement shall be made on such Global Note by the
Trustee or by the Depositary at the direction of the Trustee to reflect such
reduction; and if the beneficial interest is being exchanged for or transferred
to a Person who will take delivery thereof in the form of a beneficial interest
in another Global Note, such other Global Note shall be increased accordingly
and an endorsement shall be made on such Global Note by the Trustee or by the
Depositary at the direction of the Trustee to reflect such increase.
(i) General Provisions Relating to Transfers and Exchanges.
(i) To permit registrations of transfers and exchanges, the Company
shall execute and the Trustee shall authenticate Global Notes and Definitive
Notes upon the Company's order or at the Registrar's request.
(ii) No service charge shall be made to a holder of a beneficial interest
in a Global Note or to a Holder of a Definitive Note for any registration of
transfer or exchange, but the Company may require payment of a sum sufficient
to cover any transfer tax or similar governmental charge payable in connection
therewith (other than any such transfer taxes or similar governmental charge
payable upon exchange or transfer pursuant to Sections 2.10, 3.06, 3.09, 4.10,
4.15 and 9.05 hereof).
(iii) The Registrar shall not be required to register the transfer of or
exchange any Note selected for redemption in whole or in part, except the
unredeemed portion of any Note being redeemed in part.
(iv) All Global Notes and Definitive Notes issued upon any registration
of transfer or exchange of Global Notes or Definitive Notes shall be the valid
obligations of the Company, evidencing the same debt, and entitled to the same
benefits under this Indenture, as the Global Notes or Definitive Notes
surrendered upon such registration of transfer or exchange.
(v) The Company shall not be required (A) to issue, to register the
transfer of or to exchange any Notes during a period beginning at the opening
of business 15 days before the day of any selection of Notes for redemption
under Section 3.02 hereof and ending at the close of business on the day of
selection, (B) to register the transfer of or to exchange any Note so selected
for redemption in whole or in part, except the unredeemed portion of any Note
being redeemed in part or
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(C) to register the transfer of or to exchange a Note between a record date
and the next succeeding interest payment date.
(vi) Prior to due presentment for the registration of a transfer of any
Note, the Trustee, any Agent and the Company may deem and treat the Person in
whose name any Note is registered as the absolute owner of such Note for the
purpose of receiving payment of principal of and interest on such Notes and
for all other purposes, and none of the Trustee, any Agent or the Company
shall be affected by notice to the contrary.
(vii) The Trustee shall authenticate Global Notes and Definitive Notes in
accordance with the provisions of Section 2.02 hereof.
(viii) All certifications, certificates and Opinions of Counsel required
to be submitted to the Registrar pursuant to this Section 2.06 to effect a
registration of transfer or exchange may be submitted by facsimile.
(ix) Notwithstanding anything herein to the contrary, as to any
certifications and certificates delivered to the Registrar pursuant to this
Section 2.06, the Registrar's duties shall be limited to confirming that any
such certifications and certificates delivered to it are in the form of
Exhibits B and C attached hereto. The Registrar shall not be responsible for
confirming the truth or accuracy of representations made in any such
certifications or certificates..
Section 2.07. Replacement Notes.
If any mutilated Note is surrendered to the Trustee or the Company and
the Trustee receives evidence to its satisfaction of the destruction, loss or
theft of any Note, the Company shall issue and the Trustee, upon receipt of an
Authentication Order, shall authenticate a replacement Note if the Trustee's
requirements are met. If required by the Trustee or the Company, an indemnity
bond must be supplied by the Holder that is sufficient in the judgment of the
Trustee and the Company to protect the Company, the Trustee, any Agent and any
authenticating agent from any loss that any of them may suffer if a Note is
replaced. The Company may charge for its expenses in replacing a Note.
Every replacement Note is an additional obligation of the Company and
shall be entitled to all of the benefits of this Indenture equally and
proportionately with all other Notes duly issued hereunder.
Section 2.08. Outstanding Notes.
The Notes outstanding at any time are all the Notes authenticated by
the Trustee except for those cancelled by it, those delivered to it for
cancellation, those reductions in the interest in a Global Note effected by the
Trustee in accordance with the provisions hereof, and those described in this
Section as not outstanding. Except as set forth in Section 2.09 hereof, a Note
does not cease to be outstanding because the Company or an Affiliate of the
Company holds the Note.
If a Note is replaced pursuant to Section 2.07 hereof, it ceases to be
outstanding unless the Trustee receives proof satisfactory to it that the
replaced Note is held by a bona fide purchaser.
If the principal amount of any Note is considered paid under Section
4.01 hereof, it ceases to be outstanding and interest on it ceases to accrue.
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If the Paying Agent (other than the Company, a Subsidiary or an
Affiliate of any thereof) holds, on a redemption date or maturity date, money
sufficient to pay Notes payable on that date, then on and after that date such
Notes shall be deemed to be no longer outstanding and shall cease to accrue
interest.
If, pursuant to Section 8.01 hereof, the Company elects to have
Section 8.02 or 8.03 hereof be applied to all outstanding Notes, the Notes
shall, upon compliance with the conditions set forth in Article 8, be deemed
outstanding only for the purposes set forth in Section 8.02 or 8.03, as
applicable .
Section 2.09. Treasury Notes.
In determining whether the Holders of the required principal amount of
Notes have concurred in any direction, waiver or consent, Notes owned by the
Company, or by any Affiliate of the Company, shall be considered as though not
outstanding, except that for the purposes of determining whether the Trustee
shall be protected in relying on any such direction, waiver or consent, only
Notes that the Trustee knows are so owned shall be so disregarded. Notes that
are to be acquired by the Company or any Affiliate of the Company pursuant to an
exchange offer, tender offer or other agreement shall not be deemed to be owned
by such entity until legal title to such Notes passes to such entity.
Section 2.10. Temporary Notes.
Until certificates representing Notes are ready for delivery, the
Company may prepare and the Trustee, upon receipt of an Authentication Order,
shall authenticate temporary Notes. Temporary Notes shall be substantially in
the form of certificated Notes but may have variations that the Company
considers appropriate for temporary Notes and as shall be reasonably acceptable
to the Trustee. Without unreasonable delay, the Company shall prepare and the
Trustee shall authenticate definitive Notes in exchange for temporary Notes.
Holders of temporary Notes shall be entitled to all of the benefits of
this Indenture.
Section 2.11. Cancellation.
The Company at any time may deliver Notes to the Trustee for
cancellation. The Registrar and Paying Agent shall forward to the Trustee any
Notes surrendered to them for registration of transfer, exchange or payment. The
Trustee and no one else shall cancel all Notes surrendered for registration of
transfer, exchange, payment, replacement or cancellation and shall destroy
cancelled Notes (subject to the record retention requirement of the Exchange
Act). Certification of the destruction of all cancelled Notes shall be delivered
to the Company. Subject to Section 2.07 hereof, the Company may not issue new
Notes to replace Notes that it has paid or that have been delivered to the
Trustee for cancellation.
Section 2.12. Defaulted Interest.
If the Company defaults in a payment of interest on the Notes, it
shall pay the defaulted interest in any lawful manner plus, to the extent
lawful, interest payable on the defaulted interest, to the Persons who are
Holders on a subsequent special record date, in each case at the rate provided
in the Notes and in Section 4.01 hereof. The Company shall notify the Trustee in
writing of the amount of defaulted interest proposed to be paid on each Note and
the date of the proposed payment. The Company shall fix or cause to be fixed
each such special record date and payment date, provided that no such
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special record date shall be less than 10 days prior to the related payment date
for such defaulted interest. At least 15 days before the special record date,
the Company (or, upon the written request of the Company, the Trustee in the
name and at the expense of the Company) shall mail or cause to be mailed to
Holders a notice that states the special record date, the related payment date
and the amount of such interest to be paid.
ARTICLE 3.
REDEMPTION AND PREPAYMENT
Section 3.01. Notices to Trustee.
If the Company elects to redeem Notes pursuant to the optional
redemption provisions of Section 3.07 hereof, it shall furnish to the Trustee,
at least 30 days but not more than 60 days before a redemption date (or such
shorter period that is acceptable to the Trustee), an Officers' Certificate
setting forth (i) the clause of this Indenture pursuant to which the redemption
shall occur, (ii) the redemption date, (iii) the principal amount of Notes to be
redeemed and (iv) the redemption price.
Section 3.02. Selection of Notes to Be Redeemed.
If less than all of the Notes are to be redeemed or purchased in an
offer to purchase at any time, the Trustee shall select the Notes to be redeemed
or purchased among the Holders of the Notes in compliance with the requirements
of the principal national securities exchange, if any, on which the Notes are
listed or, if the Notes are not so listed, on a pro rata basis, by lot or in
accordance with any other method the Trustee considers fair and appropriate. In
the event of partial redemption by lot, the particular Notes to be redeemed
shall be selected, unless otherwise provided herein, not less than 30 nor more
than 60 days prior to the redemption date by the Trustee from the outstanding
Notes not previously called for redemption.
The Trustee shall promptly notify the Company in writing of the Notes
selected for redemption and, in the case of any Note selected for partial
redemption, the principal amount thereof to be redeemed. Notes and portions of
Notes selected shall be in amounts of $1,000 or whole multiples of $1,000;
except that if all of the Notes of a Holder are to be redeemed, the entire
outstanding amount of Notes held by such Holder, even if not a multiple of
$1,000, shall be redeemed. Except as provided in the preceding sentence,
provisions of this Indenture that apply to Notes called for redemption also
apply to portions of Notes called for redemption.
Section 3.03. Notice of Redemption.
Subject to the provisions of Section 3.09 hereof, at least 30 days but
not more than 60 days before a redemption date, the Company shall mail or cause
to be mailed, by first class mail, a notice of redemption to each Holder whose
Notes are to be redeemed at its registered address.
The notice shall identify the Notes to be redeemed and shall state:
(a) the redemption date;
(b) the redemption price;
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(c) if any Note is being redeemed in part, the portion of the principal
amount of such Note to be redeemed and that, after the redemption date upon
surrender of such Note, a new Note or Notes in principal amount equal to the
unredeemed portion shall be issued upon cancellation of the original Note;
(d) the name and address of the Paying Agent;
(e) that Notes called for redemption must be surrendered to the Paying
Agent to collect the redemption price;
(f) that, unless the Company defaults in making such redemption payment,
interest and Liquidated Damages, if any, on Notes called for redemption ceases
to accrue on and after the redemption date;
(g) the paragraph of the Notes and/or Section of this Indenture pursuant to
which the Notes called for redemption are being redeemed; and
(h) that no representation is made as to the correctness or accuracy of the
CUSIP number, if any, listed in such notice or printed on the Notes.
At the Company's request, the Trustee shall give the notice of
redemption in the Company's name and at its expense; provided, however, that the
Company shall have delivered to the Trustee, at least 45 days prior to the
redemption date (or such shorter period as shall be acceptable to the Trustee),
an Officers' Certificate requesting that the Trustee give such notice and
setting forth the information to be stated in such notice as provided in the
preceding paragraph. The notice mailed in the manner herein provided shall be
conclusively presumed to have been duly given whether or not the Holder receives
such notice. In any case, failure to give such notice by mail or any defect in
the notice to the Holder of any Note shall not affect the validity of the
proceeding for the redemption of any other Note, nor shall it affect the rights
of any Holder to participate in such redemption.
Section 3.04. Effect of Notice of Redemption.
Once notice of redemption is mailed in accordance with Section 3.03
hereof, Notes called for redemption become irrevocably due and payable on the
redemption date at the redemption price. A notice of redemption may not be
conditional.
Section 3.05. Deposit of Redemption Price.
One Business Day prior to the redemption date, the Company shall
deposit with the Trustee or with the Paying Agent money sufficient to pay the
redemption price of and accrued and unpaid interest on all Notes to be redeemed
on that date. The Trustee or the Paying Agent shall promptly return to the
Company any money deposited with the Trustee or the Paying Agent by the Company
in excess of the amounts necessary to pay the redemption price of, and accrued
and unpaid interest on, all Notes to be redeemed.
If the Company complies with the provisions of the preceding
paragraph, on and after the redemption date, interest and Liquidated Damages, if
any, shall cease to accrue on the Notes or the portions of Notes called for
redemption. If a Note is redeemed on or after an interest record date but on or
prior to the related interest payment date, then any accrued and unpaid interest
shall be paid to the Person in whose name such Note was registered at the close
of business on such record date. If any Note
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called for redemption shall not be so paid upon surrender for redemption because
of the failure of the Company to comply with the preceding paragraph, interest
shall be paid on the unpaid principal, from the redemption date until such
principal is paid, and to the extent lawful on any interest not paid on such
unpaid principal, in each case at the rate provided in the Notes and in Section
4.01 hereof.
Section 3.06. Notes Redeemed in Part.
Upon surrender of a Note that is redeemed in part, the Company shall
issue and, upon the Company's written request, the Trustee shall authenticate
for the Holder at the expense of the Company a new Note equal in principal
amount to the unredeemed portion of the Note surrendered.
Section 3.07. Optional Redemption.
(a) Except as set forth in clause (b) of this Section 3.07, the Company
shall not have the option to redeem the Notes pursuant to this Section 3.07
prior to June 1, 2003. Thereafter, the Notes will be subject to redemption at
any time at the option of the Company, in whole or in part, upon not less than
30 nor more than 60 days' notice, at the redemption prices (expressed as
percentages of principal amount) set forth below, plus accrued and unpaid
interest and Liquidated Damages, if any, thereon to the applicable redemption
date, if redeemed during the twelve-month period beginning on June 1 of the
years indicated below:
<TABLE>
<CAPTION>
Year Percentage
- ---- ----------
<S> <C>
2003..................................107.250%
2004..................................104.833%
2005..................................102.417%
2006 and thereafter...................100.000%
</TABLE>
(b) Notwithstanding the foregoing, on or prior to June 1, 2001, the Company
may redeem up to 35% of the aggregate principal amount of Notes issued under
this Indenture at a redemption price of 114.500% of the principal amount
thereof, plus accrued and unpaid interest and Liquidated Damages, if any,
thereon to the redemption date, with the net cash proceeds of one or more public
or private offerings of Common Stock generating net cash proceeds to the Company
in excess of $20.0 million; provided that at least 65% of the aggregate
principal amount of Notes issued on the Closing Date remains outstanding
immediately after the occurrence of such redemption.
(c) Any redemption pursuant to this Section 3.07 shall be made pursuant to
the provisions of Section 3.01 through 3.06 hereof.
Section 3.08. Mandatory Redemption.
The Company shall not be required to make mandatory redemption
payments with respect to the Notes.
Section 3.09. Offer to Purchase by Application of Excess Proceeds.
In the event that, pursuant to Section 4.10 hereof, the Company shall
be required to commence an offer to all Holders to purchase Notes (an "Asset
Sale Offer"), it shall follow the procedures specified below.
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The Asset Sale Offer shall remain open for a period of 20 Business
Days following its commencement and no longer, except to the extent that a
longer period is required by applicable law (the "Offer Period"). No later than
five Business Days after the termination of the Offer Period (the "Purchase
Date"), the Company shall purchase the principal amount of Notes required to be
purchased pursuant to Section 4.10 hereof (the "Offer Amount") or, if less than
the Offer Amount has been tendered, all Notes tendered in response to the Asset
Sale Offer. Payment for any Notes so purchased shall be made in the same manner
as interest payments are made.
If the Purchase Date is on or after an interest record date and on or
before the related interest payment date, any accrued and unpaid interest shall
be paid to the Person in whose name a Note is registered at the close of
business on such record date, and no additional interest shall be payable to
Holders who tender Notes pursuant to the Asset Sale Offer.
Upon the commencement of an Asset Sale Offer, the Company shall send,
by first class mail, a notice to each of the Holders, with a copy to the
Trustee. The notice shall contain all instructions and materials necessary to
enable such Holders to tender Notes pursuant to the Asset Sale Offer. The Asset
Sale Offer shall be made to all Holders. The notice, which shall govern the
terms of the Asset Sale Offer, shall state:
(a) that the Asset Sale Offer is being made pursuant to this Section 3.09
and Section 4.10 hereof and the length of time the Asset Sale Offer shall remain
open;
(b) the Offer Amount, the purchase price and the Purchase Date;
(c) that any Note not tendered or accepted for payment shall continue to
accrete or accrue interest;
(d) that, unless the Company defaults in making such payment, any Note
accepted for payment pursuant to the Asset Sale Offer shall cease to accrete or
accrue interest and Liquidated Damages, if any, after the Purchase Date;
(e) that Holders electing to have a Note purchased pursuant to an Asset
Sale Offer may only elect to have all of such Note purchased and may not elect
to have only a portion of such Note purchased;
(f) that Holders electing to have a Note purchased pursuant to any Asset
Sale Offer shall be required to surrender the Note, with the form entitled
"Option of Holder to Elect Purchase" on the reverse of the Note completed, or
transfer by book-entry transfer, to the Company, a depositary, if appointed by
the Company, or a Paying Agent at the address specified in the notice at least
three days before the Purchase Date;
(g) that Holders shall be entitled to withdraw their election if the
Company, the depositary or the Paying Agent, as the case may be, receives, not
later than the expiration of the Offer Period, a telegram, telex, facsimile
transmission or letter setting forth the name of the Holder, the principal
amount of the Note the Holder delivered for purchase and a statement that such
Holder is withdrawing his election to have such Note purchased;
(h) that, if the aggregate principal amount of Notes surrendered by Holders
exceeds the Offer Amount, the Company shall select the Notes to be purchased on
a pro rata basis (with such
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adjustments as may be deemed appropriate by the Company so that only Notes in
denominations of $1,000, or integral multiples thereof, shall be purchased); and
(i) that Holders whose Notes were purchased only in part shall be issued
new Notes equal in principal amount to the unpurchased portion of the Notes
surrendered (or transferred by book-entry transfer).
On or before the Purchase Date, the Company shall, to the extent
lawful, accept for payment, on a pro rata basis to the extent necessary, the
Offer Amount of Notes or portions thereof tendered pursuant to the Asset Sale
Offer, or if less than the Offer Amount has been tendered, all Notes tendered,
and shall deliver to the Trustee an Officers' Certificate stating that such
Notes or portions thereof were accepted for payment by the Company in accordance
with the terms of this Section 3.09. The Company, the Depositary or the Paying
Agent, as the case may be, shall promptly (but in any case not later than five
days after the Purchase Date) mail or deliver to each tendering Holder an amount
equal to the purchase price of the Notes tendered by such Holder and accepted by
the Company for purchase, and the Company shall promptly issue a new Note, and
the Trustee, upon written request from the Company shall authenticate and mail
or deliver such new Note to such Holder, in a principal amount equal to any
unpurchased portion of the Note surrendered. Any Note not so accepted shall be
promptly mailed or delivered by the Company to the Holder thereof. The Company
shall publicly announce the results of the Asset Sale Offer on the Purchase
Date.
Other than as specifically provided in this Section 3.09, any purchase
pursuant to this Section 3.09 shall be made pursuant to the provisions of
Sections 3.01 through 3.06 hereof.
ARTICLE 4.
COVENANTS
Section 4.01. Payment of Notes.
The Company shall pay or cause to be paid the principal of, premium,
if any, and interest on the Notes on the dates and in the manner provided in the
Notes. Principal, premium, if any, and interest shall be considered paid on the
date due if the Paying Agent, if other than the Company or a Subsidiary thereof,
holds as of 10:00 a.m. Eastern Time on the due date money deposited by the
Company in immediately available funds and designated for and sufficient to pay
all principal, premium, if any, and interest then due. The Company shall pay all
Liquidated Damages, if any, in the same manner on the dates and in the amounts
set forth in the Registration Rights Agreement.
The Company shall pay interest (including post-petition interest in
any proceeding under any Bankruptcy Law) on overdue principal at the rate equal
to 1% per annum in excess of the then applicable interest rate on the Notes to
the extent lawful; it shall pay interest (including post-petition interest in
any proceeding under any Bankruptcy Law) on overdue installments of interest and
Liquidated Damages (without regard to any applicable grace period) at the same
rate to the extent lawful.
Section 4.02. Maintenance of Office or Agency.
The Company shall maintain in the Borough of Manhattan, the City of
New York, an office or agency (which may be an office of the Trustee or an
affiliate of the Trustee, Registrar or co-registrar) where Notes may be
surrendered for registration of transfer or for exchange and where notices and
demands to or upon the Company in respect of the Notes and this Indenture may be
served.
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The Company shall give prompt written notice to the Trustee of the
location, and any change in the location, of such office or agency. If at any
time the Company shall fail to maintain any such required office or agency or
shall fail to furnish the Trustee with the address thereof, such presentations,
surrenders, notices and demands may be made or served at the Corporate Trust
Office of the Trustee.
The Company may also from time to time designate one or more other
offices or agencies where the Notes may be presented or surrendered for any or
all such purposes and may from time to time rescind such designations; provided,
however, that no such designation or rescission shall in any manner relieve the
Company of its obligation to maintain an office or agency in the Borough of
Manhattan, the City of New York for such purposes. The Company shall give prompt
written notice to the Trustee of any such designation or rescission and of any
change in the location of any such other office or agency.
The Company hereby designates the Corporate Trust Office of the
Trustee's affiliate, Harris Trust Company of New York, 88 Pine Street, New York,
New York 10005, as one such office or agency of the Company in accordance with
Section 2.03.
Section 4.03. Reports.
(a) Whether or not required by the rules and regulations of the Commission,
so long as any Notes are outstanding, the Company shall furnish to the holders
of Notes (i) all quarterly and annual financial information that would be
required to be contained in a filing with the Commission on Forms 10-Q and 10-K
if the Company were required to file such Forms, including a "Management's
Discussion and Analysis of Financial Condition and Results of Operations" that
describes the financial condition and results of operations of the Company and
its consolidated Subsidiaries (showing in reasonable detail, either on the face
of the financial statements or in the footnotes thereto and in Management's
Discussion and Analysis of Financial Condition and Results of Operations, the
financial condition and results of operations of the Company and its Restricted
Subsidiaries separate from the financial condition and results of operations of
the Unrestricted Subsidiaries of the Company) and, with respect to the annual
information only, a report thereon by the Company's certified independent
accountants (provided, however, that quarterly information for the first quarter
of 1998 need not be furnished prior to August 15, 1998) and (ii) all current
reports that would be required to be filed with the Commission on Form 8-K if
the Company were required to file such reports, in each case within the time
periods specified in the Commission's rules and regulations. In addition,
whether or not required by the rules or regulations of the Commission, the
Company shall file a copy of all such information and reports with the
Commission (unless the Commission will not accept such a filing) and make such
information and reports available to securities analysts and prospective
investors upon request.
(b) For so long as any Notes remain outstanding, the Company shall furnish
to the Holders and to securities analysts and prospective investors, upon their
request, the information required to be delivered pursuant to Rule 144A(d)(4)
under the Securities Act.
Section 4.04. Compliance Certificate.
(a) The Company and each Subsidiary Guarantor (to the extent that such
Subsidiary Guarantor is so required under the TIA) shall deliver to the Trustee,
within 90 days after the end of each fiscal year, an Officers' Certificate
stating that a review of the activities of the Company and its Subsidiaries
during the preceding fiscal year has been made under the supervision of the
signing Officers
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with a view to determining whether the Company has kept,observed, performed and
fulfilled its obligations under this Indenture and the Pledge Agreement, and
further stating, as to each such Officer signing such certificate, that to the
best of his or her knowledge the Company has kept, observed, performed and
fulfilled each and every covenant contained in this Indenture and the Pledge
Agreement and is not in default in the performance or observance of any of the
terms, provisions and conditions of this Indenture or the Pledge Agreement (or,
if a Default or Event of Default shall have occurred, describing all such
Defaults or Events of Default of which he or she may have knowledge and what
action the Company is taking or proposes to take with respect thereto) and that
to the best of his or her knowledge no event has occurred and remains in
existence by reason of which payments on account of the principal of or
interest, if any, on the Notes is prohibited or if such event has occurred, a
description of the event and what action the Company is taking or proposes to
take with respect thereto.
(b) So long as not contrary to the then current recommendations of the
American Institute of Certified Public Accountants, the year-end financial
statements delivered pursuant to Section 4.03(a) above shall be accompanied by a
written statement of the Company's independent public accountants (who shall be
a firm of established national reputation) that in making the examination
necessary for certification of such financial statements, nothing has come to
their attention that would lead them to believe that the Company has violated
any provisions of Article 4 or Article 5 hereof or, if any such violation has
occurred, specifying the nature and period of existence thereof, it being
understood that such accountants shall not be liable directly or indirectly to
any Person for any failure to obtain knowledge of any such violation.
(c) The Company shall, so long as any of the Notes are outstanding, deliver
to the Trustee, forthwith upon any Officer becoming aware of any Default or
Event of Default, an Officers' Certificate specifying such Default or Event of
Default and what action the Company is taking or proposes to take with respect
thereto.
Section 4.05. Taxes.
The Company shall pay, and shall cause each of its Subsidiaries to
pay, prior to delinquency, all material taxes, assessments, and governmental
levies except such as are contested in good faith and by appropriate proceedings
or where the failure to effect such payment is not adverse in any material
respect to the Holders of the Notes.
Section 4.06. Stay, Extension and Usury Laws.
The Company and each of the Subsidiary Guarantors covenants (to the
extent that it may lawfully do so) that it shall not at any time insist upon,
plead, or in any manner whatsoever claim or take the benefit or advantage of,
any stay, extension or usury law wherever enacted, now or at any time hereafter
in force, that may affect the covenants or the performance of this Indenture;
and the Company and each of the Subsidiary Guarantors (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such
law, and covenants that it shall not, by resort to any such law, hinder, delay
or impede the execution of any power herein granted to the Trustee, but shall
suffer and permit the execution of every such power as though no such law has
been enacted.
Section 4.07. Restricted Payments.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly: (i) declare or pay any dividend or make
any other payment or distribution on
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account of the Company's or any of its Restricted Subsidiaries' Equity Interests
(including, without limitation, any payment in connection with any merger or
consolidation involving the Company or any of its Restricted Subsidiaries) or to
the direct or indirect holders of the Company's or any of its Restricted
Subsidiaries' Equity Interests in their capacity as such (other than dividends
or distributions payable in Equity Interests (other than Disqualified Stock) of
the Company or to the Company or a Restricted Subsidiary of the Company); (ii)
purchase, redeem or otherwise acquire or retire for value (including, without
limitation, in connection with any merger or consolidation involving the
Company) any Equity Interests of the Company or any direct or indirect parent of
the Company (other than any such Equity Interests owned by the Company or any
Restricted Subsidiary of the Company); (iii) make any payment on or with respect
to, or purchase, redeem, defease or otherwise acquire or retire for value, any
Indebtedness that is subordinated to the Notes, except a payment of interest or
principal at Stated Maturity; or (iv) make any Restricted Investment (all such
payments and other actions set forth in clauses (i) through (iv) above being
collectively referred to as "Restricted Payments"), unless, at the time of and
after giving effect to such Restricted Payment:
(a) no Default or Event of Default shall have occurred and be continuing or
would occur as a consequence thereof;
(b) the Company would, at the time of such Restricted Payment and after
giving pro forma effect thereto as if such Restricted Payment had been made at
the beginning of the applicable four-quarter period, have been permitted to
incur at least $1.00 of additional Indebtedness pursuant to the Debt to Cash
Flow Ratio test set forth in the first paragraph of Section 4.09 hereof; and
(c) such Restricted Payment, together with the aggregate amount of all
other Restricted Payments made by the Company and its Restricted Subsidiaries
after the Closing Date (excluding Restricted Payments permitted by clauses (ii),
(iii) and (iv) of the next succeeding paragraph), is less than the sum, without
duplication, of (i) (A) Cumulative Consolidated Cash Flow minus (B) the product
of 1.75 and Cumulative Interest Expense, in each case as of the date of such
Restricted Payment, plus (ii) 100% of the aggregate net cash proceeds received
by the Company since the Closing Date as a contribution to its common equity
capital or from the issue or sale of Equity Interests of the Company (other than
Disqualified Stock) or from the issue or sale of Disqualified Stock or debt
securities of the Company that have been converted into such Equity Interests
(other than Equity Interests (or Disqualified Stock or convertible debt
securities) sold to a Subsidiary of the Company), plus (iii) to the extent that
any Restricted Investment that was made after the date of this Indenture is sold
for cash or otherwise liquidated or repaid for cash, the lesser of (A) the cash
return of capital with respect to such Restricted Investment (less the cost of
disposition, if any) and (B) the initial amount of such Restricted Investment,
plus (iv) in the event the Company or any Restricted Subsidiary makes an
Investment in a Person that, as a result of or in connection with such
Investment, becomes a Restricted Subsidiary, an amount equal to the lesser of
(A) the fair market value of such Person at the time it becomes a Restricted
Subsidiary as evidenced by a resolution of the Board of Directors set forth in
an Officers' Certificate delivered to the Trustee or (B) the net amount of
Restricted Investments made in such Person prior to its becoming a Restricted
Subsidiary.
So long as no Default has occurred and is continuing or would be
caused thereby, the foregoing provisions will not prohibit: (i) the payment of
any dividend within 60 days after the date of declaration thereof, if at said
date of declaration such payment would have complied with the provisions of this
Indenture; (ii) the redemption, repurchase, retirement, defeasance or other
acquisition of any subordinated Indebtedness or Equity Interests of the Company
in exchange for, or out of the net cash
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proceeds of the substantially concurrent sale (other than to a Subsidiary of the
Company) of, other Equity Interests of the Company (other than any Disqualified
Stock); provided that the amount of any such net cash proceeds that are utilized
for any such redemption, repurchase, retirement, defeasance or other acquisition
shall be excluded from clause (c)(ii) of the preceding paragraph; (iii) the
defeasance, redemption, repurchase or other acquisition of subordinated
Indebtedness with the net cash proceeds from an incurrence of Permitted
Refinancing Indebtedness; (iv) the payment of any dividend by a Restricted
Subsidiary of the Company to the holders of its common Equity Interests on a pro
rata basis; (v) the payment of cash in lieu of fractional shares of Common Stock
pursuant to the Warrant Agreement; and (vi) the repurchase, redemption or other
acquisition or retirement for value of any Equity Interests of the Company or
any Restricted Subsidiary of the Company held by any member of the Company's or
any of its Restricted Subsidiaries' management; provided that the aggregate
price paid for all such repurchased, redeemed, acquired or retired Equity
Interests shall not exceed $250,000 in any twelve-month period.
The amount of all Restricted Payments (other than cash) shall be the
fair market value on the date of the Restricted Payment of the asset(s) or
securities proposed to be transferred or issued by the Company or such
Restricted Subsidiary, as the case may be, pursuant to the Restricted Payment.
The fair market value of any assets or securities that are required to be valued
by this covenant shall be determined by the Board of Directors whose resolution
with respect thereto shall be delivered to the Trustee, such determination to be
based upon an opinion or appraisal issued by an accounting, appraisal or
investment banking firm of national standing if such fair market value exceeds
$5.0 million. Not later than the date of making any Restricted Payment, the
Company shall deliver to the Trustee an Officers' Certificate stating that such
Restricted Payment is permitted and setting forth the basis upon which the
calculations required by this Section 4.07 were computed, together with a copy
of any fairness opinion or appraisal required by this Indenture.
The Board of Directors may designate any Restricted Subsidiary to be
an Unrestricted Subsidiary if such designation would not cause a Default. For
purposes of making such determination, all outstanding Investments by the
Company and its Restricted Subsidiaries (except to the extent repaid in cash) in
the Subsidiary so designated will be deemed to be Restricted Payments at the
time of such designation and will reduce the amount available for Restricted
Payments under the first paragraph of this Section 4.07. All such outstanding
Investments will be deemed to constitute Investments in an amount equal to the
fair market value of such Investments at the time of such designation. Such
designation will only be permitted if such Restricted Payment would be permitted
at such time and if such Restricted Subsidiary otherwise meets the definition of
an Unrestricted Subsidiary. Any such designation by the Board of Directors shall
be evidenced to the Trustee by filing with the Trustee a certified copy of the
Board Resolution giving effect to such designation and an Officers' Certificate
certifying that such designation complied with the foregoing conditions and was
permitted by this Section 4.07.
If, at any time, any Unrestricted Subsidiary fails to meet the
definition of an Unrestricted Subsidiary, it shall thereafter cease to be an
Unrestricted Subsidiary for purposes of this Indenture and any Indebtedness of
such Subsidiary shall be deemed to be incurred by a Restricted Subsidiary of the
Company as of such date (and, if such Indebtedness is not permitted to be
incurred as of such date under the covenant described under Section 4.09 hereof,
the Company shall be in default of such covenant).
The Board of Directors of the Company may at any time designate any
Unrestricted Subsidiary to be a Restricted Subsidiary; provided that such
designation shall be deemed to be an
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incurrence of Indebtedness by a Restricted Subsidiary of the Company of any
outstanding Indebtedness of such Unrestricted Subsidiary and such designation
shall only be permitted if (i) such Indebtedness is permitted under Section 4.09
hereof, calculated on a pro forma basis as if such designation had occurred at
the beginning of the four-quarter reference period, and (ii) no Default or Event
of Default would be in existence following such designation.
Section 4.08. Dividend and Other Payment Restrictions Affecting Subsidiaries.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective any encumbrance or restriction on the ability of any
Subsidiary to (i)(a) pay dividends or make any other distributions to the
Company or any of its Restricted Subsidiaries (1) on its Capital Stock or (2)
with respect to any other interest or participation in, or measured by, its
profits, or (b) pay any Indebtedness owed to the Company or any of its
Restricted Subsidiaries, (ii) make loans or advances to the Company or any of
its Restricted Subsidiaries or (iii) transfer any of its properties or assets to
the Company or any of its Restricted Subsidiaries. However, the foregoing
restrictions shall not apply to encumbrances or restrictions existing under or
by reason of (a) Existing Indebtedness as in effect on the Closing Date, (b)
this Indenture and the Notes, (c) applicable law, (d) any instrument governing
Indebtedness or Capital Stock of a Person acquired by the Company or any of its
Restricted Subsidiaries as in effect at the time of such acquisition (except to
the extent such Indebtedness was incurred in connection with or in contemplation
of such acquisition), which encumbrance or restriction is not applicable to any
Person, or the properties or assets of any Person, other than the Person, or the
property or assets of the Person, so acquired, provided that, in the case of
Indebtedness, such Indebtedness was permitted by the terms of this Indenture to
be incurred, (e) customary non-assignment provisions in contracts entered into
in the ordinary course of business, (f) purchase money obligations for property
acquired in the ordinary course of business that impose restrictions of the
nature described in clause (iii) above on the property so acquired, (g) any
agreement for the sale of a Subsidiary that restricts distributions by that
Subsidiary pending its sale, (h) Permitted Refinancing Indebtedness, provided
that the restrictions contained in the agreements governing such Permitted
Refinancing Indebtedness are no more restrictive, taken as a whole, than those
contained in the agreements governing the Indebtedness being refinanced, (i)
secured Indebtedness otherwise permitted to be incurred pursuant to the
provisions of Section 4.12 hereof that limits the right of the debtor to dispose
of the assets securing such Indebtedness, (j) provisions with respect to the
disposition or distribution of assets or property in joint venture agreements
and other similar agreements entered into in the ordinary course of business and
(k) restrictions on cash or other deposits or net worth imposed by customers
under contracts entered into in the ordinary course of business.
Section 4.09. Incurrence of Indebtedness and Issuance of Disqualified Stock.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, issue, assume, guarantee
or otherwise become directly or indirectly liable, contingently or otherwise,
with respect to (collectively, "incur") any Indebtedness (including Acquired
Debt) or issue any Disqualified Stock; provided, however, that the Company may
incur Indebtedness (including Acquired Debt) or issue shares of Disqualified
Stock if the Company's Debt to Cash Flow Ratio is greater than zero and less
than or equal to (a) 5.0 to 1, if such incurrence is on or prior to June 1,
2001, and (b) 4.5 to 1, if such incurrence of issuance is after June 1, 2001, in
each case determined on a pro forma basis (including a pro forma application of
the net proceeds therefrom) as if the additional Indebtedness had been incurred
at the beginning of the Company's most recently ended four full fiscal quarters
for which internal financial statements are available immediately preceding the
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date on which such additional Indebtedness is incurred. Notwithstanding the
foregoing, neither the Company nor any of its Restricted Subsidiaries shall
incur any Indebtedness that is contractually subordinated in right of payment to
any other Indebtedness of the Company or such Restricted Subsidiary unless such
Indebtedness is also contractually subordinated in right of payment to the Notes
on substantially identical terms; provided, however, that no Indebtedness of the
Company or any Restricted Subsidiary shall be deemed to be contractually
subordinated in right of payment to any other Indebtedness of the Company or
such Restricted Subsidiary solely by virtue of being unsecured.
The provisions of the first paragraph of this Section 4.09 shall not
apply to the incurrence of any of the following items of Indebtedness
(collectively, "Permitted Debt"):
(i) the incurrence by the Company of Indebtedness from a bank or other
financial institution in an aggregate amount at any one time outstanding not
to exceed the greater of (a) $25 million and (b) 80% of the face amount of all
accounts receivable owned by the Company as of such date that are not more
than 90 days past due;
(ii) the incurrence by the Company and its Restricted Subsidiaries of
Existing Indebtedness;
(iii) the incurrence by the Company and its Restricted Subsidiaries of
Indebtedness represented by the Notes and the Subsidiary Guarantees;
(iv) the incurrence by the Company or any of its Restricted Subsidiaries
of Permitted Refinancing Indebtedness in exchange for, or the net proceeds of
which are used to refund, refinance or replace Indebtedness (other than
intercompany Indebtedness) that is permitted by this Indenture to be incurred
under the first paragraph hereof or clauses (ii), (iii), (vi) or (vii) of this
paragraph;
(v) the incurrence by the Company of Indebtedness in an aggregate
principal amount at any one time outstanding, not to exceed 2.0 times the sum
of the net cash proceeds received by the Company after the Closing Date as a
capital contribution or from the issuance and sale of Equity Interests (other
than Disqualified Stock) to a Person that is not a Subsidiary of the Company
to the extent that such net cash proceeds have not been used to make
Restricted Payments pursuant to clause (c)(ii) of the first paragraph of
Section 4.07 or clauses (ii), (iii) or (vi) of the second paragraph of Section
4.07 hereof or Investments described under clause (vi) of the definition of
Permitted Investments; provided that such Indebtedness does not mature prior
to the Notes and has a Weighted Average Life to Maturity greater than that of
the Notes;
(vi) the incurrence by the Company and its Restricted Subsidiaries of
Vendor Debt; provided that the aggregate amount of such Vendor Debt does not
exceed the sum of (a) 100% of the total cost of any digital loop carriers or
switches acquired therewith and (b) 80% of the total cost of any other
Telecommunications Equipment or Telecommunications Related Assets acquired
therewith;
(vii) the incurrence by the Company or any of its Restricted Subsidiaries
of Indebtedness in connection with the acquisition of (a) a Person engaged in
a Telecommunications Business or (b) Telecommunications Related Assets, which
include contractual rights of entry, in each case in an aggregate amount not
to exceed the product of $650 and the number of acquired telephony or video
subscribers (as stated in an Officers' Certificate delivered to the Trustee);
(viii) the incurrence by the Company or any of its Restricted Subsidiaries
of intercompany Indebtedness; provided, however, that (a) any subsequent
issuance or transfer of Equity Interests that
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results in any such Indebtedness being held by a Person other than the Company
or a Restricted Subsidiary of the Company and (b) any sale or other transfer
of any such Indebtedness to a Person that is not either the Company or a
Restricted Subsidiary of the Company shall be deemed, in each case, to
constitute an incurrence of such Indebtedness by the Company or such
Restricted Subsidiary, as the case may be, that was not permitted by this
clause (viii);
(ix) the incurrence by the Company or any of its Restricted Subsidiaries
of Hedging Obligations that are incurred for the purpose of fixing or hedging
interest rate risk with respect to any floating rate Indebtedness that is
permitted by the terms of this Indenture to be outstanding; and
(x) the Guarantee by the Company or any of its Restricted Subsidiaries of
Indebtedness of the Company or any of its Restricted Subsidiaries permitted to
be incurred pursuant to the Debt to Cash Flow Ratio test set forth in the
first paragraph of this Section 4.09 or pursuant to any of clauses (i) through
(v) or (vii) through (ix) of this Section 4.09, which guarantee has the same
ranking relative to the Notes and the Guarantees as the guaranteed
Indebtedness does.
For purposes of determining compliance with this Section 4.09, in the
event that an item of proposed Indebtedness meets the criteria of more than one
of the categories of Permitted Debt described in clauses (i) through (ix) above
as of the date of incurrence thereof or is entitled to be incurred pursuant to
the first paragraph of this Section 4.09 as of the date of incurrence thereof,
the Company shall, in its sole discretion, classify such item of Indebtedness on
the date of its incurrence in any manner that complies with this section.
Accrual of interest and accretion or amortization of original issue discount
will not be deemed to be an incurrence of Indebtedness for purposes of this
Section 4.09.
Section 4.10. Asset Sales.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, consummate an Asset Sale unless (i) the Company or such
Restricted Subsidiary, as the case may be, receives consideration at the time of
such Asset Sale at least equal to the fair market value (evidenced by a
resolution of the Board of Directors set forth in an Officers' Certificate
delivered to the Trustee) of the assets or Equity Interests issued or sold or
otherwise disposed of and (ii) at least 80% of the consideration therefor
received by the Company or such Restricted Subsidiary is in the form of cash or
Cash Equivalents; provided that the amount of (a) any liabilities (as shown on
the Company's or such Restricted Subsidiary's most recent balance sheet) of the
Company or such Restricted Subsidiary (other than contingent liabilities and
liabilities that are by their terms subordinated to the Notes or any guarantee
thereof) that are assumed by the transferee of any such assets pursuant to a
customary novation agreement that releases the Company or such Restricted
Subsidiary from further liability and (b) any securities, notes or other
obligations received by the Company or such Restricted Subsidiary from such
transferee that are contemporaneously (subject to ordinary settlement periods)
converted by the Company or such Restricted Subsidiary into cash (to the extent
of the cash received), shall be deemed to be cash for purposes of this
provision.
Within 270 days after the receipt of any Net Proceeds from an Asset
Sale, the Company may, subject to the provisions of Section 4.07 hereof, (a)
apply such Net Proceeds to the permanent repayment of any Indebtedness that is
pari passu with the Notes or (b) (i) apply such Net Proceeds to the acquisition
of the assets or a majority of the voting equity interests of another Person,
the making of capital expenditures, or the acquisition of other long-term
assets, in each case, in or used or useful in the Telecommunications Business or
(ii) enter into a binding commitment to apply, within 120 days of the
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date of such commitment, such Net Proceeds as described in clause (i) above.
Pending the final application of any such Net Proceeds, the Company may
temporarily reduce revolving credit borrowings or otherwise invest such Net
Proceeds in any manner that is not prohibited by this Indenture. Any Net
Proceeds from Asset Sales that are not applied or invested as provided in the
first sentence of this paragraph will be deemed to constitute "Excess Proceeds."
When the aggregate amount of Excess Proceeds exceeds $5.0 million, the Company
shall make an offer to all holders of Notes (an "Asset Sale Offer") to
repurchase the maximum principal amount of Notes that may be purchased out of
the Excess Proceeds, at an offer price in cash in an amount equal to 100% of the
principal amount thereof, plus accrued and unpaid interest and Liquidated
Damages, if any, thereon to the repurchase date, in accordance with the
procedures set forth in Section 3.09 hereof. To the extent that any Excess
Proceeds remain after consummation of an Asset Sale Offer, the Company may use
such Excess Proceeds for any purpose not otherwise prohibited by this Indenture.
If the aggregate principal amount of Notes tendered pursuant to such Asset Sale
Offer exceeds the amount of Excess Proceeds, the Trustee shall select the Notes
to be purchased on a pro rata basis. Upon completion of such offer to purchase,
the amount of Excess Proceeds shall be reset at zero.
Section 4.11. Transactions with Affiliates.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, make any payment to, or sell, lease, transfer or otherwise
dispose of any of its properties or assets to, or purchase any property or
assets from, or enter into or make or amend any transaction, contract,
agreement, understanding, loan, advance or guarantee with, or for the benefit
of, any Affiliate (each of the foregoing, an "Affiliate Transaction"), unless
(i) such Affiliate Transaction is on terms that are no less favorable to the
Company or such Restricted Subsidiary than those that would have been obtained
in a comparable transaction by the Company or such Restricted Subsidiary with an
unrelated Person and (ii) the Company delivers to the Trustee (a) with respect
to any Affiliate Transaction or series of related Affiliate Transactions
involving aggregate consideration in excess of $1.0 million, a resolution of the
Board of Directors set forth in an Officers' Certificate certifying that such
Affiliate Transaction complies with clause (i) above and that such Affiliate
Transaction has been approved by a majority of the disinterested members of the
Board of Directors and (b) with respect to any Affiliate Transaction or series
of related Affiliate Transactions involving aggregate consideration in excess of
$10.0 million (or if no member of the Board of Directors is an independent
director, $1.0 million), an opinion as to the fairness to the holders of such
Affiliate Transaction from a financial point of view issued by an accounting,
appraisal or investment banking firm of national standing. Notwithstanding the
foregoing, the following items shall not be deemed to be Affiliate Transactions:
(i) any employment agreement entered into by the Company or any of its
Restricted Subsidiaries in the ordinary course of business; (ii) transactions
between or among the Company and/or its Restricted Subsidiaries; (iii) payment
of reasonable directors fees to Persons who are not otherwise Affiliates of the
Company; (iv) provisioning or other agreements with SBC Communications, Inc. or
any Affiliate thereof, and under any amendment or extension thereof so long as
such agreement, amendment or extension is not disadvantageous to the holders of
the Notes in any material respect; (v) payment of management and advisory fees
to The VenCom Group Inc. or any Affiliate thereof in an amount during any
calendar year period not to exceed $900,000, provided, that if the amount paid
in any calendar year is less than $900,000, the annual cap in the next calendar
year shall be equal to the difference between $1.8 million and the amount paid
in the previous calendar year and further provided that amounts owed in excess
of the cap in any year may be paid in one or more subsequent years if and to the
extent that they are within the cap in such years; (vi) any sale or other
issuance of equity interests (other than Disqualified Stock) of the Company;
(vii) reasonable indemnity provided to officers, directors, employees,
consultants or agents of the Company
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and its Restricted Subsidiaries as determined in good faith by the Company's
Board of Directors and as permitted by the Company's governing documents and
applicable law; (viii) any transactions undertaken pursuant to any contractual
obligations or rights in existence on the Closing Date; and (ix) Restricted
Payments that are permitted by the provisions of Section 4.07 hereof.
Section 4.12. Liens.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly create, incur, assume or suffer to exist
any Lien of any kind on any asset now owned or hereafter acquired, or any income
or profits therefrom or assign or convey any right to receive income therefrom,
except Permitted Liens.
Section 4.13. Business Activities.
The Company and its Restricted Subsidiaries shall not, directly or
indirectly, engage in any business other than the Telecommunications Business.
Section 4.14. Corporate Existence.
Subject to Article 5 hereof, the Company shall do or cause to be done
all things necessary to preserve and keep in full force and effect its corporate
existence and the corporate, partnership or other existence of each of its
Restricted Subsidiaries, in accordance with the respective organizational
documents (as the same may be amended from time to time) of the Company or any
such Restricted Subsidiary; provided, however, that the Company shall not be
required to preserve any such right, license or franchise, or the corporate,
partnership or other existence of any of its Restricted Subsidiaries, if the
Board of Directors shall determine that the preservation thereof is no longer
desirable in the conduct of the business of the Company and its Restricted
Subsidiaries, taken as a whole, and that the loss thereof is not adverse in any
material respect to the Holders of the Notes.
Section 4.15. Offer to Repurchase Upon Change of Control.
(a) Upon the occurrence of a Change of Control, the Company shall make an
offer to each Holder of Notes to repurchase all or any part (equal to $1,000 or
an integral multiple thereof) of such Holder's Notes pursuant to the offer
described below (the "Change of Control Offer") at an offer price in cash equal
to 101% of the aggregate principal amount thereof, plus accrued and unpaid
interest and Liquidated Damages, if any, thereon to the date of purchase (the
"Change of Control Payment"). Within ten Business Days following any Change of
Control, the Company shall mail a notice to each Holder describing the
transaction or transactions that constitute the Change of Control and offering
to repurchase Notes on the date specified in such notice, which date shall be no
earlier than 30 days and no later than 60 days from the date such notice is
mailed (the "Change of Control Payment Date"), pursuant to the procedures
required by this Indenture and described in such notice. The Company shall
comply with the requirements of Rule 14e-1 under the Exchange Act and any other
securities laws and regulations thereunder to the extent such laws and
regulations are applicable in connection with the repurchase of the Notes as a
result of a Change of Control.
(b) On the Change of Control Payment Date, the Company shall, to the
extent lawful, (i) accept for payment all Notes or portions thereof properly
tendered pursuant to the Change of Control Offer, (ii) deposit with the Paying
Agent an amount equal to the Change of Control Payment in respect of all Notes
or portions thereof so tendered and (iii) deliver or cause to be delivered to
the Trustee the Notes
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so accepted together with an Officers' Certificate stating the aggregate
principal amount of Notes or portions thereof being purchased by the Company.
The Paying Agent will promptly mail to each Holder of Notes so tendered the
Change of Control Payment for such Notes, and the Trustee will promptly
authenticate and mail (or cause to be transferred by book entry) to each Holder
a new Note equal in principal amount to any unpurchased portion of the Notes
surrendered, if any; provided that each such new Note will be in a principal
amount of $1,000 or an integral multiple thereof. The Company shall publicly
announce the results of the Change of Control Offer on or as soon as practicable
after the Change of Control Payment Date.
(c) Notwithstanding anything to the contrary in this Section 4.15, the
Company shall not be required to make a Change of Control Offer upon a Change of
Control if a third party makes the Change of Control Offer in the manner, at the
times and otherwise in compliance with the requirements set forth in this
Section 4.15 and Section 3.09 hereof and purchases all Notes validly tendered
and not withdrawn under such Change of Control Offer.
(d) On and after the purchase date interest and Liquidated Damages, if
any, shall cease to accrue on the Notes or the portions of Notes tendered and
not withdrawn by the Holders of the Notes and purchased by the Company pursuant
to Section 4.15(d) hereof, regardless of whether certificates for such
securities are actually surrendered.
Section 4.16. Limitation on Sale and Leaseback Transactions.
The Company and its Restricted Subsidiaries shall not, directly or
indirectly, enter into, assume, Guarantee or otherwise become liable with
respect to any Sale and Leaseback Transactions, provided that the Company or any
Restricted Subsidiary of the Company may enter into any such transaction if (i)
the Company or such Restricted Subsidiary would be permitted under Sections 4.09
and 4.12 hereof to incur secured Indebtedness in an amount equal to the
Attributable Debt with respect to such transaction, (ii) the consideration
received by the Company or such Restricted Subsidiary from such transaction is
at least equal to the Fair Market Value of the property being transferred and
(iii) the Net Proceeds received by the Company or such Restricted Subsidiary
from such transaction are applied in accordance with Section 4.10 hereof.
Section 4.17. Limitation on Issuances and Sales of Equity of Wholly Owned
Restricted Subsidiaries.
The Company (i) shall not, and shall not permit any Wholly Owned
Restricted Subsidiary of the Company to, transfer, convey, sell, lease or
otherwise dispose of any Equity Interests of any Wholly Owned Restricted
Subsidiary of the Company to any Person (other than the Company or another
Wholly Owned Restricted Subsidiary of the Company), unless (a) such transfer,
conveyance, sale, lease or other disposition is of all the Equity Interests in
such Wholly Owned Restricted Subsidiary and (b) the Net Proceeds from such
transfer, conveyance, sale, lease or other disposition are applied in accordance
with Section 4.10 hereof and (ii) will not permit any Wholly Owned Restricted
Subsidiary of the Company to issue any of its Equity Interests (other than, if
necessary, shares of its Capital Stock constituting directors' qualifying
shares) to any Person other than to the Company or a Wholly Owned Restricted
Subsidiary of the Company.
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Section 4.18. Payments for Consent.
Neither the Company nor any of its Affiliates shall, directly or
indirectly, pay or cause to be paid any consideration, whether by way of
interest, fee or otherwise, to any Holder of any Notes for or as an inducement
to any consent, waiver or amendment of any of the terms or provisions of this
Indenture or the Notes unless such consideration is offered to be paid or agreed
to be paid to all Holders of the Notes that consent, waive or agree to amend in
the time frame and on the terms and conditions set forth in the solicitation
documents relating to such consent, waiver or agreement.
Section 4.19. Additional Subsidiary Guarantees.
If the Company or any of its Restricted Subsidiaries acquires or
creates another Restricted Subsidiary after the date of this Indenture, then the
Company shall cause such Restricted Subsidiary to become a Subsidiary Guarantor
by executing a supplemental indenture in the form attached hereto as Exhibit F
and delivering an Opinion of Counsel to the Trustee to the effect that such
supplemental indenture has been duly authorized, executed and delivered by such
Restricted Subsidiary and constitutes a valid and binding obligation of such
Restricted Subsidiary, enforceable against such Restricted Subsidiary in
accordance with its terms (subject to customary exceptions); provided that the
Subsidiary Guarantee of any Restricted Subsidiary will be released if the
Company (i) designates such Restricted Subsidiary to be an Unrestricted
Subsidiary in accordance with Section 4.07 hereof or (ii) sells all of the
Capital Stock of such Restricted Subsidiary in compliance with Section 4.10
hereof.
ARTICLE 5.
SUCCESSORS
Section 5.01. Merger, Consolidation, or Sale of Assets.
Neither the Company nor any of its Restricted Subsidiaries shall
consolidate or merge with or into (whether or not the Company or such Restricted
Subsidiary is the surviving corporation), or sell, assign, transfer, convey or
otherwise dispose of all or substantially all of its properties or assets in one
or more related transactions, to another Person unless (i) the Company is the
surviving corporation or such Restricted Subsidiary is the surviving entity, as
the case may be, or the Person formed by or surviving any such consolidation or
merger (if other than the Company or such Restricted Subsidiary) or to which
such sale, assignment, transfer, conveyance or other disposition shall have been
made is a corporation (in the case of the Company) or a corporation or other
entity (in the case of such Restricted Subsidiary) organized or existing under
the laws of the United States, any state thereof or the District of Columbia;
(ii) the Person formed by or surviving any such consolidation or merger (if
other than the Company or such Restricted Subsidiary) or the Person to which
such sale, assignment, transfer, conveyance or other disposition shall have been
made assumes all the obligations of the Company under the Notes, this Indenture,
the Pledge Agreement and the Registration Rights Agreement, or of such
Restricted Subsidiary under its Subsidiary Guarantee, as the case may be,
pursuant to a supplemental indenture in a form reasonably satisfactory to the
Trustee; (iii) immediately after such transaction no Default or Event of Default
exists; and (iv) except in the case of a merger of the Company with or into a
Wholly Owned Restricted Subsidiary of the Company, the Company or the Person
formed by or surviving any such consolidation or merger (if other than the
Company), or to which such sale, assignment, transfer, conveyance or other
disposition shall have been made (a) will have Consolidated Net Worth
immediately after the transaction equal to or greater than the Consolidated Net
Worth of the Company immediately preceding the transaction and (b) will,
immediately after such transaction after
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giving pro forma effect thereto and to any related financing transactions as if
the same had occurred at the beginning of the applicable four-quarter period, be
permitted to incur at least $1.00 of additional Indebtedness pursuant to the
Debt to Cash Flow Ratio test set forth in the first paragraph of Section 4.09
hereof. The Company and its Restricted Subsidiaries shall not, directly or
indirectly, lease all or substantially all of their properties or assets, in one
or more related transactions, to any other Person. The provisions of this
Section 5.01 will not be applicable to a sale, assignment, transfer, conveyance
or other disposition of assets between or among the Company and any of its
Restricted Subsidiaries.
Section 5.02. Successor Corporation Substituted.
Upon any consolidation or merger, or any sale, assignment, transfer,
lease, conveyance or other disposition of all or substantially all of the assets
of the Company in accordance with Section 5.01 hereof, the successor corporation
formed by such consolidation or into or with which the Company is merged or to
which such sale, assignment, transfer, lease, conveyance or other disposition is
made shall succeed to, and be substituted for (so that from and after the date
of such consolidation, merger, sale, lease, conveyance or other disposition, the
provisions of this Indenture referring to the "Company" shall refer instead to
the successor corporation and not to the Company), and may exercise every right
and power of the Company under this Indenture with the same effect as if such
successor Person had been named as the Company herein; provided, however, that
the predecessor Company shall not be relieved from the obligation to pay the
principal of and interest on the Notes except in the case of a sale of all of
the Company's assets that meets the requirements of Section 5.01 hereof.
ARTICLE 6.
DEFAULTS AND REMEDIES
Section 6.01. Events of Default.
An "Event of Default" occurs if:
(a) the Company defaults in the payment when due of interest on, or
Liquidated Damages with respect to, the Notes and such default continues for a
period of 30 days;
(b) the Company defaults in the payment when due of principal of or
premium, if any, on the Notes when the same becomes due and payable at maturity,
upon redemption (including in connection with an offer to purchase) or
otherwise;
(c) the Company fails to comply with any of the provisions of Section
4.07, 4.09, 4.10, 4.15 or 5.01 hereof;
(d) either the Company or its Restricted Subsidiaries fails to observe or
perform any other covenant, representation, warranty or other agreement in this
Indenture or the Notes for 30 days after notice to the Company by the Trustee or
the Holders of at least 25% in aggregate principal amount of the Notes then
outstanding voting as a single class;
(e) a default occurs under any mortgage, indenture or instrument under
which there may be issued or by which there may be secured or evidenced any
Indebtedness for money borrowed by the Company or any of its Restricted
Subsidiaries (or the payment of which is guaranteed by the Company or any of its
Restricted Subsidiaries), whether such Indebtedness or guarantee now exists, or
is created after the date of this Indenture, which default (i) is caused by a
failure to pay principal of or premium, if any,
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or interest on such Indebtedness prior to the expiration of the grace period
provided in such Indebtedness on the date of such default (a "Payment Default")
or (ii) results in the acceleration of such Indebtedness prior to its express
maturity and, in each case, the principal amount of any such Indebtedness,
together with the principal amount of any other such Indebtedness under which
there has been a Payment Default or the maturity of which has been so
accelerated, aggregates $1.5 million or more;
(f) a final judgment or final judgments for the payment of money are
entered by a court or courts of competent jurisdiction against the Company or
any of its Restricted Subsidiaries and such judgment or judgments are not paid,
discharged or stayed for a period of 60 days (other than any judgment or portion
thereof as to which an insurance carrier rated at least A by Standard & Poor's
Corporation or A2 by Moody's Investors Service, Inc. has accepted liability in
writing), provided that the aggregate of all such undischarged judgments exceeds
$3 million;
(g) the Company defaults in the performance of any covenant set forth in
the Pledge Agreement, or repudiates its obligations under the Pledge Agreement,
or the Pledge Agreement is unenforceable against the Company or any of its
Restricted Subsidiaries for any reason;
(h) a Restricted Subsidiary defaults in the performance of any obligation
under its Subsidiary Guarantee or repudiates its obligations under its
Subsidiary Guarantee, or any Subsidiary Guarantee is held in any judicial
proceeding to be unenforceable against any Restricted Subsidiary for any reason;
(i) the Company fails for any reason to retain all material licenses
necessary to conduct its business;
(j) the Company or any of its Restricted Significant Subsidiaries or any
group of Restricted Subsidiaries that, taken as a whole, would constitute a
Significant Subsidiary, pursuant to or within the meaning of Bankruptcy Law:
(i) commences a voluntary case,
(ii) consents to the entry of an order for relief against it in an
involuntary case,
(iii) consents to the appointment of a Custodian of it or for all or
substantially all of its property,
(iv) makes a general assignment for the benefit of its creditors, or
(v) generally is not paying its debts as they become due; or
(k) a court of competent jurisdiction enters an order or decree under any
Bankruptcy Law that:
(i) is for relief against the Company or any of its Restricted
Significant Subsidiaries or any group of Restricted Subsidiaries that, taken
as a whole, would constitute a Significant Subsidiary in an involuntary case;
(ii) appoints a Custodian of the Company or any of its Restricted
Significant Subsidiaries or any group of Restricted Subsidiaries that, taken
as a whole, would constitute a Restricted Significant
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Subsidiary or for all or substantially all of the property of the Company or
any of its Restricted Significant Subsidiaries or any group of Restricted
Subsidiaries that, taken as a whole, would constitute a Restricted Significant
Subsidiary; or
(iii) orders the liquidation of the Company or any of its Restricted
Significant Subsidiaries or any group of Restricted Subsidiaries that, taken
as a whole, would constitute a Significant Subsidiary;
and the order or decree remains unstayed and in effect for 60 consecutive
days.
Section 6.02. Acceleration.
If any Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in principal amount of the then outstanding Notes may
declare all the Notes to be due and payable immediately. Notwithstanding the
foregoing, in the case of an Event of Default specified in clause (j) or (k) of
Section 6.01 hereof with respect to the Company, any Significant Subsidiary or
any group of Restricted Subsidiaries that, taken together, would constitute a
Significant Subsidiary, all outstanding Notes shall become due and payable
without further action or notice. Holders of the Notes may not enforce this
Indenture or the Notes except as provided herein. The Trustee may withhold from
Holders of the Notes notice of any continuing Default or Event of Default
(except a Default or Event of Default relating to the payment of principal or
interest) if it determines that withholding notice is in their interest. The
Holders of a majority in principal amount of the then outstanding Notes by
written notice to the Trustee may on behalf of all of the Holders rescind an
acceleration and its consequences if the rescission would not conflict with any
judgment or decree and if all existing Events of Default (except nonpayment of
principal, interest or premium that has become due solely because of the
acceleration) have been cured or waived.
If an Event of Default occurs on or after June 1, 2003 by reason of
any willful action (or inaction) taken (or not taken) by or on behalf of the
Company with the intention of avoiding payment of the premium that the Company
would have had to pay if the Company then had elected to redeem the Notes
pursuant to Section 3.07 hereof, then, upon acceleration of the Notes, an
equivalent premium shall also become and be immediately due and payable, to the
extent permitted by law, anything in this Indenture or in the Notes to the
contrary notwithstanding. If an Event of Default occurs prior to June 1, 2003 by
reason of any willful action (or inaction) taken (or not taken) by or on behalf
of the Company with the intention of avoiding the prohibition on redemption of
the Notes prior to such date, then, upon acceleration of the Notes, an
additional premium shall also become and be immediately due and payable in an
amount, for each of the years beginning on June 1 of the years set forth below,
as set forth below (expressed as a percentage of the principal amount to the
date of payment that would otherwise be due but for the provisions of this
sentence):
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
1999............................... 116.917%
2000............................... 114.500%
2001............................... 112.084%
2002............................... 109.667%
</TABLE>
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Section 6.03. Other Remedies.
If an Event of Default occurs and is continuing, the Trustee may
pursue any available remedy to collect the payment of principal, premium, if
any, and interest on the Notes or to enforce the performance of any provision of
the Notes or this Indenture.
The Trustee may maintain a proceeding even if it does not possess any
of the Notes or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Holder of a Note in exercising any right or
remedy accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. All remedies
are cumulative to the extent permitted by law.
Section 6.04. Waiver of Past Defaults.
Holders of not less than a majority in aggregate principal amount of
the Notes then outstanding by notice to the Trustee may on behalf of the Holders
of all of the Notes waive any existing Default or Event of Default and its
consequences hereunder, except a continuing Default or Event of Default in the
payment of interest on, or the principal of, the Notes.
Section 6.05. Control by Majority.
Holders of a majority in principal amount of the then outstanding
Notes may direct the time, method and place of conducting any proceeding for
exercising any remedy available to the Trustee or exercising any trust or power
conferred on it. However, the Trustee may refuse to follow any direction that
conflicts with law or this Indenture that the Trustee determines may be unduly
prejudicial to the rights of other Holders of Notes or that may involve the
Trustee in personal liability.
Section 6.06. Limitation on Suits.
A Holder of a Note may pursue a remedy with respect to this Indenture
or the Notes only if:
(a) the Holder of a Note gives to the Trustee written notice of a
continuing Event of Default;
(b) the Holders of at least 25% in principal amount of the then
outstanding Notes make a written request to the Trustee to pursue the remedy;
(c) such Holder of a Note or Holders of Notes offer and, if requested,
provide to the Trustee indemnity satisfactory to the Trustee against any loss,
liability or expense;
(d) the Trustee does not comply with the request within 60 days after
receipt of the request and the offer and, if requested, the provision of
indemnity; and
(e) during such 60-day period the Holders of a majority in principal
amount of the then outstanding Notes do not give the Trustee a direction
inconsistent with the request.
A Holder of a Note may not use this Indenture to prejudice the rights
of another Holder of a Note or to obtain a preference or priority over another
Holder of a Note.
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Section 6.07. Rights of Holders of Notes to Receive Payment.
Notwithstanding any other provision of this Indenture, the right of
any Holder of a Note to receive payment of principal, premium and Liquidated
Damages, if any, and interest on the Note, on or after the respective due dates
expressed in the Note (including in connection with an offer to purchase), or to
bring suit for the enforcement of any such payment on or after such respective
dates, shall not be impaired or affected without the consent of such Holder.
Section 6.08. Collection Suit by Trustee.
If an Event of Default specified in Section 6.01(a) or (b) occurs and
is continuing, the Trustee is authorized to recover judgment in its own name and
as trustee of an express trust against the Company for the whole amount of
principal of, premium and Liquidated Damages, if any, and interest remaining
unpaid on the Notes and interest on overdue principal and, to the extent lawful,
interest and such further amount as shall be sufficient to cover the costs and
expenses of collection, including the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel.
Section 6.09. Trustee May File Proofs of Claim.
The Trustee is authorized to file such proofs of claim and other
papers or documents as may be necessary or advisable in order to have the claims
of the Trustee (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and the
Holders of the Notes allowed in any judicial proceedings relative to the Company
(or any other obligor upon the Notes), its creditors or its property and shall
be entitled and empowered to collect, receive and distribute any money or other
property payable or deliverable on any such claims and any custodian in any such
judicial proceeding is hereby authorized by each Holder to make such payments to
the Trustee, and in the event that the Trustee shall consent to the making of
such payments directly to the Holders, to pay to the Trustee any amount due to
it for the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, and any other amounts due the Trustee under
Section 7.07 hereof. To the extent that the payment of any such compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel, and
any other amounts due the Trustee under Section 7.07 hereof out of the estate in
any such proceeding, shall be denied for any reason, payment of the same shall
be secured by a Lien on, and shall be paid out of, any and all distributions,
dividends, money, securities and other properties that the Holders may be
entitled to receive in such proceeding whether in liquidation or under any plan
of reorganization or arrangement or otherwise. Nothing herein contained shall
be deemed to authorize the Trustee to authorize or consent to or accept or adopt
on behalf of any Holder any plan of reorganization, arrangement, adjustment or
composition affecting the Notes or the rights of any Holder, or to authorize the
Trustee to vote in respect of the claim of any Holder in any such proceeding.
Section 6.10. Priorities.
If the Trustee collects any money pursuant to this Article, it shall
pay out the money in the following order:
First: to the Trustee, its agents and attorneys for amounts due under
Section 7.07 hereof, including payment of all compensation, expense and
liabilities incurred, and all advances made, by the Trustee and the costs and
expenses of collection;
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Second: to Holders of Notes for amounts due and unpaid on the Notes
for principal, premium and Liquidated Damages, if any, and interest, ratably,
without preference or priority of any kind, according to the amounts due and
payable on the Notes for principal, premium and Liquidated Damages, if any and
interest, respectively; and
Third: to the Company or to such party as a court of competent
jurisdiction shall direct.
The Trustee may fix a record date and payment date for any payment to
Holders of Notes pursuant to this Section 6.10.
Section 6.11. Undertaking for Costs.
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as a Trustee, a court in its discretion may require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in the suit, having due regard to
the merits and good faith of the claims or defenses made by the party litigant.
This Section does not apply to a suit by the Trustee, a suit by a Holder of a
Note pursuant to Section 6.07 hereof, or a suit by Holders of more than 10% in
principal amount of the then outstanding Notes.
ARTICLE 7.
TRUSTEE
Section 7.01. Duties of Trustee.
(a) If an Event of Default has occurred and is continuing, the Trustee
shall exercise such of the rights and powers vested in it by this Indenture, and
use the same degree of care and skill in its exercise, as a prudent man would
exercise or use under the circumstances in the conduct of his own affairs.
(b) Except during the continuance of an Event of Default:
(i) the duties of the Trustee shall be determined solely by the express
provisions of this Indenture or the TIA and the Trustee need perform only
those duties that are specifically set forth in this Indenture or the TIA and
no others, and no implied covenants or obligations shall be read into this
Indenture against the Trustee; and
(ii) in the absence of bad faith on its part, the Trustee may conclusively
rely, as to the truth of the statements and the correctness of the opinions
expressed therein, upon certificates or opinions furnished to the Trustee and
conforming to the requirements of this Indenture. However, the Trustee shall
examine the certificates and opinions to determine whether or not they conform
to the requirements of this Indenture.
(c) The Trustee may not be relieved from liabilities for its own negligent
action, its own negligent failure to act, its own bad faith or its own willful
misconduct, except that:
(i) this paragraph does not limit the effect of paragraph (b) of this
Section;
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(ii) the Trustee shall not be liable for any error of judgment made in
good faith by a Responsible Officer, unless it is proved that the Trustee was
negligent in ascertaining the pertinent facts; and
(iii) the Trustee shall not be liable with respect to any action it takes
or omits to take in good faith in accordance with a direction received by it
pursuant to Section 6.05 hereof.
(d) Whether or not therein expressly so provided, every provision of
this Indenture that in any way relates to the Trustee is subject to paragraphs
(a), (b), and (c) of this Section.
(e) No provision of this Indenture shall require the Trustee to expend
or risk its own funds or incur any liability. The Trustee shall be under no
obligation to exercise any of its rights and powers under this Indenture at the
request of any Holders, unless such Holders shall have offered to the Trustee
security and indemnity reasonably satisfactory to it against any loss, liability
or expense.
(f) The Trustee shall not be liable for interest on any money received
by it except as the Trustee may agree in writing with the Company. Money held in
trust by the Trustee need not be segregated from other funds except to the
extent required by law.
Section 7.02. Rights of Trustee.
(a) The Trustee may conclusively rely upon any document believed by it
to be genuine and to have been signed or presented by the proper Person. The
Trustee need not investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may require an
Officers' Certificate or an Opinion of Counsel or both. The Trustee shall not
be liable for any action it takes or omits to take in good faith in reliance on
such Officers' Certificate or Opinion of Counsel. The Trustee may consult with
counsel and the written advice of such counsel or any Opinion of Counsel shall
be full and complete authorization and protection from liability in respect of
any action taken, suffered or omitted by it hereunder in good faith and in
reliance thereon.
(c) The Trustee may act through its attorneys and agents and shall not
be responsible for the willful misconduct or negligence of any agent appointed
with due care.
(d) The Trustee shall not be liable for any action it takes or omits to
take in good faith that it believes to be authorized or within the rights or
powers conferred upon it by this Indenture provided that the Trustee's conduct
does not constitute negligence or willful misconduct.
(e) Unless otherwise specifically provided in this Indenture, any
demand, request, direction or notice from the Company shall be sufficient if
signed by an Officer of the Company.
(f) The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction of
any of the Holders unless such Holders shall have offered to the Trustee
security reasonable to it or indemnity against the costs, expenses and
liabilities that might be incurred by it in compliance with such request or
direction.
(g) Except for (i) a default under Section 6.01(a) or (b) hereof, or
(ii) any other event of which the Trustee has "actual knowledge" and which
event, with the giving of notice or the passage of
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<PAGE>
time or both, would constitute an Event of Default under this Indenture, the
Trustee shall not be deemed to have notice of any Default of Event of Default
unless specifically notified in writing of such event by the Company or any
Holder.
(h) The Trustee shall not be required to give any bond or surety in
respect of the performance of its powers and duties hereunder.
(i) The permissive rights of the Trustee to do things enumerated in this
Indenture shall not be construed as a duty.
Section 7.03. Individual Rights of Trustee.
The Trustee in its individual or any other capacity may become the
owner or pledgee of Notes and may otherwise deal with the Company or any
Affiliate of the Company with the same rights it would have if it were not
Trustee. However, in the event that the Trustee acquires any conflicting
interest it must eliminate such conflict within 90 days, apply to the SEC for
permission to continue as trustee or resign. Any Agent may do the same with
like rights and duties. The Trustee is also subject to Sections 7.10 and 7.11
hereof.
Section 7.04. Trustee's Disclaimer.
The Trustee shall not be responsible for and makes no representation
as to the validity or adequacy of this Indenture or the Notes, it shall not be
accountable for the Company's use of the proceeds from the Notes or any money
paid to the Company or upon the Company's direction under any provision of this
Indenture, it shall not be responsible for the use or application of any money
received by any Paying Agent other than the Trustee, and it shall not be
responsible for any statement or recital herein or any statement in the Notes or
any other document in connection with the sale of the Notes or pursuant to this
Indenture other than its certificate of authentication.
Section 7.05. Notice of Defaults.
If a Default or Event of Default occurs and is continuing and if it is
known to the Trustee, the Trustee shall mail to Holders of Notes a notice of the
Default or Event of Default within 90 days after it occurs. Except in the case
of a Default or Event of Default in payment of principal of, premium, if any, or
interest on any Note, the Trustee may withhold the notice if and so long as a
committee of its Responsible Officers in good faith determines that withholding
the notice is in the interests of the Holders of the Notes.
Section 7.06. Reports by Trustee to Holders of the Notes.
Within 60 days after each May 15 beginning with the May 15 following
the date of this Indenture, and for so long as Notes remain outstanding, the
Trustee shall mail to the Holders of the Notes a brief report dated as of such
reporting date that complies with TIA (S) 313(a) (but if no event described in
TIA (S) 313(a) has occurred within the twelve months preceding the reporting
date, no report need be transmitted). The Trustee also shall comply with TIA
(S) 313(b)(2). The Trustee shall also transmit by mail all reports as required
by TIA (S) 313(c).
A copy of each report at the time of its mailing to the Holders of
Notes shall be mailed to the Company and filed with the SEC and each stock
exchange on which the Notes are listed in
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accordance with TIA (S) 313(d). The Company shall promptly notify the Trustee
when the Notes are listed on any stock exchange.
Section 7.07. Compensation and Indemnity.
The Company shall pay to the Trustee from time to time, and the
Trustee shall be entitled to, reasonable compensation for its acceptance of this
Indenture and services hereunder. The Trustee's compensation shall not be
limited by any law on compensation of a trustee of an express trust. The
Company shall reimburse the Trustee promptly upon request for all reasonable
disbursements, advances and expenses incurred or made by it in addition to the
compensation for its services. Such expenses shall include the reasonable
compensation, disbursements and expenses of the Trustee's agents and counsel.
The Company shall indemnify the Trustee against any and all losses,
liabilities or expenses incurred by it arising out of or in connection with the
acceptance or administration of its duties under this Indenture, including the
costs and expenses of enforcing this Indenture against the Company (including
this Section 7.07) and defending itself against or investigating any claim
(whether asserted by the Company or any Holder or any other Person) or liability
in connection with the exercise or performance of any of its powers or duties
hereunder, except to the extent any such loss, liability or expense may be
attributable to its negligence, willful misconduct or bad faith. The Trustee
shall notify the Company promptly of any claim for which it may seek indemnity.
Failure by the Trustee to so notify the Company shall not relieve the Company of
its obligations hereunder. The Company shall defend the claim and the Trustee
shall cooperate in the defense. The Trustee may have separate counsel and the
Company shall pay the reasonable fees and expenses of such counsel, not to
exceed one law firm. The Company need not pay for any settlement made without
its consent, which consent shall not be unreasonably withheld.
The obligations of the Company under this Section 7.07 shall survive
the resignation or removal of the Trustee and the satisfaction and discharge of
this Indenture.
To secure the Company's payment obligations in this Section, the
Trustee shall have a Lien prior to the Notes on all money or property held or
collected by the Trustee, except that held in trust to pay principal and
interest on particular Notes. Such Lien shall survive the satisfaction and
discharge of this Indenture.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 6.01(g) or (h) hereof occurs, the expenses and the
compensation for the services (including the fees and expenses of its agents and
counsel) are intended to constitute expenses of administration under any
Bankruptcy Law.
The Trustee shall comply with the provisions of TIA (S) 313(b)(2) to
the extent applicable.
Section 7.08. Replacement of Trustee.
A resignation or removal of the Trustee and appointment of a successor
Trustee shall become effective only upon the successor Trustee's acceptance of
appointment as provided in this Section.
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The Trustee may resign in writing at any time and be discharged from
the trust hereby created by so notifying the Company. The Holders of Notes of a
majority in principal amount of the then outstanding Notes may remove the
Trustee by so notifying the Trustee and the Company in writing. The Company may
remove the Trustee if:
(a) the Trustee fails to comply with Section 7.10 hereof;
(b) the Trustee is adjudged a bankrupt or an insolvent or an order for
relief is entered with respect to the Trustee under any Bankruptcy Law;
(c) a custodian or public officer takes charge of the Trustee or its
property; or
(d) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Company shall promptly appoint a successor
Trustee. Within one year after the successor Trustee takes office, the Holders
of a majority in principal amount of the then outstanding Notes may appoint a
successor Trustee to replace the successor Trustee appointed by the Company.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company, or
the Holders of Notes of at least 10% in principal amount of the then outstanding
Notes may petition any court of competent jurisdiction for the appointment of a
successor Trustee.
If the Trustee, after written request by any Holder of a Note who has
been a Holder of a Note for at least six months, fails to comply with Section
7.10, such Holder of a Note may petition any court of competent jurisdiction for
the removal of the Trustee and the appointment of a successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Thereupon, the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. The successor Trustee shall mail a notice of its
succession to Holders of the Notes. The retiring Trustee shall promptly
transfer all property held by it as Trustee to the successor Trustee, provided
all sums owing to the Trustee hereunder have been paid and subject to the Lien
provided for in Section 7.07 hereof. Notwithstanding replacement of the Trustee
pursuant to this Section 7.08, the Company's obligations under Section 7.07
hereof shall continue for the benefit of the retiring Trustee.
Section 7.09. Successor Trustee by Merger, etc.
If the Trustee consolidates, merges or converts into, or transfers all
or substantially all of its corporate trust business to, another corporation,
the successor corporation without any further act shall be the successor
Trustee.
Section 7.10. Eligibility; Disqualification.
There shall at all times be a Trustee hereunder that is a corporation
organized and doing business under the laws of the United States of America or
of any state thereof that is authorized under such laws to exercise corporate
trustee power, that is subject to supervision or examination by federal or
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state authorities and that has a combined capital and surplus of at least $50
million as set forth in its most recent published annual report of condition.
This Indenture shall always have a Trustee who satisfies the
requirements of TIA (S) 310(a)(1), (2) and (5). The Trustee is subject to TIA
(S) 310(b).
Section 7.11. Preferential Collection of Claims Against Company.
The Trustee is subject to TIA (S) 311(a), excluding any creditor
relationship listed in TIA (S) 311(b). A Trustee who has resigned or been
removed shall be subject to TIA (S) 311(a) to the extent indicated therein.
ARTICLE 8.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
Section 8.01. Option to Effect Legal Defeasance or Covenant Defeasance.
The Company may, at the option of its Board of Directors evidenced by
a resolution set forth in an Officers' Certificate, at any time, elect to have
either Section 8.02 or 8.03 hereof be applied to all outstanding Notes and
Subsidiary Guarantees upon compliance with the conditions set forth below in
this Article Eight.
Section 8.02. Legal Defeasance and Discharge.
Upon the Company's exercise under Section 8.01 hereof of the option
applicable to this Section 8.02, the Company and its Subsidiaries shall,
subject to the satisfaction of the conditions set forth in Section 8.04 hereof,
be deemed to have been discharged from their respective obligations with respect
to all outstanding Notes on the date the conditions set forth below are
satisfied (hereinafter, "Legal Defeasance"). For this purpose, Legal Defeasance
means that the Company shall be deemed to have paid and discharged the entire
Indebtedness represented by the outstanding Notes, which shall thereafter be
deemed to be "outstanding" only for the purposes of Section 8.05 hereof and the
other Sections of this Indenture referred to in (a) and (b) below, and to have
satisfied all its other obligations under such Notes and this Indenture (and the
Trustee, on demand of and at the expense of the Company, shall execute proper
instruments acknowledging the same), except for the following provisions which
shall survive until otherwise terminated or discharged hereunder: (a) the
rights of Holders of outstanding Notes to receive payments in respect of the
principal of and premium, interest and Liquidated Damages, if any, on such Notes
when such payments are due, from the trust fund described in Section 8.04
hereof, (b) the Company's obligations with respect to such Notes under Sections
2.06, 2.07, 2.10 and 4.02 hereof, (c) the rights, powers, trusts, duties and
immunities of the Trustee hereunder and the Company's obligations in connection
therewith and (d) the Legal Defeasance provisions of this Article Eight.
Subject to compliance with this Article Eight, the Company may exercise its
option under this Section 8.02 notwithstanding the prior exercise of its option
under Section 8.03 hereof.
Section 8.03. Covenant Defeasance.
Upon the Company's exercise under Section 8.01 hereof of the option
applicable to this Section 8.03, the Company shall, subject to the satisfaction
of the conditions set forth in Section 8.04 hereof, be released from its
obligations under the covenants contained in Sections 4.03, 4.04, 4.05, 4.07,
4.08, 4.09, 4.10, 4.11, 4.12, 4.13, 4.15, 4.16, 4.17, 4.18, 4.19 and 10.04 and
Article 5 hereof with respect
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to the outstanding Notes on and after the date the conditions set forth in
Section 8.04 are satisfied (hereinafter, "Covenant Defeasance"), and the Notes
shall thereafter be deemed not "outstanding" for the purposes of any direction,
waiver, consent or declaration or act of Holders (and the consequences of any
thereof) in connection with such covenants, but shall continue to be deemed
"outstanding" for all other purposes hereunder (it being understood that such
Notes shall not be deemed outstanding for accounting purposes). For this
purpose, Covenant Defeasance means that, with respect to the outstanding Notes,
the Company and its Subsidiaries may omit to comply with and shall have no
liability in respect of any term, condition or limitation set forth in any such
covenant, whether directly or indirectly, by reason of any reference elsewhere
herein to any such covenant or by reason of any reference in any such covenant
to any other provision herein or in any other document and such omission to
comply shall not constitute a Default or an Event of Default under Section 6.01
hereof, but, except as specified above, the remainder of this Indenture and such
Notes shall be unaffected thereby. In addition, upon the Company's exercise
under Section 8.01 hereof of the option applicable to this Section 8.03 hereof,
subject to the satisfaction of the conditions set forth in Section 8.04 hereof,
Sections 6.01(d) through 6.01(f) hereof shall not constitute Events of Default.
Section 8.04. Conditions to Legal or Covenant Defeasance.
The following shall be the conditions to the application of either
Section 8.02 or 8.03 hereof to the outstanding Notes:
In order to exercise either Legal Defeasance or Covenant Defeasance:
(a) the Company must irrevocably deposit with the Trustee, in trust, for
the benefit of the Holders, cash in United States dollars, non-callable
Government Securities, or a combination thereof, in such amounts as will be
sufficient, in the opinion of a nationally recognized firm of independent public
accountants, to pay the principal of and premium, interest and Liquidated
Damages, if any, on the outstanding Notes on the stated maturity or on the
applicable redemption date, as the case may be, and the Company must specify
whether the Notes are being defeased to maturity or to a particular redemption
date;
(b) in the case of an election of Legal Defeasance under Section 8.02
hereof, the Company shall have delivered to the Trustee an Opinion of Counsel in
the United States reasonably acceptable to the Trustee confirming that (i) the
Company has received from, or there has been published by, the Internal Revenue
Service a ruling or (ii) since the date of this Indenture, there has been a
change in the applicable federal income tax law, in either case to the effect
that, and based thereon such Opinion of Counsel shall confirm that, the Holders
of the outstanding Notes will not recognize income, gain or loss for federal
income tax purposes as a result of such Legal Defeasance and will be subject to
federal income tax on the same amounts, in the same manner and at the same times
as would have been the case if such Legal Defeasance had not occurred;
(c) in the case of an election of Covenant Defeasance under Section 8.03
hereof, the Company shall have delivered to the Trustee an Opinion of Counsel in
the United States reasonably acceptable to the Trustee confirming that the
Holders of the outstanding Notes will not recognize income, gain or loss for
federal income tax purposes as a result of such Covenant Defeasance and will be
subject to federal income tax on the same amounts, in the same manner and at the
same times as would have been the case if such Covenant Defeasance had not
occurred;
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(d) no Default or Event of Default shall have occurred and be continuing
on the date of such deposit (other than a Default or Event of Default resulting
from the borrowing of funds to be applied to such deposit) or insofar as
Sections 6.01(j) or 6.01(k) hereof are concerned, at any time in the period
ending on the 91st day after the date of deposit;
(e) such Legal Defeasance or Covenant Defeasance shall not result in a
breach or violation of, or constitute a default under, any material agreement or
instrument (other than this Indenture) to which the Company or any of its
Subsidiaries is a party or by which the Company or any of its Subsidiaries is
bound;
(f) the Company shall have delivered to the Trustee an Opinion of Counsel
(which may be subject to customary exceptions) to the effect that on the 91st
day following the deposit, the trust funds will not be subject to the effect of
any applicable bankruptcy, insolvency, reorganization or similar laws affecting
creditors' rights generally;
(g) the Company shall have delivered to the Trustee an Officers'
Certificate stating that the deposit was not made by the Company with the intent
of preferring the Holders over any other creditors of the Company or with the
intent of defeating, hindering, delaying or defrauding any other creditors of
the Company or others; and
(h) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent provided for or relating to the Legal Defeasance or the Covenant
Defeasance have been complied with.
Section 8.05. Deposited Money and Government Securities to be Held in Trust;
Other Miscellaneous Provisions.
Subject to Section 8.06 hereof, all money and non-callable Government
Securities (including the proceeds thereof) deposited with the Trustee (or other
qualifying trustee, collectively for purposes of this Section 8.05, the
"Trustee") pursuant to Section 8.04 hereof in respect of the outstanding Notes
shall be held in trust and applied by the Trustee, in accordance with the
provisions of such Notes and this Indenture, to the payment, either directly or
through any Paying Agent (including the Company acting as Paying Agent) as the
Trustee may determine, to the Holders of such Notes of all sums due and to
become due thereon in respect of principal, premium, if any, and interest, but
such money need not be segregated from other funds except to the extent required
by law.
The Company shall pay and indemnify the Trustee against any tax, fee
or other charge imposed on or assessed against the cash or non-callable
Government Securities deposited pursuant to Section 8.04 hereof or the principal
and interest received in respect thereof other than any such tax, fee or other
charge which by law is for the account of the Holders of the outstanding Notes.
Anything in this Article Eight to the contrary notwithstanding, the
Trustee shall deliver or pay to the Company from time to time upon the request
of the Company any money or non-callable Government Securities held by it as
provided in Section 8.04 hereof which, in the opinion of a nationally recognized
firm of independent public accountants expressed in a written certification
thereof delivered to the Trustee (which may be the opinion delivered under
Section 8.04(a) hereof), are in excess of the amount thereof that would then be
required to be deposited to effect an equivalent Legal Defeasance or Covenant
Defeasance.
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Section 8.06. Repayment to Company.
Any money deposited with the Trustee or any Paying Agent, or then held
by the Company, in trust for the payment of the principal of, premium, if any,
or interest on any Note and remaining unclaimed for two years after such
principal, and premium, if any, or interest has become due and payable shall be
paid to the Company on its request or (if then held by the Company) shall be
discharged from such trust; and the Holder of such Note shall thereafter, as a
secured creditor, look only to the Company for payment thereof, and all
responsibility and liability of the Trustee or such Paying Agent with respect to
such trust money, and all liability of the Company as trustee thereof, shall
thereupon cease; provided, however, that the Trustee or such Paying Agent,
before being required to make any such repayment, may at the expense of the
Company cause to be published once, in the New York Times and The Wall Street
Journal (national edition), notice that such money remains unclaimed and that,
after a date specified therein, which shall not be less than 30 days from the
date of such notification or publication, any unclaimed balance of such money
then remaining will be repaid to the Company.
Section 8.07. Reinstatement.
If the Trustee or Paying Agent is unable to apply any United States
dollars or non-callable Government Securities in accordance with Section 8.02 or
8.03 hereof, as the case may be, by reason of any order or judgment of any court
or governmental authority enjoining, restraining or otherwise prohibiting such
application, then the Company's obligations under this Indenture and the Notes
shall be revived and reinstated as though no deposit had occurred pursuant to
Section 8.02 or 8.03 hereof until such time as the Trustee or Paying Agent is
permitted to apply all such money in accordance with Section 8.02 or 8.03
hereof, as the case may be; provided, however, that, if the Company makes any
payment of principal of, premium, if any, or interest on any Note following the
reinstatement of its obligations, the Company shall be subrogated to the rights
of the Holders of such Notes to receive such payment from the money held by the
Trustee or Paying Agent.
ARTICLE 9.
AMENDMENT, SUPPLEMENT AND WAIVER
Section 9.01. Without Consent of Holders of Notes.
Notwithstanding Section 9.02 of this Indenture, the Company, the
Subsidiary Guarantors and the Trustee may amend or supplement this Indenture,
the Subsidiary Guarantees or the Notes without the consent of any Holder of a
Note:
(a) to cure any ambiguity, defect or inconsistency;
(b) to provide for uncertificated Notes in addition to or in place of
certificated Notes;
(c) to provide for the assumption of the Company's obligations to the
Holders of the Notes by a successor to the Company pursuant to Article 5 hereof;
(d) to make any change that would provide any additional rights or
benefits to the Holders of the Notes or that does not adversely affect the legal
rights hereunder of any Holder of the Notes;
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(e) to comply with requirements of the SEC in order to effect or maintain
the qualification of this Indenture under the TIA;
(f) to allow any Subsidiary Guarantor to execute a supplemental indenture
and/or a Subsidiary Guarantee with respect to the Notes.
Upon the request of the Company accompanied by a resolution of its
Board of Directors authorizing the execution of any such amended or supplemental
indenture, and upon receipt by the Trustee of the documents described in Section
7.02 hereof, the Trustee shall join with the Company and the Subsidiary
Guarantors in the execution of any amended or supplemental indenture authorized
or permitted by the terms of this Indenture and to make any further appropriate
agreements and stipulations that may be therein contained, but the Trustee shall
not be obligated to enter into such amended or supplemental indenture that
affects its own rights, duties or immunities under this Indenture or otherwise.
Section 9.02. With Consent of Holders of Notes.
Except as provided below in this Section 9.02, the Company and the
Trustee may amend or supplement this Indenture (including Section 3.09, 4.10 and
4.15 hereof), the Subsidiary Guarantees and the Notes with the consent of the
Holders of at least a majority in principal amount of the Notes then outstanding
voting as a single class (including consents obtained in connection with a
tender offer or exchange offer for, or purchase of, the Notes), and, subject to
Sections 6.04 and 6.07 hereof, any existing Default or Event of Default (other
than a Default or Event of Default in the payment of the principal of, premium,
if any, or interest on the Notes, except a payment default resulting from an
acceleration that has been rescinded) or compliance with any provision of this
Indenture, the Subsidiary Guarantees or the Notes may be waived with the consent
of the Holders of a majority in principal amount of the then outstanding Notes
voting as a single class (including consents obtained in connection with a
tender offer or exchange offer for, or purchase of, the Notes).
Upon the request of the Company accompanied by a resolution of its
Board of Directors authorizing the execution of any such amended or supplemental
indenture, and upon the filing with the Trustee of evidence satisfactory to the
Trustee of the consent of the Holders of Notes as aforesaid, and upon receipt by
the Trustee of the documents described in Section 7.02 hereof, the Trustee shall
join with the Company and the Subsidiary Guarantors in the execution of such
amended or supplemental indenture unless such amended or supplemental indenture
directly affects the Trustee's own rights, duties or immunities under this
Indenture or otherwise, in which case the Trustee may in its discretion, but
shall not be obligated to, enter into such amended or supplemental indenture.
It shall not be necessary for the consent of the Holders of Notes
under this Section 9.02 to approve the particular form of any proposed amendment
or waiver, but it shall be sufficient if such consent approves the substance
thereof.
After an amendment, supplement or waiver under this Section becomes
effective, the Company shall mail to the Holders of Notes affected thereby a
notice briefly describing the amendment, supplement or waiver. Any failure of
the Company to mail such notice, or any defect therein, shall not, however, in
any way impair or affect the validity of any such amended or supplemental
indenture or waiver. Subject to Sections 6.04 and 6.07 hereof, the Holders of a
majority in aggregate principal amount of the Notes then outstanding voting as a
single class may waive compliance in a particular
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instance by the Company with any provision of this Indenture or the Notes.
However, without the consent of each Holder affected, an amendment or waiver
under this Section 9.02 may not (with respect to any Notes held by a non-
consenting Holder):
(a) reduce the principal amount of Notes whose Holders must consent to an
amendment, supplement or waiver;
(b) reduce the principal of or change the fixed maturity of any Note or
alter the provisions with respect to the redemption of the Notes except as
provided above with respect to Sections 3.09, 4.10 and 4.15 hereof;
(c) reduce the rate of or change the time for payment of interest on any
Note;
(d) waive a Default or Event of Default in the payment of principal of or
premium, if any, or interest on the Notes (except a rescission of acceleration
of the Notes by the Holders of at least a majority in aggregate principal amount
of the Notes and a waiver of the payment default that resulted from such
acceleration);
(e) make any Note payable in money other than that stated in the Notes;
(f) make any change in the provisions of this Indenture relating to waivers
of past Defaults or the rights of Holders of Notes to receive payments of
principal of or premium, if any, interest or Liquidated Damages, if any, on the
Notes;
(g) waive a redemption payment with respect to any Note (other than a
payment required by Sections 4.10 or 4.15 hereof);
(h) amend the Pledge Agreement in a manner that adversely affects the
Holders; or
(i) make any change in the foregoing amendment and waiver provisions.
Section 9.03. Compliance with Trust Indenture Act.
Every amendment or supplement to this Indenture, the Notes or the
Subsidiary Guarantees shall be set forth in a amended or supplemental indenture
that complies with the TIA as then in effect.
Section 9.04. Revocation and Effect of Consents.
Until an amendment, supplement or waiver becomes effective, a consent
to it by a Holder of a Note is a continuing consent by the Holder of a Note and
every subsequent Holder of a Note or portion of a Note that evidences the same
debt as the consenting Holder's Note, even if notation of the consent is not
made on any Note. However, any such Holder of a Note or subsequent Holder of a
Note may revoke the consent as to its Note if the Trustee receives written
notice of revocation before the date the waiver, supplement or amendment becomes
effective. An amendment, supplement or waiver becomes effective in accordance
with its terms and thereafter binds every Holder.
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Section 9.05. Notation on or Exchange of Notes.
The Trustee may place an appropriate notation about an amendment,
supplement or waiver on any Note thereafter authenticated. The Company in
exchange for all Notes may issue and the Trustee shall, upon receipt of an
Authentication Order, authenticate new Notes that reflect the amendment,
supplement or waiver.
Failure to make the appropriate notation or issue a new Note shall not
affect the validity and effect of such amendment, supplement or waiver.
Section 9.06. Trustee to Sign Amendments, etc.
The Trustee shall sign any amended or supplemental indenture
authorized pursuant to this Article Nine if the amendment or supplement does not
adversely affect the rights, duties, liabilities or immunities of the Trustee.
The Company may not sign an amendment or supplemental indenture until the Board
of Directors approves it. In executing any amended or supplemental indenture,
the Trustee shall be entitled to receive and (subject to Section 7.01 hereof)
shall be fully protected in relying upon, in addition to the documents required
by Section 11.04 hereof, an Officer's Certificate and an Opinion of Counsel
stating that the execution of such amended or supplemental indenture is
authorized or permitted by this Indenture.
ARTICLE 10.
SUBSIDIARY GUARANTEES
Section 10.01. Subsidiary Guarantees.
Subject to this Article 10, each of the Subsidiary Guarantors hereby,
jointly and severally, unconditionally guarantees to each Holder of a Note
authenticated and delivered by the Trustee and to the Trustee and its successors
and assigns, irrespective of the validity and enforceability of this Indenture,
the Notes or the obligations of the Company hereunder or thereunder, that: (a)
the principal of and interest on the Notes will be promptly paid in full when
due, whether at maturity, by acceleration, redemption or otherwise, and interest
on the overdue principal of and interest on the Notes, if any, if lawful, and
all other obligations of the Company to the Holders or the Trustee hereunder or
thereunder will be promptly paid in full or performed, all in accordance with
the terms hereof and thereof; and (b) in case of any extension of time of
payment or renewal of any Notes or any of such other obligations, that same will
be promptly paid in full when due or performed in accordance with the terms of
the extension or renewal, whether at stated maturity, by acceleration or
otherwise. Failing payment when due of any amount so guaranteed or any
performance so guaranteed for whatever reason, the Subsidiary Guarantors shall
be jointly and severally obligated to pay the same immediately. Each Subsidiary
Guarantor agrees that this is a guarantee of payment and not a guarantee of
collection.
The Subsidiary Guarantors hereby agree that their obligations
hereunder shall be unconditional, irrespective of the validity, regularity or
enforceability of the Notes or this Indenture, the absence of any action to
enforce the same, any waiver or consent by any Holder of the Notes with respect
to any provisions hereof or thereof, the recovery of any judgment against the
Company, any action to enforce the same or any other circumstance which might
otherwise constitute a legal or equitable discharge or defense of a guarantor.
Each Subsidiary Guarantor hereby waives diligence, presentment, demand of
payment, filing of claims with a court in the event of insolvency or bankruptcy
of the Company, any right to require a proceeding first against the Company,
protest, notice and all demands
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whatsoever and covenants that its Subsidiary Guarantee shall not be discharged
except by complete performance of the obligations contained in the Notes and
this Indenture.
If any Holder or the Trustee is required by any court or otherwise to
return to the Company, the Subsidiary Guarantors or any custodian, trustee,
liquidator or other similar official acting in relation to either the Company or
the Subsidiary Guarantors, any amount paid by either to the Trustee or such
Holder, the Subsidiary Guarantees, to the extent theretofore discharged, shall
be reinstated in full force and effect.
Each Subsidiary Guarantor agrees that it shall not be entitled to any
right of subrogation in relation to the Holders in respect of any obligations
guaranteed hereby until payment in full of all obligations guaranteed hereby.
Each Subsidiary Guarantor further agrees that, as between the Subsidiary
Guarantors, on the one hand, and the Holders and the Trustee, on the other hand,
(x) the maturity of the obligations guaranteed hereby may be accelerated as
provided in Article 6 hereof for the purposes of the Subsidiary Guarantees,
notwithstanding any stay, injunction or other prohibition preventing such
acceleration in respect of the obligations guaranteed hereby, and (y) in the
event of any declaration of acceleration of such obligations as provided in
Article 6 hereof, such obligations (whether or not due and payable) shall
forthwith become due and payable by the Subsidiary Guarantors for the purpose of
the Subsidiary Guarantee. The Subsidiary Guarantors shall have the right to seek
contribution from any non-paying Subsidiary Guarantor so long as the exercise of
such right does not impair the rights of the Holders under the Subsidiary
Guarantees.
Section 10.02. Limitation on Subsidiary Guarantor Liability.
Each Subsidiary Guarantor, and by its acceptance of Notes, each
Holder, hereby confirms that it is the intention of all such parties that the
Subsidiary Guarantee of such Subsidiary Guarantor not constitute a fraudulent
transfer or conveyance for purposes of Bankruptcy Law, the Uniform Fraudulent
Conveyance Act, the Uniform Fraudulent Transfer Act or any similar federal or
state law to the extent applicable to any Subsidiary Guarantee. To effectuate
the foregoing intention, the Trustee, the Holders and the Guarantors hereby
irrevocably agree that the obligations of such Subsidiary Guarantor under its
Subsidiary Guarantee and this Article 10 shall be limited to the lesser of (i)
the aggregate amount of the Obligations of the Company under the Notes and this
Indenture and (ii) the maximum amount as will, after giving effect to such
maximum amount and all other contingent and fixed liabilities of such Subsidiary
Guarantor that are relevant under such laws, and after giving effect to any
collections from, rights to receive contribution from or payments made by or on
behalf of any other Subsidiary Guarantor in respect of the obligations of such
other Subsidiary Guarantor under this Article 10, result in the obligations of
such Subsidiary Guarantor under its Subsidiary Guarantee not constituting a
fraudulent transfer or conveyance.
Section 10.03. Execution and Delivery of Subsidiary Guarantee.
To evidence its Subsidiary Guarantee set forth in Section 10.01, each
Subsidiary Guarantor hereby agrees that a notation of such Subsidiary Guarantee
substantially in the form included in Exhibit E shall be endorsed by an Officer
of such Subsidiary Guarantor on each Note authenticated and delivered by the
Trustee and that this Indenture shall be executed on behalf of such Subsidiary
Guarantor by its President or one of its Vice Presidents.
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Each Subsidiary Guarantor hereby agrees that its Subsidiary Guarantee
set forth in Section 10.01 shall remain in full force and effect notwithstanding
any failure to endorse on each Note a notation of such Subsidiary Guarantee.
If an Officer whose signature is on this Indenture or on the
Subsidiary Guarantee no longer holds that office at the time the Trustee
authenticates the Note on which a Subsidiary Guarantee is endorsed, the
Subsidiary Guarantee shall be valid nevertheless.
The delivery of any Note by the Trustee, after the authentication
thereof hereunder, shall constitute due delivery of the Subsidiary Guarantee set
forth in this Indenture on behalf of the Subsidiary Guarantors.
In the event that the Company creates or acquires any new Subsidiaries
subsequent to the date of this Indenture, if required by Section 4.19 hereof,
the Company shall cause such Subsidiaries to execute supplemental indentures to
this Indenture and Subsidiary Guarantees in accordance with Section 4.19 hereof
and this Article 10, to the extent applicable.
Section 10.04. Subsidiary Guarantors May Consolidate, etc., on Certain Terms.
No Subsidiary Guarantor may consolidate with or merge with or into
(whether or not such Subsidiary Guarantor is the surviving Person) another
corporation, Person or entity whether or not affiliated with such Subsidiary
Guarantor unless:
(a) subject to Section 10.05 hereof, the Person formed by or surviving any
such consolidation or merger (if other than such Subsidiary Guarantor or the
Company) assumes all the obligations of such Subsidiary Guarantor pursuant to a
supplemental indenture in form and substance reasonably satisfactory to the
Trustee, under the Notes, this Indenture, the Pledge Agreement and the
Registration Rights Agreement;
(b) immediately after giving effect to such transaction, no Default or
Event of Default exists; and
(c) except in the case of any such merger or consolidation with the Company
or another Subsidiary Guarantor, the Company would, on a pro forma basis,
immediately after giving effect to such transaction, be permitted to incur at
least $1.00 of additional Indebtedness pursuant to the Debt to Cash Flow Ratio
test set forth in Section 4.09.
In case of any such consolidation, merger, sale or conveyance and upon
the assumption by the successor Person, by supplemental indenture, executed and
delivered to the Trustee and satisfactory in form to the Trustee, of the
Subsidiary Guarantee endorsed upon the Notes and the due and punctual
performance of all of the covenants and conditions of this Indenture to be
performed by the Subsidiary Guarantor, such successor Person shall succeed to
and be substituted for the Subsidiary Guarantor with the same effect as if it
had been named herein as a Subsidiary Guarantor. Such successor Person thereupon
may cause to be signed any or all of the Subsidiary Guarantees to be endorsed
upon all of the Notes issuable hereunder which theretofore shall not have been
signed by the Company and delivered to the Trustee. All the Subsidiary
Guarantees so issued shall in all respects have the same legal rank and benefit
under this Indenture as the Subsidiary Guarantees theretofore and thereafter
issued in accordance with the terms of this Indenture as though all of such
Subsidiary Guarantees had been issued at the date of the execution hereof.
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Except as set forth in Articles 4 and 5 hereof, and notwithstanding
clauses (a) and (b) above, nothing contained in this Indenture or in any of the
Notes shall prevent any consolidation or merger of a Subsidiary Guarantor with
or into the Company or another Subsidiary Guarantor, or shall prevent any sale
or conveyance of the property of a Subsidiary Guarantor as an entirety or
substantially as an entirety to the Company or another Subsidiary Guarantor.
Section 10.05. Releases Following Sale of Assets.
In the event of a sale or other disposition of all of the assets of
any Subsidiary Guarantor, by way of merger, consolidation or otherwise, or a
sale or other disposition of all of the capital stock of any Subsidiary
Guarantor, then such Subsidiary Guarantor (in the event of a sale or other
disposition, by way of merger, consolidation or otherwise, of all of the capital
stock of such Subsidiary Guarantor) or the Person acquiring the property (in the
event of a sale or other disposition of all of the assets of such Subsidiary
Guarantor) will be released and relieved of any obligations under its Subsidiary
Guarantee; provided that the Net Proceeds of such sale or other disposition are
applied in accordance with the applicable provisions of this Indenture,
including without limitation Section 4.10 hereof. Upon delivery by the Company
to the Trustee of an Officers' Certificate and an Opinion of Counsel to the
effect that such sale or other disposition was made by the Company in accordance
with the applicable provisions of this Indenture, including without limitation
Section 4.10 hereof, the Trustee shall execute any documents reasonably required
in order to evidence the release of any Subsidiary Guarantor from its
obligations under its Subsidiary Guarantee.
Any Subsidiary Guarantor not released from its obligations under its
Subsidiary Guarantee shall remain liable for the full amount of principal of and
interest on the Notes and for the other obligations of any Subsidiary Guarantor
under this Indenture as provided in this Article 10.
ARTICLE 11.
MISCELLANEOUS
Section 11.01. Trust Indenture Act Controls.
If any provision of this Indenture limits, qualifies or conflicts with
the duties imposed by TIA (S) 318(c), the imposed duties shall control.
Section 11.02. Notices.
All notices or communications shall be sent as follows:
If to the Company and/or any Subsidiary Guarantor:
OnePoint Communications Corp.
2201 Waukegan Road
Suite E-200
Bannockburn, Illinois 60015
Telecopier No.: (847) 374-1070
Attention: John D. Stavig
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If to the Trustee:
Harris Trust and Savings Bank
311 W. Monroe, 12th Floor
Chicago, Illinois 60606
Telecopier No.: (312) 461-3525
Attention: Judy Bartolini
The Company, any Subsidiary Guarantor or the Trustee, by notice to the
others may designate additional or different addresses for subsequent notices or
communications.
All notices and communications (other than those sent to Holders)
shall be deemed to have been duly given: at the time delivered by hand, if
personally delivered; five Business Days after being deposited in the mail,
postage prepaid, if mailed; when answered back, if telexed; when receipt
acknowledged, if telecopied; and the next Business Day after timely delivery to
the courier, if sent by overnight air courier guaranteeing next day delivery.
Any notice or communication to a Holder shall be mailed by first class
mail, certified or registered, return receipt requested, or by overnight air
courier guaranteeing next day delivery to its address shown on the register kept
by the Registrar. Any notice or communication shall also be so mailed to any
Person described in TIA (S) 313(c), to the extent required by the TIA. Failure
to mail a notice or communication to a Holder or any defect in it shall not
affect its sufficiency with respect to other Holders.
If a notice or communication is mailed in the manner provided above
within the time prescribed, it is duly given, whether or not the addressee
receives it.
If the Company mails a notice or communication to Holders, it shall
mail a copy to the Trustee and each Agent at the same time.
Section 11.03. Communication by Holders of Notes with Other Holders of Notes.
Holders may communicate pursuant to TIA /S/ 312(b) with other Holders
with respect to their rights under this Indenture or the Notes. The Company, the
Trustee, the Registrar and anyone else shall have the protection of TIA (S)
312(c).
Section 11.04. Certificate and Opinion as to Conditions Precedent.
Upon any request or application by the Company or any Subsidiary
Guarantor to the Trustee to take any action under this Indenture, the Company or
such Subsidiary Guarantor shall furnish to the Trustee:
(a) an Officers' Certificate in form and substance reasonably satisfactory
to the Trustee (which shall include the statements set forth in Section 11.05
hereof) stating that, in the opinion of the signers, all conditions precedent
and covenants, if any, provided for in this Indenture relating to the proposed
action have been satisfied; and
(b) an Opinion of Counsel in form and substance reasonably satisfactory to
the Trustee (which shall include the statements set forth in Section 11.05
hereof) stating that, in the opinion of such
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counsel, all such conditions precedent and covenants have been satisfied;
provided, however, that with respect to matters of fact an Opinion of Counsel
may rely on an Officer's Certificate or certificates of public officials.
Section 11.05. Statements Required in Certificate or Opinion.
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture (other than a certificate
provided pursuant to TIA (S) 314(a)(4)) shall comply with the provisions of TIA
(S) 314(e) and shall include:
(a) a statement that the Person making such certificate or opinion has read
such covenant or condition;
(b) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(c) a statement that, in the opinion of such Person, he or she has made
such examination or investigation as is necessary to enable him to express an
informed opinion as to whether or not such covenant or condition has been
satisfied; and
(d) a statement as to whether or not, in the opinion of such Person, such
condition or covenant has been satisfied.
Section 11.06. Rules by Trustee and Agents.
The Trustee may make reasonable rules for action by or at a meeting of
Holders. The Registrar or Paying Agent may make reasonable rules and set
reasonable requirements for its functions.
Section 11.07. No Personal Liability of Directors, Officers, Employees and
Stockholders.
No past, present or future director, officer, employee, incorporator
or stockholder of the Company or any Subsidiary Guarantor, as such, shall have
any liability for any obligations of the Company or such Subsidiary Guarantor
under the Notes, the Subsidiary Guarantees, this Indenture or the Pledge
Agreement or for any claim based on, in respect of, or by reason of, such
obligations or their creation. Each Holder by accepting a Note waives and
releases all such liability. The waiver and release are part of the
consideration for issuance of the Notes. Such waiver may not be effective to
waive liabilities under the federal securities laws and it is the view of the
Commission that such a waiver is against public policy.
Section 11.08. Governing Law.
THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO
CONSTRUE THIS INDENTURE, THE NOTES AND THE SUBSIDIARY GUARANTEES WITHOUT GIVING
EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE
APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
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Section 11.09. No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret any other indenture, loan
or debt agreement of the Company or its Subsidiaries or of any other Person. Any
such indenture, loan or debt agreement may not be used to interpret this
Indenture.
Section 11.10. Successors.
All agreements of the Company and the Subsidiary Guarantors in this
Indenture and the Notes shall bind their successors. All agreements of the
Trustee in this Indenture shall bind its successors.
Section 11.11. Severability.
In case any provision in this Indenture or in the Notes shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
Section 11.12. Counterpart Originals.
The parties may sign any number of copies of this Indenture. Each
signed copy shall be an original, but all of them together represent the same
agreement.
Section 11.13. Table of Contents, Headings, etc.
The Table of Contents, Cross-Reference Table and Headings of the
Articles and Sections of this Indenture have been inserted for convenience of
reference only, are not to be considered a part of this Indenture and shall in
no way modify or restrict any of the terms or provisions hereof.
[Signature Pages Follow]
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Dated as of May 21, 1998
ONEPOINT COMMUNICATIONS CORP.
By: /s/ James A. Otterbeck
---------------------------------
Name:
Title: Chairman and Chief Executive Officer
ONEPOINT COMMUNICATIONS HOLDINGS, LLC
By: ONEPOINT COMMUNICATIONS CORP.,
its Manager
By: /s/ James A. Otterbeck
---------------------------------
Name:
Title: Chairman and Chief Executive Officer
ONEPOINT COMMUNICATIONS - GEORGIA, LLC
By: ONEPOINT COMMUNICATIONS CORP.,
its Manager
By: /s/ James A. Otterbeck
---------------------------------
Name:
Title: Chairman and Chief Executive Officer
ONEPOINT COMMUNICATIONS - ILLINOIS, LLC
By: ONEPOINT COMMUNICATIONS CORP.,
its Manager
By: /s/ James A. Otterbeck
---------------------------------
Name:
Title: Chairman and Chief Executive Officer
<PAGE>
ONEPOINT COMMUNICATIONS - COLORADO, LLC
By: ONEPOINT COMMUNICATIONS CORP.,
its Manager
By: /s/ James A. Otterbeck
---------------------------------
Name:
Title: Chairman and Chief Executive Officer
VIC - RMTS - DC. LLC
By: ONEPOINT COMMUNICATIONS HOLDING, LLC,
its Manager
By: ONEPOINT COMMUNICATIONS CORP.,
its Manager
By: /s/ James A. Otterbeck
----------------------------------
Name:
Title: Chairman and Chief Executive Officer
HARRIS TRUST AND SAVINGS BANK
By: /s/ J. Bartolini
---------------------------------
Name:
Title: Vice President
<PAGE>
EXHIBIT A
(Face of Note)
================================================================================
CUSIP/CINS ______________
14 1/2% [Series A] [Series B] Senior Notes due 2008
No. _____ $____________
ONEPOINT COMMUNICATIONS CORP.
promises to pay to _______________________________________________
or registered assigns,
the principal sum of _____________________________________________
Dollars on _____________, 2008
Interest Payment Dates: ____________ and_____________
Record Dates: ____________ and ____________
Dated: May 21, 1998
ONEPOINT COMMUNICATIONS CORP.
By:________________________________
Name:
Title:
This is one of the Global
Notes referred to in the
within-mentioned Indenture:
HARRIS TRUST AND SAVINGS BANK,
as Trustee
By:_____________________________
================================================================================
A-1
<PAGE>
(Back of Note)
14 1/2% [Series A] [Series B] Senior Notes due 2008
THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE
INDENTURE GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE
BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY
CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY
BE REQUIRED PURSUANT TO SECTION 2.07 OF THE INDENTURE, (II) THIS GLOBAL NOTE MAY
BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.06(a) OF THE
INDENTURE, (III) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR
CANCELLATION PURSUANT TO SECTION 2.11 OF THE INDENTURE AND (IV) THIS GLOBAL NOTE
MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF
THE COMPANY.
THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY
ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE UNITED
STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND THE
SECURITY EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN
THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH
PURCHASER OF THE SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE SELLER
MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE
SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF THE SECURITY
EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE COMPANY THAT (A) SUCH SECURITY
MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (1)(a) TO A PERSON WHO THE
SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN
RULE 144A UNDER THE SECURITIES ACT) (b) IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144A UNDER THE SECURITIES ACT, (c) OUTSIDE THE UNITED
STATES TO A FOREIGN PERSON IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 904
UNDER THE SECURITIES ACT, (d) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" AS
DEFINED IN RULE 501(a)(1), (2), (3) OR (7) OF THE SECURITIES ACT (AN
"INSTITUTIONAL ACCREDITED INVESTOR") IN A TRANSACTION EXEMPT FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OR (e) IN ACCORDANCE WITH
ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, (2)
TO THE COMPANY OR (3) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN
EACH CASE, IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE
UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND (B) THE HOLDER WILL, AND
EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER FROM IT OF THE
SECURITY EVIDENCED HEREBY OF THE RESALE RESTRICTIONS SET FORTH IN (A) ABOVE.
THE NOTES EVIDENCED BY THIS CERTIFICATE ARE INITIALLY ISSUED AS PART
OF AN ISSUANCE OF UNITS, EACH OF WHICH CONSIST OF $1,000 PRINCIPAL AMOUNT OF THE
NOTES AND ONE WARRANT ("WARRANT") INITIALLY ENTITLING THE HOLDER THEREOF TO
PURCHASE 0.635 SHARES, PAR VALUE $0.01 PER SHARE, OF THE COMPANY. PRIOR TO THE
EARLIEST TO OCCUR OF (i) THE DATE THAT IS SIX MONTHS FOLLOWING THE INITIAL SALE
OF THE UNITS, (ii) THE COMMENCEMENT OF AN
A-2
<PAGE>
EXCHANGE OFFER WITH RESPECT TO THE NOTES, (iii) THE DATE OF A SHELF REGISTRATION
STATEMENT WITH RESPECT TO THE NOTES IS DECLARED EFFECTIVE, (iv) A CHANGE OF
CONTROL (AS DEFINED IN THE INDENTURE), OR (v) SUCH DATE AS BEAR, STEARNS & CO.
INC. MAY, IN ITS SOLE DISCRETION, DEEM APPROPRIATE, THE NOTES EVIDENCED BY THIS
CERTIFICATE MAY NOT BE TRANSFERRED OR EXCHANGED SEPARATELY FROM, BUT MAY BE
TRANSFERRED OR EXCHANGED ONLY TOGETHER WITH, THE WARRANTS.
Capitalized terms used herein shall have the meanings assigned to them
in the Indenture referred to below unless otherwise indicated.
1. Interest. OnePoint Communications Corp., a Delaware corporation
(the "Company"), promises to pay interest on the principal amount of this Note
at 14 1/2% per annum from May 21, 1998 until maturity and shall pay the
Liquidated Damages payable pursuant to Section 5 of the Registration Rights
Agreement referred to below. The Company will pay interest and Liquidated
Damages, if any, semi-annually on June 1 and December 1 of each year, or if any
such day is not a Business Day, on the next succeeding Business Day (each an
"Interest Payment Date"). Interest on the Notes will accrue from the most recent
date to which interest has been paid or, if no interest has been paid, from the
date of issuance; provided that if there is no existing Default in the payment
of interest, and if this Note is authenticated between a record date referred to
on the face hereof and the next succeeding Interest Payment Date, interest shall
accrue from such next succeeding Interest Payment Date; provided, further, that
the first Interest Payment Date shall be December 1, 1998. The Company shall pay
interest (including post-petition interest in any proceeding under any
Bankruptcy Law) on overdue principal and premium, if any, from time to time on
demand at a rate that is 1% per annum in excess of the rate then in effect; it
shall pay interest (including post-petition interest in any proceeding under any
Bankruptcy Law) on overdue installments of interest and Liquidated Damages
(without regard to any applicable grace periods) from time to time on demand at
the same rate to the extent lawful. Interest will be computed on the basis of a
360-day year of twelve 30-day months.
2. Method of Payment. The Company will pay interest and Liquidated
Damages, if any, on the Notes (except defaulted interest on each Interest
Payment Date) to the Persons who are registered Holders of Notes at the close of
business on the May 15 or November 15 preceding the Interest Payment Date, even
if such Notes are cancelled after such record date and on or before such
Interest Payment Date, except as provided in Section 2.12 of the Indenture with
respect to defaulted interest. The Notes will be payable as to principal,
premium and Liquidated Damages, if any, and interest at the office or agency of
the Company maintained for such purpose within or without the City and State of
New York, or, at the option of the Company, payment of interest and Liquidated
Damages may be made by check mailed to the Holders at their addresses set forth
in the register of Holders, and provided that payment by wire transfer of
immediately available funds will be required with respect to principal of and
interest, premium and Liquidated Damages on, all Global Notes and all other
Notes the Holders of which shall have provided wire transfer instructions to the
Company or the Paying Agent. Such payment shall be in such coin or currency of
the United States of America as at the time of payment is legal tender for
payment of public and private debts.
3. Paying Agent and Registrar. Initially, Harris Trust and Savings
Bank, the Trustee under the Indenture, will act as Paying Agent and Registrar.
The Company may change any Paying Agent or Registrar without notice to any
Holder. The Company or any of its Subsidiaries may act in any such capacity.
A-3
<PAGE>
4. Indenture. The Company issued the Notes under an Indenture dated
as of May 21, 1998 ("Indenture") among the Company, the Subsidiary Guarantors
(as defined therein) and the Trustee. The terms of the Notes include those
stated in the Indenture and those made part of the Indenture by reference to the
Trust Indenture Act of 1939, as amended (15 U.S. Code (S)(S) 77aaa-77bbbb). The
Notes are subject to all such terms, and Holders are referred to the Indenture
and such Act for a statement of such terms. To the extent any provision of this
Note conflicts with the express provisions of the Indenture, the provisions of
the Indenture shall govern and be controlling. Except as provided in the Pledge
Agreement, the Notes are unsecured obligations of the Company limited to $175.0
million in aggregate principal amount.
5. Optional Redemption.
(a) Except as set forth in subparagraph (b) of this paragraph 5, the
Company shall not have the option to redeem the Notes prior to June 1, 2003.
Thereafter, the Notes will be subject to redemption at any time at the option of
the Company, in whole or in part, upon not less than 30 nor more than 60 days'
notice, at the redemption prices (expressed as percentages of principal amount)
set forth below, plus accrued and unpaid interest and Liquidated Damages, if
any, thereon to the applicable redemption date, if redeemed during the twelve-
month period beginning on June 1 of the years indicated below:
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
2003............................. 107.250
2004............................. 104.833
2005............................. 102.417
2006 and thereafter.............. 100.000%
</TABLE>
(b) Notwithstanding the foregoing, on or prior to June 1, 2001, the
Company may redeem up to 35% of the aggregate principal amount of Notes issued
under the Indenture at a redemption price of 114.500% of the principal amount
thereof, plus accrued and unpaid interest and Liquidated Damages, if any,
thereon to the redemption date, with the net cash proceeds of one or more public
or private offerings of Common Stock generating net cash proceeds to the Company
in excess of $20.0 million; provided that at least 65% of the aggregate
principal amount of Notes issued on the Closing Date remains outstanding
immediately after the occurrence of such redemption.
6. Mandatory Redemption.
The Company shall not be required to make mandatory redemption
payments with respect to the Notes.
7. Repurchase at Option of Holder.
(a) Upon the occurrence of a Change of Control, the Company shall
make an offer to each Holder of Notes to repurchase all or any part (equal to
$1,000 or an integral multiple thereof) of such Holder's Notes pursuant to the
offer described below (the "Change of Control Offer") at an offer price in cash
equal to 101% of the aggregate principal amount thereof, plus accrued and unpaid
interest and Liquidated Damages, if any, thereon to the date of purchase (the
"Change of Control Payment"). Within ten Business Days following any Change of
Control, the Company shall mail a notice to each Holder describing the
transaction or transactions that constitute the Change of Control and offering
to
A-4
<PAGE>
repurchase Notes on the date specified in such notice, which date shall be no
earlier than 30 days and no later than 60 days from the date such notice is
mailed (the "Change of Control Payment Date"), pursuant to the procedures
required by the Indenture and described in such notice. The Company shall comply
with the requirements of Rule 14e-1 under the Exchange Act and any other
securities laws and regulations thereunder to the extent such laws and
regulations are applicable in connection with the repurchase of the Notes as a
result of a Change of Control.
(b) If the Company or a Restricted Subsidiary consummates any Asset
Sales, when the aggregate amount of Excess Proceeds exceeds $5 million, the
Company shall make an offer to all Holders of Notes (an "Asset Sale Offer") to
repurchase the maximum principal amount of Notes that may be purchased out of
the Excess Proceeds, at an offer price in cash in an amount equal to 100% of the
principal amount thereof, plus accrued and unpaid interest and Liquidated
Damages, if any, thereon to the repurchase date, in accordance with the
provisions set forth in Section 3.09 of the Indenture. To the extent that any
Excess Proceeds remain after consummation of an Asset Sale Offer, the Company
may use such Excess Proceeds for any purpose not otherwise prohibited by the
Indenture. If the aggregate principal amount of Notes tendered pursuant to such
Asset Sale Offer exceeds the amount of Excess Proceeds, the Trustee shall select
the Notes to be purchased on a pro rata basis. Holders of Notes that are the
subject of an offer to purchase will receive an Asset Sale Offer from the
Company prior to any related purchase date and may elect to have such Notes
purchased by completing the form entitled "Option of Holder to Elect Purchase"
on the reverse of the Notes.
8. Notice of Redemption. Notice of redemption will be mailed at
least 30 days but not more than 60 days before the redemption date to each
Holder whose Notes are to be redeemed at its registered address. Notes in
denominations larger than $1,000 may be redeemed in part but only in whole
multiples of $1,000, unless all of the Notes held by a Holder are to be
redeemed. On and after the redemption date interest ceases to accrue on Notes or
portions thereof called for redemption.
9. Denominations, Transfer, Exchange. The Notes are in registered
form without coupons in denominations of $1,000 and integral multiples of
$1,000. The transfer of Notes may be registered and Notes may be exchanged as
provided in the Indenture. The Registrar and the Trustee may require a Holder,
among other things, to furnish appropriate endorsements and transfer documents
and the Company may require a Holder to pay any taxes and fees required by law
or permitted by the Indenture. The Company need not exchange or register the
transfer of any Note or portion of a Note selected for redemption, except for
the unredeemed portion of any Note being redeemed in part. Also, the Company
need not exchange or register the transfer of any Notes for a period of 15 days
before a selection of Notes to be redeemed or during the period between a record
date and the corresponding Interest Payment Date.
10. Persons Deemed Owners. The registered Holder of a Note may be
treated as its owner for all purposes.
11. Amendment, Supplement and Waiver. Subject to certain exceptions,
the Indenture, the Subsidiary Guarantees or the Notes may be amended or
supplemented with the consent of the Holders of at least a majority in principal
amount of the then outstanding Notes voting as a single class, and any existing
default or compliance with any provision of the Indenture, the Subsidiary
Guarantees or the Notes may be waived with the consent of the Holders of a
majority in principal amount of the then outstanding Notes voting as a single
class. Without the consent of any Holder of a Note, the Indenture, the
Subsidiary Guarantees or the Notes may be amended or supplemented to cure any
A-5
<PAGE>
ambiguity, defect or inconsistency, to provide for uncertificated Notes in
addition to or in place of certificated Notes, to provide for the assumption of
the Company's or Subsidiary Guarantor's obligations to Holders of the Notes in
case of a merger or consolidation, to make any change that would provide any
additional rights or benefits to the Holders of the Notes or that does not
adversely affect the legal rights under the Indenture of any such Holder, to
comply with the requirements of the Commission in order to effect or maintain
the qualification of the Indenture under the Trust Indenture Act or to allow any
Subsidiary Guarantor to execute a supplemental indenture to the Indenture and/or
a Subsidiary Guarantee with respect to the Notes.
12. Defaults and Remedies. Each of the following constitutes an
Event of Default: (i) default for 30 days in the payment when due of interest
on, or Liquidated Damages with respect to, the Notes; (ii) default in payment
when due of the principal of or premium, if any, on the Notes; (iii) failure by
the Company or any of its Restricted Subsidiaries to comply with Section 4.07,
4.09, 4.10, 4.15 or 5.10 of the Indenture; (iv) failure by the Company or any of
its Restricted Subsidiaries for 30 days after notice to comply with any of its
other agreements in the Indenture or the Notes; (v) default under any mortgage,
indenture or instrument under which there may be issued or by which there may be
secured or evidenced any Indebtedness for money borrowed by the Company or any
of its Restricted Subsidiaries (or the payment of which is guaranteed by the
Company or any of its Restricted Subsidiaries), whether such Indebtedness or
guarantee now exists or is created after the Closing Date, which default (a) is
caused by a failure to pay principal of or premium, if any, or interest on such
Indebtedness prior to the expiration of the grace period provided in such
Indebtedness on the date of such default (a "Payment Default") or (b) results
in the acceleration of such Indebtedness prior to its express maturity and, in
each case, the principal amount of any such Indebtedness, together with the
principal amount of any other such Indebtedness under which there has been a
Payment Default or the maturity of which has been so accelerated, aggregates
$1.5 million or more; (vi) failure by the Company or any of its Restricted
Subsidiaries to pay final judgments (other than any judgment or portion thereof
as to which an insurance carrier rated at least A by Standard & Poor's
Corporation or A2 by Moody's Investors Service, Inc. has accepted liability in
writing) aggregating in excess of $3.0 million, which judgments are not paid,
discharged or stayed for a period of 60 days; (vii) default by the Company in
the performance of any covenant set forth in the Pledge Agreement, or
repudiation by the Company of its obligations under the Pledge Agreement, or the
unenforceability of the Pledge Agreement against the Company or any of its
Restricted Subsidiaries for any reason; (viii) default by any Restricted
Subsidiary of the Company in the performance of any obligation under its
Subsidiary Guarantee, or repudiation by any of Restricted Subsidiary of the
Company of its obligations under its Subsidiary Guarantee, or the
unenforceability of any Subsidiary Guarantee against any Restricted Subsidiary
of the Company for any reason; (ix) the failure for any reason for the Company
to retain all material licenses necessary to conduct its business; and (x)
certain events of bankruptcy or insolvency with respect to the Company or any of
its Restricted Subsidiaries.
If any Event of Default occurs and is continuing, the Trustee or the
holders of at least 25% in principal amount of the then outstanding Notes may
declare all the Notes to be due and payable immediately. Notwithstanding the
foregoing, in the case of an Event of Default arising from certain events of
bankruptcy or insolvency with respect to the Company, any Significant Subsidiary
or any group of Restricted Subsidiaries that, taken together, would constitute a
Significant Subsidiary, all outstanding Notes will become due and payable
without further action or notice. Holders of the Notes may not enforce the
Indenture or the Notes except as provided in the Indenture. Subject to certain
limitations, holders of a majority in principal amount of the then outstanding
Notes may direct the Trustee in its exercise of any trust or power. The Trustee
may withhold from holders of the Notes notice
A-6
<PAGE>
of any continuing Default or Event of Default (except a Default or Event of
Default relating to the payment of principal or interest) if it determines that
withholding notice is in their interest.
In the case of any Event of Default occurring by reason of any willful
action (or inaction) taken (or not taken) by or on behalf of the Company with
the intention of avoiding payment of the premium that the Company would have had
to pay if the Company then had elected to redeem the Notes pursuant to the
optional redemption provisions of the Indenture, an equivalent premium shall
also become and be immediately due and payable to the extent permitted by law
upon the acceleration of the Notes. If an Event of Default occurs prior to June
1, 2003 by reason of any willful action (or inaction) taken (or not taken) by or
on behalf of the Company with the intention of avoiding the prohibition on
redemption of the Notes prior to such date, then the premium specified in the
Indenture shall also become immediately due and payable to the extent permitted
by law upon the acceleration of the Notes.
The holders of a majority in aggregate principal amount of the Notes
then outstanding by notice to the Trustee may on behalf of the holders of all of
the Notes waive any existing Default or Event of Default and its consequences
under the Indenture except a continuing Default or Event of Default in the
payment of interest on, or the principal of, the Notes.
The Company is required to deliver to the Trustee annually a statement
regarding compliance with the Indenture, and the Company is required upon
becoming aware of any Default or Event of Default, to deliver to the Trustee a
statement specifying such Default or Event of Default.
13. Trustee Dealings with Company. The Trustee, in its individual or
any other capacity, may make loans to, accept deposits from, and perform
services for the Company or its Affiliates, and may otherwise deal with the
Company or its Affiliates, as if it were not the Trustee.
14. No Recourse Against Others. A director, officer, employee,
incorporator or stockholder, of the Company, as such, shall not have any
liability for any obligations of the Company under the Notes, any Subsidiary
Guarantee or the Indenture or for any claim based on, in respect of, or by
reason of, such obligations or their creation. Each Holder by accepting a Note
waives and releases all such liability. The waiver and release are part of the
consideration for the issuance of the Notes and the Subsidiary Guarantees. Such
Waiver may not be effective to waive liabilities under the federal securities
laws and it is the view of the Commission that such a waiver is against public
policy.
15. Authentication. This Note shall not be valid until authenticated
by the manual signature of the Trustee or an authenticating agent.
16. Abbreviations. Customary abbreviations may be used in the name of
a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT
(=tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
17. Additional Rights of Holders of Restricted Global Notes and
Restricted Definitive Notes. In addition to the rights provided to Holders of
Notes under the Indenture, Holders of Restricted Global Notes and Restricted
Definitive Notes shall have all the rights set forth in the Registration Rights
Agreement dated as of May 21, 1998, between the Company and the parties named on
the signature pages thereof (the "Registration Rights Agreement").
A-7
<PAGE>
18. CUSIP Numbers. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Company has caused
CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP numbers
in notices of redemption as a convenience to Holders. No representation is made
as to the accuracy of such numbers either as printed on the Notes or as
contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
The Company will furnish to any Holder upon written request and
without charge a copy of the Indenture and/or the Registration Rights Agreement.
Requests may be made to:
OnePoint Communications Corp.
2201 Waukegan Road
Suite E-200
Bannockburn, Illinois 60015
Telecopier No.: (847) 374-1070
Attention: John D. Stavig
A-8
<PAGE>
Assignment Form
To assign this Note, fill in the form below: (I) or (we) assign and transfer
this Note to
- --------------------------------------------------------------------------------
(Insert assignee's soc. sec. or tax I.D. no.)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint ________________________________________________________
to transfer this Note on the books of the Company. The agent may substitute
another to act for him.
Date:___________________
Your Signature:___________________________________
(Sign exactly as your name appears
on the face of this Note)
Signatures must be guaranteed by an "eligible
guarantor institution" meeting the requirements of
the Registrar, which requirements include
membership or participation in the Security
Transfer Agent Medallion Program ("STAMP") or such
other "signature guarantee program" as may be
determined by the Registrar in addition to, or in
substitution for, STAMP, all in accordance with
the Securities Exchange Act of 1934, as amended.
A-9
<PAGE>
Option of Holder to Elect Purchase
If you want to elect to have this Note purchased by the Company
pursuant to Section 4.10 or 4.15 of the Indenture, check the box below:
[_] Section 4.10 [_] Section 4.15
If you want to elect to have only part of the Note purchased by the
Company pursuant to Section 4.10 or Section 4.15 of the Indenture, state the
amount you elect to have purchased: $________
Date: Your Signature:
--------------------- -------------------------------
(Sign exactly as your name
appears on the Note)
Tax Identification No:
------------------------
Signatures must be guaranteed by an "eligible
guarantor institution" meeting the
requirements of the Registrar, which
requirements include membership or
participation in the Security Transfer Agent
Medallion Program ("STAMP") or such other
"signature guarantee program" as may be
determined by the Registrar in addition to, or
in substitution for, STAMP, all in accordance
with the Securities Exchange Act of 1934, as
amended.
A-10
<PAGE>
SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE/1/
The following exchanges of a part of this Global Note for an interest
in another Global Note or for a Definitive Note, or exchanges of a part of
another Global Note or Definitive Note for an interest in this Global Note, have
been made:
<TABLE>
<CAPTION>
Principal Amount
Amount of Amount of increase of
decrease in in Principal this Global Note Signature of
Principal Amount Amount following such authorized officer
of of decrease (or of Trustee or
Date of Exchange this Global Note this Global Note increase) Note Custodian
---------------- ---------------- ---------------- ------------ --------------
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------
/1/ This should be included only if the Debenture is issued in global form.
A-11
<PAGE>
EXHIBIT B
FORM OF CERTIFICATE OF TRANSFER
OnePoint Communications Corp.
2201 Waukegan Road
Suite E-200
Bannockburn, Illinois 60015
Telecopier No.: (847) 374-1070
Attention: John D. Stavig
Harris Trust and Savings Bank
311 W. Monroe, 12th Floor
Chicago, Illinois 60606
Telecopier No.: (312) 461-3525
Attention: Judy Bartolini
Re: 14 1/2% Senior Notes due 2008
-----------------------------
Reference is hereby made to the Indenture, dated as of May 21, 1998
(the "Indenture"), among OnePoint Communications Corp., as issuer (the
"Company"), the Subsidiary Guarantors (as defined therein) and Harris Trust and
Savings Bank, as trustee. Capitalized terms used but not defined herein shall
have the meanings given to them in the Indenture.
______________, (the "Transferor") owns and proposes to transfer the
Note[s] or interest in such Note[s] specified in Annex A hereto, in the
principal amount of $___________ in such Note[s] or interests (the "Transfer"),
to __________ (the "Transferee"), as further specified in Annex A hereto. In
connection with the Transfer, the Transferor hereby certifies that:
[CHECK ALL THAT APPLY]
1. [_] Check if Transferee will take delivery of a beneficial interest in the
144A Global Note or a Definitive Note Pursuant to Rule 144A. The Transfer is
being effected pursuant to and in accordance with Rule 144A under the United
States Securities Act of 1933, as amended (the "Securities Act"), and,
accordingly, the Transferor hereby further certifies that the beneficial
interest or Definitive Note is being transferred to a Person that the Transferor
reasonably believed and believes is purchasing the beneficial interest or
Definitive Note for its own account, or for one or more accounts with respect to
which such Person exercises sole investment discretion, and such Person and each
such account is a "qualified institutional buyer" within the meaning of Rule
144A in a transaction meeting the requirements of Rule 144A and such Transfer is
in compliance with any applicable blue sky securities laws of any state of the
United States. Upon consummation of the proposed Transfer in accordance with the
terms of the Indenture, the transferred beneficial interest or Definitive Note
will be subject to the restrictions on transfer enumerated in the Private
Placement Legend printed on the 144A Global Note and/or the Definitive Note and
in the Indenture and the Securities Act.
2. [_] Check if Transferee will take delivery of a beneficial interest in the
Regulation S Global Note or a Definitive Note pursuant to Regulation S. The
Transfer is being effected pursuant to and in accordance with Rule 903 or Rule
904 under the Securities Act and, accordingly, the Transferor hereby
B-1
<PAGE>
further certifies that (i) the Transfer is not being made to a person in the
United States and (x) at the time the buy order was originated, the Transferee
was outside the United States or such Transferor and any Person acting on its
behalf reasonably believed and believes that the Transferee was outside the
United States or (y) the transaction was executed in, on or through the
facilities of a designated offshore securities market and neither such
Transferor nor any Person acting on its behalf knows that the transaction was
prearranged with a buyer in the United States, (ii) no directed selling efforts
have been made in contravention of the requirements of Rule 903(a) or Rule
904(a) of Regulation S under the Securities Act and (iii) the transaction is not
part of a plan or scheme to evade the registration requirements of the
Securities Act. Upon consummation of the proposed transfer in accordance with
the terms of the Indenture, the transferred beneficial interest or Definitive
Note will be subject to the restrictions on Transfer enumerated in the Private
Placement Legend printed on the Regulation S Global Note and/or the Definitive
Note and in the Indenture and the Securities Act.
3. [_] Check and complete if Transferee will take delivery of a beneficial
interest in the IAI Global Note or a Definitive Note pursuant to any provision
of the Securities Act other than Rule 144A or Regulation S. The Transfer is
being effected in compliance with the transfer restrictions applicable to
beneficial interests in Restricted Global Notes and Restricted Definitive Notes
and pursuant to and in accordance with the Securities Act and any applicable
blue sky securities laws of any state of the United States, and accordingly the
Transferor hereby further certifies that (check one):
(a) [_] such Transfer is being effected pursuant to and in
accordance with Rule 144 under the Securities Act;
or
(b) [_] such Transfer is being effected to the Company or a
subsidiary thereof;
or
(c) [_] such Transfer is being effected pursuant to an effective
registration statement under the Securities Act and in compliance with the
prospectus delivery requirements of the Securities Act;
or
(d) [_] such Transfer is being effected to an Institutional
Accredited Investor and pursuant to an exemption from the registration
requirements of the Securities Act other than Rule 144A, Rule 144 or Rule 904,
and the Transferor hereby further certifies that it has not engaged in any
general solicitation within the meaning of Regulation D under the Securities Act
and the Transfer complies with the transfer restrictions applicable to
beneficial interests in a Restricted Global Note or Restricted Definitive Notes
and the requirements of the exemption claimed, which certification is supported
by (1) a certificate executed by the Transferee in the form of Exhibit D to the
Indenture and (2) if such Transfer is in respect of a principal amount of Notes
at the time of transfer of less than $250,000, an Opinion of Counsel provided by
the Transferor or the Transferee (a copy of which the Transferor has attached to
this certification), to the effect that such Transfer is in compliance with the
Securities Act. Upon consummation of the proposed transfer in accordance with
the terms of the Indenture, the transferred beneficial interest or Definitive
Note will be subject to the restrictions on transfer enumerated in the
B-2
<PAGE>
Private Placement Legend printed on the IAI Global Note and/or the Definitive
Notes and in the Indenture and the Securities Act.
4. [_] Check if Transferee will take delivery of a beneficial interest in an
Unrestricted Global Note or of an Unrestricted Definitive Note.
(a) [_] Check if Transfer is pursuant to Rule 144. (i) The Transfer
is being effected pursuant to and in accordance with Rule 144 under the
Securities Act and in compliance with the transfer restrictions contained in the
Indenture and any applicable blue sky securities laws of any state of the United
States and (ii) the restrictions on transfer contained in the Indenture and the
Private Placement Legend are not required in order to maintain compliance with
the Securities Act. Upon consummation of the proposed Transfer in accordance
with the terms of the Indenture, the transferred beneficial interest or
Definitive Note will no longer be subject to the restrictions on transfer
enumerated in the Private Placement Legend printed on the Restricted Global
Notes, on Restricted Definitive Notes and in the Indenture.
(b) [_] Check if Transfer is Pursuant to Regulation S. (i) The
Transfer is being effected pursuant to and in accordance with Rule 903 or Rule
904 under the Securities Act and in compliance with the transfer restrictions
contained in the Indenture and any applicable blue sky securities laws of any
state of the United States and (ii) the restrictions on transfer contained in
the Indenture and the Private Placement Legend are not required in order to
maintain compliance with the Securities Act. Upon consummation of the proposed
Transfer in accordance with the terms of the Indenture, the transferred
beneficial interest or Definitive Note will no longer be subject to the
restrictions on transfer enumerated in the Private Placement Legend printed on
the Restricted Global Notes, on Restricted Definitive Notes and in the
Indenture.
(c) [_] Check if Transfer is Pursuant to Other Exemption. (i) The
Transfer is being effected pursuant to and in compliance with an exemption from
the registration requirements of the Securities Act other than Rule 144, Rule
903 or Rule 904 and in compliance with the transfer restrictions contained in
the Indenture and any applicable blue sky securities laws of any State of the
United States and (ii) the restrictions on transfer contained in the Indenture
and the Private Placement Legend are not required in order to maintain
compliance with the Securities Act. Upon consummation of the proposed Transfer
in accordance with the terms of the Indenture, the transferred beneficial
interest or Definitive Note will not be subject to the restrictions on transfer
enumerated in the Private Placement Legend printed on the Restricted Global
Notes or Restricted Definitive Notes and in the Indenture.
This certificate and the statements contained herein are made for your
benefit and the benefit of the Company.
-------------------------------------
[Insert Name of Transferor]
By:
----------------------------------
Name:
Title:
B-3
<PAGE>
ANNEX A TO CERTIFICATE OF TRANSFER
1. The Transferor owns and proposes to transfer the following:
[CHECK ONE OF (a) OR (b)]
(a) [_] a beneficial interest in the:
(i) [_] 144A Global Note (CUSIP _________), or
(ii) [_] Regulation S Global Note (CUSIP _________), or
(iii) [_] IAI Global Note (CUSIP ________); or
(b) [_] a Restricted Definitive Note.
2. After the Transfer the Transferee will hold:
[CHECK ONE]
(a) [_] a beneficial interest in the:
(i) [_] 144A Global Note (CUSIP ________), or
(ii) [_] Regulation S Global Note (CUSIP ________), or
(iii) [_] IAI Global Note (CUSIP ________); or
(iv) [_] Unrestricted Global Note (CUSIP ________); or
(b) [_] a Restricted Definitive Note; or
(c) [_] an Unrestricted Definitive Note,
in accordance with the terms of the Indenture.
B-4
<PAGE>
EXHIBIT C
FORM OF CERTIFICATE OF EXCHANGE
OnePoint Communications Corp.
2201 Waukegan Road
Suite E-200
Bannockburn, Illinois 60015
Telecopier No.: (847) 374-1070
Attention: John D. Stavig
Harris Trust and Savings Bank
311 W. Monroe, 12th Floor
Chicago, Illinois 60606
Telecopier No.: (312) 461-3525
Attention: Judy Bartolini
Re: 14 1/2% Senior Notes due 2008
-----------------------------
(CUSIP______________)
Reference is hereby made to the Indenture, dated as of May 21, 1998
(the "Indenture"), among OnePoint Communications Corp., as issuer (the
"Company"), the Subsidiary Guarantors (as defined therein) and Harris Trust and
Savings Bank, as trustee. Capitalized terms used but not defined herein shall
have the meanings given to them in the Indenture.
____________, (the "Owner") owns and proposes to exchange the Note[s]
or interest in such Note[s] specified herein, in the principal amount of
$____________ in such Note[s] or interests (the "Exchange"). In connection with
the Exchange, the Owner hereby certifies that:
1. Exchange of Restricted Definitive Notes or Beneficial Interests in a
Restricted Global Note for Unrestricted Definitive Notes or Beneficial Interests
in an Unrestricted Global Note
(a) [_] Check if Exchange is from beneficial interest in a Restricted
Global Note to beneficial interest in an Unrestricted Global Note. In connection
with the Exchange of the Owner's beneficial interest in a Restricted Global Note
for a beneficial interest in an Unrestricted Global Note in an equal principal
amount, the Owner hereby certifies (i) the beneficial interest is being acquired
for the Owner's own account without transfer, (ii) such Exchange has been
effected in compliance with the transfer restrictions applicable to the Global
Notes and pursuant to and in accordance with the United States Securities Act of
1933, as amended (the "Securities Act"), (iii) the restrictions on transfer
contained in the Indenture and the Private Placement Legend are not required in
order to maintain compliance with the Securities Act and (iv) the beneficial
interest in an Unrestricted Global Note is being acquired in compliance with any
applicable blue sky securities laws of any state of the United States.
(b) [_] Check if Exchange is from beneficial interest in a Restricted
Global Note to Unrestricted Definitive Note. In connection with the Exchange of
the Owner's beneficial interest in a Restricted Global Note for an Unrestricted
Definitive Note, the Owner hereby certifies (i) the Definitive Note is being
acquired for the Owner's own account without transfer, (ii) such Exchange has
been effected in compliance with the transfer restrictions applicable to the
Restricted Global Notes
C-1
<PAGE>
and pursuant to and in accordance with the Securities Act, (iii) the
restrictions on transfer contained in the Indenture and the Private Placement
Legend are not required in order to maintain compliance with the Securities Act
and (iv) the Definitive Note is being acquired in compliance with any applicable
blue sky securities laws of any state of the United States.
(c) [_] Check if Exchange is from Restricted Definitive Note to
beneficial interest in an Unrestricted Global Note. In connection with the
Owner's Exchange of a Restricted Definitive Note for a beneficial interest in an
Unrestricted Global Note, the Owner hereby certifies (i) the beneficial interest
is being acquired for the Owner's own account without transfer, (ii) such
Exchange has been effected in compliance with the transfer restrictions
applicable to Restricted Definitive Notes and pursuant to and in accordance with
the Securities Act, (iii) the restrictions on transfer contained in the
Indenture and the Private Placement Legend are not required in order to maintain
compliance with the Securities Act and (iv) the beneficial interest is being
acquired in compliance with any applicable blue sky securities laws of any state
of the United States.
(d) [_] Check if Exchange is from Restricted Definitive Note to
Unrestricted Definitive Note. In connection with the Owner's Exchange of a
Restricted Definitive Note for an Unrestricted Definitive Note, the Owner hereby
certifies (i) the Unrestricted Definitive Note is being acquired for the Owner's
own account without transfer, (ii) such Exchange has been effected in compliance
with the transfer restrictions applicable to Restricted Definitive Notes and
pursuant to and in accordance with the Securities Act, (iii) the restrictions on
transfer contained in the Indenture and the Private Placement Legend are not
required in order to maintain compliance with the Securities Act and (iv) the
Unrestricted Definitive Note is being acquired in compliance with any applicable
blue sky securities laws of any state of the United States.
2. Exchange of Restricted Definitive Notes or Beneficial Interests in Restricted
Global Notes for Restricted Definitive Notes or Beneficial Interests in
Restricted Global Notes
(a)[_] Check if Exchange is from beneficial interest in a Restricted
Global Note to Restricted Definitive Note. In connection with the Exchange of
the Owner's beneficial interest in a Restricted Global Note for a Restricted
Definitive Note with an equal principal amount, the Owner hereby certifies that
the Restricted Definitive Note is being acquired for the Owner's own account
without transfer. Upon consummation of the proposed Exchange in accordance with
the terms of the Indenture, the Restricted Definitive Note issued will continue
to be subject to the restrictions on transfer enumerated in the Private
Placement Legend printed on the Restricted Definitive Note and in the Indenture
and the Securities Act.
(b) [_] Check if Exchange is from Restricted Definitive Note to
beneficial interest in a Restricted Global Note. In connection with the Exchange
of the Owner's Restricted Definitive Note for a beneficial interest in the
[CHECK ONE] 144A Global Note, Regulation S Global Note, IAI Global Note with an
equal principal amount, the Owner hereby certifies (i) the beneficial interest
is being acquired for the Owner's own account without transfer and (ii) such
Exchange has been effected in compliance with the transfer restrictions
applicable to the Restricted Global Notes and pursuant to and in accordance with
the Securities Act, and in compliance with any applicable blue sky securities
laws of any state of the United States. Upon consummation of the proposed
Exchange in accordance with the terms of the Indenture, the beneficial interest
issued will be subject to the restrictions on transfer enumerated in the Private
Placement Legend printed on the relevant Restricted Global Note and in the
Indenture and the Securities Act.
C-2
<PAGE>
This certificate and the statements contained herein are made for your
benefit and the benefit of the Company.
_______________________________________
[Insert Name of Owner]
By:____________________________________
Name:
Title:
Dated: ________________
C-3
<PAGE>
EXHIBIT D
FORM OF CERTIFICATE FROM
ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR
OnePoint Communications Corp.
2201 Waukegan Road
Suite E-200
Bannockburn, Illinois 60015
Telecopier No.: (847) 374-1070
Attention: John D. Stavig
Harris Trust and Savings Bank
311 W. Monroe, 12th Floor
Chicago, Illinois 60606
Telecopier No.: (312) 461-3525
Attention: Judy Bartolini
Re: 14 1/2% Senior Notes due 2008
-----------------------------
Reference is hereby made to the Indenture, dated as of May 21, 1998
(the "Indenture"), among OnePoint Communications Corp., as issuer (the
"Company"), the Subsidiary Guarantors (as defined therein) and Harris Trust and
Savings Bank, as trustee. Capitalized terms used but not defined herein shall
have the meanings given to them in the Indenture.
In connection with our proposed purchase of $____________ aggregate
principal amount of:
(a) [_] a beneficial interest in a Global Note, or
(b) [_] a Definitive Note,
we confirm that:
1. We understand that any subsequent transfer of the Notes or
any interest therein is subject to certain restrictions and conditions set forth
in the Indenture and the undersigned agrees to be bound by, and not to resell,
pledge or otherwise transfer the Notes or any interest therein except in
compliance with, such restrictions and conditions and the United States
Securities Act of 1933, as amended (the "Securities Act").
2. We understand that the offer and sale of the Notes have not
been registered under the Securities Act, and that the Notes and any interest
therein may not be offered or sold except as permitted in the following
sentence. We agree, on our own behalf and on behalf of any accounts for which we
are acting as hereinafter stated, that if we should sell the Notes or any
interest therein, we will do so only (A) to the Company or any subsidiary
thereof, (B) in accordance with Rule 144A under the Securities Act to a
"qualified institutional buyer" (as defined therein), (c) to an institutional
"accredited investor" (as defined below) that, prior to such transfer, furnishes
(or has furnished on its behalf by a U.S. broker-dealer) to you and to the
Company a signed letter substantially in
D-1
<PAGE>
the form of this letter and, if such transfer is in respect of a principal
amount of Notes, at the time of transfer of less than $250,000, an Opinion of
Counsel in form reasonably acceptable to the Company to the effect that such
transfer is in compliance with the Securities Act, (D) outside the United States
in accordance with Rule 904 of Regulation S under the Securities Act, (E)
pursuant to the provisions of Rule 144(k) under the Securities Act or (F)
pursuant to an effective registration statement under the Securities Act, and we
further agree to provide to any person purchasing the Definitive Note or
beneficial interest in a Global Note from us in a transaction meeting the
requirements of clauses (A) through (E) of this paragraph a notice advising such
purchaser that resales thereof are restricted as stated herein.
3. We understand that, on any proposed resale of the Notes or
beneficial interest therein, we will be required to furnish to you and the
Company such certifications, legal opinions and other information as you and the
Company may reasonably require to confirm that the proposed sale complies with
the foregoing restrictions. We further understand that the Notes purchased by
us will bear a legend to the foregoing effect. We further understand that any
subsequent transfer by us of the Notes or beneficial interest therein acquired
by us must be effected through one of the Placement Agents.
4. We are an institutional "accredited investor" (as defined in
Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and
have such knowledge and experience in financial and business matters as to be
capable of evaluating the merits and risks of our investment in the Notes, and
we and any accounts for which we are acting are each able to bear the economic
risk of our or its investment.
5. We are acquiring the Notes or beneficial interest therein
purchased by us for our own account or for one or more accounts (each of which
is an institutional "accredited investor") as to each of which we exercise sole
investment discretion.
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceedings or official inquiry with
respect to the matters covered hereby.
______________________________________
[Insert Name of Accredited Investor]
By:___________________________________
Name:
Title:
Dated: ________________
D-2
<PAGE>
EXHIBIT E
FORM OF SUBSIDIARY GUARANTEE
For value received, each Subsidiary Guarantor (which term includes any
successor Person under the Indenture) has, jointly and severally,
unconditionally guaranteed, to the extent set forth in the Indenture and subject
to the provisions in the Indenture dated as of May 21, 1998 (the "Indenture")
among ONEPOINT COMMUNICATIONS CORP., the Subsidiary Guarantors (as defined
therein) and HARRIS TRUST AND SAVINGS BANK, as trustee (the "Trustee"), that (a)
the principal of and interest on the Notes (as defined in the Indenture) will be
promptly paid in full when due, whether at maturity, by acceleration, redemption
or otherwise and interest on the overdue principal of and interest on the Notes
if any, if lawful, and all other obligations of the Company to the Holders (as
defined in the Indenture) or the Trustee under the Indenture or the Notes will
be promptly paid in full or performed, all in accordance with the terms of the
Indenture and the Notes and (b) in case of any extension of time of payment or
renewal of any Notes or any of such other obligations, that the same will be
promptly paid in full when due or performed in accordance with the terms of the
extension or renewal, whether at stated maturity, by acceleration or otherwise.
The obligations of the Subsidiary Guarantors to the Holders of Notes and to the
Trustee pursuant to this Subsidiary Guarantee and the Indenture are expressly
set forth in Article 10 of the Indenture and reference is hereby made to the
Indenture for the precise terms of the Subsidiary Guarantee. Each Holder of a
Note, by accepting the same, agrees to and shall be bound by such provisions.
OnePoint Communications Holdings, LLC
By: OnePoint Communications
Corp., its Manager
By:______________________________
Name:
Title:
OnePoint Communications - Georgia, LLC
By: OnePoint Communications
Corp, its Manager
By:______________________________
Name:
Title:
E-1
<PAGE>
OnePoint Communications - Illinois, LLC
By: OnePoint Communications
Corp, its Manager
By:_______________________________
Name:
Title:
OnePoint Communications - Colorado, LLC
By: OnePoint Communications
Corp, its Manager
By:_______________________________
Name:
Title:
VIC-RMTS-DC, LLC
By: OnePoint Communications
Holdings, LLC, its Manager
By: OnePoint Communications
Corp., its Manager
By:_______________________________
Name:
Title:
E-2
<PAGE>
EXHIBIT F
FORM OF SUPPLEMENTAL INDENTURE
TO BE DELIVERED BY SUBSEQUENT SUBSIDIARY GUARANTORS
Supplemental Indenture (this "Supplemental Indenture"), dated as of
________________, among __________________ (the "Guaranteeing Subsidiary"), a
subsidiary of ONEPOINT COMMUNICATIONS CORP. (or its permitted successor), a
Delaware corporation (the "Company"), the Company, the other Subsidiary
Guarantors (as defined in the Indenture referred to herein) and HARRIS TRUST AND
SAVINGS BANK, as trustee under the indenture referred to below (the "Trustee").
W I T N E S S E T H
WHEREAS, the Company has heretofore executed and delivered to the
Trustee an indenture (the "Indenture"), dated as of May 21, 1998 providing for
the issuance of an aggregate principal amount of up to $175,000,000 of 14 1/2%
Notes due 2008 (the "Notes");
WHEREAS, the Indenture provides that under certain circumstances the
Guaranteeing Subsidiary shall execute and deliver to the Trustee a supplemental
indenture pursuant to which the Guaranteeing Subsidiary shall unconditionally
guarantee all of the Company's Obligations under the Notes and the Indenture on
the terms and conditions set forth herein (the "Subsidiary Guarantee"); and
WHEREAS, pursuant to Section 9.01 of the Indenture, the Trustee is
authorized to execute and deliver this Supplemental Indenture.
NOW THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the receipt of which is hereby acknowledged, the
Guaranteeing Subsidiary and the Trustee mutually covenant and agree for the
equal and ratable benefit of the Holders of the Notes as follows:
1. Capitalized Terms. Capitalized terms used herein without
definition shall have the meanings assigned to them in the Indenture.
2. Agreement to Guarantee. The Guaranteeing Subsidiary hereby agrees
as follows:
(a) Along with all Subsidiary Guarantors named in the Indenture, to
jointly and severally Guarantee to each Holder of a Note
authenticated and delivered by the Trustee and to the Trustee and
its successors and assigns, irrespective of the validity and
enforceability of the Indenture, the Notes or the obligations of
the Company hereunder or thereunder, that:
(i) the principal of and interest on the Notes will be promptly
paid in full when due, whether at maturity, by acceleration,
redemption or otherwise, and interest on the overdue
principal of and interest on the Notes, if any, if lawful,
and all other obligations of the Company to the Holders or
the Trustee hereunder or thereunder will be promptly paid in
F-1
<PAGE>
full or performed, all in accordance with the terms hereof
and thereof; and
(ii) in case of any extension of time of payment or renewal of
any Notes or any of such other obligations, that same will
be promptly paid in full when due or performed in accordance
with the terms of the extension or renewal, whether at
stated maturity, by acceleration or otherwise. Failing
payment when due of any amount so guaranteed or any
performance so guaranteed for whatever reason, the
Subsidiary Guarantors shall be jointly and severally
obligated to pay the same immediately.
(b) The obligations hereunder shall be unconditional, irrespective of
the validity, regularity or enforceability of the Notes or the
Indenture, the absence of any action to enforce the same, any
waiver or consent by any Holder of the Notes with respect to any
provisions of the Indenture, this Supplemental Indenture or the
Notes, the recovery of any judgment against the Company, any
action to enforce the same or any other circumstance which might
otherwise constitute a legal or equitable discharge or defense of
a guarantor.
(c) The following is hereby waived: diligence presentment, demand
of payment, filing of claims with a court in the event of
insolvency or bankruptcy of the Company, any right to require a
proceeding first against the Company, protest, notice and all
demands whatsoever.
(d) This Subsidiary Guarantee shall not be discharged except by
complete performance of the obligations contained in the Notes
and the Indenture.
(e) If any Holder or the Trustee is required by any court or
otherwise to return to the Company, the Subsidiary Guarantors, or
any custodian, Trustee, liquidator or other similar official
acting in relation to either the Company or the Subsidiary
Guarantors, any amount paid by either to the Trustee or such
Holder, this Subsidiary Guarantee, to the extent theretofore
discharged, shall be reinstated in full force and effect.
(f) The Guaranteeing Subsidiary shall not be entitled to any right of
subrogation in relation to the Holders in respect of any
obligations guaranteed hereby until payment in full of all
obligations guaranteed hereby.
(g) As between the Subsidiary Guarantors, on the one hand, and the
Holders and the Trustee, on the other hand, (x) the maturity of
the obligations guaranteed hereby may be accelerated as provided
in Article 6 of the Indenture for the purposes of this Subsidiary
Guarantee, notwithstanding any stay, injunction or other
prohibition preventing such acceleration in respect of the
obligations guaranteed hereby, and (y) in the event of any
declaration of acceleration of such obligations as provided in
Article 6 of the Indenture, such obligations (whether or not due
and payable) shall forthwith become due and payable by the
Subsidiary Guarantors for the purpose of this Subsidiary
Guarantee.
F-2
<PAGE>
(h) The Subsidiary Guarantors shall have the right to seek
contribution from any non-paying Subsidiary Guarantor so long as
the exercise of such right does not impair the rights of the
Holders under the Subsidiary Guarantees.
(i) Pursuant to Section 10.02 of the Indenture, after giving effect
to any maximum amount and any other contingent and fixed
liabilities that are relevant under any applicable Bankruptcy or
fraudulent conveyance laws, and after giving effect to any
collections from, rights to receive contribution from or payments
made by or on behalf of any other Subsidiary Guarantor in respect
of the obligations of such other Subsidiary Guarantor under
Article 10 of the Indenture shall result in the obligations of
such Subsidiary Guarantor under its Subsidiary Guarantee not
constituting a fraudulent transfer or conveyance.
3. Execution and Delivery. Each Guaranteeing Subsidiary agrees that
the Subsidiary Guarantees shall remain in full force and effect notwithstanding
any failure to endorse on each Note a notation of such Subsidiary Guarantee.
4. Guaranteeing Subsidiary May Consolidate, Etc. on Certain Terms.
(a) The Guaranteeing Subsidiary may not consolidate with or merge
with or into (whether or not such Guaranteeing Subsidiary is the
surviving Person) another corporation, Person or entity whether
or not affiliated with such Guaranteeing Subsidiary unless:
(i) subject to Section 10.05 of the Indenture, the Person
formed by or surviving any such consolidation or merger
(if other than a Subsidiary Guarantor or the Company)
assumes all the obligations of such Subsidiary Guarantor,
pursuant to a supplemental indenture in form and substance
reasonably satisfactory to the Trustee, under the Notes,
the Indenture, the Pledge Agreement and the Registration
Rights Agreement on the terms set forth herein or therein;
and
(ii) immediately after giving effect to such transaction, no
Default or Event of Default exists.
(iii) except in the case of any such merger or consolidation
with the Company or another Subsidiary Guarantor, the
Company would, on a pro forma basis, immediately after
giving effect to such transaction, be permitted to incur
at least $1.00 of additional Indebtedness pursuant to the
Debt to Cash Flow Ratio test set forth in Section 4.09 of
the Indenture.
In case of any such consolidation, merger, sale or conveyance and
upon the assumption by the successor Person, by supplemental
indenture, executed and delivered to the Trustee and satisfactory
in form to the Trustee, of the Subsidiary Guarantee endorsed upon
the Notes and the due and punctual performance of all of the
covenants and conditions of the Indenture to be performed by the
F-3
<PAGE>
Subsidiary Guarantor, such successor Person shall succeed to and
be substituted for the Subsidiary Guarantor with the same effect
as if it had been named as a Subsidiary Guarantor. Such successor
Person thereupon may cause to be signed any or all of the
Subsidiary Guarantees to be endorsed upon all of the Notes
issuable under the Indenture which theretofore shall not have
been signed by the Company and delivered to the Trustee. All the
Subsidiary Guarantees so issued shall in all respects have the
same legal rank and benefit under the Indenture as the Subsidiary
Guarantees theretofore and thereafter issued in accordance with
the terms of the Indenture as though all of such Subsidiary
Guarantees had been issued at the date of the execution of the
Indenture.
Except as set forth in Articles 4 and 5 of the Indenture, and
notwithstanding clauses (i) and (ii) above, nothing contained in
this Supplemental Indenture, the Indenture or in any of the Notes
shall prevent any consolidation or merger of a Subsidiary
Guarantor with or into the Company or another Subsidiary
Guarantor, or shall prevent any sale or conveyance of the
property of a Subsidiary Guarantor as an entirety or
substantially as an entirety to the Company or another Subsidiary
Guarantor.
(b) In case of any such consolidation, merger, sale or conveyance and
upon the assumption by the successor Person, by supplemental
indenture, executed and delivered to the Trustee and satisfactory
in form to the Trustee, of the Subsidiary Guarantee endorsed upon
the Notes and the due and punctual performance of all of the
covenants and conditions of the Indenture to be performed by the
Subsidiary Guarantor, such successor Person shall succeed to and
be substituted for the Subsidiary Guarantor with the same effect
as if it had been named herein as a Subsidiary Guarantor. Such
successor Person thereupon may cause to be signed any or all of
the Subsidiary Guarantees to be endorsed upon all of the Notes
issuable hereunder which theretofore shall not have been signed
by the Company and delivered to the Trustee. All the Subsidiary
Guarantees so issued shall in all respects have the same legal
rank and benefit under the Indenture as the Subsidiary Guarantees
theretofore and thereafter issued in accordance with the terms of
the Indenture as though all of such Subsidiary Guarantees had
been issued at the date of the execution hereof.
(c) Except as set forth in Articles 4 and 5 of the Indenture, and
notwithstanding clauses (a) and (b) above, nothing contained in
the Indenture or in any of the Notes shall prevent any
consolidation or merger of a Subsidiary Guarantor with or into
the Company or another Subsidiary Guarantor, or shall prevent any
sale or conveyance of the property of a Subsidiary Guarantor as
an entirety or substantially as an entirety to the Company or
another Subsidiary Guarantor.
5. Releases.
(a) In the event of a sale or other disposition of all of the assets
of any Subsidiary Guarantor, by way of merger, consolidation or
otherwise, or a sale or other disposition of all to the capital
stock of any Subsidiary Guarantor, then such Subsidiary Guarantor
(in the event of a sale or other disposition, by way of
F-4
<PAGE>
merger, consolidation or otherwise, of all of the capital stock
of such Subsidiary Guarantor) or the Person acquiring the
property (in the event of a sale or other disposition of all or
substantially all of the assets of such Subsidiary Guarantor)
will be released and relieved of any obligations under its
Subsidiary Guarantee; provided that the Net Proceeds of such sale
or other disposition are applied in accordance with the
applicable provisions of the Indenture, including without
limitation Section 4.10 of the Indenture. Upon delivery by the
Company to the Trustee of an Officers' Certificate and an Opinion
of Counsel to the effect that such sale or other disposition was
made by the Company in accordance with the provisions of the
Indenture, including without limitation Section 4.10 of the
Indenture, the Trustee shall execute any documents reasonably
required in order to evidence the release of any Subsidiary
Guarantor from its obligations under its Subsidiary Guarantee.
(b) Any Subsidiary Guarantor not released from its obligations under
its Subsidiary Guarantee shall remain liable for the full amount
of principal of and interest on the Notes and for the other
obligations of any Subsidiary Guarantor under the Indenture as
provided in Article 10 of the Indenture.
6. No Recourse Against Others. No past, present or future director,
officer, employee, incorporator, stockholder or agent of the Guaranteeing
Subsidiary, as such, shall have any liability for any obligations of the Company
or any Guaranteeing Subsidiary under the Notes, any Subsidiary Guarantees, the
Indenture or this Supplemental Indenture or for any claim based on, in respect
of, or by reason of, such obligations or their creation. Each Holder of the
Notes by accepting a Note waives and releases all such liability. The waiver
and release are part of the consideration for issuance of the Notes and the
Subsidiary Guarantees. Such waiver may not be effective to waive liabilities
under the federal securities laws and it is the view of the Commission that such
a waiver is against public policy.
7. NEW YORK LAW TO GOVERN. THE INTERNAL LAW OF THE STATE OF NEW
YORK SHALL GOVERN AND BE USED TO CONSTRUE THIS SUPPLEMENTAL INDENTURE BUT
WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT
THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED
THEREBY.
8. Counterparts. The parties may sign any number of copies of this
Supplemental Indenture. Each signed copy shall be an original, but all of them
together represent the same agreement.
9. Effect of Headings. The Section headings herein are for
convenience only and shall not affect the construction hereof.
10. The Trustee. The Trustee shall not be responsible in any manner
whatsoever for or in respect of the validity or sufficiency of this Supplemental
Indenture or for or in respect of the recitals contained herein, all of which
recitals are made solely by the Guaranteeing Subsidiary and the Company.
F-5
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed and attested, all as of the date first above
written.
Dated: _______________, _____
[GUARANTEEING SUBSIDIARY]
By: _________________________________
Name:
Title:
ONEPOINT COMMUNICATIONS CORP.
By: _________________________________
Name:
Title:
[EXISTING SUBSIDIARY GUARANTORS]
By: _________________________________
Name:
Title:
HARRIS TRUST AND SAVINGS BANK,
as Trustee
By: _________________________________
Name:
Title:
F-6
<PAGE>
EXHIBIT G
FORM OF PLEDGE AGREEMENT
G-1
<PAGE>
Schedule I
SCHEDULE OF SUBSIDIARY GUARANTORS
The following schedule lists each Subsidiary Guarantor under the
Indenture as of the Issue Date:
OnePoint Communications Holdings, LLC
OnePoint Communications - Georgia, LLC
OnePoint Communications - Illinois, LLC
OnePoint Communications - Colorado, LLC
VIC-RMTS-DC, LLC
<PAGE>
Exhibit 4.3
================================================================================
CUSIP/CINS 68272TAD6
14-1/2% Series A Senior Notes due 2008
No. 1 $175,000,000
ONEPOINT COMMUNICATIONS CORP.
promises to pay to Cede & Co. or registered assigns, the principal sum of One
Hundred Seventy Five Million Dollars ($175,000,000) on June 1, 2008
Interest Payment Dates: June 1 and December 1
Record Dates: November 15 and May 15
Dated: May 21, 1998
ONEPOINT COMMUNICATIONS CORP.
By:______________________________
Name:
Title:
This is one of the Global
Notes referred to in the
within-mentioned Indenture:
HARRIS TRUST AND SAVINGS BANK,
as Trustee
By:______________________________
================================================================================
1
<PAGE>
(Back of Note)
14-1/2% Series A Senior Notes due 2008
THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE
INDENTURE GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE
BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY
CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY
BE REQUIRED PURSUANT TO SECTION 2.07 OF THE INDENTURE, (II) THIS GLOBAL NOTE MAY
BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.06(a) OF THE
INDENTURE, (III) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR
CANCELLATION PURSUANT TO SECTION 2.11 OF THE INDENTURE AND (IV) THIS GLOBAL NOTE
MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF
THE COMPANY.
THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY
ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE UNITED
STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND THE
SECURITY EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN
THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH
PURCHASER OF THE SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE SELLER
MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE
SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF THE SECURITY
EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE COMPANY THAT (A) SUCH SECURITY
MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (1)(a) TO A PERSON WHO THE
SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN
RULE 144A UNDER THE SECURITIES ACT) (b) IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144A UNDER THE SECURITIES ACT, (c) OUTSIDE THE UNITED
STATES TO A FOREIGN PERSON IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 904
UNDER THE SECURITIES ACT, (d) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" AS
DEFINED IN RULE 501(a)(1), (2), (3) OR (7) OF THE SECURITIES ACT (AN
"INSTITUTIONAL ACCREDITED INVESTOR") IN A TRANSACTION EXEMPT FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OR (e) IN ACCORDANCE WITH
ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, (2)
TO THE COMPANY OR (3) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN
EACH CASE, IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE
UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND (B) THE HOLDER WILL, AND
EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER FROM IT OF THE
SECURITY EVIDENCED HEREBY OF THE RESALE RESTRICTIONS SET FORTH IN (A) ABOVE.
2
<PAGE>
THE NOTES EVIDENCED BY THIS CERTIFICATE ARE INITIALLY ISSUED AS PART
OF AN ISSUANCE OF UNITS, EACH OF WHICH CONSIST OF $1,000 PRINCIPAL AMOUNT OF THE
NOTES AND ONE WARRANT ("WARRANT") INITIALLY ENTITLING THE HOLDER THEREOF TO
PURCHASE 0.635 SHARES, PAR VALUE $0.01 PER SHARE, OF THE COMPANY. PRIOR TO THE
EARLIEST TO OCCUR OF (i) THE DATE THAT IS SIX MONTHS FOLLOWING THE INITIAL SALE
OF THE UNITS, (ii) THE COMMENCEMENT OF AN EXCHANGE OFFER WITH RESPECT TO THE
NOTES, (iii) THE DATE OF A SHELF REGISTRATION STATEMENT WITH RESPECT TO THE
NOTES IS DECLARED EFFECTIVE, (iv) A CHANGE OF CONTROL (AS DEFINED IN THE
INDENTURE), OR (v) SUCH DATE AS BEAR, STEARNS & CO. INC. MAY, IN ITS SOLE
DISCRETION, DEEM APPROPRIATE, THE NOTES EVIDENCED BY THIS CERTIFICATE MAY NOT BE
TRANSFERRED OR EXCHANGED SEPARATELY FROM, BUT MAY BE TRANSFERRED OR EXCHANGED
ONLY TOGETHER WITH, THE WARRANTS.
Capitalized terms used herein shall have the meanings assigned to them
in the Indenture referred to below unless otherwise indicated.
1. Interest. OnePoint Communications Corp., a Delaware corporation
(the "Company"), promises to pay interest on the principal amount of this Note
at 14-1/2% per annum from May 21, 1998 until maturity and shall pay the
Liquidated Damages payable pursuant to Section 5 of the Registration Rights
Agreement referred to below. The Company will pay interest and Liquidated
Damages, if any, semi-annually on June 1 and December 1 of each year, or if any
such day is not a Business Day, on the next succeeding Business Day (each an
"Interest Payment Date"). Interest on the Notes will accrue from the most recent
date to which interest has been paid or, if no interest has been paid, from the
date of issuance; provided that if there is no existing Default in the payment
of interest, and if this Note is authenticated between a record date referred to
on the face hereof and the next succeeding Interest Payment Date, interest shall
accrue from such next succeeding Interest Payment Date; provided, further, that
the first Interest Payment Date shall be December 1, 1998. The Company shall pay
interest (including post-petition interest in any proceeding under any
Bankruptcy Law) on overdue principal and premium, if any, from time to time on
demand at a rate that is 1% per annum in excess of the rate then in effect; it
shall pay interest (including post-petition interest in any proceeding under any
Bankruptcy Law) on overdue installments of interest and Liquidated Damages
(without regard to any applicable grace periods) from time to time on demand at
the same rate to the extent lawful. Interest will be computed on the basis of a
360-day year of twelve 30-day months.
2. Method of Payment. The Company will pay interest and Liquidated
Damages, if any, on the Notes (except defaulted interest on each Interest
Payment Date) to the Persons who are registered Holders of Notes at the close of
business on the May 15 or November 15 preceding the Interest Payment Date, even
if such Notes are cancelled after such record date and on or before such
Interest Payment Date, except as provided in Section 2.12 of the Indenture with
respect to defaulted interest. The Notes will be payable as to principal,
premium and Liquidated Damages, if any, and interest at the office or agency of
the Company
3
<PAGE>
maintained for such purpose within or without the City and State of New York,
or, at the option of the Company, payment of interest and Liquidated Damages may
be made by check mailed to the Holders at their addresses set forth in the
register of Holders, and provided that payment by wire transfer of immediately
available funds will be required with respect to principal of and interest,
premium and Liquidated Damages on, all Global Notes and all other Notes the
Holders of which shall have provided wire transfer instructions to the Company
or the Paying Agent. Such payment shall be in such coin or currency of the
United States of America as at the time of payment is legal tender for payment
of public and private debts.
3. Paying Agent and Registrar. Initially, Harris Trust and Savings
Bank, the Trustee under the Indenture, will act as Paying Agent and Registrar.
The Company may change any Paying Agent or Registrar without notice to any
Holder. The Company or any of its Subsidiaries may act in any such capacity.
4. Indenture. The Company issued the Notes under an Indenture dated
as of May 21, 1998 ("Indenture") among the Company, the Subsidiary Guarantors
(as defined therein) and the Trustee. The terms of the Notes include those
stated in the Indenture and those made part of the Indenture by reference to the
Trust Indenture Act of 1939, as amended (15 U.S. Code (S)(S) 77aaa-77bbbb). The
Notes are subject to all such terms, and Holders are referred to the Indenture
and such Act for a statement of such terms. To the extent any provision of this
Note conflicts with the express provisions of the Indenture, the provisions of
the Indenture shall govern and be controlling. Except as provided in the Pledge
Agreement, the Notes are unsecured obligations of the Company limited to $175.0
million in aggregate principal amount.
5. Optional Redemption.
(a) Except as set forth in subparagraph (b) of this paragraph 5, the
Company shall not have the option to redeem the Notes prior to June 1, 2003.
Thereafter, the Notes will be subject to redemption at any time at the option of
the Company, in whole or in part, upon not less than 30 nor more than 60 days'
notice, at the redemption prices (expressed as percentages of principal amount)
set forth below, plus accrued and unpaid interest and Liquidated Damages, if
any, thereon to the applicable redemption date, if redeemed during the twelve-
month period beginning on June 1 of the years indicated below:
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
2003..........................107.250%
2004..........................104.833%
2005..........................102.417%
2006 and thereafter...........100.000%
</TABLE>
(b) Notwithstanding the foregoing, on or prior to June 1, 2001, the
Company may redeem up to 35% of the aggregate principal amount of Notes issued
under the Indenture at a redemption price of 114.500% of the principal amount
thereof, plus accrued and unpaid interest and Liquidated Damages, if any,
thereon to the redemption date, with the net cash proceeds of one or more public
or private offerings of Common Stock generating net cash proceeds to the
4
<PAGE>
Company in excess of $20.0 million; provided that at least 65% of the aggregate
principal amount of Notes issued on the Closing Date remains outstanding
immediately after the occurrence of such redemption.
6. Mandatory Redemption.
The Company shall not be required to make mandatory redemption
payments with respect to the Notes.
7. Repurchase at Option of Holder.
(a) Upon the occurrence of a Change of Control, the Company shall
make an offer to each Holder of Notes to repurchase all or any part (equal to
$1,000 or an integral multiple thereof) of such Holder's Notes pursuant to the
offer described below (the "Change of Control Offer") at an offer price in cash
equal to 101% of the aggregate principal amount thereof, plus accrued and unpaid
interest and Liquidated Damages, if any, thereon to the date of purchase (the
"Change of Control Payment"). Within ten Business Days following any Change of
Control, the Company shall mail a notice to each Holder describing the
transaction or transactions that constitute the Change of Control and offering
to repurchase Notes on the date specified in such notice, which date shall be no
earlier than 30 days and no later than 60 days from the date such notice is
mailed (the "Change of Control Payment Date"), pursuant to the procedures
required by the Indenture and described in such notice. The Company shall comply
with the requirements of Rule 14e-1 under the Exchange Act and any other
securities laws and regulations thereunder to the extent such laws and
regulations are applicable in connection with the repurchase of the Notes as a
result of a Change of Control.
(b) If the Company or a Restricted Subsidiary consummates any Asset
Sales, when the aggregate amount of Excess Proceeds exceeds $5 million, the
Company shall make an offer to all Holders of Notes (an "Asset Sale Offer") to
repurchase the maximum principal amount of Notes that may be purchased out of
the Excess Proceeds, at an offer price in cash in an amount equal to 100% of the
principal amount thereof, plus accrued and unpaid interest and Liquidated
Damages, if any, thereon to the repurchase date, in accordance with the
provisions set forth in Section 3.09 of the Indenture. To the extent that any
Excess Proceeds remain after consummation of an Asset Sale Offer, the Company
may use such Excess Proceeds for any purpose not otherwise prohibited by the
Indenture. If the aggregate principal amount of Notes tendered pursuant to such
Asset Sale Offer exceeds the amount of Excess Proceeds, the Trustee shall select
the Notes to be purchased on a pro rata basis. Holders of Notes that are the
subject of an offer to purchase will receive an Asset Sale Offer from the
Company prior to any related purchase date and may elect to have such Notes
purchased by completing the form entitled "Option of Holder to Elect Purchase"
on the reverse of the Notes.
8. Notice of Redemption. Notice of redemption will be mailed at
least 30 days but not more than 60 days before the redemption date to each
Holder whose Notes are to be redeemed at its registered address. Notes in
denominations larger than $1,000 may be redeemed in part but only in whole
multiples of $1,000, unless all of the Notes held by a Holder are to be
5
<PAGE>
redeemed. On and after the redemption date interest ceases to accrue on Notes or
portions thereof called for redemption.
9. Denominations, Transfer, Exchange. The Notes are in registered
form without coupons in denominations of $1,000 and integral multiples of
$1,000. The transfer of Notes may be registered and Notes may be exchanged as
provided in the Indenture. The Registrar and the Trustee may require a Holder,
among other things, to furnish appropriate endorsements and transfer documents
and the Company may require a Holder to pay any taxes and fees required by law
or permitted by the Indenture. The Company need not exchange or register the
transfer of any Note or portion of a Note selected for redemption, except for
the unredeemed portion of any Note being redeemed in part. Also, the Company
need not exchange or register the transfer of any Notes for a period of 15 days
before a selection of Notes to be redeemed or during the period between a record
date and the corresponding Interest Payment Date.
10. Persons Deemed Owners. The registered Holder of a Note may be
treated as its owner for all purposes.
11. Amendment, Supplement and Waiver. Subject to certain exceptions,
the Indenture, the Subsidiary Guarantees or the Notes may be amended or
supplemented with the consent of the Holders of at least a majority in principal
amount of the then outstanding Notes voting as a single class, and any existing
default or compliance with any provision of the Indenture, the Subsidiary
Guarantees or the Notes may be waived with the consent of the Holders of a
majority in principal amount of the then outstanding Notes voting as a single
class. Without the consent of any Holder of a Note, the Indenture, the
Subsidiary Guarantees or the Notes may be amended or supplemented to cure any
ambiguity, defect or inconsistency, to provide for uncertificated Notes in
addition to or in place of certificated Notes, to provide for the assumption of
the Company's or Subsidiary Guarantor's obligations to Holders of the Notes in
case of a merger or consolidation, to make any change that would provide any
additional rights or benefits to the Holders of the Notes or that does not
adversely affect the legal rights under the Indenture of any such Holder, to
comply with the requirements of the Commission in order to effect or maintain
the qualification of the Indenture under the Trust Indenture Act or to allow any
Subsidiary Guarantor to execute a supplemental indenture to the Indenture and/or
a Subsidiary Guarantee with respect to the Notes.
12. Defaults and Remedies. Each of the following constitutes an
Event of Default: (i) default for 30 days in the payment when due of interest
on, or Liquidated Damages with respect to, the Notes; (ii) default in payment
when due of the principal of or premium, if any, on the Notes; (iii) failure by
the Company or any of its Restricted Subsidiaries to comply with Section 4.07,
4.09, 4.10, 4.15 or 5.10 of the Indenture; (iv) failure by the Company or any of
its Restricted Subsidiaries for 30 days after notice to comply with any of its
other agreements in the Indenture or the Notes; (v) default under any mortgage,
indenture or instrument under which there may be issued or by which there may be
secured or evidenced any Indebtedness for money borrowed by the Company or any
of its Restricted Subsidiaries (or the payment of which is guaranteed by the
Company or any of its Restricted Subsidiaries), whether such Indebtedness
6
<PAGE>
or guarantee now exists or is created after the Closing Date, which default (a)
is caused by a failure to pay principal of or premium, if any, or interest on
such Indebtedness prior to the expiration of the grace period provided in such
Indebtedness on the date of such default (a "Payment Default") or (b) results in
the acceleration of such Indebtedness prior to its express maturity and, in each
case, the principal amount of any such Indebtedness, together with the principal
amount of any other such Indebtedness under which there has been a Payment
Default or the maturity of which has been so accelerated, aggregates $1.5
million or more; (vi) failure by the Company or any of its Restricted
Subsidiaries to pay final judgments (other than any judgment or portion thereof
as to which an insurance carrier rated at least A by Standard & Poor's
Corporation or A2 by Moody's Investors Service, Inc. has accepted liability in
writing) aggregating in excess of $3.0 million, which judgments are not paid,
discharged or stayed for a period of 60 days; (vii) default by the Company in
the performance of any covenant set forth in the Pledge Agreement, or
repudiation by the Company of its obligations under the Pledge Agreement, or the
unenforceability of the Pledge Agreement against the Company or any of its
Restricted Subsidiaries for any reason; (viii) default by any Restricted
Subsidiary of the Company in the performance of any obligation under its
Subsidiary Guarantee, or repudiation by any of Restricted Subsidiary of the
Company of its obligations under its Subsidiary Guarantee, or the
unenforceability of any Subsidiary Guarantee against any Restricted Subsidiary
of the Company for any reason; (ix) the failure for any reason for the Company
to retain all material licenses necessary to conduct its business; and (x)
certain events of bankruptcy or insolvency with respect to the Company or any of
its Restricted Subsidiaries.
If any Event of Default occurs and is continuing, the Trustee or the
holders of at least 25% in principal amount of the then outstanding Notes may
declare all the Notes to be due and payable immediately. Notwithstanding the
foregoing, in the case of an Event of Default arising from certain events of
bankruptcy or insolvency with respect to the Company, any Significant Subsidiary
or any group of Restricted Subsidiaries that, taken together, would constitute a
Significant Subsidiary, all outstanding Notes will become due and payable
without further action or notice. Holders of the Notes may not enforce the
Indenture or the Notes except as provided in the Indenture. Subject to certain
limitations, holders of a majority in principal amount of the then outstanding
Notes may direct the Trustee in its exercise of any trust or power. The Trustee
may withhold from holders of the Notes notice of any continuing Default or Event
of Default (except a Default or Event of Default relating to the payment of
principal or interest) if it determines that withholding notice is in their
interest.
In the case of any Event of Default occurring by reason of any willful
action (or inaction) taken (or not taken) by or on behalf of the Company with
the intention of avoiding payment of the premium that the Company would have had
to pay if the Company then had elected to redeem the Notes pursuant to the
optional redemption provisions of the Indenture, an equivalent premium shall
also become and be immediately due and payable to the extent permitted by law
upon the acceleration of the Notes. If an Event of Default occurs prior to June
1, 2003 by reason of any willful action (or inaction) taken (or not taken) by or
on behalf of the Company with the intention of avoiding the prohibition on
redemption of the Notes prior to such date, then the premium specified in the
Indenture shall also become immediately due and payable to the extent permitted
by law upon the acceleration of the Notes.
7
<PAGE>
The holders of a majority in aggregate principal amount of the Notes
then outstanding by notice to the Trustee may on behalf of the holders of all of
the Notes waive any existing Default or Event of Default and its consequences
under the Indenture except a continuing Default or Event of Default in the
payment of interest on, or the principal of, the Notes.
The Company is required to deliver to the Trustee annually a statement
regarding compliance with the Indenture, and the Company is required upon
becoming aware of any Default or Event of Default, to deliver to the Trustee a
statement specifying such Default or Event of Default.
13. Trustee Dealings with Company. The Trustee, in its individual or
any other capacity, may make loans to, accept deposits from, and perform
services for the Company or its Affiliates, and may otherwise deal with the
Company or its Affiliates, as if it were not the Trustee.
14. No Recourse Against Others. A director, officer, employee,
incorporator or stockholder, of the Company, as such, shall not have any
liability for any obligations of the Company under the Notes, any Subsidiary
Guarantee or the Indenture or for any claim based on, in respect of, or by
reason of, such obligations or their creation. Each Holder by accepting a Note
waives and releases all such liability. The waiver and release are part of the
consideration for the issuance of the Notes and the Subsidiary Guarantees. Such
Waiver may not be effective to waive liabilities under the federal securities
laws and it is the view of the Commission that such a waiver is against public
policy.
15. Authentication. This Note shall not be valid until authenticated
by the manual signature of the Trustee or an authenticating agent.
16. Abbreviations. Customary abbreviations may be used in the name
of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
17. Additional Rights of Holders of Restricted Global Notes and
Restricted Definitive Notes. In addition to the rights provided to Holders of
Notes under the Indenture, Holders of Restricted Global Notes and Restricted
Definitive Notes shall have all the rights set forth in the Registration Rights
Agreement dated as of May 21, 1998, between the Company and the parties named on
the signature pages thereof (the "Registration Rights Agreement").
18. CUSIP Numbers. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Company has caused
CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP numbers
in notices of redemption as a convenience to Holders. No representation is made
as to the accuracy of such numbers either as printed on the Notes or as
contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
8
<PAGE>
The Company will furnish to any Holder upon written request and
without charge a copy of the Indenture and/or the Registration Rights Agreement.
Requests may be made to:
OnePoint Communications Corp.
2201 Waukegan Road
Suite E-200
Bannockburn, Illinois 60015
Telecopier No.: (847) 374-1070
Attention: John D. Stavig
9
<PAGE>
Assignment Form
To assign this Note, fill in the form below: (I) or (we) assign and transfer
this Note to
________________________________________________________________________________
(Insert assignee's soc. sec. or tax I.D. no.)
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Print or type assignee's name, address and zip code)
and irrevocably appoint ________________________________________________________
to transfer this Note on the books of the Company. The agent may substitute
another to act for him.
Date: _________________
Your Signature:________________________________________
(Sign exactly as your name appears on
the face of this Note)
Signatures must be guaranteed by an "eligible guarantor
institution" meeting the requirements of the Registrar,
which requirements include membership or participation
in the Security Transfer Agent Medallion Program
("STAMP") or such other "signature guarantee program"
as may be determined by the Registrar in addition to,
or in substitution for, STAMP, all in accordance with
the Securities Exchange Act of 1934, as amended.
10
<PAGE>
Option of Holder to Elect Purchase
If you want to elect to have this Note purchased by the Company
pursuant to Section 4.10 or 4.15 of the Indenture, check the box below:
[_] Section 4.10 [_] Section 4.15
If you want to elect to have only part of the Note purchased by the
Company pursuant to Section 4.10 or Section 4.15 of the Indenture, state the
amount you elect to have purchased: $________
Date:_________________ Your Signature:___________________________________
(Sign exactly as your name appears on the Note)
Tax Identification No:____________________________
Signatures must be guaranteed by an "eligible
guarantor institution" meeting the requirements of
the Registrar, which requirements include
membership or participation in the Security
Transfer Agent Medallion Program ("STAMP") or such
other "signature guarantee program" as may be
determined by the Registrar in addition to, or in
substitution for, STAMP, all in accordance with
the Securities Exchange Act of 1934, as amended.
11
<PAGE>
SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE
The following exchanges of a part of this Global Note for an interest
in another Global Note or for a Definitive Note, or exchanges of a part of
another Global Note or Definitive Note for an interest in this Global Note, have
been made:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
Principal Amount
Amount of Amount of of Signature of
decrease in increase in this Global Note authorized
Principal Amount Principal Amount following such officer of
of of decrease (or Trustee or
Date of Exchange this Global Note this Global Note increase) Note Custodian
- ----------------- ------------------- ------------------- -------------------- -----------------
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
</TABLE>
12
<PAGE>
Assignment Form
To assign this Note, fill in the form below: (I) or (we) assign and transfer
this Note to
________________________________________________________________________________
(Insert assignee's soc. sec. or tax I.D. no.)
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Print or type assignee's name, address and zip code)
and irrevocably appoint_________________________________________________________
to transfer this Note on the books of the Company. The agent may substitute
another to act for him.
Date:________________________
Your Signature:________________________________________
(Sign exactly as your name appears on the face of this
Note)
Signatures must be guaranteed by an "eligible guarantor
institution" meeting the requirements of the Registrar,
which requirements include membership or participation
in the Security Transfer Agent Medallion Program
("STAMP") or such other "signature guarantee program"
as may be determined by the Registrar in addition to,
or in substitution for, STAMP, all in accordance with
the Securities Exchange Act of 1934, as amended.
<PAGE>
Option of Holder to Elect Purchase
If you want to elect to have this Note purchased by the Company
pursuant to Section 4.10 or 4.15 of the Indenture, check the box below:
[_] Section 4.10 [_] Section 4.15
If you want to elect to have only part of the Note purchased by the
Company pursuant to Section 4.10 or Section 4.15 of the Indenture, state the
amount you elect to have purchased: $________
Date:_________________ Your Signature:___________________________________
(Sign exactly as your name appears on the Note)
Tax Identification No:____________________________
Signatures must be guaranteed by an "eligible
guarantor institution" meeting the requirements of
the Registrar, which requirements include
membership or participation in the Security
Transfer Agent Medallion Program ("STAMP") or such
other "signature guarantee program" as may be
determined by the Registrar in addition to, or in
substitution for, STAMP, all in accordance with
the Securities Exchange Act of 1934, as amended.
<PAGE>
Exhibit 4.4
================================================================================
REGISTRATION RIGHTS AGREEMENT
May 21, 1998
-----------------------------
by and among
OnePoint Communications Corp.,
The Guarantors Named on
the Signature Pages Hereto
and
Bear, Stearns & Co. Inc.
and
NationsBanc Montgomery Securities LLC
-----------------------------
================================================================================
<PAGE>
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement") is made and entered
into as of May 21, 1998, by and among OnePoint Communications Corp., a Delaware
corporation (the "Company"), OnePoint Communications Holdings, LLC, OnePoint
Communications-Georgia, LLC, OnePoint Communications-Illinois, LLC, OnePoint
Communications-Colorado, LLC and VIC-RMTS-DC, LLC (collectively, the
"Guarantors") and Bear, Stearns & Co. Inc. and NationsBanc Montgomery Securities
LLC (each an "Initial Purchaser" and, collectively, the "Initial Purchasers"),
each of whom has agreed to purchase the Company's 14-1/2% Senior Notes due 2008
(the "Series A Notes") pursuant to the Purchase Agreement (as defined below).
This Agreement is made pursuant to the Purchase Agreement, dated May 15,
1998, (the "Purchase Agreement"), by and among the Company, the Guarantors and
the Initial Purchasers. In order to induce the Initial Purchasers to purchase
the Series A Notes, the Company and the Guarantors have agreed to provide the
registration rights set forth in this Agreement. The execution and delivery of
this Agreement is a condition to the obligations of the Initial Purchasers set
forth in Section 9 of the Purchase Agreement. Capitalized terms used herein and
not otherwise defined shall have the meaning assigned to them in the Indenture,
dated May 21, 1998, among the Company, the Guarantors and Harris Trust and
Savings Bank, as Trustee (the "Trustee"), relating to the Series A and Series B
Notes (the "Indenture").
The parties hereby agree as follows:
SECTION 1. DEFINITIONS.
As used in this Agreement, the following capitalized terms shall have the
following meanings:
Act: The Securities Act of 1933, as amended.
Affiliate: As defined in Rule 144 of the Act.
Broker-Dealer: Any broker or dealer registered under the Exchange Act.
Certificated Securities: Definitive Notes, as defined in the Indenture.
Closing Date: The date hereof.
Commission: The Securities and Exchange Commission.
Consummate: An Exchange Offer shall be deemed "Consummated" for purposes
of this Agreement upon the occurrence of (a) the filing and effectiveness under
the Act of the Exchange Offer Registration Statement relating to the Series B
Notes to be issued in the Exchange Offer, (b) the maintenance of such Exchange
Offer Registration Statement continuously effective and the keeping of the
Exchange Offer open for a period not less than the period required pursuant to
Section 3(b) hereof and (c) the delivery by the Company to the Registrar under
the Indenture of Series B Notes in the same aggregate principal amount as the
aggregate principal amount of Series A Notes tendered by Holders thereof
pursuant to the Exchange Offer.
Consummation Deadline: As defined in Section 3(b) hereof.
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Effectiveness Deadline: As defined in Section 3(a) and 4(a) hereof.
Exchange Act: The Securities Exchange Act of 1934, as amended.
Exchange Offer: The offer by the Company to holders of Transfer Restricted
Securities of the opportunity to exchange such Transfer Restricted Securities
for Series B Notes (which shall be registered pursuant to the Exchange Offer
Registration Statement) in an aggregate principal amount equal to the
outstanding principal amount of Series A Notes that are tendered by such Holders
in connection with such exchange.
Exchange Offer Registration Statement: The Registration Statement relating
to the Exchange Offer, including the related Prospectus.
Exempt Resales: The transactions in which the Initial Purchasers propose
to sell the Series A Notes to certain "qualified institutional buyers," as such
term is defined in Rule 144A under the Act and pursuant to Regulation S under
the Act.
Filing Deadline: As defined in Sections 3(a) and 4(a) hereof.
Holders: As defined in Section 2 hereof.
Prospectus: The prospectus included in a Registration Statement at the
time such Registration Statement is declared effective, as amended or
supplemented by any prospectus supplement and by all other amendments thereto,
including post-effective amendments, and all material incorporated by reference
into such Prospectus.
Recommencement Date: As defined in Section 6(d) hereof.
Registration Default: As defined in Section 5 hereof.
Registration Statement: Any registration statement of the Company and the
Guarantors relating to (a) an offering of Series B Notes pursuant to an Exchange
Offer or (b) the registration for resale of Transfer Restricted Securities
pursuant to the Shelf Registration Statement, in each case, (i) that is filed
pursuant to the provisions of this Agreement and (ii) including the Prospectus
included therein, all amendments and supplements thereto (including post-
effective amendments) and all exhibits and material incorporated by reference
therein.
Regulation S: Regulation S promulgated under the Act.
Rule 144: Rule 144 promulgated under the Act.
Series B Notes: The Company's 14-1/2% Senior Notes due 2008 to be issued
pursuant to the Indenture (i) in the Exchange Offer or (ii) as contemplated by
Section 4 hereof.
Shelf Registration Statement: As defined in Section 4 hereof.
Suspension Notice: As defined in Section 6(d) hereof.
TIA: The Trust Indenture Act of 1939 (15 U.S.C. Section 77aaa-77bbbb) as in
effect on the date of the Indenture.
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Transfer Restricted Securities: Each Series A Note, until the earliest to
occur of (a) the date on which such Series A Note is exchanged in the Exchange
Offer for a Series B Note which is entitled to be resold to the public by the
Holder thereof without complying with the prospectus delivery requirements of
the Act, (b) the date on which such Series A Note has been disposed of in
accordance with a Shelf Registration Statement, (c) the date on which such Note
is disposed of by a Broker-Dealer pursuant to the "Plan of Distribution"
contemplated by the Exchange Offer Registration Statement (including delivery of
the Prospectus contained therein) or (d) the date on which such Note is
distributed to the public pursuant to Rule 144 under the Act.
SECTION 2. HOLDERS.
A Person is deemed to be a holder of Transfer Restricted Securities (each,
a "Holder") whenever such Person owns Transfer Restricted Securities.
SECTION 3. REGISTERED EXCHANGE OFFER.
(a) Unless the Exchange Offer shall not be permitted by applicable federal
law (after the procedures set forth in Section 6(a)(i) below have been complied
with), the Company and the Guarantors shall (i) cause the Exchange Offer
Registration Statement to be filed with the Commission as soon as practicable
after the Closing Date, but in no event later than 120 days after the Closing
Date (such 120th day being the "Filing Deadline"), (ii) use its best efforts to
cause such Exchange Offer Registration Statement to be declared effective by the
Commission on or prior to 180 days after the Closing Date (such 180th day being
the "Effectiveness Deadline"), (iii) in connection with the foregoing, (A) file
all pre-effective amendments to such Exchange Offer Registration Statement as
may be necessary in order to cause it to become effective, (B) file, if
applicable, a post-effective amendment to such Exchange Offer Registration
Statement pursuant to Rule 430A under the Act and (C) cause all necessary
filings, if any, in connection with the registration and qualification of the
Series B Notes to be made under the Blue Sky laws of such jurisdictions as are
necessary to permit Consummation of the Exchange Offer, and (iv) upon the
effectiveness of such Exchange Offer Registration Statement, commence and
Consummate the Exchange Offer. The Exchange Offer shall be on the appropriate
form permitting (i) registration of the Series B Notes to be offered in exchange
for the Notes that are Transfer Restricted Securities and (ii) resales of Series
B Notes by Broker-Dealers that tendered into the Exchange Offer for Series A
Notes that such Broker-Dealer acquired for its own account as a result of market
making activities or other trading activities (other than Series A Notes
acquired directly from the Company or any of its Affiliates) as contemplated by
Section 3(c) below.
(b) The Company and the Guarantors shall use their respective best efforts
to cause the Exchange Offer Registration Statement to be effective continuously,
and shall keep the Exchange Offer open for a period of not less than the minimum
period required under applicable federal and state securities laws to Consummate
the Exchange Offer; provided, however, that in no event shall such period be
less than 20 Business Days. The Company and the Guarantors shall cause the
Exchange Offer to comply with all applicable federal and state securities laws.
No securities other than the Series B Notes shall be included in the Exchange
Offer Registration Statement. The Company and the Guarantors shall use their
respective best efforts to cause the Exchange Offer to be Consummated on the
earliest practicable date after the Exchange Offer Registration Statement has
become effective, but in no event later than 30 Business Days thereafter (such
30th day being the "Consummation Deadline").
(c) The Company shall include a "Plan of Distribution" section in the
Prospectus contained in
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<PAGE>
the Exchange Offer Registration Statement and indicate therein that any Broker-
Dealer who holds Transfer Restricted Securities that were acquired for the
account of such Broker-Dealer as a result of market-making activities or other
trading activities (other than Transfer Restricted Securities acquired directly
from the Company or any Affiliate of the Company), may exchange such Transfer
Restricted Securities pursuant to the Exchange Offer; however, such Broker-
Dealer may be deemed to be an "underwriter" within the meaning of the Act and
must, therefore, deliver a prospectus meeting the requirements of the Act in
connection with its initial sale of any Series B Notes received by such Broker-
Dealer in the Exchange Offer and that the Prospectus contained in the Exchange
Offer Registration Statement may be used to satisfy such Prospectus delivery
requirement. Such "Plan of Distribution" section shall also contain all other
information with respect to such sales by such Broker-Dealers that the
Commission may require in order to permit such sales pursuant thereto, but such
"Plan of Distribution" shall not name any such Broker-Dealer or disclose the
amount of Transfer Restricted Securities held by any such Broker-Dealer, except
to the extent required by the Commission as a result of a change in policy,
rules or regulations after the date of this Agreement.
To the extent necessary to ensure that the prospectus contained in the
Exchange Offer Registration Statement is available for sales of Series B Notes
by Broker-Dealers, the Company and the Guarantors agree to use their respective
best efforts to keep the Exchange Offer Registration Statement continuously
effective, supplemented, amended and current as required by and subject to the
provisions of Section 6(a) and (c) hereof and in conformity with the
requirements of this Agreement, the Act and the policies, rules and regulations
of the Commission as announced from time to time, for a period of one year from
the Consummation Deadline or such shorter period as will terminate when all
Transfer Restricted Securities covered by such Registration Statement have been
sold pursuant thereto. The Company and the Guarantors shall promptly provide
sufficient copies of the latest version of such Prospectus to such Broker-
Dealers, promptly upon request, and in no event later than one day after such
request, at any time during such period.
On the date of filing of the Exchange Offer on a Shelf Registration
Statement, as the case may be, notice shall be delivered to Bear, Stearns & Co.,
245 Park Avenue, New York, New York 10167, on behalf of the Initial Purchasers
(in the form attached hereto as Exhibit A).
SECTION 4. SHELF REGISTRATION.
(a) Shelf Registration. If (i) the Exchange Offer is not permitted by
applicable law (after the Company and the Guarantors have complied with the
procedures set forth in Section 6(a)(i) below) or (ii) if any Holder of Transfer
Restricted Securities shall notify the Company within 20 Business Days following
the Consummation Deadline that (A) such Holder was prohibited by law or
Commission policy from participating in the Exchange Offer or (B) such Holder
may not resell the Series B Notes acquired by it in the Exchange Offer to the
public without delivering a prospectus and the Prospectus contained in the
Exchange Offer Registration Statement is not appropriate or available for such
resales by such Holder or (C) such Holder is a Broker-Dealer and holds Series A
Notes acquired directly from the Company or any of its Affiliates, then the
Company and the Guarantors shall:
(x) cause to be filed, on or prior to 30 days after the earlier
of (i) the date on which the Company determines that the Exchange Offer
Registration Statement cannot be filed as a result of clause (a)(i) above
and (ii) the date on which the Company receives the notice specified in
clause (a)(ii) above, (such earlier date, the "Filing Deadline"), a shelf
registration statement pursuant to Rule 415 under the Act (which may be an
amendment to the Exchange
-4-
<PAGE>
Offer Registration Statement (the "Shelf Registration Statement")),
relating to all Transfer Restricted Securities, and
(y) shall use their respective best efforts to cause such Shelf
Registration Statement to become effective on or prior to 90 days after the
Filing Deadline for the Shelf Registration Statement (such 90th day the
"Effectiveness Deadline").
If, after the Company has filed an Exchange Offer Registration Statement
that satisfies the requirements of Section 3(a) above, the Company is required
to file and make effective a Shelf Registration Statement solely because the
Exchange Offer is not permitted under applicable federal law (i.e., clause
(a)(i) above), then the filing of the Exchange Offer Registration Statement
shall be deemed to satisfy the requirements of clause (x) above; provided that,
in such event, the Company shall remain obligated to meet the Effectiveness
Deadline set forth in clause (y).
To the extent necessary to ensure that the Shelf Registration Statement is
available for sales of Transfer Restricted Securities by the Holders thereof
entitled to the benefit of this Section 4(a) and the other securities required
to be registered therein pursuant to Section 6(b)(ii) hereof, the Company and
the Guarantors shall use their respective best efforts to keep any Shelf
Registration Statement required by this Section 4(a) continuously effective,
supplemented, amended and current as required by and subject to the provisions
of Sections 6(b) and (c) hereof and in conformity with the requirements of this
Agreement, the Act and the policies, rules and regulations of the Commission as
announced from time to time, for a period of at least two years (as extended
pursuant to Section 6(c)(i)) following the Closing Date, or such shorter period
as will terminate when all Transfer Restricted Securities covered by such Shelf
Registration Statement have been sold pursuant thereto.
(b) Provision by Holders of Certain Information in Connection with the
Shelf Registration Statement. No Holder of Transfer Restricted Securities may
include any of its Transfer Restricted Securities in any Shelf Registration
Statement pursuant to this Agreement unless and until such Holder furnishes to
the Company in writing, within 20 days after receipt of a request therefor, the
information specified in Item 507 or 508 of Regulation S-K, as applicable, of
the Act for use in connection with any Shelf Registration Statement or
Prospectus or preliminary Prospectus included therein. No Holder of Transfer
Restricted Securities shall be entitled to liquidated damages pursuant to
Section 5 hereof unless and until such Holder shall have provided all such
information. Each selling Holder agrees to promptly furnish additional
information required to be disclosed in order to make the information previously
furnished to the Company by such Holder not materially misleading.
(c) Black Out Period. During any consecutive 365 day period, the Company
may suspend the effectiveness of the Shelf Registration Statement on two
occasions for a period of not more than 45 consecutive days if there is a
possible acquisition or business combination or other transaction, business
development or event involving the Company that may require disclosure in the
Shelf Registration Statement and the Board of Directors of the Company
determines in the exercise of its reasonable judgment that such disclosure is
not in the best interests of the Company and its stockholders or obtaining any
financial statements relating to an acquisition or business combination required
to be included in the Shelf Registration Statement would be impracticable. In
such a case, the Company shall promptly notify the Holders of the suspension of
the Shelf Registration Statements effectiveness, provided that such notice shall
not require the Company to disclose the possible acquisition or business
combination or other transaction, business development or event if the Board of
Directors of the Company determines in good faith that such acquisition or
business combination or other transaction, business development or even should
remain confidential. Upon the abandonment, consummation, or
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<PAGE>
termination of the possible acquisition or business combination or other
transaction, business development or event, or the availability of the required
financial statements with respect to a possible acquisition or business
combination, the suspension of the use of the Shelf Registration Statement
pursuant to this Section 4(c) shall cease and the Company shall promptly comply
with Section 6(c)(ii) hereof and notify the Holders that disposition of
Registrable Securities may be resumed.
SECTION 5. LIQUIDATED DAMAGES.
If (i) any Registration Statement required by this Agreement is not filed
with the Commission on or prior to the applicable Filing Deadline, (ii) any such
Registration Statement has not been declared effective by the Commission on or
prior to the applicable Effectiveness Deadline, (iii) the Exchange Offer has not
been Consummated on or prior to the Consummation Deadline or (iv) any
Registration Statement required by this Agreement is filed and declared
effective but shall thereafter cease to be effective or fail to be usable for
its intended purpose without being succeeded immediately by a post-effective
amendment to such Registration Statement that cures such failure and that is
itself declared effective immediately (each such event referred to in clauses
(i) through (iv), a "Registration Default"), then the Company and the Guarantors
hereby jointly and severally agree to pay to each Holder of Transfer Restricted
Securities affected thereby liquidated damages in an amount equal to $.05 per
week per $1,000 in principal amount of Transfer Restricted Securities held by
such Holder for each week or portion thereof that the Registration Default
continues for the first 90-day period immediately following the occurrence of
such Registration Default. The amount of the liquidated damages shall increase
by an additional $.05 per week per $1,000 in principal amount of Transfer
Restricted Securities with respect to each subsequent 90-day period until all
Registration Defaults have been cured, up to a maximum amount of liquidated
damages of $.50 per week per $1,000 in principal amount of Transfer Restricted
Securities; provided that the Company and the Guarantors shall in no event be
required to pay liquidated damages for more than one Registration Default at any
given time. Notwithstanding anything to the contrary set forth herein, (1) upon
filing of the Exchange Offer Registration Statement and the Shelf Registration
Statement, in the case of (i) above, (2) upon the effectiveness of the Exchange
Offer Registration Statement and the Shelf Registration Statement, in the case
of (ii) above, (3) upon Consummation of the Exchange Offer, in the case of (iii)
above, or (4) upon the filing of a post-effective amendment to the Registration
Statement or an additional Registration Statement that causes the Exchange Offer
Registration Statement and the Shelf Registration Statement to again be declared
effective or made usable in the case of (iv) above, the liquidated damages
payable with respect to the Transfer Restricted Securities as a result of such
clause (i), (ii), (iii) or (iv), as applicable, shall cease.
All accrued liquidated damages shall be paid to the Holders entitled
thereto, in the manner provided for the payment of interest in the Indenture, on
each Interest Payment Date, as more fully set forth in the Indenture and the
Notes. All obligations of the Company and the Guarantors set forth in the
preceding paragraph that are outstanding with respect to any Transfer Restricted
Securities at the time such security ceases to be a Transfer Restricted Security
shall survive until such time as such obligations with respect to such security
shall have been satisfied in full.
SECTION 6. REGISTRATION PROCEDURES.
(a) Exchange Offer Registration Statement. In connection with the Exchange
Offer, the Company and the Guarantors shall (x) comply with all applicable
provisions of Section 6(c) below, (y) use their respective best efforts to
effect such exchange and to permit the resale of Series B Notes by Broker-
Dealers that tendered in the Exchange Offer Series A Notes that such Broker-
Dealer acquired for
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<PAGE>
its own account as a result of its market making activities or other trading
activities (other than Series A Notes acquired directly from the Company or any
of its Affiliates) being sold in accordance with the intended method or methods
of distribution thereof, and (z) comply with all of the following provisions:
(i) If, following the date hereof there has been announced a change
in Commission policy with respect to exchange offers such as the Exchange
Offer, that in the reasonable opinion of counsel to the Company raises a
substantial question as to whether the Exchange Offer is permitted by
applicable federal law, the Company and the Guarantors hereby agree to seek
a no-action letter or other favorable decision from the Commission allowing
the Company and the Guarantors to Consummate an Exchange Offer for such
Transfer Restricted Securities. The Company and the Guarantors hereby agree
to pursue the issuance of such a decision to the Commission staff level. In
connection with the foregoing, the Company and the Guarantors hereby agree
to take all such other actions as may be requested by the Commission or
otherwise required in connection with the issuance of such decision,
including without limitation (A) participating in telephonic conferences
with the Commission, (B) delivering to the Commission staff an analysis
prepared by counsel to the Company setting forth the legal bases, if any,
upon which such counsel has concluded that such an Exchange Offer should be
permitted and (C) diligently pursuing a resolution (which need not be
favorable) by the Commission staff.
(ii) As a condition to its participation in the Exchange Offer, each
Holder of Transfer Restricted Securities (including, without limitation,
any Holder who is a Broker Dealer) shall furnish, upon the request of the
Company, prior to the Consummation of the Exchange Offer, a written
representation to the Company and the Guarantors (which may be contained in
the letter of transmittal contemplated by the Exchange Offer Registration
Statement) to the effect that (A) it is not an Affiliate of the Company,
(B) it is not engaged in, and does not intend to engage in, and has no
arrangement or understanding with any person to participate in, a
distribution of the Series B Notes to be issued in the Exchange Offer and
(C) it is acquiring the Series B Notes in its ordinary course of business.
As a condition to its participation in the Exchange Offer each Holder using
the Exchange Offer to participate in a distribution of the Series B Notes
shall acknowledge and agree that, if the resales are of Series B Notes
obtained by such Holder in exchange for Series A Notes acquired directly
from the Company or an Affiliate thereof, it (1) could not, under
Commission policy as in effect on the date of this Agreement, rely on the
position of the Commission enunciated in Morgan Stanley and Co., Inc.
(available June 5, 1991) and Exxon Capital Holdings Corporation (available
May 13, 1988), as interpreted in the Commission's letter to Shearman &
Sterling dated July 2, 1993, and similar no-action letters (including, if
applicable, any no-action letter obtained pursuant to clause (i) above),
and (2) must comply with the registration and prospectus delivery
requirements of the Act in connection with a secondary resale transaction
and that such a secondary resale transaction must be covered by an
effective registration statement containing the selling security holder
information required by Item 507 or 508, as applicable, of Regulation S-K.
(iii) Prior to effectiveness of the Exchange Offer Registration
Statement, the Company and the Guarantors shall, if requested by the
Commission, provide a supplemental letter to the Commission (A) stating
that the Company and the Guarantors are registering the Exchange Offer in
reliance on the position of the Commission enunciated in Exxon Capital
Holdings Corporation (available May 13, 1988), Morgan Stanley and Co., Inc.
(available June 5, 1991) as interpreted in the Commission's letter to
Shearman & Sterling dated July 2, 1993, and, if applicable, any no-action
letter obtained pursuant to clause (i) above, (B) including a
representation that neither the Company nor any Guarantor has entered into
any arrangement or understanding with any Person
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<PAGE>
to distribute the Series B Notes to be received in the Exchange Offer and
that, to the best of the Company's and each Guarantor's information and
belief, each Holder participating in the Exchange Offer is acquiring the
Series B Notes in its ordinary course of business and has no arrangement or
understanding with any Person to participate in the distribution of the
Series B Notes received in the Exchange Offer and (C) any other undertaking
or representation required by the Commission as set forth in any no-action
letter obtained pursuant to clause (i) above, if applicable.
(b) Shelf Registration Statement. In connection with the Shelf
Registration Statement, the Company and the Guarantors shall comply with all the
provisions of Section 6(c) below and use their respective best efforts to effect
such registration to permit the sale of the Transfer Restricted Securities being
sold in accordance with the intended method or methods of distribution thereof
(as indicated in the information furnished to the Company pursuant to Section
4(b) hereof), and pursuant thereto the Company and the Guarantors will prepare
and file with the Commission a Registration Statement relating to the
registration on any appropriate form under the Act, which form shall be
available for the sale of the Transfer Restricted Securities in accordance with
the intended method or methods of distribution thereof within the time periods
and otherwise in accordance with the provisions hereof.
(c) General Provisions. In connection with any Registration Statement and
any related Prospectus required by this Agreement, the Company and the
Guarantors shall:
(i) use their respective best efforts to keep such Registration
Statement continuously effective and provide all requisite financial
statements for the period specified in Section 3 or 4 of this Agreement, as
applicable. Upon the occurrence of any event that would cause any such
Registration Statement or the Prospectus contained therein (A) to contain
an untrue statement of material fact or omit to state any material fact
necessary to make the statements therein not misleading or (B) not to be
effective and usable for resale of Transfer Restricted Securities during
the period required by this Agreement, the Company and the Guarantors shall
file promptly an appropriate amendment to such Registration Statement
curing such defect, and, if Commission review is required, use their
respective best efforts to cause such amendment to be declared effective as
soon as practicable.
(ii) prepare and file with the Commission such amendments and post-
effective amendments to the applicable Registration Statement as may be
necessary to keep such Registration Statement effective for the applicable
period set forth in Section 3 or 4 hereof, as the case may be; cause the
Prospectus to be supplemented by any required Prospectus supplement, and as
so supplemented to be filed pursuant to Rule 424 under the Act, and to
comply fully with Rules 424, 430A and 462, as applicable, under the Act in
a timely manner; and comply with the provisions of the Act with respect to
the disposition of all securities covered by such Registration Statement
during the applicable period in accordance with the intended method or
methods of distribution by the sellers thereof set forth in such
Registration Statement or supplement to the Prospectus;
(iii) advise each selling Holder named in any Registration Statement
or Prospectus ("Named Holders") and each Initial Purchaser who is required
to deliver a prospectus in connection with sales or market making
activities promptly and, if requested by such Holder, confirm such advice
in writing, (A) when the Prospectus or any Prospectus supplement or post-
effective amendment has been filed, and, with respect to any applicable
Registration Statement or any post-effective amendment thereto, when the
same has become effective, (B) of any request by
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the Commission for amendments to the Registration Statement or amendments
or supplements to the Prospectus or for additional information relating
thereto, (C) of the issuance by the Commission of any stop order suspending
the effectiveness of the Registration Statement under the Act or of the
suspension by any state securities commission of the qualification of the
Transfer Restricted Securities for offering or sale in any jurisdiction, or
the initiation of any proceeding for any of the preceding purposes, (D) of
the existence of any fact or the happening of any event that makes any
statement of a material fact made in the Registration Statement, the
Prospectus, any amendment or supplement thereto or any document
incorporated by reference therein untrue, or that requires the making of
any additions to or changes in the Registration Statement in order to make
the statements therein not misleading, or that requires the making of any
additions to or changes in the Prospectus in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading. If at any time the Commission shall issue any stop order
suspending the effectiveness of the Registration Statement, or any state
securities commission or other regulatory authority shall issue an order
suspending the qualification or exemption from qualification of the
Transfer Restricted Securities under state securities or Blue Sky laws, the
Company and the Guarantors shall use their respective best efforts to
obtain the withdrawal or lifting of such order at the earliest possible
time;
(iv) subject to Section 6(c)(i), if any fact or event contemplated
by Section 6(c)(iii)(D) above shall exist or have occurred, prepare a
supplement or post-effective amendment to the Registration Statement or
related Prospectus or any document incorporated therein by reference or file
any other required document so that, as thereafter delivered to the
purchasers of Transfer Restricted Securities, the Prospectus will not
contain an untrue statement of a material fact or omit to state any material
fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading;
(v) furnish to each Named Holder in connection with such exchange
or sale, if any, before filing with the Commission, copies of any
Registration Statement or any Prospectus included therein or any amendments
or supplements to any such Registration Statement or Prospectus (including
all documents incorporated by reference after the initial filing of such
Registration Statement), which documents will be subject to the review and
comment of such Named Holders in connection with such sale, if any, for a
period of at least five Business Days, and the Company will not file any
such Registration Statement or Prospectus or any amendment or supplement to
any such Registration Statement or Prospectus (including all such documents
incorporated by reference) to which such Named Holders shall reasonably
object within five Business Days after the receipt thereof. A Named Holder
shall be deemed to have reasonably objected to such filing if such
Registration Statement, amendment, Prospectus or supplement, as applicable,
as proposed to be filed, contains an untrue statement of a material fact or
omits to state any material fact necessary to make the statements therein
not misleading or fails to comply with the applicable requirements of the
Act;
(vi) promptly prior to the filing of any document that is to be
incorporated by reference into a Registration Statement or Prospectus,
provide copies of such document to each Named Holder in connection with
such exchange or sale, if any, make the Company's and the Guarantors'
representatives available for discussion of such document and other
customary due diligence matters, and include such information in such
document prior to the filing thereof as such Named Holders may reasonably
request;
(vii) make available, at reasonable times, for inspection by each
Named Holder and any
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attorney or accountant retained by such Named Holders, all financial and
other records, pertinent corporate documents of the Company and the
Guarantors subject to appropriate confidentiality agreements and cause the
Company's and the Guarantors' officers, directors and employees to supply
all information reasonably requested by any such Named Holder, attorney or
accountant in connection with such Registration Statement or any post-
effective amendment thereto subsequent to the filing thereof and prior to
its effectiveness;
(viii) if requested by any Named Holders in connection with such
exchange or, promptly include in any Registration Statement or Prospectus,
pursuant to a supplement or post-effective amendment if necessary, such
information as such Named Holders may reasonably request to have included
therein, including, without limitation, information relating to the "Plan
of Distribution" of the Transfer Restricted Securities; and make all
required filings of such Prospectus supplement or post-effective amendment
as soon as practicable after the Company is notified of the matters to be
included in such Prospectus supplement or post-effective amendment;
(ix) furnish to each Named Holder in connection with such exchange or
sale, without charge, at least one copy of the Registration Statement, as
first filed with the Commission, and of each amendment thereto, including
all documents incorporated by reference therein and all exhibits (including
exhibits incorporated therein by reference);
(x) deliver to each Named Holder without charge, as many copies of the
Prospectus (including each preliminary prospectus) and any amendment or
supplement thereto as such Persons reasonably may request; the Company and
the Guarantors hereby consent to the use (in accordance with law) of the
Prospectus and any amendment or supplement thereto by each selling Holder
in connection with the offering and the sale of the Transfer Restricted
Securities covered by the Prospectus or any amendment or supplement
thereto;
(xi) upon the request of any Holder, enter into such agreements
(including underwriting agreements) and make such representations and
warranties and take all such other actions in connection therewith in order
to expedite or facilitate the disposition of the Transfer Restricted
Securities pursuant to any applicable Registration Statement contemplated
by this Agreement as may be reasonably requested by any Holder in
connection with any sale or resale pursuant to any applicable Registration
Statement. In such connection, the Company and the Guarantors shall:
(A) upon request of any Named Holder, furnish (or in the case of
paragraphs (2) and (3), use its best efforts to cause to be furnished) to
each Named Holder, upon Consummation of the Exchange Offer or upon the
effectiveness of the Shelf Registration Statement, as the case may be:
(1) a certificate, dated such date, signed on behalf of the
Company and each Guarantor by (x) the President or any Vice President
and (y) a principal financial or accounting officer of the Company and
such Guarantor, confirming, as of the date thereof, matters of the
type set forth in the last sentence of Section 9(a) and Sections 9(b),
9(c) and 9(d) of the Purchase Agreement, and making representations
and warranties of the type set forth in Section 5 of the Purchase
Agreement, with respect to the applicable Registration Statement and
the securities offered thereby and such other similar matters as such
Holders may reasonably request;
(2) an opinion (which may be rendered by the general counsel of
the Company,
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<PAGE>
except in the case of an underwritten offering), dated the date of
Consummation of the Exchange Offer or the date of effectiveness of the
Shelf Registration Statement, as the case may be, of counsel for the
Company and the Guarantors covering matters similar to those set forth
in Sections 9(f), 9(g) and 9(h) of the Purchase Agreement and such
other matters as such Holder may reasonably request, and in any event
including a statement to the effect that such counsel has participated
in conferences with representatives of the Company and the Guarantors,
representatives of the Initial Purchasers and representatives of the
independent public accountants for the Company and the Guarantors
during which disclosures in the applicable Registration Statement were
discussed, that such counsel has reviewed certain other corporate
records furnished to it by the Company; and that based upon such
conversations and document review, such counsel's understanding of
applicable law and its experience gained in practicing thereunder and
relying as to materiality to the extent such counsel deems appropriate
upon the opinions and statements of officers of the Company and the
Guarantors, no facts came to such counsel's attention that caused such
counsel to conclude that the applicable Registration Statement, at the
time such Registration Statement or any post-effective amendment
thereto became effective, contained an untrue statement of a material
fact or omitted to state a material fact required to be stated therein
or necessary to make the statements contained therein not misleading,
in light of the circumstances under which they were made, or that the
Prospectus contained in such Registration Statement as of its date
and, in the case of the opinion dated the date of Consummation of the
Exchange Offer, as of the date of Consummation, contained an untrue
statement of a material fact or omitted to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. Without
limiting the foregoing, such counsel may state further that such
counsel assumes no responsibility for, and has not independently
verified, the accuracy, completeness or fairness of the financial
statements, notes and schedules, statistical and accounting data and
other financial data included in any Registration Statement
contemplated by this Agreement or the related Prospectus; and
(3) a customary comfort letter, dated the date of Consummation of
the Exchange Offer, or as of the date of effectiveness of the Shelf
Registration Statement, as the case may be, from the Company's
independent accountants, in the customary form and covering matters of
the type customarily covered in comfort letters to underwriters in
connection with underwritten offerings, and affirming the matters set
forth in the comfort letters delivered pursuant to Section 9(j) of the
Purchase Agreement; and
(B) deliver such other documents and certificates as may be
reasonably requested by the selling Holders to evidence compliance with the
matters covered in clause (A) above and with any customary conditions
contained in the agreement entered into by the Company and the Guarantors
pursuant to this clause (xi);
(xii) prior to any public offering of Transfer Restricted Securities,
cooperate with the Named Holders and their counsel in connection with the
registration and qualification of the Transfer Restricted Securities under
the securities or Blue Sky laws of such jurisdictions as the Named Holders
may request and do any and all other acts or things necessary or advisable
to enable the disposition in such jurisdictions of the Transfer Restricted
Securities covered by the applicable Registration Statement; provided,
however, that neither the Company nor any Guarantor shall be required to
register or qualify as a foreign corporation where it is not now so
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<PAGE>
qualified or to take any action that would subject it to the service of
process in suits or to taxation, other than as to matters and transactions
relating to the Registration Statement, in any jurisdiction where it is not
now so subject;
(xiii) issue, upon the request of any Holder or purchaser of Notes
covered by any Shelf Registration Statement contemplated by this Agreement,
Series B Notes having an aggregate principal amount equal to the aggregate
principal amount of Notes sold pursuant to the Shelf Registration Statement
and surrendered to the Company for cancellation; the Company shall register
Series B Notes on the Shelf Registration Statement for this purpose and
issue the Series B Notes to the purchasers of securities subject to the
Shelf Registration Statement in the names as such purchasers shall
designate.
(xiv) in connection with any sale of Transfer Restricted Securities
that will result in such securities no longer being Transfer Restricted
Securities, cooperate with the Named Holders to facilitate the timely
preparation and delivery of certificates representing Transfer Restricted
Securities to be sold and not bearing any restrictive legends; and to
register such Transfer Restricted Securities in such denominations and such
names as the selling Named Holders may request at least two Business Days
prior to such sale of Transfer Restricted Securities;
(xv) use their respective best efforts to cause the disposition of the
Transfer Restricted Securities covered by the Registration Statement to be
registered with or approved by such other governmental agencies or
authorities as may be necessary to enable the seller or sellers thereof to
consummate the disposition of such Transfer Restricted Securities, subject
to the proviso contained in clause (xii) above;
(xvi) provide a CUSIP number for all Transfer Restricted Securities
not later than the effective date of a Registration Statement covering such
Transfer Restricted Securities and provide the Trustee under the Indenture
with printed certificates for the Transfer Restricted Securities which are
in a form eligible for deposit with the Depository Trust Company;
(xvii) otherwise use their respective best efforts to comply with all
applicable rules and regulations of the Commission, and make generally
available to its security holders with regard to any applicable
Registration Statement, as soon as practicable, a consolidated earnings
statement meeting the requirements of Rule 158 (which need not be audited)
covering a twelve-month period beginning after the effective date of the
Registration Statement (as such term is defined in paragraph (c) of Rule
158 under the Act);
(xviii) cause the Indenture to be qualified under the TIA not later
than the effective date of the first Registration Statement required by
this Agreement and, in connection therewith, cooperate with the Trustee and
the Holders to effect such changes to the Indenture as may be required for
such Indenture to be so qualified in accordance with the terms of the TIA;
and execute and use its best efforts to cause the Trustee to execute, all
documents that may be required to effect such changes and all other forms
and documents required to be filed with the Commission to enable such
Indenture to be so qualified in a timely manner; and
(xix) provide promptly to each Holder, upon request, each document
filed with the Commission pursuant to the requirements of Section 13 or
Section 15(d) of the Exchange Act.
(d) Restrictions on Holders. Each Holder agrees by acquisition of a
Transfer Restricted
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Security that, upon receipt of the notice referred to in Section 6(c)(iii)(C) or
any notice from the Company of the existence of any fact of the kind described
in Section 6(c)(iii)(D) hereof (in each case, a "Suspension Notice"), such
Holder will forthwith discontinue disposition of Transfer Restricted Securities
pursuant to the applicable Registration Statement until (i) such Holder has
received copies of the supplemented or amended Prospectus contemplated by
Section 6(c)(iv) hereof, or (ii) such Holder is advised in writing by the
Company that the use of the Prospectus may be resumed, and has received copies
of any additional or supplemental filings that are incorporated by reference in
the Prospectus (in each case, the "Recommencement Date"). Each Holder receiving
a Suspension Notice hereby agrees that it will either (i) destroy any
Prospectuses, other than permanent file copies, then in such Holder's possession
which have been replaced by the Company with more recently dated Prospectuses or
(ii) deliver to the Company (at the Company's expense) all copies, other than
permanent file copies, then in such Holder's possession of the Prospectus
covering such Transfer Restricted Securities that was current at the time of
receipt of the Suspension Notice. The time period regarding the effectiveness of
such Registration Statement set forth in Section 3 or 4 hereof, as applicable,
shall be extended by a number of days equal to the number of days in the period
from and including the date of delivery of the Suspension Notice to the date of
delivery of the Recommencement Date.
SECTION 7. REGISTRATION EXPENSES.
(a) All expenses incident to the Company's and the Guarantors' performance
of or compliance with this Agreement will be borne by the Company, regardless of
whether a Registration Statement becomes effective, including without
limitation: (i) all registration and filing fees and expenses; (ii) all fees and
expenses of compliance with federal securities and state Blue Sky or securities
laws; (iii) all expenses of printing (including printing certificates for the
Series B Notes to be issued in the Exchange Offer and printing of Prospectuses
whether for exchanges, sales, market making or otherwise), messenger and
delivery services and telephone; (iv) all fees and disbursements of counsel for
the Company, the Guarantors and the Holders of Transfer Restricted Securities;
provided that the Company shall not be responsible for the fees and
disbursements of more than one counsel for all Holders of Transfer Restricted
Securities pursuant to 7(b); and (v) all fees and disbursements of independent
certified public accountants of the Company and the Guarantors (including the
expenses of any special audit and comfort letters required by or incident to
such performance).
The Company will, in any event, bear its and the Guarantors' internal
expenses (including, without limitation, all salaries and expenses of its
officers and employees performing legal or accounting duties), the expenses of
any annual audit and the fees and expenses of any Person, including special
experts, retained by the Company or the Guarantors.
(b) In connection with any Registration Statement required by this
Agreement (including, without limitation, the Exchange Offer Registration
Statement and the Shelf Registration Statement), the Company and the Guarantors
will reimburse the Initial Purchasers and the Holders of Transfer Restricted
Securities who are tendering Notes into in the Exchange Offer and/or selling or
reselling Notes or Series B Notes pursuant to the "Plan of Distribution"
contained in the Exchange Offer Registration Statement or the Shelf Registration
Statement, as applicable, for the reasonable fees and disbursements of not more
than one counsel, who shall be Latham & Watkins, unless another firm shall be
chosen by the Holders of a majority in principal amount of the Transfer
Restricted Securities for whose benefit such Registration Statement is being
prepared.
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<PAGE>
SECTION 8. INDEMNIFICATION.
(a) The Company and the Guarantors agree, jointly and severally, to
indemnify and hold harmless each Holder, its directors, officers and each
Person, if any, who controls such Holder (within the meaning of Section 15 of
the Act or Section 20 of the Exchange Act), from and against any and all losses,
claims, damages, liabilities, judgments, (including without limitation, any
reasonable legal or other expenses incurred in connection with investigating or
defending any matter, including any action that could give rise to any such
losses, claims, damages, liabilities or judgments) caused by any untrue
statement or alleged untrue statement of a material fact contained in any
Registration Statement, preliminary prospectus or Prospectus (or any amendment
or supplement thereto) provided by the Company to any Holder or any prospective
purchaser of Series B Notes or registered Notes, or caused by any omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading in light of the
circumstances in which they were made, except insofar as such losses, claims,
damages, liabilities or judgments are caused by an untrue statement or omission
or alleged untrue statement or omission that is based upon information relating
to any of the Holders furnished in writing to the Company by any of the Holders.
Notwithstanding the foregoing, the Company and the Guarantors shall not be
liable with respect to any Shelf Registration, to the extent that any such Loss
arises out of, or is based upon, an untrue statement or alleged untrue statement
or omission or alleged omission made in any preliminary prospectus if (i) the
selling Holder of registered Notes failed to send or deliver a copy of the
Prospectus with or prior to the delivery of written confirmation of the sale of
Notes to the person asserting such Loss or who purchased such Notes which are
the subject thereof and (ii) the Prospectus would have corrected such untrue
statement or omission or alleged untrue statement or alleged omission.
(b) Each Holder of Transfer Restricted Securities agrees, severally and not
jointly, to indemnify and hold harmless the Company and the Guarantors, and
their respective directors and officers, and each person, if any, who controls
(within the meaning of Section 15 of the Act or Section 20 of the Exchange Act)
the Company or the Guarantors to the same extent as the foregoing indemnity from
the Company and the Guarantors set forth in section (a) above, but only with
reference to information relating to such Holder furnished in writing to the
Company by such Holder expressly for use in any Registration Statement. In no
event shall any Holder, its directors, officers or any Person who controls such
Holder be liable or responsible for any amount in excess of the amount by which
the total amount received by such Holder with respect to its sale of Transfer
Restricted Securities pursuant to a Registration Statement exceeds (i) the
amount paid by such Holder for such Transfer Restricted Securities and (ii) the
amount of any damages that such Holder, its directors, officers or any Person
who controls such Holder has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission.
(c) In case any action shall be commenced involving any person in respect
of which indemnity may be sought pursuant to Section 8(a) or 8(b) (the
"indemnified party"), the indemnified party shall promptly notify the person
against whom such indemnity may be sought (the "indemnifying person") in writing
and the indemnifying party shall assume the defense of such action, including
the employment of counsel reasonably satisfactory to the indemnified party and
the payment of all fees and expenses of such counsel, as incurred (except that
in the case of any action in respect of which indemnity may be sought pursuant
to both Sections 8(a) and 8(b), a Holder shall not be required to assume the
defense of such action pursuant to this Section 8(c), but may employ separate
counsel and participate in the defense thereof, but the fees and expenses of
such counsel, except as provided below, shall be at the expense of the Holder).
Any indemnified party shall have the right to employ separate counsel in any
such action and participate in the defense thereof, but the fees and expenses of
such counsel shall be at
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the expense of the indemnified party unless (i) the employment of such counsel
shall have been specifically authorized in writing by the indemnifying party,
(ii) the indemnifying party shall have failed to assume the defense of such
action or employ counsel reasonably satisfactory to the indemnified party or
(iii) the named parties to any such action (including any impleaded parties)
include both the indemnified party and the indemnifying party, and the
indemnified party shall have been advised by such counsel that there may be one
or more legal defenses available to it which are different from or additional to
those available to the indemnifying party (in which case the indemnifying party
shall not have the right to assume the defense of such action on behalf of the
indemnified party). In any such case, the indemnifying party shall not, in
connection with any one action or separate but substantially similar or related
actions in the same jurisdiction arising out of the same general allegations or
circumstances, be liable for the fees and expenses of more than one separate
firm of attorneys (in addition to any local counsel) for all indemnified parties
and all such fees and expenses shall be reimbursed as they are incurred. Such
firm shall be designated in writing by a majority of the Holders, in the case of
the parties indemnified pursuant to Section 8(a), and by the Company and
Guarantors, in the case of parties indemnified pursuant to Section 8(b). No
indemnifying party shall be liable for any settlement of any claim or action
effected without its prior written consent. No indemnifying party shall, without
the prior written consent of the indemnified party, effect any settlement or
compromise of, or consent to the entry of judgment with respect to, any pending
or threatened action in respect of which the indemnified party is or could have
been a party and indemnity or contribution may be or could have been sought
hereunder by the indemnified party, unless such settlement, compromise or
judgment (i) includes an unconditional release of the indemnified party from all
liability on claims that are or could have been the subject matter of such
action and (ii) does not include a statement as to or an admission of fault,
culpability or a failure to act, by or on behalf of the indemnified party.
(d) To the extent that the indemnification provided for in this Section 8
is unavailable to an indemnified party in respect of any losses, claims,
damages, liabilities or judgments referred to therein, then each indemnifying
party, in lieu of indemnifying such indemnified party, shall contribute to the
amount paid or payable by such indemnified party as a result of such losses,
claims, damages, liabilities or judgments (i) in such proportion as is
appropriate to reflect the relative benefits received by the Company and the
Guarantors, on the one hand, and the Holders, on the other hand, from their sale
of Transfer Restricted Securities or (ii) if the allocation provided by clause
8(d)(i) is not permitted by applicable law, in such proportion as is appropriate
to reflect not only the relative benefits referred to in clause 8(d)(i) above
but also the relative fault of the Company and the Guarantors, on the one hand,
and of the Holder, on the other hand, in connection with the statements or
omissions which resulted in such losses, claims, damages, liabilities or
judgments, as well as any other relevant equitable considerations. The relative
fault of the Company and the Guarantors, on the one hand, and of the Holder, on
the other hand, shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied by the
Company or such Guarantor, on the one hand, or by the Holder, on the other hand,
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The amount paid or
payable by a party as a result of the losses, claims, damages, liabilities and
judgments referred to above shall be deemed to include, subject to the
limitations set forth in the second paragraph of Section 8(a), any legal or
other fees or expenses reasonably incurred by such party in connection with
investigating or defending any action or claim.
The Company, the Guarantors and each Holder agree that it would not be just
and equitable if contribution pursuant to this Section 8(d) were determined by
pro rata allocation (even if the Holders were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to in the immediately preceding paragraph.
The amount
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paid or payable by an indemnified party as a result of the losses, claims,
damages, liabilities or judgments referred to in the immediately preceding
paragraph shall be deemed to include, subject to the limitations set forth
above, any legal or other expenses reasonably incurred by such indemnified party
in connection with investigating or defending any matter, including any action
that could have given rise to such losses, claims, damages, liabilities or
judgments. Notwithstanding the provisions of this Section 8, no Holder, its
directors, its officers or any Person, if any, who controls such Holder shall be
required to contribute, in the aggregate, any amount in excess of the amount by
which the total received by such Holder with respect to the sale of Transfer
Restricted Securities pursuant to a Registration Statement exceeds the sum of
(i) the amount paid by such Holder for such Transfer Restricted Securities and
(ii) the amount of any damages which such Holder has otherwise been required to
pay by reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. The Holders'
obligations to contribute pursuant to this Section 8(c) are several in
proportion to the respective principal amount of Transfer Restricted Securities
held by each Holder hereunder and not joint.
Section 9. RULE 144A.
The Company and each Guarantor agree with each Holder, for so long as any
Transfer Restricted Securities remain outstanding and during any period in which
the Company or such Guarantor (i) is not subject to Section 13 or 15(d) of the
Exchange Act, to make available, upon request of any Holder, to such Holder or
beneficial owner of Transfer Restricted Securities in connection with any sale
thereof and any prospective purchaser of such Transfer Restricted Securities
designated by such Holder or beneficial owner, the information required by Rule
144A(d)(4) under the Act in order to permit resales of such Transfer Restricted
Securities pursuant to Rule 144A.
Section 10. MISCELLANEOUS.
(a) Remedies. The Company and the Guarantors acknowledge and agree that any
failure by the Company or the Guarantors to comply with their respective
obligations under Sections 3 and 4 hereof may result in material irreparable
injury to the Initial Purchasers or the Holders for which there is no adequate
remedy at law, that it will not be possible to measure damages for such injuries
precisely and that, in the event of any such failure, the Initial Purchasers or
any Holder may obtain such relief as may be required to specifically enforce the
Company's and the Guarantors' obligations under Sections 3 and 4 hereof. The
Company and the Guarantors further agree to waive the defense in any action for
specific performance that a remedy at law would be adequate.
(b) No Inconsistent Agreements. Neither the Company nor any Guarantor will,
on or after the date of this Agreement, enter into any agreement with respect to
its securities that is inconsistent with the rights granted to the Holders in
this Agreement or otherwise conflicts with the provisions hereof. Except for the
Warrant Registration Rights Agreement and the Registration Agreement between the
Company and Ventures in Communications II, LLC, neither the Company nor any
Guarantor has previously entered into any agreement granting any registration
rights with respect to its securities to any Person. The rights granted to the
Holders hereunder do not in any way conflict with and are not inconsistent with
the rights granted to the holders of the Company's and the Guarantors'
securities under any agreement in effect on the date hereof.
(c) Amendments and Waivers. The provisions of this Agreement may not be
amended,
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modified or supplemented, and waivers or consents to or departures from the
provisions hereof may not be given unless (i) in the case of Section 5 hereof
and this Section 10(c)(i), the Company has obtained the written consent of
Holders of all outstanding Transfer Restricted Securities and (ii) in the case
of all other provisions hereof, the Company has obtained the written consent of
Holders of a majority of the outstanding principal amount of Transfer Restricted
Securities (excluding Transfer Restricted Securities held by the Company or its
Affiliates). Notwithstanding the foregoing, a waiver or consent to departure
from the provisions hereof that relates exclusively to the rights of Holders
whose Transfer Restricted Securities are being tendered pursuant to the Exchange
Offer, and that does not affect directly or indirectly the rights of other
Holders whose Transfer Restricted Securities are not being tendered pursuant to
such Exchange Offer, may be given by the Holders of a majority of the
outstanding principal amount of Transfer Restricted Securities subject to such
Exchange Offer.
(d) Third Party Beneficiary. The Holders shall be third party
beneficiaries to the agreements made hereunder between the Company and the
Guarantors, on the one hand, and the Initial Purchasers, on the other hand, and
shall have the right to enforce such agreements directly to the extent they may
deem such enforcement necessary or advisable to protect its rights or the rights
of Holders hereunder.
(e) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, first-class mail
(registered or certified, return receipt requested), telex, telecopier, or air
courier guaranteeing overnight delivery:
(i) if to a Holder, at the address set forth on the records of the
Registrar under the Indenture, with a copy to the Registrar under the
Indenture; and
(ii) if to the Company or the Guarantors:
OnePoint Communications Corp.
2201 Waukegan Road
Suite E-200
Bannockburn, Illinois 60015
Telecopy No.: (847) 374-1070
Attention:
With a copy to:
Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Telecopy No.: (312) 861-2200
Attention: Laurie Gunther
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five Business
Days after being deposited in the mail, postage prepaid, if mailed; when receipt
acknowledged, if telecopied; and on the next Business Day, if timely delivered
to an air courier guaranteeing overnight delivery.
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Trustee at the
address specified in the Indenture.
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(f) Successors and Assigns. This Agreement shall inure to the benefit of
and be binding upon the successors and assigns of each of the parties, including
without limitation and without the need for an express assignment, subsequent
Holders; provided, that nothing herein shall be deemed to permit any assignment,
transfer or other disposition of Transfer Restricted Securities in violation of
the terms hereof or of the Purchase Agreement or the Indenture. If any
transferee of any Holder shall acquire Transfer Restricted Securities in any
manner, whether by operation of law or otherwise, such Transfer Restricted
Securities shall be held subject to all of the terms of this Agreement, and by
taking and holding such Transfer Restricted Securities such Person shall be
conclusively deemed to have agreed to be bound by and to perform all of the
terms and provisions of this Agreement, including the restrictions on resale set
forth in this Agreement and, if applicable, the Purchase Agreement, and such
Person shall be entitled to receive the benefits hereof.
(g) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(h) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(i) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE
CONFLICT OF LAW RULES THEREOF.
(j) Severability. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable, the validity, legality and enforceability of
any such provision in every other respect and of the remaining provisions
contained herein shall not be affected or impaired thereby.
(k) Entire Agreement. This Agreement is intended by the parties as a
final expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein
with respect to the registration rights granted with respect to the Transfer
Restricted Securities. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject matter.
[Signature page(s) follow]
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
ONEPOINT COMMUNICATIONS CORP.
By: /s/ James A. Otterbeck
___________________________________________
Name: James A. Otterbeck
Title: Chairman and Chief Executive Officer
ONEPOINT COMMUNICATIONS HOLDINGS, LLC
By: ONEPOINT COMMUNICATIONS CORP.,
its Manager
By: /s/ James A. Otterbeck
___________________________________________
Name: James A. Otterbeck
Title: Chairman and Chief Executive Officer
ONEPOINT COMMUNICATIONS - GEORGIA, LLC
By: ONEPOINT COMMUNICATIONS CORP.,
its Manager
By: /s/ James A. Otterbeck
___________________________________________
Name: James A. Otterbeck
Title: Chairman and Chief Executive Officer
ONEPOINT COMMUNICATIONS - ILLINOIS, LLC
By: ONEPOINT COMMUNICATIONS CORP.,
its Manager
By: /s/ James A. Otterbeck
___________________________________________
Name: James A. Otterbeck
Title: Chairman and Chief Executive Officer
<PAGE>
ONEPOINT COMMUNICATIONS - COLORADO, LLC
By: ONEPOINT COMMUNICATIONS CORP.,
its Manager
By: /s/ James A. Otterbeck
___________________________________________
Name: James A. Otterbeck
Title: Chairman and Chief Executive Officer
VIC-RMTS-DC, LLC
By: ONEPOINT COMMUNICATIONS CORP.,
its Manager
By: /s/ James A. Otterbeck
___________________________________________
Name: James A. Otterbeck
Title: Chairman and Chief Executive Officer
BEAR, STEARNS & CO. INC.,
on behalf of the Initial Purchasers
By: /s/ J. Andrew Bugas
________________________________
Name: J. Andrew Bugas
Title: Senior Managing Director
<PAGE>
EXHIBIT A
---------
NOTICE OF FILING
To: Bear, Stearns & Co.
245 Park Avenue
New York, New York 10167
Attention:
Fax: (212)
From: [Name of issuer]
[Name of 144A securities]
Date: _____________, 199___
For your information only (NO ACTION REQUIRED):
Today, _____________, 199___, we filed [an A/B Exchange Registration
Statement/a Shelf Registration Statement] with the Securities and Exchange
Commission. We currently expect this registration statement to be declared
effective within ___ business days of the date hereof.
<PAGE>
Exhibit 4.5
================================================================================
WARRANT AGREEMENT
----------------------------------
OnePoint Communications Corp.
as Issuer
and
Harris Trust and Savings Bank
as Warrant Agent
------------------------------------
May 21, 1998
------------------------------------
================================================================================
<PAGE>
WARRANT AGREEMENT dated as of May 21, 1998 between OnePoint
Communications Corp. (the "Company") and Harris Trust and Savings Bank, as
Warrant Agent (the "Warrant Agent").
WHEREAS, the Company proposes to issue common stock purchase warrants,
as hereinafter described (the "Warrants"), to purchase up to an aggregate of
111,125 shares of Common Stock, par value $0.01 per share (the "Common Stock"),
of the Company (the Common Stock issuable on exercise of the Warrants being
referred to herein as the "Warrant Shares"), in connection with a private
placement of an aggregate of $175,000,000 principal amount of the 14 1/2% Senior
Notes due 2008 (the "Notes") of the Company and 175,000 Warrants, each Warrant
entitling the holder thereof to purchase 0.635 Warrant Shares. The Notes and
Warrants will be sold in Units (the "Units"), each Unit consisting of $1,000 in
aggregate principal amount of Notes and One Warrant.
WHEREAS, the Company desires the Warrant Agent to act on behalf of the
Company, and the Warrant Agent is willing so to act, in connection with the
issuance of Warrant Certificates (as defined below) and other matters as
provided herein;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, the parties hereto agree as follows:
Section 1. Definitions.
"144A Global Warrant" means a Global Warrant in the form of Exhibit A1
hereto bearing the Global Warrant Legend and the Private Placement Legend and
deposited with or on behalf of, and registered in the name of, the Depositary or
its nominee that will be issued in a denomination equal to the outstanding
number of the Warrants sold in reliance on Rule 144A.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with") as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise; provided that
beneficial ownership of 10% or more of the voting equity interests of a Person
shall be deemed to be control.
"Applicable Procedures" means, with respect to any transfer or
exchange of or for beneficial interests in any Global Warrant, the rules and
procedures of the Depositary, Euroclear and Cedel Bank that apply to such
transfer or exchange.
"Business Day" means any day other than a Legal Holiday.
"Cedel Bank" means Cedel Bank, SA.
"Definitive Warrant" means a certificated Warrant registered in the
name of the holder thereof and issued in accordance with Section 3.6 hereof, in
the form of Exhibit A1 hereto except that such Warrant shall not bear the Global
Warrant Legend and shall not have the "Schedule of Exchanges of Interests in the
Global Warrant" attached thereto.
<PAGE>
"Depositary" means, with respect to the Warrants issuable or issued in
whole or in part in global form, the Person specified in Section 3.3 hereof as
the Depositary with respect to the Warrants, and any and all successors thereto
appointed as Depositary hereunder and having become such pursuant to the
applicable provision of this Indenture.
"Disinterested Director" means, in connection with any issuance of
securities that give rise to a determination of the Fair Market Value thereof
(as described in Section 8.7 hereof), each member of the Board of Directors of
the Company who is not an officer, employee, director or other Affiliate of the
party to whom the Company is proposing to issue the securities giving rise to
such determination.
"Euroclear" means Morgan Guaranty Trust Company of New York, Brussels
office, as operator of the Euroclear system.
"Global Warrants" means, individually and collectively, each of the
Restricted Global Warrants, in the form of Exhibits A1 and A2 hereto issued in
accordance with Section 3.1 hereof.
"Global Warrant Legend" means the legend set forth in Section
3.6(f)(ii), which is required to be placed on all Global Warrants issued under
this Warrant Agreement.
"IAI Global Warrant" means the Global Warrant in the form of Exhibit A
hereto bearing the Global Warrant Legend and the Private Placement Legend and
deposited with or on behalf of and registered in the name of the Depositary or
its nominee that will be issued in a denomination equal to the outstanding
number of the Warrants sold to Institutional Accredited Investors.
"Indirect Participant" means a Person who holds a beneficial interest
in a Global Warrant through a Participant.
"Institutional Accredited Investor" means an institution that is an
"accredited investor" as defined in Rule 501(a)(1), (2), (3) or (7) under the
Securities Act, who are not also QIBs.
"Legal Holiday" means a Saturday, a Sunday or a day on which banking
institutions in the City of New York, the City of Chicago, Illinois or at a
place of payment are authorized by law, regulation or executive order to remain
closed. If a payment date is a Legal Holiday at a place of payment, payment may
be made at that place on the next succeeding day that is not a Legal Holiday,
and no interest shall accrue on such payment for the intervening period.
"Non-U.S. Person" means a Person who is not a U.S. Person.
"Officer" means, with respect to any Person, the Chairman of the
Board, the Chief Executive Officer, the President, the Chief Operating Officer,
the Chief Financial Officer, the Treasurer, any Assistant Treasurer, the
Controller, the Secretary or any Vice-President of such Person.
"Opinion of Counsel" means an opinion from legal counsel who is
reasonably acceptable to the Warrant Agent in form and substance reasonably
acceptable to the Warrant Agent. The counsel may be an employee of or counsel to
the Company, any subsidiary of the Company or the Warrant Agent.
2
<PAGE>
"Participant" means, with respect to the Depositary, Euroclear or
Cedel, a Person who has an account with the Depositary, Euroclear or Cedel,
respectively (and, with respect to The Depository Trust Company, shall include
Euroclear and Cedel).
"Person" means any individual, corporation, limited liability company,
partnership, joint venture, association, joint-stock company, trust, business
trust, unincorporated organization or government or any agency or political
subdivision thereof.
"Private Placement Legend" means the legend set forth in Section
3.6(f)(i) to be placed on all Warrants issued under this Warrant Agreement
except where otherwise permitted by the provisions of this Warrant Agreement.
"QIB" means a "qualified institutional buyer" as defined in Rule 144A.
"Registrable Securities" shall have the meaning ascribed to such term
in the Warrant Registration Rights Agreement, of even date herewith, between the
Company and the Initial Purchasers (as defined therein).
"Regulation S" means Regulation S promulgated under the Securities
Act.
"Regulation S Global Warrant" means a Global Warrant in the form of
Exhibit A hereto bearing the Global Warrant Legend and the Private Placement
Legend and deposited with or on behalf of and registered in the name of the
Depositary or its nominee, issued in a denomination equal to the outstanding
number of the Warrants initially sold in reliance on Rule 903 of Regulation S.
"Restricted Definitive Warrant" means a Definitive Warrant bearing the
Private Placement Legend.
"Restricted Global Warrant" means a Global Warrant bearing the Private
Placement Legend.
"Rule 144" means Rule 144 promulgated under the Securities Act.
"Rule 144A" means Rule 144A promulgated under the Securities Act.
"Rule 903" means Rule 903 promulgated under the Securities Act.
"Rule 904" means Rule 904 promulgated under the Securities Act.
"Securities Act" means the Securities Act of 1933, as amended.
"U.S. Person" means a U.S. person as defined in Rule 902(o) under the
Securities Act.
Section 2. Appointment of Warrant Agent.
----------------------------
The Company hereby appoints the Warrant Agent to act as agent for the
Company in accordance with the instructions set forth hereinafter in this
Agreement, and the Warrant Agent hereby accepts such appointment.
3
<PAGE>
Section 3. Warrant Certificate.
3.1. Form and Dating.
(a) General.
The Warrants shall be substantially in the form of Exhibit A hereto
(the "Warrant Certificates"). The Warrants may have notations, legends or
endorsements required by law, stock exchange rule or usage. Each Warrant shall
be dated the date of the countersignature.
The terms and provisions contained in the Warrants shall constitute,
and are hereby expressly made, a part of this Warrant Agreement. The Company and
the Warrant Agent, by their execution and delivery of this Warrant Agreement,
expressly agree to such terms and provisions and to be bound thereby. However,
to the extent any provision of any Warrant conflicts with the express provisions
of this Warrant Agreement, the provisions of this Warrant Agreement shall govern
and be controlling.
(b) Global Warrants.
Warrants issued in global form shall be substantially in the form of
Exhibit A attached hereto (including the Global Warrant Legend thereon and the
"Schedule of Exchanges of Interests in the Global Warrant" attached thereto).
Warrants issued in definitive form shall be substantially in the form of Exhibit
A attached hereto (but without the Global Warrant Legend thereon and without the
"Schedule of Exchanges of Interests in the Global Warrant" attached thereto).
Each Global Warrant shall represent such of the outstanding Warrants as shall be
specified therein and each shall provide that it shall represent the number of
outstanding Warrants from time to time endorsed thereon and that the number of
outstanding Warrants represented thereby may from time to time be reduced or
increased, as appropriate, to reflect exchanges and redemptions. Any endorsement
of a Global Warrant to reflect the amount of any increase or decrease in the
number of outstanding Warrants represented thereby shall be made by the Warrant
Agent in accordance with instructions given by the holder thereof as required by
Section 3.6 hereof.
(c) Euroclear and Cedel Procedures Applicable.
The provisions of the "Operating Procedures of the Euroclear System"
and "Terms and Conditions Governing Use of Euroclear" and the "General Terms and
Conditions of Cedel Bank" and "Customer Handbook" of Cedel Bank shall be
applicable to transfers of beneficial interests in the Regulation S Global
Warrant that are held by Participants through Euroclear or Cedel Bank.
3.2. Execution.
An Officer shall sign the Warrants for the Company by manual or
facsimile signature.
If the Officer whose signature is on a Warrant no longer holds that
office at the time a Warrant is authenticated, the Warrant shall nevertheless be
valid.
A Warrant shall not be valid until countersigned by the manual
signature of the Warrant Agent. The signature shall be conclusive evidence that
the Warrant has been authenticated under this Warrant Agreement.
4
<PAGE>
The Warrant Agent shall, upon a written order of the Company signed by
an Officer (a "Warrant Countersignature Order"), countersign Warrants for
original issue up to the number stated in the preamble hereto.
The Warrant Agent may appoint an agent acceptable to the Company to
countersign Warrants. Such an agent may countersign Warrants whenever the
Warrant Agent may do so. Each reference in this Warrant Agreement to a
countersignature by the Warrant Agent includes a countersignature by such agent.
Such an agent has the same rights as an Agent to deal with the Company or an
Affiliate of the Company.
3.3. Warrant Registrar.
The Company shall maintain an office or agency where Warrants may be
presented for registration of transfer or for exchange ("Warrant Registrar").
The Warrant Registrar shall keep a register of the Warrants and of their
transfer and exchange. The Company may appoint one or more co-Warrant
Registrars. The term "Warrant Registrar" includes any co-Warrant Registrar. The
Company may change any Warrant Registrar without notice to any holder. The
Company shall notify the Warrant Agent in writing of the name and address of any
Agent not a party to this Warrant Agreement. If the Company fails to appoint or
maintain another entity as Warrant Registrar, the Warrant Agent shall act as
such. The Company or any of its subsidiaries may act as Warrant Registrar.
The Company initially appoints The Depository Trust Company ("DTC") to
act as Depositary with respect to the Global Warrants.
The Company initially appoints the Warrant Agent to act as the Warrant
Registrar with respect to the Global Warrants.
3.4. Holder Lists.
The Warrant Agent shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
all holders. If the Warrant Agent is not the Warrant Registrar, the Company
shall furnish to the Warrant Agent at least seven Business Days before each
interest payment date and at such other times as the Warrant Agent may request
in writing, a list in such form and as of such date as the Warrant Agent may
reasonably require of the names and addresses of the holders of Warrants.
3.5. Registration of Transfers and Exchanges.
(a) Transfer and Exchange of Global Warrants. The transfer and
exchange of Global Warrants or beneficial interests therein shall be effected
through the Depositary, in accordance with this Agreement and the procedures of
the Depositary therefor.
(b) Exchange of a Beneficial Interest in a Global Warrant for a
Definitive Warrant.
(i) Any holder of a beneficial interest in a Global Warrant may
upon request exchange such beneficial interest for a Definitive
Warrant. Upon receipt by the Warrant Agent of written instructions or
such other form of instructions as is customary for the Depositary
from the Depositary or its nominee on behalf of any Person having a
beneficial interest in a Global Warrant and, in the case of a
Registrable Security, the following additional information and
documents (all of which may be submitted by
5
<PAGE>
facsimile):
(A) if such beneficial interest is being delivered to the
Person designated by the Depositary as being the beneficial owner, a
certification to that effect (in substantially the form of Exhibit B
hereto);
(B) if such beneficial interest is being transferred (1) to
a "qualified institutional buyer" (as defined in Rule 144A under the
Securities Act) in accordance with Rule 144A under the Securities Act
or (2) pursuant to an exemption from registration in accordance with
Rule 144 under the Securities Act (based on an opinion of counsel if
the Company so requests) or (3) pursuant to an effective registration
statement under the Securities Act, a certification to that effect (in
substantially the form of Exhibit B hereto);
(C) if such beneficial interest is being transferred to any
institutional "accredited investor," within the meaning of Rule
501(a)(1), (2), (3) or (7) under the Securities Act pursuant to a
private placement exemption from the registration requirements of the
Securities Act (based on an opinion of counsel if the Company so
requests), a certification to that effect (in substantially the form
of Exhibit B hereto) and a certification from the applicable
transferee ;
(D) if such beneficial interest is being transferred
pursuant to an exemption from registration in accordance with Rule 904
under the Securities Act (and based on an opinion of counsel if the
Company so requests), a certification to that effect (in substantially
the form of Exhibit B);or
(E) if such beneficial interest is being transferred in
reliance on another exemption from the registration requirements of
the Securities Act (and based on an opinion of counsel if the Company
so requests), a certification to that effect (in substantially the
form of Exhibit B hereto);
then the Warrant Agent shall cause, in accordance with the standing
instructions and procedures existing between the Depositary and Warrant Agent,
the number of Warrants and Warrant Shares represented by the Global Warrant to
be reduced by the number of Warrants and Warrant Shares to be represented by the
Definitive Warrants to be issued in exchange for the interest of such Person in
the Global Warrant and, following such reduction, the Company shall execute and
the Warrant Agent shall countersign and deliver to the transferee, as the case
may be, a Definitive Warrant.
(ii) Definitive Warrants issued in exchange for a beneficial
interest in a Global Warrant pursuant to this Section 3.5(b) shall be
registered in such names as the Depositary, pursuant to instructions
from its direct or indirect participants or otherwise, shall instruct
the Warrant Agent. The Warrant Agent shall deliver such Definitive
Warrants to the Persons in whose names such Warrants are so
registered.
(c) Transfer and Exchange of Definitive Warrants.
When Definitive Warrants are presented to the Warrant Agent with a
request:
(i) to register the transfer of the Definitive Warrants; or
6
<PAGE>
(ii) to exchange such Definitive Warrants for an equal number of
Definitive Warrants of other authorized denominations,
the Warrant Agent shall register the transfer or make the exchange as requested
if its requirements for such transactions are met; provided, however, that the
Definitive Warrants presented or surrendered for registration of transfer or
exchange:
(x) shall be duly endorsed or accompanied by a written instruction of
transfer in form satisfactory to the Warrant Agent, duly executed by the holder
thereof or by his attorney, duly authorized in writing; and
(y) in the case of Registrable Securities, such request shall be
accompanied by the following additional information and documents, as
applicable:
(A) if such Registrable Security is being delivered to the
Warrant Agent by a holder for registration in the name of such holder,
without transfer, a certification from such holder to that effect (in
substantially the form of Exhibit B hereto);
(B) if such Registrable Security is being transferred (1) to
a "qualified institutional buyer" (as defined in Rule 144A under the
Securities Act) in accordance with Rule 144A under the Securities Act
or (2) pursuant to an exemption from registration in accordance with
Rule 144 under the Securities Act (and based on an opinion of counsel
if the Company so requests) or (3) pursuant to an effective
registration statement under the Securities Act, a certification to
that effect (in substantially the form of Exhibit B hereto);
(C) if such Registrable Security is being transferred to an
institutional "accredited investor," within the meaning of Rule
501(a)(1), (2), (3) or (7) under the Securities Act pursuant to a
private placement exemption from the registration requirements of the
Securities Act (and based on an opinion of counsel if the Company so
requests), a certification to that effect (in substantially the form
of Exhibit B hereto) and a certification from the applicable
transferee ;
(D) if such Registrable Security is being transferred
pursuant to an exemption from registration in accordance with Rule 904
under the Securities Act (and based on an opinion of counsel if the
Company so requests), a certification to that effect (in substantially
the form of Exhibit B hereto); or
(E) if such Registrable Security is being transferred in
reliance on another exemption from the registration requirements of
the Securities Act (and based on an opinion of counsel if the Company
so requests), a certification to that effect (in substantially the
form of Exhibit B hereto).
(d) Restrictions on Exchange or Transfer of a Definitive Warrant for a
Beneficial Interest in a Global Warrant. A Definitive Warrant may not be
exchanged for a beneficial interest in a Global Warrant except upon satisfaction
of the requirements set forth below. Upon receipt by the Warrant Agent of a
Definitive Warrant, duly endorsed or accompanied by appropriate instruments of
transfer, in form satisfactory to the Warrant Agent, together with:
7
<PAGE>
(i) if such Definitive Warrant is a Registrable Security,
certification from the holder thereof (in substantially the form of
Exhibit B hereto) to the effect that such Definitive Warrant is being
transferred by such holder either (A) to a "qualified institutional
buyer" (as defined in Rule 144A under the Securities Act) in
accordance with Rule 144A under the Securities Act, (B) outside the
United States to a foreign Person in a transaction meeting the
requirements of Rule 904 under the Securities Act (and based on an
opinion of counsel if the Company so requests) or (C) to an
institutional "accredited investor" within the meaning of Rule
501(a)(1), (2), (3) or (7) under the Securities Act, pursuant to a
private placement exemption from the registration requirements of the
Securities Act, who has provided a certification to that effect (and
based on an opinion of counsel if the Company so requests) and who
wishes to take delivery thereof in the form of a beneficial interest
in a Global Warrant; and
(ii) whether or not such Definitive Warrant is a Registrable
Security, written instructions directing the Warrant Agent to make, or
to direct the Depositary to make, an endorsement on the Global Warrant
to reflect an increase in the number of Warrants and Warrant Shares
represented by the Global Warrant equal to the number of Warrants and
Warrant Shares represented by such Definitive Warrant,
then the Warrant Agent shall cancel such Definitive Warrant and cause, or direct
the Depositary to cause, in accordance with the standing instructions and
procedures existing between the Depositary and the Warrant Agent, the number of
Warrants and Warrant Shares represented by the Global Warrant to be increased
accordingly. If no Global Warrants are then outstanding, the Company shall issue
and the Warrant Agent shall countersign a new Global Warrant representing the
appropriate number of Warrants and Warrant Shares.
(e) Restrictions on Transfer and Exchange of Global Warrants.
Notwithstanding any other provisions of this Agreement (other than the
provisions set forth in subsection (f) of this Section 3.5), a Global Warrant
may not be transferred as a whole except by the Depositary to a nominee of the
Depositary or by a nominee of the Depositary to the Depositary or another
nominee of the Depositary or by the Depositary or any such nominee to a
successor Depositary or a nominee of such successor Depositary.
(f) Countersigning of Definitive Warrants in Absence of Depositary. If
at any time:
(i) the Depositary for the Global Warrants notifies the Company
that the Depositary is unwilling or unable to continue as Depositary
for the Global Warrants and a successor Depositary for the Global
Warrants is not appointed by the Company within 90 days after delivery
of such notice; or
(ii) the Company, in its sole discretion, notifies the Warrant
Agent in writing that it elects to cause the issuance of Definitive
Warrants under this Agreement,
then the Company shall execute, and the Warrant Agent, upon written instructions
signed by an officer of the Company, shall countersign and deliver Definitive
Warrants, in an aggregate number equal to the number of Warrants represented by
the Global Warrants, in exchange for such Global Warrants.
(g) Legends.
8
<PAGE>
The following legends shall appear on the face of all Global Warrants
and Definitive Warrants issued under this Warrant Agreement unless specifically
stated otherwise in the applicable provisions of this Warrant Agreement.
(i) Private Placement Legend.
(A) Except as permitted by subparagraph (B) below, each
Global Warrant and each Definitive Warrant (and all Warrants issued in
exchange therefor or substitution thereof) shall bear the legend in
substantially the following form:
"THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS
ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5
OF THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND THE SECURITY EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE
EXEMPTION THEREFROM. EACH PURCHASER OF THE SECURITY EVIDENCED HEREBY IS
HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON THE EXEMPTION FROM THE
PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A
THEREUNDER. THE HOLDER OF THE SECURITY EVIDENCED HEREBY AGREES FOR THE
BENEFIT OF THE COMPANY THAT (A) SUCH SECURITY MAY BE RESOLD, PLEDGED OR
OTHERWISE TRANSFERRED, ONLY (1)(a) TO A PERSON WHO THE SELLER REASONABLY
BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER
THE SECURITIES ACT) (b) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE
144A UNDER THE SECURITIES ACT, (c) OUTSIDE THE UNITED STATES TO A FOREIGN
PERSON IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 UNDER THE
SECURITIES ACT, (d) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" AS DEFINED IN
RULE 501(a)(1), (2), (3) OR (7) OF THE SECURITIES ACT (AN "INSTITUTIONAL
ACCREDITED INVESTOR") IN A TRANSACTION EXEMPT FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT OR (e) IN ACCORDANCE WITH ANOTHER
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, (2) TO
THE COMPANY OR (3) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN
EACH CASE, IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE
OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND (B) THE
HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY
PURCHASER FROM IT OF THE SECURITY EVIDENCED HEREBY OF THE RESALE
RESTRICTIONS SET FORTH IN (A) ABOVE."
(B) Notwithstanding the foregoing, any Global Warrant or
Definitive Warrant issued pursuant to subparagraphs (b)(iv), (c)(ii),
(c)(iii), (d)(ii), (d)(iii), (e)(ii), (e)(iii) or (f) to this Section
3.6 (and all Warrants issued in exchange therefor or substitution
thereof) shall not bear the Private Placement Legend.
(ii) Global Warrant Legend. Each Global Warrant shall bear a
legend in substantially the following form:
"THIS GLOBAL WARRANT IS HELD BY THE DEPOSITARY (AS DEFINED IN THE
WARRANT AGREEMENT GOVERNING THIS WARRANT) OR ITS
9
<PAGE>
NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL OWNERS HEREOF, AND IS
NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES EXCEPT THAT (I) THE
WARRANT AGENT MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED PURSUANT TO
SECTION 3.7 OF THE WARRANT AGREEMENT, (II) THIS GLOBAL WARRANT MAY BE
EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 3.6(a) OF THE
WARRANT AGREEMENT, (III) THIS GLOBAL NOTE MAY BE DELIVERED TO THE WARRANT
AGREEMENT FOR CANCELLATION PURSUANT TO SECTION 3.11 OF THE WARRANT AGENT
AND (IV) THIS GLOBAL NOTE MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH
THE PRIOR WRITTEN CONSENT OF THE COMPANY."
(iii) Unit Legend. Each Warrant issued prior to the Separation
Date shall bear the following legend (the "Unit Legend") on the face
thereof:
"THE WARRANTS EVIDENCED BY THIS CERTIFICATE ARE INITIALLY ISSUED
AS PART OF AN ISSUANCE OF UNITS (THE "UNITS"), EACH OF WHICH CONSIST OF
$1,000 PRINCIPAL AMOUNT OF THE 14 1/2% SENIOR NOTES DUE 2008 OF THE COMPANY
(THE "NOTES") AND ONE WARRANT (THE "WARRANT") INITIALLY ENTITLING THE
HOLDER THEREOF TO PURCHASE 0.635 SHARES, PAR VALUE $0.01 PER SHARE, OF THE
COMPANY. PRIOR TO THE EARLIEST TO OCCUR OF (i) THE DATE THAT IS SIX MONTHS
FOLLOWING THE INITIAL SALE OF THE UNITS, (ii) THE COMMENCEMENT OF AN
EXCHANGE OFFER WITH RESPECT TO THE NOTES, (iii) THE DATE A SHELF
REGISTRATION STATEMENT (AS DEFINED IN THE INDENTURE) WITH RESPECT TO THE
NOTES IS DECLARED EFFECTIVE, (iv) A CHANGE OF CONTROL (AS DEFINED IN THE
INDENTURE), OR (v) SUCH DATE AS BEAR, STEARNS & CO. INC. MAY, IN ITS SOLE
DISCRETION, DEEM APPROPRIATE, THE WARRANTS EVIDENCED BY THIS CERTIFICATE
MAY NOT BE TRANSFERRED OR EXCHANGED SEPARATELY FROM, BUT MAY BE TRANSFERRED
OR EXCHANGED ONLY TOGETHER WITH, THE NOTES.
(h) Cancellation and/or Adjustment of Global Warrants.
At such time as all beneficial interests in a particular Global
Warrant have been exercised or exchanged for Definitive Warrants or a particular
Global Warrant has been exercised, redeemed, repurchased or canceled in whole
and not in part, each such Global Warrant shall be returned to or retained and
canceled by the Warrant Agent in accordance with Section 3.11 hereof. At any
time prior to such cancellation, if any beneficial interest in a Global Warrant
is exercised or exchanged for or transferred to a Person who will take delivery
thereof in the form of a beneficial interest in another Global Warrant or for
Definitive Warrants, the amount of Warrants represented by such Global Warrant
shall be reduced accordingly and an endorsement shall be made on such Global
Warrant by the Warrant Agent or by the Depositary at the direction of the
Warrant Agent to reflect such reduction; and if the beneficial interest is being
exchanged for or transferred to a Person who will take delivery thereof in the
form of a beneficial interest in another Global Warrant, such other Global
Warrant shall be increased accordingly and an endorsement shall be made on such
Global Warrant by the Warrant Agent or by the Depositary at the direction of the
Warrant Agent to reflect such increase.
(i) General Provisions Relating to Transfers and Exchanges.
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<PAGE>
(i) To permit registrations of transfers and exchanges, the
Company shall execute and the Warrant Agent shall countersign Global
Warrants and Definitive Warrants upon the Company's order or at the
Warrant Registrar's request.
(ii) No service charge shall be made to a holder of a beneficial
interest in a Global Warrant or to a holder of a Definitive Warrant
for any registration of transfer or exchange, but the Company may
require payment of a sum sufficient to cover any transfer tax or
similar governmental charge payable in connection therewith (other
than any such transfer taxes or similar governmental charge payable
upon exchange or transfer pursuant to Sections 3.10) hereof.
(iii) All Global Warrants and Definitive Warrants issued upon any
registration of transfer or exchange of Global Warrants or Definitive
Warrants shall be the duly authorized, executed and issued warrants
for Common Stock of the Company, not subject to any preemptive rights,
and entitled to the same benefits under this Warrant Agreement, as the
Global Warrants or Definitive Warrants surrendered upon such
registration of transfer or exchange.
(iv) Prior to due presentment for the registration of a transfer
of any Warrant, the Warrant Agent, any Agent and the Company may deem
and treat the Person in whose name any Warrant is registered as the
absolute owner of such Warrant for all purposes and none of the
Warrant Agent, any Agent or the Company shall be affected by notice to
the contrary.
(v) The Warrant Agent shall countersign Global Warrants and
Definitive Warrants in accordance with the provisions of Section 3.2
hereof.
(j) Facsimile Submissions to Warrant Agent.
All certifications, certificates and Opinions of Counsel required to
be submitted to the Warrant Registrar pursuant to this Section 3.6 to effect a
registration of transfer or exchange may be submitted by facsimile.
Notwithstanding anything herein to the contrary, as to any
certificates and/or certifications delivered to the Warrant Registrar pursuant
to this Section 3.5, the Warrant Registrar's duties shall be limited to
confirming that any such certifications and certificates delivered to it are in
the form of Exhibits B and C attached hereto. The Warrant Registrar shall not be
responsible for confirming the truth or accuracy of representations made in any
such certifications or certificates. As to any Opinions of Counsel delivered
pursuant to this Section 3.5, the Warrant Registrar may rely upon, and be fully
protected in relying upon, such opinions.
3.6. Replacement Warrants.
If any mutilated Warrant is surrendered to the Warrant Agent or the
Company and the Warrant Agent receives evidence to its satisfaction of the
destruction, loss or theft of any Warrant, the Company shall issue and the
Warrant Agent, upon receipt of a Warrant Countersignature Order, shall
countersign a replacement Warrant if the Warrant Agent's requirements are met.
If required by the Warrant Agent or the Company, an indemnity bond must be
supplied by the holder that is sufficient in the judgment of the Warrant Agent
and the Company to protect the Company, the Warrant Agent, any
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<PAGE>
Agent and any agent for purposes of the countersignature from any loss that any
of them may suffer if a Warrant is replaced. The Company may charge for its
expenses in replacing a Warrant.
Every replacement Warrant is an additional warrant of the Company and
shall be entitled to all of the benefits of this Warrant Agreement equally and
proportionately with all other Warrants duly issued hereunder.
3.7. Temporary Warrants
Until certificates representing Warrants are ready for delivery, the
Company may prepare and the Warrant Agent, upon receipt of a Warrant
Authentication Order, shall authenticate temporary Warrants. Temporary Warrants
shall be substantially in the form of certificated Warrants but may have
variations that the Company considers appropriate for temporary Warrants and as
shall be reasonably acceptable to the Warrant Agent. Without unreasonable delay,
the Company shall prepare and the Warrant Agent shall countersign definitive
Warrants in exchange for temporary Warrants.
Holders of temporary Warrants shall be entitled to all of the benefits
of this Warrant Agreement.
3.8. Cancellation.
Subject to Section 3.7 hereof, the Company at any time may deliver
Warrants to the Warrant Agent for cancellation. The Warrant Registrar and
Warrant Paying Agent shall forward to the Warrant Agent any Warrants surrendered
to them for registration of transfer, exchange or exercise. The Warrant Agent
and no one else shall cancel all Warrants surrendered for registration of
transfer, exchange, exercise, replacement or cancellation and shall destroy
canceled Warrants (subject to the record retention requirement of the Exchange
Act). Certification of the destruction of all canceled Warrants shall be
delivered to the Company. The Company may not issue new Warrants to replace
Warrants that have been exercised or that have been delivered to the Warrant
Agent for cancellation.
Section 4. Separation of Warrants; Terms of Warrants; Exercise of
Warrants.
4.1. The Notes and Warrants will not be separately transferable until
the earliest to occur of (i) the date that is six months following the initial
sale of the Units, (ii) the commencement of the Exchange Offer (as defined in
the Indenture), (iii) the date a Shelf Registration Statement (as defined in the
Indenture) with respect to the Notes is declared effective, (iv) a Change of
Control (as defined in the Indenture) or (v) such date as Bear, Stearns & Co.
Inc. may, in its sole discretion, deem appropriate (the earliest of such dates,
the "Separation Date"), at which time such Warrants shall become separately
transferable. Subject to the terms of this Agreement, each Warrant holder shall
have the right, which may be exercised during the period commencing on the
earlier of (a) the opening of business on the Separation Date and (b) in the
event a Change of Control occurs, the date the Company mails notice thereof to
holders of Notes and Warrants, until 5:00 p.m., New York City time on June 1,
2008 (the "Exercise Period"), to receive from the Company the number of fully
paid and nonassessable Warrant Shares which the holder may at the time be
entitled to receive on exercise of such Warrants and payment of the exercise
price (the "Exercise Price") then in effect for such Warrant Shares; provided
that holders shall be able to exercise their Warrants only if a registration
statement relating to the Warrant Shares is then in effect, or the exercise of
such Warrants is exempt from the registration requirements of the Securities Act
of 1933, as amended (the "Securities Act"), and such securities are qualified
for sale or exempt from qualification under the applicable securities laws of
the states in which the various holders
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<PAGE>
of the Warrants or other persons to whom it is proposed that the Warrant Shares
be issued on exercise of the Warrants reside. In the alternative, each holder
may exercise its right to receive Warrant Shares on a net basis, such that
without the exchange of any funds, the holder receives that number of Warrant
Shares otherwise issuable upon exercise of its Warrants less that number of
Warrant Shares having a Fair Market Value equal to the aggregate Exercise Price
that would otherwise have been paid by the holder for the Warrant Shares being
issued. For purposes of the foregoing sentence, the "Fair Market Value" of the
Warrant Shares shall be the current market price of the Warrant Shares on the
date immediately preceding the date of payment of the Exercise Price as
determined by the procedures set forth in Section 8.7. Each Warrant not
exercised prior to 5:00 p.m., New York City time, on June 1, 2008 (the
"Expiration Date") shall become void and all rights thereunder and all rights in
respect thereof under this agreement shall cease as of such time. No adjustments
as to dividends will be made upon exercise of the Warrants.
The Company shall give notice not less than 90, and not more than 120,
days prior to the Expiration Date to the registered holders of all then
outstanding Warrants to the effect that the Warrants will terminate and become
void as of 5:00 p.m., New York City time, on the Expiration Date. If the Company
fails to give such notice, the Warrants will not expire until 90 days after the
Company gives such notice; provided, however, in no event will holders be
entitled to any damages or other remedy for the Company's failure to give such
notice other than any such extension.
4.2. In order to exercise all or any of the Warrants represented by a
Warrant Certificate, (i) in the case of Definitive Warrants, the holder thereof
must surrender for exercise the Warrant Certificate to the Company at the office
of the Warrant Agent at its New York corporate trust office, (ii) in the case of
a book-entry interest in a Global Warrant, the exercising Participant whose name
appears on a securities position listing of the Depositary as the holder of such
book-entry interest must comply with the Depositary's procedures relating to the
exercise of such book-entry interest in such Global Warrant and (iii) in the
case of both Global Warrants and Definitive Warrants, the holder thereof or the
Participant, as applicable, must deliver to the Company at the office of the
Warrant Agent the form of election to purchase on the reverse thereof duly
filled in and signed, which signature shall be a medallion guaranteed by an
institution which is a member of a Securities Transfer Association recognized
signature guarantee program, and upon payment to the Warrant Agent for the
account of the Company of the Exercise Price, which is set forth in the form of
Warrant Certificate as adjusted as herein provided, for the number of Warrant
Shares in respect of which such Warrants are then exercised. In addition, if the
holder is exercising warrants sold pursuant to Regulation S, such holder must
certify in writing that it is not a U.S. Person and that the warrant is not
being exercised on behalf of a U.S. Person or give a written opinion of counsel
to the effect that the warrant and the securities delivered upon exercise
thereof have been registered under the Securities Act or are exempt from
registration thereunder. Payment of the aggregate Exercise Price shall be made
(i) in cash, by wire transfer or by certified or official bank check payable to
the order of the Company or (ii) on a net basis in the manner provided in
Section 4.1 hereof.
4.3. Subject to the provisions of Section 5 hereof, upon compliance
with Section 4.2 above, the Company shall deliver or cause to be delivered with
all reasonable dispatch, to or upon the written order of the holder and in such
name or names as the Warrant holder or Participant may designate, a certificate
or certificates for the number of whole Warrant Shares issuable upon the
exercise of such Warrants or other securities or property to which such holder
is entitled hereunder, together with cash as provided in Section 9 hereof;
provided that if any consolidation, merger or lease or sale of assets is
proposed to be effected by the Company as described in Section 8.13 hereof, or a
tender offer or an exchange offer for shares of Common Stock is made, upon such
surrender of Warrants and payment of
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<PAGE>
the Exercise Price as aforesaid, the Company shall, as soon as possible, but in
any event not later than two Business Days thereafter, deliver or cause to be
delivered the full number of Warrant Shares issuable upon the exercise of such
Warrants in the manner described in this sentence or other securities or
property to which such holder is entitled hereunder, together with cash as
provided in Section 9 hereof. Such certificate or certificates shall be deemed
to have been issued and any person so designated to be named therein shall be
deemed to have become a holder of record of such Warrant Shares as of the date
of the surrender of such Warrants and payment of the Exercise Price.
4.4. The Warrants shall be exercisable, at the election of the holders
thereof, either in full or from time to time in part. If less than all the
Warrants represented by a Definitive Warrant are exercised, such Definitive
Warrant shall be surrendered and a new Definitive Warrant of the same tenor and
for the number of Warrants which were not exercised shall be executed by the
Company and delivered to the Warrant Agent and the Warrant Agent shall
countersign the new Definitive Warrant, registered in such name or names as may
be directed in writing by the holder, and shall deliver the new Definitive
Warrant to the Person or Persons entitled to receive the same. The Warrant Agent
shall make such notations on Schedule A to each Global Warrant as are required
to reflect any change in the number of Warrants represented by such Global
Warrant resulting from any exercise in accordance with the terms hereof.
4.5. All Warrant Certificates surrendered upon exercise of Warrants
shall be canceled by the Warrant Agent. Such canceled Warrant Certificates shall
then be disposed of by the Warrant Agent in a manner satisfactory to the
Company. The Warrant Agent shall account promptly to the Company with respect to
Warrants exercised and concurrently pay to the Company all monies received by
the Warrant Agent for the purchase of the Warrant Shares through the exercise of
such Warrants.
4.6. The Warrant Agent shall keep copies of this Agreement and any
notices given or received hereunder available for inspection by the holders
during normal business hours at its office. The Company shall supply the Warrant
Agent from time to time with such numbers of copies of this Agreement as the
Warrant Agent may request.
Section 5. Payment of Taxes.
The Company will pay all documentary stamp taxes attributable to the
initial issuance of Warrant Shares upon the exercise of Warrants; provided,
however, that the Company shall not be required to pay any tax or taxes which
may be payable in respect of any transfer involved in the issue of any Warrant
Certificates or any certificates for Warrant Shares in a name other than that of
the registered holder of a Warrant Certificate surrendered upon the exercise of
a Warrant, and the Company shall not be required to issue or deliver such
Warrant Certificates unless or until the person or persons requesting the
issuance thereof shall have paid to the Company the amount of such tax or shall
have established to the satisfaction of the Company that such tax has been paid.
Section 6. Reservation of Warrant Shares.
6.1. The Company will at all times reserve and keep available, free
from preemptive rights, out of the aggregate of its authorized but unissued
Common Stock or its authorized and issued Common Stock held in its treasury, for
the purpose of enabling it to satisfy any obligation to issue Warrant Shares
upon exercise of Warrants, the maximum number of shares of Common Stock which
may then be deliverable upon the exercise of all outstanding Warrants.
14
<PAGE>
6.2. The Company or, if appointed, the transfer agent for the Common
Stock (the "Transfer Agent") and every subsequent transfer agent for any shares
of the Company's capital stock issuable upon the exercise of any of the rights
of purchase aforesaid will be irrevocably authorized and directed at all times
to reserve such number of authorized shares as shall be required for such
purpose. The Company will keep a copy of this Agreement on file with the
Transfer Agent and with every subsequent transfer agent for any shares of the
Company's capital stock issuable upon the exercise of the rights of purchase
represented by the Warrants. The Warrant Agent is hereby irrevocably authorized
to requisition from time to time from such Transfer Agent the stock certificates
required to honor outstanding Warrants upon exercise thereof in accordance with
the terms of this Agreement. The Company will supply such Transfer Agent with
duly executed certificates for such purposes and will provide or otherwise make
available any cash which may be payable as provided in Section 9. The Company
will furnish such Transfer Agent a copy of all notices of adjustments and
certificates related thereto, transmitted to each holder pursuant to Section 10
hereof.
6.3. Before taking any action which would cause an adjustment pursuant
to Section 8 hereof to reduce the Exercise Price below the then par value (if
any) of the Warrant Shares, the Company will take any corporate action which
may, in the opinion of its counsel (which may be counsel employed by the
Company), be necessary in order that the Company may validly and legally issue
fully paid and nonassessable Warrant Shares at the Exercise Price as so
adjusted.
6.4. The Company covenants that all Warrant Shares which may be issued
upon exercise of Warrants will, upon issue, be fully paid, nonassessable, free
of preemptive rights and free from all taxes, liens, charges and security
interests with respect to the issue thereof.
Section 7. Obtaining Stock Exchange Listings.
The Company will from time to time take all action which may be
necessary so that the Warrant Shares, immediately upon their issuance upon the
exercise of Warrants, will be listed on the principal securities exchanges and
markets within the United States of America, if any, on which other shares of
Common Stock are then listed.
Section 8. Adjustment of Exercise Price and Number of Warrant Shares
Issuable.
The Exercise Price and the number of Warrant Shares issuable upon the
exercise of each Warrant are subject to adjustment from time to time upon the
occurrence of the events enumerated in this Section 8. For purposes of this
Section 8 "Common Stock" means shares now or hereafter authorized of any class
of common stock of the Company and any other stock of the Company, however
designated, that has the right (subject to any prior rights of any class or
series of preferred stock) to participate in any distribution of the assets or
earnings of the Company without limit as to per share amount.
8.1. Adjustment for Change in Capital Stock. If the Company (i) pays a
dividend or makes a distribution on its Common Stock in shares of its Common
Stock, (ii) subdivides its outstanding shares of Common Stock into a greater
number of shares, (iii) combines its outstanding shares of Common Stock into a
smaller number of shares, (iv) makes a distribution on its Common Stock in
shares of its capital stock other than Common Stock or (v) issues by
reclassification of its Common Stock any shares of its capital stock; then the
Exercise Price in effect immediately prior to such action shall be
proportionately adjusted so that the holder of any Warrant thereafter exercised
may receive the aggregate number and kind of shares of capital stock of the
Company which he would have owned immediately following such action if such
Warrant had been exercised immediately prior to such action.
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<PAGE>
The adjustment shall become effective immediately after the record
date in the case of a dividend or distribution and immediately after the
effective date in the case of a subdivision, combination or reclassification.
If, after an adjustment, a holder of a Warrant upon exercise of it may receive
shares of two or more classes of capital stock of the Company, the Company shall
determine the allocation of the adjusted Exercise Price between the classes of
capital stock. After such allocation, the exercise privilege and the Exercise
Price of each class of capital stock shall thereafter be subject to adjustment
on terms comparable to those applicable to Common Stock in this Section 8. Such
adjustment shall be made successively whenever any event listed above shall
occur.
8.2. Adjustment for Rights Issue. If the Company distributes any
rights, options or warrants to all holders of its Common Stock entitling them
for a period expiring within 45 days after the record date mentioned below to
purchase shares of Common Stock, or securities convertible into or exchangeable
for shares of Common Stock, at a price per share less than the Fair Market Value
(as defined herein) per share on that record date, the Exercise Price shall be
adjusted in accordance with the formula:
O + N x P
-----
E' = E x M
----------
O + N
where:
E' = the adjusted Exercise Price.
E = the current Exercise Price.
O = the number of shares of Common Stock outstanding on the record date.
N = the number of additional shares of Common Stock offered.
P = the offering price per share of the additional shares.
M = the Fair Market Value per share of Common Stock on the record date.
The adjustment shall be made successively whenever any such rights,
options or warrants are issued and shall become effective immediately after the
record date for the determination of stockholders entitled to receive the
rights, options or warrants. If at the end of the period during which such
rights, options or warrants are exercisable, not all rights, options or warrants
shall have been exercised, the Exercise Price shall be immediately readjusted to
what it would have been if "N" in the above formula had been the number of
shares actually issued.
8.3. Adjustment for Other Distributions. If the Company distributes to
all holders of its Common Stock any of its assets or debt securities or any
rights or warrants to purchase debt securities, assets or other securities of
the Company, the Exercise Price shall be adjusted in accordance with the
formula:
E'= E x M - F
-----
M
where:
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<PAGE>
E' = the adjusted Exercise Price.
E = the current Exercise Price.
M = the Fair Market Value per share of Common Stock on the record date
mentioned below.
F = the fair market value on the record date of the assets, securities,
rights or warrants to be distributed in respect of one share of Common
Stock as determined in good faith by the Board of Directors of the
Company (the "Board of Directors").
The adjustment shall be made successively whenever any such
distribution is made and shall become effective immediately after the record
date for the determination of stockholders entitled to receive the distribution.
This Section 8.3 does not apply to cash dividends or cash
distributions paid out of consolidated current or retained earnings as shown on
the books of the Company prepared in accordance with generally accepted
accounting principles. Also, this Section 8.3 does not apply to rights, options
or warrants referred to in Section 8.2 hereof.
8.4. Adjustment for Common Stock Issue. If the Company issues shares
of Common Stock for a consideration per share less than the Fair Market Value
per share on the date the Company fixes the offering price of such additional
shares, the Exercise Price shall be adjusted in accordance with the formula:
C
-
E'= Ex O + M
-------
A
where:
E' = the adjusted Exercise Price.
E = the then current Exercise Price.
O = the number of shares outstanding immediately prior to the issuance of
such additional shares.
C = the aggregate consideration received for the issuance of such
additional shares.
M = the Fair Market Value per share on the date of issuance of such
additional shares.
A = the number of shares outstanding immediately after the issuance of
such additional shares.
The adjustment shall be made successively whenever any such issuance
is made, and shall become effective immediately after such issuance.
This Section 8.4 does not apply to:
(i) any of the transactions described in Sections 8.2 and 8.3
hereof,
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<PAGE>
(ii) the exercise of Warrants, or the conversion or exchange of
other securities convertible or exchangeable for Common Stock,
(iii) Common Stock issued to the Company's employees under bona
fide employee benefit plans adopted by the Board of Directors and
approved by the holders of Common Stock when required by law, if such
Common Stock would otherwise be covered by this subsection (d) (but
only to the extent that the aggregate number of shares excluded hereby
and issued after the date of this Warrant Agreement shall not exceed
15% of the Common Stock outstanding at the time of the adoption of
each such plan, exclusive of antidilution adjustments thereunder),
(iv) Common Stock upon the exercise of rights or warrants issued
to the holders of Common Stock,
(v) Common Stock issued to shareholders of any person which
merges into the Company in proportion to their stock holdings of such
person immediately prior to such merger, upon such merger, or
(vi) the issuance of shares of Common Stock pursuant to rights,
options or warrants which were originally issued in a Non-Affiliate
Sale (as defined below) together with one or more other securities as
part of a unit at a price per unit.
8.5. Adjustment for Convertible Securities Issue. If the Company
issues any securities convertible into or exchangeable for Common Stock (other
than securities issued in transactions described in Sections 8.2 and 8.3 hereof
for a consideration per share of Common Stock initially deliverable upon
conversion or exchange of such securities less than the Fair Market Value per
share on the date of issuance of such securities, the Exercise Price shall be
adjusted in accordance with this formula:
C
-
E'= Ex O + M
-----
O + D
where:
E' = the adjusted Exercise Price.
E = the then current Exercise Price.
O = the number of shares outstanding immediately prior to the issuance of
such securities.
C = the aggregate consideration received for the issuance of such
securities.
M = the Fair Value per share on the date of issuance of such securities.
D = the maximum number of shares deliverable upon conversion or in
exchange for such securities at the initial conversion or exchange
rate.
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<PAGE>
The adjustment shall be made successively whenever any such issuance
is made, and shall become effective immediately after such issuance.
If all of the Common Stock deliverable upon conversion or exchange of
such securities have not been issued when such securities are no longer
outstanding, then the Exercise Price shall promptly be readjusted to the
Exercise Price which would then be in effect had the adjustment upon the
issuance of such securities been made on the basis of the actual number of
shares of Common Stock issued upon conversion or exchange of such securities.
This Section 8.5 does not apply to convertible securities issued to
shareholders of any person which merges into the Company, or with a subsidiary
of the Company, in proportion to their stock holdings of such person immediately
prior to such merger, upon such merger.
8.6. Consideration Received. For purposes of any computation
respecting consideration received pursuant to Sections 8.4 and 8.5 hereof the
following shall apply:
(i) in the case of the issuance of shares of Common Stock for
cash, the consideration shall be the amount of such cash, provided
that in no case shall any deduction be made for any commissions,
discounts or other expenses incurred by the Company for any
underwriting of the issue or otherwise in connection therewith;
(ii) in the case of the issuance of shares of Common Stock for a
consideration in whole or in part other than cash, the consideration
other than cash shall be deemed to be the fair market value thereof as
determined in good faith by the Board of Directors (irrespective of
the accounting treatment thereof), whose determination shall be
conclusive, and described in a Board resolution which shall be filed
with the Warrant Agent;
(iii) in the case of the issuance of securities convertible into
or exchangeable for shares, the aggregate consideration received
therefor shall be deemed to be the consideration received by the
Company for the issuance of such securities plus the additional
consideration, if any, to be received by the Company upon the
conversion or exchange thereof (the consideration in each case to be
determined in the same manner as provided in clauses (1) and (2) of
this subsection); and
(iv) in the case of the issuance of shares of Common Stock
pursuant to rights, options or warrants, which rights, options or
warrants were originally issued together with one or more other
securities as part of a unit, the consideration shall be deemed to be
(i) the fair value of such rights, options or warrants at the time of
issuance thereof as determined in good faith by the Board of Directors
whose determination shall be conclusive and described in a Board
resolution which shall be filed with the Warrant Agent plus (ii) the
additional consideration, if any, to be received by the Company upon
the exercise, conversion or exchange thereof (as determined in the
same manner as provided in clause (1) and (2) of this subsection).
8.7. Fair Market Value. The Fair Market Value for a security shall be
(A) the average over the 20 trading days ending on the date immediately
preceding the date of such determination of the last reported sale price, or, if
no such sale takes place on any such day, the closing bid price, in either case
as reported for consolidated transactions on the principal national securities
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<PAGE>
exchange (including the NASDAQ National Market) on which such security is listed
or admitted for trading; provided, however, that if any event that results in an
adjustment of the Exercise Price occurs during the period beginning on the first
day of such 20-day period and ending on the date immediately preceding the date
of determination, the Fair Market Value as determined pursuant to the foregoing
will be appropriately adjusted to reflect the occurrence of such event or (B) if
such security is not listed on any exchange or admitted for trading on the
NASDAQ Stock Market, the Fair Market Value shall be (1) in connection with a
sale to a party that is not an Affiliate of the Company in an arm's length
transaction (a "Non-Affiliate Sale"), the price per security at which such
security is sold and (2) in connection with any sale to an Affiliate of the
Company, (a) the last price per security at which such security was sold in a
Non-Affiliate Sale within the three-month period preceding such date of
determination or (b) if clause (a) is not applicable, the fair market value of
such security determined in good faith by (i) a majority of the Board of
Directors of the Company, including a majority of the Disinterested Directors,
and approved in a board resolution delivered to the Warrant Agent or (ii) a
nationally recognized investment banking, appraisal or valuation firm, which is
not an Affiliate of the Company, in each case, taking into account, among other
factors deemed relevant by the Board of Directors or such investment banking,
appraisal or valuation firm, the trading price and volume of such security on
any national securities exchange or automated quotation system on which such
security is traded.
8.8. When De Minimis Adjustment May Be Deferred. No adjustment in
the Exercise Price need be made unless the adjustment would require an increase
or decrease (prior to rounding) of at least 1.0% in the Exercise Price. Any
adjustments that are not made shall be carried forward and taken into account in
any subsequent adjustment. All calculations under this Section 8 shall be made
to the nearest cent or to the nearest 1/100th of a share, as the case may be.
8.9. When No Adjustment Required. No adjustment need be made for a
transaction referred to Sections 8.1., 8.2, 8.3, 8.4 or 8.5 hereof, if Warrant
holders are to participate in the transaction on a basis and with notice that
the Board of Directors determines to be fair and appropriate in light of the
basis and notice on which holders of Common Stock participate in the
transaction. No adjustment need be made for (i) rights to purchase Common Stock
pursuant to a the Company plan for reinvestment of dividends or interest, (ii) a
change in the par value or no par value of the Common Stock. To the extent the
Warrants become convertible into cash, no adjustment need be made thereafter as
to the cash. Interest will not accrue on the cash.
8.10. Notice of Adjustment. Whenever the Exercise Price is adjusted,
the Company shall provide the notices required by Section 10 hereof.
8.11. Voluntary Reduction. The Company from time to time may reduce
the Exercise Price by any amount for any period of time, if the period is at
least 20 days and if the reduction is irrevocable during the period; provided
that in no event may the Exercise Price be less than the par value of a share of
Common Stock. Whenever the Exercise Price is reduced, the Company shall mail to
Warrant holders a notice of the reduction. The Company shall mail the notice at
least 15 days before the date the reduced Exercise Price takes effect. The
notice shall state the reduced Exercise Price and the period in which it will be
in effect. A reduction of the Exercise Price does not change or adjust the
Exercise Price otherwise in effect for purposes of Sections 8.1, 8.2, 8.3, 8.4
and 8.5 hereof.
8.12. Notice of Certain Transactions. If (i) the Company takes any
action that would require an adjustment in the Exercise Price pursuant to
Sections 8.1, 8.2, 8.3, 8.4 and 8.5 hereof and if the Company does not arrange
for Warrant holders to participate pursuant to Section 8.9 hereof, (ii) the
Company takes any action that would require a supplemental Warrant Agreement
pursuant to Section
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8.13 hereof or (iii) there is a liquidation or dissolution of the Company, then
the Company shall mail to Warrant holders a notice stating the proposed record
date for a dividend or distribution or the proposed effective date of a
subdivision, combination, reclassification, consolidation, merger, transfer,
lease, liquidation or dissolution. The Company shall mail the notice at least 15
days before such date. Failure to mail the notice or any defect in it shall not
affect the validity of the transaction.
8.13. Reorganization of the Company. Immediately after the Effective
Time, if the Company consolidates or merges with or into, or transfers or leases
all or substantially all its assets to, any person, upon consummation of such
transaction the Warrants shall automatically become exercisable for the kind and
amount of securities, cash or other assets which the holder of a Warrant would
have owned immediately after the consolidation, merger, transfer or lease if the
holder had exercised the Warrant immediately before the effective date of the
transaction. Concurrently with the consummation of such transaction, the
corporation formed by or surviving any such consolidation or merger if other
than the Company, or the person to which such sale or conveyance shall have been
made, shall enter into a supplemental Warrant Agreement so providing and further
providing for adjustments which shall be as nearly equivalent as may be
practical to the adjustments provided for in this Section 8.13. The successor
company shall mail to Warrant holders a notice describing the supplemental
Warrant Agreement. If the issuer of securities deliverable upon exercise of
Warrants under the supplemental Warrant Agreement is an affiliate of the formed,
surviving, transferee or lessee corporation, that issuer shall join in the
supplemental Warrant Agreement. If this Section 8.13 applies, Sections 8.1, 8.2,
8.3, 8.4 and 8.5 hereof do not apply.
8.14. The Company Determination Final. Any determination that the
Company or the Board of Directors must make pursuant to Section 8.1, 8.2, 8.3,
8.4 ,8.5, 8.6, 8.7 or 8.8 hereof is conclusive.
8.15. Warrant Agent's Disclaimer. The Warrant Agent has no duty to
determine when an adjustment under this Section 8 should be made, how it should
be made or what it should be. The Warrant Agent has no duty to determine whether
any provisions of a supplemental Warrant Agreement under Section 8.13 hereof are
correct. The Warrant Agent makes no representation as to the legality, validity
or value of any securities or assets issued upon exercise of Warrants. The
Warrant Agent shall not be responsible for the Company's failure to comply with
this Section 8.
8.16. When Issuance or Payment May Be Deferred. In any case in which
this Section 8 shall require that an adjustment in the Exercise Price be made
effective as of a record date for a specified event, the Company may elect to
defer until the occurrence of such event (i) issuing to the holder of any
Warrant exercised after such record date the Warrant Shares and other capital
stock of the Company, if any, issuable upon such exercise over and above the
Warrant Shares and other capital stock of the Company, if any, issuable upon
such exercise on the basis of the Exercise Price and (ii) paying to such holder
any amount in cash in lieu of a fractional share pursuant to Section 9 hereof;
provided that the Company shall deliver to such holder a due bill or other
appropriate instrument evidencing such holder's right to receive such additional
Warrant Shares, other capital stock and cash upon the occurrence of the event
requiring such adjustment.
8.17. Adjustment in Number of Shares. Upon each adjustment of the
Exercise Price pursuant to this Section 8, each Warrant outstanding prior to the
making of the adjustment in the Exercise Price shall thereafter evidence the
right to receive upon payment of the adjusted Exercise Price that number of
shares of Common Stock (calculated to the nearest hundredth) obtained from the
following formula:
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N' = N x E
----------------------
E'
where:
N' = the adjusted number of Warrant Shares issuable upon exercise of a
Warrant by payment of the adjusted Exercise Price.
N = the number or Warrant Shares previously issuable upon exercise of a
Warrant by payment of the Exercise Price prior to adjustment.
E' = the adjusted Exercise Price.
E = the Exercise Price prior to adjustment.
8.18. Form of Warrants. Irrespective of any adjustments in the Exercise
Price or the number or kind of shares purchasable upon the exercise of the
Warrants, Warrants theretofore or thereafter issued may continue to express the
same price and number and kind of shares as are stated in the Warrants
initially issuable pursuant to this Agreement.
Section 9. Fractional Interests.
The Company shall not be required to issue fractional Warrant Shares
on the exercise of Warrants. If more than one Warrant shall be presented for
exercise in full at the same time by the same holder, the number of full Warrant
Shares which shall be issuable upon the exercise thereof shall be computed on
the basis of the aggregate number of Warrant Shares purchasable on exercise of
the Warrants so presented. If any fraction of a Warrant Share would, except for
the provisions of this Section 9, be issuable on the exercise of any Warrants
(or specified portion thereof), the Company shall pay an amount in cash equal to
the Fair Market Value on the day immediately preceding the date the Warrant is
presented for exercise, multiplied by such fraction.
Section 10. Notices to Warrant Holders.
Upon any adjustment of the Exercise Price pursuant to Section 8, the
Company shall promptly thereafter (i) cause to be filed with the Warrant Agent a
certificate of a firm of independent public accountants of recognized standing
selected by the Board of Directors of the Company (who may be the regular
auditors of the Company) setting forth the Exercise Price after such adjustment
and setting forth in reasonable detail the method of calculation and the facts
upon which such calculations are based and setting forth the number of Warrant
Shares (or portion thereof) issuable after such adjustment in the Exercise
Price, upon exercise of a Warrant and payment of the adjusted Exercise Price,
which certificate shall be conclusive evidence of the correctness of the matters
set forth therein, and (ii) cause to be given to each of the registered holders
of the Warrant Certificates at his address appearing on the Warrant register
written notice of such adjustments by first-class mail, postage prepaid. Where
appropriate, such notice may be given in advance and included as a part of the
notice required to be mailed under the other provisions of this Section 10.
In case:
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(a) The Company shall authorize the issuance to all holders of shares
of Common Stock of rights, options or warrants to subscribe for or purchase
shares of Common Stock or of any other subscription rights or warrants; or
(b) The Company shall authorize the distribution to all holders of
shares of Common Stock of evidences of its indebtedness or assets (other than
cash dividends or cash distributions payable out of consolidated earnings or
earned surplus or dividends payable in shares of Common Stock or distributions
referred to in Section 8.1 hereof); or
(c) of any consolidation or merger to which the Company is a party and
for which approval of any shareholders of the Company is required, or of the
conveyance or transfer of the properties and assets of the Company substantially
as an entirety, or of any reclassification or change of Common Stock issuable
upon exercise of the Warrants (other than a change in par value, or from par
value to no par value, or from no par value to par value, or as a result of a
subdivision or combination), or a tender offer or exchange offer for shares of
Common Stock; or
(d) of the voluntary or involuntary dissolution, liquidation or
winding up of the Company; or
(e) The Company proposes to take any action (other than actions of the
character described in Section 8.1 which would require an adjustment of the
Exercise Price pursuant to Section 8,
then the Company shall cause to be filed with the Warrant Agent and shall cause
to be given to each of the registered holders of the Warrant Certificates at his
address appearing on the Warrant register, at least 20 days (or 10 days in any
case specified in clauses (a) or (b) above) prior to the applicable record date
hereinafter specified, or promptly in the case of events for which there is no
record date, by first-class mail, postage prepaid, a written notice stating (i)
the date as of which the holders of record of shares of Common Stock to be
entitled to receive any such rights, options, warrants or distribution are to be
determined, or (ii) the initial expiration date set forth in any tender offer or
exchange offer for shares of Common Stock, or (iii) the date on which any such
consolidation, merger, conveyance, transfer, dissolution, liquidation or winding
up is expected to become effective or consummated, and the date as of which it
is expected that holders of record of shares of Common Stock shall be entitled
to exchange such shares for securities or other property, if any, deliverable
upon such reclassification, consolidation, merger, conveyance, transfer,
dissolution, liquidation or winding up. The failure to give the notice required
by this Section 10 or any defect therein shall not affect the legality or
validity of any distribution, right, option, warrant, consolidation, merger,
conveyance, transfer, dissolution, liquidation or winding up, or the vote upon
any action.
Nothing contained in this Agreement or in any of the Warrant
Certificates shall be construed as conferring upon the holders thereof the right
to vote or to consent or to receive notice as shareholders in respect of the
meetings of shareholders or the election of Directors of the Company or any
other matter, or any rights whatsoever as shareholders of the Company.
Section 11. Merger, Consolidation or Change of Name of Warrant Agent.
Any corporation into which the Warrant Agent may be merged or with
which it may be consolidated, or any corporation resulting from any merger or
consolidation to which the Warrant Agent shall be a party, or any corporation
succeeding to the business of the Warrant Agent, shall be the successor to the
Warrant Agent hereunder without the execution or filing of any paper or any
further act
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on the part of any of the parties hereto, provided that such corporation would
be eligible for appointment as a successor warrant agent under the provisions of
Section 14. In case at the time such successor to the Warrant Agent shall
succeed to the agency created by this Agreement, and in case at that time any of
the Warrant Certificates shall have been countersigned but not delivered, any
such successor to the Warrant Agent may adopt the countersignature of the
original Warrant Agent; and in case at that time any of the Warrant Certificates
shall not have been countersigned, any successor to the Warrant Agent may
countersign such Warrant Certificates either in the name of the predecessor
Warrant Agent or in the name of the successor to the Warrant Agent; and in all
such cases such Warrant Certificates shall have the full force and effect
provided in the Warrant Certificates and in this Agreement.
In case at any time the name of the Warrant Agent shall be changed and
at such time any of the Warrant Certificates shall have been countersigned but
not delivered, the Warrant Agent whose name has been changed may adopt the
countersignature under its prior name, and in case at that time any of the
Warrant Certificates shall not have been countersigned, the Warrant Agent may
countersign such Warrant Certificates either in its prior name or in its changed
name, and in all such cases such Warrant Certificates shall have the full force
and effect provided in the Warrant Certificates and in this Agreement.
Section 12. Warrant Agent.
The Warrant Agent undertakes the duties and obligations imposed by
this Agreement upon the following terms and conditions, by all of which the
Company and the holders of Warrants, by their acceptance thereof, shall be
bound:
(a) The duties of the Warrant Agent shall be determined by the express
provisions of this Warrant Agreement and no implied covenants or obligations
shall be read into this Warrant Agreement against the Trustee.
(b) The statements contained herein and in the Warrant Certificates
shall be taken as statements of the Company and the Warrant Agent assumes no
responsibility for the correctness of any of the same except such as describe
the Warrant Agent or action taken or to be taken by it. The Warrant Agent
assumes no responsibility with respect to the distribution of the Warrant
Certificates except as herein otherwise provided.
(c) The Warrant Agent shall not be responsible for any failure of the
Company to comply with any of the covenants contained in this Agreement or in
the Warrant Certificates to be complied with by the Company.
(d) Before the Warrant Agent acts or refrains from acting, the Warrant
Agent may consult at any time with counsel satisfactory to it (who may be
counsel for the Company) and the Warrant Agent shall incur no liability or
responsibility to the Company or to any holder of any Warrant Certificate in
respect of any action taken, suffered or omitted by it hereunder in good faith
and in accordance with the opinion or the advice of such counsel.
(e) The Warrant Agent shall incur no liability or responsibility to
the Company or to any holder of any Warrant Certificate for any action taken in
reliance on any Warrant Certificate, certificate of shares, notice, resolution,
waiver, consent, order, certificate, or other paper, document or instrument
believed by it to be genuine and to have been signed, sent or presented by the
proper party or parties.
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(f) The Company agrees to pay to the Warrant Agent reasonable
compensation for all services rendered by the Warrant Agent in the execution of
this Agreement, to reimburse the Warrant Agent for all expenses, taxes and
governmental charges and other charges of any kind and nature incurred by the
Warrant Agent in the execution of this Agreement and to indemnify the Warrant
Agent and save it harmless against any and all liabilities, including judgments,
costs and counsel fees, for anything done or omitted by the Warrant Agent in the
execution of this Agreement except as a result of its negligence or bad faith.
(g) The Company shall indemnify the Warrant Agent against any and all
losses, liabilities or expenses incurred by it arising out of or in connection
with the acceptance or administration of its duties under this Warrant
Agreement, including the costs and expenses of enforcing this Warrant Agreement
against the Company (including this Section 12(f)) and defending itself or
investigating against any claim (whether asserted by the Company or any holder
or any other person) or liability in connection with the exercise or performance
of any of its powers or duties hereunder, except to the extent any such loss,
liability or expense may be attributable to its negligence or bad faith. The
Warrant Agent shall notify the Company promptly of any claim for which it may
seek indemnity. Failure by the Warrant Agent to so notify the Company shall not
relieve the Company of its obligations hereunder. The Company shall defend the
claim and the Warrant Agent shall cooperate in the defense. The Warrant Agent
may have separate counsel and the Company shall pay for reasonable fees and
expenses of such counsel. The Company need not pay for any settlement made
without its consent. All rights of action under this Agreement or under any of
the Warrants may be enforced by the Warrant Agent without the possession of any
of the Warrant Certificates or the production thereof at any trial or other
proceeding relative thereto, and any such action, suit or proceeding instituted
by the Warrant Agent shall be brought in its name as Warrant Agent and any
recovery of judgment shall be for the ratable benefit of the registered holders
of the Warrants, as their respective rights or interests may appear.
(h) The Warrant Agent, and any stockholder, director, officer or
employee of it, may buy, sell or deal in any of the Warrants or other securities
of the Company or become pecuniarily interested in any transaction in which the
Company may be interested, or contract with or lend money to the Company or
otherwise act as fully and freely as though it were not Warrant Agent under this
Agreement. Nothing herein shall preclude the Warrant Agent from acting in any
other capacity for the Company or for any other legal entity.
(i) The Warrant Agent shall act hereunder solely as agent for the
Company, and its duties shall be determined solely by the provisions hereof. The
Warrant Agent shall not be liable for anything which it may do or refrain from
doing in connection with this Agreement except for its own negligence or bad
faith.
(j) The Warrant Agent shall not at any time be under any duty or
responsibility to any holder of any Warrant Certificate to make or cause to be
made any adjustment of the Exercise Price or number of the Warrant Shares or
other securities or property deliverable as provided in this Agreement, or to
determine whether any facts exist which may require any of such adjustments, or
with respect to the nature or extent of any such adjustments, when made, or with
respect to the method employed in making the same. The Warrant Agent shall not
be accountable with respect to the legality, validity or value or the kind or
amount of any Warrant Shares or of any securities or property which may at any
time be issued or delivered upon the exercise of any Warrant or with respect to
whether any such Warrant Shares or other securities will when issued be validly
issued and fully paid and nonassessable, and makes no representation with
respect thereto.
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(k) The Warrant Agent shall not be required to take notice or be
deemed to have notice of any fact, event or determination (including, without
limitation, any dates other than the end of the Exercise Period or events
defined in this Agreement or the designation of any Person as an Affiliate),
under this Agreement unless and until the Warrant Agent shall be specifically
notified in writing by the Company or any holder of such fact, event or
determination.
(l) No provision of this Agreement shall require the Warrant Agent to
expand or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder or in the exercise of its rights if
there shall be reasonable grounds for believing that repayment of such funds or
adequate indemnification against such risk or liability is not reasonably
assured to it.
(m) The Warrant Agent may act through its attorneys or agents and
shall not be responsible for the willful misconduct or negligence of any agent
appointed with due care.
Section 13. Change of Warrant Agent.
If the Warrant Agent shall become incapable of acting as Warrant
Agent, the Company shall appoint a successor to such Warrant Agent. If the
Company shall fail to make such appointment within a period of 30 days after it
has been notified in writing of such incapacity by the Warrant Agent or by the
registered holder of a Warrant Certificate, then the registered holder of any
Warrant Certificate may apply to any court of competent jurisdiction for the
appointment of a successor to the Warrant Agent. Pending appointment of a
successor to such Warrant Agent, either by the Company or by such a court, the
duties of the Warrant Agent shall be carried out by the Company. After
appointment the successor to the Warrant Agent shall be vested with the same
powers, rights, duties and responsibilities as if it had been originally named
as Warrant Agent without further act or deed; but the former Warrant Agent shall
deliver and transfer to the successor to the Warrant Agent any property at the
time held by it hereunder and execute and deliver any further assurance,
conveyance, act or deed necessary for the purpose. Failure to give any notice
provided for in this Section 13, however, or any defect therein, shall not
affect the legality or validity of the appointment of a successor to the Warrant
Agent.
Section 14. Registration.
Holders shall be able to exercise their Warrants only if a
registration statement relating to the Warrant Shares is then in effect, or the
exercise of such Warrants is exempt from the registration requirements of the
Securities Act, and such securities are qualified for sale or exempt from
qualification under the applicable securities laws of the states in which the
various holders of the Warrants or other persons to whom it is proposed that the
Warrant Shares be issued on exercise of the Warrants reside.
Section 15. Reports.
(a) Whether or not required by the rules and regulations of the
Securities and Exchange Commission (the "Commission"), so long as any Warrants
are outstanding, the Company shall furnish to the Warrant Agent and the holders
of Warrants (i) all quarterly and annual financial information that would be
required to be contained in a filing with the Commission on Forms 10-Q and 10-K
if the Company were required to file such Forms, including a "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and,
with respect to the annual information only, a report thereon by the Company's
certified independent accountants (provided, however, that quarterly information
for the first quarter of 1998 need not be furnished prior to August 15, 1998)
and (ii) all current reports that would be required to be filed with the
Commission on Form 8-K if the
26
<PAGE>
Company were required to file such reports. In addition, whether or not required
by the rules and regulations of the Commission, the Company shall file a copy of
all such information and reports with the Commission for public availability
(unless the Commission shall not accept such a filing) and make such information
available to securities analysts and prospective investors upon request.
(b) The Company shall provide the Warrant Agent with a sufficient
number of copies of all such reports that the Warrant Agent may be required to
deliver to the holders of the Warrants under this Section 15.
Section 16. Notices to the Company and Warrant Agent.
Any notice or demand authorized by this Agreement to be given or made
by the Warrant Agent or by the registered holder of any Warrant Certificate to
or on the Company shall be sufficiently given or made when and if deposited in
the mail, first class or registered, postage prepaid, addressed (until another
address is filed in writing by the Company with the Warrant Agent), as follows:
OnePoint Communications Corp.
2201 Waukegan Road
Suite E-200
Bannockburn, Illinois 60015
Attention: John D. Stavig
In case the Company shall fail to maintain such office or agency or
shall fail to give such notice of the location or of any change in the location
thereof, presentations may be made and notices and demands may be served at the
principal office of the Warrant Agent.
Any notice pursuant to this Agreement to be given by the Company or by
the registered holder(s) of any Warrant Certificate to the Warrant Agent shall
be sufficiently given when and if deposited in the mail, first-class or
registered, postage prepaid, addressed (until another address is filed in
writing by the Warrant Agent with the Company) to the Warrant Agent as follows:
Harris Trust and Savings Bank
311 West Monroe, 12th Floor
Chicago, Illinois 60606
Attention: Judy Bartolini
Section 17. Supplements and Amendments.
From time to time, the Company and the Warrant Agent, without consent
of the holders of the Warrants, may amend or supplement the Warrant Agreement
for certain purposes, including curing defects or inconsistencies or making
changes that do not materially adversely affect the rights of any holder. Any
amendment or supplement to the Warrant Agreement that has a material adverse
effect on the interests of the holders of the Warrants requires the written
consent of the holders of a majority of the then outstanding Warrants, including
any Warrants held by the Company or a subsidiary of the Company. The consent of
each holder of the Warrants is required for any amendment pursuant to which the
Exercise Price would be increased or the number of Warrant Shares purchasable
upon exercise of Warrants would be decreased (other than pursuant to adjustments
provided for in the Warrant Agreement as generally described above).
Notwithstanding anything in this Agreement to the contrary, no supplement or
amendment that changes the rights and duties of the Warrant Agent under this
Agreement
27
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will be effective against the Warrant Agent without the execution of such
supplement or amendment by the Warrant Agent.
Section 18. Successors.
All the covenants and provisions of this Agreement by or for the
benefit of the Company or the Warrant Agent shall bind and inure to the benefit
of their respective successors and assigns hereunder.
Section 19. Termination.
This Agreement shall terminate at 5:00 p.m., New York City time on
June 1, 2008. Notwithstanding the foregoing, this Agreement will terminate on
any earlier date if all Warrants have been exercised. The provisions of Section
12, regarding indemnification, shall survive such termination.
Section 20. Governing Law.
This Agreement and each Warrant Certificate issued hereunder shall be
deemed to be a contract made under the laws of the State of New York and for all
purposes shall be construed in accordance with the internal laws of said State.
Section 21. Benefits of This Agreement.
Nothing in this Agreement shall be construed to give to any person or
corporation other than the Company, the Warrant Agent and the registered holders
of the Warrant Certificates any legal or equitable right, remedy or claim under
this Agreement; but this Agreement shall be for the sole and exclusive benefit
of the Company, the Warrant Agent and the registered holders of the Warrant
Certificates.
Section 22. Counterparts.
This Agreement may be executed in any number of counterparts and each
of such counterparts shall for all purposes be deemed to be an original, and all
such counterparts shall together constitute but one and the same instrument.
[Signature Page Follows]
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IN WITNESS WHEREOF, the parties hereto have caused this Warrant
Agreement to be duly executed, as of the day and year first above written.
OnePoint Communications Corp.
By: /s/ James A. Otterbeck
----------------------------------------
Name: James A. Otterbeck
Title: Chairman and Chief Executive Officer
Harris Trust and Savings Bank,
as Warrant Agent
By: /s/ J. Bartolini
----------------------------------
Name: J. Bartolini
Title: Vice President
<PAGE>
EXHIBIT A
FORM OF WARRANT
[Face of Warrant Certificate]
THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY
ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE UNITED
STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND THE
SECURITY EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN
THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH
PURCHASER OF THE SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE SELLER
MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE
SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF THE SECURITY
EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE COMPANY THAT (A) SUCH SECURITY
MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (1)(a) TO A PERSON WHO THE
SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN
RULE 144A UNDER THE SECURITIES ACT) (b) IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144A UNDER THE SECURITIES ACT, (c) OUTSIDE THE UNITED
STATES TO A FOREIGN PERSON IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 904
UNDER THE SECURITIES ACT, (d) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" AS
DEFINED IN RULE 501(a)(1), (2), (3) OR (7) OF THE SECURITIES ACT (AN
"INSTITUTIONAL ACCREDITED INVESTOR") IN A TRANSACTION EXEMPT FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OR (e) IN ACCORDANCE WITH
ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, (2)
TO THE COMPANY OR (3) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN
EACH CASE, IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE
UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND (B) THE HOLDER WILL, AND
EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER FROM IT OF THE
SECURITY EVIDENCED HEREBY OF THE RESALE RESTRICTIONS SET FORTH IN (A) ABOVE.
THIS GLOBAL WARRANT IS HELD BY THE DEPOSITARY (AS DEFINED IN THE
WARRANT AGREEMENT GOVERNING THIS WARRANT) OR ITS NOMINEE IN CUSTODY FOR THE
BENEFIT OF THE BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON
UNDER ANY CIRCUMSTANCES EXCEPT THAT (I) THE WARRANT AGENT MAY MAKE SUCH
NOTATIONS HEREON AS MAY BE REQUIRED PURSUANT TO SECTION 3.7 OF THE WARRANT
AGREEMENT, (II) THIS GLOBAL WARRANT MAY BE EXCHANGED IN WHOLE BUT NOT IN PART
PURSUANT TO SECTION 3.6(a) OF THE WARRANT AGREEMENT, (III) THIS GLOBAL NOTE MAY
BE DELIVERED TO THE WARRANT AGREEMENT FOR CANCELLATION PURSUANT TO SECTION 3.11
OF THE WARRANT AGENT AND (IV) THIS GLOBAL NOTE MAY BE TRANSFERRED TO A SUCCESSOR
DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF THE COMPANY.
THE WARRANTS EVIDENCED BY THIS CERTIFICATE ARE INITIALLY ISSUED AS
PART OF AN ISSUANCE OF UNITS (THE "UNITS"), EACH OF WHICH CONSIST OF $1,000
PRINCIPAL AMOUNT OF 14 1/2% SENIOR NOTES DUE 2008 OF THE COMPANY AND ONE
A-1
<PAGE>
WARRANT ("WARRANT") INITIALLY ENTITLING THE HOLDER THEREOF TO PURCHASE 0.635
SHARES, PAR VALUE $0.01 PER SHARE, OF THE COMPANY. PRIOR TO THE EARLIEST TO
OCCUR OF (i) THE DATE THAT IS SIX MONTHS FOLLOWING THE INITIAL SALE OF THE
UNITS, (ii) THE COMMENCEMENT OF AN EXCHANGE OFFER WITH RESPECT TO THE NOTES,
(iii) THE DATE A SHELF REGISTRATION STATEMENT (AS DEFINED IN THE INDENTURE) WITH
RESPECT TO THE NOTES IS DECLARED EFFECTIVE, (iv) A CHANGE OF CONTROL (AS DEFINED
IN THE INDENTURE), OR (v) SUCH DATE AS BEAR, STEARNS & CO. INC. MAY, IN ITS SOLE
DISCRETION, DEEM APPROPRIATE, THE WARRANTS EVIDENCED BY THIS CERTIFICATE MAY NOT
BE TRANSFERRED OR EXCHANGED SEPARATELY FROM, BUT MAY BE TRANSFERRED OR EXCHANGED
ONLY TOGETHER WITH, THE NOTES.
EXERCISABLE ON OR AFTER THE SEPARATION DATE
No. ______ _________ Warrants
Warrant Certificate
ONEPOINT COMMUNICATIONS CORP.
This Warrant Certificate certifies that ______________, or registered
assigns, is the registered holder of Warrants expiring June 1, 2008 (the
"Warrants") to purchase Common Stock. Each Warrant entitles the holder upon
exercise to receive from the Company commencing on the earlier of (a) the
Separation Date (as defined in the Warrant Agreement) and (b) in the event a
Change of Control occurs, the date the Company mails notice thereof to holders
of Notes and Warrants, until 5:00 p.m. New York City Time on June 1, 2008, the
number of fully paid and nonassessable Warrant Shares as set forth in the
Warrant Agreement, subject to adjustment as set forth in Section 8 of the
Warrant Agreement, at the initial exercise price (the "Exercise Price") of $0.01
per share payable in lawful money of the United States of America upon surrender
of this Warrant Certificate and payment of the Exercise Price at the office or
agency of the Warrant Agent, but only subject to the conditions set forth herein
and in the Warrant Agreement referred to on the reverse hereof. Notwithstanding
the foregoing, Warrants may be exercised without the exchange of funds pursuant
to the net exercise provisions of Section 4 of the Warrant Agreement. The
Exercise Price and number of Warrant Shares issuable upon exercise of the
Warrants are subject to adjustment upon the occurrence of certain events set
forth in the Warrant Agreement. No Warrant may be exercised after 5:00 p.m.,
New York City Time on June 1, 2008, and to the extent not exercised by such time
such Warrants shall become void. Reference is hereby made to the further
provisions of this Warrant Certificate set forth on the reverse hereof and such
further provisions shall for all purposes have the same effect as though fully
set forth at this place. This Warrant Certificate shall not be valid unless
countersigned by the Warrant Agent, as such term is used in the Warrant
Agreement. This Warrant Certificate shall be governed and construed in
accordance with the internal laws of the State of New York.
A-2
<PAGE>
IN WITNESS WHEREOF, OnePoint Communications Corp. has caused this
Warrant Certificate to be signed by its President and Treasurer and by its Vice
President and Secretary and may cause its corporate seal to be affixed hereunto
or imprinted hereon.
Dated: May 21, 1998
OnePoint Communications Corp.
By:
-----------------------------------
Name:
Title:
By:
-----------------------------------
Name:
Title:
Countersigned:
Harris Trust and Savings Bank,
as Warrant Agent
By:
-----------------------------------
Name:
Title:
A-3
<PAGE>
[Reverse of Warrant Certificate]
The Warrants evidenced by this Warrant Certificate are part of a duly
authorized issue of Warrants expiring June 1, 2008 entitling the holder on
exercise to receive shares of Common Stock, and are issued or to be issued
pursuant to a Warrant Agreement dated as of May 21, 1998 (the "Warrant
Agreement") and a Warrant Registration Rights Agreement (the "Warrant
Registration Rights Agreement"), both duly executed and delivered by the Company
to Harris Trust and Savings Bank, as warrant agent (the "Warrant Agent"), which
Warrant Agreement and Warrant Registration Rights Agreement are hereby
incorporated by reference in and made a part of this instrument and are hereby
referred to for a description of the rights, limitation of rights, obligations,
duties and immunities thereunder of the Warrant Agent, the Company and the
holders (the words "holders" or "holder" meaning the registered holders or
registered holder) of the Warrants. Copies of the Warrant Agreement and the
Warrant Registration Rights Agreement may be obtained by the holder hereof upon
written request to the Company.
Warrants may be exercised at any time on or after the earlier of (a)
the Separation Date and (b) in the event a Change of Control occurs, the date
the Company mails notice thereof to holder of Notes and Warrants, and on or
before June 1, 2008; provided that holders shall be able to exercise their
Warrants only if a registration statement relating to the Warrant Shares is then
in effect, or the exercise of such Warrants is exempt from the registration
requirements of the Securities Act of 1933, as amended (the "Securities Act"),
and such securities are qualified for sale or exempt from qualification under
the applicable securities laws of the states in which the various holders of the
Warrants or other persons to whom it is proposed that the Warrant Shares be
issued on exercise of the Warrants reside. In order to exercise all or any of
the Warrants represented by this Warrant Certificate, (i) in the case of
Definitive Warrants, the holder must surrender for exercise this Warrant
Certificate to the Warrant Agent at its New York corporate trust office set
forth in Section 16 of the Warrant Agreement, (ii) in the case of a book-entry
interest in a Global Warrant, the exercising Participant whose name appears on a
securities position listing of the Depositary as the holder of such book-entry
interest must comply with the Depositary's procedures relating to the exercise
of such book-entry interest in such Global Warrant and (iii) in the case of both
Global Warrants and Definitive Warrants, the holder thereof or the Participant,
as applicable, must deliver to the Warrant Agent the form of election to
purchase on the reverse hereof duly filled in and signed, which signature shall
be a medallion guaranteed by an institution which is a member of a Securities
Transfer Association recognized signature guarantee program, and upon payment to
the Warrant Agent for the account of the Company of the Exercise Price, as
adjusted as provided in the Warrant Agreement, for the number of Warrant Shares
in respect of which such Warrants are then exercised. No adjustment shall be
made for any dividends on any Common Stock issuable upon exercise of this
Warrant.
The Warrant Agreement provides that upon the occurrence of certain
events the Exercise Price set forth on the face hereof may, subject to certain
conditions, be adjusted. If the Exercise Price is adjusted, the Warrant
Agreement provides that the number of shares of Common Stock issuable upon the
exercise of each Warrant shall be adjusted. No fractions of a share of Common
Stock will be issued upon the exercise of any Warrant, but the Company will pay
the cash value thereof determined as provided in the Warrant Agreement.
Warrant Certificates, when surrendered at the office of the Warrant
Agent by the registered holder thereof in person or by legal representative or
attorney duly authorized in writing, may be exchanged, in the manner and subject
to the limitations provided in the Warrant Agreement, but
A-4
<PAGE>
without payment of any service charge, for another Warrant Certificate or
Warrant Certificates of like tenor evidencing in the aggregate a like number of
Warrants.
Upon due presentation for registration of transfer of this Warrant
Certificate at the office of the Warrant Agent a new Warrant Certificate or
Warrant Certificates of like tenor and evidencing in the aggregate a like number
of Warrants shall be issued to the transferee(s) in exchange for this Warrant
Certificate, subject to the limitations provided in the Warrant Agreement,
without charge except for any tax or other governmental charge imposed in
connection therewith.
The Company and the Warrant Agent may deem and treat the registered
holder(s) thereof as the absolute owner(s) of this Warrant Certificate
(notwithstanding any notation of ownership or other writing hereon made by
anyone), for the purpose of any exercise hereof, of any distribution to the
holder(s) hereof, and for all other purposes, and neither the Company nor the
Warrant Agent shall be affected by any notice to the contrary. Neither the
Warrants nor this Warrant Certificate entitles any holder hereof to any rights
of a stockholder of the Company.
A-5
<PAGE>
Form of Election to Purchase
(To Be Executed Upon Exercise Of Warrant)
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate, to receive _______ shares of Common
Stock and herewith tenders payment for such shares to the order of the Company
in the amount of $______ in accordance with the terms hereof unless the holder
is exercising Warrants pursuant to the net exercise provisions of Section 4 of
the Warrant Agreement in which case the holder shall tender Warrants having a
Fair Market Value (as defined in the Warrant Agreement) equal to the Exercise
Price of the Warrants being exercised by such holder. The undersigned requests
that a certificate for such shares be registered in the name
of ______________________, whose address is ___________________________ and that
such shares be delivered to ________________ whose address is
_________________________________. If said number of shares is less than all of
the shares of Common Stock purchasable hereunder, the undersigned requests that
a new Warrant Certificate representing the remaining balance of such shares be
registered in the name of ______________, whose address is
_________________________, and that such Warrant Certificate be delivered to
_________________, whose address is __________________.
Date: ______________, ____
__________________________
(Signature)
__________________________
(Signature Guaranteed)
A-6
<PAGE>
SCHEDULE A
SCHEDULE OF WARRANTS
EVIDENCED BY THIS GLOBAL WARRANT
The initial number of Warrants evidenced by this Global Warrant shall
be 175,000. The following decreases/increases in the number of Warrants
evidenced by this Warrant have been made:
<TABLE>
<CAPTION>
Decrease in Total Number of
Number of Increase in Warrants Evidenced
Warrants Number of by this Global
Date of Evidenced by Warrants Warrant Following Notation Made by
Decrease/ this Global Evidenced by this such Decrease/ or on Behalf of
Increase Warrant Global Warrant Increase Warrant Agent
--------- ------------ ----------------- ------------------ ----------------
<S> <C> <C> <C> <C>
- --------- ------------ ----------------- ------------------ ----------------
- --------- ------------ ----------------- ------------------ ----------------
- --------- ------------ ----------------- ------------------ ----------------
- --------- ------------ ----------------- ------------------ ----------------
- --------- ------------ ----------------- ------------------ ----------------
- --------- ------------ ----------------- ------------------ ----------------
- --------- ------------ ----------------- ------------------ ----------------
- --------- ------------ ----------------- ------------------ ----------------
- --------- ------------ ----------------- ------------------ ----------------
- --------- ------------ ----------------- ------------------ ----------------
- --------- ------------ ----------------- ------------------ ----------------
- --------- ------------ ----------------- ------------------ ----------------
- --------- ------------ ----------------- ------------------ ----------------
- --------- ------------ ----------------- ------------------ ----------------
- --------- ------------ ----------------- ------------------ ----------------
- --------- ------------ ----------------- ------------------ ----------------
</TABLE>
A-7
<PAGE>
EXHIBIT B
FORM OF CERTIFICATE OF TRANSFER
OnePoint Communications Corp.
2201 Waukegan Road
Suite E-200
Bannockburn, Illinois 60015
Attention:_____________________
Harris Trust and Savings Bank
311 West Monroe, 12th Floor
Chicago, Illinois 60606
Attention: Tod Shafer
Re: 175,000 Warrants to Purchase 111,125 Shares of Common Stock
-----------------------------------------------------------
(CUSIP __________)
Reference is hereby made to the Warrant Agreement, dated as of May 21,
1998 (the "Warrant Agreement"), among OnePoint Communications Corp., as issuer
(the "Company"), and Harris Trust and Savings Bank, as Warrant Agent.
Capitalized terms used but not defined herein shall have the meanings given to
them in the Warrant Agreement.
______________, (the "Transferor") owns and proposes to transfer the
Warrant[s] or interest in such Warrant[s] specified in Annex A hereto, in the
amount of ___________ in such Warrant[s] or interests (the "Transfer"), to
__________ (the "Transferee"), as further specified in Annex A hereto. In
connection with the Transfer, the Transferor hereby certifies that:
[CHECK ALL THAT APPLY]
1. [_] Check if Transferee will take delivery of a beneficial interest in the
144A Global Warrant or a Definitive Warrant Pursuant to Rule 144A. The Transfer
is being effected pursuant to and in accordance with Rule 144A under the United
States Securities Act of 1933, as amended (the "Securities Act"), and,
accordingly, the Transferor hereby further certifies that the beneficial
interest or Definitive Warrant is being transferred to a Person that the
Transferor reasonably believed and believes is purchasing the beneficial
interest or Definitive Warrant for its own account, or for one or more accounts
with respect to which such Person exercises sole investment discretion, and such
Person and each such account is a "qualified institutional buyer" within the
meaning of Rule 144A in a transaction meeting the requirements of Rule 144A and
such Transfer is in compliance with any applicable blue sky securities laws of
any state of the United States. Upon consummation of the proposed Transfer in
accordance with the terms of the Warrant Agreement, the transferred beneficial
interest or Definitive Warrant will be subject to the restrictions on transfer
enumerated in the Private Placement Legend printed on the 144A Global Warrant
and/or the Definitive Warrant and in the Warrant Agreement and the Securities
Act.
2. [_] Check if Transferee will take delivery of a beneficial interest in the
Regulation S Global Warrant or a Definitive Warrant pursuant to Regulation S.
The Transfer is being effected pursuant
B-1
<PAGE>
to and in accordance with Rule 903 or Rule 904 under the Securities Act and,
accordingly, the Transferor hereby further certifies that (i) the Transfer is
not being made to a person in the United States and (x) at the time the buy
order was originated, the Transferee was outside the United States or such
Transferor and any Person acting on its behalf reasonably believed and believes
that the Transferee was outside the United States or (y) the transaction was
executed in, on or through the facilities of a designated offshore securities
market and neither such Transferor nor any Person acting on its behalf knows
that the transaction was prearranged with a buyer in the United States, (ii) no
directed selling efforts have been made in contravention of the requirements of
Rule 903(a) or Rule 904(a) of Regulation S under the Securities Act and, (iii)
the transaction is not part of a plan or scheme to evade the registration
requirements of the Securities Act and (iv) if the proposed transfer is being
made prior to the expiration of the Restricted Period, the transfer is not being
made to a U.S. Person or for the account or benefit of a U.S. Person (other than
an Initial Purchaser). Upon consummation of the proposed transfer in accordance
with the terms of the Warrant Agreement, the transferred beneficial interest or
Definitive Warrant will be subject to the restrictions on Transfer enumerated in
the Private Placement Legend printed on the Regulation S Global Warrant and/or
the Definitive Warrant and in the Warrant Agreement and the Securities Act.
3. [_] Check and complete if Transferee will take delivery of a beneficial
interest in the IAI Global Warrant or a Definitive Warrant pursuant to any
provision of the Securities Act other than Rule 144A or Regulation S. The
Transfer is being effected in compliance with the transfer restrictions
applicable to beneficial interests in Restricted Global Warrants and Restricted
Definitive Warrants and pursuant to and in accordance with the Securities Act
and any applicable blue sky securities laws of any state of the United States,
and accordingly the Transferor hereby further certifies that (check one):
(a) [_] such Transfer is being effected pursuant to and in accordance
with Rule 144 under the Securities Act;
or
(b) [_] such Transfer is being effected to the Company or a
subsidiary thereof;
or
(c) [_] such Transfer is being effected pursuant to an effective
registration statement under the Securities Act and in compliance with the
prospectus delivery requirements of the Securities Act;
or
(d) [_] such Transfer is being effected to an Institutional
Accredited Investor and pursuant to an exemption from the registration
requirements of the Securities Act other than Rule 144A, Rule 144 or Rule 904,
and the Transferor hereby further certifies that it has not engaged in any
general solicitation within the meaning of Regulation D under the Securities Act
and the Transfer complies with the transfer restrictions applicable to
beneficial interests in a Restricted Global Warrant or Restricted Definitive
Warrants and the requirements of the exemption claimed, which certification is
supported by (1) a certificate executed by the Transferee in the form of Exhibit
D to the Warrant Agreement and (2) if such Transfer is in respect of ___________
of Warrants at the time of transfer of less than $250,000, an
B-2
<PAGE>
Opinion of Counsel provided by the Transferor or the Transferee (a copy of which
the Transferor has attached to this certification), to the effect that such
Transfer is in compliance with the Securities Act. Upon consummation of the
proposed transfer in accordance with the terms of the Warrant Agreement, the
transferred beneficial interest or Definitive Warrant will be subject to the
restrictions on transfer enumerated in the Private Placement Legend printed on
the IAI Global Warrant and/or the Definitive Warrants and in the Warrant
Agreement and the Securities Act.
4. [_] Check if Transferee will take delivery of a beneficial interest in an
Unrestricted Global Warrant or of an Unrestricted Definitive Warrant.
(a) [_] Check if Transfer is pursuant to Rule 144. (i) The Transfer
is being effected pursuant to and in accordance with Rule 144 under the
Securities Act and in compliance with the transfer restrictions contained in the
Warrant Agreement and any applicable blue sky securities laws of any state of
the United States and (ii) the restrictions on transfer contained in the Warrant
Agreement and the Private Placement Legend are not required in order to maintain
compliance with the Securities Act. Upon consummation of the proposed Transfer
in accordance with the terms of the Warrant Agreement, the transferred
beneficial interest or Definitive Warrant will no longer be subject to the
restrictions on transfer enumerated in the Private Placement Legend printed on
the Restricted Global Warrants, on Restricted Definitive Warrants and in the
Warrant Agreement.
(b) [_] Check if Transfer is Pursuant to Regulation S. (i) The
Transfer is being effected pursuant to and in accordance with Rule 903 or Rule
904 under the Securities Act and in compliance with the transfer restrictions
contained in the Warrant Agreement and any applicable blue sky securities laws
of any state of the United States and (ii) the restrictions on transfer
contained in the Warrant Agreement and the Private Placement Legend are not
required in order to maintain compliance with the Securities Act. Upon
consummation of the proposed Transfer in accordance with the terms of the
Warrant Agreement, the transferred beneficial interest or Definitive Warrant
will no longer be subject to the restrictions on transfer enumerated in the
Private Placement Legend printed on the Restricted Global Warrants, on
Restricted Definitive Warrants and in the Warrant Agreement.
(c) [_] Check if Transfer is Pursuant to Other Exemption. (i) The
Transfer is being effected pursuant to and in compliance with an exemption from
the registration requirements of the Securities Act other than Rule 144, Rule
903 or Rule 904 and in compliance with the transfer restrictions contained in
the Warrant Agreement and any applicable blue sky securities laws of any State
of the United States and (ii) the restrictions on transfer contained in the
Warrant Agreement and the Private Placement Legend are not required in order to
maintain compliance with the Securities Act. Upon consummation of the proposed
Transfer in accordance with the terms of the Warrant Agreement, the transferred
beneficial interest or Definitive Warrant will not be subject to the
restrictions on transfer enumerated in the Private Placement Legend printed on
the Restricted Global Warrants or Restricted Definitive Warrants and in the
Warrant Agreement.
B-3
<PAGE>
This certificate and the statements contained herein are made for your
benefit and the benefit of the Company.
____________________________________
[Insert Name of Transferor]
By: ______________________________
Name:
Title:
Dated: ________ __, ____
B-4
<PAGE>
ANNEX A TO CERTIFICATE OF TRANSFER
1. The Transferor owns and proposes to transfer the following:
[CHECK ONE OF (a) OR (b)]
(a) [_] a beneficial interest in the:
(i) [_] 144A Global Warrant (CUSIP _________), or
(ii) [_] Regulation S Global Warrant (CUSIP _________), or
(iii) [_] IAI Global Warrant (CUSIP ________); or
(b) [_] a Restricted Definitive Warrant.
2. After the Transfer the Transferee will hold:
[CHECK ONE]
(a) [_] a beneficial interest in the:
(i) [_] 144A Global Warrant (CUSIP ________), or
(ii) [_] Regulation S Global Warrant (CUSIP ________), or
(iii) [_] IAI Global Warrant (CUSIP ________); or
(iv) [_] Unrestricted Global Warrant (CUSIP ________); or
(b) [_] a Restricted Definitive Warrant; or
(c) [_] an Unrestricted Definitive Warrant,
in accordance with the terms of the Warrant Agreement.
B-5
<PAGE>
EXHIBIT C
FORM OF CERTIFICATE OF EXCHANGE
OnePoint Communications Corp.
2201 Waukegan Road
Suite E-200
Bannockburn, Illinois 60015
Attention:_____________________
Harris Trust and Savings Bank
311 West Monroe, 12th Floor
Chicago, Illinois 60606
Attention: Tod Shafer
Re: 175,000 Warrants to Purchase 111,125 Shares of Common Stock
-----------------------------------------------------------
(CUSIP __________)
Reference is hereby made to the Warrant Agreement, dated as of May 21,
1998 (the "Warrant Agreement"), among OnePoint Communications Corp., as issuer
(the "Company"), and Harris Trust and Savings Bank, as Warrant Agent.
Capitalized terms used but not defined herein shall have the meanings given to
them in the Warrant Agreement.
____________, (the "Owner") owns and proposes to exchange the
Warrant[s] or interest in such Warrant[s] specified herein, in the amount of
____________ in such Warrant[s] or interests (the "Exchange"). In connection
with the Exchange, the Owner hereby certifies that:
1. Exchange of Restricted Definitive Warrants or Beneficial Interests in a
Restricted Global Warrant for Unrestricted Definitive Warrants or Beneficial
Interests in an Unrestricted Global Warrant
(a) [_] Check if Exchange is from beneficial interest in a Restricted
Global Warrant to beneficial interest in an Unrestricted Global Warrant. In
connection with the Exchange of the Owner's beneficial interest in a Restricted
Global Warrant for a beneficial interest in an Unrestricted Global Warrant in an
equal amount, the Owner hereby certifies (i) the beneficial interest is being
acquired for the Owner's own account without transfer, (ii) such Exchange has
been effected in compliance with the transfer restrictions applicable to the
Global Warrants and pursuant to and in accordance with the United States
Securities Act of 1933, as amended (the "Securities Act"), (iii) the
restrictions on transfer contained in the Warrant Agreement and the Private
Placement Legend are not required in order to maintain compliance with the
Securities Act and (iv) the beneficial interest in an Unrestricted Global
Warrant is being acquired in compliance with any applicable blue sky securities
laws of any state of the United States.
(b) [_] Check if Exchange is from beneficial interest in a Restricted
Global Warrant to Unrestricted Definitive Warrant. In connection with the
Exchange of the Owner's beneficial interest in a Restricted Global Warrant for
an Unrestricted Definitive Warrant, the
Owner hereby certifies (i) the Definitive Warrant is being acquired for the
Owner's own account without
C-1
<PAGE>
transfer, (ii) such Exchange has been effected in compliance with the transfer
restrictions applicable to the Restricted Global Warrants and pursuant to and in
accordance with the Securities Act, (iii) the restrictions on transfer contained
in the Warrant Agreement and the Private Placement Legend are not required in
order to maintain compliance with the Securities Act and (iv) the Definitive
Warrant is being acquired in compliance with any applicable blue sky securities
laws of any state of the United States.
(c) [_] Check if Exchange is from Restricted Definitive Warrant to
beneficial interest in an Unrestricted Global Warrant. In connection with the
Owner's Exchange of a Restricted Definitive Warrant for a beneficial interest in
an Unrestricted Global Warrant, the Owner hereby certifies (i) the beneficial
interest is being acquired for the Owner's own account without transfer, (ii)
such Exchange has been effected in compliance with the transfer restrictions
applicable to Restricted Definitive Warrants and pursuant to and in accordance
with the Securities Act, (iii) the restrictions on transfer contained in the
Warrant Agreement and the Private Placement Legend are not required in order to
maintain compliance with the Securities Act and (iv) the beneficial interest is
being acquired in compliance with any applicable blue sky securities laws of any
state of the United States.
(d) [_] Check if Exchange is from Restricted Definitive Warrant to
Unrestricted Definitive Warrant. In connection with the Owner's Exchange of a
Restricted Definitive Warrant for an Unrestricted Definitive Warrant, the Owner
hereby certifies (i) the Unrestricted Definitive Warrant is being acquired for
the Owner's own account without transfer, (ii) such Exchange has been effected
in compliance with the transfer restrictions applicable to Restricted Definitive
Warrants and pursuant to and in accordance with the Securities Act, (iii) the
restrictions on transfer contained in the Warrant Agreement and the Private
Placement Legend are not required in order to maintain compliance with the
Securities Act and (iv) the Unrestricted Definitive Warrant is being acquired in
compliance with any applicable blue sky securities laws of any state of the
United States.
2. Exchange of Restricted Definitive Warrants or Beneficial Interests in
Restricted Global Warrants for Restricted Definitive Warrants or Beneficial
Interests in Restricted Global Warrants.
(a) [_] Check if Exchange is from beneficial interest in a Restricted
Global Warrant to Restricted Definitive Warrant. In connection with the
Exchange of the Owner's beneficial interest in a Restricted Global Warrant for a
Restricted Definitive Warrant with an equal amount, the Owner hereby certifies
that the Restricted Definitive Warrant is being acquired for the Owner's own
account without transfer. Upon consummation of the proposed Exchange in
accordance with the terms of the Warrant Agreement, the Restricted Definitive
Warrant issued will continue to be subject to the restrictions on transfer
enumerated in the Private Placement Legend printed on the Restricted Definitive
Warrant and in the Warrant Agreement and the Securities Act.
C-2
<PAGE>
(b) [_] Check if Exchange is from Restricted Definitive Warrant to
beneficial interest in a Restricted Global Warrant. In connection with the
Exchange of the Owner's Restricted Definitive Warrant for a beneficial interest
in the [CHECK ONE] 144A Global Warrant, Regulation S Global Warrant, IAI
Global Warrant with an equal amount, the Owner hereby certifies (i) the
beneficial interest is being acquired for the Owner's own account without
transfer and (ii) such Exchange has been effected in compliance with the
transfer restrictions applicable to the Restricted Global Warrants and pursuant
to and in accordance with the Securities Act, and in compliance with any
applicable blue sky securities laws of any state of the United States. Upon
consummation of the proposed Exchange in accordance with the terms of the
Warrant Agreement, the beneficial interest issued will be subject to the
restrictions on transfer enumerated in the Private Placement Legend printed on
the relevant Restricted Global Warrant and in the Warrant Agreement and the
Securities Act.
C-3
<PAGE>
This certificate and the statements contained herein are made for your
benefit and the benefit of the Company.
__________________________________
[Insert Name of Owner]
By: _____________________________
Name:
Title:
Dated: ________________, ____
C-4
<PAGE>
EXHIBIT D
FORM OF CERTIFICATE FROM
ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR
OnePoint Communications Corp.
2201 Waukegan Road
Suite E-200
Bannockburn, Illinois 60015
Attention:____________________
Harris Trust and Savings Bank
311 West Monroe, 12th Floor
Chicago, Illinois 60606
Attention: Tod Shafer
Re: 175,000 Warrants to Purchase 111,125 Shares of Common Stock
-----------------------------------------------------------
(CUSIP __________)
Reference is hereby made to the Warrant Agreement, dated as of May 21,
1998 (the "Warrant Agreement"), among OnePoint Communications Corp., as issuer
(the "Company"), and Harris Trust and Savings Bank, as Warrant Agent.
Capitalized terms used but not defined herein shall have the meanings given to
them in the Warrant Agreement.
In connection with our proposed purchase of ____________ amount of:
(a) [_] a beneficial interest in a Global Warrant, or
(b) [_] a Definitive Warrant,
we confirm that:
1. We understand that any subsequent transfer of the Warrants or any
interest therein is subject to certain restrictions and conditions set forth in
the Warrant Agreement and the undersigned agrees to be bound by, and not to
resell, pledge or otherwise transfer the Warrants or any interest therein except
in compliance with, such restrictions and conditions and the United States
Securities Act of 1933, as amended (the "Securities Act").
2. We understand that the offer and sale of the Warrants have not
been registered under the Securities Act, and that the Warrants and any interest
therein may not be offered or sold except as permitted in the following
sentence. We agree, on our own behalf and on behalf of any accounts for which
we are acting as hereinafter stated, that if we should sell the Warrants or any
interest therein, we will do so only (A) to the Company or any subsidiary
thereof, (B) in accordance with Rule 144A under the Securities Act to a
"qualified institutional buyer" (as defined therein), (c) to an institutional
"accredited investor" (as defined below) that, prior to such transfer, furnishes
(or has furnished on its behalf by a U.S. broker-dealer) to you and to the
Company a signed letter substantially in the form of this letter and, if such
transfer is in respect of a __________ of Warrants, at the time of transfer of
less than $250,000, an Opinion of Counsel in form reasonably acceptable to the
Company to the effect that such
D-1
<PAGE>
transfer is in compliance with the Securities Act, (D) outside the United States
in accordance with Rule 904 of Regulation S under the Securities Act, (E)
pursuant to the provisions of Rule 144(k) under the Securities Act or (F)
pursuant to an effective registration statement under the Securities Act, and we
further agree to provide to any person purchasing the Definitive Warrant or
beneficial interest in a Global Warrant from us in a transaction meeting the
requirements of clauses (A) through (E) of this paragraph a notice advising such
purchaser that resales thereof are restricted as stated herein.
3. We understand that, on any proposed resale of the Warrants or
beneficial interest therein, we will be required to furnish to you and the
Company such certifications, legal opinions and other information as you and the
Company may reasonably require to confirm that the proposed sale complies with
the foregoing restrictions. We further understand that the Warrants purchased
by us will bear a legend to the foregoing effect. We further understand that
any subsequent transfer by us of the Warrants or beneficial interest therein
acquired by us must be effected through one of the Initial Purchasers.
4. We are an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and have
such knowledge and experience in financial and business matters as to be capable
of evaluating the merits and risks of our investment in the Warrants, and we and
any accounts for which we are acting are each able to bear the economic risk of
our or its investment.
5. We are acquiring the Warrants or beneficial interest therein
purchased by us for our own account or for one or more accounts (each of which
is an institutional "accredited investor") as to each of which we exercise sole
investment discretion.
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceedings or official inquiry with
respect to the matters covered hereby.
__________________________________________
[Insert Name of Accredited Investor]
By: _______________________________
Name:
Title:
D-2
<PAGE>
Exhibit 4.6
144A WARRANT
[Face of Warrant Certificate]
THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY
ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE UNITED
STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND THE
SECURITY EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN
THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH
PURCHASER OF THE SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE SELLER
MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE
SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF THE SECURITY
EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE COMPANY THAT (A) SUCH SECURITY
MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (1)(a) TO A PERSON WHO THE
SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN
RULE 144A UNDER THE SECURITIES ACT) (b) IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144A UNDER THE SECURITIES ACT, (c) OUTSIDE THE UNITED
STATES TO A FOREIGN PERSON IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 904
UNDER THE SECURITIES ACT, (d) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" AS
DEFINED IN RULE 501(a)(1), (2), (3) OR (7) OF THE SECURITIES ACT (AN
"INSTITUTIONAL ACCREDITED INVESTOR") IN A TRANSACTION EXEMPT FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OR (e) IN ACCORDANCE WITH
ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, (2)
TO THE COMPANY OR (3) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN
EACH CASE, IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE
UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND (B) THE HOLDER WILL, AND
EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER FROM IT OF THE
SECURITY EVIDENCED HEREBY OF THE RESALE RESTRICTIONS SET FORTH IN (A) ABOVE.
THIS GLOBAL WARRANT IS HELD BY THE DEPOSITARY (AS DEFINED IN THE
WARRANT AGREEMENT GOVERNING THIS WARRANT) OR ITS NOMINEE IN CUSTODY FOR THE
BENEFIT OF THE BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON
UNDER ANY CIRCUMSTANCES EXCEPT THAT (I) THE WARRANT AGENT MAY MAKE SUCH
NOTATIONS HEREON AS MAY BE REQUIRED PURSUANT TO SECTION 3.7 OF THE WARRANT
AGREEMENT, (II) THIS GLOBAL WARRANT MAY BE EXCHANGED IN WHOLE BUT NOT IN PART
PURSUANT TO SECTION 3.6(a) OF THE WARRANT AGREEMENT, (III) THIS GLOBAL NOTE MAY
BE DELIVERED TO THE WARRANT AGREEMENT FOR CANCELLATION PURSUANT TO SECTION 3.11
OF THE WARRANT AGENT AND (IV) THIS GLOBAL NOTE MAY BE TRANSFERRED TO A SUCCESSOR
DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF THE COMPANY.
<PAGE>
THE WARRANTS EVIDENCED BY THIS CERTIFICATE ARE INITIALLY ISSUED AS
PART OF AN ISSUANCE OF UNITS (THE "UNITS"), EACH OF WHICH CONSIST OF $1,000
PRINCIPAL AMOUNT OF 14-1/2% SENIOR NOTES DUE 2008 OF THE COMPANY AND ONE WARRANT
("WARRANT") INITIALLY ENTITLING THE HOLDER THEREOF TO PURCHASE 0.635 SHARES, PAR
VALUE $0.01 PER SHARE, OF THE COMPANY. PRIOR TO THE EARLIEST TO OCCUR OF (i)
THE DATE THAT IS SIX MONTHS FOLLOWING THE INITIAL SALE OF THE UNITS, (ii) THE
COMMENCEMENT OF AN EXCHANGE OFFER WITH RESPECT TO THE NOTES, (iii) THE DATE OF A
SHELF REGISTRATION STATEMENT (AS DEFINED IN THE INDENTURE) WITH RESPECT TO THE
NOTES IS DECLARED EFFECTIVE, (iv) A CHANGE OF CONTROL (AS DEFINED IN THE
INDENTURE), OR (v) SUCH DATE AS BEAR, STEARNS & CO. INC. MAY, IN ITS SOLE
DISCRETION, DEEM APPROPRIATE, THE WARRANTS EVIDENCED BY THIS CERTIFICATE MAY NOT
BE TRANSFERRED OR EXCHANGED SEPARATELY FROM, BUT MAY BE TRANSFERRED OR EXCHANGED
ONLY TOGETHER WITH, THE NOTES.
EXERCISABLE ON OR AFTER THE SEPARATION DATE
No. 1 175,000 Warrants
Warrant Certificate
ONEPOINT COMMUNICATIONS CORP.
This Warrant Certificate certifies that Cede & Co., or registered
assigns, is the registered holder of Warrants expiring June 1, 2008 (the
"Warrants") to purchase Common Stock. Each Warrant entitles the holder upon
exercise to receive from the Company commencing on the earlier of (a) the
Separation Date (as defined in the Warrant Agreement) and (b) in the event a
Change of Control occurs, the date the Company mails notice thereof to holders
of Notes and Warrants, until 5:00 p.m. New York City Time on June 1, 2008, the
number of fully paid and nonassessable Warrant Shares as set forth in the
Warrant Agreement, subject to adjustment as set forth in Section 8 of the
Warrant Agreement, at the initial exercise price (the "Exercise Price") of $0.01
per share payable in lawful money of the United States of America upon surrender
of this Warrant Certificate and payment of the Exercise Price at the office or
agency of the Warrant Agent, but only subject to the conditions set forth herein
and in the Warrant Agreement referred to on the reverse hereof. Notwithstanding
the foregoing, Warrants may be exercised without the exchange of funds pursuant
to the net exercise provisions of Section 4 of the Warrant Agreement. The
Exercise Price and number of Warrant Shares issuable upon exercise of the
Warrants are subject to adjustment upon the occurrence of certain events set
forth in the Warrant Agreement. No Warrant may be exercised after 5:00 p.m.,
New York City Time on June 1, 2008, and to the extent not exercised by such time
such Warrants shall become void. Reference is hereby made to the further
provisions of this Warrant Certificate set forth on the reverse hereof and such
further provisions shall for all purposes have the same effect as though fully
set forth at this place. This Warrant Certificate shall not be valid unless
countersigned by the Warrant Agent, as such term is used in the Warrant
Agreement. This
2
<PAGE>
Warrant Certificate shall be governed and construed in accordance with the
internal laws of the State of New York.
3
<PAGE>
IN WITNESS WHEREOF, OnePoint Communications Corp. has caused this
Warrant Certificate to be signed by the officer named below.
Dated: May 21, 1998
OnePoint Communications Corp.
By: __________________________
Name:
Title:
Countersigned:
Harris Trust and Savings Bank,
as Warrant Agent
By: __________________________
Name:
Title:
4
<PAGE>
[Reverse of Warrant Certificate]
The Warrants evidenced by this Warrant Certificate are part of a duly
authorized issue of Warrants expiring June 1, 2008 entitling the holder on
exercise to receive shares of Common Stock, and are issued or to be issued
pursuant to a Warrant Agreement dated as of May 21, 1998 (the "Warrant
Agreement") and a Warrant Registration Rights Agreement (the "Warrant
Registration Rights Agreement"), both duly executed and delivered by the Company
to Harris Trust and Savings Bank, as warrant agent (the "Warrant Agent"), which
Warrant Agreement and Warrant Registration Rights Agreement are hereby
incorporated by reference in and made a part of this instrument and are hereby
referred to for a description of the rights, limitation of rights, obligations,
duties and immunities thereunder of the Warrant Agent, the Company and the
holders (the words "holders" or "holder" meaning the registered holders or
registered holder) of the Warrants. Copies of the Warrant Agreement and the
Warrant Registration Rights Agreement may be obtained by the holder hereof upon
written request to the Company.
Warrants may be exercised at any time on or after the earlier of (a)
the Separation Date and (b) in the event a Change of Control occurs, the date
the Company mails notice thereof to holder of Notes and Warrants, and on or
before June 1, 2008; provided that holders shall be able to exercise their
Warrants only if a registration statement relating to the Warrant Shares is then
in effect, or the exercise of such Warrants is exempt from the registration
requirements of the Securities Act of 1933, as amended (the "Securities Act"),
and such securities are qualified for sale or exempt from qualification under
the applicable securities laws of the states in which the various holders of the
Warrants or other persons to whom it is proposed that the Warrant Shares be
issued on exercise of the Warrants reside. In order to exercise all or any of
the Warrants represented by this Warrant Certificate, (i) in the case of
Definitive Warrants, the holder must surrender for exercise this Warrant
Certificate to the Warrant Agent at its New York corporate trust office set
forth in Section 16 of the Warrant Agreement, (ii) in the case of a book-entry
interest in a Global Warrant, the exercising Participant whose name appears on a
securities position listing of the Depositary as the holder of such book-entry
interest must comply with the Depositary's procedures relating to the exercise
of such book-entry interest in such Global Warrant and (iii) in the case of both
Global Warrants and Definitive Warrants, the holder thereof or the Participant,
as applicable, must deliver to the Warrant Agent the form of election to
purchase on the reverse hereof duly filled in and signed, which signature shall
be a medallion guaranteed by an institution which is a member of a Securities
Transfer Association recognized signature guarantee program, and upon payment to
the Warrant Agent for the account of the Company of the Exercise Price, as
adjusted as provided in the Warrant Agreement, for the number of Warrant Shares
in respect of which such Warrants are then exercised. No adjustment shall be
made for any dividends on any Common Stock issuable upon exercise of this
Warrant.
The Warrant Agreement provides that upon the occurrence of certain
events the Exercise Price set forth on the face hereof may, subject to certain
conditions, be adjusted. If the Exercise Price is adjusted, the Warrant
Agreement provides that the number of shares of Common Stock issuable upon the
exercise of each Warrant shall be adjusted. No fractions of a
5
<PAGE>
share of Common Stock will be issued upon the exercise of any Warrant, but the
Company will pay the cash value thereof determined as provided in the Warrant
Agreement.
Warrant Certificates, when surrendered at the office of the Warrant
Agent by the registered holder thereof in person or by legal representative or
attorney duly authorized in writing, may be exchanged, in the manner and subject
to the limitations provided in the Warrant Agreement, but without payment of any
service charge, for another Warrant Certificate or Warrant Certificates of like
tenor evidencing in the aggregate a like number of Warrants.
Upon due presentation for registration of transfer of this Warrant
Certificate at the office of the Warrant Agent a new Warrant Certificate or
Warrant Certificates of like tenor and evidencing in the aggregate a like number
of Warrants shall be issued to the transferee(s) in exchange for this Warrant
Certificate, subject to the limitations provided in the Warrant Agreement,
without charge except for any tax or other governmental charge imposed in
connection therewith.
The Company and the Warrant Agent may deem and treat the registered
holder(s) thereof as the absolute owner(s) of this Warrant Certificate
(notwithstanding any notation of ownership or other writing hereon made by
anyone), for the purpose of any exercise hereof, of any distribution to the
holder(s) hereof, and for all other purposes, and neither the Company nor the
Warrant Agent shall be affected by any notice to the contrary. Neither the
Warrants nor this Warrant Certificate entitles any holder hereof to any rights
of a stockholder of the Company.
6
<PAGE>
Form of Election to Purchase
(To Be Executed Upon Exercise Of Warrant)
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate, to receive _____ shares of Common Stock
and herewith tenders payment for such shares to the order of the Company in the
amount of $______ in accordance with the terms hereof unless the holder is
exercising Warrants pursuant to the net exercise provisions of Section 4 of the
Warrant Agreement in which case the holder shall tender Warrants having a Fair
Market Value (as defined in the Warrant Agreement) equal to the Exercise Price
of the Warrants being exercised by such holder. The undersigned requests that a
certificate for such shares be registered in the name of
_______________________________, whose address is ______________________________
and that such shares be delivered to ________________ whose address is
_________________________________. If said number of shares is less than all of
the shares of Common Stock purchasable hereunder, the undersigned requests that
a new Warrant Certificate representing the remaining balance of such shares be
registered in the name of ______________, whose address is
_________________________, and that such Warrant Certificate be delivered to
_________________, whose address is __________________.
Date: ______________, ____
__________________________
(Signature)
__________________________
(Signature Guaranteed)
7
<PAGE>
SCHEDULE A
SCHEDULE OF WARRANTS
EVIDENCED BY THIS GLOBAL WARRANT
The initial number of Warrants evidenced by this Global Warrant shall
be 175,000. The following decreases/increases in the number of Warrants
evidenced by this Warrant have been made:
<TABLE>
<CAPTION>
Total Number of
Decrease in Increase in Warrants
Number of Number of Evidenced by this
Warrants Warrants Global Warrant Notation Made
Date of Evidenced by Evidenced by Following such by or on
Decrease/ this Global this Global Decrease/ Behalf of
Increase Warrant Warrant Increase Warrant Agent
- ----------------- ----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
- ----------------- ----------------- ----------------- ----------------- -----------------
- ----------------- ----------------- ----------------- ----------------- -----------------
- ----------------- ----------------- ----------------- ----------------- -----------------
- ----------------- ----------------- ----------------- ----------------- -----------------
- ----------------- ----------------- ----------------- ----------------- -----------------
- ----------------- ----------------- ----------------- ----------------- -----------------
- ----------------- ----------------- ----------------- ----------------- -----------------
- ----------------- ----------------- ----------------- ----------------- -----------------
- ----------------- ----------------- ----------------- ----------------- -----------------
- ----------------- ----------------- ----------------- ----------------- -----------------
- ----------------- ----------------- ----------------- ----------------- -----------------
- ----------------- ----------------- ----------------- ----------------- -----------------
- ----------------- ----------------- ----------------- ----------------- -----------------
- ----------------- ----------------- ----------------- ----------------- -----------------
- ----------------- ----------------- ----------------- ----------------- -----------------
- ----------------- ----------------- ----------------- ----------------- -----------------
</TABLE>
8
<PAGE>
Exhibit 4.7
WARRANT REGISTRATION RIGHTS AGREEMENT
Dated May 21, 1998
By and Among
ONEPOINT COMMUNICATIONS CORP.
BEAR, STEARNS & CO. INC.
and
NATIONSBANC MONTGOMERY SECURITIES LLC
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Section 1. Definitions..................................................... 1
Section 2. Registration Rights............................................. 5
2.1. Demand Registration After Triggering Event...................... 5
2.2. Piggy-Back Registration......................................... 7
2.3. Limitations, Conditions and Qualifications to Obligations Under
Registration Covenants........................................ 10
2.4. Restrictions on Sale by the Company and Others.................. 11
2.5. Rule 144 and Rule 144A.......................................... 12
Section 3. "Market Stand-Off" Agreement.................................... 12
Section 4. Registration Procedures......................................... 13
Section 5. Section Indemnification......................................... 18
Section 6. Miscellaneous................................................... 21
</TABLE>
i
<PAGE>
WARRANT REGISTRATION RIGHTS AGREEMENT
THIS WARRANT REGISTRATION RIGHTS AGREEMENT (the "Agreement") is made
and entered into May 21, 1998, by and among ONEPOINT COMMUNICATIONS CORP., a
Delaware corporation (the "Company"), and BEAR, STEARNS & CO. INC. and
NATIONSBANC MONTGOMERY SECURITIES LLC (each an "Initial Purchaser" and
collectively, the "Initial Purchasers").
This Agreement is made pursuant to the Purchase Agreement dated as of
May 15, 1998 among the Company and the Initial Purchasers (the "Purchase
Agreement"), relating to, among other things, the sale by the Company to the
Initial Purchasers of an aggregate of 175,000 Units, each Unit consisting of
$1,000 principal amount at maturity of 14 1/2% Senior Notes due 2008 and one
Warrant, each initially exercisable for 0.635 shares of Common Stock, par value
$0.01 per share, of the Company. In order to induce the Initial Purchasers to
enter into the Purchase Agreement, the Company has agreed to provide to the
Initial Purchasers and the Holders (as defined herein), among other things, the
registration rights for the Warrant Shares (as defined herein) set forth in this
Agreement. The execution and delivery of this Agreement is a condition to the
obligations of the Initial Purchasers under the Purchase Agreement.
In consideration of the foregoing, the parties hereto agree as
follows:
Section 1. Definitions. As used in this Agreement, the following
defined terms shall have the following meanings:
"Advice" has the meaning ascribed to such term in the last paragraph
of Section 4 hereof.
"Affiliate" has the meaning given it in Rule 144 of the Securities Act
of 1933, as amended.
"Business Day" means any day other than a Legal Holiday.
"Capital Stock" means, with respect to the Company, any and all
shares, interests, rights to purchase, warrants, options, participations, or
other equivalents of, or interests (however designated) in stock issued by the
Company.
"Common Stock" means the Common Stock, par value $0.01 per share, of
the Company.
"Company" shall have the meaning ascribed to that term in the preamble
of this Agreement and shall also include the Company's permitted successors and
assigns.
"Demand Registration" has the meaning ascribed to such term in Section
2.1(a) hereof.
<PAGE>
"DTC" has the meaning ascribed to such term in Section 4(i) hereof.
"Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time.
"Holder" means each of the Initial Purchasers, for so long as it owns
any Warrant Shares, and each of its successors, assigns and direct and indirect
transferees who become registered owners of such Warrant Shares.
"Included Securities" has the meaning ascribed to such term in Section
2.1(a) hereof.
"indemnified party" has the meaning ascribed to such term in Section
5(c) hereof.
"indemnifying party" has the meaning ascribed to such term in Section
5(c) hereof.
"Indenture" means the Indenture dated as of May 21, 1998, as amended
or supplemented from time to time, between the Company and Harris Trust and
Savings Bank, as Trustee, pursuant to which the Notes are issued.
"Initial Purchasers" has the meaning ascribed to such term in the
preamble hereof.
"Legal Holiday" means a Saturday, a Sunday or a day on which banking
institutions in the City of New York or Chicago, Illinois, or at a place of
payment are authorized by law, regulation or executive order to remain closed.
If a payment date is a Legal Holiday at a place of payment, payment may be made
at that place on the next succeeding day that is not a Legal Holiday, and no
interest shall accrue on such payment for the intervening period.
"Notes" means the aggregate of $175,000,000 principal amount of 14
1/2% Senior Notes due 2008 of the Company issued under the Indenture.
"Person" means any individual, corporation, limited liability company,
partnership, joint venture, association, joint-stock company, trust,
unincorporated organization or government or agency or political subdivision
thereof (including any subdivision or ongoing business of any such entity or
substantially all of the assets of any such entity, subdivision or business).
"Piggy-Back Registration" has the meaning ascribed to such term in
Section 2.2(a) hereof.
"Prospectus" means the prospectus included in any Registration
Statement (including, without limitation, any prospectus subject to completion
and a prospectus that includes any information previously omitted from a
prospectus filed as part of an effective registration statement in reliance upon
Rule 430A promulgated under the Securities Act), as amended or supplemented by
any prospectus supplement, and all other amendments and
2
<PAGE>
supplements to the Prospectus, including post-effective amendments, and all
material incorporated by reference or deemed to be incorporated by reference in
such Prospectus.
"Public Equity Offering" means an underwritten offering of Common
Stock pursuant to a registration statement that has been declared effective by
the SEC pursuant to the Securities Act (other than a registration statement on
Form S-8 or otherwise relating to equity securities issuable under any employee
benefit plan of the Company).
"Purchase Agreement" has the meaning ascribed to such term in the
preamble hereof.
"Registrable Securities" means any of (i) the Warrant Shares and (ii)
any other securities issued or issuable with respect to any Registrable
Securities by way of stock dividend or stock split or in connection with a
combination of shares, recapitalization, merger, consolidation or other
reorganization or otherwise, unless, in each case, such Warrant Shares have been
offered and sold to the Holder pursuant to an effective Registration Statement
under the Securities Act declared effective prior to the exercisability of the
Warrants and such securities may be sold to the public pursuant to Rule 144
without any restriction on the amount of securities which may be sold by such
Holder. As to any particular Registrable Securities held by a Holder, such
securities shall cease to be Registrable Securities when (i) a Registration
Statement with respect to the offering of such securities by the Holder thereof
shall have been declared effective under the Securities Act and such securities
shall have been disposed of by such Holder pursuant to such Registration
Statement, (ii) such securities may at the time of determination be sold to the
public pursuant to Rule 144 without any restriction on the amount of securities
which may be sold by such Holder or Rule 144(k) (or any similar provision then
in force, but not Rule 144A) promulgated under the Securities Act without the
lapse of any further time or the satisfaction of any condition, (iii) such
securities shall have been otherwise transferred by such Holder and new
certificates for such securities not bearing a legend restricting further
transfer shall have been delivered by the Company or its transfer agent and
subsequent disposition of such securities shall not require registration or
qualification under the Securities Act or any similar state law then in force or
(iv) such securities shall have ceased to be outstanding.
"Registration Expenses" means all expenses incident to the Company's
performance of or compliance with this Agreement, including, without limitation,
all SEC and stock exchange or National Association of Securities Dealers, Inc.
registration and filing fees and expenses, fees and expenses of compliance with
securities or blue sky laws (including, without limitation, reasonable fees and
disbursements of counsel for the underwriters in connection with blue sky
qualifications of the Registrable Securities), printing expenses, messenger,
telephone and delivery expenses, fees and disbursements of counsel for the
Company and all independent certified public accountants, the fees and
disbursements of underwriters customarily paid by issuers or sellers of
securities (but not including any underwriting discounts or commissions or
transfer taxes, if any, attributable to the sale of Registrable Securities by
Holders of such Registrable Securities) and other reasonable out-of-pocket
expenses of Holders (it being
3
<PAGE>
understood that Registration Expenses shall not include, as to the fees and
expenses of counsel, the fees and expenses of more than one counsel for the
Holders).
"Registration Statement" means any appropriate registration statement
of the Company filed with the SEC pursuant to the Securities Act which covers
any of the Registrable Securities pursuant to the provisions of this Agreement
and all amendments and supplements to any such Registration Statement, including
post-effective amendments, in each case including the Prospectus contained
therein, all exhibits thereto and all material incorporated by reference
therein.
"Requisite Securities" means a number of Registrable Securities equal
to not less than 25% of the Registrable Securities then outstanding held in the
aggregate by all Holders; provided, however, that with respect to any action to
be taken at the request of the Holders of the Registrable Securities prior to
such time as the Warrants have expired pursuant to the terms thereof and of the
Warrant Agreement, each Warrant outstanding shall be deemed to represent that
number of Registrable Securities for which such Warrant would be then
exercisable.
"Rule 144" means Rule 144 promulgated under the Securities Act.
"Rule 144A" means Rule 144A promulgated under the Securities Act.
"SEC" means the Securities and Exchange Commission or any successor.
"Securities Act" means the Securities Act of 1933, as amended.
"Selling Holder" means a Holder who is selling Registrable Securities
in accordance with the provisions of Section 2.1 or 2.2.
"Triggering Event" means the occurrence of any of the following
events: (i) the day immediately prior to a Change of Control, (ii) the 180th day
(or such earlier date as determined by the Company in its sole discretion)
following the initial Public Equity Offering of the Company or (iii) other than
as a result of the initial Public Equity Offering of the Company, the day on
which a class of common equity securities of the Company is listed on a national
securities exchange or authorized for quotation on the Nasdaq National Market
System or is otherwise subject to registration under the Exchange Act.
"Warrant Agent" means Harris Trust and Savings Bank and any successor
Warrant Agent for the Warrants pursuant to the Warrant Agreement.
"Warrant Agreement" means the Warrant Agreement dated May 21, 1998
between the Company and Harris Trust and Savings Bank, as Warrant Agent, as
amended or supplemented from time to time in accordance with the terms thereof.
"Warrants" means the warrants of the Company issued pursuant to the
Warrant Agreement.
4
<PAGE>
"Warrant Share Prospectus" means the prospectus included in any
Warrant Share Registration Statement (including, without limitation, any
prospectus subject to completion and a prospectus that includes any information
previously omitted from a prospectus filed as part of an effective registration
statement in reliance upon Rule 430A promulgated under the Securities Act), as
amended or supplemented by any prospectus supplement, and all other amendments
and supplements to the Warrant Share Prospectus, including post-effective
amendments, and all material incorporated by reference or deemed to be
incorporated by reference in such Warrant Share Prospectus.
"Warrant Share Registration Statement" has the meaning ascribed to
that term in Section 5(a) hereof.
"Warrant Shares" means the shares of Common Stock deliverable upon
exercise of the Warrants.
Section 2. Registration Rights.
2.1. Demand Registration After Triggering Event.
(a) Registration Rights. Commencing on the earlier of May 21, 2003
or the occurrence of a Triggering Event, Holders owning, individually or in the
aggregate, not less than the Requisite Securities may make a written request for
one registration under the Securities Act of their Registrable Securities (a
"Demand Registration"). Subject to Section 2.3 hereof, within 120 days of the
receipt of such written request for a Demand Registration, the Company shall
file with the SEC and use its best efforts to cause to become effective under
the Securities Act a Registration Statement with respect to such Registrable
Securities. Any such request will specify the number of Registrable Securities
proposed to be sold and will also specify the intended method of disposition
thereof. Subject to Section 2.3 hereof, the Company shall give written notice of
such registration request to all other Holders of Registrable Securities within
20 days after the receipt thereof. Within 30 days after the date of such notice
from the Company, any Holder may request in writing that such Holder's
Registrable Securities be included in such Registration Statement and the
Company shall include in such Registration Statement the Registrable Securities
of any such Holder requested to be so included (the "Included Securities"). Each
such request by such other Holders shall specify the number of Included
Securities proposed to be sold and the intended method of disposition thereof.
Subject to Sections 2.1(b) and 2.1(f) hereof, the Company shall be required to
register Registrable Securities pursuant to this Section 2.1(a) only once.
Subject to Section 2.1(f) hereof, no other securities of the Company
except (i) Registrable Securities held by any Holder, (ii) equity securities to
be offered and sold for the account of the Company and (iii) any equity
securities of the Company held by any Person having "piggy-back" registration
rights pursuant to any contractual obligation of the Company shall be included
in a Demand Registration; provided, however, that no such securities for the
account of the Company or any other Person shall be so included unless, in
connection with any underwritten offering, the managing underwriter or
underwriters confirm to the Holders of
5
<PAGE>
Registrable Securities to be included in such Demand Registration that the
inclusion of such other securities will not be likely to affect the price at
which the Registrable Securities may be sold. The inclusion of any such
securities for the account of the Company or any other Person shall be on the
same terms as that of the Registrable Securities.
(b) Effective Registration. A Registration Statement will not be
deemed to have been effected as a Demand Registration unless it has been
declared effective by the SEC and the Company has complied in a timely manner
and in all material respects with all of its obligations under this Agreement
with respect thereto; provided, however, that if, after such Registration
Statement has become effective, the offering of Registrable Securities pursuant
to such Registration Statement is or becomes the subject of any stop order,
injunction or other order or requirement of the SEC or any other governmental or
administrative agency or court that prevents, restrains or otherwise limits the
sale of Registrable Securities pursuant to such Registration Statement for any
reason not attributable to any Holder participating in such registration and
such Registration Statement has not become effective within a reasonable time
period thereafter (not to exceed 45 days), such Registration Statement will be
deemed not to have been effected. If (i) a registration requested pursuant to
this Section 2.1 is deemed not to have been effected or (ii) a Demand
Registration does not remain effective under the Securities Act until at least
the earlier of (A) an aggregate of 180 days after the effective date thereof or
(B) the consummation of the distribution by the Holders of all of the
Registrable Securities covered thereby, then such registration shall not count
towards determining if the Company has satisfied its obligation to effect one
Demand Registration pursuant to this Section 2.1. For purposes of calculating
the 180-day period referred to in the preceding sentence, any period of time
during which such Registration Statement was not in effect shall be excluded.
The Holders of Registrable Securities shall be permitted to withdraw all or any
part of the Registrable Securities from a Demand Registration at any time prior
to the effective date of such Demand Registration.
(c) Underwritten Registrations. If any of the Registrable Securities
covered by a Demand Registration are to be sold in an underwritten offering, the
investment banker or investment bankers and manager or managers that will manage
the offering will be selected by the Company.
No Holder of Registrable Securities may participate in any
underwritten registration pursuant to a Registration Statement filed under this
Agreement unless such Holder (a) agrees to (i) sell such Holder's Registrable
Securities on the basis provided in and in compliance with any underwriting
arrangements approved by the Holders of not less than a majority of the
Registrable Securities to be sold thereunder and (ii) comply with Regulation M
under the Exchange Act and (b) completes and executes all questionnaires, powers
of attorney, indemnities, underwriting agreements and other documents reasonably
required under the terms of such underwriting arrangements; provided, however,
that no Holder of Registrable Securities shall be required to enter into a
custody or escrow agreement or power of attorney with respect to Registrable
Securities to be sold in connection with such underwriting arrangements.
6
<PAGE>
(d) Expenses. The Company will pay all Registration Expenses in
connection with the registrations requested pursuant to Section 2.1(a) hereof.
Each Holder of Registrable Securities shall pay all underwriting discounts and
commissions and transfer taxes, if any, relating to the sale or disposition of
such Holder's Registrable Securities pursuant to a Registration Statement
requested pursuant to this Section 2.1.
(e) Priority in Demand Registration. In a registration pursuant to
Section 2.1 hereof involving an underwritten offering, if the managing
underwriter or underwriters of such underwritten offering have informed, in
writing, the Company and the Selling Holders who have requested such Demand
Registration or who have sought inclusion therein that in such underwriter's or
underwriters' opinion the total number of securities which the Selling Holders
and any other Person desiring to participate in such registration intend to
include in such offering is such as to affect adversely the success of such
offering, including the price at which such securities can be sold, then the
Company will be required to include in such registration only the amount of
securities which it is so advised should be included in such registration. In
such event, securities shall be registered in such registration in the following
order of priority: (i) first, the securities which have been requested to be
included in such registration by the Holders of Registrable Securities pursuant
to this Agreement, (ii) second, provided that no securities sought to be
included by the Holders of Registrable Securities have been excluded from such
registration, the securities of other Persons entitled to exercise "piggy-back"
registration rights pursuant to contractual commitments of the Company (pro rata
based on the amount of securities sought to be registered by such Persons) and
(iii) third, provided that no securities of any other Person sought to be
included therein have been excluded from such registration, securities to be
offered and sold for the account of the Company.
If any securities of a Holder have been excluded from a registration
statement pursuant to the provisions of the foregoing paragraph, then such
registration shall not count towards determining whether the Company has
satisfied its obligation to effect one Demand Registration pursuant to Section
2.1 hereof.
2.2. Piggy-Back Registration.
(a) Registration Rights. If at any time the Company proposes to file
a Registration Statement under the Securities Act with respect to an offering by
the Company for its own account or for the account of any of its security
holders of Common Stock (other than (i) a Registration Statement on Form S-4 or
S-8 (or any substitute form that may be adopted by the SEC), (ii) a Registration
Statement filed in connection with an offering of securities solely to the
Company's existing security holders or any offer of debt securities or
convertible debt securities or (iii) a Demand Registration), then the Company
shall give written notice of such proposed filing to the Holders of Registrable
Securities as soon as practicable (but in no event fewer than 15 days before the
anticipated filing date or 10 days if the Company is subject to filing reports
under the Exchange Act and able to use Form S-3 under the Securities Act), and
such notice shall offer such Holders the opportunity to register such number of
shares of Registrable Securities as each such Holder may request in writing not
later than the earlier of
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(i) 15 days after notice of the proposed filing and (ii) 15 days prior to the
anticipated effective date of the Registration Statement (or eight days after
the notice of the proposed filing if the Company is subject to filing reports
under the Exchange Act and able to use Form S-3 under the Securities Act) after
receipt of such written notice from the Company (which request shall specify the
Registrable Securities intended to be disposed of by such Selling Holder and the
intended method of distribution thereof) (a "Piggy-Back Registration"). The
Company shall use its best efforts to keep such Piggy-Back Registration
continuously effective under the Securities Act until at least the earlier of
(A) 90 days after the effective date thereof or (B) the consummation of the
distribution by the Holders of all of the Registrable Securities covered
thereby. Subject to Section 2.2(b), the Company shall cause the managing
underwriter or underwriters, if any, of such proposed offering to permit the
Registrable Securities requested to be included in a Piggy-Back Registration to
be included on the same terms and conditions as any similar securities of the
Company or any other security holder included therein and to permit the sale or
other disposition of such Registrable Securities in accordance with the intended
method of distribution thereof. Any Selling Holder shall have the right to
withdraw its request for inclusion of its Registrable Securities in any
Registration Statement pursuant to this Section 2.2 by giving written notice to
the Company of its request to withdraw. The Company may withdraw a Piggy-Back
Registration at any time prior to the time it becomes effective or the Company
may elect to delay the registration; provided, however, that the Company shall
give prompt written notice thereof to participating Selling Holders. The Piggy-
Back Registration right of holders of Warrants and Warrant Shares shall not
apply to any Public Equity Offering that is the initial Public Equity Offering
of the Company unless the securities of other Selling Holders are to be included
therein. The Company will pay all Registration Expenses in connection with each
registration of Registrable Securities requested pursuant to this Section 2.2,
and each Holder of Registrable Securities shall pay all underwriting discounts
and commissions and transfer taxes, if any, relating to the sale or disposition
of such Holder's Registrable Securities pursuant to a Registration Statement
effected pursuant to this Section 2.2.
No registration effected under this Section 2.2, and no failure to
effect a registration under this Section 2.2, shall relieve the Company of its
obligation to effect a registration upon the request of Holders of Registrable
Securities pursuant to Section 2.1 hereof, and no failure to effect a
registration under this Section 2.2 and to complete the sale of securities
registered thereunder in connection therewith shall relieve the Company of any
other obligation under this Agreement.
(b) Priority in Piggy-Back Registration. In a registration pursuant
to Section 2.2 hereof involving an underwritten offering, if the managing
underwriter or underwriters of such underwritten offering have informed, in
writing, the Company and the Selling Holders requesting inclusion in such
offering that in such underwriter's or underwriters' opinion the total number of
securities which the Company, the Selling Holders and any other Persons desiring
to participate in such registration intend to include in such offering is such
as to materially and adversely affect the success of such offering, including
the price at which such securities can be sold, then the Company will be
required to include in such registration only the amount of securities which it
is so advised should be included in such registration. In such
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event: (1) in cases only involving the registration for sale of securities for
the Company's own account (other than pursuant to the exercise of "piggy-back"
rights herein and in other contractual commitments of the Company), securities
shall be registered in such offering in the following order of priority: (i)
first, the securities which the Company proposes to register, (ii) second,
provided that no securities sought to be included by the Company have been
excluded from such registration, the securities which have been requested to be
included in such registration by the Holders of Registrable Securities pursuant
to this Agreement together with the securities of other Persons entitled to
exercise "piggy-back" registration rights pursuant to contractual commitments of
the Company existing as of the date hereof, pro rata based upon the aggregate
amount of securities then held, and (iii) third, provided that no securities
sought to be included by the Company, the Holders or the other Persons described
in the immediately preceding clause (ii) have been excluded from such
registration, the securities of other Persons entitled to exercise "piggy-back"
registration rights pursuant to contractual commitments of the Company (pro rata
based on the amount of securities sought to be registered by such Persons); and
(2) in cases not involving the registration for sale of securities for the
Company's own account only, securities shall be registered in such offering in
the following order of priority: (i) first, the securities of any Person whose
exercise of a "demand" registration right pursuant to a contractual commitment
of the Company is the basis for the registration (provided that if such Person
is a Holder of Registrable Securities, as among Holders of Registrable
Securities there shall be no priority and Registrable Securities sought to be
included by Holders of Registrable Securities shall be included pro rata based
on the amount of securities sought to be registered by such Persons), (ii)
second, provided that no securities of such Person referred to in the
immediately preceding clause (i) have been excluded from such registration, the
securities which have been requested to be included in such registration by the
Holders of Registrable Securities pursuant to this Agreement together with the
securities of other Persons entitled to exercise "piggy-back" registration
rights pursuant to a contractual commitment of the Company existing as of the
date hereof, pro rata based upon the aggregate amount of securities held; (iii)
third, provided that no securities of such Person referred to in the immediately
preceding clause (i) or (ii) or the Holders have been excluded from such
registration, the securities of other Persons entitled to exercise "piggy-back"
registration rights pursuant to contractual commitments (pro rata based on the
amount of securities sought to be registered by such Persons) and (iv) fourth,
provided that no securities of any other Person have been excluded from such
registration, the securities which the Company proposes to register.
If, as a result of the provisions of this Section 2.2(b), any Selling
Holder shall not be entitled to include all Registrable Securities in a Piggy-
Back Registration that such Selling Holder has requested to be included, such
Selling Holder may elect to withdraw his request to include Registrable
Securities in such registration.
(c) Underwritten Registrations. If any of the Registrable Securities
covered by a Piggy-Back Registration are to be sold in an underwritten offering,
the investment banker or investment bankers and manager or managers that will
manage the offering will be selected by the Company.
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No Holder of Registrable Securities may participate in any
underwritten registration as contemplated by this Section 2.2 unless such Holder
(a) agrees to (i) sell such Holder's Registrable Securities on the basis
provided in and in compliance with any underwriting arrangements approved by the
Holders of not less than a majority of the Registrable Securities to be sold
thereunder and (ii) comply with Regulation M under the Exchange Act and (b)
completes and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents reasonably required under the terms
of such underwriting arrangements; provided, however, that no Holder of
Registrable Securities shall be required to enter into a custody or escrow
agreement or power of attorney with respect to Registrable Securities to be sold
in connection with such underwriting arrangements.
(d) Expenses. The Company will pay all Registration Expenses in
connection with the registrations requested pursuant to Section 2.2(a) hereof.
Each Holder of Registrable Securities shall pay all underwriting discounts and
commissions and transfer taxes, if any, relating to the sale or disposition of
such Holder's Registrable Securities pursuant to this Section 2.2.
2.3. Limitations, Conditions and Qualifications to Obligations Under
Registration Covenants.
(a) The obligations of the Company set forth in Sections 2.1 and 2.2
hereof are subject to each of the following limitations, conditions and
qualifications:
(i) Subject to the next sentence of this paragraph, the Company
shall be entitled to postpone, for a reasonable period of time, the filing
or effectiveness of, or suspend the rights of any Holders to make sales
pursuant to, any Registration Statement otherwise required to be prepared,
filed and made and kept effective by it hereunder; provided, however, that
the duration of such postponement or suspension may not exceed the earlier
to occur of (A) 15 days after the cessation of the circumstances described
in the next sentence of this paragraph on which such postponement or
suspension is based or (B) 90 days after the date of the determination of
the Board of Directors referred to in the next sentence, and the duration
of such postponement or suspension shall be excluded from the calculation
of the 180-day period described in Section 2.1(b) hereof. Such postponement
or suspension may be effected only if the Board of Directors of the Company
determines reasonably and in good faith that the filing or effectiveness
of, or sales pursuant to, such Registration Statement would materially
impede, delay or interfere with any financing, offer or sale of securities,
acquisition, divestiture, corporate reorganization or other significant
transaction involving the Company or any of its Affiliates or require
disclosure of material information which the Company has a bona fide
business purpose for preserving as confidential, which financing, offer or
sale of securities, acquisition, divestiture, corporate reorganization or
other significant transaction had been initiated at the time of the filing
of such Registration Statement; provided, however, that the Company shall
not be entitled to such postponement or suspension more than twice in any
twelve-month period. If the Company shall so
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postpone the filing of a Registration Statement it shall, as promptly as
possible, deliver a certificate signed by the Chief Executive Officer of
the Company to the Selling Holders as to such determination, and the
Selling Holders shall (y) have the right, in the case of a postponement of
the filing or effectiveness of a Registration Statement, upon the
affirmative vote of the Holders of not less than a majority of the
Registrable Securities to be included in such Registration Statement, to
withdraw the request for registration by giving written notice to the
Company within 10 days after receipt of such notice or (z) in the case of a
suspension of the right to make sales, receive an extension of the
registration period equal to the number of days of the suspension. Any
Demand Registration as to which the withdrawal election referred to in the
preceding sentence has been effected shall not be counted for purposes of
the single Demand Registration the Company may be required to effect
pursuant to Section 2.1 hereof.
(ii) The Company shall not be required by this Agreement to
effect a Demand Registration within 180 days immediately following the
effective date of any registration statement pertaining to a firmly
underwritten offering of equity securities of the Company for its own
account; provided, however, that this clause (ii) shall not apply if the
underwriter of such offering consents to the request for such Demand
Registration pursuant to Section 2.1(a).
(b) The Company shall not be required by this Agreement to effect a
Demand Registration within 120 days immediately following the effective date of
any registration statement pertaining to a firmly underwritten offering of
equity securities of the Company for the account of any security holder of the
Company; provided, however, that this clause (ii) shall not apply if the
underwriter of such offering consents to the request for such Demand
Registration pursuant to Section 2.1(a).
(c) The Company's obligations shall be subject to the obligations of
the Selling Holders, which the Selling Holders acknowledge, to furnish all
information and materials and to take any and all actions as may be required
under applicable federal and state securities laws and regulations to permit the
Company to comply with all applicable requirements of the SEC and to obtain any
acceleration of the effective date of such Registration Statement.
(d) The Company shall not be obligated to cause any special audit to
be undertaken in connection with any registration pursuant to this Agreement
unless such audit is required by the SEC or requested by the underwriters with
respect to such registration.
2.4. Restrictions on Sale by the Company and Others. The Company
covenants and agrees that (i) it shall not, and that it shall not cause or
permit any of its subsidiaries to, effect any public sale or distribution of any
securities of the same class as any of the Registrable Securities or any
securities convertible into or exchangeable or exercisable for such securities
(or any option or other right for such securities) during the 30-day period
prior to, and during the 180-day period beginning on, the commencement of any
underwritten offering of Registrable Securities pursuant to a Demand
Registration which has been requested pursuant to
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this Agreement, or a Piggy-Back Registration which has been scheduled, prior to
the Company or any of its subsidiaries publicly announcing its intention to
effect any such public sale or distribution; (ii) the Company will not, and the
Company will not cause or permit any subsidiary of the Company to, after the
date hereof, enter into any agreement or contract that conflicts with or limits
or prohibits the full and timely exercise by the Holders of Registrable
Securities of the rights herein to request a Demand Registration or to join in
any Piggy-Back Registration subject to the other terms and provisions hereof;
and (iii) that it shall use its reasonable best efforts to secure the written
agreement of each of its officers and directors to not effect any public sale or
distribution of any securities of the same class as the Registrable Securities
(or any securities convertible into or exchangeable or exercisable for any such
securities), or any option or right for such securities during the period
described in clause (i) of this Section 2.4.
2.5. Rule 144 and Rule 144A. The Company covenants that it will file
the reports required to be filed by it under the Securities Act and the Exchange
Act and the rules and regulations adopted by the SEC thereunder in a timely
manner and, if at any time the Company is not required to file such reports, it
will, upon the request of any Holder or beneficial owner of Registrable
Securities, make available such information necessary to permit sales pursuant
to Rule 144A under the Securities Act. The Company further covenants that it
will take such further action as any Holder of Registrable Securities may
reasonably request, all to the extent required from time to time to enable such
Holder to sell Registrable Securities without registration under the Securities
Act within the limitation of the exemptions provided by (a) Rule 144(k) and Rule
144A under the Securities Act, as such Rules may be amended from time to time,
or (b) any similar rule or regulation hereafter adopted by the SEC (it being
expressly understood that the foregoing shall not create any obligation on the
part of the Company to file periodic reports or other reports under the Exchange
Act at any time that it is not then required to file such reports pursuant to
the Exchange Act). Upon the request of any Holder of Registrable Securities, the
Company will in a timely manner deliver to such Holder a written statement as to
whether it has complied with such information requirements.
Section 3. "Market Stand-Off" Agreement.
(a) Each Holder of Registrable Securities whose Registrable
Securities are covered by a Registration Statement filed pursuant to Sections
2.1 or 2.2 hereof agrees, if and to the extent reasonably requested by the lead
managing underwriter with respect to an underwritten public offering, not to
sell or otherwise dispose of any Registrable Securities owned by it for a period
not to exceed 180 days from the consummation of such underwritten public
offering; provided, however, that except for the initial Public Equity Offering
of the Company, such requirement shall apply to Registrable Securities not sold
in a Demand Registration or Piggy-Back Registration due to a reduction pursuant
to Sections 2.1(e) or 2.2(b) hereof for a period not to exceed 90 days from such
date of consummation. Such requirement shall not apply to any Holder of
Registrable Securities if such Holder is prevented by applicable statute or
regulation from entering into any such agreement; provided, however, that any
such Holder shall undertake, in its request to participate in any such
underwritten offering, not to effect any public sale or distribution of any
Registrable Securities commencing on the date of sale of such Registrable
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Securities unless it has provided 45 days prior written notice of such sale or
distribution to the underwriter or underwriters.
(b) In order to enforce the foregoing covenant, the Company shall
have the right to place restrictive legends on the certificates representing the
shares subject to this Section 3 and to impose stop transfer instructions with
respect to the Registrable Securities and such other shares of stock of each
Holder (and the shares or securities of every other Person subject to the
foregoing restriction) until the end of such period. The provisions of this
Section 3 shall be binding upon any transferee of any Registrable Securities.
Section 4. Registration Procedures. In connection with the
obligations of the Company with respect to any Registration Statement pursuant
to Sections 2.1 and 2.2 hereof, the Company shall, except as otherwise provided:
(a) Prepare and file with the SEC as soon as practicable each such
Registration Statement and use its reasonable best efforts to cause such
Registration Statement to become effective and remain effective as provided
herein; provided, however, that before filing any such Registration Statement or
any Prospectus (for registrations pursuant to Sections 2.1 and 2.2 hereof) or
any amendments or supplements thereto (only for registrations pursuant to
Section 2.1 hereof) (including documents that would be incorporated or deemed to
be incorporated therein by reference, including such documents filed under the
Exchange Act that would be incorporated therein by reference), the Company
shall, upon request, afford promptly to the Selling Holders, their counsel and
the managing underwriter or underwriters, if any, an opportunity to review
copies of all such documents proposed to be filed a reasonable time prior to the
proposed filing thereof. The Company shall not file any Registration Statement
or Prospectus (for registrations pursuant to Sections 2.1 and 2.2 hereof) or any
amendments or supplements thereto (only for registrations pursuant to Section
2.1 hereof) if the Holders of a majority of the Registrable Securities covered
by such Registration Statement, their counsel, or the managing underwriter or
underwriters, if any, shall reasonably object in writing unless failure to file
any such amendment or supplement would involve a violation of the Securities Act
or other applicable law.
(b) Prepare and file with the SEC such amendments and post-effective
amendments to the Registration Statement as may be necessary to keep such
Registration Statement continuously effective for the time periods prescribed
hereby; cause the related Prospectus to be supplemented by any required
prospectus supplement, and as so supplemented to be filed pursuant to Rule 424
(or any similar provisions then in force) promulgated under the Securities Act;
and comply with the provisions of the Securities Act, the Exchange Act and the
rules and regulations of the SEC promulgated thereunder applicable to it with
respect to the disposition of all securities covered by such Registration
Statement as so amended or in such prospectus as so supplemented.
(c) Notify the Selling Holders, their counsel and the managing
underwriter or underwriters, if any, promptly (but in any event within two (2)
Business Days), and confirm such
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notice in writing, (i) when a Prospectus or any prospectus supplement or post-
effective amendment has been filed, and, with respect to a Registration
Statement or any post-effective amendment, when the same has become effective
(including in such notice a written statement that any Selling Holder may, upon
request, obtain, without charge, one conformed copy of such Registration
Statement or post-effective amendment including financial statements and
schedules and exhibits), (ii) of the issuance by the SEC of any stop order
suspending the effectiveness of such Registration Statement or of any order
preventing or suspending the use of any preliminary prospectus or the initiation
or threatening of any proceedings for that purpose, (iii) if at any time when a
prospectus is required by the Securities Act to be delivered in connection with
sales of the Registrable Securities the representations and warranties of the
Company contained in any agreement (including any underwriting agreement)
contemplated by Section 4(l) below, to the knowledge of the Company, cease to be
true and correct in any material respect, (iv) of the receipt by the Company of
any notification with respect to (A) the suspension of the qualification or
exemption from qualification of the Registration Statement or any of the
Registrable Securities covered thereby for offer or sale in any jurisdiction, or
(B) the initiation of any proceeding for such purpose, (v) of the happening at
any time prior to the completion of the distribution of the securities
registered pursuant to such Registration Statement of any event, the existence
of any condition or information becoming known that requires the making of any
changes in such Registration Statement, Prospectus or documents so that, in the
case of such Registration Statement, it will conform in all material respects
with the requirements of the Securities Act and it will not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading, and
that in the case of the Prospectus, it will conform in all material respects
with the requirements of the Securities Act and it will not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, and (vi) of the
Company's reasonable determination that a post-effective amendment to such
Registration Statement would be appropriate.
(d) Use every reasonable effort to prevent the issuance of any order
suspending the effectiveness of the Registration Statement or of any order
preventing or suspending the use of a Prospectus or suspending the qualification
(or exemption from qualification) of any of the Registrable Securities covered
thereby for sale in any jurisdiction, and, if any such order is issued, to
obtain the withdrawal of any such order as soon as practicable.
(e) If requested by the managing underwriter or underwriters, if any,
or the Holders of a majority of the Registrable Securities being sold in
connection with an underwritten offering (only for registrations pursuant to
Section 2.1 hereof), (i) promptly incorporate in a prospectus supplement or post
effective amendment such information as the managing underwriter or
underwriters, if any, or such Selling Holders reasonably request to be included
therein to comply with applicable law, (ii) make all required filings of such
prospectus supplement or such post-effective amendment as soon as practicable
after the Company has received notification of the matters to be incorporated in
such prospectus supplement or post-effective amendment, and (iii) supplement or
make amendments to such Registration Statement.
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(f) Furnish to each Selling Holder of Registrable Securities who so
requests and to counsel for the Selling Holders of Registrable Securities and
each managing underwriter, if any, without charge, upon request, one conformed
copy of the Registration Statement and each post-effective amendment thereto,
including financial statements and schedules, and of all documents incorporated
or deemed to be incorporated therein by reference and all exhibits (including
exhibits incorporated by reference).
(g) Deliver to each Selling Holder of Registrable Securities, their
counsel and each underwriter, if any, without charge, as many copies of each
Prospectus (including each form of prospectus) and each amendment or supplement
thereto as such Persons may reasonably request; and, subject to the last
paragraph of this Section 4, the Company hereby consents to the use of such
Prospectus and each amendment or supplement thereto by each of the Selling
Holders of Registrable Securities and the underwriter or underwriters or agents,
if any, in connection with the offering and sale of the Registrable Securities
covered by such Prospectus and any amendment or supplement thereto.
(h) Prior to any offering of Registrable Securities, to register or
qualify, and cooperate with the Selling Holders of Registrable Securities, the
underwriter or underwriters, if any, and their respective counsel in connection
with the registration or qualification (or exemption from such registration or
qualification) of, such Registrable Securities for offer and sale under the
securities or blue sky laws of such jurisdictions within the United States as
the managing underwriter or underwriters reasonably request in writing, or, in
the event of a non-underwritten offering, as the Holders of a majority of the
Registrable Securities may request included in such offering; provided, however,
that where Registrable Securities are offered other than through an underwritten
offering, the Company agrees to cause its counsel to perform blue sky
investigations and file registrations and qualifications required to be filed
pursuant to this Section 4(h); keep each such registration or qualification (or
exemption therefrom) effective during the Effectiveness Period and do any and
all other acts or things reasonably necessary or advisable to enable the
disposition in such jurisdictions of the securities covered thereby; provided,
however, that the Company will not be required to (A) qualify generally to do
business in any jurisdiction where it is not then so qualified, (B) take any
action that would subject it to general service of process in any such
jurisdiction where it is not then so subject or (C) become subject to taxation
in any jurisdiction where it is not then so subject.
(i) Cooperate with the Selling Holders of Registrable Securities and
the managing underwriter or underwriters, if any, to facilitate the timely
preparation and delivery of certificates representing Registrable Securities to
be sold, which certificates shall not bear any restrictive legends whatsoever
and shall be in a form eligible for deposit with The Depository Trust Company
("DTC"); and enable such Registrable Securities to be in such denominations and
registered in such names as the managing underwriter or underwriters, if any, or
Selling Holders may reasonably request at least two Business Days prior to any
sale of Registrable Securities in a firm commitment underwritten public
offering.
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(j) Upon the occurrence of any event contemplated by Section 4(c)(v)
or 4(c)(vi) above, as promptly as practicable prepare a supplement or post-
effective amendment to the Registration Statement or a supplement to the related
Prospectus or any document incorporated or deemed to be incorporated therein by
reference, and, subject to Section 4(a) hereof, file such with the SEC so that,
as thereafter delivered to the purchasers of Registrable Securities being sold
thereunder, such Prospectus will not contain an untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading.
(k) Prior to the effective date of a Registration Statement, (i)
provide the registrar for the Registrable Securities with certificates for such
securities in a form eligible for deposit with DTC and (ii) provide a CUSIP
number for such securities.
(l) Enter into an underwriting agreement in form, scope and substance
as is customary in underwritten offerings and take all such other actions as are
reasonably requested by the managing underwriter or underwriters in order to
expedite or facilitate the registration or disposition of such Registrable
Securities in any underwritten offering to be made of the Registrable Securities
in accordance with this Agreement, and in such connection, (i) make such
representations and warranties to the underwriter or underwriters, with respect
to the business of the Company and the subsidiaries of the Company, and the
Registration Statement, Prospectus and documents, if any, incorporated or deemed
to be incorporated by reference therein, in each case, in form, substance and
scope as are customarily made by issuers to underwriters in underwritten
offerings, and confirm the same if and when requested; (ii) use reasonable
efforts to obtain opinions of counsel to the Company and updates thereof,
addressed to the underwriter or underwriters covering the matters customarily
covered in opinions requested in underwritten offerings and such other matters
as may be reasonably requested by underwriters; (iii) use reasonable efforts to
obtain "cold comfort" letters and updates thereof from the independent certified
public accountants of the Company (and, if applicable, the subsidiaries of the
Company) and, if necessary, any other independent certified public accountants
of any subsidiary of the Company or of any business acquired or invested in by
the Company for which financial statements and financial data are, or are
required to be, included in the Registration Statement, addressed to each of the
underwriters, such letters to be in customary form and covering matters of the
type customarily covered in "cold comfort" letters in connection with
underwritten offerings and such other matters as reasonably requested by the
managing underwriter or underwriters and as permitted by the Statement of
Auditing Standards No. 72; and (iv) if an underwriting agreement is entered
into, the same shall contain customary indemnification provisions and procedures
(or such other provisions and procedures acceptable to Holders of a majority of
Registrable Securities covered by such Registration Statement and the managing
underwriter or underwriters or agents) with respect to all parties to be
indemnified pursuant to such agreement. The above shall be done at each closing
under such underwriting agreement, or as and to the extent required thereunder.
(m) Make available for inspection by a representative of the Selling
Holders, any underwriter participating in any such disposition of Registrable
Securities, if any, and any
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attorney or accountant retained by such representative of the Selling Holders or
underwriter, at the offices where normally kept, during reasonable business
hours, all financial and other records, pertinent corporate documents and
properties of the Company and the subsidiaries of the Company, and cause the
officers, directors and employees of the Company and the subsidiaries of the
Company to supply all information in each case reasonably requested by any such
Person in connection with such Registration Statement; provided, however, that
all material non-public information shall be kept confidential by such Person,
except to the extent that (i) the disclosure of such information is necessary or
advisable to avoid or correct a misstatement or omission in the Registration
Statement or in any Prospectus; provided, however, that prior notice is given to
the Company, and the Company's legal counsel and such Selling Holder's legal
counsel concur that disclosure is required, (ii) the release of such information
is ordered pursuant to a subpoena or other order from a court of competent
jurisdiction, (iii) disclosure of such information is necessary in connection
with any action, claim, suit or proceeding, directly or indirectly, involving or
potentially involving such Person and arising out of, based upon, relating to or
involving this Agreement or any of the transactions contemplated hereby or
arising hereunder; provided, however, that prior notice shall be provided as
soon as practicable to the Company of the potential disclosure of any
information by such Person pursuant to clauses (ii) or (iii) of this sentence to
permit the Company to obtain a protective order (or waive the provisions of this
paragraph (m)) and that such Person shall take all actions as are reasonably
necessary to protect the confidentiality of such information (if practicable) to
the extent such action is otherwise not inconsistent with, an impairment of or
in derogation of the rights and interests of the Holder or any such Person, or
(iv) such information has been made generally available to the public.
(n) Comply with all applicable rules and regulations of the SEC and
make generally available to its security holders earnings statements satisfying
the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder
(or any similar rule promulgated under the Securities Act) no later than forty-
five (45) days after the end of any 12-month period (or ninety (90) days after
the end of any 12-month period if such period is a fiscal year) (i) commencing
at the end of any fiscal quarter in which Registrable Securities are sold to an
underwriter or to underwriters in a firm commitment or best efforts underwritten
offering and (ii) if not sold to an underwriter or to underwriters in such an
offering, commencing on the first day of the first fiscal quarter of the Company
after the effective date of the relevant Registration Statement, which
statements shall cover such 12-month periods.
(o) Use its reasonable best efforts to cause all Registrable
Securities relating to such Registration Statement to be listed on each
securities exchange, if any, on which similar securities issued by the Company
are then listed.
(p) Cooperate with the Selling Holders to facilitate the timely
preparation and delivery of certificates representing Registrable Securities to
be sold and not bearing any restrictive legends and registered in such names as
the Selling Holders may reasonably request at least two Business Days prior to
the closing of any sale of Registrable Securities.
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<PAGE>
Each seller of Registrable Securities as to which any registration is
being effected agrees, as a condition to the registration obligations with
respect to such Holder provided herein, to furnish to the Company such
information regarding such seller and the distribution of such Registrable
Securities as the Company may, from time to time, reasonably request in writing
to comply with the Securities Act and other applicable law. The Company may
exclude from such registration the Registrable Securities of any seller for so
long as such seller fails to furnish such information within a reasonable time
after receiving such request. If the identity of a seller of Registrable
Securities is to be disclosed in the Registration Statement, such seller shall
be permitted to include all information regarding such seller as it shall
reasonably request.
Each Holder of Registrable Securities agrees by acquisition of such
Registrable Securities that, upon receipt of any notice from the Company of the
happening of any event of the kind described in Section 4(c)(ii), 4(c)(iv),
4(c)(v), or 4(c)(vi) hereof, such Holder will forthwith discontinue disposition
of such Registrable Securities covered by the Registration Statement or
Prospectus until such Holder's receipt of the copies of the supplemented or
amended Prospectus contemplated by Section 4(j) hereof), or until it is advised
in writing (the "Advice") by the Company that the use of the applicable
prospectus may be resumed, and has received copies of any amendments or
supplements thereto, and, if so directed by the Company, such Holder will, at
the Company's expense, deliver to the Company all copies, other than permanent
file copies, then in such Holder's actual possession of the Prospectus covering
such Registrable Securities current at the time of receipt of such notice;
provided, however, that nothing herein shall create any obligation on the part
of any Holder to undertake to retrieve or return any such Prospectus not within
the actual possession of such Holder. In the event the Company shall give any
such notice, the period of time for which a Registration Statement is required
hereunder to be effective shall be extended by the number of days during such
periods from and including the date of the giving of such notice to and
including the date when each seller of Registrable Securities covered by such
Registration Statement shall have received (x) the copies of the supplemented or
amended Prospectus contemplated by Section 4(j) hereof or (y) the Advice.
Section 5. Section Indemnification.
(a) The Company agrees to indemnify and hold harmless each Holder, its
directors, officers and each Person, if any, who controls such Holder (within
the meaning of Section 15 of the Act or Section 20 of the Exchange Act), from
and against any and all losses, claims, damages, liabilities, judgments,
(including without limitation, any reasonable legal or other expenses incurred
in connection with investigating or defending any matter, including any action
that could give rise to any such losses, claims, damages, liabilities or
judgments) caused by any untrue statement or alleged untrue statement of a
material fact contained in any Registration Statement, preliminary prospectus,
Prospectus or in any registration statement pursuant to which Registrable
Securities were registered under the Securities Act or in any registration
statement filed by the Company covering the issuance of Warrant Shares and
resales thereof (a "Warrant Share Registration Statement") (or any amendment or
supplement thereto) provided by the Company to any Holder or any prospective
purchaser of Registrable Securities,
18
<PAGE>
or caused by any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading in light of the circumstances in which they were made, except insofar
as such losses, claims, damages, liabilities or judgments are caused by an
untrue statement or omission or alleged untrue statement or omission that is
based upon information relating to any of the Holders furnished in writing to
the Company by any of the Holders. Notwithstanding the foregoing, the Company
shall not be liable with respect to any Registration, to the extent that any
such Loss arises out of, or is based upon, an untrue statement or alleged untrue
statement or omission or alleged omission made in any preliminary prospectus if
(i) the Selling Holder of Registrable Securities failed to send or deliver a
copy of the Prospectus with or prior to the delivery of written confirmation of
the sale of Registrable Securities to the person asserting such Loss or who
purchased such Registrable Securities which are the subject thereof and (ii) the
Prospectus would have corrected such untrue statement or omission or alleged
untrue statement or alleged omission.
(b) Each Holder agrees, severally and not jointly, to indemnify and
hold harmless the Company and its directors and officers, and each person, if
any, who controls (within the meaning of Section 15 of the Act or Section 20 of
the Exchange Act) the Company to the same extent as the foregoing indemnity from
the Company set forth in section (a) above, but only with reference to
information relating to such Holder furnished in writing to the Company by such
Holder expressly for use in any Registration Statement or Warrant Share
Registration Statement, as the case may be. In no event shall any Holder, its
directors, officers or any Person who controls such Holder be liable or
responsible for any amount in excess of the amount by which the total amount
received by such Holder with respect to its sale of Registrable Securities
pursuant to a Registration Statement or Warrant Share Registration Statement, as
the case may be, exceeds (i) the amount paid by such Holder for such Registrable
Securities and (ii) the amount of any damages that such Holder, its directors,
officers or any Person who controls such Holder has otherwise been required to
pay by reason of such untrue or alleged untrue statement or omission or alleged
omission.
(c) In case any action shall be commenced involving any person in
respect of which indemnity may be sought pursuant to Section 5(a) or 5(b) (the
"indemnified party"), the indemnified party shall promptly notify the person
against whom such indemnity may be sought (the "indemnifying person") in writing
and the indemnifying party shall assume the defense of such action, including
the employment of counsel reasonably satisfactory to the indemnified party and
the payment of all fees and expenses of such counsel, as incurred (except that
in the case of any action in respect of which indemnity may be sought pursuant
to both Sections 5(a) and 5(b), a Holder shall not be required to assume the
defense of such action pursuant to this Section 5(c), but may employ separate
counsel and participate in the defense thereof, but the fees and expenses of
such counsel, except as provided below, shall be at the expense of the Holder).
Any indemnified party shall have the right to employ separate counsel in any
such action and participate in the defense thereof, but the fees and expenses of
such counsel shall be at the expense of the indemnified party unless (i) the
employment of such counsel shall have been specifically authorized in writing by
the indemnifying party, (ii) the indemnifying party shall have failed to assume
the defense of such action or employ counsel reasonably satisfactory to the
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<PAGE>
indemnified party or (iii) the named parties to any such action (including any
impleaded parties) include both the indemnified party and the indemnifying
party, and the indemnified party shall have been advised by such counsel that
there may be one or more legal defenses available to it which are different from
or additional to those available to the indemnifying party (in which case the
indemnifying party shall not have the right to assume the defense of such action
on behalf of the indemnified party). In any such case, the indemnifying party
shall not, in connection with any one action or separate but substantially
similar or related actions in the same jurisdiction arising out of the same
general allegations or circumstances, be liable for the fees and expenses of
more than one separate firm of attorneys (in addition to any local counsel) for
all indemnified parties and all such fees and expenses shall be reimbursed as
they are incurred. Such firm shall be designated in writing by a majority of
the Holders, in the case of the parties indemnified pursuant to Section 5(a),
and by the Company, in the case of parties indemnified pursuant to Section 5(b).
No indemnifying party shall be liable for any settlement of any claim or action
effected without its prior written consent. No indemnifying party shall,
without the prior written consent of the indemnified party, effect any
settlement or compromise of, or consent to the entry of judgment with respect
to, any pending or threatened action in respect of which the indemnified party
is or could have been a party and indemnity or contribution may be or could have
been sought hereunder by the indemnified party, unless such settlement,
compromise or judgment (i) includes an unconditional release of the indemnified
party from all liability on claims that are or could have been the subject
matter of such action and (ii) does not include a statement as to or an
admission of fault, culpability or a failure to act, by or on behalf of the
indemnified party.
(d) To the extent that the indemnification provided for in this
Section 5 is unavailable to an indemnified party in respect of any losses,
claims, damages, liabilities or judgments referred to therein, then each
indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages, liabilities or judgments (i) in such proportion
as is appropriate to reflect the relative benefits received by the Company, on
the one hand, and the Holders, on the other hand, from their sale of Registrable
Securities or (ii) if the allocation provided by clause 5(d)(i) is not permitted
by applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause 5(d)(i) above but also the relative
fault of the Company, on the one hand, and of the Holder, on the other hand, in
connection with the statements or omissions which resulted in such losses,
claims, damages, liabilities or judgments, as well as any other relevant
equitable considerations. The relative fault of the Company, on the one hand,
and of the Holder, on the other hand, shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact relates to
information supplied by the Company, on the one hand, or by the Holder, on the
other hand, and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission. The amount
paid or payable by a party as a result of the losses, claims, damages,
liabilities and judgments referred to above shall be deemed to include, subject
to the limitations set forth in the second paragraph of Section 5(d), any legal
or other fees or expenses reasonably incurred by such party in connection with
investigating or defending any action or claim.
20
<PAGE>
(e) The Company and each Holder agree that it would not be just and
equitable if contribution pursuant to this Section 5(e) were determined by pro
rata allocation (even if the Holders were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to in the immediately preceding paragraph. The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages, liabilities or judgments referred to in the immediately
preceding paragraph shall be deemed to include, subject to the limitations set
forth above, any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any matter, including any
action that could have given rise to such losses, claims, damages, liabilities
or judgments. Notwithstanding the provisions of this Section 5, no Holder, its
directors, its officers or any Person, if any, who controls such Holder shall be
required to contribute, in the aggregate, any amount in excess of the amount by
which the total received by such Holder with respect to the sale of Registrable
Securities pursuant to a Registration Statement or a Warrant Share Registration
Statement exceeds the sum of (i) the amount paid by such Holder for such
Registrable Securities and (ii) the amount of any damages which such Holder has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. The Holders' obligations to contribute pursuant to this
Section 5(c) are several in proportion to the respective principal amount of
Registrable Securities held by each Holder hereunder and not joint.
Section 6. Miscellaneous.
(a) No Inconsistent Agreements. The Company represents and warrants
to the Holders that it has not entered into nor will the Company on or after the
date of this Agreement enter into, or cause or permit any of its subsidiaries to
enter into, any agreement which is inconsistent with the rights granted to the
Holders of Registrable Securities in this Agreement or otherwise conflicts with
the provisions hereof. The rights granted to the Holders hereunder do not in any
way conflict with and are not inconsistent with the rights granted to the
holders of the Company's other issued and outstanding securities, if any, under
any such agreements.
(b) Amendments and Waivers. The provisions of this Agreement may not
be amended, modified or supplemented, and waivers or consents to departures from
the provisions hereof may not be given unless the Company has obtained the prior
written consent of Holders of not less than a majority of the outstanding
Registrable Securities affected by such amendment, modification, supplement,
waiver or consent; provided, however, that Section 5 hereof and this Section
6(b) may not be amended, modified or supplemented without the prior written
consent of each Holder (including any Person who was a Holder of Registrable
Securities disposed of pursuant to any Registration Statement or a Warrant Share
Registration Statement) affected by such amendment, modification or supplement.
Notwithstanding the foregoing, a waiver or consent to departure from the
provisions hereof that relates exclusively to the rights of Holders of
Registrable Securities whose securities are being sold pursuant to a
Registration Statement and that does not directly or indirectly affect, impair,
limit or compromise the rights of other Holders
21
<PAGE>
of Registrable Securities may be given by the Holders of not less than a
majority of the Registrable Securities proposed to be sold by such Holders
pursuant to such Registration Statement.
(c) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand delivery, registered or
certified first-class mail, telex, telecopier, or any courier guaranteeing
overnight delivery (i) if to a Holder, at the most current address of Holder as
set forth in the register for the Warrants or the Warrant Shares, which address
initially is, with respect to the Initial Purchasers, the address set forth in
the Purchase Agreement; and (ii) if to the Company, initially at the address set
forth below the Company's name on the signature pages hereto and thereafter at
such other address, notice of which is given in accordance with the provisions
of this Section 6(c), with a copy to Kirkland & Ellis, 200 East Randolph Drive,
Chicago, Illinois 60606, Attention: Laurie Gunther, and thereafter at such other
address notice of which is given in accordance with the provisions of this
Section 6(c).
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five Business
Days after being deposited in the mail, postage prepaid, if mailed; when
answered back, if telexed; when receipt is acknowledged, if telecopied; and on
the next Business Day, if timely delivered to an air courier guaranteeing
overnight delivery.
(d) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors, assigns and transferees of each
of the parties, including, without limitation and without the need for an
express assignment, subsequent Holders. If any transferee of any Holder shall
acquire Warrants and/or Registrable Securities, in any manner, whether by
operation of law or otherwise, such Warrants and/or Registrable Securities shall
be held subject to all of the terms of this Agreement, and by taking and holding
such Warrants and/or Registrable Securities such Person shall be conclusively
deemed to have agreed to be bound by and to perform all of the terms and
provisions of this Agreement and such Person shall be entitled to receive the
benefits hereof.
(e) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(f) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(g) Governing Law; Jurisdiction. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED
TO CONTRACTS MADE AND PERFORMED WHOLLY WITHIN THE STATE OF NEW YORK, WITHOUT
REGARD TO PRINCIPLES OF CONFLICTS OF LAW.
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<PAGE>
(h) Severability. If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction to be invalid,
illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their best efforts to find and employ an alternative means to
achieve the same or substantially the same result as that contemplated by such
term, provision, covenant or restriction. It is hereby stipulated and declared
to be the intention of the parties that they would have executed the remaining
terms, provisions, covenants and restrictions without including any of such that
may be hereafter declared invalid, illegal, void or unenforceable.
(i) Entire Agreement. This Agreement, together with the Purchase
Agreement and the Warrant Agreement, is intended by the parties as a final
expression of their agreement, and is intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein and therein. This Agreement, the Purchase
Agreement and the Warrant Agreement supersede all prior agreements and
understandings between the parties with respect to such subject matter.
(j) Attorneys' Fees. As between the parties to this Agreement, in
any action or proceeding brought to enforce any provision of this Agreement, or
where any provision hereof is validly asserted as a defense, the successful
party shall be entitled to recover reasonable attorneys' fees in addition to its
costs and expenses and any other available remedy.
(k) Securities Held by the Company or Its Affiliates. Whenever the
consent or approval of Holders of a specified percentage of Registrable
Securities or Warrants is required hereunder, Registrable Securities or Warrants
held by the Company or by any of its affiliates (as such term is defined in Rule
405 under the Securities Act) shall not be counted (in either the numerator or
the denominator) in determining whether such consent or approval was given by
the Holders of such required percentage.
(l) Remedies. In the event of a breach by the Company of any of its
obligations under this Agreement, each Holder, in addition to being entitled to
exercise all rights provided herein, in the Purchase Agreement or granted by
law, including recovery of damages, will be entitled to specific performance of
its rights under this Agreement. The Company agrees that monetary damages would
not be adequate compensation for any loss incurred by reason of a breach by it
of any of the provisions of this Agreement.
[Remainder of Page Intentionally Left Blank]
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
ONEPOINT COMMUNICATIONS CORP.
By: /s/ James A. Otterbeck
-------------------------------------------
Name: James A. Otterbeck
Title: Chairman and Chief Executive Officer
Address for Notices:
2201 Waukegan Road
Suite E-200
Bannockburn, Illinois 60015
Telecopier: (847) 374-1070
<PAGE>
BEAR, STEARNS & CO. INC.,
on behalf of the Initial Purchasers
By: /s/ J. Andrew Bugas
-----------------------------------
Name: J. Andrew Bugas
Title: Senior Managing Director
<PAGE>
Exhibit 4.8
================================================================================
PLEDGE AND SECURITY AGREEMENT
by and among
ONEPOINT COMMUNICATIONS CORP.,
HARRIS TRUST AND SAVINGS BANK,
as Trustee
and
HARRIS TRUST AND SAVINGS BANK
as Collateral Agent
May 21, 1998
================================================================================
<PAGE>
PLEDGE AND SECURITY AGREEMENT
PLEDGE AND SECURITY AGREEMENT, dated as of May 21, 1998 (the "Pledge
Agreement") by and among OnePoint Communications Corp., a Delaware corporation
(the "Pledgor"), the Trustee (as defined below) and Harris Trust and Savings
Bank, as collateral agent (the "Collateral Agent"), for the Trustee on behalf of
the holders of the Notes (as defined herein).
RECITALS
A. The Pledgor, the Subsidiary Guarantors (as defined in the
Indenture) and Harris Trust and Savings Bank, as Trustee (the "Trustee") have
entered into that certain Indenture dated as of May 21, 1998 (as amended,
restated, supplemented or otherwise modified from time to time, the
"Indenture"), pursuant to which the Pledgor issued 175,000 Units consisting of
$175,000,000 in aggregate principal amount of 14 1/2% Notes due 2008 (the
"Notes") and warrants to purchase an aggregate of 111,125 shares of common
stock, $.01 par value (the "Warrants"). Each Unit consists of $1,000 principal
amount of Notes and one Warrant to purchase 0.635 shares of common stock of
Pledgor.
B. The Pledgor has agreed, pursuant to a Purchase Agreement dated May
15, 1998 by and among the Pledgor, the Subsidiary Guarantors, Bear, Stearns &
Co. Inc. and NationsBanc Montgomery Securities LLC, to (i) purchase a portfolio
of securities consisting of Government Securities (as defined herein)
(collectively, the "Pledged Securities") in an amount sufficient, upon receipt
of the scheduled interest and principal payments in respect of the Pledged
Securities, in the opinion of a nationally recognized firm of independent
certified public accountants selected by the Pledgor, to provide for payment of
the first seven scheduled interest payments due on the Notes, and (ii) place
such Pledged Securities in the Pledge Account (as defined herein) held by the
Collateral Agent for the benefit of the holders of the Notes.
C. The Pledgor is the sole legal and beneficial owner of the Pledged
Securities.
D. To secure the payment and performance by the Pledgor of its
obligations under the Indenture and the Notes (collectively, the "Obligations"),
the Pledgor has agreed to (i) pledge to the Collateral Agent for the benefit of
the Trustee and the ratable benefit of the holders of the Notes a security
interest in the Pledged Securities and the Pledge Account, and (ii) execute and
deliver this Pledge Agreement.
AGREEMENT
NOW, THEREFORE, in order to induce the holders of Notes to purchase
the Notes, and for good and valuable consideration, the receipt of which is
hereby acknowledged, the Pledgor hereby agrees with the Collateral Agent for the
benefit of the Trustee and for the ratable benefit of the holders of Notes as
follows:
1. Defined Terms. All capitalized terms used but not defined herein
shall have the meanings ascribed to them in the Indenture. In addition to any
other defined terms used herein, the following terms shall constitute defined
terms for purposes of this Pledge Agreement and shall have the meanings set
forth below:
"Collateral" has the meaning given in Section 2 hereof.
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<PAGE>
"Government Securities" means direct obligations of, or obligations
fully guaranteed by, the United States of America for the payment of which
guarantee or obligations the full faith and credit of the United States is
pledged.
"UCC" means, with respect to the validity and perfection and the
effect of perfection or non-perfection of the security interest, the Uniform
Commercial Code as in effect on the date hereof in the State of New York.
2. Pledge and Grant of Security Interest
(a) The Pledgor hereby pledges and grants to the Trustee, for the
ratable benefit of the holders of the Notes, a continuing first priority
security interest in and to (i) all of the Pledgor's right, title and interest
in the Pledged Securities and the Pledge Account, (ii) all certificates or other
evidence of ownership representing the Pledged Securities and the Pledge
Account, and (iii) all products and proceeds of any of the Pledged Securities,
including, without limitation, all dividends, interest, principal payments,
cash, options, warrants, rights, instruments, subscriptions and other property
or proceeds from time to time received, receivable or otherwise distributed or
distributable in respect of or in exchange for any or all of the Pledged
Securities (collectively, the "Collateral").
(b) The Pledgor shall have no right to remove or withdraw from the
Pledge Account any financial asset, cash or other property now or hereafter
credited to the Pledge Account without the prior written consent of the Trustee,
except as provided in Section 5(b) herein. If at any time the Collateral Agent
shall receive any entitlement order from the Trustee (including, without
limitation, any order directing the sale, transfer or redemption of any
financial asset relating to, or cash or other item credited to, the Pledge
Account), the Collateral Agent shall comply with such entitlement order, without
further consent by the Pledgor or any other Person.
(c) The Trustee appoints the Collateral Agent as its agent and
securities intermediary hereunder, and the Collateral Agent accepts such
appointment and agrees to act as agent and securities intermediary for the
Trustee with respect to the Pledged Securities, without cost or expense to the
Trustee. The Collateral Agent will, no later than the Business Day immediately
following the date hereof, completely and accurately identify on its books and
records the Pledged Securities being held in the Pledge Account. In addition,
the Collateral Agent will, upon the Trustee's written request given at any time
to the Collateral Agent, either (a) deliver to the Trustee possession of duly
issued certificates evidencing the Pledged Securities registered in the name of
the Trustee or its nominee or designee, or (b) transfer the Pledged Securities
to an account at the Collateral Agent or to another financial intermediary
designated by the Trustee in the name of the Trustee. In the event that the
Pledgor shall be entitled to receive or acquire any distribution, in any form
whatsoever, including, without limitation, cash and non-cash dividends and
interest, in respect of the Pledged Securities, the Collateral Agent agrees that
it shall hold the same as agent and securities intermediary for the Trustee
subject to the terms hereof and the written instructions of the Trustee.
3. Security for Obligations. This Pledge Agreement and the
Collateral secure the prompt and complete payment and performance when due
(whether at stated maturity, by acceleration or otherwise) of all of the
Obligations.
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<PAGE>
4. Delivery of Collateral; Pledge Account; Interest; Substitution of
Collateral
(a) If and to the extent the Pledged Securities comprise
"certificated securities," as defined in Section 8-102 of the UCC, such
securities shall be registered in the name of the Collateral Agent or its
nominee for the benefit of the holders of the Notes and delivered to the
Collateral Agent or its custodian in the State of New York, and possession
thereof shall be maintained by the Collateral Agent within the State of New
York.
(b) All Government Securities included in the Collateral shall be
registered in the name of the Collateral Agent or its nominee for the benefit of
the holders of the Notes on the records of the Federal Reserve Bank of New York
and credited in the books and records of the Collateral Agent to the Pledge
Account. All other uncertificated securities, if any, included in the
Collateral shall be registered on the books of the issuer of such uncertificated
securities in the name of the Collateral Agent or its nominee for the benefit of
the holders of the Notes, and credited in the books and records of the
Collateral Agent to the Pledge Account.
(c) Concurrently with the execution and delivery of this Pledge
Agreement, the Collateral Agent shall establish an account entitled the "PLEDGE
ACCOUNT FOR THE BENEFIT OF HOLDERS OF 14 1/2% NOTES DUE 2008 OF ONEPOINT
COMMUNICATIONS CORP." for the deposit of the Pledged Securities (the "Pledge
Account") at its office at 311 West Monroe, Chicago, Illinois 60606. The Pledge
Account is and shall be maintained as a "securities account" within the meaning
of Article 8 of the UCC, and the Collateral Agent will treat all property held
by it in the Pledge Account as "financial assets" under Article 8-501(a) of the
UCC. Subject to the other terms and conditions of this Pledge Agreement, all
funds or other property accepted by the Collateral Agent pursuant to this Pledge
Agreement shall be held in the Pledge Account for the ratable benefit of the
holders of the Notes. All proceeds of the Pledged Securities shall remain on
deposit in the Pledge Account until withdrawn in accordance with this Pledge
Agreement.
(d) All proceeds of, interest earned on and other distributions or
amounts paid with respect to, any Collateral shall be credited to and retained
in the Pledge Account, and the Collateral Agent shall invest and reinvest the
same as directed from time to time in writing by the Pledgor; provided, however,
that such proceeds and other amounts must be invested in Government Securities
except as otherwise provided in this Section 4(d). Prior to the Collateral
Agent's receipt of written instructions from the Pledgor, the Collateral Agent
shall invest any such proceeds and other amounts in cash or Cash Equivalents (as
defined in the Indenture). In all events, any monies so invested or reinvested
and any securities acquired thereby shall be (i) held as Collateral in the
Pledge Account, (ii) subject in all respects to the security interest created
hereby and shall be and remain under the control of the Collateral Agent, and
(iii) otherwise subject to the terms hereof.
(e) The parties acknowledge that the Collateral Agent shall not be
responsible for any diminution in the Pledge Account due to losses resulting
from investments. The Collateral Agent may use its own Bond Department in
executing purchases and sales of permissible investments.
5. Disbursements
(a) The Collateral Agent shall transfer, on each date when one of the
first seven scheduled interest payments is due on the Notes and without notice
from the Pledgor, from the Pledge Account to the Paying Agent under the
Indenture, funds necessary to provide for payment in full or of
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<PAGE>
any portion of the next scheduled interest payment on the Notes and the Paying
Agent shall apply the proceeds to such interest payment.
(b) If at any time the amount of Collateral exceeds the amount
sufficient, in the opinion of a nationally recognized firm of independent
certified public accountants selected by the Pledgor, to provide for payment in
full of the first seven scheduled interest payments due on the Notes then
outstanding (or, in the event any of the first seven interest payments have been
made on the Notes, an amount sufficient to provide for payment in full of all
interest payments then remaining up to and including the seventh scheduled
interest payment on the Notes then outstanding), the Pledgor may direct the
Collateral Agent in writing to release to the Pledgor, or as the Pledgor
directs, an amount less than or equal to such excess. Upon receipt of such
written direction from the Pledgor, together with the opinion of a nationally
recognized firm of independent certified public accountants with respect to the
value of the Pledged Securities, the Collateral Agent shall take such action as
is necessary to provide for the payment to the Pledgor of the amount requested
from the Pledge Account.
(c) Immediately following the earlier of (i) the payment in full of
the first seven scheduled interest payments on the Notes, and (ii) the day on
which all of the Notes have been repurchased, redeemed or defeased, if no
Default or Event of Default is continuing, the security interest in the
Collateral evidenced by this Pledge Agreement shall terminate and be of no
further force and effect, and any and all Collateral in the Pledge Account shall
be released and transferred by the Collateral Agent to the Pledgor in accordance
with the Pledgor's written instructions. Furthermore, upon release of any
Collateral from the Pledge Account in accordance with the terms of this Pledge
Agreement, whether upon release of Collateral to the Paying Agent, to the
Pledgor or otherwise, the security interest evidenced by this Pledge Agreement
in the Collateral so released shall terminate and be of no further force and
effect.
6. Representations and Warranties. The Pledgor hereby represents and
warrants that:
(a) The execution, delivery and performance by the Pledgor of this
Pledge Agreement has been duly authorized by all necessary corporate action and
does not contravene or constitute a default under any provision of applicable
law, regulation or the certificate of incorporation or the bylaws of the
Pledgor, or of any judgment, injunction, order, decree or any material agreement
or instrument binding upon the Pledgor, and does not result in the creation or
imposition of any Lien on any asset of the Pledgor, except for the security
interests granted under this Pledge Agreement.
(b) This Pledge Agreement has been duly executed and delivered by the
Pledgor and constitutes a valid and binding obligation of the Pledgor,
enforceable against the Pledgor in accordance with its terms, except as such
enforceability may be limited by the effect of any applicable bankruptcy,
insolvency, reorganization, fraudulent conveyances, moratorium or other similar
laws affecting creditors' rights generally or general principles of equity.
(c) The Pledgor is the record and beneficial owner of the Collateral,
free and clear of any Lien or claims of any Person (except for the security
interest granted under this Pledge Agreement). No financing statement covering
the Pledged Securities is on file in any public office, other than financing
statements filed pursuant to this Pledge Agreement.
(d) Upon the delivery to the Collateral Agent of the certificates, if
any, representing the Pledged Securities, any filing of financing statements
required by the UCC and notation on the
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records of the Collateral Agent that it holds the Pledged Securities as pledgee,
the pledge of the Collateral pursuant to this Pledge Agreement creates a valid
and perfected first priority security interest in and to the Collateral,
securing the payment and performance of the Obligations for the ratable benefit
of the holders of the Notes, enforceable as such against all creditors of the
Pledgor and any Persons purporting to purchase any of the Collateral from the
Pledgor.
(e) No consent of any other Person and no consent, authorization,
approval, or other action by, and no notice to or filing with, any governmental
authority or regulatory body, is required either (i) for the pledge by the
Pledgor of the Collateral pursuant to this Pledge Agreement or for the
execution, delivery or performance of this Pledge Agreement by the Pledgor
(except for any filings and notations necessary to perfect the security interest
created hereby in the Collateral) or (ii) for the exercise by the Collateral
Agent of the rights provided for in this Pledge Agreement or the remedies in
respect of the Collateral pursuant to this Pledge Agreement.
(f) No litigation, proceeding or investigation of or before any
arbitrator or governmental authority is pending or, to the knowledge of the
Pledgor, threatened by or against the Pledgor with respect to this Pledge
Agreement or any of the transactions contemplated hereby.
(g) The pledge of the Collateral pursuant to this Pledge Agreement is
not prohibited by any applicable law or government regulation, release,
interpretation or opinion of the Board of Governors of the Federal Reserve
System or other regulatory agency (including, without limitation, Regulations T,
U and X of the Board of Governors of the Federal Reserve System).
7. Further Assurances. The Pledgor agrees promptly to take such
actions and to execute and deliver or cause to be executed and delivered, or use
its best efforts to procure, such stock or bond powers, proxies, assignments,
instruments and such other or different writings as the Collateral Agent may
reasonably request, all in form and substance satisfactory to the Collateral
Agent, deliver any instruments to the Collateral Agent and take any other
actions that are necessary to perfect, continue the perfection of, confirm and
assure the first priority of the Collateral Agent's security interest in the
Collateral, to protect the Collateral against the rights, claims or interests of
third persons, or to otherwise effect the purposes of this Pledge Agreement.
The Pledgor also hereby authorizes the Collateral Agent to file any financing or
continuation statements with respect to the Collateral without the signature of
the Pledgor (to the extent permitted by applicable law). The Pledgor will pay
all costs incurred by the Collateral Agent in connection with any of the
foregoing.
8. Covenants. The Pledgor covenants and agrees with the Collateral
Agent and the holders of the Notes from and after the date of this Pledge
Agreement until the earlier of payment in full in cash of (A) each of the first
seven scheduled interest payments due on the Notes under the terms of the
Indenture or (B) all Obligations due and owing under the Indenture and the Notes
in the event such Obligations become due and payable prior to the payment of the
first seven scheduled interest payments on the Notes, as follows:
(a) The Pledgor agrees that it (i) will not sell or otherwise dispose
of, or grant any option or other interest with respect to, any of the
Collateral, (ii) will not create or permit to exist any Lien upon or with
respect to any of the Collateral, except for the Liens created pursuant to this
Pledge Agreement, and (iii) will at all times be the sole beneficial owner of
the Collateral.
(b) The Pledgor agrees that it will not (i) enter into any agreement
or understanding that purports to or may restrict or inhibit the Collateral
Agent's rights or remedies hereunder, including,
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<PAGE>
without limitation, the Collateral Agent's right to sell or otherwise dispose of
the Collateral, or (ii) with regard to the Collateral, fail to pay or discharge
any tax, assessment or levy of any nature due with respect thereto later than
five days prior to the date of any proposed sale under any judgment, writ or
warrant of attachment.
9. Power of Attorney
(a) The Pledgor hereby appoints and constitutes the Collateral Agent
as the Pledgor's attorney-in-fact with full power of substitution to exercise to
the fullest extent permitted by law all of the following powers upon and at any
time after the occurrence and during the continuance of an Event of Default:
(i) collection of proceeds of any Collateral;
(ii) conveyance of any item of Collateral to any purchaser thereof
as specified herein;
(iii) giving of any notices or recording of any Liens pursuant to
Section 7 hereof;
(iv) making any payments or taking any acts pursuant to Section 10
hereof;
(v) paying or discharging taxes or Liens levied or placed upon the
Collateral, the legality or validity thereof and the amounts necessary to
discharge the same to be determined by the Collateral Agent in its sole
discretion, and any such payments made by the Collateral Agent shall become
Obligations of the Pledgor to the Collateral Agent, due and payable immediately
upon demand; and
(vi) taking any acts pursuant to Section 13 hereof.
(b) The Collateral Agent's authority under this Section 9 shall
include, without limitation, the authority to endorse and negotiate any checks
or instruments representing proceeds of Collateral in the name of the Pledgor,
execute and give receipt for any certificate of ownership or any document
constituting Collateral, transfer title to any item of Collateral, to the extent
permitted by applicable law, sign the Pledgor's names on all financing
statements or any other documents deemed necessary or appropriate by the
Collateral Agent to preserve, process or perfect the security interest in the
Collateral, and to file the same, and to prepare, sign the Pledgor's name and
file any notice of Lien, and to take any other actions arising from or incident
to the powers granted to the Collateral Agent in this Pledge Agreement. This
power of attorney is coupled with an interest and shall be irrevocable by the
Pledgor.
(c) The Pledgor acknowledges that the rights and responsibilities of
the Collateral Agent under this Pledge Agreement with respect to any action
taken by the Collateral Agent or the exercise or non-exercise by the Collateral
Agent of any option, right, request, judgment or other right or remedy provided
for herein or resulting or arising out of this Pledge Agreement shall, as
between the Collateral Agent and the holders of the Notes, be governed by this
Pledge Agreement, but, as between the Collateral Agent and the Pledgor, the
Collateral Agent shall be conclusively presumed to be acting as agent for the
holders of the Notes with full and valid authority so to act or refrain from
acting, and the Pledgor shall not be obligated or entitled to make any inquiry
respecting such authority.
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<PAGE>
(d) The Collateral Agent undertakes to perform such duties and only
such duties as are specifically set forth in this Pledge Agreement and no
implied covenants or obligations shall be read into this Pledge Agreement
against the Collateral Agent. The Collateral Agent shall not be deemed to have
knowledge of an Event of Default under the Indenture unless informed in writing
by the Pledgor or the holder of any Note.
(e) The Collateral Agent shall not be required to exercise any
remedies hereunder unless requested in writing to do so by the holders of a
majority in principal amount of the outstanding Notes and only if furnished with
indemnity reasonably satisfactory to the Collateral Agent. The Collateral Agent
may consult with counsel and shall not be liable for any action taken in good
faith in reliance upon advice of counsel except for gross negligence or willful
misconduct. The Collateral Agent makes no representation or warranty and shall
have not responsibility concerning the value or validity of the Collateral or
the validity or perfection of the pledge thereof or any security interest
therein. The provisions of Section 7.02(a)(i) of the Indenture are incorporated
herein by reference.
(f) The Collateral Agent may at any time on 30 days notice to the
Pledgor and the holders of the Notes resign hereunder. Upon any such
resignation the Pledgor shall promptly appoint another financial institution
reasonably satisfactory to the holders of a majority in principal amount or the
outstanding Notes to act as Collateral Agent hereunder and such resignation
shall become effective upon the acceptance of the appointment by the successor.
(g) The Collateral Agent shall be deemed to have exercised reasonable
care in the custody and preservation of the Collateral in its possession if the
Collateral is accorded treatment substantially equal to that which a prudent
financial institution similarly situated would accord its own property, it being
understood that neither the Collateral Agent nor the holders of the Notes shall
have responsibility for (i) ascertaining or taking action with respect to calls,
conversions, exchanges, maturities, tenders or other matters relative to any
Collateral, whether or not any such Person has or is deemed to have knowledge of
such matters, or (ii) taking any necessary steps to preserve rights against any
parties with respect to any Collateral.
10. Collateral Agent May Perform. If the Pledgor fails to perform
any agreement contained herein, the Collateral Agent may, but shall not be
obligated to, itself perform or cause performance of such agreement, and the
expenses incurred by or on behalf of the Collateral Agent in connection
therewith shall be payable by the Pledgor under Section 14 hereof.
11. No Assumption of Duties. The rights and powers granted to the
Collateral Agent hereunder are being granted in order to preserve and protect
the security interest of the Collateral Agent and the holders of Notes in and to
the Collateral granted hereby and shall not be interpreted to, and shall not,
impose any duties on the Collateral Agent in connection therewith other than
those imposed under applicable law.
12. Indemnity. The Pledgor shall indemnify, defend and hold harmless
the Collateral Agent and its directors, officers, agents and employees from and
against all claims, actions, obligations, losses, liabilities and expenses,
including reasonable costs, fees and disbursements of counsel, the costs of
investigations, and claims for damages, arising from the Collateral Agent's
performance under this Pledge Agreement, except insofar as the same may have
been caused by the gross negligence or willful misconduct of such indemnified
Person. The obligations of the Pledgor under this Section 12 shall survive the
resignation or removal of the Collateral Agent or the termination of this Pledge
Agreement.
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<PAGE>
13. Remedies upon Event of Default. If an Event of Default shall
have occurred:
(a) Upon the acceleration of the Notes in accordance with the terms
of the Indenture, the Collateral Agent shall have and may exercise with
reference to the Collateral any or all of the rights and remedies of a secured
party under the UCC, and as otherwise granted herein or under any other
applicable law or under any other agreement executed by Pledgor, including,
without limitation, the right and power to sell, at public or private sale or
sales, or otherwise dispose of, or otherwise utilize the Collateral and any part
or parts thereof, in any manner authorized or permitted under the UCC after
default by a debtor, and to apply the proceeds thereof toward payment of any
costs and expenses and attorneys' fees and expenses thereby incurred by the
Collateral Agent and toward payment of the Obligations in such order or manner
as the Collateral Agent may elect. The purchaser of any or all Collateral so
sold shall thereafter hold the same absolutely, free from any claim, encumbrance
or right of any kind whatsoever created by or through the Pledgor. Unless any of
the Collateral threatens, in the reasonable judgment of the Collateral Agent, to
decline speedily in value or is or becomes of a type sold on a recognized
market, the Collateral Agent shall give the Pledgor reasonable notice of the
time and place of any public sale thereof, or of the time after which any
private sale or other intended disposition is to be made. Any sale of the
Collateral conducted in conformity with reasonable commercial practices of
banks, insurance companies, commercial finance companies, or other financial
institutions disposing of property similar to the Collateral shall be deemed to
be commercially reasonable. Any requirements of reasonable notice shall be met
if such notice is mailed to the Pledgor as provided in Section 17 herein, at
least fifteen (15) days before the time of the sale or disposition. The
Collateral Agent or any holder of Notes may, in its own name or in the name of a
designee or nominee, buy any of the Collateral at any public sale and, if
permitted by applicable law, at any private sale. All expenses (including court
costs and reasonable attorneys' fees, expenses and disbursements) of, or
incident to, the enforcement of any of the provisions hereof shall be
recoverable from the proceeds of the sale or other disposition of the
Collateral.
(b) The Pledgor further agrees to use its best efforts to do or cause
to be done all such other acts as may be necessary to make such sale or sales of
all or any portion of the Collateral pursuant to this Section 13 valid and
binding and in compliance with any and all other applicable requirements of law.
The Pledgor further agrees that a breach of any of the covenants contained in
this Section 13 will cause irreparable injury to the Collateral Agent and the
holders of Notes, that the Collateral Agent and the holders of Notes have no
adequate remedy at law in respect of such breach and, as a consequence, that
each and every covenant contained in this Section 13 shall be specifically
enforceable against the Pledgor, and the Pledgor hereby waives and agrees not to
assert any defenses against an action for specific performance of such
covenants, except for a defense that no Event of Default has occurred.
(c) All rights to marshaling of assets of the Pledgor, including any
such right with respect to the Collateral, are hereby waived by the Pledgor.
The Pledgor shall not contest or support any other Person in contesting the
validity or priority of the security interests created under this Pledge
Agreement.
14. Fees and Expenses. The Pledgor shall, upon demand, pay to the
Collateral Agent the amount of its fees (which shall be in an amount previously
agreed by the Pledgor and the Collateral Agent) and any and all expenses
(including, without limitation, the reasonable fees, expenses and disbursements
of counsel, experts and agents retained by the Collateral Agent) that the
Collateral Agent may incur in connection with (i) the administration of this
Pledge Agreement, (ii) the custody or preservation of, or the sale of,
collection from, or other realization upon, any of the Collateral, (iii) the
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<PAGE>
exercise or enforcement of any of the rights of the Collateral Agent and the
holders of the Notes hereunder, or (iv) the failure by the Pledgor to perform or
observe any of the provisions hereof.
15. Security Interest Absolute. All rights of the Collateral Agent
and the holders of the Notes, and the security interests created hereunder, and
all obligations of the Pledgor hereunder, shall be absolute and unconditional
irrespective of:
(a) any lack of validity or enforceability of the Indenture or any
other agreement or instrument relating thereto;
(b) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Obligations, or any other amendment or waiver
of or any consent to any departure from the Indenture;
(c) any exchange, surrender, release or non-perfection of any Liens
on any other Collateral for all or any of the Obligations; or
(d) any other circumstance that might otherwise constitute a defense
available to, or a discharge of, the Pledgor in respect of the Obligations or of
this Pledge Agreement.
16. Authority of the Collateral Agent. The Collateral Agent shall
have and be entitled to exercise all powers hereunder that are specifically
granted to the Collateral Agent by the terms hereof, together with such powers
as are incident thereto. The Collateral Agent may perform any of its duties
hereunder or in connection with the Collateral by or through agents or employees
and shall be entitled to retain counsel and to act in reliance upon the advice
of counsel concerning all such matters. None of the Collateral Agent, any
director, officer, employee, attorney or agent of the Collateral Agent nor any
holder of the Notes shall be liable to the Pledgor for any action taken or
omitted to be taken by it or them hereunder, except for its own bad faith, gross
negligence or willful misconduct, nor shall the Collateral Agent be responsible
for the legality, validity, effectiveness or sufficiency hereof or of any
document or security furnished pursuant hereto. The Collateral Agent and its
directors, officers, employees, attorneys and agents shall be entitled to rely
on any communication, instrument or document believed by it or them to be
genuine and correct and to have been signed or sent by the proper Person or
Persons. The Collateral Agent and its directors, officers, employees, attorneys
and agents shall be entitled to rely on the opinion of a nationally recognized
firm of independent certified public accountants with respect to the dollar
amount of the Pledged Securities.
17. Notices. Any communication, notice or demand to be given
hereunder shall be duly given hereunder if given in the form and manner, and
delivered to the address set forth in the Indenture, or in such other form and
manner or to such other address as shall be designated by any party hereto to
each other party hereto in a written notice delivered in accordance with the
terms of the Indenture.
18. No Waiver; Cumulative Rights. No failure on the part of the
Collateral Agent to exercise, and no delay in exercising, any right, remedy or
power hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise by the Collateral Agent of any right, remedy or power hereunder
preclude any other or future exercise of any other right, remedy or power. Each
and every right, remedy and power hereby granted to the Collateral Agent or
allowed it by law or other agreement shall be cumulative and not exclusive the
one of any other, and may be exercised by the Collateral Agent from time to
time.
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<PAGE>
19. Benefits of Pledge Agreement. Nothing in this Pledge Agreement,
whether express or implied, shall give to any Person other than the parties
hereto and their successors hereunder, and the holders of the Notes, any benefit
or any legal or equitable right, remedy or claim under this Pledge Agreement.
20. Applicable Law; Consent to Jurisdiction; Waiver of Jury Trial.
(a) THIS PLEDGE AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF
THE STATE OF NEW YORK. TO INDUCE THE COLLATERAL AGENT TO ENTER INTO THIS PLEDGE
AGREEMENT, THE PLEDGOR HEREBY IRREVOCABLY AGREES THAT, SUBJECT TO THE COLLATERAL
AGENT'S SOLE AND ABSOLUTE ELECTION, ALL ACTIONS OR PROCEEDINGS THAT IN ANY
MANNER ARISE OUT OF OR IN CONNECTION WITH OR ARE IN ANY WAY RELATED TO THIS
PLEDGE AGREEMENT SHALL BE LITIGATED IN COURTS HAVING SITUS WITHIN THE COUNTY OF
NEW YORK, STATE OF NEW YORK. THE PLEDGOR HEREBY CONSENTS TO THE JURISDICTION OF
ANY STATE OR FEDERAL COURT LOCATED WITHIN THE COUNTY OF NEW YORK, STATE OF NEW
YORK. THE PLEDGOR HEREBY IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OF ANY
OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF
COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL TO THE PLEDGOR'S NOTICE ADDRESS
AS SPECIFIED HEREIN. THE PLEDGOR HEREBY WAIVES ANY RIGHT IT MAY HAVE TO
TRANSFER OR CHANGE THE VENUE OF ANY LITIGATION BETWEEN THE PLEDGOR AND THE
COLLATERAL AGENT IN ACCORDANCE WITH THIS PARAGRAPH. EACH OF THE PLEDGOR AND THE
COLLATERAL AGENT HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHT
TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING THAT IN ANY MANNER ARISES OUT OF OR
IN CONNECTION WITH OR IS IN ANY WAY RELATED TO THIS PLEDGE AGREEMENT OR ANY OF
THE TRANSACTIONS CONTEMPLATED HEREIN.
(b) THE PROVISIONS OF THIS SECTION 20 ARE A MATERIAL INDUCEMENT FOR
THE COLLATERAL AGENT ENTERING INTO THIS PLEDGE AGREEMENT AND THE TRANSACTIONS
CONTEMPLATED HEREBY. THE PLEDGOR HEREBY ACKNOWLEDGES THAT IT HAS REVIEWED THE
PROVISIONS OF THIS SECTION 20 WITH INDEPENDENT COUNSEL.
21. Calculation of Interest. For purposes of this Pledge Agreement,
all calculations of the first seven scheduled interest payments on the Notes
shall be calculated on the basis that interest will accrue on the Notes at the
rate of 14 1/2% per annum and will be payable semi-annually in arrears on
December 1, 1998, June 1, 1999, December 1, 1999, June 1, 2000, December 1,
2000, June 1, 2001 and December 1, 2001. Interest on the Notes will be computed
on the basis of a 360-day year comprised of twelve 30-day months.
22. Execution in Counterparts. This Pledge Agreement may be executed
in any number of counterparts, each of which shall be an original, but such
counterparts shall together constitute one and the same instrument.
23. Settlement. Amounts, if any, held in the Pledge Account pending
settlement of purchase of the Pledged Securities shall constitute Collateral
hereunder, shall be held by the Collateral Agent for the benefit of the holders
of the Notes and a portion thereof equal to the aggregate price paid for such
Pledged Securities shall be released by the Collateral Agent (without further
direction or
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<PAGE>
instruction required from any other party hereto) against delivery of such
Pledged Securities, and any excess funds remaining in the Pledge Account after
giving effect to such settlement shall be promptly forwarded pursuant to written
instructions of the Company.
Signature page follows
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Pledge and Security Agreement as of the day first written above.
OnePoint Communications Corp.,
as Pledgor
By: /s/ James A. Otterbeck
---------------------------------------
Name: James A. Otterbeck
Title: Chairman and Chief Executive Officer
HARRIS TRUST AND SAVINGS BANK,
as Trustee and Collateral Agent
By: /s/ J. Bartolini
---------------------------------------
Name: J. Bartolini
Title: Vice President
<PAGE>
EXHIBIT 4.9
SUBSIDIARY GUARANTEE
For value received, each Subsidiary Guarantor (which term includes any
successor Person under the Indenture) has, jointly and severally,
unconditionally guaranteed, to the extent set forth in the Indenture and subject
to the provisions in the Indenture dated as of May 21, 1998 (the "Indenture")
among ONEPOINT COMMUNICATIONS CORP., the Subsidiary Guarantors (as defined
therein) and HARRIS TRUST AND SAVINGS BANK, as trustee (the "Trustee"), that (a)
the principal of and interest on the Notes (as defined in the Indenture) will be
promptly paid in full when due, whether at maturity, by acceleration, redemption
or otherwise and interest on the overdue principal of and interest on the Notes,
if any, if lawful, and all other obligations of the Company to the Holders (as
defined in the Indenture) or the Trustee under the Indenture or the Notes will
be promptly paid in full or performed, all in accordance with the terms of the
Indenture and the Notes and (b) in case of any extension of time of payment or
renewal of any Notes or any of such other obligations, that the same will be
promptly paid in full when due or performed in accordance with the terms of the
extension or renewal, whether at stated maturity, by acceleration or otherwise.
The obligations of the Subsidiary Guarantors to the Holders of Notes and to the
Trustee pursuant to this Subsidiary Guarantee and the Indenture are expressly
set forth in Article 10 of the Indenture and reference is hereby made to the
Indenture for the precise terms of the Subsidiary Guarantee. Each Holder of a
Note, by accepting the same, agrees to and shall be bound by such provisions.
[SIGNATURE PAGE FOLLOWS]
<PAGE>
OnePoint Communications Holdings, LLC
By: OnePoint Communications
Corp, its Manager
By: /s/ James A. Otterbeck
------------------------------
Name: James A. Otterbeck
Title: Chairman and Chief Executive Officer
OnePoint Communications - Georgia, LLC
By: OnePoint Communications
Corp, its Manager
By: /s/ James A. Otterbeck
------------------------------
Name: James A. otterbeck
Title: Chairman and Chief Executive Officer
OnePoint Communications - Illinois, LLC
By: OnePoint Communications
Corp, its Manager
By: /s/ James A.Otterbeck
------------------------------
Name: James A. Otterbeck
Title: Chairman and Chief Executive Officer
OnePoint Communications - Colorado, LLC
By: OnePoint Communications
Corp, its Manager
By: /s/ James A.Otterbeck
------------------------------
Name: James A.Otterbeck
Title: Chairman and Chief Executive Officer
<PAGE>
VIC-RMTS-DC, LLC
By: OnePoint Communications
Holdings, LLC, its Manager
By: OnePoint Communications
Corp., its Manager
By: /s/ James A. Otterbeck
-------------------------------------
Name: James A. Otterbeck
Title: Chairman and Chief Executive Officer
<PAGE>
Exhibit 4.10
ONEPOINT COMMUNICATIONS CORP.
REGISTRATION AGREEMENT
REGISTRATION AGREEMENT (this "Agreement"") dated as of April 29, 1998
between OnePoint Communications Corp., a Delaware limited liability company (the
"Company") and Ventures in Communications II, LLC, a Delaware limited liability
-------
company ("VIC2").
----
RECITALS:
--------
A. As of the date hereof, VIC2 holds all of the outstanding common
stock and preferred stock of the Company.
B. Ventures in Communications, L.L.C., an Illinois limited liability
company ("VIC") and VenCom, L.L.C., an Illinois limited liability company
---
("VenCom") hold all of the outstanding membership units of VIC2. VIC and VenCom
- --------
were previously the sole members of OnePoint Communications, LLC, a Delaware
limited liability company ("OnePoint, LLC") and are currently parties to the
-------------
Operating Agreement of VIC2 dated as of the date hereof (the "Operating
---------
Agreement") In connection therewith, VIC was party to an agreement with
- ---------
OnePoint, LLC providing it with certain registration rights relating to its
equity holdings in OnePoint, LLC. In connection with the merger of OnePoint,
LLC into the Company, VIC and VenCom contributed their rights and interests in
OnePoint, LLC to VIC2 and now wish to provide for similar registration rights
for the benefit of VIC2. Unless otherwise provided, capitalized terms used
herein shall have the meanings set forth in the Operating Agreement.
NOW, THEREFORE, the parties hereto agree as follows:
1. Demand Registrations.
--------------------
(a) Requests for Registration. Subject to paragraph 1(b) below, the
-------------------------
holders of a majority of the Registrable Securities may request at any time
after the earlier of (i) the third anniversary of the date of the Operating
Agreement (the "Closing") or (ii) such time as the Company has effected a public
-------
offering of its equity securities under the Securities Act of 1933, as amended
(the "Securities Act"), registration under the Securities Act of all or part of
--------------
their Registrable Securities on Form S-1 or any similar long-form registration
("Long-Form Registrations"). In addition, the holders of a majority of the
-----------------------
Registrable Securities may request registration under the Securities Act of all
or part of their Registrable Securities on Form S-2 or S-3 or any similar short-
form registration ("Short-Form Registrations") if available. All registrations
------------------------
requested pursuant to this paragraph 1(a) are referred to herein as "Demand
------
Registrations". Each request for a Demand Registration shall specify the
- -------------
approximate number of Registrable Securities requested to be registered and the
anticipated per share price range for such offering. Within ten days after
receipt of any such request, the Company shall give written notice of such
requested registration to all other holders of Registrable Securities and shall
include in such registration all Registrable Securities with
<PAGE>
respect to which the Company has received written requests for inclusion therein
within 15 days after the receipt of the Company's notice.
(b) Long-Form Registrations. The holders of Registrable Securities
-----------------------
shall be entitled to request (i) one Long-Form Registrations in which the
Company shall pay all Registration Expenses ("Company-paid Long-Form
Registrations") and (ii) two Long-Form Registrations in which the holders of
Registrable Securities shall pay their share of the Registration Expenses as set
forth in paragraph 5 hereof; provided that the aggregate offering value of the
Registrable Securities requested to be registered in any Long-Form Registration
must equal at least $25,000,000 if the registration is the Company's initial
registered public offering and at least $10,000,000 in all other Long-Form
Registrations. A registration shall not count as one of the permitted Long-Form
Registrations until it has become effective (unless such Long-Form Registration
has not become effective due solely to the fault of the holders requesting such
registration), and neither the first nor any subsequent Company-paid Long-Form
Registration nor the second or any subsequent Long-Form Registration pursuant to
(ii) above shall count as one of the permitted Long-Form Registrations unless
the holders of Registrable Securities are able to register and sell at least 90%
of the Registrable Securities requested to be included in such registration;
provided that in any event the Company shall pay all Registration Expenses in
connection with any registration initiated as a Company-paid Long-Form
Registration whether or not it has become effective and whether or not such
registration has counted as one of the permitted Company-paid Long-Form
Registrations.
(c) Short-Form Registrations. In addition to the Long-Form
------------------------
Registrations provided pursuant to paragraph 1(b), the holders of Registrable
Securities shall be entitled to request an unlimited number of Short-Form
Registrations in which the Company shall pay all Registration Expenses; provided
that the aggregate offering value of the Registrable Securities requested to be
registered in any Short-Form Registration must equal at least $5,000,000.
Demand Registrations shall be Short-Form Registrations whenever the Company is
permitted to use any applicable short form. After the Company has become
subject to the reporting requirements of the Securities Exchange Act, the
Company shall use its best efforts to make Short-Form Registrations available
for the sale of Registrable Securities.
(d) Priority on Demand Registrations. The Company shall not include
--------------------------------
in any Demand Registration any securities which are not Registrable Securities
without the prior written consent of the holders of a majority of the
Registrable Securities included in such registration. If a Demand Registration
is an underwritten offering and the managing underwriters advise the Company in
writing that in their opinion the number of Registrable Securities and, if
permitted hereunder, other securities requested to be included in such offering
exceeds the number of Registrable Securities and other securities, if any, which
can be sold in an orderly manner in such offering within a price range
acceptable to the holders of a majority of the Registrable Securities initially
requesting registration, the Company shall include in such registration prior to
the inclusion of any securities which are not Registrable Securities the number
of Registrable Securities requested to be included which in the opinion of such
underwriters can be sold in an orderly manner within the price range of such
offering, pro rata among the respective holders thereof on the basis of the
amount of Registrable Securities owned by each such holder. Any Persons other
than holders of Registrable Securities who participate in Demand Registrations
which are not at the Company's expense must
2
<PAGE>
pay their share of the Registration Expenses as provided in paragraph 5 hereof.
(e) Restrictions on Demand Registrations. The Company shall not be
------------------------------------
obligated to effect any Demand Registration within 180 days after the effective
date of a previous Demand Registration or a previous registration in which the
holders of Registrable Securities were given piggyback rights pursuant to
paragraph 2 and in which there was no reduction in the number of Registrable
Securities requested to be included. The Company may postpone for up to 90 days
the filing or the effectiveness of a registration statement for a Demand
Registration if the Company's board of directors determines in its reasonable
good faith judgment that such Demand Registration would reasonably be expected
to have a material adverse effect on any proposal or plan by the Company or any
of its Subsidiaries to engage in any acquisition of assets (other than in the
ordinary course of business) or any merger, consolidation, tender offer,
reorganization or similar transaction; provided that in such event, the holders
of Registrable Securities initially requesting such Demand Registration shall be
entitled to withdraw such request and, if such request is withdrawn, such Demand
Registration shall not count as one of the permitted Demand Registrations
hereunder and the Company shall pay all Registration Expenses in connection with
such registration.
(f) Selection of Underwriters. The holders of a majority of the
-------------------------
Registrable Securities included in any Demand Registration shall have the right
to select the investment banker(s) and manager(s) to administer the offering,
subject to the Company's approval which shall not be unreasonably withheld.
(g) Other Registration Rights. Except as provided in this Agreement,
-------------------------
the Company shall not grant to any Persons the right to request the Company to
register any equity securities of the Company, or any securities convertible or
exchangeable into or exercisable for such securities, without the prior written
consent of the holders of a majority of the Registrable Securities; provided
that the Company may grant rights to other Persons to participate in Piggyback
Registrations so long as such rights are subordinate to the rights of the
holders of Registrable Securi ties with respect to such Piggyback
Registrations.
2. Piggyback Registrations.
-----------------------
(a) Right to Piggyback. Whenever the Company proposes to register any
------------------
of its securities under the Securities Act (other than pursuant to a Demand
Registration) and the registration form to be used may be used for the
registration of Registrable Securities (a "Piggyback Registration"), the Company
----------------------
shall give prompt written notice to all holders of Registrable Securities of its
intention to effect such a registration and shall include in such registration
all Registrable Securities with respect to which the Company has received
written requests for inclusion therein within 20 days after the receipt of the
Company's notice.
(b) Piggyback Expenses. The Registration Expenses of the holders of
------------------
Registrable Securities shall be paid by the Company in all Piggyback
Registrations.
(c) Priority on Primary Registrations. If a Piggyback Registration is
---------------------------------
an underwritten primary registration on behalf of the Company, and the managing
underwriters advise the Company in writing that in their opinion the number of
securities requested to be included in
3
<PAGE>
such registration exceeds the number which can be sold in an orderly manner in
such offering within a price range acceptable to the Company, the Company shall
include in such registration (i) first, the securities the Company proposes to
sell, (ii) second, the Registrable Securities requested to be included in such
registration, pro rata among the holders of such Registrable Securities on the
basis of the number of shares owned by each such holder, and (iii) third, other
securities requested to be included in such registration.
(d) Priority on Secondary Registrations. If a Piggyback Registration
-----------------------------------
is an underwritten secondary registration on behalf of holders of the Company's
securities, and the managing underwriters advise the Company in writing that in
their opinion the number of securities requested to be included in such
registration exceeds the number which can be sold in an orderly manner in such
offering within a price range acceptable to the holders initially requesting
such registration, the Company shall include in such registration (i) first, the
securities requested to be included therein by the holders requesting such
registration, (ii) second, the Registrable Securities requested to be included
in such registration, pro rata among the holders of such Registrable Securities
on the basis of the number of shares owned by each such holder, and (iii) third,
other securities requested to be included in such registration.
(e) Other Registrations. If the Company has previously filed a
-------------------
registration statement with respect to Registrable Securities pursuant to
paragraph 1 or pursuant to this paragraph 2, and if such previous registration
has not been withdrawn or abandoned, the Company shall not file or cause to be
effected any other registration of any of its equity securities or securities
convertible or exchangeable into or exercisable for its equity securities under
the Securities Act (except on Form S-8 or any successor form), whether on its
own behalf or at the request of any holder or holders of such securities, until
a period of at least 90 days has elapsed from the effective date of such
previous registration.
3. Holdback Agreements.
-------------------
(a) Each holder of Registrable Securities shall not effect any public
sale or distribution (including sales pursuant to Rule 144) of equity securities
of the Company, or any securities convertible into or exchangeable or
exercisable for such securities, during the seven days prior to and the 90-day
period beginning on the effective date of any underwritten Demand Registration
(except as part of such underwritten registration) unless the underwriters
managing the registered public offering otherwise agree.
(b) The Company (i) shall not effect any public sale or distribution
of its equity securities, or any securities convertible into or exchangeable or
exercisable for such securities, during the seven days prior to and during the
90-day period beginning on the effective date of any underwritten Demand
Registration or any underwritten Piggyback Registration (except as part of such
underwritten registration or pursuant to registrations on Form S-8 or any
successor form), unless the underwriters managing the registered public offering
otherwise agree, and (ii) shall cause each holder of its common equity, or any
securities convertible into or exchangeable or exercisable for common equity,
purchased from the Company at any time after the date of this Agreement (other
than in a registered public offering) to agree not to effect any public sale or
distribution (including
4
<PAGE>
sales pursuant to Rule 144) of any such securities during such period (except as
part of such underwritten registration, if otherwise permitted), unless the
underwriters managing the registered public offering otherwise agree.
4. Registration Procedures. Whenever the holders of Registrable
-----------------------
Securities have requested that any Registrable Securities be registered pursuant
to this Agreement, the Company shall use its best efforts to effect the
registration and the sale of such Registrable Securities in accordance with the
intended method of disposition thereof (including the registration of Warrants
held by a holder of Registrable Securities requesting registration as to which
the Company has received reasonable assurances that only Registrable Securities
shall be distributed to the public), and pursuant thereto the Company shall as
expeditiously as possible:
(a) prepare and file with the Securities and Exchange Commission a
registration statement with respect to such Registrable Securities and use its
best efforts to cause such registration statement to become effective (provided
that before filing a registration statement or prospectus or any amendments or
supplements thereto, the Company shall furnish to the counsel selected by the
holders of a majority of the Registrable Securities covered by such registration
statement copies of all such documents proposed to be filed, which documents
shall be subject to the review and comment of such counsel);
(b) notify each holder of Registrable Securities of the effectiveness
of each registration statement filed hereunder and prepare and file with the
Securities and Exchange Commission such amendments and supplements to such
registration statement and the prospectus used in connection therewith as may be
necessary to keep such registration statement effective for a period of not less
than 180 days and comply with the provisions of the Securities Act with respect
to the disposition of all securities covered by such registration statement
during such period in accordance with the intended methods of disposition by the
sellers thereof set forth in such registration statement;
(c) furnish to each seller of Registrable Securities such number of
copies of such registration statement, each amendment and supplement thereto,
the prospectus included in such registration statement (including each
preliminary prospectus) and such other documents as such seller may reasonably
request in order to facilitate the disposition of the Registrable Securities
owned by such seller;
(d) use its best efforts to register or qualify such Registrable
Securities under such other securities or blue sky laws of such jurisdictions as
any seller reasonably requests and do any and all other acts and things which
may be reasonably necessary or advisable to enable such seller to consummate the
disposition in such jurisdictions of the Registrable Securities owned by such
seller (provided that the Company shall not be required to (i) qualify generally
to do business in any jurisdiction where it would not otherwise be required to
qualify but for this subparagraph, (ii) subject itself to taxation in any such
jurisdiction or (iii) consent to general service of process in any such
jurisdiction);
(e) notify each seller of such Registrable Securities, at any time
when a prospectus relating thereto is required to be delivered under the
Securities Act, of the happening of
5
<PAGE>
any event as a result of which the prospectus included in such registration
statement contains an untrue statement of a material fact or omits any fact
necessary to make the statements therein not misleading, and, at the request of
any such seller, the Company shall prepare a supplement or amendment to such
prospectus so that, as thereafter delivered to the purchasers of such
Registrable Securities, such prospectus shall not contain an untrue statement of
a material fact or omit to state any fact necessary to make the statements
therein not misleading;
(f) cause all such Registrable Securities to be listed on each
securities exchange on which similar securities issued by the Company are then
listed and, if not so listed, to be listed on the NASD automated quotation
system;
(g) provide a transfer agent and registrar for all such Registrable
Securities not later than the effective date of such registration statement;
(h) enter into such customary agreements (including underwriting
agreements in customary form) and take all such other actions as the holders of
a majority of the Registrable Securities being sold or the underwriters, if any,
reasonably request in order to expedite or facilitate the disposition of such
Registrable Securities (including effecting a stock split or a combination of
shares);
(i) make available for inspection by any seller of Registrable
Securities, any underwriter participating in any disposition pursuant to such
registration statement and any attorney, accountant or other agent retained by
any such seller or underwriter, all financial and other records, pertinent
corporate documents and properties of the Company, and cause the Company's
officers, directors, employees and independent accountants to supply all
information reasonably requested by any such seller, underwriter, attorney,
accountant or agent in connection with such registration statement; and
(j) otherwise use its best efforts to comply with all applicable rules
and regulations of the Securities and Exchange Commission, and make available to
its security holders, as soon as reasonably practicable, an earnings statement
covering the period of at least twelve months beginning with the first day of
the Company's first full calendar quarter after the effective date of the
registration statement, which earnings statement shall satisfy the provisions of
Section 11(a) of the Securities Act and Rule 158 thereunder.
6
<PAGE>
5. Registration Expenses.
---------------------
(a) All expenses incident to the Company's performance of or
compliance with this Agreement, including without limitation all registration
and filing fees, fees and expenses of compliance with securities or blue sky
laws, printing expenses, messenger and delivery expenses, fees and disbursements
of custodians, and fees and disbursements of counsel for the Company and all
independent certified public accountants, underwriters (excluding discounts and
commissions) and other Persons retained by the Company (all such expenses being
herein called "Registration Expenses"), shall be borne as provided in this
---------------------
Agreement, except that the Company shall, in any event, pay its internal
expenses (including, without limitation, all salaries and expenses of its
officers and employees performing legal or accounting duties), the expense of
any annual audit or quarterly review, the expense of any liability insurance and
the expenses and fees for listing the securities to be registered on each
securities exchange on which similar securities issued by the Company are then
listed or on the NASD automated quotation system.
(b) In connection with each Demand Registration and each Piggyback
Registration, the Company shall reimburse the holders of Registrable Securities
included in such registration for the reasonable fees and disbursements of one
counsel chosen by the holders of a majority of the Registrable Securities
included in such registration and for the reasonable fees and disbursements of
each additional counsel retained by any holder of Registrable Securities for the
purpose of rendering a legal opinion on behalf of such holder in connection with
any underwritten Demand Registration or Piggyback Registration.
(c) To the extent Registration Expenses are not required to be paid by
the Company, each holder of securities included in any registration hereunder
shall pay those Registration Expenses allocable to the registration of such
holder's securities so included, and any Registration Expenses not so allocable
shall be borne by all sellers of securities included in such registration in
proportion to the aggregate selling price of the securities to be so registered.
6. Indemnification.
---------------
(a) The Company agrees to indemnify, to the extent permitted by law,
each holder of Registrable Securities, its officers and directors and each
Person who controls such holder (within the meaning of the Securities Act)
against all losses, claims, damages, liabilities and expenses caused by any
untrue or alleged untrue statement of material fact contained in any
registration statement, prospectus or preliminary prospectus or any amendment
thereof or supplement thereto or any omission or alleged omission of a material
fact required to be stated therein or necessary to make the statements therein
not misleading or any violation by the Company of the Securities Act or any rule
or regulation promulgated under the Securities Act applicable to the Company in
connection with any such registration, qualification or compliance, and the
Company will reimburse on a monthly basis each such holder, each of its officers
and directors and each person controlling such holder, each underwriter and each
person who controls any such underwriter, for any legal and other expenses
reasonably incurred in connection with investigating, preparing or defending any
such loss, claim, damage, liability or expense, except to the extent as the same
are made in reliance upon and in strict conformity with information furnished in
writing to the Company
7
<PAGE>
by such holder expressly for use therein or by such holder's failure to deliver
a copy of the registration statement or prospectus or any amendments or
supplements thereto after the Company has furnished such holder with a
sufficient number of copies of the same. In connection with an underwritten
offering, the Company shall indemnify such underwriters, their officers and
directors and each Person who controls such underwriters (within the meaning of
the Securities Act) to the same extent as provided above with respect to the
indemnification of the holders of Registrable Securities.
(b) In connection with any registration statement in which a holder of
Registrable Securities is participating, each such holder shall furnish to the
Company in writing such information and affidavits as the Company reasonably
requests for use in connection with any such registration statement or
prospectus and, to the extent permitted by law, shall indemnify the Company, its
directors and officers and each Person who controls the Company (within the
meaning of the Securities Act) against any losses, claims, damages, liabilities
and expenses resulting from any untrue or alleged untrue statement of material
fact contained in the registration statement, prospectus or preliminary
prospectus or any amendment thereof or supplement thereto or any omission or
alleged omission of a material fact required to be stated therein or necessary
to make the statements therein not misleading, but only to the extent that such
untrue statement or omission is made in reliance upon and in strict conformity
with information or affidavit so furnished in writing by such holder; provided
that the obligation to indemnify shall be individual, not joint and several, for
each holder and shall be limited to the net amount of proceeds received by such
holder from the sale of Registrable Securities pursuant to such registration
statement.
(c) Any Person entitled to indemnification hereunder shall (i) give
prompt written notice to the indemnifying party of any claim with respect to
which it seeks indemnification (provided that the failure to give prompt notice
shall not impair any Person's right to indemnification hereunder to the extent
such failure has not prejudiced the indemnifying party) and (ii) unless in such
indemnified party's reasonable judgment a conflict of interest between such
indemnified and indemnifying parties may exist with respect to such claim,
permit such indemnifying party to assume the defense of such claim with counsel
reasonably satisfactory to the indemnified party. If such defense is assumed,
the indemnifying party shall not be subject to any liability for any settlement
made by the indemnified party without its consent (but such consent shall not be
unreasonably withheld). An indemnifying party who is not entitled to, or elects
not to, assume the defense of a claim shall not be obligated to pay the fees and
expenses of more than one counsel for all parties indemnified by such
indemnifying party with respect to such claim, unless in the reasonable judgment
of any indemnified party a conflict of interest may exist between such
indemnified party and any other of such indemnified parties with respect to such
claim. No indemnifying party shall consent to entry of any judgment or enter
into any settlement which does not include as an unconditional term thereof the
giving by the claimant to such indemnified party of a release from all liability
in respect to such claim or litigation, except with the consent of such
indemnified party.
(d) The indemnification provided for under this Agreement shall remain
in full force and effect regardless of any investigation made by or on behalf of
the indemnified party or any officer, director or controlling Person of such
indemnified party and shall survive the transfer of securities. The Company
also agrees to make such provisions, as are reasonably requested by any
8
<PAGE>
indemnified party, for contribution to such party in the event the Company's
indemnification is unavailable for any reason.
7. Participation in Underwritten Registrations. No Person may
-------------------------------------------
participate in any registration hereunder which is underwritten unless such
Person (i) agrees to sell such Person's securities on the basis provided in any
underwriting arrangements approved by the Person or Persons entitled hereunder
to approve such arrangements and (ii) completes and executes all questionnaires,
powers of attorney, indemnities, underwriting agreements and other documents
required under the terms of such underwriting arrangements.
8. Definition.
----------
"Registrable Securities" means (i) any capital Stock held by VIC2
----------------------
as of the date hereof, or (ii) any other equity securities issued or issuable
with respect to the securities referred to in clause (i) above by way of a stock
dividend or stock split or in connection with a combination of shares,
recapitalization, merger, exchange, conversion, consolidation or other
reorganization. As to any particular Registrable Securities, such securities
shall cease to be Registrable Securities when they have been transferred to any
Person other than an Affiliate of VIC2 or repurchased by the Company or any
Subsidiary. For purposes of this Agreement, a Person shall be deemed to be a
holder of Registrable Securities, and the Registrable Securities shall be deemed
to be in existence, whenever such Person has the right to acquire directly or
indirectly such Registrable Securities (upon conversion or exercise in
connection with a transfer of securities or otherwise, but disregarding any
restrictions or limitations upon the exercise of such right), whether or not
such acquisition has actually been effected, and such Person shall be entitled
to exercise the rights of a holder of Registrable Securities hereunder.
9. Miscellaneous.
-------------
(a) No Inconsistent Agreements. The Company shall not hereafter enter
--------------------------
into any agreement with respect to its securities which is inconsistent with or
violates the rights granted to the holders of Registrable Securities in this
Agreement.
(b) Adjustments Affecting Registrable Securities. The Company shall
--------------------------------------------
not take any action, or permit any change to occur, with respect to its
securities which would materially and adversely affect the ability of the
holders of Registrable Securities to include such Registrable Securities in a
registration undertaken pursuant to this Agreement or which would materially and
adversely affect the marketability of such Registrable Securities in any such
registration (including, without limitation, effecting a stock split or a
combination of shares).
(c) Remedies. Any Person having rights under any provision of this
--------
Agreement shall be entitled to enforce such rights specifically to recover
damages caused by reason of any breach of any provision of this Agreement and to
exercise all other rights granted by law. The parties hereto agree and
acknowledge that money damages may not be an adequate remedy for any breach of
the provisions of this Agreement and that any party may in its sole discretion
apply to any court of law or equity of competent jurisdiction (without posting
any bond or other security) for
9
<PAGE>
specific performance and for other injunctive relief in order to enforce or
prevent violation of the provisions of this Agreement.
(d) Amendments and Waivers. Except as otherwise provided herein, the
----------------------
provisions of this Agreement may be amended or waived only upon the prior
written consent of the Company and holders of a majority of the Registrable
Securities.
(e) Successors and Assigns. Except as specified herein, all covenants
----------------------
and agreements in this Agreement by or on behalf of any of the parties hereto
shall bind and inure to the benefit of the respective successors and assigns of
the parties hereto whether so expressed or not.
(f) Severability. Whenever possible, each provision of this Agreement
------------
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision shall be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of this Agreement.
(g) Counterparts. This Agreement may be executed simultaneously in
------------
two or more counterparts, any one of which need not contain the signatures of
more than one party, but all such counterparts taken together shall constitute
one and the same Agreement.
(h) Descriptive Headings. The descriptive headings of this Agreement
--------------------
are inserted for convenience only and do not constitute a part of this
Agreement.
(i) GOVERNING LAW. ALL ISSUES AND QUESTIONS CONCERNING THE
-------------
CONSTRUCTION, VALIDITY, INTERPRETATION AND ENFORCEMENT OF THIS AGREEMENT AND THE
EXHIBITS AND SCHEDULES HERETO SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF ILLINOIS, WITHOUT GIVING EFFECT TO ANY CHOICE OF
LAW OR CONFLICT OF LAW RULES OR PROVISIONS (WHETHER OF THE STATE OF ILLINOIS OR
ANY OTHER JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY
JURISDICTION OTHER THAN THE STATE OF ILLINOIS.
(j) Notices. All notices, demands or other communications to be given
-------
or delivered under or by reason of the provisions of this Agreement shall be in
writing and shall be deemed to have been given when delivered personally to the
recipient, sent to the recipient by reputable overnight courier service (charges
prepaid) or mailed to the recipient by certified or registered mail, return
receipt requested and postage prepaid. Such notices, demands and other
communications shall be sent to the respective parties at the address set forth
below:
To the Company: 2201 Waukegan Road
--------------
Suite E-200
Bannockburn, Illinois 60015
To VIC2: 2201 Waukegan Road
-------
Suite E-200
Bannockburn, Illinois 60015
10
<PAGE>
or to such other address or to the attention of such other person as the
recipient party has specified by prior written notice to the sending party.
11
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
VENTURES IN COMMUNICATIONS II, LLC
By: The VenCom Group, Inc.
-------------------------------------
Its: Manager
-------------------------------------
By: /s/ James A. Otterbeck
---------------------------------
James A. Otterbeck
Its: President
---------------------------------
ONEPOINT COMMUNICATIONS CORP.
By: /s/ James A. Otterbeck
-------------------------------------
James A. Otterbeck
Its: Chairman and Chief Executive Officer
------------------------------------
12
<PAGE>
Exhibit 10.1
PROFESSIONAL SERVICES AGREEMENT
-------------------------------
THIS AGREEMENT ("Agreement"), dated as of May 15, 1998, by and
between The VenCom Group, Inc., an Illinois corporation ("VenCom") and OnePoint
Communications Corp., a Delaware corporation (the "Company").
WHEREAS, Ventures in Communications II, LLC, a Delaware limited
liability company ("VIC2") has purchased all of the outstanding shares of the
Company's Common Stock, par value $0.01 per share and all of the outstanding
shares of the Company's Preferred Stock, par value $1.00 per share;
WHEREAS, Ventures in Communications, L.L.C., an Illinois limited
liability company ("VIC") owns a portion of the membership units of VIC2 and
VenCom has purchased a portion of the membership units of VIC;
WHEREAS, the Company desires to receive financial and management
consulting services from VenCom, and obtain the benefit of the experience of
VenCom in business and financial management generally and its knowledge of the
Company and the Company's financial affairs in particular; and
WHEREAS, in connection with its investment in the Company through
VIC2, VenCom is willing to provide financial and management consulting services
to the Company, and the compensation arrangements set forth in this Agreement
are designed to compensate VenCom for such services.
NOW, THEREFORE, in consideration of the foregoing premises and the
respective agreements hereinafter set forth and the mutual benefits to be
derived herefrom, VenCom and the Company hereby agree as follows:
1. Engagement. The Company hereby engages VenCom as a financial and
management consultant, and VenCom hereby agrees to provide financial and
management consulting services to the Company, all on the terms and subject to
the conditions set forth below.
2. Services of VenCom. VenCom hereby agrees during the term of this
engagement to consult with the Company's board of directors (the "Board") and
management of the Company and its subsidiaries in such manner and on such
business and financial matters as may be reasonably requested from time to time
by the Board, including but not limited to:
(i) corporate strategy;
(ii) budgeting of future corporate investments;
<PAGE>
(iii) acquisition and divestiture strategies; and
(iv) debt and equity financings.
3. Personnel. VenCom shall provide and devote to the performance of
this Agreement such directors, officers, employees and agents of VenCom as
VenCom shall deem appropriate for the furnishing of the services required
thereby.
4. Investment Fee. Subject to Section 6 hereof, at the time of any
(a) debt or equity financing of the Company (other than such financing by a
member of the Company's senior management other than James A. Otterbeck) (a
"financing transaction"), or (b) any acquisition of assets or equity interests
of an entity by the Company, or merger of the Company and another entity (an
"acquisition transaction"), the Company shall pay to VenCom an investment fee
(the "Investment Fee") in immediately available funds equal to two percent
(2.0%) of the amount paid to the Company in connection with such financing
transaction or such acquisition transaction.
5. Management Fee. Subject to Section 6 hereof, the Company shall
pay to VenCom with respect to each fiscal year a management fee (the "Management
Fee") equal to $750,000, payable in advance on the first day of such fiscal
year.
6. Fee Cap. Fees payable hereunder, including the Management Fee
and the Investment Fee are subject to an annual aggregate cap of $900,000,
provided that if the amount paid in any calendar year is less than $900,000, the
annual cap in the next calendar year shall be equal to the difference between
$1,800,000 and the amount paid in the previous year and further provided that
amounts owed in excess of the cap in any year may be paid in one or more
subsequent years if and to the extent they are within the cap in such years.
7. Expenses. The Company shall promptly reimburse VenCom for such
reasonable travel expenses and other out-of-pocket fees and expenses as may be
incurred by VenCom, its directors, officers and employees in connection with the
transactions related thereto and in connection with the rendering of services
hereunder.
8. Term. This Agreement will continue from the date hereof until
VIC2 ceases to own at least 25% of the Common Stock, par value $0.01 per share,
of the Company. No termination of this Agreement, whether pursuant to this
paragraph or otherwise, shall affect the Company's obligations with respect to
the fees, costs and expenses incurred by VenCom in rendering services hereunder
and not reimbursed by the Company as of the effective date of such termination.
9. Liability. Neither VenCom nor any of its affiliates, partners,
employees or agents shall be liable to the Company or its subsidiaries or
affiliates for any loss, liability, damage or expense arising out of or in
connection with the performance of services contemplated by this Agreement,
unless such loss, liability, damage or expense shall be proven to result
directly from the gross negligence or willful misconduct of VenCom.
-2-
<PAGE>
10. Indemnification. The Company agrees to indemnify and hold
harmless VenCom, its directors, affiliates, officers, agents and employees
against and from any and all loss, liability, suits, claims, costs, damages and
expenses (including attorneys' fees) arising from their performance hereunder,
except as a result of their gross negligence or intentional wrongdoing.
11. VenCom an Independent Contractor. VenCom and the Company agree
that VenCom shall perform services hereunder as an independent contractor,
retaining control over and responsibility for its own operations and personnel.
Neither VenCom nor its directors, officers, or employees shall be considered
employees or agents of the Company as a result of this Agreement nor shall any
of them have authority to contract in the name of or bind the Company, except as
expressly agreed to in writing by the Company.
12. Notices. Any notice, report or payment required or permitted to
be given or made under this Agreement by one party to the other shall be deemed
to have been duly given or made if personally delivered or, if mailed, when
mailed by registered or certified mail, postage prepaid, to the other party at
the following addresses (or at such other address as shall be given in writing
by one party to the other):
If to VenCom:
The VenCom Group, Inc.
2201 Waukegan Road, Suite E200
Bannockburn, IL 60015
Attention: President
If to the Company:
OnePoint Communications Corp.
2201 Waukegan Road, Suite E200
Bannockburn, IL 60015
Attention: Chairman
13. Entire Agreement; Modification. This Agreement (a) contains the
complete and entire understanding and agreement of VenCom and the Company with
respect to the subject matter hereof; and (b) supersedes all prior and
contemporaneous understandings, conditions and agreements, oral or written,
express or implied, respecting the engagement of VenCom in connection with the
subject matter hereof.
14. Waiver of Breach. The waiver by either party of a breach of any
provision of this Agreement by the other party shall not operate or be construed
as a waiver of any subsequent breach of that provision or any other provision
hereof.
-3-
<PAGE>
15. Assignment. Neither VenCom nor the Company may assign its rights
or obligations under this Agreement without the express written consent of the
other; provided that VenCom, without the consent of the Company may assign its
rights and obligations hereunder to any successor entity to VenCom.
16. Successors. This Agreement and all the obligations and benefits
hereunder shall inure to the successors and permitted assigns of the parties.
17. Counterparts. This Agreement may be executed and delivered by
each party hereto in separate counterparts, each of which when so executed and
delivered shall be deemed an original and both of which taken together shall
constitute one and the same agreement.
18. Choice of Law. This Agreement shall be governed by and construed
in accordance with the domestic laws of the State of Delaware, without giving
effect to any choice of law or conflict of law provision or rule (whether of the
State of Delaware or any other jurisdiction) that would cause the application of
the laws of any jurisdiction other than the State of Delaware.
* * * * *
-4-
<PAGE>
IN WITNESS WHEREOF, VenCom and the Company have caused this Agreement
to be duly executed and delivered on the date and year first above written.
THE VENCOM GROUP, INC.
By: /s/ James A. Otterbeck
-----------------------------
James A. Otterbeck
Its: President
ONEPOINT COMMUNICATIONS CORP.
By: /s/ John D. Stavig
-----------------------------
John D. Stavig
Its: Chief Financial Officer
<PAGE>
EXHIBIT 10.2
[LETTERHEAD OF ONEPOINT COMMUNICATIONS APPEARS HERE]
John Rehling
National Accounts Manager
Sprint Communications
1801 Park 270
St. Louis, MO. 53146
April 23, 1998
Dear Mr. Rehling,
This letter will act as a formal election be OnePoint Communications, LLC
(including its successors) on behalf of itself and all its operating
subsidiaries (collectively "OnePoint") to renew the Affiliate Services Agreement
(the "Agreement") dated April 4/th/, 1997 for the purchase of certain long
distance telecommunications services from Sprint Communications Company L.P.
("Sprint").
Subject to OnePoint's affiliation with Pacific Bell Communications (PBC), we
wish to renew the Agreement as contemplated in Section 3.2 of the PBC "Master
Agreement". OnePoint hereby elects renewal under option 5(a) of the Agreement on
an Exclusive Basis, for a term which is co-extensive with the Term of the Master
Agreement and subject to the name exclusivity provisions as set forth in Article
6 of the Master Agreement (excluding any volume commitments set forth therein).
It is hereby understood that OnePoint's affilation with PBC is subject to a 10%
or higher ownership interest by Southwestern Bell Communications Corp, (SBC), as
is consistent with the Telecommunications Act of 1996. As such, it is understood
that should SBC's ownership interest in OnePoint fall below the 10% threshold,
both OnePoint and Sprint shall each have the right to terminate the Agreement on
90 days prior written notice.
The undersigned, each acting with proper authority agree to this renewal of the
Agreement by their signatures below, to be effective as of April 4/th/, 1998.
ONEPOINT COMMUNICATIONS, LLC SPRINT COMMUNICATIONS COMPANY L.P.
By: /s/[SIGNATURE ILLEGIBLE]^^ By: /s/[SIGNATURE ILLEGIBLE]^^
--------------------------- --------------------------------
Title: President Title: President
------------------------- ----------------------------
Wholesale Services Group.
<PAGE>
EXHIBIT 10.3
AFFILIATE SERVICES AGREEMENT
THIS AFFILIATE SERVICES AGREEMENT (the "Affiliate Contract") is entered
into this 4th day of APRIL, 1997, by and between ONEPOINT COMMUNICATIONS, LLC, a
Delaware limited liability company, and its operating subsidiaries doing
business as OnePoint (collectively "OnePoint"), and SPRINT COMMUNICATIONS
COMPANY L.P. ("Sprint").
RECITALS
WHEREAS, Sprint entered into a Services Agreement with Pacific Bell
Communications ("PBC") dated February 3, 1997 (the "Master Agreement") pursuant
to which Sprint will sell to PBC, and PBC will purchase from Sprint, certain
long distance telecommunications services; and
WHEREAS, Section 3.2 of the Master Agreement provides that "Affiliates" of
PBC may elect to obtain from Sprint any of the "Services" under the Master
Agreement by execution of a written Affiliate Contract between such Affiliate
and Sprint; and
WHEREAS, the Master Agreement defines "Affiliate" to include, for purposes
of the Master Agreement only, Southwestern Bell Communications Services, Inc., a
Delaware corporation ("SBCS") and Affiliates of SBCS; and
WHEREAS, OnePoint, as an Affiliate of SBCS (and thereby an "Affiliate" of
PBC), desires to obtain Services from Sprint pursuant to Section 3.2 of the
Master Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
set forth below and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties intending legally to
be bound, agree as follows:
1. Definitions. Capitalized terms not herein defined shall have their
-----------
respective meanings set forth in Article I and Attachment DE of the Master
Agreement.
2. Term. Unless otherwise extended or earlier terminated in accordance with
----
Section 5 hereof or as contemplated by Section 3.2(b) of the Master Agreement,
the term of the
<PAGE>
Affiliate Contract shall commence as of the date hereof and shall continue in
full force and effect until the first anniversary of the date hereof (the
"Termination Date").
3. Integration. Sprint shall provide such Services to OnePoint as OnePoint may
-----------
request from time to time pursuant to the terms hereof in accordance with
Section 3.2(a) of the Master Agreement, and OnePoint shall be entitled to the
benefits of, and subject to the obligations set forth in, the provisions of the
Master Agreement set forth herein with respect to the provision of such Services
to the same extend as if a party to the Master Agreement, other than as
expressly set forth herein.
4. Non-Exclusive Agreement; Rates and Charges. During the term of the
------------------------------------------
Affiliate Contract, OnePoint may elect, without regard to the exclusivity
provisions of Article 6 of the Master Agreement, to obtain any of the Services
from Sprint at the Rates and Charges set forth in the Master Agreement and
Attachment PS thereto.
5. Company Affiliate's Right to Renew. On or prior to the Termination Date,
----------------------------------
OnePoint may elect, by notice delivered to Sprint, to renew the Affiliate
Contract on either an exclusive or a non-exclusive basis as follows (subject, in
each case, to the right to terminate the Affiliate Contract in accordance with
Section 3.2(b) of the Master Agreement):
(a) Exclusive Basis. OnePoint may renew the Affiliate Contract for a term
which is coextensive with the Term of the Master Agreement; provided
that in such event, OnePoint shall thereupon become subject to the
same exclusivity provisions as set forth in Article 6 of the Master
Agreement (excluding any volume commitments set forth therein) except
that clause (iv) of the first sentence of Section 6.1(a) of the Master
Agreement shall be modified to permit OnePoint to obtain services
provided by a carrier other than Sprint under any contract existing as
of the date of OnePoint's election to renew the Affiliate Contract
pursuant to this Section 5(a) (which contracts will be terminated as
soon as practicable to the extent no breach or penalty results
therefrom).
(b) Non-Exclusive Basis. OnePoint may renew the Affiliate Contract and
elect, without regard to the exclusivity provisions of Article 6 of
the Agreement, to obtain any of the Services from Sprint at the rates
and charges and for the terms and conditions to be negotiated in good
faith.
6. Other Terms and Conditions. The following terms and conditions of the
--------------------------
Master Agreement, with such modifications set forth herein and such conforming
changes as shall be necessary to reflect the identity of OnePoint and to be
consistent with the foregoing, are incorporated herein and made a part hereof by
reference:
(a) Article 1 (Definitions);
(b) Section 3.2 (Services to Company Affiliates);
(c) Section 4.4
2
<PAGE>
(d) Section 4.6 (Quality of Services) amended to read as follows:
4.6 Quality of Services. Sprint shall provide Services purchased
-------------------
by OnePoint hereunder in compliance with the Performance
Guarantees to the extent set forth in Section (6)r of this
Affiliate Contract;
(e) Section 8 (Rates and Charges);
(f) Section 10.1 (Price Adjustments); provided, however, that this Section
shall not become operational with respect to OnePoint until Sprint
begins making the adjustments provided for herein for PBC;
(g) Article 12 (Confidential Information);
(h) Article 14 (Representations, Warranties and Covenants);
(i) Article 15 (Intellectual Property Rights);
(j) Article 16 (Indemnification; Third Party Claims);
(k) Section 17.2(c) ("Pass-Through Compensation"); provided, however, that
this Section shall be administered using the same procedures used to
accomplish the pass-through provided for herein for PBC;
(l) Section 17.6(b) (Special Remedies Under Certain Circumstances-Fraud);
(m) Sections 18.2 (Force Majeure), 18.3 (Independent Contractor), 18.4
(Advertising or Publicity), 18.5 (Subcontracting), 18.6 (Dispute
Resolution), and 18.7 (Assignment);
(n) Article 19 (Miscellaneous), with the address of the parties in Section
19.3 (Notices) modified as follows:
If to OnePoint
--------------
OnePoint Communications, LLC
Address: c/o The VenCom Group, Inc.
2201 Waukegan Rd., Suite E-200
Bannockburn, Illinois 60015
Facsimile: (847) 374-1070
Telephone: (847) 374-7000
Attention: President
3
<PAGE>
If to Sprint
------------
Sprint Communications Company L.P.
Address: 5420 LBJ Freeway, 18th Floor
Dallas, TX 75240
Facsimile: (214) 405-5002
Telephone: (214) 405-5504
Attention: Vice President/General Manager RBOC Services
(o) Section I (General Matters) of Attachment BA (Billing and Accounting);
provided, however, that the last sentence of Subsection I.A shall be
replaced with the following:
Sprint hereby waives all charges for any usage not billed within
180 days following the end of the first available monthly billing
cycle after the usage is recorded, unless (a) Sprint can document
in writing that the delayed billing was caused by the Company or
(b) the parties agree in writing to a longer time period.
(p) Section III.A (Cost Categories for General Ledger Account Purposes) of
Attachment BA (Billing and Accounting);
(q) Attachment DE (Definitions);
(r) Sections I.1, I.3, I.4 and I.5 (Sprint Support Levels) of Attachment
PG (Performance Guarantees);
(s) Attachment PS (Pricing of Services) with Attachments.
IN WITNESS WHEREOF, the parties hereto, each acting with proper authority, have
executed this Service Contract, to be effective as of the date first above
written.
ONEPOINT COMMUNICATIONS, LLC SPRINT COMMUNICATIONS COMPANY L.P.
By: [SIGNATURE ILLEGIBLE] By: /s/ Leo Welsh
------------------------- -------------------------------
Title: Chairman/CEO Title: Vice President
---------------------- ----------------------------
STAMP APPEARS HERE
4
<PAGE>
EXHIBIT 10.6
AMENDED AND RESTATED
SECURITY AGREEMENT
(ACCOUNTS, GENERAL INTANGIBLES, INVENTORY, EQUIPMENT & OTHER COLLATERAL)
Dated as of April 29, 1998
This Amended and Restated Security Agreement (as modified from time to time, the
"Agreement") has been executed by ONEPOINT COMMUNICATIONS CORP., a Delaware
---------
corporation ("Debtor"), as debtor, in favor of THE NORTHERN TRUST COMPANY, an
------
Illinois banking corporation, as secured party (together with any successor,
assign or subsequent holder, "Secured Party"), with its office at 265 East
-------------
Deerpath, Lake Forest, Illinois 60045.
In consideration of Secured Party's making loans and extensions of credit
and/or considering making loans or extensions of credit to Debtor, and other
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, Debtor agrees as follows:
1. DEFINITIONS. As used in this Agreement:
(a) Unless otherwise defined herein, all terms that are defined in the
Uniform Commercial Code of the State in which the main banking office of Secured
Party is located shall have the same meanings herein as in such Code.
(b) "Guarantor" means SBC Communications Inc., its successors and assigns.
(c) "Prime Rate" means that floating rate of interest per year announced
from time to time by Secured Party called its prime rate, which at any time may
not be the lowest rate charged by Secured Party, computed for the actual number
of days elapsed on the basis of a year of 360 days.
(d) "Subsidiary" means any corporation, partnership, joint venture, trust,
or other legal entity of which Debtor owns directly or indirectly 80% or more of
the outstanding voting stock or interest, or of which Debtor has effective
control, by contract or otherwise.
2. SECURITY INTEREST. Debtor hereby grants to Secured Party a continuing
security interest in, and assigns and transfers to Secured Party, all of
Debtor's right, title and interest in the following property or types of
property now owned by Debtor or hereafter created or acquired by Debtor,
wherever located (any or all of such, the "Collateral"):
----------
(a) All accounts (including without limitation all rights to payment for
services or the Inventory, however arising), leases, chattel paper, contract
rights, instruments, life insurance policies, and documents;
(b) All general intangibles (including without limitation inventions,
designs, patents, patent applications, service marks, trademarks, trade names,
copyrights, licenses, leasehold
<PAGE>
interests, tax refund claims, guaranty claims, and security interests or other
security held by Debtor to secure accounts);
(c) All inventory, including without limitation returned and repossessed
goods, raw materials, and work in progress (the "Inventory");
---------
(d) All goods (other than Inventory), equipment, vehicles, leasehold
improvements, and fixtures, together with accessions thereto and replacement
parts therefor (the "Equipment");
---------
(e) All monies, accounts, deposits, and property now or at any time
hereafter in the possession or under the control of Secured Party or its bailee,
including that certain account of the Borrower Account No. 5839149 maintained at
the Secured Party and all cash, property maintained therein and proceeds
thereof; and
(f) All books and records, including without limitation customer lists,
credit files, computer programs, printouts, and other materials and records,
pertaining to any of the foregoing;
(g) All documents of title evidencing or issued with respect to any of the
foregoing; and
(h) All proceeds and products of all of the foregoing, including without
limitation proceeds of insurance policies insuring the foregoing.
3. LIABILITIES. The Collateral shall secure the payment and performance of
all obligations and liabilities of Debtor to Secured Party howsoever created,
evidenced or arising, whether direct or indirect, absolute or contingent, now
due or to become due, or now existing or hereafter arising, including without
limitation future advances, letters of credit issued for the account of or at
the request of Debtor as well as all agreements relating to any of the foregoing
(the "Liabilities").
-----------
4. REPRESENTATIONS. Debtor hereby represents and warrants to Secured Party
that:
(a) Debtor and any Subsidiary are existing and in good standing under the
laws of their state of formation, are duly qualified, in good standing and
authorized to do business in each jurisdiction where failure to do so might have
a material adverse impact on the consolidated assets, condition or prospects of
Debtor; the execution, delivery and performance of this Agreement and all
related documents and instruments are within Debtor's powers and have been
authorized by all necessary corporate action.
(b) The execution, delivery and performance of this Agreement and all
related documents and instruments have received any and all necessary
governmental approval, and do not and will not contravene or conflict with any
provision of law or of the articles of incorporation or by-laws or similar
agreement of Debtor or any agreement affecting Debtor or its property.
2
<PAGE>
(c) There has been no material adverse change in the business, condition,
properties, assets, operations or prospects of Debtor or the Guarantor since the
date of the latest financial statements provided on behalf of Debtor or the
Guarantor to Secured Party.
(d) Debtor does not do business, nor has it done business during the five
(5) years and six months prior to the date of this Agreement, under any other
name except Ventures in Communications RMTS, LLC. and OnePoint Communications,
L.L.C.
(e) No financing statement, mortgage, notice of judgment, or any similar
instrument (unless filed on behalf of Secured Party) covering any of the
Collateral is on file in any public office.
(f) Debtor is the lawful owner of all Collateral, free and clear of all
liens, pledges, charges, mortgages, and claims other than any in favor of
Secured Party, except liens for current taxes not delinquent and the interest of
lessors in property leased to Debtor.
(g) All Collateral is located at Debtor's address for notices set forth
below or at the addresses set forth on Schedule A hereto, and is not in transit,
----------
except: (i) for goods covered by negotiable warehouse receipts that have been
delivered to Secured Party or (ii) as notified to Secured Party in compliance
herewith. All Collateral is of good and merchantable quality and free from any
defects that would affect its market value.
(h) All accounts receivable of Debtor are genuine, are in all respects
what they purport to be, are not evidenced by a judgment, and represent
undisputed, bona fide transactions completed or to be completed in accordance
with the terms and conditions of any document related thereto; none of the
Collateral has been sold or pledged to any other person or entity; and Debtor
has no knowledge of any fact or circumstance which would impair the validity or
collectibility of any of the Collateral.
(i) Debtor (and each shareholder of Debtor) has filed or caused to be
filed all federal, state, and local tax returns that are required to be filed,
and has paid or has caused to be paid all of its taxes, including without
limitation any taxes shown on such returns or on any assessment received by it
to the extent that such taxes have become due, except in the case of a
shareholder of Debtor only, where the failure to file such returns or pay such
taxes would not have a material adverse effect on the ability of the Debtor to
perform the Liabilities.
5. COVENANTS OF DEBTOR. Debtor agrees that so long as this Agreement remains
in effect, it will: (a) NOTIFY SECURED PARTY IN WRITING AT LEAST SIXTY (60)
DAYS IN ADVANCE OF ANY CHANGE WHATSOEVER IN THE NAME OF DEBTOR OR THE NAME(S)
UNDER WHICH DEBTOR CONDUCTS BUSINESS, ANY NEW NAMES UNDER WHICH DEBTOR INTENDS
TO DO BUSINESS, AND ANY NEW ADDRESSES AT OR FROM WHICH DEBTOR INTENDS TO DO
BUSINESS OR TO KEEP COLLATERAL OF ANY KIND. Debtor shall keep all Collateral
within one or more of the United States of America;
3
<PAGE>
(b) Provide and maintain insurance with respect to the Collateral and the
operation of Debtor's business, as reasonably required by Secured Party from
time to time; all such insurance shall be in such amounts and against such risks
as shall be reasonably satisfactory in all respects to Secured Party, with
Secured Party named as additional insured and loss payee;
(c) Defend the Collateral against the claims and demands of all persons
other than Secured Party and promptly pay all taxes, assessments, and charges
upon the Collateral, except for such taxes, assessments and charges which are
being contested in good faith by appropriate proceedings and for which adequate
reserves in accordance with generally accepted accounting principles have been
reserved on the books of the Debtor; and not sign (or permit to be signed) any
financing statements or other documents creating or perfecting a lien upon or
security interest in any of the Collateral except in favor of Secured Party, or
otherwise create, suffer, or permit to exist any liens or security interests
upon any Collateral other than in favor of Secured Party, except tax liens,
provided that such liens are removed before related taxes become delinquent;
(d) Execute such financing statements and other documents (and pay the
cost of filing and recording the same in all public offices deemed necessary by
Secured Party) and do such other acts as Secured Party may request to establish
and maintain a valid and perfected security interest in the Collateral free and
clear of all other liens and claims, except tax liens, provided that such liens
are removed before related taxes become delinquent;
(e) Deliver to Secured Party any certificates or other documents of title
representing or issued with respect to any of the Collateral, with Secured
Party's security interest and lien endorsed thereon, and record such
certificates or documents with all appropriate regulatory agencies;
(f) Furnish to Secured Party, immediately upon the request of Secured
Party, any evidence of ownership of the Collateral, including without limitation
bills of sale, paid invoices, certificates of title, or applications for title;
(g) Keep at its address for notices set forth under or opposite its
signature hereto its records concerning the Collateral, which records shall be
of such character as will enable Secured Party to determine at any time the
status of the Collateral; furnish to Secured Party such information concerning
Debtor, the Collateral, and the account debtors as Secured Party may from time
to time reasonably request; and permit Secured Party from time to time to
inspect the Collateral and to inspect, audit, and make copies of, and extracts
from, all records and all other papers in the possession of Debtor pertaining to
the Collateral and the account debtors. Secured Party shall have the right at
any time or times to make direct verification with the account debtors of any
and all of the accounts;
(h) Keep and maintain the Collateral in good operating condition and
repair, and make all necessary replacements and renewals to the Collateral so
that the value and operating efficiency thereof shall at all times be maintained
and preserved;
4
<PAGE>
(i) Make appropriate entries upon its financial statements and its books
and records disclosing Secured Party's security interest in the Collateral;
(j) Provide to Secured Party from time to time such financial statements
of and other information concerning Debtor and any shareholder of Debtor,
including Ventures in Communications II, LLC ("VIC2") (audited, if requested by
----
Secured Party) as Secured Party shall reasonably request;
(k) If at any time any of the Collateral shall be or become evidenced by
any instrument, note, or other document, immediately deliver such instrument,
note, or document to Secured Party, endorsed as requested by Secured Party;
(l) Immediately notify Secured Party of any material loss or depreciation
in the value of the Collateral; and
(m) Except to the extent specifically permitted in Section 6 of this
---------
Agreement, not sell, transfer, or otherwise dispose of any Collateral without
Secured Party's prior written consent.
6. USE OF THE INVENTORY. Until notice to the contrary is given by the Secured
Party, Debtor may use, consume, and sell Inventory in carrying on its business
in the ordinary course of business substantially in the same manner as now
conducted, but a sale in the ordinary course of business shall not include any
transfer or sale in satisfaction, partial or complete, of a debt owed by Debtor
or any shareholder.
7. COLLECTIONS.
(a) Until written notice to the contrary is given by Secured Party, Debtor
(i) shall collect the accounts for Secured Party at Debtor's own expense, and
(ii) may grant, in the ordinary course of business, to any party obligated on
any of the Collateral, any rebate, refund, or allowance to which such party may
be lawfully entitled and accept in connection therewith the return of any goods
the sale or lease of which shall have given rise to such accounts.
(b) At any time and from time to time, after the occurrence of an Event of
Default, Secured Party, at Debtor's expense, may or, upon request of Secured
Party, Debtor shall, notify any account debtors of the existence of this
Agreement and direct such account debtors to pay directly to Secured Party the
amounts due or to become due from such account debtors. Each account debtor so
notified and directed may accept the receipt of Secured Party for any such
payment as a full release of any amounts so paid.
(c) Secured Party may enforce collection of any or all of the Collateral
by suit or otherwise, and surrender, release, or exchange all or any part
thereof, or compromise or extend or renew for any period (whether or not longer
than the original period) any indebtedness thereunder.
5
<PAGE>
(d) Secured Party at any time may, and upon direction of Debtor or upon
the happening of an Event of Default shall, apply all payments received from
account debtors to the Liabilities when due (whether by acceleration or
otherwise) and may credit any balance after such payment to the account of
Debtor.
8. WARRANTY-FUTURE. The request or application by Debtor for any Liability
secured hereby shall be a representation and warranty by Debtor as of the date
of such request or application that: (i) no Event of Default or Unmatured Event
of Default (in each case as defined herein) has occurred or is continuing as of
such date; and (ii) Debtor's representations and warranties herein are true and
correct as of such date as though made on such date, except that Section 4(c)
------------
shall be deemed to refer to the then most recent financial statements furnished
to Secured Party.
9. EVENTS OF DEFAULT. The occurrence of any of the following shall constitute
an "Event of Default":
----------------
(a) Failure to pay, when and as due, and subject to any applicable grace
period, any principal, interest or other amounts payable hereunder or in
connection with any of the Liabilities; or failure to comply with or perform any
agreement or covenant of Debtor contained herein, which failure shall continue
unremedied for a period of 10 days after the notice thereof from Secured Party
to Debtor; or
(b) Any default, event of default, or similar event shall occur or
continue (after the expiration of any applicable grace period) under any other
instrument, document, note, agreement, or guaranty delivered to Secured Party in
connection with this Agreement; or any such instrument, document, note,
agreement, or guaranty shall not be, or shall cease to be, enforceable in
accordance with its terms; or
(c) There shall occur any default or event of default, or any event or
condition that might become such with notice or the passage of time or both, or
any similar event, or any event that requires the prepayment of borrowed money
or the acceleration of the maturity thereof, under the terms of any evidence of
indebtedness or other agreement issued or assumed or entered into by Debtor, any
Subsidiary, Ventures in Communications, L.L.C. ("VIC"), VIC2 or VenCom L.L.C.
---
("VenCom") in an aggregate amount in excess of $5,000,000, or the Guarantor, or
------
under the terms of any indenture, agreement, or instrument under which any such
evidence of indebtedness or other agreement is issued, assumed, secured, or
guaranteed, and such event shall continue beyond any applicable period of grace;
or
(d) Any representation, warranty, schedule, certificate, financial
statement, report, notice, or other writing furnished by or on behalf of Debtor,
any Subsidiary, VIC, VIC2, VenCom, or the Guarantor to Secured Party is false or
misleading in any material respect on the date as of which the facts therein set
forth are stated or certified; or
6
<PAGE>
(e) Any guaranty of or pledge of collateral security for the Liabilities,
including without limitation this Agreement, shall be repudiated or become
unenforceable or incapable of performance; or
(f) Debtor, any Subsidiary or the Guarantor shall fail to maintain their
existence in good standing in their state of formation or shall fail to be duly
qualified, in good standing and authorized to do business in each jurisdiction
where failure to do so might have a material adverse impact on the consolidated
assets, condition or prospects of Debtor; or
(g) Debtor, any Subsidiary, VIC, VIC2, VenCom, or the Guarantor shall
dissolve, liquidate, merge, consolidate, or cease to be in existence for any
reason; or any member of VIC2 shall withdraw or notify VIC2 of its intention to
withdraw as a member of VIC2; or any member of VIC2 shall fail to make any
contribution required by the limited liability company agreement or operating
agreement of VIC2 as and when due under such agreement; or there shall be any
change in a limited liability company agreement or operating agreement of VIC2
from that in force on the date hereof which may have a material adverse impact
on the ability of Borrower to repay the Liabilities; or
(h) Any person or entity presently not in control of Debtor, VIC2, VenCom,
or the Guarantor, shall obtain control directly or indirectly of Debtor, VIC2,
VenCom or the Guarantor, whether by purchase or gift of stock or assets, by
contract, or otherwise; provided, however, that ownership of less than 20% of
the issued and outstanding shares of the Debtor by persons not owning shares of
the Debtor on the date hereof shall not constitute a change in control for
purposes of this clause (h); or
(i) Any proceeding (judicial or administrative) shall be commenced against
Debtor, any Subsidiary, VIC, VIC2, VenCom, or the Guarantor, or with respect to
any assets of Debtor, any Subsidiary, VIC, VIC2, VenCom or the Guarantor which
shall threaten to have a material and adverse effect on the assets, condition or
prospects of Debtor, any Subsidiary, VIC, VIC2, VenCom, or the Guarantor; or
final judgment(s) and/or settlement(s) in an aggregate amount in excess of (i)
in the case of the Guarantor, TWENTY-FIVE MILLION UNITED STATES DOLLARS
($25,000,000), (ii) in the case of VIC, TEN MILLION UNITED STATES DOLLARS
($10,000,000), or (iii) in the case of the Debtor, any Subsidiary, VIC2 or
VenCom, ONE MILLION UNITED STATES DOLLARS ($1,000,000), in each case in excess
of insurance for which the insurer has confirmed coverage in writing, a copy of
which writing has been furnished to Secured Party, shall be entered or agreed to
in any suit or action; or
(j) Debtor shall grant or any person (other than Secured Party) shall
obtain a security interest in any of the Collateral; Debtor or any other person
shall perfect (or attempt to perfect) such a security interest; a court shall
determine that Secured Party does not have a first-priority security interest in
any of the Collateral enforceable in accordance with the terms hereof; or any
notice of a federal tax lien against Debtor, VIC, VIC2 or VenCom in excess of
$1,000,000 shall be filed with any public recorder; or
7
<PAGE>
(k) There shall be any material loss or depreciation in the value of any
of the Collateral for any reason, or Secured Party shall otherwise reasonably
deem itself insecure; or, unless expressly permitted by this Agreement or the
related documents, all or any part of any of the Collateral or any direct,
indirect, legal, equitable or beneficial interest therein is assigned,
transferred or sold without Secured Party's prior written consent; or
(l) Any bankruptcy, insolvency, reorganization, arrangement, readjustment,
liquidation, dissolution, or similar proceeding, domestic or foreign, is
instituted by or against Debtor, any Subsidiary, VIC, VIC2, VenCom, or any
Guarantor and any such involuntary proceeding is not dismissed within 60 days;
or Debtor, any Subsidiary, VIC, VIC2, VenCom, or any Guarantor shall take any
steps toward, or to authorize, such a proceeding; or
(m) Debtor, any Subsidiary, VIC, VIC2, VenCom, or any Guarantor shall
become insolvent, generally shall fail or be unable to pay its debts as they
mature, shall admit in writing its inability to pay its debts as they mature,
shall make a general assignment for the benefit of its creditors, shall enter
into any composition or similar agreement, or shall suspend the transaction of
all or a substantial portion of its usual business.
10. DEFAULT REMEDIES.
(a) Notwithstanding any provision of any document or instrument evidencing
or relating to any Liability: (i) upon the occurrence and during the continuance
of any Event of Default specified in Section 9(a)-(k), Secured Party at its
----------------
option may declare the Liabilities immediately due and payable without notice or
demand of any kind; and (ii) upon the occurrence of any Event of Default
specified in Section 9(l)-(m), the Liabilities shall be immediately and
----------------
automatically due and payable without action of any kind on the part of Secured
Party. Upon the occurrence and during the continuance of any Event of Default,
Secured Party may exercise any rights and remedies under this Agreement, any
related document or instrument (including without limitation any pertaining to
Collateral), and at law or in equity.
(b) If any Event of Default shall have occurred and be continuing, then,
in addition to having the right to exercise any rights and remedies of a secured
party upon default under the Uniform Commercial Code in effect in the State
where the main banking office of Secured Party and/or any Collateral is located,
Secured Party may, in its sole discretion, exercise any rights or powers set
forth in this Agreement. Secured Party may require Debtor to assemble the
Collateral and deliver it to a place designated by Secured Party. Without
limiting any other provision hereof, Debtor shall pay all related expenses,
including without limitation attorneys' fees and reasonable time charges of
attorneys of Secured Party in enforcing its rights hereunder. If any
notification of intended disposition of any of the Collateral is required by
law, such notification, if mailed, shall be deemed reasonably and properly given
if mailed at least ten days before such disposition, by certified mail, postage
prepaid, addressed to Debtor at the address of Debtor shown below. Secured Party
shall, in addition to and not in limitation of all rights of offset under
applicable law, have the right to appropriate and apply all of the Collateral in
its possession to payment of the Liabilities. Secured Party may proceed to sell
or otherwise dispose of the Collateral at public or private sale for cash or
credit; provided, however, that Debtor shall be
8
<PAGE>
credited with proceeds of such sale only when the proceeds are actually received
by Secured Party. Any proceeds of the Collateral may be applied by Secured Party
to the payment of expenses and costs to exercise of Secured Party's rights
hereunder, and any balance of such proceeds shall be applied toward the
Liabilities in such order as Secured Party shall determine in its sole
discretion. Any balance remaining shall be returned to Debtor.
(c) Secured Party may, by written notice to Debtor, at any time and from
time to time, waive any Event of Default or "Unmatured Event of Default" (as
--------------------------
defined below), which shall be for such period and subject to such conditions as
shall be specified in any such notice. In the case of any such waiver, Secured
Party and Debtor shall be restored to their former position and rights
hereunder, and any Event of Default or Unmatured Event of Default so waived
shall be deemed to be cured and not continuing; but no such waiver shall extend
to or impair any subsequent or other Event of Default or Unmatured Event of
Default. No failure to exercise, and no delay in exercising, on the part of
Secured Party of any right, power or privilege hereunder shall preclude any
other or further exercise thereof or the exercise of any other right, power or
privilege. The rights and remedies of Secured Party herein provided are
cumulative and not exclusive of any rights or remedies provided by law.
"Unmatured Event of Default" means any event or condition which would become an
Event of Default with notice or the passage of time or both.
11. RIGHTS OF SECURED PARTY. Secured Party may, from time to time, at its
option (but shall have no duty to):
(a) Perform any agreement of Debtor hereunder that Debtor shall have
failed to perform;
(b) Take any other action which Secured Party deems necessary or desirable
for the preservation of the Collateral or Secured Party's interest therein and
the carrying out of this Agreement, including without limiting the generality of
the foregoing: (i) any action to collect or realize upon the Collateral; (ii)
the discharge of taxes, liens, security interests or other encumbrances at any
time levied or placed on the Collateral; (iii) the discharge or keeping current
of any obligation of Debtor having effect on the Collateral; or (iv) receiving,
endorsing and collecting all checks and other orders for the payment of money
made payable to Debtor representing any dividend, interest payment or other
distribution payable or distributable in respect of the Collateral or any part
thereof, and to give full discharge for the same; and
(c) File, or cause to be filed, photocopies or carbon copies of any
financing statement respecting any right of Secured Party in the Collateral, and
any such photocopy or carbon copy of the signature of Debtor on such photocopy
or carbon copy shall be deemed an original for purposes of such filing. Debtor
hereby authorizes Secured Party to sign financing statements on Debtor's behalf
to be filed in all jurisdictions in which such authorization is permitted.
Debtor hereby appoints Secured Party as Debtor's attorney in fact, which
appointment is and shall be deemed to be irrevocable and coupled with an
interest, for purposes of performing acts and signing and delivering any
agreement, document, or instrument, on behalf of Debtor in accordance with this
Section. Secured Party shall provide Debtor with reasonable advance notice
9
<PAGE>
of its intent to exercise the powers of attorney provided herein, except in the
event that an Event of Default shall have occurred. Debtor immediately will
reimburse Secured Party for all expenses so incurred by Secured Party, together
with interest thereon at 3% in addition to the Prime Rate.
12. FURTHER ASSURANCES. (a) Debtor agrees to do such further acts and things,
and to execute and deliver such additional conveyances, assignments, agreements,
and instruments, as Secured Party may at any time request in connection with the
administration or enforcement of this Agreement or related to the Collateral or
any part thereof or in order better to assure and confirm unto Secured Party its
rights, powers and remedies hereunder.
(b) No delay in enforcing payment of the Liabilities, nor any amendment,
waiver, change, or modification of any terms of any document or instrument which
evidences or is given in connection with the Liabilities, shall release Debtor
from any obligation hereunder. The obligations of Debtor under this Agreement
are and shall be primary, continuing, unconditional and absolute, irrespective
of the value, genuineness, regularity, validity or enforceability of any
documents or instruments respecting or evidencing the Liabilities. In order to
hold Debtor liable or exercise rights or remedies hereunder, there shall be no
obligation on the part of Secured Party, at any time, to resort for payment to
any Guarantor or to any other security for the Liabilities. Secured Party shall
have the right to enforce this Agreement irrespective of whether or not other
proceedings or steps are being taken against any other property securing the
Liabilities or any other party primarily or secondarily liable on any of the
Liabilities.
(c) Debtor irrevocably waives presentment, protest, demand, notice of
dishonor or default, and all demands and notices of any kind in connection with
this Agreement or the Liabilities.
13. NOTICES. All notices, requests and demands to or upon the respective
parties hereto shall be deemed to have been given or made when deposited in the
mail, postage prepaid, addressed if to Secured Party to The Northern Trust Bank,
265 E. Deerpath, Lake Forest, Illinois 60045 (Attention: Division Head,
Commercial Division), and if to Debtor to its address set forth below, or to
such other address as may be hereafter designated in writing by the respective
parties hereto or, as to Debtor, may appear in Secured Party's records.
14. MISCELLANEOUS. This Agreement and any document or instrument executed in
connection herewith shall be governed by and construed in accordance with the
internal law of the State of Illinois, and shall be deemed to have been executed
in such State. Unless the context requires otherwise, wherever used herein the
singular shall include the plural and vice versa. Captions herein are for
convenience of reference only and shall not define or limit any of the terms or
provisions hereof; references herein to Sections or provisions without reference
to the document in which they are contained are references to this Agreement.
This Agreement shall bind Debtor, its successors and assigns, and shall inure to
the benefit of Secured Party, its successors and assigns, except that Debtor may
not transfer or assign any of its rights or interest hereunder without the prior
written consent of Secured Party. Debtor agrees to pay upon demand all expenses
(including without limitation attorneys' fees, legal costs and expenses, and
time
10
<PAGE>
charges of attorneys in each case whether in or out of court, in original or
appellate proceedings or in bankruptcy) incurred or paid by Secured Party or any
holder hereof in connection with the enforcement or preservation of its rights
hereunder or under any document or instrument executed in connection herewith.
15. WAIVER OF JURY TRIAL, ETC. DEBTOR AND SECURED PARTY HEREBY IRREVOCABLY
AGREE THAT ALL SUITS, ACTIONS OR OTHER PROCEEDINGS WITH RESPECT TO, ARISING OUT
OF OR IN CONNECTION WITH THIS AGREEMENT OR ANY DOCUMENT OR INSTRUMENT EXECUTED
IN CONNECTION HEREWITH SHALL BE SUBJECT TO LITIGATION IN COURTS HAVING SITUS
WITHIN OR JURISDICTION OVER CHICAGO, ILLINOIS. DEBTOR HEREBY CONSENTS AND
SUBMITS TO THE JURISDICTION OF ANY LOCAL, STATE OR FEDERAL COURT LOCATED IN OR
HAVING JURISDICTION OVER SUCH CITY, AND HEREBY IRREVOCABLY WAIVES ANY RIGHT IT
MAY HAVE TO REQUEST OR DEMAND TRIAL BY JURY, TO TRANSFER OR CHANGE THE VENUE OF
ANY SUIT, ACTION OR OTHER PROCEEDING BROUGHT BY SECURED PARTY IN ACCORDANCE WITH
THIS PARAGRAPH, OR TO CLAIM THAT ANY SUCH PROCEEDING HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM.
16. AMENDMENT AND RESTATEMENT. This Agreement amends and restates in its
entirety the Security Agreement dated as of March 25, 1998 of OnePoint
Communications, L.L.C. (the predecessor of Debtor) in favor of the Secured Party
("Prior Agreement") and nothing contained herein shall be construed to release,
---------------
cancel, terminate or otherwise adversely affect all or any part of any lien or
security interest heretofore granted to Secured Party under the Prior Agreement
which has not been expressly released.
ONEPOINT COMMUNICATIONS CORP.
By: [SIGNATURE ILLEGIBLE]
--------------------------
Title:________________________
Address for notices:
2201 Waukegan Road
Suite E-200
Bannockburn, Illinois 60015
Attention:____________________
11
<PAGE>
SCHEDULE A
COLLATERAL LOCATIONS
--------------------
OnePoint Communications Corp. OnePoint Communications Corp.
Corporate Headquarters 5335 Wisconsin Ave., NW
2201 Waukegan Road, Suite E-200 Suite #950
Bannockbum, Illinois 60015 Washington, D.C. 20015
OnePoint Communications Corp. OnePoint Communications Corp.
Two Point Royal 14001 E. Iliff Ave.
4550 North Point Pkwy. Suite #320
Suite #350 Aurora, CO 80014-1426
Alpharette, GA 30022
OnePoint Communications Corp. OnePoint Communications Corp.
(temporary office space) 1200 Mercantile Lane
2999 N. 44th St. Suite #114
Suite #300 Largo, MD 20774
Phoenix, AZ 85018
<PAGE>
EXHIBIT A
TO
FINANCING STATEMENT
OF
ONEPOINT COMMUNICATIONS CORP.
IN FAVOR OF
THE NORTHERN TRUST COMPANY
(CONSISTING OF ONE PAGE)
All of Debtor's right, title and interest in the following property or
types of property whether now existing or hereafter arising or acquired,
wherever located:
(a) All accounts (including without limitation all rights to payment for
services or the Inventory, however arising), leases, chattel paper, contract
rights, instruments, life insurance policies, and documents;
(b) All general intangibles (including without limitation inventions,
designs, patents, patent applications, service marks, trademarks, trade
names, copyrights, licenses, leasehold interests, tax refund claims, guaranty
claims, and security interests or other security held by Debtor to secure
accounts);
(c) All inventory, including without limitation returned and repossessed
goods, raw materials, and work in progress (the "Inventory");
---------
(d) All goods (other than Inventory), equipment, vehicles, leasehold
improvements, and fixtures, together with accessions thereto and replacement
parts therefor, but excluding property used exclusively for personal,
household, or family use (the "Equipment");
---------
(e) All monies, accounts, deposits, and property now or at any time
hereafter in the possession or under the control of Secured Party or its
bailee, including that certain account of Debtor Account No. 5839149
maintained at Secured Party and all cash, property maintained therein and
proceeds thereof;
(f) All books and records, including without limitation customer lists,
credit files, computer programs, printouts, and other materials and records,
pertaining to any of the foregoing;
(g) All documents of title evidencing or issued with respect to any of the
foregoing; and
(h) All proceeds and products of all of the foregoing, including without
limitation proceeds of insurance policies insuring the foregoing.
<PAGE>
EXHIBIT 10.7
<TABLE>
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Obligor File Name Obligor # Obligation Number Officer # Amount
$9,000,000
- --------------------------------------------------------------------------------
</TABLE>
Chicago, Illinois
Dated as of April 29, 1998
AMENDED AND RESTATED
CALL ON TERM-TERM NOTE
This Note has been executed by ONEPOINT COMMUNICATIONS CORP. (successor by
merger to OnePoint Communications, L.L.C.), a corporation formed under the laws
of the State of Delaware ("Borrower").
--------
FOR VALUE RECEIVED, on or before January 1, 2003, the scheduled maturity date
hereof, Borrower promises to pay to the order of THE NORTHERN TRUST COMPANY, an
Illinois banking corporation (hereafter, together with any subsequent holder
hereof, called "Lender"), at its office at 265 East Deerpath, Lake Forest,
------
Illinois 60045, or at such other place as Lender may direct, the lesser of the
principal sum of NINE MILLION AND NO/100 United States Dollars ($9,000,000) (the
"Facility Amount") or the amount borrowed as endorsed on any grid attached to
---------------
this Note (or recorded in Lender's books and records, if Lender is the holder
hereof). The amount of principal outstanding hereunder as of the close of
business on December 15, 1998 (the "Final Drawdown Date") shall be converted
-------------------
into a term loan which shall be payable in four (4) consecutive quarterly
payments of $62,500 each, four (4) consecutive quarterly payments of $125,000
each, four (4) consecutive quarterly payments of $562,500 each, four (4)
consecutive quarterly payments of $875,000 each, and a final installment of all
then remaining unpaid principal, payable on the first day of each January,
April, July and October of each year, beginning on January 1, 1999, provided
that, notwithstanding the foregoing, any and all remaining outstanding principal
shall be due and payable in full on January 1, 2003, the scheduled maturity date
of this Note. Each advance of principal hereunder and the term loan are
hereafter sometimes referred to as the "Loan(s)"; the period from the date
-------
hereof to and including the Final Drawdown Date is referred to as the "Drawdown
--------
Period" and the period thereafter is referred to as the "Payback Period". No
- ------ --------------
additional advances of principal shall be made after the Final Drawdown Date.
The aggregate amount of Loans shall not exceed the Facility Amount; amounts
borrowed which are repaid may not be reborrowed. Lender has no obligation to
refinance this Note.
Lender is hereby authorized by Borrower at any time and from time to time at
Lender's sole option to attach a schedule (grid) to this Note and to endorse
thereon notations with respect to each Loan specifying the date and principal
amount thereof, the applicable interest rate and rate option, and the date and
amount of each payment of principal and interest made by Borrower with respect
to each such Loan. Absent manifest error, Lender's endorsements as well as its
records relating to Loans shall be rebuttably presumptive evidence of the
outstanding principal and interest on the Loans, and, in the event of
inconsistency, shall prevail over any records of Borrower and any written
confirmations of Loans given by Borrower; provided, however, that
-------- -------
<PAGE>
Lender has provided Borrower with Lender's standard transaction confirmation
tickets at or about the time of each Loan and Borrower has not objected thereto
within 10 days of issue thereof.
Each request for a Loan shall be deemed to be a representation and warranty by
Borrower to Lender that: (i) no Event of Default or Unmatured Event of Default
(in each case as defined below) has occurred and is continuing as of the date of
such request or would result from the making of the Loan; and (ii) Borrower's
representations and warranties herein and the other documents delivered in
connection herewith are true and correct as of such date as though made on such
date. Upon receipt of each Loan request, Lender in its sole discretion shall
have the right to request that Borrower provide to Lender, prior to Lender's
funding of the Loan, a certificate executed by Borrower's President, Treasurer,
or Chief Financial Officer to such effect.
1. INTEREST.
1.1. INTEREST RATES. The unpaid principal amount from time to time
outstanding hereunder shall bear interest as the following rates per year:
(a) before maturity of any Loan, whether by acceleration or
otherwise, at the option of Borrower, subject to the terms hereof at a rate
equal to:
(i) the "Prime-Based Rate," which shall mean the Prime Rate (as
defined below) less 3/4 of 1%. Changes in the rate of interest
on the Loans resulting from a change in the Prime Rate shall take
effect on the date set forth in each announcement for a change in
the Prime Rate. "Prime Rate" means the rate announced from time
to time by the Lender called its prime rate, which may not at any
time be the lowest rate charged by the Lender; or
(ii) "LIBOR," which shall mean that fixed rate of interest per
-----
year for deposits with maturity periods of one, two or three
months (which maturity period Borrower shall select subject to
the terms stated herein) in United States Dollars offered to
Lender in or through the London or another offshore interbank
market, as determined by the Lender in its sole discretion for or
as of the borrowing date requested by the Borrower, divided by
------- --
one minus any applicable reserve requirement (expressed as a
decimal) on Eurodollar deposits of the same amount and maturity
as determined by Lender in its sole discretion, plus 50 basis
----
points; or
(iii) the "Federal Funds Rate," defined as the rate on overnight
------------------
Federal funds transactions as determined by the Lender in its
sole discretion, plus 50 basis points. In the case of a
----
Saturday, Sunday or legal holding, the Federal Funds Rate shall
be the rate applicable on the immediately preceding day for which
such weighted average rate is reported.
(b) after the maturity of any Loan, until paid, at a rate equal to 2%
in addition to the Prime Rate (but not less than the Prime Rate in effect
at maturity).
2
<PAGE>
1.2. RATE SELECTION. Borrower shall select and change its selection of the
--------------
interest rate as between the Prime-Based Rate, Federal Funds Rate and LIBOR to
apply to at least $100,000 and in integral multiples of $100,000 thereafter (or
the remaining amount available hereunder) of any advance (Loan), subject to the
requirements herein stated:
(a) At the time any advance is made;
(b) At the expiration of the particular LIBOR maturity period
selected for the outstanding principal balance of any advance currently
bearing interest at the LIBOR Rate; and
(c) At any time for the outstanding principal balance of any advance
currently bearing interest at the Prime-Based Rate.
1.3. RATE CHANGES AND NOTIFICATIONS.
(a) LIBOR. If Borrower wishes to borrow funds at LIBOR or if Borrower
-----
wishes to change the rate of interest on any advance, within the limits
described above, from any other rate to LIBOR, it shall, not less than
three banking days of the Lender prior to the banking day of the Lender on
which such rate is to take effect, give Lender written or telephonic notice
thereof, which shall be irrevocable. Such notice shall specify the advance
to which LIBOR is to apply, and, in addition, the desired LIBOR maturity
period (but not to exceed the maturity date of this Note unless the Lender
consents otherwise).
(b) Failure to Notify. If Borrower does not notify Lender at the
-----------------
expiration of a selected maturity period with respect to any principal
outstanding at LIBOR, then in the absence of such notice Borrower shall be
deemed to have elected to have such principal accrue interest after the
respective LIBOR maturity period at the Prime-Based Rate. If Borrower
wishes to borrow money at the Federal Funds Rate or the Prime-Based Rate,
or to change the interest rate from the Federal Funds Rate to or from the
Prime-Based Rate, it shall notify Lender on the date of borrowing or
conversion; if any such notification is not received before 10:00 AM
Chicago time on a banking day of the Lender, at Lender's option the
borrowing or conversion may not be effected until the next banking day. If
Borrower does not notify Lender as to its selection of the interest rate
option with respect to any new advance of principal, then in the absence of
such notice Borrower shall be deemed to have elected to have such advance
accrue interest at the Prime-Based Rate.
1.4. INTEREST PAYMENT DATES. Accrued interest shall be paid in respect of:
----------------------
each portion of principal to which:
(a) the Prime-Based Rate or the Federal Funds Rate applies, quarterly
on the first day of each January, April, July and October of each year,
beginning with the first of such dates to occur after the date of the first
advance, at maturity of this Note, and upon payment in full, whichever is
earlier or more frequent; and
3
<PAGE>
(b) LIBOR applies, monthly on the first day of each month, at the end
of each respective maturity period (unless interest is payable monthly as
provided above), at maturity of this Note, and upon payment in full,
whichever is earlier or more frequent.
After maturity, interest shall be payable upon demand.
1.5. ADDITIONAL PROVISIONS WITH RESPECT TO FEDERAL FUNDS RATE AND LIBOR
LOANS.
The selection by Borrower of the Federal Funds Rate or LIBOR and the
maintenance of advances at such rate shall be subject to the following
additional terms and conditions:
(a) Availability of Deposits at a Determinable Rate. If, after
-----------------------------------------------
Borrower has elected to borrow or maintain any advance at LIBOR or the
Federal Funds Rate, Lender notifies Borrower that:
(i) With respect to LIBOR, United States dollar deposits in the
amount and for the maturity requested are not available to Lender
in the London interbank market, or
(ii) Reasonable means do not exist for Lender to determine the
Federal Funds Rate, or LIBOR for the amount and maturity
requested, all as determined by the Lender in its sole
discretion, then the principal subject or to be subject to LIBOR
or the Federal Funds Rate, as applicable, shall accrue or shall
continue to accrue interest at the Prime-Based Rate.
(b) Prohibition of Making, Maintaining, or Repayment or Principal at
----------------------------------------------------------------
LIBOR or Federal Funds Rate. If any treaty, statute, regulation,
---------------------------
interpretation thereof, or any directive, guideline, or otherwise by a
central bank or fiscal authority (whether or not having the force of law)
shall either prohibit or extend the time at which any principal subject to
LIBOR or the Federal Funds Rate may be purchased, maintained, or repaid,
then on and as of the date the prohibition becomes effective, the principal
subject to that prohibition shall continue at the Prime-Based Rate.
(c) Payments of Principal and Interest to be Net of Any Taxes or
------------------------------------------------------------
Costs. All payments of principal and interest shall be made net of any
taxes and costs incurred by Lender resulting from having principal
outstanding hereunder at LIBOR. Without limiting the generality of the
preceding obligation, illustrations of such taxes and costs are:
(i) Taxes (or the withholding of amounts for taxes) of any
nature whatsoever including income, excise, and interest
equalization taxes (other than income taxes imposed by the United
States or any state thereof on the income of Lender), as well as
all levies, imposts, duties, or fees whether now in existence or
resulting from a change in, or promulgation of, any treaty,
statute, regulation, interpretation thereof, or any directive,
4
<PAGE>
guideline, or otherwise, by a central bank or fiscal authority
(whether or not having the force of law) or a change in the basis
of, or time of payment of, such taxes and other amounts resulting
therefrom;
(ii) Any reserve or special deposit requirements against assets
or liabilities of, or deposits with or for the account of, Lender
with respect to principal outstanding at LIBOR (including those
imposed under Regulation D of the Federal Reserve Board) or
resulting from a change in, or the promulgation of, such
requirements by treaty, statute, regulation, interpretation
thereof, or any directive, guideline, or otherwise by a central
bank or fiscal authority (whether or not having the force of
law);
(iii) Any other costs resulting from compliance with treaties,
statutes, regulations, interpretations, or any directives or
guidelines, or otherwise by a central bank or fiscal authority
(whether or not having the force of law);
(iv) Any loss (including loss of anticipated profits) or expense
incurred by reason of the liquidation or re-employment of
deposits acquired by Lender to make advances or maintain
principal outstanding at LIBOR:
(A) As the result of a voluntary prepayment at a date other
than the maturity date selected for principal outstanding
at LIBOR; or
(B) As the result of a mandatory repayment at a date other
than the maturity date selected for principal outstanding
at LIBOR as a result of (i) the occurrence of an Event of
Default and the acceleration of any portion of the
indebtedness hereunder, or (ii) the scheduled maturity date
of this Note occurring prior to the LIBOR maturity date due
to Borrower's selection of a LIBOR maturity period which
extends beyond the scheduled maturity date of this Note; or
(C) As the result of a prohibition on making, maintaining,
or repaying principal outstanding at LIBOR.
If Lender incurs any such taxes or costs, Borrower, upon demand in writing
specifying such taxes and costs, shall promptly pay them; save for manifest
error Lender's specification shall be presumptively deemed correct. All
advances made at LIBOR shall be conclusively deemed to have been funded by or on
behalf of Lender in the London interbank market by the purchase of deposits
corresponding in amount and maturity to the amount and interest periods selected
(or deemed to have been selected) by Borrower under this Note.
5
<PAGE>
2. PAYMENT.
2.1. PAYMENT AND PREPAYMENT. Borrower may from time to time, upon at least
----------------------
three days' prior written notice to Lender, prepay any principal bearing
interest at the Prime-Based Rate or the Federal Funds Rate in whole or in part
at any time and may prepay any principal bearing interest at LIBOR at the end of
the maturity period chosen or agreed to by Borrower applicable to the advance or
portion of the advance being prepaid, without premium or penalty, provided that
any partial prepayment shall be in an aggregate principal amount of at least
$10,000. Any prepayment of an amount bearing interest at LIBOR at a date other
than the maturity date applicable to the advance or the portion of the advance
being prepaid shall be subject to the provisions of Section 1.5. All
------------
prepayments of principal shall include interest accrued to the date of
prepayment on the principal amount being prepaid.
2.2. MANDATORY PREPAYMENT. In the event that (i) twenty percent (20%) or
--------------------
more of the issued and outstanding shares of Borrower are held by persons not
owning shares of the Borrower on the date hereof or substantially all the assets
of the Borrower are sold, or (ii) Ventures in Communications, L.L.C. ("VIC")
---
sells all its membership interests in Ventures in Communications II, LLC
("VIC2"), then on the date such event shall occur, the Borrower immediately
----
agrees to prepay the entire outstanding principal amount of the Loans and all
unpaid and accrued interest on the Loans and acknowledges and agrees that any
commitment to lend hereunder is terminated without further notice or action on
the part of the Lender. Any prepayment of an amount bearing interest at LIBOR
on a date other than the maturity date applicable to the advance or portion of
the advance being prepaid shall be subject to the provisions of Section 1.5.
-----------
2.3. BASIS OF COMPUTATION. Interest shall be computed for the actual
--------------------
number of days elapsed on the basis of a year consisting of 360 days, including
the date a Loan is made and excluding the date a Loan or any portion thereof is
paid or prepaid.
3. REFERENCES TO FACILITY TYPE, COLLATERAL, GUARANTIES, OTHER AGREEMENTS.
3.1. FACILITY TYPE. Lender intends to make available to Borrower the Loans
-------------
as outlined herein until the Final Drawdown Date unless in Lender's good faith
determination there has occurred an adverse change in the assets, condition or
prospects of Borrower or the Guarantor (as defined below). THE CALL ON TERM-
TERM LOAN FACILITY EVIDENCED HEREBY IS REVOCABLE UPON 48 HOURS WRITTEN NOTICE TO
BORROWER (IT IS UNDERSTOOD NO NOTICE IS REQUIRED IF AN EVENT OF DEFAULT HAS
OCCURRED AND IS CONTINUING) AS TO FURTHER ADVANCES NOTWITHSTANDING PAYMENT OF
ANY FEES OR MAINTENANCE OF ANY ACCOUNT BALANCES, AS AND IF PROVIDED IN ANY
ACCOMPANYING LETTER OR OTHER DOCUMENT PERTAINING TO SUCH FEES AND/OR BALANCES.
Any such fees and/or balances shall be deemed compensation to Lender for being
prepared to respond to Borrower's requests for credit under this Note.
6
<PAGE>
3.2. SECURITY. This Note is secured by an Amended and Restated Security
--------
Agreement, dated even date herewith, between Borrower and Lender (as amended,
modified, renewed, restated or replaced from time to time (the "Security
--------
Agreement").
- ---------
3.3. GUARANTY. Payment of this Note has been unconditionally guaranteed by
--------
SBC Communications Inc. (the "Guarantor") pursuant to a guaranty (as amended,
---------
modified or supplemented, the "Guaranty") in form and substance satisfactory to
--------
Lender.
4. USE OF PROCEEDS. (a) Borrower represents and warrants that the proceeds
of this Note will be used solely for business purposes, and not for personal,
family or household use, within the meaning of Federal Truth in Lending and
similar state laws and regulations.
(b) Notwithstanding anything herein to the contrary, Borrower agrees
that its initial request for Loans hereunder shall be in an amount equal to
at least $150,000. Borrower acknowledges and agrees that $150,000 of such
initial Loan shall be deposited by Lender into an account maintained by
Borrower at Lender (the "Account") and constitute additional collateral for
-------
the Borrower's obligations hereunder and the Security Agreement.
Concurrently with the funding of such Loan, the Borrower agrees to execute
a security agreement and any other documents as Lender may reasonably
request evidencing its security interest in funds in the Account. Borrower
further agrees that Lender shall have no obligation to return all or a
portion of the funds or property in the Account until the later of the
Final Drawdown Date and the date on which the obligations of the Guarantor
to Lender under the Guaranty exceed the outstanding principal balance of
the term loan hereunder and all accrued and unpaid interest hereunder and
if and only if no Event of Default or Unmatured Event of Default shall have
occurred and be continuing.
5. REPRESENTATIONS.
Borrower hereby represents and warrants to Lender that:
(a) Borrower and any "Subsidiary" (as defined below) are duly
organized, validly existing and in good standing under the laws of their
state of formation, are duly qualified, in good standing and authorized to
do business in each jurisdiction where failure to do so might have a
material adverse impact on the consolidated assets, condition or prospects
of Borrower; the execution, delivery and performance of this Note and all
related documents and instruments are within Borrower's corporate powers
and have been authorized by all necessary corporate action;
(b) the execution, delivery and performance of this Note and all
related documents and instruments have received any and all necessary
governmental approval, and do not and will not contravene or conflict with
any provision of law or of the articles of incorporation or by-laws or
similar agreement of Borrower or any agreement affecting Borrower or its
property; and
7
<PAGE>
(c) there has been no material adverse change in the business,
condition, properties, assets, operations or prospects of Borrower or the
Guarantor since the date of the latest financial statements provided on
behalf of Borrower and Guarantor to Lender prior to the execution of this
Note.
"Subsidiary" means any corporation, partnership, joint venture, trust, or other
----------
legal entity of which Borrower owns directly or indirectly eighty percent (80%)
or more of the outstanding voting stock or interest, or of which Borrower has
effective control, by contract or otherwise.
6. EVENTS OF DEFAULT. The occurrence of any of the following shall constitute
an "Event of Default":
----------------
(a) failure to pay, when and as due, any principal, interest or other
amounts payable hereunder; failure to comply with or perform any agreement
or covenant of Borrower contained herein or the Security Agreement; in each
case, which failure shall have continued unremedied for a period of 10 days
after written notice thereof from Lender to Borrower; or
(b) any default, event of default, or similar event shall occur or
continue under any other instrument, document, note, agreement, or guaranty
delivered to Lender in connection with this Note (including without
limitation, the Security Agreement or Guaranty), which failure shall have
continued unremedied after the expiration of any grace period therein; or
any such instrument, document, note, agreement, or guaranty shall not be,
or shall cease to be, enforceable in accordance with its terms; or
(c) there shall occur any default or event of default, or any event or
condition that might become such with notice or the passage of time or
both, or any similar event, or any event that requires the prepayment of
borrowed money or the acceleration of the maturity thereof, under the terms
of any evidence of indebtedness or other agreement issued or assumed or
entered into by Borrower, any Subsidiary, VIC, VIC2 or VenCom L.L.C.
("VenCom") in an aggregate amount in excess of $5,000,000, or Guarantor, or
------
under the terms of any indenture, agreement, or instrument under which any
such evidence of indebtedness or other agreement is issued, assumed,
secured, or guaranteed, and such event shall continue beyond any applicable
period of grace; or
(d) any representation, warranty, schedule, certificate, financial
statement, report, notice, or other writing furnished by or on behalf of
Borrower, any Subsidiary, VIC, VIC2, VenCom or Guarantor to Lender is false
or misleading in any material respect on the date as of which the facts
therein set forth are stated or certified; or
(e) the Guaranty or any pledge of collateral security for this Note
shall be repudiated or become unenforceable or incapable of performance; or
(f) Borrower, any Subsidiary or Guarantor shall fail to maintain their
existence in good standing in their state of formation or shall fail to be
duly qualified, in
8
<PAGE>
good standing and authorized to do business in each jurisdiction where
failure to do so might have a material adverse impact on the consolidated
assets, condition or prospects of Borrower; or
(g) Borrower, any Subsidiary, VIC, VIC2, VenCom, or Guarantor shall
dissolve, liquidate, merge, consolidate, or cease to be in existence for
any reason; or any member of VIC2 shall withdraw or notify any member of
VIC2 of its intention to withdraw as a member of VIC2; or any member of
VIC2 shall fail to make any contribution required by the limited liability
company agreement or operating agreement of VIC2 as and when due under such
agreement; or there shall be any change in the limited liability company
agreement or operating agreement of VIC2 from that in force on the date
hereof which may have a material adverse impact on the ability of Borrower
to repay this Note; or
(h) any person or entity presently not in control of Borrower, VIC2,
VenCom, or Guarantor, shall obtain control directly or indirectly of
Borrower, VIC2, VenCom, or the Guarantor, whether by purchase or gift of
stock or assets, by contract, or otherwise; provided, however, that
ownership of less than 20% of the issued and outstanding shares of the
Borrower by persons not owning shares of the Borrower on the date hereof
shall not constitute a change in control for purposes of this clause (h);
----------
or
(i) any proceeding (judicial or administrative) shall be commenced
against Borrower, any Subsidiary, VIC, VIC2, VenCom, or the Guarantor, or
with respect to any assets of Borrower, any Subsidiary, VIC, VIC2, VenCom,
or the Guarantor which shall threaten to have a material and adverse effect
on the assets, condition or prospects of Borrower, any Subsidiary, VIC,
VIC2, VenCom, or the Guarantor; or final judgment(s) and/or settlement(s)
in an aggregate amount in excess of (i) in the case of the Guarantor,
TWENTY-FIVE MILLION AND NO/100 UNITED STATES DOLLARS ($25,000,000.00), (ii)
in the case of VIC, TEN MILLION AND NO/100 UNITED STATES DOLLARS
($10,000,000), or (iii) in the case of the Borrower, any Subsidiary, VIC2
or VenCom, ONE MILLION AND NO/100 UNITED STATES DOLLARS ($1,000,000), in
each case in excess of insurance for which the insurer has confirmed
coverage in writing, a copy of which writing has been furnished to Lender,
shall be entered or agreed to in any suit or action; or
(j) Borrower shall grant or any person other than Lender shall obtain
a security interest in any Collateral (as defined in the Security
Agreement) for this Note; Borrower or any other person shall perfect (or
attempt to perfect) such a security interest; a court shall determine that
Lender does not have a first-priority security interest in any of the
Collateral for this Note enforceable in accordance with the terms of the
related documents; or any notice of a federal tax lien against Borrower,
VIC, VIC2 or VenCom in excess of $1,000,000 shall be filed with any public
recorder; or
(k) there shall be any material loss or depreciation in the value of
any Collateral for this Note for any reason, or Lender shall otherwise
reasonably deem itself insecure; or, unless expressly permitted by the
related documents, all or any part of any
9
<PAGE>
Collateral for this Note or any direct, indirect, legal, equitable or
beneficial interest therein is assigned, transferred or sold without
Lender's prior written consent; or
(l) any bankruptcy, insolvency, reorganization, arrangement,
readjustment, liquidation, dissolution, or similar proceeding, domestic or
foreign, is instituted by or against Borrower, any Subsidiary, VIC, VIC2,
VenCom, or the Guarantor and in the case of an involuntary proceeding is
not dismissed within 60 days; or Borrower, any Subsidiary, VIC, VIC2,
VenCom, or the Guarantor shall take any steps toward, or to authorize, such
a proceeding; or
(m) Borrower, any Subsidiary, VIC, VIC2, VenCom, or any Guarantor
shall become insolvent, generally shall fail or be unable to pay its debts
as they mature, shall admit in writing its inability to pay its debts as
they mature, shall make a general assignment for the benefit of its
creditors, shall enter into any composition or similar agreement, or shall
suspend the transaction of all or a substantial portion of its usual
business.
7. DEFAULT REMEDIES.
(a) Upon the occurrence and during the continuance of any Event of
Default specified in Section 6(a)-(k), Lender at its option may declare
------------ ---
this Note (principal, interest and other amounts) immediately due and
payable without notice or demand of any kind. Upon the occurrence of any
Event of Default specified in Section 6(l)-(m), this Note (principal,
------------ ---
interest and other amounts) shall be immediately and automatically due and
payable without action of any kind on the part of Lender. Upon the
occurrence and during the continuance of any Event of Default, Lender may
exercise any rights and remedies under this Note, the Security Agreement
any related document or instrument (including without limitation any
pertaining to Collateral), and at law or in equity.
(b) Lender may, by written notice to Borrower, at any time and from
time to time, waive any Event of Default or "Unmatured Event of Default"
(as defined below), which shall be for such period and subject to such
conditions as shall be specified in any such notice. In the case of any
such waiver, Lender and Borrower shall be restored to their former position
and rights hereunder, and any Event of Default or Unmatured Event of
Default so waived shall be deemed to be cured and not continuing; but no
such waiver shall extend to or impair any subsequent or other Event of
Default or Unmatured Event of Default. No failure to exercise, and no
delay in exercising, on the part of Lender of any right, power or privilege
hereunder shall preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies
of Lender herein provided are cumulative and not exclusive of any rights or
remedies provided by law. "Unmatured Event of Default" means any event or
--------------------------
condition which would become an Event of Default with notice or the passage
of time or both.
10
<PAGE>
8. NO INTEREST OVER LEGAL RATE.
Borrower does not intend or expect to pay, nor does Lender intend or expect
to charge, accept or collect any interest which, when added to any fee or other
charge which may legally be treated as interest, shall be in excess of the
highest lawful rate. If acceleration, prepayment or any other charges upon the
principal or any portion thereof, or any other circumstance, result in the
computation or earning of interest in excess of the highest lawful rate, then
any and all such excess is hereby waived and shall be applied against the
remaining principal balance. Without limiting the generality of the foregoing,
and notwithstanding anything to the contrary contained herein or otherwise, no
deposit of funds shall be required in connection herewith which will, when
deducted from the principal amount outstanding hereunder, cause the rate of
interest hereunder to exceed the highest lawful rate.
9. PAYMENTS, ETC.
All payments hereunder shall be made in immediately available funds, and
shall be applied first to accrued interest and then to principal; however, if an
Event of Default occurs, Lender may, in its sole discretion, and in such order
as it may choose, apply any payment to interest, principal and/or lawful charges
and expenses then accrued. Borrower shall receive immediate credit on payments
received during Lender's normal banking hours if made in cash, immediately
available funds, or by debit to available balances in an account at Lender;
otherwise payments shall be credited after clearance through normal banking
channels. Borrower authorizes Lender to charge any account of Borrower
maintained with Lender for any amounts of principal, interest, taxes, duties, or
other charges or amounts due or payable hereunder, with the amount of such
payment subject to availability of collected balances in Lender's discretion;
unless Borrower instructs otherwise, any Loan shall be credited to an account(s)
of Borrower with Lender. LENDER AT ITS OPTION MAY MAKE LOANS HEREUNDER UPON
TELEPHONIC INSTRUCTIONS AND IN SO DOING SHALL BE FULLY ENTITLED TO RELY SOLELY
UPON INSTRUCTIONS, INCLUDING WITHOUT LIMITATION INSTRUCTIONS TO MAKE TRANSFERS
TO THIRD PARTIES, REASONABLY BELIEVED BY LENDER TO HAVE BEEN GIVEN BY AN
AUTHORIZED PERSON, WITHOUT INDEPENDENT INQUIRY OF ANY TYPE. All payments shall
be made without deduction for or on account of any present or future taxes,
duties or other charges levied or imposed on this Note or the proceeds, Lender
(other than based solely on the income of the Lender) or Borrower by any
government or political subdivision thereof. Borrower shall upon request of
Lender pay all such taxes, duties or other charges in addition to principal and
interest, including without limitation all documentary stamp and intangible
taxes, but excluding income taxes based solely on Lender's income.
10. SETOFF.
At any time and without notice of any kind, any account, deposit or other
indebtedness owing by Lender to Borrower, and any securities or other property
of Borrower delivered to or left in the possession of Lender or its nominee or
bailee, may be set off against and applied in payment of any obligation
hereunder, whether due or not.
11
<PAGE>
11. NOTICES.
All notices, requests and demands to or upon the respective parties hereto
shall be deemed to have been given or made when deposited in the mail, postage
prepaid, addressed if to Lender to its main banking office indicated above
(Attention: Division Head, Commercial Division), and if to Borrower to its
address set forth below, or to such other address as may be hereafter designated
in writing by the respective parties hereto or, as to Borrower, may appear in
Lender's records.
12. MISCELLANEOUS.
This Note and any document or instrument executed in connection herewith
shall be governed by and construed in accordance with the internal law of the
State of Illinois, and shall be deemed to have been executed in the State of
Illinois. Unless the context requires otherwise, wherever used herein the
singular shall include the plural and vice versa. Captions herein are for
convenience of reference only and shall not define or limit any of the terms or
provisions hereof; references herein to Sections or provisions without reference
to the document in which they are contained are references to this Note. This
Note shall bind Borrower, its successors and assigns, and shall inure to the
benefit of Lender, its successors and assigns, except that Borrower may not
transfer or assign any of its rights or interest hereunder without the prior
written consent of Lender. Borrower agrees to pay upon demand all expenses
(including without limitation attorneys' fees, legal costs and expenses, in each
case whether in or out of court, in original or appellate proceedings or in
bankruptcy) incurred or paid by Lender or any holder hereof in connection with
the enforcement or preservation of its rights hereunder or under any document or
instrument executed in connection herewith. Except as otherwise expressly
provided herein, Borrower expressly and irrevocably waives notice of dishonor or
default as well as presentment, protest, demand and notice of any kind in
connection herewith. Borrower and, by acceptance of this Note, Lender agree not
to amend this Note without the prior written consent of Guarantor if and only if
such amendment relates to (a) subordinating the Lender's right to payment under
this Note to the payment of any other indebtedness or equity interest of the
Borrower, (b) releasing the security interest of the Lender in all or any part
of the collateral subject to the Security Agreement, (c) extending the scheduled
maturity date of this Note or any installments hereunder, (d) changing Section
-------
2.2 hereof, (e) increasing the principal amount of this Note above $9,000,000,
- ---
(f) impairing the subrogation rights of the Guarantor, or (g) extending the
Final Drawdown Date.
13. WAIVER OF JURY TRAIL, ETC.
BORROWER AND LENDER HEREBY IRREVOCABLY AGREE THAT ALL SUITS, ACTIONS OR
OTHER PROCEEDINGS WITH RESPECT TO, ARISING OUT OF OR IN CONNECTION WITH THIS
NOTE OR ANY DOCUMENT OR INSTRUMENT EXECUTED IN CONNECTION HEREWITH SHALL BE
SUBJECT TO LITIGATION IN COURTS HAVING SITUS WITHIN OR JURISDICTION OVER
CHICAGO, ILLINOIS. BORROWER AND LENDER HEREBY CONSENT AND SUBMIT TO THE
JURISDICTION OF ANY LOCAL, STATE OR FEDERAL COURT LOCATED IN OR HAVING
JURISDICTION OVER SUCH CITY, AND HEREBY IRREVOCABLY WAIVE ANY RIGHT IT MAY HAVE
TO
12
<PAGE>
REQUEST OR DEMAND TRIAL BY JURY, TO TRANSFER OR CHANGE THE VENUE OF ANY SUIT,
ACTION OR OTHER PROCEEDING BROUGHT BY LENDER IN ACCORDANCE WITH THIS PARAGRAPH,
OR TO CLAIM THAT ANY SUCH PROCEEDING HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
14. AMENDMENT AND RESTATEMENT
This Note is a restatement of the indebtedness evidenced by, and is a
replacement of, that certain Call On Term-Term Note of OnePoint Communications,
L.L.C. (predecessor of the Borrower) dated March 25, 1998 in the face principal
amount of $9,000,000 payable to the order of the Lender, and nothing contained
herein shall be construed (i) to deem paid or forgiven the unpaid principal
amount of, or unpaid accrued interest on, said Call On Term-Term Note
outstanding at the time of its replacement by this Note, or (ii) to release,
cancel, terminate or otherwise adversely affect all or any part of any lien,
mortgage, deed of trust, assignment, security interest or other encumbrance
heretofore granted to or for the benefit of the payee of said Call On Term-Term
Note which has not otherwise been expressly released.
ONEPOINT COMMUNICATIONS CORP. Address for Notices:
By: [SIGNATURE ILLEGIBLE] 2201 N. Waukegan Road
------------------------------- ---------------------------------
Type Name _________________________ Suite E-200
---------------------------------
Bannockburn, Illinois 60015
---------------------------------
_________________________________
Attention: ______________________
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<PAGE>
EXHIBIT 10.9
ONEPOINT COMMUNICATIONS
STOCK APPRECIATION
RIGHTS PLAN
EFFECTIVE DATE 1/1/98
<PAGE>
CONTENTS
Article 1. Establishment, Objectives, and Duration 1
Article 2. Definitions 1
Article 3. Administration 3
Article 4. SARs Available for Grant 4
Article 5. Eligibility and Participation 4
Article 6. Stock Appreciation Rights 4
Article 7. Beneficiary Designation 6
Article 8. Rights of Employees 6
Article 9. Public Offering of Company Securities 6
Article 10. Amendment, Modification, and Termination 6
Article 11. Tax Withholding 6
Article 12. Indemnification 6
Article 13. Successors 7
Article 14. Nature of the Plan 7
Article 15. Legal Construction 7
<PAGE>
ONEPOINT COMMUNICATIONS, CORP.
STOCK APPRECIATION RIGHTS PLAN
ARTICLE 1. ESTABLISHMENT, OBJECTIVES, AND DURATION
1.1 ESTABLISHMENT OF THE PLAN. OnePoint Communications, Corp., a Delaware
corporation (hereinafter the "Company"), hereby establishes an incentive
compensation plan to be known as the "OnePoint Communications, Corp. Stock
Appreciation Rights Plan" (hereinafter the "Plan"), as set forth in this
document. The Plan permits the grant of Stock Appreciation Rights.
The Plan shall become effective as of January 1, 1998 (the "Effective Date")
and shall remain in effect as provided in Section 1.3 hereof.
1.2 OBJECTIVES OF THE PLAN. The objectives of the Plan are to optimize the
profitability and growth of the Company through incentives that are consistent
with the Company's goals and that link and align the personal interests of all
Participants; to provide Participants with an incentive for excellence in
individual performance; and to promote teamwork among Participants.
1.3 DURATION OF THE PLAN. The Plan shall commence on the Effective Date, as
described in Section 1.1 hereof, and shall remain in effect, subject to the
right of the Company's Chairman to alter, amend, suspend, or terminate the Plan
at any time pursuant to Article 9 hereof, until payments with respect to all
Stock Appreciation Rights subject to it shall have been made according to the
Plan's provisions.
ARTICLE 2. DEFINITIONS
Whenever used in the Plan, the following terms shall have the meanings set
forth below, and when the meaning is intended, the initial letter of the word
shall be capitalized:
2.1 "AWARD" means a grant under the Plan of Stock Appreciation Rights.
2.2 "AWARD AGREEMENT" means an agreement entered into by the Company and
each Participant setting forth the terms and provisions applicable to
the Award granted to such Participant under the Plan.
2.3 "CODE" means the Internal Revenue Code of 1986, as amended from time
to time.
2.4 "COMMITTEE" means the Compensation Committee appointed by the Board of
Directors of the Company to administer the Plan with respect to grants
of Awards, as specified in Article 3 herein.
2.5 "COMPANY" means OnePoint Communications, Corp., a Delaware
Corporation, or any successors thereto.
2.6 "DISABILITY" shall have the meaning ascribed to such term in the
governing long-term disability plan pursuant to which the Participant
may be entitled to benefits, if any, or if there shall be no such
plan, as determined by the Committee in its absolute discretion.
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<PAGE>
2.7 "EARNINGS MULTIPLE VALUE" of a Share, as of a particular date of
determination, means the Company's most recent fiscal year EBITDA,
multiplied by eight (8), less any and all outstanding debt, unreturned
preferred capital, and unpaid dividends, and divided by 1,111,125 (i.e.,
the total number of Shares and options to acquire shares outstanding as
of June 30, 1998); provided, however, that in the event the Company
issues, after June 30, 1998, additional Shares or options or similar
rights to acquire Shares (but not including the granting of Stock
Appreciation Rights pursuant to this Plan), or engages in any transaction
described in Section 4.2 herein, the number 1,111,125 shall be adjusted
as may be determined to be appropriate and equitable by the Committee, in
its sole discretion.
2.8 "EBITDA" shall mean the Company's earnings before interest, taxes,
depreciation, and amortization, on a consolidated basis, as determined by
the Committee in its sole discretion.
2.9 "EFFECTIVE DATE" shall have the meaning ascribed to such term in Section
1.1 hereof.
2.10 "EMPLOYEE" means any employee of the Company.
2.11 "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended from
time to time, or any successor act thereto.
2.12 "FAIR MARKET VALUE" of a Share as of a particular date means (a) if the
Company is not a Public Company or if the Company is a Public Company and
Shares are not publicly traded, the Earnings Multiple Value of a Share or
(b) if the Company is a Public Company and Shares are publicly traded,
the average closing sale price of a Share on the principal securities
exchange on which the Shares are publicly traded or, if the Shares are
not listed on an exchange, then the average of the closing bid and asking
prices of a Share, in each case, for the thirty (30) trading days
preceding such date of determination. Notwithstanding the above, the
Committee may establish the Fair Market Value of a Share in the event of
a Triggering Event or otherwise; provided, however, that in no event
shall such Fair Market Value be less than (a) or (b) above.
2.13 "GRANT PRICE" means the reference price from which the economic value, if
any, of an SAR may be derived, which shall be established as provided in
Section 6.3 herein.
2.14 "INCREASE IN SHARE VALUE" as of a particular date shall mean, with
respect to an Award, unless the related Award Agreement provides
otherwise, the excess, if any, of (a) over (b) where (a) and (b) are
defined as follows:
(a) The Fair Market Value of a Share as of such determination date; and
(b) The Grant Price of the SAR.
2.16 "PARTICIPANT" means an Employee who has outstanding an Award granted
under the Plan.
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<PAGE>
2.17 "PERSON" means any legal person, including any individual, corporation,
partnership, joint venture, estate, association, joint stock company,
limited liability company, trust, unincorporated organization or
government, or any agency or political subdivision or any other entity.
2.18 "PUBLIC" OR "PUBLIC COMPANY" means that the Company has publicly offered
equity securities which require registration under the Exchange Act.
2.19 "PUBLIC OFFERING" means a public offering of shares of common stock of
the company registered under the Securities Act of 1933, as amended from
time to time, or any successor thereto.
2.20 "SHARE" means: (a) if the Company is not a Public Company, a notional
share of common stock of the Company, determined as if 1,111,125 shares
of common stock were outstanding (provided, however, that such number
shall be adjusted as described in Section 2.7 herein); or (b) if the
Company is a Public Company, an actual share of common stock of the
Company.
2.21 "STOCK APPRECIATION RIGHT" or "SAR" means the right, as granted under
Article 6 herein, to the Increase in Share Value, as further described in
the related Award Agreement.
2.22 "THIRD PARTY" means any Person who is not Ventures in Communications II;
LLC, an Illinois limited liability company, or James A. Otterbeck, or an
affiliate of either of such Persons.
2.23 "TRIGGERING EVENT" means the consummation of any of the following events:
(i) the complete liquidation of the Company; or (ii) the sale to a Third
Party of all but a de minimis amount of the assets of the Company
pursuant to a plan of liquidation or otherwise; (iii) a Public Offering
of more than 50% of the Shares; or (iv) any other transaction determined
by the Committee, in its sole discretion, to be a Triggering Event;
provided, however, that a Triggering Event shall not be deemed to occur
unless and until all unreturned preferred capital has been met.
ARTICLE 3. ADMINISTRATION
3.1 THE COMMITTEE. The Plan shall be administered by the Compensation
Committee. The members of the Committee shall be appointed from time to time by,
and shall serve at the sole discretion of, the Board of Directors of the
Company.
3.2 AUTHORITY OF THE COMMITTEE. Except as limited by law or by the Articles
of Incorporation of the Company, and subject to the provisions herein, the
Committee shall have full and absolute discretionary power to select Employees
who shall participate in the Plan; determine the Award sizes; determine the
terms and conditions of Awards and Award Agreements in a manner consistent with
the Plan; construe and interpret the Plan and any agreement or instrument
entered into under the Plan (including, without limitation, any Award
Agreement); establish, amend, or waive rules and regulations for the Plan's
administration; and, subject to the provisions of Article 10 herein, amend the
terms and conditions of any outstanding Award to the extent such terms and
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conditions are within the discretion of the Committee as provided in the Plan
and the related Award Agreement. Further, the Committee shall make all other
determinations which may be necessary or advisable for the administration of the
Plan. As permitted by law, the Committee may delegate its authority as
identified herein.
3.3 DECISIONS BINDING. All interpretations, determinations, and decisions
made by the Committee pursuant to the provisions of the Plan shall be final,
conclusive, and binding on all Persons, including the Company, stockholders of
the Company, Employees, Participants, and their estates and beneficiaries.
ARTICLE 4. SARS AVAILABLE FOR GRANT
4.1 NUMBER OF SARS AVAILABLE FOR GRANT. Subject to adjustment as provided in
Section 4.2 herein, on the Effective Date, the number of Shares covered by SARs
hereby reserved for grant under the Plan shall be 166,669.
4.2 ADJUSTMENTS. In the event of any Company transaction impacting the
capital structure of the Company, such as any merger, consolidation, or other
distribution of ownership interests or property of the Company, any
reorganization, or any partial or complete liquidation of the Company, such
adjustment shall be made in the number of Shares covered by SARs available for
grant and the number of Shares covered by, and/or the Grant Price of, SARs
subject to outstanding Awards granted under the Plan, and/or calculations of the
Increase in Share Value under outstanding Award Agreements, as may be determined
to be appropriate and equitable by the Committee, in its sole discretion, to
prevent diminution or enlargement of rights; provided, however, that unless the
Committee determines otherwise, in the event of any Public Offering of Shares,
no such adjustment shall be necessary to prevent diminution or enlargement of
Participants' rights except as may be required to convert the non-Public Company
notional shares into actual shares of common stock in the Public Company.
ARTICLE 5. ELIGIBILITY AND PARTICIPATION
5.1 ELIGIBILITY. Persons eligible to participate in this Plan include all
active full-time Employees of the Company.
5.2 ACTUAL PARTICIPATION. Subject to the provisions of the Plan, the
Committee may, from time to time, select from all eligible Employees those to
whom Awards shall be granted and shall determine the amount of each Award and
the terms and conditions related thereto.
ARTICLE 6. STOCK APPRECIATION RIGHTS
6.1 GRANT OF SARS. Subject to the terms and provisions of the Plan, SARs may
be granted to one or more Participants in such number, and upon such terms and
conditions, and at any time and from time to time as shall be determined by the
Committee.
6.2 AWARD AGREEMENT. Each SAR grant shall be evidenced by an Award Agreement
that shall specify the number of Shares covered by the SAR, and such other
provisions as the Committee shall determine. Award Agreements may differ among
Participants. The grant to a Participant of certain benefits under an Award
Agreement shall not confer upon any other Participant or any future Participant
a right to the same or similar benefits.
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6.3 GRANT PRICE. At the Committee's discretion, the Grant Price for each SAR
under this Plan may be below, at, or above the Fair Market Value of a Share on
the date the SAR is granted.
6.4 DURATION OF SARS. Each SAR granted to an Employee shall expire at such
time as the Committee shall determine at the time of grant and as set forth in
the related Award Agreement; provided, however, that unless otherwise expressly
designated by the Committee at the time of grant, no payment request shall be
made with respect to an SAR later than the tenth (10th) anniversary date of its
grant.
6.5 VESTING AND PAYMENTS WITH RESPECT TO SARS. Participants granted SARs
under this Article 6 shall be entitled to payments with respect thereto at such
times and be subject to such restrictions and conditions as the Committee shall
in each instance approve (as reflected in the related Award Agreement), which
need not be the same for each grant or for each Participant.
Participants granted SARs under this Article 6 shall be entitled to payments
with respect to an SAR by the delivery of a written request for payment to the
Company, setting forth the number of Shares with respect to which payment under
the SAR is to be made and satisfaction of any other conditions to payment set
forth in the related Award Agreements.
6.6 PAYMENT OF SAR. Unless otherwise provided in an Award Agreement, upon
delivery of a written request for payment and satisfaction of the other terms
and requirements set forth in an Award Agreement, the Participant shall be
entitled to the timely payment of an amount equal to the Increase in Share
Value, multiplied by the number of Shares with respect to which payment under
the SAR is requested.
6.7 TERMINATION OF EMPLOYMENT. Each Award Agreement shall set forth the
extent to which the Participant shall have the right to receive payment with
respect to a SAR after the Participant shall no longer be an Employee. Such
provisions shall be determined in the absolute discretion of the Committee,
shall be included in the Award Agreement entered into with each Participant,
need not be uniform among all SARs issued pursuant to the Plan, and may reflect
distinctions based on the reasons for termination of employment.
6.8 NONTRANSFERABILITY OF SARS. Except as otherwise provided in a
Participant's Award Agreement, no SARs granted under this Article 6 may be sold,
transferred, pledged, assigned, participated, or otherwise alienated or
hypothecated, other than by will or by the laws of descent and distribution, and
any attempted sale, transfer, pledge, assignment, participation, or other
alienation or hypothecation in violation of the foregoing shall be null and
void. Further, except as otherwise provided in the Participant's Award
Agreement, payment requests with respect to all SARs granted to a Participant
under this Article 6 shall be made during his or her lifetime only by such
Participant.
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ARTICLE 7. BENEFICIARY DESIGNATION
Each Participant under the Plan may, from time to time, name any beneficiary
or beneficiaries (who may be named contingently or successively) to whom any
benefit under the Plan is to be paid in case of his or her death before he or
she receives any or all of such benefit. Each such designation shall revoke all
prior designations by the same Participant, shall be in a form prescribed by the
Company, and will be effective only when filed by the Participant in writing
with the Secretary of the Company during the Participant's lifetime.
Beneficiaries may be changed without notice to prior beneficiaries. In the
absence of any such designation, benefits remaining unpaid at the Participant's
death shall be paid to the Participant's estate.
ARTICLE 8. RIGHTS OF EMPLOYEES
8.1 EMPLOYMENT. Nothing in the Plan shall interfere with or limit in any way
the right of the Company to terminate any Participant's employment at any time,
nor confer upon any Participant any right to continue in the employ of the
Company, nor be deemed a waiver or modification of any agreement between the
Employee and the Company.
8.2 PARTICIPATION. No Employee shall have the right to be selected to
receive an Award under this Plan, or, having been so selected, to be selected to
receive a future Award.
ARTICLE 9. PUBLIC OFFERING OF COMPANY SECURITIES
In the event of a Public Offering of Shares, the Committee in its absolute
discretion may elect to convert an Award into an option to purchase Shares or to
pay out SARs in the form of Shares. The right of the Committee to make any such
determination shall be included in the Award Agreement entered into with each
Participant, and need not be uniform among all SARs issued pursuant to the Plan.
ARTICLE 10. AMENDMENT, MODIFICATION, AND TERMINATION
The Committee may, at any time and from time to time, alter, amend, suspend,
or terminate the Plan in whole or in part.
ARTICLE 11. TAX WITHHOLDING
The Company shall have the power and the right to deduct or withhold, or
require a Participant to remit to the Company, an amount sufficient to satisfy
federal, state, and local taxes required by law or regulation to be withheld
with respect to any taxable event arising as a result of this Plan.
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ARTICLE 12. INDEMNIFICATION
Each Person who is or shall have been a member of the Committee shall be
indemnified by the Company against and from any loss, cost, liability, or
expense that may be imposed upon or reasonably incurred by him or her in
connection with or resulting from any claim, action, suit, or proceeding to
which he or she may be a party or in which he or she may be involved by reason
of any good faith action taken or good faith failure to act under the Plan. Such
Person shall be indemnified by the Company for all amounts paid by him or her in
settlement thereof, with the Company's approval, or paid by him or her in
satisfaction of any judgment in any such action, suit, or proceeding against him
or her; provided, he or she shall give the Company an opportunity, at its own
expense, to handle and defend the same before he or she undertakes to handle and
defend it on his or her own behalf. The foregoing right of indemnification shall
not be exclusive of any other rights of indemnification to which such Persons
may be entitled under the Company's Operating Agreement, as a matter of law, or
otherwise, or any power that the Company may have to indemnify them or hold them
harmless.
ARTICLE 13. SUCCESSORS
All obligations of the Company under the Plan with respect to Awards granted
hereunder shall be binding on any successor to the Company, whether the
existence of such successor is the result of a direct or indirect purchase,
merger, consolidation, or otherwise, of all or substantially all of the business
and/or assets of the Company.
ARTICLE 14. NATURE OF THE PLAN
The Plan constitutes a mere promise by the Company to make benefit payments
in the future. A Participant has the status of a general unsecured creditor of
the Company. Nothing contained herein shall be deemed to create a trust or fund
of any kind or create any fiduciary relationship.
ARTICLE 15. LEGAL CONSTRUCTION
15.1 GENDER AND NUMBER. Except where otherwise indicated by the context, any
masculine term used herein also shall include the feminine; the plural shall
include the singular, and the singular shall include the plural.
15.2 SEVERABILITY. In the event any provision of the Plan shall be held
illegal or invalid for any reason, the illegality or invalidity shall not affect
the remaining parts of the Plan, and the Plan shall be construed and enforced as
if the illegal or invalid provision had not been included.
15.3 REQUIREMENTS OF LAW. The granting of Awards under the Plan and any
Award Agreement shall be subject to all applicable laws, rules, and regulations,
and to such approvals by any governmental agencies or national securities
exchanges as may be required.
15.4 GOVERNING LAW. To the extent not preempted by federal law, the Plan,
and all agreements hereunder, shall be construed in accordance with and governed
by the laws of the State of Delaware, without giving effect to the principles of
conflicts of law thereof.
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EXHIBIT 10.12
RESALE AGREEMENT
----------------
(Virginia)
PREFACE
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THIS RESALE AGREEMENT (this "Agreement") is made effective as of May
28, 1997 (the "Effective Date"), by and between VIC-RMTS-DC, L.L.C.,
("Reseller"), a Delaware limited liability company, d/b/a OnePoint
Communications, and affiliate of OnePoint Communications, L.L.C., with offices
at 5335 Wisconsin Avenue, Suite 950, Washington, D. C. 20015, and Bell Atlantic-
Virginia, Inc. ("Bell Atlantic"), a Virginia corporation, with offices at 600
East Main Street, 24th Floor, Richmond, Virginia 23261.
WHEREAS, pursuant to Section 251(c)(4) of the Act, 47 U.S.C. (S)
251(c)(4), Reseller wishes to purchase Bell Atlantic Retail Telecommunications
Services from Bell Atlantic for resale by Reseller as a Telecommunications
Carrier providing Telecommunications Services in the Commonwealth of Virginia
and
WHEREAS, Bell Atlantic is willing to provide such Bell Atlantic Retail
Telecommunications Services in accordance with this Agreement.
NOW THEREFORE, in consideration of the mutual promises set forth in
this Agreement, Reseller and Bell Atlantic, each on behalf of itself and its
respective successors and assigns, agree as follows:
1. DEFINITIONS
-----------
1.1 As used in the Principal Document, the terms listed below shall have
the meanings stated below:
1.1.1 "Act" means the Communications Act of 1934, 47 U.S.C. (S) 151, et
--
seq., as amended from time-to-time.
----
1.1.2 "Agent" means agent or servant.
1.1.3 "Applicable Law" means all applicable laws and government
regulations and orders.
1.1.4 "Bell Atlantic Other Service" means any service listed in Exhibit I.
1.1.5 "Bell Atlantic Retail Telecommunications Service" means any
Telecommunications Service that Bell Atlantic provides at retail to
subscribers who are not Telecommunications Carriers. The term "Bell
Atlantic Retail Telecommunications Service" does not include any exchange
access service (as defined in Section 3(16) of the Act, 47 U.S.C. (S)
153(16)) provided by Bell Atlantic.
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1.1.6 "Bell Atlantic Service" means and includes any Bell Atlantic Retail
Telecommunications Service and any Bell Atlantic Other Service.
1.1.7 "Bell Atlantic's Affiliates" means any corporations, partnerships or
other persons who control, are controlled by, or are under common control with,
Bell Atlantic.
1.1.8 "Bell Atlantic's Tariffs" and "Bell Atlantic Tariff" mean and include:
(a) Bell Atlantic's effective Federal and state tariffs, as amended by Bell
Atlantic from time-to-time; and,
(b) to the extent Bell Atlantic Services are not subject to Bell Atlantic
tariffs, any standard agreements and other documents, as amended by Bell
Atlantic from time-to-time, that set forth the generally available terms,
conditions and prices under which Bell Atlantic offers such Bell Atlantic
Services.
The terms "Bell Atlantic's Tariffs" and "Bell Atlantic Tariff" do not include
Bell Atlantic's "Statement of Generally Available Terms and Conditions for
Interconnection, Unbundled Network Elements, Ancillary Services and Resale of
Telecommunications Services" which has been approved by the Commission pursuant
to Section 252(f) of the Act, 47 U.S.C. (S) 252(f).
1.1.9 "Commission" means the Virginia State Corporation Commission.
1.1.10 "Contract Period", as used in Section 1.1.14 and Section 6.2, means a
stated period or minimum period of time for which Reseller is required by this
Agreement to subscribe to, use and/or pay for a Bell Atlantic Service.
1.1.11 "CPNI" means "Customer Proprietary Network Information" as defined by
Applicable Law, including, but not limited to, Section 222 of the Act, 47 U.S.C.
(S) 222.
1.1.12 "Customer Information" means CPNI, and any other individually
identifiable information about a customer of a Party or the purchase by a
customer of a Party of the services or products of that Party.
1.1.13 "Effective Date" means the date first above written.
1.1.14 "Expiration Date Bell Atlantic Service" means: (a) any Bell Atlantic
Service being provided by Bell Atlantic under this Agreement at the time of
expiration of the term of this Agreement, that at the time of expiration of the
term of this Agreement is subject to a Contract Period which is greater than one
(1) month; and, (b) any Bell Atlantic Service requested by Reseller under this
Agreement in an Order accepted by Bell Atlantic prior to expiration of the term
of this Agreement but not yet being provided by Bell Atlantic at the time of
expiration of this Agreement, that is subject to an initial Contract Period
which is greater than one (1) month.
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1.1.15 "Jurisdiction" means the Commonwealth of Virginia.
1.1.16 "Operator Services" means: (a) services accessed by dialing 411,
555-1212, 1-555-1212, 0+ local, 0+ intraLATA, and, 0-; and, (b) any other
automated or live operator or directory assistance service.
1.1.17 "Order" means an order or application.
1.1.18 "Principal Document" means this document, including the Preface,
Sections 1 through 33, the signature page, Exhibit I, Exhibit II, and
Exhibit II, Attachment 1.
1.1.19 "Reseller Customers" means and includes customers, subscribers and
patrons, of Reseller, purchasers and users of Telecommunications Services
(including, but not limited to, resold Bell Atlantic Retail
Telecommunications Services) provided by Reseller, and purchasers and users
of other services and products provided by Reseller.
1.1.20 "Retail Prices" means the prices at which Bell Atlantic Retail
Telecommunications Services are provided by Bell Atlantic at retail to
subscribers who are not Telecommunications Carriers.
1.1.21 "Telecommunications Carrier" means "Telecommunications Carrier" as
defined in Section 3(44) of the Act, 47 U.S.C. (S) 153(44).
1.1.22 "Telecommunications Service" means "Telecommunications Service" as
defined in Section 3(46) of the Act, 47 U.S.C. (S) 153(46).
1.1.23 "Telephone Exchange Service" means "Telephone Exchange Service" as
defined in Section 3(47) of the Act, 47 U.S.C. (S) 153(47).
1.2 Unless the context clearly indicates otherwise, any defined term which
is defined or used in the singular shall include the plural, and any
defined term which is defined or used in the plural shall include the
singular.
2. THE AGREEMENT
-------------
2.1 This Agreement includes: (a) the Principal Document; (b) Bell
Atlantic's Tariffs (which Bell Atlantic Tariffs are incorporated into this
Agreement by reference and made a part hereof); and, (c) a Reseller Order
to provide, change or terminate a Bell Atlantic Service, which has been
accepted by Bell Atlantic (including, but not limited to, any Order which
includes a commitment to purchase a stated number or minimum number of
lines or other Bell Atlantic Services, or a commitment to purchase lines or
other Bell Atlantic Services for a stated period or minimum period of
time).
2.2 Conflicts among terms in the Principal Document, Bell Atlantic's
Tariffs, and a Reseller Order which has been accepted by Bell Atlantic,
shall be resolved in accordance
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with the following order of precedence, where the document identified in
subsection "(a)" shall have the highest precedence: (a) the Principal
Document; (b) Bell Atlantic's Tariffs; and, (c) a Reseller Order which has
been accepted by Bell Atlantic. The fact that a term appears in the
Principal Document but not in a Bell Atlantic Tariff, or in a Bell Atlantic
Tariff but not in the Principal Document, shall not be interpreted as, or
deemed grounds for finding, a conflict for the purposes of this Section
2.2.
2.3 This Agreement (including the Principal Document, Bell Atlantic's
Tariffs, and Reseller Orders which have been accepted by Bell Atlantic),
constitutes the entire agreement between the Parties on the subject matter
hereof, and supersedes any prior or contemporaneous agreement,
understanding, or representation on the subject matter hereof. Except as
otherwise provided in the Principal Document, the terms in the Principal
Document may not be waived or modified except by a written document which
is signed by the Parties. Bell Atlantic shall have the right to add,
modify, or withdraw, a Bell Atlantic Tariff at any time, without the
consent of, or notice to, Reseller.
2.4 A failure or delay of either Party to enforce any of the provisions of
this Agreement, or any right or remedy available under this Agreement or at
law or in equity, or to require performance of any of the provisions of
this Agreement, or to exercise any option provided under this Agreement,
shall in no way be construed to be a waiver of such provisions, rights,
remedies, or options.
3. BELL ATLANTIC SERVICES
----------------------
3.1 Reseller may, from time-to-time, during the term of this Agreement,
submit Orders to Bell Atlantic requesting Bell Atlantic to provide Bell
Atlantic Retail Telecommunications Services for resale by Reseller as a
Telecommunications Carrier providing Telecommunications Services, pursuant
to Section 251(c)(4) of the Act, 47 U.S.C. (S) 251(c)(4).
3.2 Reseller may, from time-to-time, during the term of this Agreement,
submit Orders to Bell Atlantic requesting Bell Atlantic to provide Bell
Atlantic Other Services.
3.3 Bell Atlantic may require that Reseller's Orders requesting Bell
Atlantic to provide Bell Atlantic Services be in writing on forms specified
by Bell Atlantic or in an electronic form specified by Bell Atlantic.
3.4 Upon receipt and acceptance by Bell Atlantic of a Reseller Order
requesting Bell Atlantic to provide a Bell Atlantic Service, Bell Atlantic
shall provide, and Reseller shall subscribe to, use and pay for, the Bell
Atlantic Service, in accordance with this Agreement.
3.5 Bell Atlantic Retail Telecommunications Services may be purchased by
Reseller under this Agreement only for the purpose of resale by Reseller as
a Telecommunications Carrier providing Telecommunications Services,
pursuant to Section 251(c)(4) of the Act, 47 U.S.C. (S) 251(c)(4). Bell
Atlantic Retail Telecommunications Services to be purchased by Reseller
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for other purposes (including, but not limited to, Reseller's own use) must
be purchased by Reseller pursuant to separate written agreements,
including, but not limited to, applicable Bell Atlantic Tariffs. Reseller
warrants and agrees that Reseller will purchase Bell Atlantic Retail
Telecommunications Services from Bell Atlantic under this Agreement only
for the purpose of resale by Reseller as a Telecommunications Carrier
providing Telecommunications Services, pursuant to Section 251(c)(4) of the
Act, 47 U.S.C. (S) 251(c)(4).
3.6 Except as otherwise provided in this Agreement, Bell Atlantic shall
have the right to add, modify, grandfather, discontinue or terminate Bell
Atlantic Services at any time, without the consent of Reseller.
4. PRICES
------
4.1 Reseller shall pay Bell Atlantic for Bell Atlantic Services at the
prices stated in this Agreement, including, but not limited to, in Exhibit
I and Exhibit II.
4.2 If, prior to establishment of a Bell Atlantic Service, Reseller cancels
or changes its Order for the Bell Atlantic Service, Reseller shall
reimburse Bell Atlantic for the costs associated with such cancellation or
changes as required by this Agreement (including, but not limited to, Bell
Atlantic's Tariffs).
4.3 Upon request by Bell Atlantic, Reseller shall provide to Bell Atlantic
adequate assurance of payment of charges due to Bell Atlantic. Assurance of
payment of charges may be requested by Bell Atlantic: (a) if Reseller, in
Bell Atlantic's reasonable judgment, at the Effective Date or at any time
thereafter, is unable to show itself to be creditworthy; (b) if Reseller,
in Bell Atlantic's reasonable judgment, at the Effective Date or at any
time thereafter, is not creditworthy; or, (c) if Reseller fails to timely
pay a bill rendered to Reseller by Bell Atlantic. Unless otherwise agreed
by the Parties, the assurance of payment shall be in the form of a cash
deposit and shall be in an amount equal to the charges for Bell Atlantic
Services that Reseller may reasonably be expected to incur during a period
of two (2) months. Bell Atlantic may at any time use the deposit or other
assurance of payment to pay amounts due from Reseller.
5. BILLING AND PAYMENT
-------------------
5.1 Except as otherwise permitted or required by this Agreement, or agreed
in writing by the Parties, Bell Atlantic shall render bills to Reseller
monthly. Except as otherwise agreed in writing by the Parties, Bell
Atlantic will render bills to Reseller in a paper form.
5.2 Reseller shall pay Bell Atlantic's bills in immediately available U.S.
funds. Payments shall be transmitted by electronic funds transfer.
5.3 Payment of charges shall be due by the due date stated on Bell
Atlantic's bills. Except as otherwise required by Bell Atlantic's Tariffs
or agreed in writing by the Parties, the due
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date shall not be sooner than fifteen (15) days after the date the bill is
received by Reseller.
5.4 Charges which are not paid by the due date stated on Bell Atlantic's bill
shall be subject to a late payment charge. The late payment charge shall be in
the amount provided in the applicable Bell Atlantic Tariff; provided, that in
the absence of an applicable Bell Atlantic Tariff late payment charge, the late
payment charge shall be in an amount specified by Bell Atlantic, which shall not
exceed a rate of one and one-half percent (1.5%) of the over-due amount
(including any unpaid, previously billed late payment charges) per month.
5.5 Reseller acknowledges and agrees that:
5.5.1 During the term of this Agreement, Bell Atlantic will be engaged in
developing and deploying new or modified forms of bills for Telecommunications
Carriers who are engaged in the resale of Bell Atlantic Retail
Telecommunications Services and new or modified systems and methods for
computing and rendering such bills.
5.5.2 Prior to the completion of deployment of such new or modified forms of
bills and such new or modified systems and methods for computing and rendering
bills, Bell Atlantic's form of bill and systems and methods for computing and
rendering bills may be subject to limitations and restrictions, including, but
not limited to, the limitations stated in Section 5.5.3, below, the inability to
provide Reseller with a single, consolidated bill for all Bell Atlantic Services
purchased by Reseller, and the unavailability of bills and billing information
in an electronic form (e.g., bills may be rendered in a paper form).
5.5.3 Prior to the completion of deployment of the new or modified forms of
bills and the new or modified systems and methods for computing and rendering
bills, Bell Atlantic may apply the discount identified in Exhibit II, Section
1.1, in a manner (including, but not limited to, in a "bottom-of-the-bill"
format) that results in the Exhibit II, Section 1.1 discount being applied to
charges stated in the bill (including, but not limited to, Subscriber Line
Charges, Federal Line Cost Charges, end user common line charges, carrier
selection and change charges, Audiotex Service charges, and charges for services
which are not Bell Atlantic Retail Telecommunications Services) which are not
subject to the Exhibit II, Section 1.1 discount. Bell Atlantic will implement a
"true-up" process and within six (6) months after the due date of each monthly
bill, issue to Reseller a "true-up" bill for amounts which were not collected
from Reseller under the monthly bill because of the application of the Exhibit
II, Section 1.1 discount to charges which are not subject to the Exhibit II,
Section 1.1 discount. The "true-up" bill may be issued as a part of or an entry
on a monthly bill, as a bill separate from a monthly bill, or in such other form
as Bell Atlantic may determine.
5.6 Although it is the intent of Bell Atlantic to submit timely and accurate
bills, failure by Bell Atlantic to present bills (including, but not limited to,
monthly bills and "true-up" bills) to Reseller in a timely or accurate manner
shall not constitute a breach or default of this Agreement, or a waiver of a
right of payment of the incurred charges, by Bell Atlantic. Reseller shall not
be entitled to dispute charges for Bell Atlantic Services provided by Bell
Atlantic based on Bell Atlantic's failure to submit a bill for the charges in a
timely fashion.
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Notwithstanding the foregoing, closure of a specific billing period shall
occur by joint agreement of Bell Atlantic and Reseller whereby such billing
period is closed to further charges, analysis and financial transactions,
within one (l) year of the bill date.
6. TERM
----
6.1 The term of this Agreement shall commence on the Effective Date, and,
except as otherwise provided in this Agreement, shall remain in effect
through May 28, 1998.
6.2 Following the expiration of the term of this Agreement specified in
Section 6.1, this Agreement, as amended from time to time, shall remain in
effect as to any Expiration Date Bell Atlantic Service for the remainder of
the Contract Period applicable to such Expiration Date Bell Atlantic
Service at the time of the expiration of this Agreement. If an Expiration
Date Bell Atlantic Service is terminated prior to the expiration of the
Contract Period applicable to such Expiration Date Bell Atlantic Service,
Reseller shall pay any termination charge provided for in this Agreement,
as amended from time-to-time. Following expiration of the applicable
Contract Period for an Expiration Date Bell Atlantic Service, the
Expiration Date Bell Atlantic Service, until terminated, shall be subject
to any applicable new agreement executed by the Parties, or, to the extent
such Expiration Date Bell Atlantic Service is not covered by a new
agreement executed by the Parties, to applicable Bell Atlantic Tariffs.
7. SERVICE INSTALLATION AND MAINTENANCE
------------------------------------
Reseller shall comply with Bell Atlantic's processes and procedures
(including, but not limited to, requirements by Bell Atlantic that Reseller
use Bell Atlantic OSS Services or Bell Atlantic Pre-OSS Services) for the
communication to Bell Atlantic of (a) Reseller's Orders to provide, change
or terminate, Bell Atlantic Services, and (b) Reseller's requests for
information about, assistance in using, or repair or maintenance of, Bell
Atlantic Services. Bell Atlantic may, from time-to-time, upon notice to
Reseller, change these processes and procedures.
8. ASSIGNMENT
----------
8.1 Reseller shall not assign this Agreement or any right or interest under
this Agreement, nor delegate any obligation under this Agreement, without
the prior written approval of Bell Atlantic, which approval shall not be
unreasonably withheld, conditioned or delayed. Any attempted assignment or
delegation in contravention of the foregoing shall be void and ineffective.
8.2 Bell Atlantic may, without the consent of Reseller, assign this
Agreement or any right or interest under this Agreement, and/or delegate
any obligation under this Agreement, to any of Bell Atlantic's Affiliates,
or to a person with which Bell Atlantic merges or which acquires
substantially all of Bell Atlantic's assets.
9. AVAILABILITY OF SERVICE
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9.1 Except as otherwise stated in Bell Atlantic's Tariffs, Bell Atlantic
shall be obligated to provide Bell Atlantic Services to Reseller under this
Agreement only where Bell Atlantic is able, without unreasonable expense
(as determined by Bell Atlantic in its reasonable judgment), (a) to obtain,
retain, install and maintain suitable facilities for the provision of such
Bell Atlantic Services, and (b) to obtain, retain and maintain suitable
rights for the provision of such Bell Atlantic Services.
9.2 Bell Atlantic's obligation to provide a Bell Atlantic Retail
Telecommunications Service to Reseller under this Agreement shall be
limited to providing the Bell Atlantic Retail Telecommunications Service to
Reseller where, and to the same extent, that Bell Atlantic provides such
Bell Atlantic Retail Telecommunications Service to Bell Atlantic's own end
user retail customers.
10. BRANDING
--------
10.1 Except as stated in Section 10.2, in providing Bell Atlantic Services
to Reseller, Bell Atlantic shall have the right, but not the obligation, to
identify the Bell Atlantic Services with Bell Atlantic's trade names,
trademarks and service marks. Any such identification of the Bell Atlantic
Services shall not constitute the grant of a license or other right to
Reseller to use Bell Atlantic's trade names, trade marks or service marks.
10.2 To the extent required by Applicable Law, upon request by Reseller and
at prices, terms and conditions to be negotiated by Reseller and Bell
Atlantic, Bell Atlantic shall provide Bell Atlantic Retail
Telecommunications Services that are identified by Reseller's trade name,
or that are not identified by trade name, trademark or service mark.
11. CHOICE OF LAW
-------------
11.1 The construction, interpretation and performance of this Agreement
shall be governed by the laws of the United States of America and the laws
of Jurisdiction (without regard to Jurisdiction's conflicts of laws rules).
All disputes relating to this Agreement shall be resolved through the
application of such laws.
11.2 Reseller agrees to submit to the jurisdiction of any court, commission
or other governmental entity in which a claim, suit or proceeding which
arises out of or in connection with this Agreement or Bell Atlantic
Services provided under this Agreement and in which Bell Atlantic is a
party, is brought.
12. COMPLIANCE WITH APPLICABLE LAW
------------------------------
12.1 Each Party shall in its performance of this Agreement comply with
Applicable Law, including, but not limited to, all applicable regulations
and orders of the Commission and the Federal Communications Commission.
12.2 Reseller shall in providing Bell Atlantic Retail Telecommunications
Services to
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Reseller Customers comply with Applicable Law, including, but not limited
to, all applicable regulations and orders of the Commission and the Federal
Communications Commission.
13. CONTINGENCIES
-------------
Neither Party shall be liable for any delay or failure in performance by it
which results from strikes, labor slowdowns, or other labor disputes,
fires, explosions, floods, earthquakes, volcanic action, delays in
obtaining or inability to obtain necessary services, facilities, equipment,
parts or repairs thereof, power failures, embargoes, boycotts, unusually
severe weather conditions, revolution, riots or other civil disturbances,
war or acts of the public enemy, acts of God, or causes beyond the Party's
reasonable control.
14. RESELLER'S PROVISION OF SERVICE
-------------------------------
14.1 Prior to providing Bell Atlantic Retail Telecommunications Services
purchased by Reseller under this Agreement to Reseller Customers, Reseller
shall obtain from the Commission, the Federal Communications Commission,
and any other applicable governmental entities, any certificates or other
authorizations required by Applicable Law for Reseller to provide
Telecommunications Services. Reseller shall promptly notify Bell Atlantic
in writing of any governmental action which suspends, cancels or withdraws
any such certificate or authorization, or otherwise limits or affects
Reseller's right to provide Telecommunications Services.
14.2 To the extent required by Applicable Law, Reseller shall: (a) file
with the Commission, the Federal Communications Commission, and/or other
applicable governmental entities, the tariffs, arrangements and other
documents that set forth the terms, conditions and prices under which
Reseller provides Telecommunications Services; and, (b) make available for
public inspection, the tariffs, arrangements and other documents that set
forth the terms, conditions and prices under which Reseller provides
Telecommunications Services.
15. RESELLER'S RESALE AND USE OF SERVICE
------------------------------------
15.1 Reseller shall comply with the provisions of this Agreement
(including, but not limited to, Bell Atlantic's Tariffs) regarding resale
or use of Bell Atlantic Services, including, but not limited to, any
restrictions on resale or use of Bell Atlantic Services.
15.2 Without in any way limiting Section 15.1, (a) Reseller shall not
resell residential service to persons not eligible to subscribe to such
service from Bell Atlantic (including, but not limited to, business
Reseller Customers and other nonresidential Reseller Customers), and (b)
Reseller shall not resell Lifeline or other means-tested service offerings,
or grandfathered or discontinued service offerings, to persons not eligible
to subscribe to such service offerings from Bell Atlantic.
15.3 Reseller shall undertake in good faith to ensure that Reseller
Customers comply with the provisions of Bell Atlantic's Tariffs applicable
to their use of Bell Atlantic Retail
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Telecommunications Services.
15.4.1 Without in any way limiting Reseller's obligations under Section 12,
Reseller shall comply with Applicable Law with regard to end user selection
of a primary Telephone Exchange Service provider. Until the Commission or
the Federal Communications Commission adopts regulations and/or orders
applicable to end user selection of a primary Telephone Exchange Service
provider, Reseller shall apply the rules and procedures set forth in
Section 64.1100 of the FCC Rules, 47 CFR (S) 64.1100, to the process for
end user selection of a primary Telephone Exchange Service provider
(including, to end user selection of a primary Telephone Exchange Service
provider that occurs during any telemarketing contact with an end user),
and shall comply with such rules and procedures.
15.4.2 By submitting to Bell Atlantic an Order to install, provide, change
or terminate a Telecommunications Service, to select, change or reassign a
telephone number, or to select, change or terminate an end user's primary
Telephone Exchange Service provider, Reseller represents and warrants: (a)
that Reseller has obtained authorization for such action from the
applicable end user; and, (b) that if Applicable Law and/or this Agreement
required such authorization to be obtained in a particular manner, Reseller
obtained the authorization in the manner required by Applicable Law and
this Agreement. Reseller shall upon request by Bell Atlantic provide proof
of such authorization (including, a copy of any written authorization).
15.4.3 If Reseller submits an Order to Bell Atlantic to install, provide,
change or terminate a Telecommunications Service, to select, change or
reassign a telephone number, or to select, change or terminate an end
user's primary Telephone Exchange Service provider, and (a) when requested
by Bell Atlantic to provide a written document signed by the end user
stating the end user's primary Telephone Exchange Service provider
selection, fails to provide such document to Bell Atlantic, or (b) has not
obtained authorization for such installation, provision, selection, change,
reassignment or termination, from the end user in the manner required by
Applicable Law (or, in the absence of Applicable Law, in the manner
required by the rules and procedures in 47 CFR (S) 64.1100), Reseller shall
be liable to Bell Atlantic for all charges that would be applicable to the
end user for the initial installation, provision, selection, change,
reassignment or termination, of the end user's Telecommunications Service,
telephone number, and/or primary Telephone Exchange Service provider, and
any charges for restoring the end user's Telecommunications Service,
telephone number, and/or primary Telephone Exchange Service provider
selection, to its end user authorized condition.
15.5.1 Without in any way limiting Reseller's obligations under Section 12,
Reseller shall comply with Applicable Law with regard to Customer
Information, including, but not limited to, 47 U.S.C. (S) 222. Reseller
shall not access (including, but not limited to, through Bell Atlantic OSS
Services and Bell Atlantic Pre-OSS Services), use or disclose Customer
Information made available to Reseller by Bell Atlantic pursuant to this
Agreement unless Reseller has obtained any customer authorization for such
access, use and/or disclosure required by Applicable Law. By accessing,
using or disclosing Customer Information, Reseller represents and warrants
that Reseller has obtained authorization for such action from the
applicable customer in the manner required by Applicable Law and this
Agreement.
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Reseller shall upon request by Bell Atlantic provide proof of such
authorization (including, a copy of any written authorization).
15.5.2 Bell Atlantic shall have the right to audit Reseller to ascertain
whether Reseller is complying with the requirements of Applicable Law and
this Agreement, with regard to Reseller's access to, and use and disclosure
of, Customer Information which is made available to Reseller by Bell
Atlantic pursuant to this Agreement.
15.5.3 Without in any way limiting Section 15.5.2, to the extent permitted
by Applicable Law, Bell Atlantic shall have the right to monitor Reseller's
access to and use of Customer Information which is made available by Bell
Atlantic to Reseller pursuant to this Agreement, to ascertain whether
Reseller is complying with the requirements of Applicable Law and this
Agreement, with regard to Reseller's access to, and use and disclosure of,
such Customer Information. The foregoing right shall include, but not be
limited to, to the extent permitted by Applicable Law, the right to
electronically monitor Reseller's access to and use of Customer Information
which is made available by Bell Atlantic to Reseller pursuant to this
Agreement through electronic interfaces or gateways.
15.6.1 Reseller shall be the single point of contact for Reseller Customers
and other persons with regard to Telecommunications Services and other
services and products which they wish to purchase from Reseller or which
they have purchased from Reseller. Communications by Reseller Customers and
other persons with regard to Telecommunications Services and other services
and products which they wish to purchase from Reseller or which they have
purchased from Reseller, shall be made to Reseller, and not to Bell
Atlantic. Reseller shall instruct Reseller Customers and other persons that
such communications shall be directed to Reseller.
15.6.2 Without in any way limiting Section 15.6.1, Reseller shall be the
single point of contact for Reseller Customers (a) to request information
about or provision of Telecommunications Services which they wish to
purchase from Reseller, (b) to change, terminate, or request information
about, assistance in using, or repair or maintenance of, Telecommunications
Services which they have purchased from Reseller, and (c) to make inquiries
concerning Reseller's bills, charges for Reseller's Telecommunications
Services, and, if the Reseller Customers receive dial tone line service
from Reseller, annoyance calls. Requests by Reseller Customers for
information about or provision of Telecommunications Services which they
wish to purchase from Reseller, requests by Reseller Customers to change,
terminate, or obtain information about, assistance in using, or repair or
maintenance of, Telecommunications Services which they have purchased from
Reseller, and inquiries by Reseller Customers concerning Reseller's bills,
charges for Reseller's Telecommunications Services, and, if the Reseller
Customers receive dial tone line service from Reseller, annoyance calls,
shall be made by the Reseller Customers to Reseller, and not to Bell
Atlantic.
15.6.3 Reseller shall establish telephone numbers at which Reseller
Customers and other persons may communicate with Reseller and shall advise
Reseller Customers and other
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persons who may wish to communicate with Reseller of these telephone
numbers.
15.7.1 Reseller's use of telephone numbers shall be subject to Applicable
Law (including, but not limited to, the rules of the Federal Communications
Commission, the North American Numbering Council, and the North American
Numbering Plan Administrator), the applicable provisions of this Agreement
(including, but not limited to, this Section 15.7), and Bell Atlantic's
practices and procedures for use and assignment of telephone numbers, as
amended from time-to-time.
15.7.2 Subject to Sections 15.7.1 and 15.7.3, if an end user who subscribes
to a Bell Atlantic Retail Telecommunications Service dial tone line from
either Reseller or Bell Atlantic changes the Telecommunications Carrier
from whom the end user subscribes for such dial tone line (including a
change from Bell Atlantic to Reseller, from Reseller to Bell Atlantic, or
from Reseller to a Telecommunications Carrier other than Bell Atlantic),
after such change, the end user may continue to use with the dial tone line
the telephone numbers which were assigned to the dial tone line by Bell
Atlantic immediately prior to the change.
15.7.3 Bell Atlantic shall have the right to change the telephone numbers
used by an end user if at any time: (a) the type or class of service
subscribed to by the end user changes; (b) the end user requests service at
a new location, that is not served by the Bell Atlantic switch and the Bell
Atlantic rate center from which the end user previously had service; or,
(c) continued use of the telephone numbers is not technically feasible.
15.7.4 If service on a Bell Atlantic Retail Telecommunications Service dial
tone line subscribed to by Reseller from Bell Atlantic under this Agreement
is terminated, the telephone numbers associated with such dial tone line
shall be available for reassignment by Bell Atlantic to any person to whom
Bell Atlantic elects to assign the telephone numbers, including, but not
limited to, Bell Atlantic, Bell Atlantic end user retail customers,
Reseller, or Telecommunications Carriers other than Bell Atlantic and
Reseller.
15.8 Reseller shall comply with Applicable Law, and Bell Atlantic's
procedures, for handling requests from law enforcement and other government
agencies for service termination, assistance with electronic surveillance,
and provision of information.
16. COUNTERPARTS
------------
This Agreement may be executed in two or more counterparts, each of which
shall be deemed an original and all of which shall together constitute one
and the same instrument.
17. DEFAULT
-------
17.1 If Reseller materially breaches a material provision of this Agreement
(other than an obligation to make payment of any amount billed under this
Agreement), and such breach continues for more than thirty (30) days after
written notice thereof from Bell Atlantic, then, except as otherwise
required by Applicable Law, Bell Atlantic shall have the right, upon
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notice to Reseller, to terminate or suspend this Agreement and/or provision
of Bell Atlantic Services, in whole or in part.
17.2.1 If Reseller fails to make a payment of any amount billed under this
Agreement by the due date stated on the bill and such failure continues for
more than thirty (30) days after written notice thereof from Bell Atlantic,
then, except as provided in Section 17.2.2, below, or as otherwise required
by Applicable Law, Bell Atlantic shall have the right, upon notice to
Reseller, to terminate or suspend this Agreement and/or provision of Bell
Atlantic Services, in whole or in part.
17.2.2 If a good faith dispute arises between the Parties concerning the
obligation of Reseller to make payment of an amount billed under this
Agreement, the failure to pay the amount in dispute shall not constitute
cause for termination or suspension of this Agreement or provision of Bell
Atlantic Services, if, within thirty (30) days of the date that Bell
Atlantic gives Reseller written notice of the failure to pay the amount in
dispute, Reseller (a) gives Bell Atlantic written notice of the dispute
stating the basis of the dispute, and (b) furnishes to Bell Atlantic an
irrevocable letter of credit or other security arrangement acceptable to
Bell Atlantic, guaranteeing payment to Bell Atlantic of any portion of the
disputed amount (including the whole of the disputed amount) which is
thereafter agreed by Bell Atlantic and Reseller, or determined by a court
or other governmental entity of appropriate jurisdiction, to be due to Bell
Atlantic. The existence of such a dispute shall not relieve Reseller of its
obligations to pay any undisputed amount which is due to Bell Atlantic and
to otherwise comply with this Agreement.
18. FACILITIES
----------
18.1 Bell Atlantic or its suppliers shall retain all right, title and
interest in, and ownership of, all facilities, equipment, software,
information, and wiring, used to provide Bell Atlantic Services. During the
period in which Bell Atlantic Services are provided, Bell Atlantic shall
have free and unimpeded access at all reasonable times to Reseller and
Reseller Customer locations for the purpose of installing, inspecting,
maintaining, and repairing, all facilities, equipment, software, and
wiring, used to provide the Bell Atlantic Services. At the conclusion of
the period in which Bell Atlantic Services are provided, Bell Atlantic
shall have free and unimpeded access at Reseller and Reseller Customer
locations at all reasonable times to remove all facilities, equipment,
software, and wiring, used to provide the Bell Atlantic Services. Reseller
shall, at Reseller's expense, obtain any rights and authorizations
necessary for such access.
18.2 Except as otherwise agreed to in writing by Bell Atlantic, Bell
Atlantic shall not be responsible for the installation, inspection, repair,
maintenance, or removal, of facilities, equipment, software, or wiring,
provided by Reseller or Reseller Customers for use with Bell Atlantic
Services.
19. INTELLECTUAL PROPERTY
---------------------
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Except as expressly stated in this Agreement, nothing contained within this
Agreement shall be construed as the grant of a license, either express or
implied, with respect to any patent, copyright, trade name, trade mark,
service mark, trade secret, or other proprietary interest or intellectual
property, now or hereafter owned, controlled or licensable by either Party.
20. JOINT WORK PRODUCT
------------------
The Principal Document is the joint work product of the representatives of
the Parties. For convenience, the Principal Document has been drafted in
final form by Bell Atlantic. Accordingly, in the event of ambiguities, no
inferences shall be drawn against either Party solely on the basis of
authorship of the Principal Document.
21. LIABILITY
---------
21.1.1 AS USED IN THIS SECTION 21, "OTHER BELL ATLANTIC PERSONS" MEANS BELL
ATLANTIC'S AFFILIATES, AND THE DIRECTORS, OFFICERS, EMPLOYEES, AGENTS AND
CONTRACTORS, OF BELL ATLANTIC AND BELL ATLANTIC'S AFFILIATES.
21.1.2 AS USED IN THIS SECTION 21, "BELL ATLANTIC SERVICE FAILURE" MEANS
ANY FAILURE TO INSTALL, RESTORE, PROVIDE OR TERMINATE A BELL ATLANTIC
SERVICE, OR ANY MISTAKE, OMISSION, INTERRUPTION, DELAY, ERROR, DEFECT,
FAULT, FAILURE, OR DEFICIENCY, IN A BELL ATLANTIC SERVICE.
21.2 THE LIABILITY, IF ANY, OF BELL ATLANTIC AND OTHER BELL ATLANTIC
PERSONS, TO RESELLER, RESELLER CUSTOMERS AND/OR ANY OTHER PERSON, FOR ANY
CLAIM, LOSS OR DAMAGES ARISING OUT OF OR IN CONNECTION WITH A BELL ATLANTIC
SERVICE FAILURE, SHALL BE LIMITED AND/OR EXCLUDED AS SET FORTH IN BELL
ATLANTIC'S TARIFFS.
21.3.1 TO THE EXTENT THE BELL ATLANTIC TARIFFS APPLICABLE TO A BELL
ATLANTIC SERVICE DO NOT CONTAIN A PROVISION WHICH LIMITS OR EXCLUDES THE
LIABILITY OF BELL ATLANTIC AND/OR OTHER BELL ATLANTIC PERSONS TO RESELLER,
RESELLER CUSTOMERS AND/OR ANY OTHER PERSON, FOR ANY CLAIM, LOSS OR DAMAGES
ARISING OUT OF OR IN CONNECTION WITH A BELL ATLANTIC SERVICE FAILURE,
SECTION 21.3.3 SHALL APPLY.
21.3.2 TO THE EXTENT A BELL ATLANTIC SERVICE IS NOT SUBJECT TO A BELL
ATLANTIC TARIFF, SECTION 21.3.3 SHALL APPLY.
21.3.3 THE LIABILITY, IF ANY, OF BELL ATLANTIC AND OTHER BELL ATLANTIC
PERSONS, TO RESELLER, RESELLER CUSTOMERS AND/OR ANY
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OTHER PERSON, FOR ANY CLAIM, LOSS OR DAMAGES ARISING OUT OF OR IN
CONNECTION WITH A BELL ATLANTIC SERVICE FAILURE, SHALL BE LIMITED TO A
TOTAL AMOUNT NOT IN EXCESS OF: (A) TWICE THE PROPORTIONATE CHARGE FOR THE
BELL ATLANTIC SERVICE AFFECTED DURING THE PERIOD OF THE BELL ATLANTIC
SERVICE FAILURE; OR, (B) IF THERE IS NO CHARGE FOR THE BELL ATLANTIC
SERVICE AFFECTED, FIVE HUNDRED DOLLARS ($500.00).
21.4 NOTWITHSTANDING ANYTHING CONTAINED IN SECTION 21.2, SECTION 21.3.1,
SECTION 21.3.2, OR SECTION 21.3.3, ABOVE, BELL ATLANTIC AND OTHER BELL
ATLANTIC PERSONS SHALL HAVE NO LIABILITY TO RESELLER, RESELLER CUSTOMERS,
AND/OR ANY OTHER PERSON, FOR ANY SPECIAL, INDIRECT, INCIDENTAL, OR
CONSEQUENTIAL, DAMAGES (INCLUDING, BUT NOT LIMITED TO, DAMAGES FOR HARM TO
BUSINESS, LOST REVENUES, LOST PROFITS, LOST SAVINGS, OR OTHER COMMERCIAL OR
ECONOMIC LOSS), ARISING OUT OF OR IN CONNECTION WITH A BELL ATLANTIC
SERVICE FAILURE OR ANY BREACH OR FAILURE IN PERFORMANCE OF THIS AGREEMENT
BY BELL ATLANTIC.
21.5 THE LIMITATIONS AND EXCLUSIONS FROM LIABILITY STATED IN SECTIONS 21.2
THROUGH 21.4 SHALL APPLY REGARDLESS OF THE FORM OF A CLAIM OR ACTION,
WHETHER IN CONTRACT, WARRANTY, TORT (INCLUDING, BUT NOT LIMITED TO, THE
NEGLIGENCE OF BELL ATLANTIC AND/OR OTHER BELL ATLANTIC PERSONS), STRICT
LIABILITY, OR OTHERWISE, AND REGARDLESS OF WHETHER BELL ATLANTIC HAS BEEN
ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
21.6 Reseller shall, in its tariffs or other contracts with Reseller
Customers, provide that in no case shall Bell Atlantic or Other Bell
Atlantic Persons be liable to Reseller Customers or to any other third
parties for any indirect, special, incidental, consequential, or other
damages, including, but not limited to, harm to business, lost revenues,
lost profits, lost savings, or other commercial or economic loss, whether
foreseeable or not, and regardless of notification of the possibility of
such damages. Reseller shall indemnify, defend and hold Bell Atlantic and
Other Bell Atlantic Persons harmless from claims by Reseller Customers and
other third parties as provided in Bell Atlantic's Tariffs.
21.7 Bell Atlantic's obligations under this Agreement shall extend only to
Reseller. Bell Atlantic shall have no liability under this Agreement to
Reseller Customers or to any other third party. Nothing in this Agreement
shall be deemed to create a third party beneficiary relationship between
Bell Atlantic and Reseller Customers or any other third party.
21.8 Reseller shall indemnify, defend and hold harmless Bell Atlantic, Bell
Atlantic's Affiliates, and the directors, officers and employees of Bell
Atlantic and Bell Atlantic's Affiliates, from any claims, suits, government
proceedings, judgments, fines, liabilities, losses, damages, costs or
expenses (including reasonable attorneys fees) arising out of or
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resulting from: (a) the failure of Reseller to transmit to Bell Atlantic a
request by a Reseller Customer to install, provide, change or terminate, a
Bell Atlantic Retail Telecommunications Service; (b) the transmission by
Reseller to Bell Atlantic of an Order to install, provide, change or
terminate, a Bell Atlantic Retail Telecommunications Service, which Order
was not authorized by the applicable Reseller Customer; (c) erroneous or
inaccurate information in an Order transmitted by Reseller to Bell
Atlantic; (d) the transmission by Reseller to Bell Atlantic of an Order to
change or terminate a Telecommunications Service provided to an end user by
Bell Atlantic or another Telecommunications Service provider, or to install
or provide a Telecommunications Service for an end user, which Order was
not authorized by the applicable end user; (e) the transmission by Reseller
to Bell Atlantic of an Order to select, change or reassign a telephone
number for an end user, which Order was not authorized by the applicable
end user; (f) the transmission by Reseller to Bell Atlantic of an Order to
select a primary Telephone Exchange Service provider for an end user, or to
change or terminate an end user's selection of a primary Telephone Exchange
Service provider, which Order was not authorized by the applicable end user
in the manner required by Applicable Law (or, in the absence of such
Applicable Law, in the manner required by the rules and procedures in 47
CFR (S) 64.1100); (g) access to, or use or disclosure of, Customer
Information or Bell Atlantic OSS Information by Reseller or Reseller's
employees, Agents or contractors; (h) the failure of Reseller to transmit,
or to transmit in a timely manner, E911/911 information to Bell Atlantic;
(i) erroneous or inaccurate E911/911 information transmitted by Reseller to
Bell Atlantic; (j) any information provided by Reseller for inclusion in
Bell Atlantic's LIDB; or, (k) the marketing, advertising or sale of
Reseller's services and/or products (including, but not limited to, resold
Bell Atlantic Retail Telecommunications Services), or the billing or
collection of charges for Reseller's services and/or products (including,
but not limited to, resold Bell Atlantic Retail Telecommunications
Services). For the purposes of Section 21.8(b), (d) and (e), an Order shall
be deemed not to have been authorized by a Reseller Customer or end user if
Applicable Law and/or this Agreement required such authorization to be
obtained in a particular manner, and Reseller did not obtain the
authorization in the manner required by Applicable Law and this Agreement.
22. NON-EXCLUSIVE REMEDIES
----------------------
Except as otherwise expressly provided in this Agreement, each of the
remedies provided under this Agreement is cumulative and is in addition to
any other remedies that may be available under this Agreement or at law or
in equity.
23. NOTICES
-------
All notices and other communications under this Agreement shall be deemed
effective upon receipt by the Party being notified, provided such notices
or communications are in writing and are sent by certified or registered
mail, return receipt requested, or by a reputable private delivery service
which provides a record of delivery, and addressed as shown below:
TO BELL ATLANTIC: Bell Atlantic - Virginia, Inc.
c/o Bell Atlantic Network Services, Inc.
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1320 North Courthouse Road, 9th Floor
Arlington, Virginia 22201
Attn.: Director, Resale
Initiatives
TO RESELLER: VIC-RMTS-DC, L.L.C.
c/o OnePoint Communications, L.L.C.
5335 Wisconsin Avenue
Suite 950
Washington, D.C. 20015
Attn: President
Either Party may from time-to-time designate another address or addressee
by giving notice in accordance with this Section 23.
24. REGULATORY APPROVALS
--------------------
24.1 Within thirty (30) days after execution of this Agreement by the
Parties, Bell Atlantic shall file the Agreement with the Commission for
approval by the Commission.
24.2 Each Party shall exercise reasonable efforts (including reasonably
cooperating with the other Party) to secure approval of this Agreement, and
any amendment to this Agreement agreed to by the Parties, from the
Commission, the Federal Communications Commission, and other applicable
governmental entities.
24.3 Upon request by Bell Atlantic, Reseller shall, at Reseller's expense,
provide reasonable, good-faith support and assistance to Bell Atlantic in
obtaining any governmental approvals necessary for (a) this Agreement and
any amendment to this Agreement agreed to by the Parties, and/or (b) the
provision of Bell Atlantic Services by Bell Atlantic to Reseller. Without
in any way limiting the foregoing, upon request by Bell Atlantic, Reseller
shall (a) join in petitions requesting approval of this Agreement, or an
amendment to this Agreement agreed to by the Parties, to be filed with the
Commission, the Federal Communications Commission, or other applicable
governmental entities, and (b) file other documents with and present
testimony to the Commission, the Federal Communications Commission, or
other applicable governmental entities, requesting approval of this
Agreement or an amendment to this Agreement agreed to by the Parties.
25. REGULATORY CONTINGENCIES
------------------------
25.1 Neither Party shall be liable for any delay or failure in performance
by it which results from requirements of Applicable Law, or acts or
failures to act of any governmental entity or official.
25.2 In the event that any provision of this Agreement shall be invalid or
unenforceable, such invalidity or unenforceability shall not invalidate or
render unenforceable any other
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provision of this Agreement, and this Agreement shall be construed as if it
did not contain such invalid or unenforceable provision.
25.3 In the event that any legislative, regulatory, judicial or other
governmental action materially affects any material terms of this
Agreement, the ability of either Party to perform any material terms of
this Agreement, or the rights or obligations of either Party under this
Agreement, the Parties shall take such action as shall be necessary to
conform this Agreement to the governmental action and/or to permit Bell
Atlantic to continue to provide and Reseller to continue to purchase Bell
Atlantic Services, including, but not limited to, conducting good faith
negotiations to enter into a mutually acceptable modified or substitute
agreement, filing tariffs, or additional, supplemental or modified tariffs,
and making other required filings with governmental entities.
25.4 In the event of a governmental action described in Section 25.3,
above, to the extent permitted by Applicable Law, Bell Atlantic shall
continue to provide and Reseller shall continue to subscribe to, use and
pay for, any Bell Atlantic Services affected by the governmental action
until the action to be taken by Bell Atlantic and Reseller under Section
25.3, above, is taken and becomes effective in accordance with Applicable
Law. Such provision of and subscription to, use of and payment for, the
affected Bell Atlantic Services shall be in accordance with the terms
(including prices) of this Agreement, unless other terms, including but not
limited to the terms of a Bell Atlantic Tariff, are required by Applicable
Law.
25.5 If suspension or termination of the provision of any Bell Atlantic
Service is required by or as a result of a governmental action, such
suspension or termination shall not affect Reseller's subscription to, use
or obligation to pay for, other Bell Atlantic Services, unless such
suspension or termination has a material, adverse effect on Reseller's
ability to use the other Bell Atlantic Services.
25.6 If any of the Bell Atlantic Services to be provided by Bell Atlantic
pursuant to a tariff shall at any time become detariffed or deregulated,
Bell Atlantic may transfer the provisions of the tariff relative to such
Bell Atlantic Services to a Bell Atlantic "Guide for Detariffed Services"
or similar document, and such "Guide for Detariffed Services" or similar
document, as amended by Bell Atlantic from time-to-time, shall become a
part of this Agreement.
26. RELATIONSHIP OF THE PARTIES
---------------------------
26.1 The relationship between the Parties under this Agreement shall be
that of independent contractors.
26.2 Nothing contained in this Agreement shall:
(a) make either Party the Agent or employee of the other Party;
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(b) grant either Party the authority to enter into a contract on
behalf of, or otherwise legally bind, the other Party in any way;
(c) creat e a partnership, joint venture or other similar relationship
between the parties; or
(d) grant to Reseller a franchise, distributorship or similar
interest.
26.3 Each Party shall be solely responsible for selection, supervision,
termination, and compensation, of its respective employees, Agents and
contractors.
26.4 Each Party shall be solely responsible for payment of any Social
Security or other taxes which it is required by Applicable Law to pay in
conjunction with its employees, Agents or contractors, and for collecting
and remitting to applicable taxing authorities any taxes which it is
required by Applicable Law to collect from its employees, Agents or
contractors.
26.5 The relationship of the Parties under this Agreement is a non-
exclusive relationship. Bell Atlantic shall have the right to provide
services to be provided by Bell Atlantic under this Agreement to persons
other than Reseller. Reseller shall have the right to purchase services to
be purchased by Reseller under this Agreement from persons other than Bell
Atlantic.
27. RESPONSIBILITY FOR CHARGES
--------------------------
27.1 Reseller shall be responsible for and pay all charges for any Bell
Atlantic Service provided by Bell Atlantic to Reseller, whether the Bell
Atlantic Service is ordered, activated or used by Reseller, a Reseller
Customer, or another person.
27.2 In addition to the charges for Bell Atlantic Services, Reseller agrees
to pay, and to indemnify, defend and hold Bell Atlantic harmless from, any
charges for Telecommunications Services, facilities, equipment, software,
wiring, or other services or products, ordered, activated or used by
Reseller, Reseller Customers or other persons, through, by means of, or in
association with, Bell Atlantic Services provided by Bell Atlantic to
Reseller, whether provided or billed for by Bell Atlantic or persons other
than Bell Atlantic (including, but not limited to, charges billed to any
line, telephone number or other Bell Atlantic Service provided by Bell
Atlantic, or to any Reseller account with Bell Atlantic, and charges for
intraLATA and interLATA toll calls, 1+ calls, 10XXX calls, 101XXXX calls,
900, 888, 800, 700, 555, 500 and N11 number calls, Audiotex Service, Dial-
It, 976, 915 and 556 calls, "pay-per-call" services, Operator Services
calls, Directory Assistance calls, and calling card, collect, and bill-to-
third-number calls).
27.3 Without in any way limiting Reseller's obligations under Section 27.1
and Section 27.2, Reseller shall pay, or collect and remit to Bell
Atlantic, without discount, all Subscriber Line Charges, Federal Line Cost
Charges, end user common line charges, and carrier selection and change
charges, associated with Bell Atlantic Services provided by Bell
19
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Atlantic to Reseller.
27.4 Upon request by Reseller, Bell Atlantic will provide for use on
resold Bell Atlantic Retail Telecommunications Service dial tone lines
purchased by Reseller such Bell Atlantic Retail Telecommunications Service
call blocking services as Bell Atlantic provides to Bell Atlantic's own end
user retail customers, where and to the extent Bell Atlantic provides such
Bell Atlantic Retail Telecommunications Service call blocking services to
Bell Atlantic's own end user retail customers.
28. SECTION HEADINGS
----------------
The section headings in the Principal Document are for convenience only and
are not intended to affect the meaning or interpretation of the Principal
Document.
29. SERVICES NOT COVERED BY THIS AGREEMENT
--------------------------------------
29.1 This Agreement applies only to Bell Atlantic Services (as the term
"Bell Atlantic Service" is defined in Section 1.1.6) provided, or to be
provided, by Bell Atlantic to Reseller, as specified in Section 3. Any
Telecommunications Services, facilities, equipment, software, wiring, or
other services or products (including, but not limited to,
Telecommunications Services, facilities, equipment, software, wiring, or
other services or products, interconnected or used with Bell Atlantic
Services provided, or to be provided, by Bell Atlantic to Reseller)
provided, or to be provided, by Bell Atlantic to Reseller, which are not
subscribed to by Reseller under this Agreement, must be subscribed to by
Reseller separately, pursuant to other written agreements (including, but
not limited to, applicable Bell Atlantic Tariffs). Reseller shall use and
pay for any Telecommunications Services, facilities, equipment, software,
wiring, or other services or products, provided, or to be provided, by Bell
Atlantic to Reseller, which are not subscribed to by Reseller under this
Agreement, in accordance with such other written agreements (including, but
not limited to, applicable Bell Atlantic Tariffs).
29.2 Without in any way limiting Section 29.1 and without attempting to
list all Bell Atlantic products and services that are not subject to this
Agreement, the Parties agree that this Agreement does not apply to the
purchase by Reseller of the following Bell Atlantic services and products:
except as expressly stated in the Principal Document, exchange access
services as defined in Section 3(16) of the Act, 47 U.S.C. (S) 153(16)
(including, but not limited to, primary interLATA toll carrier and primary
intraLATA toll carrier choice or change); Bell Atlantic Answer Call, Bell
Atlantic Answer Call Plus, Bell Atlantic Home Voice Mail, Bell Atlantic
Home Voice Mail Plus, Bell Atlantic Voice Mail, Bell Atlantic Basic
Mailbox, Bell Atlantic OptiMail Service, and other voice mail, fax mail,
voice messaging, and fax messaging, services; Bell Atlantic Optional Wire
Maintenance Plan; Bell Atlantic Guardian Enhanced Maintenance Service; Bell
Atlantic Sentry I Enhanced Maintenance Service; Bell Atlantic Sentry II
Enhanced Maintenance Service; Bell Atlantic Sentry III Enhanced Maintenance
Service; Bell Atlantic Call 54 Service; Bell Atlantic Public Telephone
Service; customer premises equipment; Bell Atlantic telephone directory
listings
20
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offered under agreements or arrangements other than Bell Atlantic Tariffs
filed with the Commission; and, Bell Atlantic telephone directory
advertisements.
29.3 Without in any way limiting Section 29.1, the Parties also agree that
this Agreement does not apply to the installation, inspection, maintenance,
repair, removal, or use of any facilities, equipment, software, or wiring,
located on Reseller's side of the Network Rate Demarcation Point applicable
to Reseller and does not grant to Reseller or Reseller Customers a right to
installation, inspection, maintenance, repair, or removal, by Bell
Atlantic, or use, by Reseller or Reseller Customers, of any such
facilities, equipment, software, or wiring.
29.4 Without in any way limiting Section 30.1, the Parties agree that this
Agreement does not apply to the purchase by Reseller of Bell Atlantic
Audiotex Services, including, but not limited to, Dial-It, 976, 915 and 556
services. Reseller shall block, and Bell Atlantic shall have the right (but
not the obligation) to block, calls made to Audiotex Service numbers
(including, but not limited to, Dial-It numbers and 976, 915 and 556
numbers) through Bell Atlantic Services purchased by Reseller under this
Agreement until Reseller enters into a separate written agreement with Bell
Atlantic for the billing and collection of charges for such calls.
29.5 Nothing contained within this Agreement shall obligate Bell Atlantic
to provide any service or product which is not a Bell Atlantic Service
(including, but not limited to, the services listed in Sections 29.2, 29.3
and 29.4, above) to Reseller.
29.6 Nothing contained within this Agreement shall obligate Bell Atlantic
to provide a Bell Atlantic Service or any other service or product to a
Reseller Customer. Without in any way limiting the foregoing, except as
otherwise required by Applicable Law, Bell Atlantic reserves the right to
terminate provision of services and products (including, but not limited
to, Telecommunications Services and the services listed in Sections 29.2
and 29.3, above) to any person who ceases to purchase Bell Atlantic Retail
Telecommunications Service dial tone line service from Bell Atlantic.
29.7 Nothing contained in this Section 29 shall in any way exclude or
limit Reseller's obligations and liabilities under Section 27, including,
but not limited to Reseller's obligations and liabilities to pay charges
for services and products as required by Section 27.
30. SERVICE QUALITY
---------------
Bell Atlantic Retail Telecommunications Services provided by Bell Atlantic
to Reseller under this Agreement shall comply with the quality requirements
for such Bell Atlantic Retail Telecommunications Services specified by
Applicable Law.
31. SURVIVAL
--------
Any liabilities or obligations of a Party for acts or omissions of the
Party prior to the
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termination, cancellation or expiration of this Agreement, any liabilities
or obligations of a Party under any provision of this Agreement regarding
indemnification, Customer Information, Bell Atlantic OSS Information,
confidential information, or limitation or exclusion of liability, and any
liabilities or obligations of a Party under any provision of this Agreement
which by its terms is contemplated to survive (or be performed after)
termination, cancellation or expiration of this Agreement, shall survive
termination, cancellation or expiration of this Agreement.
32. TAXES
-----
32.1 With respect to any purchase of Bell Atlantic Services under this
Agreement, if any Federal, state or local government tax, fee, duty,
surcharge (including, but not limited to any 911, telecommunications relay
service, or universal service fund, surcharge), or other tax-like charge (a
"Tax") is required or permitted by Applicable Law to be collected from
Reseller by Bell Atlantic, then (a) to the extent required by Applicable
Law, Bell Atlantic shall bill Reseller for such Tax, (b) Reseller shall
timely remit such Tax to Bell Atlantic (including both Taxes billed by Bell
Atlantic and Taxes Reseller is required by Applicable Law to remit without
billing by Bell Atlantic), and (c) Bell Atlantic shall remit such collected
Tax to the applicable taxing authority.
32.2 With respect to any purchase of Bell Atlantic Services under this
Agreement, if any Tax is imposed by Applicable Law on the receipts of Bell
Atlantic, which Applicable Law permits Bell Atlantic to exclude certain
receipts received from sales of Bell Atlantic Services for resale by
Reseller, such exclusion being based on the fact that Reseller is also
subject to a Tax based upon receipts ("Receipts Tax"), then Reseller (a)
shall provide Bell Atlantic with notice in writing in accordance with
Section 32.7 of its intent to pay the Receipts Tax, and (b) shall timely
pay the Receipts Tax to the applicable taxing authority.
32.3 With respect to any purchase of Bell Atlantic Services under this
Agreement, that are resold by Reseller to a Reseller Customer, if any Tax
is imposed by Applicable Law on the Reseller Customer in connection with
the Reseller Customer's purchase of the resold Bell Atlantic Services which
Reseller is required to impose and/or collect from the Reseller Customer,
then Reseller (a) shall impose and/or collect such Tax from the Reseller
Customer, and (b) shall timely remit such Tax to the applicable taxing
authority.
32.4.1 If Bell Atlantic has not received an exemption certificate from
Reseller and fails to bill Reseller for any Tax as required by Section
32.1, then, as between Bell Atlantic and Reseller, (a) Reseller shall
remain liable for such unbilled Tax, and (b) Bell Atlantic shall be liable
for any interest and/or penalty assessed on the unbilled Tax by the
applicable taxing authority.
32.4.2 If Reseller fails to remit any Tax to Bell Atlantic as required by
Section 32.1, then, as between Bell Atlantic and Reseller, Reseller shall
be liable for such uncollected Tax and any interest and/or penalty assessed
on the uncollected Tax by the applicable taxing authority.
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<PAGE>
32.4.3 If Bell Atlantic does not collect a Tax because Reseller has
provided Bell Atlantic with an exemption certificate which is later found
to be inadequate by the applicable taxing authority, then, as between Bell
Atlantic and Reseller, Reseller shall be liable for such uncollected Tax
and any interest and/or penalty assessed on the uncollected Tax by the
applicable taxing authority.
32.4.4 Except as provided in Section 32.4.5, if Reseller fails to pay the
Receipts Tax as required by Section 32.2, then, as between Bell Atlantic
and Reseller, (a) Bell Atlantic shall be liable for any Tax imposed on Bell
Atlantic's receipts, (b) Reseller shall be liable for any interest and/or
penalty imposed on Bell Atlantic with respect to the Tax on Bell Atlantic's
receipts, and (c) Reseller shall be liable for any Tax imposed on
Reseller's receipts and any interest and/or penalty assessed by the
applicable taxing authority on Reseller with respect to the Tax on
Reseller's receipts.
32.4.5 If any discount or portion of a discount in price provided to
Reseller under this Agreement (including, but not limited to, a discount
provided for in Exhibit II, Section 1) represents Tax savings to Bell
Atlantic which it was anticipated Bell Atlantic would receive, because it
was anticipated that receipts from sales of Bell Atlantic Services, that
would otherwise be subject to a Tax on such receipts, could be excluded
from such Tax under Applicable Law because the Bell Atlantic Services would
be sold to Reseller for resale, and Bell Atlantic is, in fact, required by
Applicable Law to pay such Tax on receipts from sales of Bell Atlantic
Services to Reseller, then, as between Bell Atlantic and Reseller, (a)
Reseller shall be liable for any such Tax, and (b) Reseller shall be liable
for any interest and/or penalty assessed by the applicable taxing authority
on either Reseller or Bell Atlantic with respect to the Tax on Bell
Atlantic's receipts.
32.4.6 If Reseller fails to impose and/or collect any Tax from Reseller
Customers as required by Section 32.3, then, as between Bell Atlantic and
Reseller, Reseller shall remain liable for such uncollected Tax and any
interest and/or penalty assessed on such uncollected Tax by the applicable
taxing authority.
32.4.7 With respect to any Tax that Reseller has agreed to pay, is
responsible for because Reseller received a discount in price on Bell
Atlantic Services attributable to anticipated Tax savings by Bell Atlantic,
or is required to impose on and/or collect from Reseller Customers,
Reseller agrees to indemnify and hold Bell Atlantic harmless on an after-
tax basis for any costs incurred by Bell Atlantic as a result of actions
taken by the applicable taxing authority to recover the Tax from Bell
Atlantic due to failure of Reseller to timely remit the Tax to Bell
Atlantic, or timely pay, or collect and timely remit, the Tax to the taxing
authority.
32.5 If either Party is audited by a taxing authority, the other Party
agrees to reasonably cooperate with the Party being audited in order to
respond to any audit inquiries in a proper and timely manner so that the
audit and/or any resulting controversy may be resolved expeditiously.
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<PAGE>
32.6.1 If Applicable Law clearly exempts a purchase of Bell Atlantic
Services under this Agreement from a Tax, and if such Applicable Law also
provides an exemption procedure, such as an exemption certificate
requirement, then, if Reseller complies with such procedure, Bell Atlantic
shall not collect such Tax during the effective period of the exemption.
Such exemption shall be effective upon receipt of the exemption certificate
or affidavit in accordance with Section 32.7.
32.6.2 If Applicable Law clearly exempts a purchase of Bell Atlantic
Services under this Agreement from a Tax, but does not also provide an
exemption procedure, then Bell Atlantic shall not collect such Tax if
Reseller (a) furnishes Bell Atlantic with a letter signed by an officer of
Reseller requesting an exemption and citing the provision in the Applicable
Law which clearly allows such exemption, and (b) supplies Bell Atlantic
with an indemnification agreement, reasonably acceptable to Bell Atlantic,
which holds Bell Atlantic harmless on an after-tax basis with respect to
forbearing to collect such Tax.
32.7 All notices, affidavits, exemption certificates or other
communications required or permitted to be given by either Party to the
other under this Section 32, shall be made in writing and shall be sent by
certified or registered mail, return receipt requested, or by a reputable
private delivery service which provides a record of delivery, to the
addressee stated in Section 23 at the address stated in Section 23 and to
the following:
To Bell Atlantic: Tax Administration
Bell Atlantic Network Services, Inc.
1717 Arch Street, 30th Floor
Philadelphia, PA 19103
To Reseller: OnePoint Communications, L.L.C.
2201 Waukegan Road
Suite E-200
Bannockburn, Illinois 60015
Either Party may from time-to-time designate another address or addressee
by giving notice in accordance with the terms of this Section 32.7.
Any notice or other communication shall be deemed to be given when
received.
33. WARRANTIES
----------
EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, BELL ATLANTIC MAKES NO
WARRANTIES WITH RESPECT TO BELL ATLANTIC SERVICES, WHETHER EXPRESS OR
IMPLIED, WRITTEN OR ORAL, IN FACT OR IN LAW.
24
<PAGE>
THE WARRANTIES SET FORTH IN THIS AGREEMENT ARE BELL ATLANTIC'S EXCLUSIVE
WARRANTIES WITH RESPECT TO BELL ATLANTIC SERVICES AND ARE IN LIEU OF ALL
OTHER WARRANTIES, EXPRESS OR IMPLIED, WRITTEN OR ORAL, IN FACT OR IN LAW.
BELL ATLANTIC DISCLAIMS ANY AND ALL OTHER WARRANTIES, INCLUDING, BUT NOT
LIMITED TO, WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR
----------------------------------------------------------
PURPOSE, WARRANTIES AGAINST INFRINGEMENT, AND WARRANTIES ARISING BY TRADE
-------
CUSTOM, TRADE USAGE, COURSE OF DEALING, OR OTHERWISE.
34. AUTHORIZATION
-------------
34.1 Bell Atlantic is a corporation duly organized, validly existing and
in good standing under the laws of the Commonwealth of Virginia and has
full power and authority to execute and deliver this Agreement and to
perform the obligations hereunder on behalf of Bell Atlantic.
34.2 VIC-RMTS-DC, L.L.C., a State of Delaware limited liability company,
d/b/a OnePoint Communications, an affiliate of and trade name licenseee of
OnePoint Comunications, L.L.C., a company duly organized, validly existing
and in good standing under the laws of the State of Delaware, and has full
power and authority to execute and deliver this Agreement and to perform
its obligations hereunder, as the case may be.
25
<PAGE>
IN WITNESS WHEREOF, intending to be legally bound, Reseller and Bell
Atlantic have caused this Agreement to be executed by their respective
authorized representatives.
VIC-RMTS-DC, L.L.C.
d/b/a OnePoint Comunications
BY: _________________________________
Signature
_________________________________
Name (Printed)
ITS: _________________________________
Title
BELL ATLANTIC -VIRGINIA, INC.
BY: _________________________________
Signature
_________________________________
Name (Printed)
ITS: _________________________________
Title
26
<PAGE>
EXHIBIT I
BELL ATLANTIC OTHER SERVICES
----------------------------
1. BELL ATLANTIC OSS SERVICES
--------------------------
1.1 Definitions
-----------
As used in the Principal Document, the terms listed below shall have the
meanings stated below:
1.1.1 "Bell Atlantic Operations Support Systems" means Bell Atlantic
systems for pre-ordering, ordering, provisioning, maintenance and repair,
and billing.
1.1.2 "Bell Atlantic OSS Services" means access to Bell Atlantic
Operations Support Systems functions. The term "Bell Atlantic OSS Services"
includes, but is not limited to: (a) Bell Atlantic's provision of Usage
Information to Reseller pursuant to Exhibit I, Section 1.3, below; and, (b)
"Bell Atlantic OSS Information", as defined in Exhibit I, Section 1.1.4,
below.
1.1.3 "Bell Atlantic OSS Facilities" means any gateways, interfaces,
databases or other facilities, used by Bell Atlantic to provide Bell
Atlantic OSS Services to Reseller.
1.1.4 "Bell Atlantic OSS Information" means any information accessed by,
or disclosed or provided to, Reseller through or as a part of Bell Atlantic
OSS Services. The term "Bell Atlantic OSS Information" includes, but is not
limited to: (a) any Customer Information related to a present or former
customer of Bell Atlantic accessed by, or disclosed or provided to,
Reseller through or as a part of Bell Atlantic OSS Services; and, (b) any
Usage Information (as defined in Exhibit I, Section 1.1.5, below) accessed
by, or disclosed or provided to, Reseller.
1.1.5 "Usage Information" means the usage information and other billing
information for a Bell Atlantic Retail Telecommunications Service purchased
by Reseller under this Agreement that Bell Atlantic would record if Bell
Atlantic was furnishing such Bell Atlantic Retail Telecommunications
Service to a Bell Atlantic end-user retail customer.
1.1.6 "Reseller OSS Information" means the following Bell Atlantic OSS
Information: (a) Usage Information provided to Reseller pursuant to Exhibit
I, Section 1.3, below; (b) CPNI of Reseller; and, (c) CPNI of a customer of
Reseller or Bell Atlantic, to the extent the customer, in the manner
required by Applicable Law, has consented to Reseller's access to, or use
or disclosure of, such CPNI.
1.2 Bell Atlantic OSS Services
--------------------------
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<PAGE>
1.2.1 Upon request by Reseller, Bell Atlantic shall provide to Reseller
Bell Atlantic OSS Services.
1.2.2 Bell Atlantic Operations Support Systems, Bell Atlantic Operations
Support Systems functions, gateways and interfaces for accessing Bell
Atlantic Operations Support Systems functions, Bell Atlantic OSS
Information, and the Bell Atlantic OSS Services that will be offered by
Bell Atlantic, subject to the requirements of Applicable Law, shall be as
determined by Bell Atlantic. Except as otherwise agreed in writing by the
Parties, to the extent required by Applicable Law, the Bell Atlantic OSS
Services that will be offered by Bell Atlantic to Reseller shall be the
same as the Bell Atlantic OSS Services Bell Atlantic offers, under
agreements approved by the Commission pursuant to 47 U.S.C. (S) 252, to
other Telecommunications Carriers that are engaged in the resale of Bell
Atlantic Retail Telecommunications Services pursuant to 47 U.S.C. (S)
251(c)(4). Subject to the requirements of Applicable Law, Bell Atlantic
shall have the right to change Bell Atlantic Operations Support Systems,
Bell Atlantic Operations Support Systems functions, the gateways and
interfaces for accessing Bell Atlantic Operations Support Systems
functions, Bell Atlantic OSS Information, and the Bell Atlantic OSS
Services, from time-to-time, without the consent of Reseller.
1.3 Usage Information
-----------------
1.3.1 Upon request by Reseller, Bell Atlantic shall provide Usage
Information to Reseller.
1.3.2 Bell Atlantic Usage Information will be available to Reseller
through the following:
(a) Daily Usage File on Data Tape.
(b) Daily Usage File through Network Data Mover ("NDM").
(c) Daily Usage File through Centralized Message Distribution System
("CMDS").
1.3.3.1 Bell Atlantic Usage Information will be provided in a
BeL.L.C.ore Exchange Message Records ("EMR") format.
1.3.3.2 Daily Usage File Data Tapes will be issued each day, Monday
through Friday, except holidays observed by Bell Atlantic.
1.3.4 Except as stated in this Exhibit I, Section 1.3 or agreed in writing
by the Parties, the manner in which, and the frequency with which, Bell
Atlantic Usage Information will be provided to Reseller shall be determined
by Bell Atlantic.
1.4 Prices
------
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<PAGE>
The prices for Bell Atlantic OSS Services shall be as stated in Exhibit II,
Section 2.
1.5 Access to and Use of Bell Atlantic OSS Facilities
-------------------------------------------------
1.5.1 Bell Atlantic OSS Facilities may be accessed and used by Reseller
only to: (a) purchase and provide Bell Atlantic Retail Telecommunications
Services pursuant to this Agreement; and (b) obtain Reseller OSS
Information.
1.5.2 Reseller shall restrict access to and use of Bell Atlantic OSS
Facilities to Reseller. This Agreement does not grant to Reseller any right
or license to grant sublicenses or permission to other persons (except
Reseller's employees, Agents and contractors in accordance with Exhibit I,
Section 1.5.5) to access or use Bell Atlantic OSS Facilities.
1.5.3 Reseller shall comply with all practices and procedures established
by Bell Atlantic for access to and use of Bell Atlantic OSS Facilities
(including, but not limited to, Bell Atlantic practices and procedures with
regard to security and use of access and user identification codes).
1.5.4 All practices and procedures for access to and use of Bell Atlantic
OSS Facilities, and all access and user identification codes for Bell
Atlantic OSS Facilities: (a) shall remain the property of Bell Atlantic;
(b) shall be used by Reseller only in connection with Reseller's use of
Bell Atlantic OSS Facilities permitted by this Agreement; (c) shall be held
in confidence by Reseller and not disclosed by Reseller to any other person
(except Reseller's employees, Agents and contractors, in accordance with
Exhibit I, Section 1.5.5); and, (d) shall be destroyed or returned by
Reseller to Bell Atlantic upon the earlier of request by Bell Atlantic or
the expiration or termination of this Agreement.
1.5.5 Reseller's employees, Agents and contractors may access and use Bell
Atlantic OSS Facilities only to the extent necessary for Reseller's use of
the Bell Atlantic OSS Facilities permitted by this Agreement. Reseller may
disclose practices and procedures for access to and use of Bell Atlantic
OSS Facilities, and access and user identification codes for Bell Atlantic
OSS Facilities, to Reseller's employees, Agents and contractors, and
Reseller's employees, Agents and contractors may receive and use such
practices, procedures and codes, only to the extent necessary for
Reseller's use of Bell Atlantic OSS Facilities permitted by this Agreement.
Reseller's employees, Agents and contractors shall hold the practices,
procedures and codes in confidence and shall not disclose the practices,
procedures and codes to any other person (provided, that an employee, Agent
or contractor of Reseller, may disclose the practices, procedures and codes
to other employees, Agents or contractors of Reseller, to the extent
necessary for Reseller's use of the Bell Atlantic OSS Facilities permitted
by this Agreement).
1.6 Bell Atlantic OSS Information
-----------------------------
1.6.1 Subject to the provisions of this Agreement, Bell Atlantic grants to
Reseller a non-exclusive license to use OSS Information.
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<PAGE>
1.6.2 All OSS Information shall at all times remain the property of Bell
Atlantic. Except as expressly stated in this Agreement, Reseller shall
acquire no rights in or to any OSS Information.
1.6.3 Reseller and Reseller's employees, Agents and contractors, shall
not access, use or disclose OSS Information if such access, use or
disclosure is prohibited by Applicable Law.
1.6.4.1 The provisions of this Exhibit I, Section 1.6.4 apply to all OSS
Information, except Reseller's OSS Information.
1.6.4.2 Reseller may access and use Bell Atlantic OSS Information only to
purchase and provide Bell Atlantic Retail Telecommunications Services
pursuant to this Agreement. If Bell Atlantic OSS Information is Customer
Information related to a customer of a Party, Reseller may access and use
the Bell Atlantic OSS Information only to purchase Bell Atlantic Retail
Telecommunications Services for and provide Bell Atlantic Retail
Telecommunications Services to, the customer to whom that Customer
Information is related, pursuant to this Agreement.
1.6.4.3 Reseller shall hold Bell Atlantic OSS Information in confidence and
shall not disclose Bell Atlantic OSS Information to any other person
(except Reseller's employees, Agents and contractors, in accordance with
Exhibit I, Section 1.6.4.7).
1.6.4.4 Except as expressly stated in this Agreement, this Agreement does
not grant to Reseller any right or license to grant sublicenses or
permission to other persons to access, use or disclose Bell Atlantic OSS
Information.
1.6.4.5 Reseller's license to use Bell Atlantic OSS Information shall
expire upon the earliest of: (a) the time when the Bell Atlantic OSS
Information is no longer needed by Reseller to provide Bell Atlantic Retail
Telecommunications Services; (b) termination of the license in accordance
with this Agreement; or (c) expiration or termination of this Agreement.
1.6.4.6 All Bell Atlantic OSS Information received by Reseller shall be
destroyed or returned by Reseller to Bell Atlantic, upon expiration,
suspension or termination of the license to use such Bell Atlantic OSS
Information.
1.6.4.7 Reseller may disclose Bell Atlantic OSS Information to Reseller's
employees, Agents and contractors, and Reseller's employees, Agents and
contractors may access, receive and use Bell Atlantic OSS Information, only
to the extent necessary for Reseller's access to and use of Bell Atlantic
OSS Information permitted by this Agreement. Reseller's employees, Agents
and contractors shall hold Bell Atlantic OSS Information in confidence and
shall not disclose Bell Atlantic OSS Information to any other person
(except other employees, Agents or contractors of Reseller, to the extent
necessary for Reseller's use of the Bell Atlantic OSS Information permitted
by this Agreement).
30
<PAGE>
1.6.5 Unless sooner terminated or suspended in accordance with this
Agreement (including, but not limited to, Section 17.1 and Exhibit I,
Section 1.7.2), Reseller's access to Bell Atlantic OSS Information through
Bell Atlantic OSS Services shall terminate upon the expiration or
termination of this Agreement.
1.6.6.1 Without in any way limiting Section 15.5.2, Bell Atlantic shall
have the right to audit Reseller to ascertain whether Reseller is complying
with the requirements of Applicable Law and this Agreement, with regard to
Reseller's access to, and use and disclosure of, Bell Atlantic OSS
Information.
1.6.6.2 Without in any way limiting Section 15.5.2, Section 15.5.3, or
Exhibit I, Section 1.6.6.1, to the extent permitted by Applicable Law, Bell
Atlantic shall have the right to monitor Reseller's access to and use of
Bell Atlantic OSS Information which is made available by Bell Atlantic to
Reseller pursuant to this Agreement, to ascertain whether Reseller is
complying with the requirements of Applicable Law and this Agreement, with
regard to Reseller's access to, and use and disclosure of, such Bell
Atlantic OSS Information. The foregoing right shall include, but not be
limited to, to the extent permitted by Applicable Law, the right to
electronically monitor Reseller's access to and use of Bell Atlantic OSS
Information which is made available by Bell Atlantic to Reseller through
electronic interfaces or gateways.
1.6.7 Reseller acknowledges that the Bell Atlantic OSS Information, by
its nature, is updated and corrected on a continuous basis by Bell
Atlantic, and therefore that Bell Atlantic OSS Information is subject to
change from time to time.
1.7 Liabilities and Remedies
------------------------
1.7.1 Reseller shall be liable for any breach of Exhibit I, Section 1.5
or Exhibit I, Section 1.6 by an employee, Agent or contractor of Reseller.
1.7.2 Any breach by Reseller, or Reseller's employees, Agents or
contractors, of the provisions of Exhibit I, Section 1.5 or Exhibit I,
Section 1.6, shall be deemed a material breach of a material provision of
this Agreement by Reseller under Section 17.1 of this Agreement. In
addition, if Reseller or an employee, Agent or contractor of Reseller at
any time breaches a provision of Exhibit I, Section 1.5 or Exhibit I,
Section 1.6, and such breach continues for more than ten (10) days after
written notice thereof from Bell Atlantic, then, except as otherwise
required by Applicable Law, Bell Atlantic shall have the right, upon notice
to Reseller, to suspend the license to use Bell Atlantic OSS Information
granted by Exhibit I, Section 1.6.1, and/or the provision of Bell Atlantic
OSS Services, in whole or in part.
1.7.3 Reseller agrees that Bell Atlantic would be irreparably injured by
a breach of Exhibit I, Section 1.5 or Exhibit I, Section 1.6 by Reseller or
the employees, Agents or contractors of Reseller, and that Bell Atlantic
shall be entitled to seek equitable relief, including injunctive relief and
specific performance, in the event of any breach of Exhibit I, Section
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<PAGE>
1.5 or Exhibit I, Section 1.6 by Reseller or the employees, Agents or
contractors of Reseller. Such remedies shall not be deemed to be the
exclusive remedies for a breach of Exhibit I, Section 1.5 or Exhibit I,
Section 1.6, but shall be in addition to any other remedies available under
this Agreement or at law or equity.
1.8 Relation to Applicable Law
--------------------------
The provisions of Exhibit I, Sections 1.5, 1.6 and 1.7 shall be in addition
to and not in derogation of any provisions of Applicable Law, including,
but not limited to, 47 U.S.C. (S) 222, and are not intended to constitute a
waiver by Bell Atlantic of any right with regard to protection of the
confidentiality of the information of Bell Atlantic or Bell Atlantic's
customers provided by Applicable Law.
1.9 Cooperation
-----------
Reseller, at Reseller's expense, shall reasonably cooperate with Bell
Atlantic in using Bell Atlantic OSS Services. Such cooperation shall
include, but not be limited to, the following:
1.9.1 Upon request by Bell Atlantic, Reseller shall by no later than the
fifteenth (15th) day of each calendar month submit to Bell Atlantic
reasonable, good faith estimates (by central office or other Bell Atlantic
office or geographic area designated by Bell Atlantic) of the volume of
each Bell Atlantic Retail Telecommunications Service for which Reseller
anticipates submitting Orders in each week of the next calendar month.
1.9.2 Upon request by Bell Atlantic, Reseller shall submit to Bell
Atlantic reasonable, good faith estimates of other types of transactions or
use of Bell Atlantic OSS Services that Reseller anticipates.
1.9.3 Reseller shall reasonably cooperate with Bell Atlantic in submitting
Orders for Bell Atlantic Retail Telecommunications Services and otherwise
using the Bell Atlantic OSS Services, in order to avoid exceeding the
capacity or capabilities of such Bell Atlantic OSS Services.
1.9.4 Reseller shall participate in cooperative testing of Bell Atlantic
OSS Services and shall provide assistance to Bell Atlantic in identifying
and correcting mistakes, omissions, interruptions, delays, errors, defects,
faults, failures, or other deficiencies, in Bell Atlantic OSS Services.
1.10 Reseller Operations Support Systems
-----------------------------------
Upon request by Bell Atlantic, Reseller shall negotiate in good faith and
enter into a contract with Bell Atlantic, pursuant to which Bell Atlantic
may obtain access to Reseller's operations support systems (including,
systems for pre-ordering, ordering, provisioning, maintenance and repair,
and billing) and information contained in such systems, to permit Bell
Atlantic to obtain Reseller Customer CPNI (as authorized by the applicable
Reseller Customer), to
32
<PAGE>
permit customers to transfer service from one Telecommunications Carrier to
another, and for such other purposes as may be permitted by Applicable Law.
2. BELL ATLANTIC PRE-OSS SERVICES
------------------------------
2.1 As used in the Principal Document, "Bell Atlantic Pre-OSS Service"
means a service which allows the performance of an activity which is
comparable to an activity to be performed through a Bell Atlantic OSS
Service and which Bell Atlantic offers to provide to Reseller prior to, or
in lieu of, Bell Atlantic's provision of the Bell Atlantic OSS Service to
Reseller. "Bell Atlantic Pre-OSS Services" include, but are not limited to,
the activity of placing Orders for Bell Atlantic Retail Telecommunications
Services through a telephone facsimile ("Fax") communication.
2.2 The Bell Atlantic Pre-OSS Services that will be offered by Bell
Atlantic, shall be as determined by Bell Atlantic. Subject to the
requirements of Applicable Law, Bell Atlantic shall have the right to
change Bell Atlantic Pre-OSS Services, from time-to-time, without the
consent of Reseller.
2.3 Subject to the requirements of Applicable Law, the prices for Bell
Atlantic Pre-OSS Services shall be as determined by Bell Atlantic and shall
be subject to change by Bell Atlantic from time-to-time.
2.4 The provisions of Exhibit I, Sections 1.5 through 1.9 shall also apply
to Bell Atlantic Pre-OSS Services. For the purposes of this Exhibit I,
Section 2.4: (a) references in Exhibit I, Sections 1.5 through 1.9 to Bell
Atlantic OSS Services shall be deemed to include Bell Atlantic Pre-OSS
Services; and, (b) references in Exhibit I, Sections 1.5 through 1.9 to
Bell Atlantic OSS Information shall be deemed to include information made
available to Reseller through Bell Atlantic Pre-OSS Services.
3. E911/911 SERVICES
-----------------
3.1 Where and to the extent that Bell Atlantic provides E911/911 call
routing to a Public Safety Answering Point ("PSAP") to Bell Atlantic's own
end user retail customers, Bell Atlantic will provide to Reseller, for
resold Bell Atlantic Retail Telecommunications Service dial tone lines,
E911/911 call routing to the appropriate PSAP. Bell Atlantic will provide
Reseller Customer information for resold Bell Atlantic Retail
Telecommunications Service dial tone lines to the PSAP as that information
is provided to Bell Atlantic by Reseller where and to the same extent that
Bell Atlantic provides Bell Atlantic end user retail customer information
to the PSAP. Bell Atlantic will update and maintain, on the same schedule
that Bell Atlantic uses with Bell Atlantic's own end user retail customers,
the Reseller Customer information in Bell Atlantic's E911/911 databases.
3.2 Reseller shall provide to Bell Atlantic the name, telephone number and
address, of all Reseller Customers, and such other information as may be
requested by Bell Atlantic, for inclusion in E911/911 databases. Any change
in Reseller Customer name, address or
33
<PAGE>
telephone number information (including addition or deletion of a Reseller
Customer, or a change in Reseller Customer name, telephone number or
address), or in other E911/911 information supplied by Reseller to Bell
Atlantic, shall be reported to Bell Atlantic by Reseller within one (1) day
after the change.
4. Routing to Directory Assistance and Operator Services
-----------------------------------------------------
4.1 Upon request by Reseller, to the extent technically feasible, Bell
Atlantic will provide to Reseller the capability of rerouting to Reseller's
platforms directory assistance traffic (411 and 555-1212 calls) from
Reseller Customers served by resold Bell Atlantic Retail Telecommunications
Service dial tone line service and operator services traffic (O+ and 0-
intraLATA calls) from Reseller Customers served by resold Bell Atlantic
Retail Telecommunications Service dial tone line service.
4.2 A request for the rerouting service described in Exhibit I, Section
4.1 must be made by Reseller (a) on a switch-by-switch basis, and (b) at
least ninety (90) days in advance of the date that the rerouting capability
is to be made available in an applicable Bell Atlantic switch.
4.3 The prices for the rerouting service described in Exhibit I, Section
4.1 shall be as stated in Exhibit II, Section 2.
5. LIDB/BVS
--------
5.1 Upon request by Reseller, Bell Atlantic will maintain information
(including calling card numbers and collect and bill to third party billing
restriction notation) for Reseller Customers who subscribe to resold Bell
Atlantic Retail Telecommunications Service dial tone line service, in Bell
Atlantic's Line Information Database ("LIDB"), where and to the same extent
that Bell Atlantic maintains information in Bell Atlantic's LIDB for Bell
Atlantic's own end-user retail customers.
5.2 If an end-user terminates Bell Atlantic Retail Telecommunications
Service dial tone line service provided to the end-user by Bell Atlantic
and, in place thereof, subscribes to Reseller for resold Bell Atlantic
Retail Telecommunications Service dial tone line service, Bell Atlantic
will remove from Bell Atlantic's LIDB any Bell Atlantic-assigned telephone
line calling card number (including area code) ("TLN") and Personal
Identification Number ("PIN") associated with the terminated Bell Atlantic
Retail Telecommunications Service dial tone line service. The Bell Atlantic
assigned TLN and PIN will be removed from Bell Atlantic's LIDB within
twenty-four (24) hours after Bell Atlantic terminates the Bell Atlantic
Retail Telecommunications Service dial tone line service with which the
number was associated. Reseller may issue a new telephone calling card to
such end-user, utilizing the same TLN, and the same or a different PIN.
Upon request by Reseller, Bell Atlantic will enter such TLN and PIN in Bell
Atlantic's LIDB for calling card validation purposes.
5.3 Reseller information which is stored in Bell Atlantic's LIDB will be
subject, to the same extent as Bell Atlantic information stored in Bell
Atlantic's LIDB, to access and use by, and
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<PAGE>
disclosure to, those persons (including, but not limited to, Bell Atlantic)
to whom Bell Atlantic allows access to information which is stored in Bell
Atlantic's LIDB. Reseller hereby grants to Bell Atlantic and the persons to
whom Bell Atlantic allows access to information which is stored in Bell
Atlantic's LIDB, a royalty free license for such access, use and
disclosure.
5.4 Reseller shall obtain contractual agreements with each of the persons
authorized to have access to Bell Atlantic's LIDB, under which Reseller
will bill Reseller Customers for calling card, third party, collect and
other calls validated by such persons through Bell Atlantic's LIDB.
5.5 Reseller warrants that the information provided by Reseller for
inclusion in Bell Atlantic's LIDB will at all times be current, accurate
and appropriate for use for billing validation services.
5.6 Upon request by Reseller, Bell Atlantic will provide to Reseller Bell
Atlantic Billing Validation Service, in accordance with Bell Atlantic's
Tariffs, for use by Reseller in connection with Bell Atlantic Retail
Telecommunications Services purchased and provided by Reseller pursuant to
this Agreement.
5.7 Reseller's use of information in Bell Atlantic's LIDB shall be subject
to the provisions of Exhibit I, Sections 1.5 through 1.8 with regard to
Bell Atlantic OSS Information. For the purposes of this Exhibit I, Section
5.7, references in Exhibit I, Sections 1.5 through 1.8 to Bell Atlantic OSS
Information shall be deemed to be references to information in Bell
Atlantic's LIDB.
5.8 The prices for the services described in this Exhibit I, Section 5
shall be as stated in Exhibit II, Section 2.
35
<PAGE>
EXHIBIT II
PRICES FOR BELL ATLANTIC SERVICES
---------------------------------
1. BELL ATLANTIC RETAIL TELECOMMUNICATIONS SERVICES
------------------------------------------------
1.1 Prices
------
The prices for Bell Atlantic Retail Telecommunications Services shall be
the Retail Prices stated in Bell Atlantic's Tariffs for such Bell Atlantic
Retail Telecommunications Services, less: (a) the applicable discount
stated in Bell Atlantic's Tariffs for Bell Atlantic Retail
Telecommunications Services purchased for resale pursuant to 47 U.S.C. (S)
251(c)(4); or, (b) in the absence of an applicable Bell Atlantic Tariff
discount for Bell Atlantic Retail Telecommunications Services purchased for
resale pursuant to 47 U.S.C. (S) 251(c)(4), the applicable discount stated
in Exhibit II, Attachment 1.
1.2 Inapplicability of Discounts
----------------------------
The discounts provided for in Exhibit II, Section 1.1, shall not be applied
to:
1.2.1 Retail Prices that are in effect for no more than ninety (90)
days;
1.2.2 Charges for services and products provided by Bell Atlantic
that are not Bell Atlantic Retail Telecommunications Services, including,
but not limited to, Bell Atlantic Other Services, and exchange access
services as defined in Section 3(16) of the Act, 47 U.S.C. (S) 153(16);
1.2.3 Subscriber Line Charges, Federal Line Cost Charges, end user
common line charges, carrier selection and change charges, and Audiotex
Service charges; and,
1.2.4 Any service or charge which the Commission, the Federal
Communications Commission, or other governmental entity of appropriate
jurisdiction, determines is not subject to a wholesale rate discount under
47 U.S.C. (S) 251(c)(4).
1.3 Discount Changes
----------------
1.3.1 Bell Atlantic shall change the discounts provided for in Exhibit II,
Section 1.1, above, from time-to-time, to the extent such change is
required by Applicable Law, including, but not limited to, by regulation or
order of the Commission, the Federal Communications Commission, or other
governmental entity of appropriate jurisdiction.
1.3.2 Bell Atlantic shall have the right to change the discounts provided
for in Exhibit II, Section 1.1, above, from time-to-time, to the extent
such change is required, approved or permitted by Applicable Law,
including, but not limited to, by regulation or order of the
36
<PAGE>
Commission, the Federal Communications Commission, or other governmental
entity of appropriate jurisdiction.
1.4 Best Discount
-------------
Should Bell Atlantic at any time, in an agreement approved by the
Commission pursuant to 47 U.S.C. (S) 252, offer discounts pursuant to 47
U.S.C. (S)(S) 251(c)(4) to another Telecommunications Carriers which are
greater than the discounts then being offered to Reseller pursuant to
Exhibit II, Section 1.1, above, Bell Atlantic, to the extent required by
Applicable Law, shall offer such greater discounts to Reseller under this
Agreement. Except as otherwise required by Applicable Law or agreed in
writing by the Parties, the new, greater discounts: (a) shall become
effective for each Reseller billing account at the commencement of the
first billing cycle for such Reseller billing account following execution
of an amendment to this Agreement specifying the new discounts; and, (b)
shall apply on a prospective basis only and shall not apply to charges
incurred by Reseller prior to the time the new discounts become effective
under Part "(a)" of this sentence.
1.5 Offers of Merchandise and Services which are not Bell Atlantic Retail
---------------
Telecommunications Services
---------------------------
Reseller shall not be eligible to participate in any Bell Atlantic plan or
program under which Bell Atlantic end user retail customers may obtain
products or merchandise, or services which are not Bell Atlantic Retail
Telecommunications Services, in return for trying, agreeing to purchase,
purchasing, or using, Bell Atlantic Retail Telecommunications Services.
2. BELL ATLANTIC OTHER SERVICES
----------------------------
2.1 Prices
------
2.1.1 The prices for Bell Atlantic Other Services shall be as stated: (a)
in Bell Atlantic's Tariffs; or, (b) in the absence of an applicable Bell
Atlantic Tariff price, in Exhibit II, Attachment 1.
2.1.2 If Bell Atlantic at any time offers a Bell Atlantic Other Service the
prices for which are not stated in Bell Atlantic's Tariffs or Exhibit II,
Attachment 1, Bell Atlantic shall have the right to revise Exhibit II,
Attachment 1, to add the prices to Exhibit II, Attachment 1.
2.2 Price Changes
-------------
2.2.1 Bell Atlantic shall change the prices for Bell Atlantic Other
Services, from time-to-time, to the extent such change is required by
Applicable Law, including, but not limited to, by regulation or order of
the Commission, the Federal Communications Commission, or other
governmental entity of appropriate jurisdiction.
37
<PAGE>
2.2.2 Bell Atlantic shall have the right to change the prices for Bell
Atlantic Other Services, from time-to-time, to the extent such change is
required, approved or permitted by Applicable Law, including, but not
limited to, by regulation or order of the Commission, the Federal
Communications Commission, or other governmental entity of appropriate
jurisdiction.
2.2.3 Except as otherwise required by Applicable Law, Bell Atlantic shall
give Reseller thirty (30) days advance written notice of any increase in
the prices stated in Exhibit II, Attachment 1 for Bell Atlantic Other
Services.
38
<PAGE>
MSO PROGRAMMING SERVICES AGREEMENT
----------------------------------
THIS AGREEMENT (the Agreement), made affective the 1st day of May, 1998, by
---------------------
and between WORLD SATELLITE NETWORK INC. ("WSNet"), wish an office at 821
Marquate Avenue South, Suite 700, Minneapolis, MN 55402, and ONEPOINT
--------
COMMUNICATIONS, CORP. (the "MSO"), at 2201 Waukogen Road, Bannockburn IL 60015.
- -------------------- ----------------------------------------
SECTION 1: DEFINITIONS. For the purpose of this Agreement, the following terms
- ---------
are defined as follows:
1.1 "Programming Service" is the television content of the channels set forth
on the Request(s) For Service(s) which is (are) transmitted from a domestic
satellite and available for distribution pursuant to the terms of this
Agreement.
1.2 "Premium Programming Service" is television content of HBO, Cinemax,
Showtime, Movie Channel, ????, Sundance, Playboy and Encore Stars. WSNet
may amend this definition at its sole discretion at any time during the
term of this Agreement with twenty-four (24) hours notice.
1.3 "Programming Fees" are the per Subscriber dollar amounts set forth in the
Request For Service charged by WSNet for the Programming Service.
1.4 "Property" is the physical location of the antennas, receivers,
modulators, amplifiers and cable, for receiving and delivering the
Programming Services, owned and operated by MSO and are identified by each
Request For Service.
1.5 "Request For Service" is an order by MSO for certain Programming Service(s)
for a Property. Each Request For Service shall be subject to WSNet's
acceptance.
1.6 "Subscriber" is a recipient of all or a portion of the Programming Service
from MSO.
SECTION 2: WSNet OBLIGATIONS.
- ---------
2.1 WSNet hereby grants to MSO, and MSO hereby accepts, the non-exclusive right
to deliver the Programming Service to Subscribers subject to the terms
herein.
2.2 WSNet agrees to provide MSO the Programming Service in accordance with the
?????? of this Agreement.
2.3 WSNet ??????? that it has the right to provide the Programming Service,
to MSO for delivery to Subscribers as provided herein.
2.4 ??? WSNet ?????? its ability to provide any of the Programming Service,
WSNet shall notify MSO within five (5) business days of receipt by WSNet of
notification such Programming Services will be lost.
2.5 WSNet shall provide MSO an itemized invoice of Programming Fees for each
Property on a monthly basis based on the information MSO provides WSNet
pursuant to Section 5.2 below.
2.6 WSNet shall provide MSO notice of technical changes required for MSO to
continue receiving Programming Service within 30 days after WSNet receives
notice of such required technical changes.
2.7 WSNet will pay all fees and amounts that are required to be paid to the
programming originators for Programming Service delivered to MSO'S
Subscribers based on the Subscriber reports provided to WSNet by the MSO.
SECTION 3: TERM.
- ---------
3.1 Unless terminated earlier pursuant to the terms of this Agreement, this
Agreement shall commence on the effective date hereof and continue in force
for a period of ONE (1) YEAR, and shall automatically renew for additional
------------
periods of twelve (12) months thereafter. Either party may terminate this
Agreement at the end of the initial or a renewal term by giving the other
party written notice at least ninety (90) days but not more than one
hundred-twenty (120) days prior to the expiration of such initial or
renewal term, informing the other that the Agreement will not be renewed.
SECTION 4: DEPOSIT
- ---------
4.1 Upon execution of this Agreement by MSO, MSO shall pay WSNet a deposit of
$ 0 that shall be credited against the Programming Fees due in the final
----
month of this Agreement or will be forfeited in the event of default by
MSO.
SECTION 5: PRICE AND PAYMENT
- ---------
5.1 Programming Fees may be increased from time to time by WSNet, at its
option, as follows: (1) to ???? increases in fees charged to WSNet by the
programming originators, and (ii) by a percentage figure equal to the cost
of living adjustment as calculated by the U.S. Department of Labor,
Consumer Price Index (CPI-U/all ???/all hems). whichever is greater. WSNet
shall give MSO at least 30 days prior written notice of any increase in
Programming Fees. MSO shall, within sixty (60) days of such notice from
WSNet, have the option of requesting cancellation for the specific service
for which the ?? increase applied by submitting a minimum of thirty (30)
days written notification of cancellation to WSNet. MSO shall pay the
increased Programming Fees for the period between the effective date of the
increase and the effective date of the cancellation.
5.2 On or before the 15th day of each month, MSO shall notify WSNet of the
Programming Services received by each Subscriber at each Property for the
preceding month.
pg 1 of 4
<PAGE>
WSN
5.3 MSO shall pay WSNet all Programming Fees due for each month within fifteen
(15) days of the first day of such month based on the subscriber report
provided WSNet for the previous month. Any amounts not paid when due will
be subject to a late payment fee computed daily at a rate equal to 1.5% per
month at the highest rate permissible by law, whichever is lower.
5.4 WSNet's failure, for any reason, to invoice MSO for any payment shall not
relieve MSO of its obligation to make payment to WSNet in a timely manner
consistent with the terms of this Section 5.
5.5 All Programming Fees shall be paid to WSNet whether or not MSO receives
payment from its Subscribers.
5.6 MSO shall pay to WSNet applicable taxes (if any) on Programming Services as
part of the monthly Programming Fees.
SECTION 6; MSO OBLIGATIONS
- ----------
6.1 During the term of this Agreement MSO shall exhibit the Programming
Service ordered by MSO in its entirety when and exactly as transmitted
without any additions, commercial or other insertions, alterations or
deletions of any kind, ???? ????? and deliver the Programming Service only
as specifically authorized by the programming originators and ?????, MSO
shall deliver Programming Services only to Subscribers reported to WSNet.
MSO shall not alter, ??????????, copy redistribute or transmit the
Programming Service in any manner, except as permitted by the terms of this
Agreement without WSNets prior written consent.
6.2 MSO shall take reasonable precautions to prevent any unauthorized copying,
taping, connection to, or reception of Programming Service. MSO shall also
take all reasonable precautions and other steps necessary to ensure that
the Programming Service is distributed to and received only by Subscribers
who pay the applicable Programming Fees and that no part of the Programming
Service is received at any location where an admission fee, cover charge,
minimum or like sum is charged, or which is a commercial, non-residential
building or which is a public gathering area. WSNet shall give MSO notice
of changes in distribution requirements within five (5) business days of
WSNet's notification of such changes.
6.3 Subject to Programmer approval, MSO shall have the right to deliver
Programming Services other than Premium Programming Services and Super???
to public viewing areas in residential multiple dwelling buildings. MSO
shall report each such public viewing outlet as a Subscriber, subject to
the requirements of the Programmers, for purposes of determining
Programming Fees. MSO shall provide WSNet with written notification of each
public viewing outlet prior to delivering Programming Services to such
outlet. In no event will Premium Programming Services, previews of Premium
Programming Services or Pay-Per-View Services ever be displayed in such
public viewing areas.
6.4 MSO acknowledges that all programming decisions regarding the content of
the Programming Service are at the sole discretion of the programming
originators, including the substitution or withdrawal of any scheduled
programs. MSO agrees to distribute the Programming Service in compliance
with the existing or future requirements of the programming originators.
6.5 MSO agrees to maintain and when requested provide proof to WSNet of MSO's
authorization to occupy the Property and proof of ownership to operate the
equipment at the Property. Within thirty-six (36) hours of receiving a
request from WSNet, MSO agrees to escort a WSNet representative to the
Property for inspection purposes.
6.6 MSO agrees to install the necessary equipment, to the extent the cost of
such equipment is not prohibitive, to receive the Programming Service at
each Property and to operate and maintain this equipment in compliance with
technical service standards and applicable law during the term of this
Agreement.
6.7 MSO agrees to use its best effort to maximize the marketing and sale of the
Programming Service and provide adequate personnel to respond to and
service any and all requests and inquiries from Subscribers and potential
Subscribers.
6.8 MSO shall take all steps necessary to charge and collect the appropriate
fees from its Subscribers. If Programming known as a "Supers??????" (such
as WTBS, WGN, etc.) is part of the Programming provided, MSO agrees to pay
the current semi-annual copyright fee per Property to the U.S. Copyright
Office and file such forms as are required (currently such required form is
known as the "Statement of Account"). MSO is responsible for any music
performance fees.
6.9 MSO agrees to keep accurate and complete record of billings, Subscribers
and marketing data and to make this information available for inspection by
WSNet at all reasonable times for three (3) years from the date the related
subscriber report has been submitted to WSNet. MSO also agrees that WSNet
may physically audit, at its own expense, the MSO's Property and records to
determine the accuracy of MSO's notices delivered to WSNet pursuant to
Section 5.2 and the computation of the Programming Fees. If WSNet discovers
that the information MSO reported to it for computation of the Programming
Fees caused an understatement of the Programming Fees due WSNet, the MSO
will pay all unpaid Programming Fees discovered by such audit with interest
at the rate applicable under Paragraph 5.3. If such understatement is five
(5)% or more. MSO shall pay WSNet's or its representative's costs and
expenses to audit MSO's records.
MSO AGREEMENT Pg 2 of 4
<PAGE>
6.10 MSO shall indemnify, defend and hold WSNet harmless from and against any
and all claims, liabilities, costs and expenses (collectively "Claims")
including but not limited to Programming Service interruption claims,
except for claims permitted under Section 6.2., to the extent the Claims
are the result of a breach of the MSO's obligations under this Agreement.
6.11 MSO agrees that WSNet shall be the exclusive provider to each Property for
the Programming Service which such Property receives from WSNet as outlined
on each Request For Service. In the event MSO identifies selected
Programming Services legitimately available from sources other than WSNEt
at lower costs. WSNet shall have the ???? effect such selected Programming
Services at the same cost within thirty (30) days and MSO shall purchase
???? selected Programming Services form WSNet. If WSNet does not offer the
selected Programming Services to ???? the ??? ??? ??? the MSO may purchase
those selected Programming Services apart from WSNet.
6.12 MSO agrees to meet any minimum Subscriber requirements according to the
Programmer or WSnet specifications.
SECTION 7: DEFAULT BY MSO. The following events shall constitute a default and
- ---------
article WSNet to terminate its obligations to provide Programming Services
hereunder and shall accelerate all payments which the MSO has agreed to make
during the terms of this Agreement in addition to any other remedies provided in
this Agreement and available in law or equity:
7.1 The non-payment by MSO for a period of five (5) days of any sum required to
be paid by MSO.
7.2 Underreporting of Subscribers in any billing period and failure to cure
such underreporting within (5) days of notice from WSNet.
7.3 The display of Premium Programming Services in public viewing areas and
failure to terminate such display within five (5) days of notice from
WSNet.
7.4 Other than a default described in paragraph 7.1 through 7.3 above, the
failure of MSO to perform any term, covenant, or condition of this
Agreement shall constitute a default and if such default is not cured
within thirty (30) days after written notice thereof to MSO by WSNet, WSNet
shall have the right, at its sole option, to terminate this Agreement.
SECTION 8. DEFAULT BY WSNet
- ---------
8.1 Failure of WSNet perform any term, covenant, or condition of this
Agreement shall constitute a default and if such default is not cured
within thirty (30) days after written notice thereof to WSNet by MSO. MSO
shall have the right, at its sole option, to terminate this Agreement.
8.2 If Programming Service is disrupted for any reason through no fault of MSO.
WSNet shall have seventy-two (72) hours after receiving notice from MSO of
such disruption to restore Programming Service, during which time no
adjustment shall be made to the Programming Fees otherwise due. If
Programming Service, is not restored within such seventy-two (72) hour
period, WSNet's sole obligation, and MSO"S sole right, shall be a credit
for Programming Fees for disrupted Programming Service thereafter on a
prorated basis (based on a thirty day month). WSNet agrees to pass through
to the MSO credit it receives from Programmers related to such disruptions
of Programming Service. If WSNet is directly responsible for such
disruption and does not restore the Programming Service with in forty-eight
(48) hours of receipt of notice from MSO of such disruption, MSO shall have
the right to terminate this Agreement with respect to the Properties
affected by such disruption.
8.3 WSNet and its officers, agents and employees shall not be responsible for
any loss, damage (including incidental and consequential), expense, delay
or failure to perform arising or resulting, in whole or part, from acts of
God, or other causes which are beyond the control of WSNet, to provide the
Programming Service hereunder.
SECTION 9. EFFECT OF WAIVER REMEDIES
- ---------
9.1 No delay or omission to exercise any right, power or remedy accruing to a
party under this Agreement shall be construed to be a waiver of any such
right, power or remedy. Any waiver shall be limited to the circumstance or
event specifically referenced in the written waiver document and shall not
be deemed a waiver of any other term or provision of this Agreement or of
the same circumstance or event upon any reoccurrence thereof. All remedies,
either under this Agreement or at law, shall be cumulative and not
alternative.
SECTION 10: PROGRAMMING SERVICE CHANGES
- ----------
10.1 Subject to the written consent of WSNEt, which consent shall not be
unreasonably withheld, MSO may make changes to any Request For Service
by written notice to WSNet. Detections of Programming Service will be
effective at the end of the month at least 30 days after accepted and
approved by WSNet.
SECTION 11: CONFIDENTIALITY
- ----------
11.1 The terms and conditions, other than the existence and duration, of this
Agreement shall be kept confidential by MSO and shall not be disclosed by
MSO to any third party except as may be required by any court or
governmental agency of competent jurisdiction, and except to MSO's
accountants, auditors, agents, legal counsel and parent company, each of
whom must agree to be bound by this confidentiality provision.
Pg 3 of 4
<PAGE>
SECTION 12. NOTICES
- ----------
17.1 Any notice required or permitted to be given under this Agreement shall be
by written notice delivered via facsimile or U.S. mail and shall be deemed
duly given when received and acknowledged, or three (3) days after
deposited in the U.S. mail, postage prepaid, for delivery and addressed to
the appropriate party at the address set forth on the first page hereof MSO
name or addresses must be changed by delivery of written notice as provided
herein.
SECTION 13. ASSIGNMENT
- ----------
13.1 MSO shall not assign, transfer, pledge, or hypotheces this Agreement, or
any part thereof, or any interests herein by operation of law or otherwise,
except to a controlled affiliate, without the prior written consent of
WSNet, shall not be unreasonably withheld. No change of ownership or
management of MSO or a Property, shall affect the MSO's obligation under
this Agreement and any new owners or managers of the MSO shall be bound by
the terms of this Agreement.
SECTION 14. CONSTRUCTION AND INTERPRETATION
- ----------
14.1 In case any one or more of the provisions contained in this Agreement, for
any reason are held to be invalid, illegal, or unenforceable in any
respect, such invalidity, illegality, or unenforceability shall not affect
the validity and enforceability of any other provisions hereof. This
Agreement shall be governed by and construed in accordance with the laws
of the State of Minnesota.
SECTION 15. CONSENT TO JURISDICTION
- ----------
15.1 MSO submits to the jurisdiction of Henneph County District Court, State of
Minnessota, or United States District Court for the District of Minnessota,
for the purposes of any lawsuit by WSNet to enforce any claim it may have
for amounts due but unpaid to it as described herein above - this Paragraph
shall survive the termination of non-renewal of this Agreement under any
circumstances.
SECTION 16. COUNTERPARTS.
- ----------
16.1 This Agreement may be executed in counterparts and by different parties
with the same effect as if the signatures thereto were on the same
instrument. This Agreement shall be effective and binding upon all parties
hereto at such time as all parties have executed and delivered (including
by facsimile) a counterpart of this Agreement.
SECTION 17. ENTIRE AGREEMENT.
- ----------
17.1 This Agreement constitutes the entire agreement between the parties
concerning the subject matter hereof and supersedes all prior and
contemporaneous agreements whether written or oral relating to the subject
matter hereof. Other changes to this Agreement shall be effective upon the
written agreement of both parties hereto. No agreement to make changes to
this Agreement shall impose an obligation on either party to agree to any
similar type of change in the future.
WORLD SATELLITE NETWORK, INC. MSO: ONEPOINT COMMUNICATIONS, CORP.
SIGN /s/ Robert Ringstad SIGN /s/ William F. Wallace
--------------------------- ---------------------------
PRINT: ROBERT RINGSTAD PRINT: WILLIAM WALLACE
--------------------------- --------------------------
TITLE: Chief Operating Officer TITLE: President
--------------------------- --------------------------
Date Signed: 4/24/98 Date Signed: 4/24/98
--------------------- ---------------------
Pg 4 of 4
<PAGE>
DIGITAL ADDENDUM
This is an Addendum to that certain MSO Programming Services Agreement dated
May 1, 1998 (herein so defined) by and between World Satellite Network, Inc
("WSNet") and
ONEPOINT COMMUNICATIONS, CORP. ("MSO")
------------------------------
NAME
2201 Waukegan Road, Bannockburn Il 60015 ADDRESS
----------------------------------------
for the use of Ku-Band digital encrypted signals from DIRECTV (collectively,
the" Signals" and individually, the "Signal") to receive Programming at the
MSO Properties as described in Exhibit A attached hereto and incorporated herein
by reference for all purposes (the "Addendum").
1. Defined Terms. Unless otherwise defined in this Addendum, all initial
-------------
capitalized terms used herein shall have the same meaning ascribed to
such terms in the MSO Programming Services Agreement.
2. License. WSNet grants a non-exclusive license to the MSO to use the
--------
Signals to receive Programming at each Property (the "License").
WSNet warrants and represents that it has the right to grant the
License provided that the MSO complies with all of its obligations
under this Addendum and the MSO Programming Service Agreement. WSNet
makes no other warranty or representation of any kind regarding the
License or the Signal, including, without limitation, its strength,
quality or duration. Nothing in this Addendum shall be construed as
granting MSO any rights in the Signal, other than the right to receive
it as described above, nor does the MSO acquire any rights from or
claims against DIRECTV by operation of this Addendum.
3. Equipment and Transport. MSO shall, at its own expense, purchase,
-----------------------
install and maintain according to the technical specifications annexed
as Exhibit 8 attached hereto and incorporated herein by reference for
all purposes (the "Specifications") any and all equipment necessary to
receive the Signals and distribute the Programming to the Subscribers
of each Property (collectively, the "Equipment"). WSNet has the right
to inspect each Property and Equipment on three (3) days notice to the
MSO to ensure compliance with this provision. The Equipment includes,
without limitation, the DSSO receiver necessary to receive and decrypt
each Signal (the"IRD"). WSNet will arrange for the activation of each
IRD at each Property to receive the Signals. MSO will, at all times,
receive no less than five (5) Signals at each Property. MSO may
purchase or base those IRDs from WSNet as described in Exhibit A. The
warranties, if any, the MSO may receive for any Equipment it acquires
from or through WSNet are only granted by the manufacturer thereof and
not WSN. WSNet makes no warranties or representations of any kind with
respect to the IRD's and WSNet disclaims any warranties for the IRDs
under the Uniform Commercial Code, or otherwise implied in law.
4. Property. Each Property shall be only a multifamily dwelling unit
--------
property, including a condominium, apartment or cooperative building.
MSO shall have a written Agreement with the owner or authorized
manager of the Property to install, operate and maintain the
Equipment. The MSO shall not use, receive or distribute, or cause to
be used, received or distributed, Ku-Band or Ku-Band satellite signals
other than the Signals to receive or distribute the programming or any
other programming or other similar services at the property.
5. Term. The minimum term of this Agreement shall be three (3) years.
----
WSNet may terminate this Addendum on fifteen (15) days notice in the
event that the MSO breaches the terms of this Addendum. WSNet's right
to termination is in addition to any other rights WSNet may have
hereunder, under the MSO Programming Services Agreement or by law.
6. Fees. In addition to any other payments provided for herein, MSO
----
shall pay, each month, a transport fee for each IRD, pursuant to the
table on Exhibit C, plus any applicable taxes.
1
<PAGE>
RESELLER MEASUREMENT REPORTS
STATEWIDE, INCLUDING BA AFFILIATES
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
Performance Measurement ACTUAL BA SERVICE PERFORMANCE (BY QUARTER)
-----------------------------------------------------
DSO DS1 DS3 RESELLER TRUNKING POTS
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INSTALLATION
- -------------------------------------------------------------------------------------------
G) Number of Installations /1/ /2/ /3/ /4/ /5/
1-1-97 1-1-97 1-1-97 4-1-97 1-1-97
- -------------------------------------------------------------------------------------------
H) Average Interval in days /6/ /7/ /8/ /9/ /10/
1-1-97 1-1-97 1-1-97 4-1-97 1-1-97
- -------------------------------------------------------------------------------------------
I) Percent Install on time /11/ /12/ /13/ /14/ /15/
1-1-97 1-1-97 1-1-97 4-1-97 1-1-97
- -------------------------------------------------------------------------------------------
SERVICE QUALITY
- -------------------------------------------------------------------------------------------
J) Number of Reports /16/ /17/ /18/ /19/ /20/
1-1-97 1-1-97 1-1-97 4-1-97 1-1-97
- -------------------------------------------------------------------------------------------
K) Mean Time to Clear /21/ /22/ /23/ /24/ /25/
Reports 1-1-97 1-1-97 1-1-97 4-1-97 1-1-97
- -------------------------------------------------------------------------------------------
L) Number of Failures /26/ /27/ /28/ /29/ /30/
1-1-97 1-1-97 1-1-97 4-1-97 1-1-97
- -------------------------------------------------------------------------------------------
M) Failure Frequency /31/ /32/ /33/ /34/ /35/
Percent 1-1-97 1-1-97 1-1-97 4-1-97 1-1-97
- -------------------------------------------------------------------------------------------
N) Percent Without Report /36/ /37/ /38/ /39/ /40/
Outstanding 1-1-97 1-1-97 1-1-97 4-1-97 1-1-97
- -------------------------------------------------------------------------------------------
</TABLE>
-6-
<PAGE>
ONEPOINT COMMUNICATIONS, CORP.
EXHIBIT A - PROPERTY AND PROGRAMMING
------------------------------------
- --------------------------------------------------------------------------------
??????
- --------------------------------------------------------------------------------
Property Name
- --------------------------------------------------------------------------------
Property Address:
- --------------------------------------------------------------------------------
City: State/Zip:
- --------------------------------------------------------------------------------
Property Contact Contact Phone:
- --------------------------------------------------------------------------------
?????????? Basic Subs: Premium Subs:
- --------------------------------------------------------------------------------
DIRECT SYSTEM OPERATOR # (IF APPLICABLE):
- --------------------------------------------------------------------------------
DIRECT ?????? # (if applicable)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
??????
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
MSO shall provide such other information as is required by WSNet to property
license the Signal for receiving Programming at each Property.
MSO: ONEPOINT COMMUNICATIONS, CORP.
Signature: ----------------------- Date:------------------------
Print Name: ----------------------
Print Title: ---------------------
3
<PAGE>
RESELLER MEASUREMENT REPORTS
10 LARGEST RETAIL CUSTOMERS
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
Performance Measurement ACTUAL BA SERVICE PERFORMANCE (BY QUARTER)
-----------------------------------------------------------------------------------
DSO DS1 DS3 RESELLER TRUNKING POTS
(A) (B) (C) (D) (E) (F)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INSTALLATION
- -----------------------------------------------------------------------------------------------------------------
G) Number of Installations /1/ /2/ /3/ /4/ /5/
TBD TBD TBD TBD TBD
- -----------------------------------------------------------------------------------------------------------------
H) Average Interval in days /6/ /7/ /8/ /9/ /10/
TBD TBD TBD TBD TBD
- -----------------------------------------------------------------------------------------------------------------
I) Percent Install on time /11/ /12/ /13/ /14/ /15/
TBD TBD TBD TBD TBD
- -----------------------------------------------------------------------------------------------------------------
SERVICE QUALITY
- -----------------------------------------------------------------------------------------------------------------
J) Number of Reports /16/ /17/ /18/ /19/ /20/
TBD TBD TBD TBD TBD
- -----------------------------------------------------------------------------------------------------------------
K) Mean Time to Clear /21/ /22/ /23/ /24/ /25/
Reports TBD TBD TBD TBD TBD
- -----------------------------------------------------------------------------------------------------------------
L) Number of Failures /26/ /27/ /28/ /29/ /30/
TBD TBD TBD TBD TBD
- -----------------------------------------------------------------------------------------------------------------
M) Failure Frequency /31/ /32/ /33/ /34/ /35/
Percent TBD TBD TBD TBD TBD
- -----------------------------------------------------------------------------------------------------------------
N) Percent Without Report /36/ /37/ /38/ /39/ /40/
Outstanding TBD TBD TBD TBD TBD
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
-1-
<PAGE>
ONEPOINT COMMUNICATIONS, CORP.
EXHIBIT C - FEES
----------------
TRANSPORT FEES
--------------
WSNet will provide transport via DIRECTLY for a price per IRD/month. Transport
fees are guaranteed for the term of the Agreement, subject to the price
increase(s) described in item 8 of the Addendum. Transport fees will be
discounted based on volume per the following table.
<TABLE>
<CAPTION>
-------------------------------------------------------------
Number of IRD's for Transport Incremented Charged per IRD
-------------------------------------------------------------
<S> <C>
-------------------------------------------------------------
0-1000 $6.00
-------------------------------------------------------------
1001-1500 $5.58
-------------------------------------------------------------
1601-2000 $5.17
-------------------------------------------------------------
2001-2501 $4.75
-------------------------------------------------------------
2501 + $4.33
-------------------------------------------------------------
</TABLE>
* Affiliate is required to pay any applicable taxes.
WSNet, Inc. MSO: ONEPOINT COMMUNICATIONS, CORP.
BY: /s/ Robert Ringstad BY: /s/ William F. Wallace
- -------------------------------- ----------------------------------
Robert Ringstad William F. Wallace
Chief Operating Officer President
Date Signed: 4/24/98 Date Signed: 4/20/98
- -------------------------------- ----------------------------------
<PAGE>
SCHEDULE 35C
I): PERCENT INSTALL ON TIME: This measurement is the total number of
installations (both "x" and "w" service orders) that were completed on time
(based on the service order established due date) divided by the total number of
service orders. This is the percentage of orders completed on time.
SERVICE QUALITY CATEGORIES
- --------------------------
J): NUMBER OF REPORTS: This is the total number of troubles received from
Reseller by service category. Each trouble counts as one and in cases where the
trouble is redated or subsequent reports are received for escalations or to
question status, BA will not count the subsequent reports. From receipt to
close, each trouble counts as 1, regardless of the trouble resolution (CPE, NTF
or BA Network).
K): MEAN TIME TO CLEAR REPORTS: This is the total measurable hours and minutes
from all troubles (from the time BA receives a trouble from Reseller until the
service is restored and closed with Reseller) divided by the total number of
troubles for the report period.
For DSO, DS1, DS3 and Reseller Trunking, the measurements will be "Stop Clock"
measurements where "no access" (customer access delayed) time is removed from
the measurement.
For POTS, this will be a running 24 hour clock from trouble receipt to trouble
clearance time. The BA clear time is the time service is restored. The BA work
process is for the customer (Reseller) to be notified as soon as the service is
cleared. BA does not use the "close time" because after clearing the trouble,
the technician may stay and complete another hour or so of clean up before
actually closing the trouble.
L): NUMBER OF FAILURES: The number of failures is the total number of trouble
reports (by category) where the trouble was closed out to a code indicating that
the fault was a BA service problem.
Removed from the total trouble reports will be all troubles that reflect the
cause of the trouble to be other than a Bell Atlantic Network fault. Examples
would be troubles caused by Customer Provided Equipment (CPE), errors by the
customers/end user in the use of the service or where no trouble was detected
(F/OK and T/OK).
M): FAILURE FREQUENCY PERCENT: This measurement is the total number of Network
Troubles "l", divided by the total number of circuits that Reseller has
purchased from BA. The result expressed as a percentage.
-3-
<PAGE>
SCHEDULE 35E
N): PERCENT WITHOUT REPORT OUTSTANDING: For this measurement Bell Atlantic is
to do the following:
1. Multiply the total number of circuits by the total hours in the
report period to establish the total hours of service availability possible for
the report period.
2. Add all of the measurable time (hours and minutes) for only the
Network Reports to establish the total non service availability hours for the
report period.
3. Subtract the "non service availability" hours from the "total service
availability" hours and divide the result by the "total service availability"
hours and display this as a percentage.
-4-
<PAGE>
EXHIBIT 10.14
RESALE AGREEMENT
----------------
(Pennsylvania)
PREFACE
-------
THIS RESALE AGREEMENT (this "Agreement") is made effective as of
August 1, 1997 (the "Effective Date") by and between VIC-RMTS-DC, L.L.C.
("Reseller") a Delaware limited liability company, d/b/a OnePoint
Communications, and affiliate of OnePoint Communications, L.L.C., with offices
at 5335 Wisconsin Avenue, N.W., Suite 950, Washington, D.C. 20015, and Bell
Atlantic - Pennsylvania, Inc. ("Bell Atlantic"), a Pennsylvania corporation,
with offices at 1717 Arch Street, Philadelphia, Pennsylvania 19103.
WHEREAS, pursuant to Section 251(c)(4) of the Act, 47 U.S.C. (S)
251(c)(4), Reseller wishes to purchase Bell Atlantic Retail Telecommunications
Services from Bell Atlantic for resale by Reseller as a Telecommunications
Carrier providing Telecommunications Services in the Commonwealth of
Pennsylvania; and
WHEREAS, Bell Atlantic is willing to provide such Bell Atlantic Retail
Telecommunications Services in accordance with this Agreement.
NOW THEREFORE, in consideration of the mutual promises set forth in
this Agreement, Reseller and Bell Atlantic, each on behalf of itself and its
respective successors and assigns, agree as follows:
1. DEFINITIONS
-----------
1.1 As used in the Principal Document, the terms listed below shall
have the meanings stated below:
1.1.1 "Act" means the Communications Act of 1934, 47 U.S.C. (S) 151, et
--
seq., as amended from time-to-time.
----
1.1.2 "Agent" means agent or servant.
1.1.3 "Applicable Law" means all applicable laws and government
regulations and orders.
1.1.4 "Bell Atlantic Ancillary Service" means any service offered by
Bell Atlantic to Reseller in Exhibit I.
1.1.5 "Bell Atlantic Retail Telecommunications Service" means any
Telecommunications Service that Bell Atlantic provides at retail to
subscribers who are not
1
<PAGE>
Telecommunications Carriers. The term "Bell Atlantic Retail
Telecommunications Service" does not include any exchange access service
(as defined in Section 3(16) of the Act, 47 U.S.C. (S) 153(16)) provided by
Bell Atlantic.
1.1.6 "Bell Atlantic Service" means and includes any Bell Atlantic
Retail Telecommunications Service and any Bell Atlantic Ancillary Service.
1.1.7 "Bell Atlantic's Affiliates" means any corporations, partnerships
or other persons who control, are controlled by, or are under common
control with, Bell Atlantic.
1.1.8 "Bell Atlantic's Tariffs" and "Bell Atlantic Tariff" mean and
include:
(a) Bell Atlantic's effective Federal and state tariffs, as
amended by Bell Atlantic from time-to-time; and,
(b) to the extent Bell Atlantic Services are not subject to Bell
Atlantic tariffs, any standard agreements and other documents, as amended
by Bell Atlantic from time-to-time, that set forth the generally available
terms, conditions and prices under which Bell Atlantic offers such Bell
Atlantic Services.
The terms "Bell Atlantic's Tariffs" and "Bell Atlantic Tariff" do
not include Bell Atlantic's "Statement of Generally Available Terms and
Conditions for Interconnection, Unbundled Network Elements, Ancillary
Services and Resale of Telecommunications Services" which has been approved
by the Commission pursuant to Section 252(f) of the Act, 47 U.S.C. (S)
252(f).
1.1.9 "Commission" means the Pennsylvania Public Utilities Commission.
1.1.10 "Contract Period", as used in Section 1.1.25 and Section 6.2,
means a stated period or minimum period of time for which Reseller is
required by this Agreement to subscribe to, use and/or pay for a Bell
Atlantic Service.
1.1.11 "Customer" means and includes customers, subscribers and patrons,
of a Party, purchasers and users of Telecommunications Services (including,
but not limited to, resold Bell Atlantic Retail Telecommunications
Services) provided by a Party, and purchasers and users of other services
and products provided by a Party. The term "Customer" does not include a
Party.
1.1.12 "Bell Atlantic Customer" means a Customer of Bell Atlantic.
1.1.13 "Customer Information" means CPNI of a Customer and any other
non-public, individually identifiable information about a Customer or the
purchase by a Customer of the services or products of a Party.
2
<PAGE>
1.1.14 "Customer Proprietary Network Information" ("CPNI") means
"Customer Proprietary Network Information" as defined in Section 222 of the
Act, 47 U.S.C. (S) 222.
1.1.15 "Effective Date" means the date first above written.
1.1.16 "Jurisdiction" means the Commonwealth of Pennsylvania.
1.1.17 "Operator Services" means: (a) services accessed by dialing 411,
555-1212, 1-555-1212, 0+ local, 0+ intraLATA, and, 0-; and, (b) any other
automated or live operator or directory assistance service.
1.1.18 "Order" means an order or application.
1.1.19 "Principal Document" means this document, including the Preface,
Sections 1 through 39, the signature page, Exhibit I, Exhibit II, and
Exhibit II, Attachment 1.
1.1.20 "Reseller Customer" means a Customer of Reseller.
1.1.21 "Retail Prices" means the prices at which Bell Atlantic Retail
Telecommunications Services are provided by Bell Atlantic at retail to
subscribers who are not Telecommunications Carriers.
1.1.22 "Telecommunications Carrier" means "Telecommunications Carrier"
as defined in Section 3(44) of the Act, 47 U.S.C. (S) 153(44).
1.1.23 "Telecommunications Service" means "Telecommunications Service"
as defined in Section 3(46) of the Act, 47 U.S.C. (S) 153(46).
1.1.24 "Telephone Exchange Service" means "Telephone Exchange Service"
as defined in Section 3(47) of the Act, 47 U.S.C. (S) 153(47).
1.1.25 "Termination Date Bell Atlantic Service" means: (a) any Bell
Atlantic Service being provided by Bell Atlantic under this Agreement at
the time of termination of this Agreement, that at the time of termination
of this Agreement is subject to a Contract Period which is greater than one
(1) month; and, (b) any Bell Atlantic Service requested by Reseller under
this Agreement in an Order accepted by Bell Atlantic prior to termination
of this Agreement but not yet being provided by Bell Atlantic at the time
of termination of this Agreement, that is subject to an initial Contract
Period which is greater than one (1) month.
1.2 Unless the context clearly indicates otherwise, any defined term
which is defined or used in the singular shall include the plural, and any
defined term which is defined or used in the plural shall include the
singular.
3
<PAGE>
2. THE AGREEMENT
-------------
2.1 This Agreement includes: (a) the Principal Document; (b) Bell
Atlantic's Tariffs (which Bell Atlantic Tariffs are incorporated into this
Agreement by reference and made a part hereof); and, (c) a Reseller Order
to provide, change or terminate a Bell Atlantic Service, which has been
accepted by Bell Atlantic (including, but not limited to, any Order which
includes a commitment to purchase a stated number or minimum number of
lines or other Bell Atlantic Services, or a commitment to purchase lines or
other Bell Atlantic Services for a stated period or minimum period of
time).
2.2 Conflicts among terms in the Principal Document, Bell Atlantic's
Tariffs, and a Reseller Order which has been accepted by Bell Atlantic,
shall be resolved in accordance with the following order of precedence,
where the document identified in subsection "(a)" shall have the highest
precedence: (a) the Principal Document; (b) Bell Atlantic's Tariffs; and,
(c) a Reseller Order which has been accepted by Bell Atlantic. The fact
that a term appears in the Principal Document but not in a Bell Atlantic
Tariff, or in a Bell Atlantic Tariff but not in the Principal Document,
shall not be interpreted as, or deemed grounds for finding, a conflict for
the purposes of this Section 2.2.
2.3 This Agreement (including the Principal Document, Bell Atlantic's
Tariffs, and Reseller Orders which have been accepted by Bell Atlantic),
constitutes the entire agreement between the Parties on the subject matter
hereof, and supersedes any prior or contemporaneous agreement,
understanding, or representation on the subject matter hereof. Except as
otherwise provided in the Principal Document, the terms in the Principal
Document may not be waived or modified except by a written document which
is signed by the Parties. Subject to the requirements of Applicable Law,
Bell Atlantic shall have the right to add, modify, or withdraw, a Bell
Atlantic Tariff at any time, without the consent of, or notice to,
Reseller.
2.4 A failure or delay of either Party to enforce any of the
provisions of this Agreement, or any right or remedy available under this
Agreement or at law or in equity, or to require performance of any of the
provisions of this Agreement, or to exercise any option provided under this
Agreement, shall in no way be construed to be a waiver of such provisions,
rights, remedies, or options.
3. BELL ATLANTIC SERVICES
----------------------
3.1 During the term of this Agreement, Reseller, pursuant to Section
251(c)(4) of the Act, 47 U.S.C. (S) 251(c)(4), may submit Orders to Bell
Atlantic requesting Bell Atlantic to provide Bell Atlantic Retail
Telecommunications Services for resale by Reseller as a Telecommunications
Carrier providing Telecommunications Services.
3.2 During the term of this Agreement, Reseller may submit Orders to
Bell Atlantic requesting Bell Atlantic to provide Bell Atlantic Ancillary
Services for use by
4
<PAGE>
Reseller as a Telecommunications Carrier providing Telecommunications
Services.
3.3 Bell Atlantic may require that Reseller's Orders requesting Bell
Atlantic to provide Bell Atlantic Services be in writing on forms specified
by Bell Atlantic or in an electronic form specified by Bell Atlantic.
3.4 Upon receipt and acceptance by Bell Atlantic of a Reseller Order
requesting Bell Atlantic to provide a Bell Atlantic Service, Bell Atlantic
shall provide, and Reseller shall subscribe to, use and pay for, the Bell
Atlantic Service, in accordance with this Agreement.
3.5 Bell Atlantic Retail Telecommunications Services may be purchased
by Reseller under this Agreement only for the purpose of resale by Reseller
as a Telecommunications Carrier providing Telecommunications Services,
pursuant to Section 251(c)(4) of the Act, 47 U.S.C. (S) 251(c)(4). Bell
Atlantic Retail Telecommunications Services to be purchased by Reseller for
other purposes (including, but not limited to, Reseller's own use) must be
purchased by Reseller pursuant to separate written agreements, including,
but not limited to, applicable Bell Atlantic Tariffs. Reseller warrants and
agrees that Reseller will purchase Bell Atlantic Retail Telecommunications
Services from Bell Atlantic under this Agreement only for the purpose of
resale by Reseller as a Telecommunications Carrier providing
Telecommunications Services, pursuant to Section 251(c)(4) of the Act, 47
U.S.C. (S) 251(c)(4).
3.6 Bell Atlantic Ancillary Services may be purchased by Reseller
under this Agreement only for use by Reseller as a Telecommunications
Carrier providing Telecommunications Services. Bell Atlantic Ancillary
Services to be purchased by Reseller for other purposes must be purchased
by Reseller pursuant to separate written agreements, including, but not
limited to, applicable Bell Atlantic Tariffs. Reseller warrants and agrees
that Reseller will purchase Bell Atlantic Ancillary Services from Bell
Atlantic under this Agreement only for use by Reseller as a
Telecommunications Carrier providing Telecommunications Services.
3.7 Subject to the requirements of Applicable Law, Bell Atlantic
shall have the right to add, modify, grandfather, discontinue or terminate
Bell Atlantic Services at any time, without the consent of Reseller.
4. PRICES
------
4.1 Reseller shall pay Bell Atlantic for Bell Atlantic Services at
the prices stated in this Agreement, including, but not limited to, in
Exhibit II, Attachment 1.
4.2 If, prior to establishment of a Bell Atlantic Service, Reseller
cancels or changes its Order for the Bell Atlantic Service, Reseller shall
reimburse Bell Atlantic for the costs associated with such cancellation or
changes as required by this Agreement (including,
5
<PAGE>
but not limited to, Bell Atlantic's Tariffs).
4.3 Upon request by Bell Atlantic, Reseller shall provide to Bell
Atlantic adequate assurance of payment of charges due to Bell Atlantic.
Assurance of payment of charges may be requested by Bell Atlantic: (a) if
Reseller, in Bell Atlantic's reasonable judgment, at the Effective Date or
at any time thereafter, is unable to show itself to be creditworthy; (b) if
Reseller, in Bell Atlantic's reasonable judgment, at the Effective Date or
at any time thereafter, is not creditworthy; or, (c) if Reseller fails to
timely pay a bill rendered to Reseller by Bell Atlantic. Unless otherwise
agreed by the Parties, the assurance of payment shall be in the form of a
cash deposit and shall be in an amount equal to the charges for Bell
Atlantic Services that Reseller may reasonably be expected to incur during
a period of two (2) months. Bell Atlantic may at any time use the deposit
or other assurance of payment to pay amounts due from Reseller.
5. BILLING AND PAYMENT
-------------------
5.1 Except as otherwise permitted or required by this Agreement, or
agreed in writing by the Parties, Bell Atlantic shall render bills to
Reseller monthly. Except as otherwise agreed in writing by the Parties,
Bell Atlantic will render bills to Reseller in a paper form.
5.2 Reseller shall pay Bell Atlantic's bills in immediately available
U.S. funds. Except as otherwise agreed in writing by the Parties, payments
shall be transmitted by electronic funds transfer.
5.3 Payment of charges shall be due by the due date stated on Bell
Atlantic's bills. Except as otherwise required by Bell Atlantic's Tariffs
or agreed in writing by the Parties, the due date shall not be sooner than
twenty (20) days after the date the bill is received by Reseller.
5.4 Charges which are not paid by the due date stated on Bell
Atlantic's bill shall be subject to a late payment charge. The late payment
charge shall be in an amount specified by Bell Atlantic, which shall not
exceed a rate of one-and-one-half percent (1.5%) of the over-due amount
(including any unpaid, previously billed late payment charges) per month.
5.5 Reseller acknowledges and agrees that:
5.5.1 During the term of this Agreement, Bell Atlantic will be engaged
in developing and deploying new or modified forms of bills for
Telecommunications Carriers who are engaged in the resale of Bell Atlantic
Retail Telecommunications Services and new or modified systems and methods
for computing and rendering such bills.
5.5.2 Prior to the completion of deployment of such new or modified
forms of bills and such new or modified systems and methods for computing
and rendering bills, Bell
6
<PAGE>
Atlantic's form of bill and systems and methods for computing and rendering
bills may be subject to limitations and restrictions, including, but not
limited to, the limitations stated in Section 5.5.3, below, the inability
to provide Reseller with a single, consolidated bill for all Bell Atlantic
Services purchased by Reseller, and the unavailability of bills and billing
information in an electronic form (e.g., bills may be rendered in a paper
form).
5.5.3 Prior to the completion of deployment of the new or modified
forms of bills and the new or modified systems and methods for computing
and rendering bills, Bell Atlantic may apply the discount identified in
Exhibit II, Section 1.1, in a manner (including, but not limited to, in a
"bottom-of-the-bill" format) that results in the Exhibit II, Section 1.1
discount being applied to charges stated in the bill (including, but not
limited to, Subscriber Line Charges, Federal Line Cost Charges, end user
common line charges, carrier selection and change charges, Audiotex Service
charges, and charges for services which are not Bell Atlantic Retail
Telecommunications Services) which are not subject to the Exhibit II,
Section 1.1 discount. Bell Atlantic will implement a "true-up" process and
within six (6) months after the due date of each monthly bill, issue to
Reseller a "true-up" bill for amounts which were not collected from
Reseller under the monthly bill because of the application of the Exhibit
II, Section 1.1 discount to charges which are not subject to the Exhibit
II, Section 1.1 discount. The "true-up" bill may be issued as a part of or
an entry on a monthly bill, as a bill separate from a monthly bill, or in
such other form as Bell Atlantic may determine.
5.6 Although it is the intent of Bell Atlantic to submit timely and
accurate bills, failure by Bell Atlantic to present bills (including, but
not limited to, monthly bills and "true-up" bills) to Reseller in a timely
or accurate manner shall not constitute a breach or default of this
Agreement, or a waiver of a right of payment of the incurred charges, by
Bell Atlantic. Reseller shall not be entitled to dispute charges for Bell
Atlantic Services provided by Bell Atlantic based on Bell Atlantic's
failure to submit a bill for the charges in a timely fashion.
6. TERM
----
6.1 The term of this Agreement shall commence on the Effective Date,
and, except as otherwise provided in this Agreement, shall remain in effect
through August 1, 1998 (the "Initial Term Ending Date"). After the Initial
Term Ending Date, this Agreement shall continue in force and effect unless
and until terminated as provided in this Agreement. Following the Initial
Term Ending Date, either Party may terminate this Agreement by providing
written notice of termination to the other Party, such written notice to be
provided at least ninety (90) days in advance of the date of termination.
6.2 Following termination of this Agreement pursuant to Section 6.1,
this Agreement, as amended from time to time, shall remain in effect as to
any Termination Date Bell Atlantic Service for the remainder of the
Contract Period applicable to such Termination Date Bell Atlantic Service
at the time of the termination of this Agreement. If a Termination Date
Bell Atlantic Service is terminated prior to the expiration of the Contract
Period applicable to such Termination Date Bell Atlantic Service, Reseller
shall pay any termination
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charge provided for in this Agreement.
7. SERVICE INSTALLATION AND MAINTENANCE
------------------------------------
Reseller shall comply with Bell Atlantic's processes and
procedures (including, but not limited to, requirements by Bell Atlantic
that Reseller use Bell Atlantic OSS Services or Bell Atlantic Pre-OSS
Services) for the communication to Bell Atlantic of (a) Reseller's Orders
to provide, change or terminate, Bell Atlantic Services, and (b) Reseller's
requests for information about, assistance in using, or repair or
maintenance of, Bell Atlantic Services. Bell Atlantic may, from time-to-
time, upon notice to Reseller, change these processes and procedures.
8. ASSIGNMENT
----------
8.1 Reseller shall not assign this Agreement or any right or interest
under this Agreement, nor delegate any obligation under this Agreement,
without the prior written approval of Bell Atlantic, which approval shall
not be unreasonably withheld, conditioned or delayed. Any attempted
assignment or delegation in contravention of the foregoing shall be void
and ineffective.
8.2 Bell Atlantic may, without the consent of Reseller, assign this
Agreement or any right or interest under this Agreement, and/or delegate
any obligation under this Agreement, to any of Bell Atlantic's Affiliates,
or to a person with which Bell Atlantic merges or which acquires
substantially all of Bell Atlantic's assets.
9. AVAILABILITY OF SERVICE
-----------------------
9.1 Subject to the requirements of Applicable Law, Bell Atlantic
shall be obligated to provide Bell Atlantic Services to Reseller under this
Agreement only where Bell Atlantic is able, without unreasonable expense
(as determined by Bell Atlantic in its reasonable judgment), (a) to obtain,
retain, install and maintain suitable facilities for the provision of such
Bell Atlantic Services, and (b) to obtain, retain and maintain suitable
rights for the provision of such Bell Atlantic Services.
9.2 Bell Atlantic's obligation to provide a Bell Atlantic Retail
Telecommunications Service to Reseller under this Agreement shall be
limited to providing the Bell Atlantic Retail Telecommunications Service to
Reseller where, and to the same extent, that Bell Atlantic provides such
Bell Atlantic Retail Telecommunications Service to Bell Atlantic's own end
user retail Customers.
10. BRANDING
--------
10.1 Except as stated in Section 10.2, in providing Bell Atlantic
Services to Reseller, Bell Atlantic shall have the right, but not the
obligation, to identify the Bell Atlantic
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Services with Bell Atlantic's trade names, trademarks and service marks.
Any such identification of the Bell Atlantic Services shall not constitute
the grant of a license or other right to Reseller to use Bell Atlantic's
trade names, trade marks or service marks.
10.2 To the extent required by Applicable Law, upon request by
Reseller and at prices, terms and conditions to be negotiated by Reseller
and Bell Atlantic, Bell Atlantic shall provide Bell Atlantic Retail
Telecommunications Services that are identified by Reseller's trade name,
or that are not identified by trade name, trademark or service mark.
11. CHOICE OF LAW
-------------
11.1 The construction, interpretation and performance of this
Agreement shall be governed by the laws of the United States of America and
the laws of Jurisdiction (without regard to Jurisdiction's conflicts of
laws rules). All disputes relating to this Agreement shall be resolved
through the application of such laws.
11.2 Reseller agrees to submit to the jurisdiction of any court,
commission or other governmental entity in which a claim, suit or
proceeding which arises out of or in connection with this Agreement or Bell
Atlantic Services provided under this Agreement and in which Bell Atlantic
is a party, is brought.
12. COMPLIANCE WITH APPLICABLE LAW
------------------------------
12.1 Each Party shall in its performance of this Agreement comply with
Applicable Law, including, but not limited to, all applicable regulations
and orders of the Commission and the Federal Communications Commission
(hereinafter the "FCC").
12.2 Reseller shall in providing Bell Atlantic Retail
Telecommunications Services to Reseller Customers comply with Applicable
Law, including, but not limited to, all applicable regulations and orders
of the Commission and the FCC.
13. CONFIDENTIAL INFORMATION
------------------------
13.1 For the purposes of this Section 13, "Confidential Information"
means the following information disclosed by one Party ("Discloser") to the
other Party ("Recipient") in connection with this Agreement:
(a) Customer Information related to a Reseller Customer which is
disclosed by Reseller to Bell Atlantic (except to the extent that (i) the
Customer Information is subject to publication in a directory, (ii) the
Customer Information is subject to disclosure through an Operator Service
or other Telecommunications Service, or in the course of furnishing
Telecommunications Services, or (iii) the Reseller Customer to whom the
Customer Information is related, in the manner required by Applicable Law,
has given Bell Atlantic permission to use and/or disclose the Customer
Information);
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(b) Customer Information related to a Bell Atlantic Customer
which is disclosed by Bell Atlantic to Reseller (except to the extent that
the Bell Atlantic Customer to whom the Customer Information is related, in
the manner required by Applicable Law, has given Reseller permission to use
and/or disclose the Customer Information);
(c) Information related to specific Bell Atlantic facilities and
equipment (including, but not limited to, cable-and-pair information) which
is disclosed by Bell Atlantic to Reseller; and
(d) Any other information which is identified by the Discloser
as Confidential Information in accordance with Section 13.2.
13.2 All information which is to be treated as Confidential
Information under Section 13.1(d) shall:
(a) if in written, graphic, electromagnetic, or other tangible
form, be marked as "Confidential" or "Proprietary"; and
(b) if oral, (i) be identified by the Discloser at the time of
disclosure to be "Confidential" or "Proprietary", and (ii) be set forth in
a written summary which identifies the information as "Confidential" or
"Proprietary" and is delivered by the Discloser to the Recipient within ten
(10) days after the oral disclosure.
Each Party shall have the right to correct an inadvertent failure
to identify information as Confidential Information pursuant to Section
13.1(d) by giving written notification within thirty (30) days after the
information is disclosed. The Recipient shall, from that time forward,
treat such information as Confidential Information.
Notwithstanding any other provision of this Agreement, a Party
shall have the right to refuse to accept receipt of information which the
other Party has identified as Confidential Information pursuant to Section
13.1(d).
13.3 In addition to any requirements imposed by law, including, but
not limited to, 47 U.S.C. (S) 222, for a period of five years from the
receipt of Confidential Information from the Discloser, except as otherwise
specified in this Agreement, the Recipient agrees:
(a) to use the Confidential Information only for the purpose of
performing under this Agreement;
(b) using the same degree of care that it uses with similar
confidential information of its own, to hold the Confidential Information
in confidence and restrict disclosure of the Confidential Information
solely to the Recipient's Affiliates, and the directors, officers and
employees of the Recipient and the Recipient's Affiliates, having a
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need to know the Confidential Information for the purpose of performing
under this Agreement. The Recipient's Affiliates and the directors,
officers and employees of the Recipient and the Recipient's Affiliates,
shall be required by the Recipient to comply with the provisions of this
Section 13 in the same manner as the Recipient. The Recipient shall be
liable for any failure of the Recipient's Affiliates and the directors,
officers and employees of the Recipient and the Recipient's Affiliates, to
comply with the provisions of this Section 13.
13.4 If the Recipient wishes to disclose the Discloser's Confidential
Information to a third party Agent or contractor, such disclosure must be
mutually agreed to in writing by the Parties to this Agreement, and the
Agent or contractor must have executed a written agreement of non-
disclosure and non-use comparable in scope to the terms of this Section 13.
13.5 The Recipient may make copies of Confidential Information only as
reasonably necessary to perform its obligations under this Agreement. All
such copies shall bear the same copyright and proprietary rights notices as
are contained on the original.
13.6 The Recipient shall return or destroy all Confidential
Information received from the Discloser, including any copies made by the
Recipient, within thirty (30) days after a written request by the Discloser
is delivered to the Recipient, except for (a) Confidential Information that
the Recipient reasonably requires to perform its obligations under this
Agreement, and (b) Customer Information related to a Reseller Customer that
is to be treated by Bell Atlantic as Confidential Information pursuant to
Section 13.1(a). If the Recipient loses or makes an unauthorized disclosure
of the Discloser's Confidential Information, it shall notify the Discloser
immediately and use reasonable efforts to retrieve the lost or improperly
disclosed information.
13.7 The requirements of this Section 13 shall not apply to
Confidential Information:
(a) which was in the possession of the Recipient free of
restriction prior to its receipt from the Discloser;
(b) after it becomes publicly known or available through no
breach of this Agreement by the Recipient, the Recipient's Affiliates, or
the directors, officers, employees, Agents, or contractors, of the
Recipient or the Recipient's Affiliates;
(c) after it is rightfully acquired by the Recipient free of
restrictions on its disclosure;
(d) after it is independently developed by the Recipient; or
(e) to the extent the disclosure is required by Applicable Law,
a court, or
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governmental agency; provided, the Discloser has been notified of the
required disclosure promptly after the Recipient becomes aware of the
required disclosure, the Recipient undertakes reasonable lawful measures to
avoid disclosing the Confidential Information until the Discloser has had
reasonable time to seek a protective order, and the Recipient complies with
any protective order that covers the Confidential Information to be
disclosed.
13.8 Each Party's obligations to safeguard Confidential Information
disclosed prior to expiration, cancellation or termination of this
Agreement shall survive such expiration, cancellation or termination.
13.9 Confidential Information shall remain the property of the
Discloser, and the Discloser shall retain all of the Discloser's right,
title and interest in any Confidential Information disclosed by the
Discloser to the Recipient. Except as otherwise expressly provided
elsewhere in this Agreement, no license is granted by this Agreement with
respect to any Confidential Information (including, but not limited to,
under any patent, trademark, or copyright), nor is any such license to be
implied, solely by virtue of the disclosure of any Confidential
Information.
13.10 Each Party agrees that the Discloser would be irreparably injured
by a breach of this Section 13 by the Recipient, the Recipient's
Affiliates, or the directors, officers, employees, Agents or contractors of
the Recipient or the Recipient's Affiliates, and that the Discloser shall
be entitled to seek equitable relief, including injunctive relief and
specific performance, in the event of any breach of the provisions of this
Section 13. Such remedies shall not be deemed to be the exclusive remedies
for a breach of this Section 13, but shall be in addition to any other
remedies available under this Agreement or at law or in equity.
13.11 The provisions of this Section 13 shall be in addition to and not
in derogation of any provisions of Applicable Law, including, but not
limited to, 47 U.S.C. (S) 222, and are not intended to constitute a waiver
by a Party of any right with regard to protection of the confidentiality of
information of the Party or its Customers provided by Applicable Law. In
the event of a conflict between a provision of this Section 13 and a
provision of Applicable Law, the provision of Applicable Law shall prevail.
14. CONTINGENCIES
-------------
Neither Party shall be liable for any delay or failure in
performance by it which results from strikes, labor slowdowns, or other
labor disputes, fires, explosions, floods, earthquakes, volcanic action,
delays in obtaining or inability to obtain necessary services, facilities,
equipment, parts or repairs thereof, power failures, embargoes, boycotts,
unusually severe weather conditions, revolution, riots or other civil
disturbances, war or acts of the public enemy, acts of God, or causes
beyond the Party's reasonable control.
15. COUNTERPARTS
------------
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This Agreement may be executed in two or more counterparts, each
of which shall be deemed an original and all of which shall together
constitute one and the same instrument.
16. CUSTOMER INFORMATION
--------------------
16.1 Without in any way limiting Section 12, each Party shall comply
with Applicable Law with regard to Customer Information, including, but not
limited to, 47 U.S.C. (S) 222.
16.2 A Party ("Accessing Party") shall not access (including, but not
limited to, in the case of Reseller, through Bell Atlantic OSS Services and
Bell Atlantic Pre-OSS Services), use or disclose Customer Information made
available to the Accessing Party by the other Party pursuant to this
Agreement unless the Accessing Party, in the manner required by Applicable
Law, has obtained any Customer authorization for such access, use and/or
disclosure required by Applicable Law. By accessing, using or disclosing
Customer Information made available to the Accessing Party by the other
Party pursuant to this Agreement, the Accessing Party represents and
warrants that the Accessing Party has obtained, in the manner required by
Applicable Law, any Customer authorization for such action required by
Applicable Law. The Accessing Party shall upon request by the other Party
provide proof of such authorization (including, a copy of any written
authorization).
16.3 Bell Atlantic shall have the right (but not the obligation) to
audit Reseller to ascertain whether Reseller is complying with the
requirements of Applicable Law and this Agreement, with regard to
Reseller's access to, and use and disclosure of, Customer Information which
is made available to Reseller by Bell Atlantic pursuant to this Agreement.
16.4 In addition to Bell Atlantic's audit rights under Section 16.3,
Bell Atlantic shall have the right (but not the obligation) to monitor
Reseller's access to and use of Customer Information which is made
available by Bell Atlantic to Reseller pursuant to this Agreement, to
ascertain whether Reseller is complying with the requirements of Applicable
Law and this Agreement, with regard to Reseller's access to, and use and
disclosure of, such Customer Information. The foregoing right shall
include, but not be limited to, the right (but not the obligation) to
electronically monitor Reseller's access to and use of Customer Information
which is made available by Bell Atlantic to Reseller pursuant to this
Agreement through Bell Atlantic OSS Facilities or other electronic
interfaces or gateways.
16.5 Information obtained by Bell Atlantic pursuant to Section 16.3 or
Section 16.4 shall be treated by Bell Atlantic as Confidential Information
of Reseller pursuant to Section 13; provided that, Bell Atlantic shall have
the right (but not the obligation) to use and disclose information obtained
by Bell Atlantic pursuant to this Section 16 to enforce Applicable Law
and/or Bell Atlantic's rights under this Agreement.
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17. DEFAULT
-------
17.1 If Reseller materially breaches a material provision of this
Agreement (other than an obligation to make payment of any amount billed
under this Agreement), and such breach continues for more than thirty (30)
days after written notice thereof from Bell Atlantic, then, except as
otherwise required by Applicable Law, Bell Atlantic shall have the right,
upon notice to Reseller, to terminate or suspend this Agreement and/or
provision of Bell Atlantic Services, in whole or in part.
17.2.1 If Reseller fails to make a payment of any amount billed under
this Agreement by the due date stated on the bill and such failure
continues for more than thirty (30) days after written notice thereof from
Bell Atlantic, then, except as provided in Section 17.2.2, below, or as
otherwise required by Applicable Law, Bell Atlantic shall have the right,
upon notice to Reseller, to terminate or suspend this Agreement and/or
provision of Bell Atlantic Services, in whole or in part.
17.2.2 If a good faith dispute arises between the Parties concerning the
obligation of Reseller to make payment of an amount billed under this
Agreement, the failure to pay the amount in dispute shall not constitute
cause for termination or suspension of this Agreement or provision of Bell
Atlantic Services, if, within thirty (30) days of the date that Bell
Atlantic gives Reseller written notice of the failure to pay the amount in
dispute, Reseller (a) gives Bell Atlantic written notice of the dispute
stating the basis of the dispute, and (b) furnishes to Bell Atlantic an
irrevocable letter of credit in a form acceptable to Bell Atlantic or other
security arrangement acceptable to Bell Atlantic, guaranteeing payment to
Bell Atlantic of any portion of the disputed amount (including the whole of
the disputed amount) which is thereafter agreed by Bell Atlantic and
Reseller, or determined by a court or other governmental entity of
appropriate jurisdiction, to be due to Bell Atlantic. The existence of such
a dispute shall not relieve Reseller of its obligations to pay any
undisputed amount which is due to Bell Atlantic and to otherwise comply
with this Agreement.
18. FACILITIES
----------
18.1 Bell Atlantic or its suppliers shall retain all right, title and
interest in, and ownership of, all facilities, equipment, software,
information, and wiring, used to provide Bell Atlantic Services. Bell
Atlantic shall have access at all reasonable times to Reseller and Reseller
Customer locations for the purpose of installing, inspecting, maintaining,
repairing, and removing, facilities, equipment, software, and wiring, used
to provide the Bell Atlantic Services. Reseller shall, at Reseller's
expense, obtain any rights and authorizations necessary for such access.
18.2 Except as otherwise agreed to in writing by Bell Atlantic, Bell
Atlantic shall not be responsible for the installation, inspection, repair,
maintenance, or removal, of facilities, equipment, software, or wiring,
provided by Reseller or Reseller Customers for use with Bell Atlantic
Services.
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19. INTELLECTUAL PROPERTY
---------------------
Except as expressly stated in this Agreement, nothing contained
within this Agreement shall be construed as the grant of a license, either
express or implied, with respect to any patent, copyright, trade name,
trade mark, service mark, trade secret, or other proprietary interest or
intellectual property, now or hereafter owned, controlled or licensable by
either Party.
20. JOINT WORK PRODUCT
------------------
The Principal Document is the joint work product of the
representatives of the Parties. For convenience, the Principal Document has
been drafted in final form by Bell Atlantic. Accordingly, in the event of
ambiguities, no inferences shall be drawn against either Party solely on
the basis of authorship of the Principal Document.
21. LIABILITY
---------
21.1.1 AS USED IN THIS SECTION 21, "OTHER BELL ATLANTIC PERSONS" MEANS
BELL ATLANTIC'S AFFILIATES, AND THE DIRECTORS, OFFICERS, EMPLOYEES, AGENTS
AND CONTRACTORS, OF BELL ATLANTIC AND BELL ATLANTIC'S AFFILIATES.
21.1.2 AS USED IN THIS SECTION 21, "BELL ATLANTIC SERVICE FAILURE" MEANS
AND INCLUDES ANY FAILURE TO INSTALL, RESTORE, PROVIDE OR TERMINATE A BELL
ATLANTIC SERVICE, AND ANY MISTAKE, OMISSION, INTERRUPTION, DELAY, ERROR,
DEFECT, FAULT, FAILURE, OR DEFICIENCY, IN A BELL ATLANTIC SERVICE.
21.2 THE LIABILITY, IF ANY, OF BELL ATLANTIC AND OTHER BELL ATLANTIC
PERSONS, TO RESELLER, RESELLER CUSTOMERS AND/OR ANY OTHER PERSON, FOR ANY
CLAIM, LOSS OR DAMAGES ARISING OUT OF OR IN CONNECTION WITH A BELL ATLANTIC
SERVICE FAILURE, SHALL BE LIMITED AND/OR EXCLUDED AS SET FORTH IN BELL
ATLANTIC'S TARIFFS.
21.3.1 TO THE EXTENT THE BELL ATLANTIC TARIFFS APPLICABLE TO A BELL
ATLANTIC SERVICE DO NOT CONTAIN A PROVISION WHICH LIMITS OR EXCLUDES THE
LIABILITY OF BELL ATLANTIC AND/OR OTHER BELL ATLANTIC PERSONS TO RESELLER,
RESELLER CUSTOMERS AND/OR ANY OTHER PERSON, FOR ANY CLAIM, LOSS OR DAMAGES
ARISING OUT OF OR IN CONNECTION WITH A BELL ATLANTIC SERVICE FAILURE,
SECTION 21.3.3 SHALL APPLY.
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21.3.2 TO THE EXTENT A BELL ATLANTIC SERVICE IS NOT SUBJECT TO A BELL
ATLANTIC TARIFF, SECTION 21.3.3 SHALL APPLY.
21.3.3 THE LIABILITY, IF ANY, OF BELL ATLANTIC AND OTHER BELL ATLANTIC
PERSONS, TO RESELLER, RESELLER CUSTOMERS AND/OR ANY OTHER PERSON, FOR ANY
CLAIM, LOSS OR DAMAGES ARISING OUT OF OR IN CONNECTION WITH A BELL ATLANTIC
SERVICE FAILURE, SHALL BE LIMITED TO A TOTAL AMOUNT NOT IN EXCESS OF: (A)
TWICE THE PROPORTIONATE CHARGE FOR THE BELL ATLANTIC SERVICE AFFECTED
DURING THE PERIOD OF THE BELL ATLANTIC SERVICE FAILURE; OR, (B) IF THERE IS
NO CHARGE FOR THE BELL ATLANTIC SERVICE AFFECTED, FIVE HUNDRED DOLLARS
($500.00).
21.4 NOTWITHSTANDING ANYTHING CONTAINED IN SECTION 21.2, SECTION
21.3.1, SECTION 21.3.2, OR SECTION 21.3.3, ABOVE, BELL ATLANTIC AND OTHER
BELL ATLANTIC PERSONS SHALL HAVE NO LIABILITY TO RESELLER, RESELLER
CUSTOMERS, AND/OR ANY OTHER PERSON, FOR ANY SPECIAL, INDIRECT, INCIDENTAL,
OR CONSEQUENTIAL, DAMAGES (INCLUDING, BUT NOT LIMITED TO, DAMAGES FOR HARM
TO BUSINESS, LOST REVENUES, LOST PROFITS, LOST SAVINGS, OR OTHER COMMERCIAL
OR ECONOMIC LOSS), ARISING OUT OF OR IN CONNECTION WITH A BELL ATLANTIC
SERVICE FAILURE OR ANY BREACH OR FAILURE IN PERFORMANCE OF THIS AGREEMENT
BY BELL ATLANTIC.
21.5 THE LIMITATIONS AND EXCLUSIONS FROM LIABILITY STATED IN SECTIONS
21.2 THROUGH 21.4 SHALL APPLY REGARDLESS OF THE FORM OF A CLAIM OR ACTION,
WHETHER IN CONTRACT, WARRANTY, TORT (INCLUDING, BUT NOT LIMITED TO, THE
NEGLIGENCE OF BELL ATLANTIC AND/OR OTHER BELL ATLANTIC PERSONS), STRICT
LIABILITY, OR OTHERWISE, AND REGARDLESS OF WHETHER BELL ATLANTIC HAS BEEN
ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
21.6 Reseller shall, in its tariffs or other contracts with Reseller
Customers, provide that in no case shall Bell Atlantic or Other Bell
Atlantic Persons be liable to Reseller Customers or to any other third
parties for any indirect, special, incidental, consequential, or other
damages, including, but not limited to, harm to business, lost revenues,
lost profits, lost savings, or other commercial or economic loss, whether
foreseeable or not, and regardless of notification of the possibility of
such damages. Reseller shall indemnify, defend and hold Bell Atlantic and
Other Bell Atlantic Persons harmless from claims by Reseller Customers and
other third parties as provided in Bell Atlantic's Tariffs.
21.7 Bell Atlantic's obligations under this Agreement shall extend
only to Reseller. Bell Atlantic shall have no liability under this
Agreement to Reseller Customers or to any other third party. Nothing in
this Agreement shall be deemed to create a third party
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beneficiary relationship between Bell Atlantic and Reseller Customers or
any other third party.
21.8 Reseller shall indemnify, defend and hold harmless Bell Atlantic,
Bell Atlantic's Affiliates, and the directors, officers and employees of
Bell Atlantic and Bell Atlantic's Affiliates, from any claims, suits,
government proceedings, judgments, fines, liabilities, losses, damages,
costs or expenses (including reasonable attorneys fees) arising out of or
in connection with: (a) the failure of Reseller to transmit to Bell
Atlantic a request by a Reseller Customer to install, provide, change or
terminate, a Bell Atlantic Retail Telecommunications Service; (b) the
transmission by Reseller to Bell Atlantic of an Order to install, provide,
change or terminate, a Bell Atlantic Retail Telecommunications Service,
which Order was not authorized by the applicable Reseller Customer; (c)
erroneous or inaccurate information in an Order transmitted by Reseller to
Bell Atlantic; (d) the transmission by Reseller to Bell Atlantic of an
Order to change or terminate a Telecommunications Service provided to an
end user by Bell Atlantic or another Telecommunications Service provider,
or to install or provide a Telecommunications Service for an end user,
which Order was not authorized by the applicable end user; (e) the
transmission by Reseller to Bell Atlantic of an Order to select, change or
reassign a telephone number for an end user, which Order was not authorized
by the applicable end user; (f) the transmission by Reseller to Bell
Atlantic of an Order to select a Telephone Exchange Service provider for an
end user, or to change or terminate an end user's selection of a Telephone
Exchange Service provider, which Order was not authorized by the applicable
end user in the manner required by Applicable Law (or, in the absence of
such Applicable Law, in the manner required by the rules and procedures in
47 CFR (S) 64.1100); (g) access to, or use or disclosure of, Customer
Information or Bell Atlantic OSS Information by Reseller or Reseller's
employees, Agents or contractors; (h) the failure of Reseller to transmit,
or to transmit in a timely manner, E911/911 information to Bell Atlantic;
(i) erroneous or inaccurate E911/911 information transmitted by Reseller to
Bell Atlantic; (j) any information provided by Reseller for inclusion in
Bell Atlantic's LIDB; or, (k) the marketing, advertising or sale of
Reseller's services and/or products (including, but not limited to, resold
Bell Atlantic Retail Telecommunications Services), or the billing or
collection of charges for Reseller's services and/or products (including,
but not limited to, resold Bell Atlantic Retail Telecommunications
Services). For the purposes of Section 21.8(b), (d) and (e), an Order shall
be deemed not to have been authorized by a Reseller Customer or end user if
Applicable Law and/or this Agreement required such authorization to be
obtained in a particular manner, and Reseller did not obtain the
authorization in the manner required by Applicable Law and this Agreement.
22. NON-EXCLUSIVE REMEDIES
----------------------
Except as otherwise expressly provided in this Agreement, each of
the remedies provided under this Agreement is cumulative and is in addition
to any other remedies that may be available under this Agreement or at law
or in equity.
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23. NOTICES
-------
All notices and other communications under this Agreement shall
be deemed effective upon receipt by the Party being notified, provided such
notices or communications are in writing and are sent by certified or
registered mail, return receipt requested, or by a reputable private
delivery service which provides a record of delivery, and addressed as
shown below:
To Bell Atlantic:
Bell Atlantic - Pennsylvania, Inc.
c/o Bell Atlantic Network Services, Inc.
1320 North Court House Road, 9th Floor Arlington, Virginia 22201
Attn.: Director, Resale Initiatives
To Reseller:
OnePoint Communications Holdings, LLC
5335 Wisconsin Avenue, N.W., Suite 950
Washington, DC 20015
Attn.: William Wallace, President
Either Party may from time-to-time designate another address or
addressee by giving notice in accordance with this Section 23.
24. OPTION TO OBTAIN BELL ATLANTIC SERVICE UNDER OTHER AGREEMENTS
-------------------------------------------------------------
24.1 If, at any time while this Agreement is in effect, Bell Atlantic
is a party to an agreement with a Telecommunications Carrier other than
Reseller ("Third-Person Telecommunications Carrier) to provide Bell
Atlantic Services to the Third-Person Telecommunications Carrier, which
agreement has been approved by the Commission pursuant to 47 U.S.C. (S)
252, upon request by Reseller, Bell Atlantic, to the extent required by
Applicable Law (including, but not limited to 47 U.S.C. (S) 252(i)), shall
make available to Reseller any Bell Atlantic Service offered by Bell
Atlantic under the agreement with the Third-Person Telecommunications
Carrier upon the same terms and conditions (including prices) provided in
the agreement with the Third-Person Telecommunications Carrier, but (except
as otherwise expressly agreed in writing by the Parties) only on a
prospective basis. Following such request by Reseller and prior to
provision of the Bell Atlantic Service by Bell Atlantic to Reseller
pursuant to the terms and conditions (including prices) of the Third-Person
Telecommunications Carrier agreement, this Agreement shall be amended to
incorporate the terms and conditions (including prices) from the Third-
Person Telecommunications Carrier agreement applicable to the Bell Atlantic
Service Reseller has elected to purchase pursuant to the terms and
conditions (including prices) of the Third-Person Telecommunications
Carrier agreement. Except as otherwise expressly agreed in
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writing by the Parties, the amendment shall apply on a prospective basis
only and shall not apply with regard to any Bell Atlantic Service provided
by Bell Atlantic to Reseller prior to the effective date of the amendment.
24.2 To the extent the exercise of the foregoing option requires a
rearrangement of facilities by Bell Atlantic, Reseller shall be liable for
the non-recurring charges associated therewith, as well as for any
termination charges associated with the termination of existing facilities
or Bell Atlantic Services.
25. REGULATORY APPROVALS
--------------------
25.1 Within thirty (30) days after execution of this Agreement by the
Parties, Bell Atlantic shall file the Agreement with the Commission for
approval by the Commission.
25.2 Each Party shall exercise reasonable efforts (including
reasonably cooperating with the other Party) to secure approval of this
Agreement, and any amendment to this Agreement agreed to by the Parties,
from the Commission, the FCC, and other applicable governmental entities.
25.3 Upon request by Bell Atlantic, Reseller shall, at Reseller's
expense, provide reasonable, good-faith support and assistance to Bell
Atlantic in obtaining any governmental approvals necessary for (a) this
Agreement and any amendment to this Agreement agreed to by the Parties,
and/or (b) the provision of Bell Atlantic Services by Bell Atlantic to
Reseller. Without in any way limiting the foregoing, upon request by Bell
Atlantic, Reseller shall (a) join in petitions requesting approval of this
Agreement, or an amendment to this Agreement agreed to by the Parties, to
be filed with the Commission, the FCC, or other applicable governmental
entities, and (b) file other documents with and present testimony to the
Commission, the FCC, or other applicable governmental entities, requesting
approval of this Agreement or an amendment to this Agreement agreed to by
the Parties.
26. REGULATORY CONTINGENCIES
------------------------
26.1 Neither Party shall be liable for any delay or failure in
performance by it which results from requirements of Applicable Law, or
acts or failures to act of any governmental entity or official.
26.2 In the event that any provision of this Agreement shall be
invalid or unenforceable, such invalidity or unenforceability shall not
invalidate or render unenforceable any other provision of this Agreement,
and this Agreement shall be construed as if it did not contain such invalid
or unenforceable provision.
26.3 In the event that any legislative, regulatory, judicial or other
governmental action materially affects any material terms of this
Agreement, the ability of either Party to perform any material terms of
this Agreement, or the rights or obligations of either Party
19
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under this Agreement, the Parties shall take such action as shall be
necessary to conform this Agreement to the governmental action and/or to
permit Bell Atlantic to continue to provide and Reseller to continue to
purchase Bell Atlantic Services, including, but not limited to, conducting
good faith negotiations to enter into a mutually acceptable modified or
substitute agreement, filing tariffs, or additional, supplemental or
modified tariffs, and making other required filings with governmental
entities.
26.4 In the event of a governmental action described in Section 26.3,
above, to the extent permitted by Applicable Law, Bell Atlantic shall
continue to provide and Reseller shall continue to subscribe to, use and
pay for, any Bell Atlantic Services affected by the governmental action
until the action to be taken by Bell Atlantic and Reseller under Section
26.3, above, is taken and becomes effective in accordance with Applicable
Law. Such continued provision of and subscription to, use of and payment
for, the affected Bell Atlantic Services shall be in accordance with the
terms (including prices) of this Agreement, unless other terms, including
but not limited to the terms of a Bell Atlantic Tariff, are required by
Applicable Law.
26.5 If suspension or termination of the provision of any Bell
Atlantic Service is required by or as a result of a governmental action,
such suspension or termination shall not affect Reseller's subscription to,
use or obligation to pay for, other Bell Atlantic Services, unless such
suspension or termination has a material, adverse effect on Reseller's
ability to use the other Bell Atlantic Services.
26.6 If any of the Bell Atlantic Services to be provided by Bell
Atlantic pursuant to a tariff shall at any time become detariffed or
deregulated, Bell Atlantic may transfer the provisions of the tariff
relative to such Bell Atlantic Services to a Bell Atlantic "Guide for
Detariffed Services" or similar document, and such "Guide for Detariffed
Services" or similar document, as amended by Bell Atlantic from time-to-
time, shall become a part of this Agreement.
27. RELATIONSHIP OF THE PARTIES
---------------------------
27.1 The relationship between the Parties under this Agreement shall
be that of independent contractors.
27.2 Nothing contained in this Agreement shall:
(a) make either Party the Agent or employee of the other Party;
(b) grant either Party the authority to enter into a contract on
behalf of, or otherwise legally bind, the other Party in any way;
(c) create a partnership, joint venture or other similar
relationship between the parties; or
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<PAGE>
(d) grant to Reseller a franchise, distributorship or similar
interest.
27.3 Each Party shall be solely responsible for selection,
supervision, termination, and compensation, of its respective employees,
Agents and contractors.
27.4 Each Party shall be solely responsible for payment of any Social
Security or other taxes which it is required by Applicable Law to pay in
conjunction with its employees, Agents or contractors, and for collecting
and remitting to applicable taxing authorities any taxes which it is
required by Applicable Law to collect from its employees, Agents or
contractors.
27.5 The relationship of the Parties under this Agreement is a non-
exclusive relationship. Bell Atlantic shall have the right to provide
services offered by Bell Atlantic under this Agreement to persons other
than Reseller. Reseller shall have the right to purchase services that may
be purchased by Reseller under this Agreement from persons other than Bell
Atlantic.
28. RESELLER'S PROVISION OF SERVICE
-------------------------------
28.1 Prior to providing Bell Atlantic Retail Telecommunications
Services purchased by Reseller under this Agreement to Reseller Customers,
Reseller shall obtain from the Commission, the FCC, and any other
applicable governmental entities, any certificates or other authorizations
required by Applicable Law for Reseller to provide Telecommunications
Services. Reseller shall promptly notify Bell Atlantic in writing of any
governmental action which suspends, cancels or withdraws any such
certificate or authorization, or otherwise limits or affects Reseller's
right to provide Telecommunications Services.
28.2 To the extent required by Applicable Law, Reseller shall: (a)
file with the Commission, the FCC, and/or other applicable governmental
entities, the tariffs, arrangements and other documents that set forth the
terms, conditions and prices under which Reseller provides
Telecommunications Services; and, (b) make available for public inspection,
the tariffs, arrangements and other documents that set forth the terms,
conditions and prices under which Reseller provides Telecommunications
Services.
29. RESELLER'S RESALE AND USE OF SERVICE
------------------------------------
29.1 Reseller shall comply with the provisions of this Agreement
(including, but not limited to, Bell Atlantic's Tariffs) regarding resale
or use of Bell Atlantic Services, including, but not limited to, any
restrictions on resale or use of Bell Atlantic Services.
29.2 Without in any way limiting Section 29.1, (a) Reseller shall not
resell residential service to persons not eligible to subscribe to such
service from Bell Atlantic
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(including, but not limited to, business Reseller Customers and other
nonresidential Reseller Customers), and (b) Reseller shall not resell
Lifeline or other means-tested service offerings, or grandfathered or
discontinued service offerings, to persons not eligible to subscribe to
such service offerings from Bell Atlantic.
29.3 Reseller shall undertake in good faith to ensure that Reseller
Customers comply with the provisions of Bell Atlantic's Tariffs applicable
to their use of Bell Atlantic Retail Telecommunications Services.
29.4 Reseller shall comply with Applicable Law, and Bell Atlantic's
procedures, for handling requests from law enforcement and other government
agencies for service termination, assistance with electronic surveillance,
and provision of information.
30. RESPONSIBILITY FOR CHARGES
--------------------------
30.1 Reseller shall be responsible for and pay all charges for any
Bell Atlantic Service provided by Bell Atlantic to Reseller, whether the
Bell Atlantic Service is ordered, activated or used by Reseller, a Reseller
Customer, or another person.
30.2 In addition to the charges for Bell Atlantic Services, Reseller
agrees to pay any charges for Telecommunications Services, facilities,
equipment, software, wiring, or other services or products, provided by
Bell Atlantic, or provided by persons other than Bell Atlantic and billed
for by Bell Atlantic, that are ordered, activated or used by Reseller,
Reseller Customers or other persons, through, by means of, or in
association with, Bell Atlantic Services provided by Bell Atlantic to
Reseller.
30.3 Reseller agrees to indemnify, defend and hold Bell Atlantic
harmless from, any charges for Telecommunications Services, facilities,
equipment, software, wiring, or other services or products, provided by
persons other than Bell Atlantic that are ordered, activated or used by
Reseller, Reseller Customers or other persons, through, by means of, or in
association with, Bell Atlantic Services provided by Bell Atlantic to
Reseller.
30.4 Without in any way limiting Reseller's obligations under Section
30.1, Section 30.2 and Section 30.3, Reseller shall pay, or collect and
remit to Bell Atlantic, without discount, all Subscriber Line Charges,
Federal Line Cost Charges, end user common line charges, and carrier
selection and change charges, associated with Bell Atlantic Services
provided by Bell Atlantic to Reseller.
30.5 Upon request by Reseller, Bell Atlantic will provide for use on
resold Bell Atlantic Retail Telecommunications Service dial tone lines
purchased by Reseller such Bell Atlantic Retail Telecommunications Service
call blocking services as Bell Atlantic provides to Bell Atlantic's own end
user retail Customers, where and to the extent Bell Atlantic provides such
Bell Atlantic Retail Telecommunications Service call blocking services to
Bell Atlantic's own end user retail Customers.
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31. SECTION HEADINGS
----------------
The section headings in the Principal Document are for
convenience only and are not intended to affect the meaning or
interpretation of the Principal Document.
32. SERVICES NOT COVERED BY THIS AGREEMENT
--------------------------------------
32.1 This Agreement applies only to Bell Atlantic Services (as the
term "Bell Atlantic Service" is defined in Section 1.1.6) provided, or to
be provided, by Bell Atlantic to Reseller, as specified in Section 3. Any
Telecommunications Services, facilities, equipment, software, wiring, or
other services or products (including, but not limited to,
Telecommunications Services, facilities, equipment, software, wiring, or
other services or products, interconnected or used with Bell Atlantic
Services provided, or to be provided, by Bell Atlantic to Reseller)
provided, or to be provided, by Bell Atlantic to Reseller, which are not
subscribed to by Reseller under this Agreement, must be subscribed to by
Reseller separately, pursuant to other written agreements (including, but
not limited to, applicable Bell Atlantic Tariffs). Reseller shall use and
pay for any Telecommunications Services, facilities, equipment, software,
wiring, or other services or products, provided, or to be provided, by Bell
Atlantic to Reseller, which are not subscribed to by Reseller under this
Agreement, in accordance with such other written agreements (including, but
not limited to, applicable Bell Atlantic Tariffs).
32.2 Without in any way limiting Section 32.1 and without attempting
to list all Bell Atlantic products and services that are not subject to
this Agreement, the Parties agree that this Agreement does not apply to the
purchase by Reseller of the following Bell Atlantic services and products:
except as expressly stated in the Principal Document, exchange access
services as defined in Section 3(16) of the Act, 47 U.S.C. (S) 153(16)
(including, but not limited to, primary interLATA toll carrier and primary
intraLATA toll carrier choice or change); Bell Atlantic Answer Call, Bell
Atlantic Answer Call Plus, Bell Atlantic Home Voice Mail, Bell Atlantic
Home Voice Mail Plus, Bell Atlantic Voice Mail, Bell Atlantic Basic
Mailbox, Bell Atlantic OptiMail Service, and other voice mail, fax mail,
voice messaging, and fax messaging, services; Bell Atlantic Optional Wire
Maintenance Plan; Bell Atlantic Guardian Enhanced Maintenance Service; Bell
Atlantic Sentry I Enhanced Maintenance Service; Bell Atlantic Sentry II
Enhanced Maintenance Service; Bell Atlantic Sentry III Enhanced Maintenance
Service; Bell Atlantic Call 54 Service; Bell Atlantic Public Telephone
Service; customer premises equipment; Bell Atlantic telephone directory
listings offered under agreements or arrangements other than Bell Atlantic
Tariffs filed with the Commission; and, Bell Atlantic telephone directory
advertisements.
32.3 Without in any way limiting Section 32.1, the Parties also agree
that this Agreement does not apply to the installation, inspection,
maintenance, repair, removal, or use of any facilities, equipment,
software, or wiring, located on Reseller's side of the Network Rate
Demarcation Point applicable to Reseller and does not grant to Reseller or
Reseller
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Customers a right to installation, inspection, maintenance, repair, or
removal, by Bell Atlantic, or use, by Reseller or Reseller Customers, of
any such facilities, equipment, software, or wiring.
32.4 Without in any way limiting Section 32.1, the Parties agree that
this Agreement does not apply to the purchase by Reseller of Audiotex
Services provided by Bell Atlantic or Bell Atlantic Customers, including,
but not limited to, Dial-It, 976, 915 and 556 services. Reseller shall
block, and Bell Atlantic shall have the right (but not the obligation) to
block, calls made to Audiotex Service numbers (including, but not limited
to, Dial-It numbers and 976, 915 and 556 numbers) through Bell Atlantic
Services purchased by Reseller under this Agreement until Reseller enters
into a separate written agreement with Bell Atlantic for the billing and
collection of charges for such calls.
32.5 Nothing contained within this Agreement shall obligate Bell
Atlantic to provide any service or product which is not a Bell Atlantic
Service (including, but not limited to, the services listed in Sections
32.2, 32.3 and 32.4, above) to Reseller.
32.6 Nothing contained within this Agreement shall obligate Bell
Atlantic to provide a Bell Atlantic Service or any other service or product
to a Reseller Customer. Without in any way limiting the foregoing, except
as otherwise required by Applicable Law, Bell Atlantic reserves the right
to terminate provision of services and products (including, but not limited
to, Telecommunications Services and the services listed in Sections 32.2
and 32.3, above) to any person who ceases to purchase Bell Atlantic Retail
Telecommunications Service dial tone line service from Bell Atlantic.
32.7 Nothing contained in this Section 32 shall in any way exclude or
limit Reseller's obligations and liabilities under Section 30, including,
but not limited to Reseller's obligations and liabilities to pay charges
for services and products as required by Section 30.
33. SERVICE QUALITY
---------------
Bell Atlantic Services provided by Bell Atlantic to Reseller
under this Agreement shall comply with the quality requirements for such
Bell Atlantic Services specified by Applicable Law (including, but not
limited to, any applicable provisions of 47 CFR (S)(S) 51.311 and
51.603(b)).
34. SINGLE POINT OF CONTACT
-----------------------
34.1 Reseller shall be the single point of contact for Reseller
Customers and other persons with regard to Telecommunications Services and
other services and products which they wish to purchase from Reseller or
which they have purchased from Reseller. Communications by Reseller
Customers and other persons with regard to Telecommunications Services and
other services and products which they wish to purchase from Reseller or
which they have purchased from Reseller,shall be made to Reseller, and
24
<PAGE>
not to Bell Atlantic. Reseller shall instruct Reseller Customers and other
persons that such communications shall be directed to Reseller.
34.2 Without in any way limiting Section 34.1, requests by Reseller
Customers for information about or provision of Telecommunications Services
which they wish to purchase from Reseller, requests by Reseller Customers
to change, terminate, or obtain information about, assistance in using, or
repair or maintenance of, Telecommunications Services which they have
purchased from Reseller, and inquiries by Reseller Customers concerning
Reseller's bills, charges for Reseller's Telecommunications Services, and,
if the Reseller Customers receive dial tone line service from Reseller,
annoyance calls, shall be made by the Reseller Customers to Reseller, and
not to Bell Atlantic.
34.3 Reseller shall establish telephone numbers and mailing addresses
at which Reseller Customers and other persons may communicate with Reseller
and shall advise Reseller Customers and other persons who may wish to
communicate with Reseller of these telephone numbers and mailing addresses.
35. SURVIVAL
--------
The liabilities and obligations of a Party for acts or omissions
of the Party prior to the termination, cancellation or expiration of this
Agreement, the rights, liabilities and obligations of a Party under any
provision of this Agreement regarding indemnification or defense, Customer
Information, confidential information, or limitation or exclusion of
liability, the rights of Bell Atlantic and the liabilities and obligations
of Reseller under Section 18.1, and the rights, liabilities and obligations
of a Party under any provision of this Agreement which by its terms is
contemplated to survive (or be performed after) termination, cancellation
or expiration of this Agreement, shall survive termination, cancellation or
expiration of this Agreement.
36. TAXES
-----
36.1 With respect to any purchase of Bell Atlantic Services under this
Agreement, if any Federal, state or local government tax, fee, duty,
surcharge (including, but not limited to any E911/911, telecommunications
relay service, or universal service fund, surcharge), or other tax-like
charge (a "Tax") is required or permitted by Applicable Law to be collected
from Reseller by Bell Atlantic, then (a) to the extent required by
Applicable Law, Bell Atlantic shall bill Reseller for such Tax, (b)
Reseller shall timely remit such Tax to Bell Atlantic (including both Taxes
billed by Bell Atlantic and Taxes Reseller is required by Applicable Law to
remit without billing by Bell Atlantic), and (c) Bell Atlantic shall remit
such collected Tax to the applicable taxing authority.
36.2 With respect to any purchase of Bell Atlantic Services under this
Agreement, if any Tax is imposed by Applicable Law on the receipts of Bell
Atlantic, which Applicable Law permits Bell Atlantic to exclude certain
receipts received from sales of Bell Atlantic
25
<PAGE>
Services for resale by Reseller, such exclusion being based on the fact
that Reseller is also subject to a Tax based upon receipts ("Receipts
Tax"), then Reseller (a) shall provide Bell Atlantic with notice in writing
in accordance with Section 36.7 of its intent to pay the Receipts Tax, and
(b) shall timely pay the Receipts Tax to the applicable taxing authority.
36.3 With respect to any purchase of Bell Atlantic Services under this
Agreement, that are resold by Reseller to a Reseller Customer, if any Tax
is imposed by Applicable Law on the Reseller Customer in connection with
the Reseller Customer's purchase of the resold Bell Atlantic Services which
Reseller is required to impose and/or collect from the Reseller Customer,
then Reseller (a) shall impose and/or collect such Tax from the Reseller
Customer, and (b) shall timely remit such Tax to the applicable taxing
authority.
36.4.1 If Bell Atlantic has not received an exemption certificate from
Reseller and fails to bill Reseller for any Tax as required by Section
36.1, then, as between Bell Atlantic and Reseller, (a) Reseller shall
remain liable for such unbilled Tax, and (b) Bell Atlantic shall be liable
for any interest and/or penalty assessed on the unbilled Tax by the
applicable taxing authority.
36.4.2 If Reseller fails to remit any Tax to Bell Atlantic as required
by Section 36.1, then, as between Bell Atlantic and Reseller, Reseller
shall be liable for such uncollected Tax and any interest and/or penalty
assessed on the uncollected Tax by the applicable taxing authority.
36.4.3 If Bell Atlantic does not collect a Tax because Reseller has
provided Bell Atlantic with an exemption certificate which is later found
to be inadequate by the applicable taxing authority, then, as between Bell
Atlantic and Reseller, Reseller shall be liable for such uncollected Tax
and any interest and/or penalty assessed on the uncollected Tax by the
applicable taxing authority.
36.4.4 Except as provided in Section 36.4.5, if Reseller fails to pay
the Receipts Tax as required by Section 36.2, then, as between Bell
Atlantic and Reseller, (a) Bell Atlantic shall be liable for any Tax
imposed on Bell Atlantic's receipts, (b) Reseller shall be liable for any
interest and/or penalty imposed on Bell Atlantic with respect to the Tax on
Bell Atlantic's receipts, and (c) Reseller shall be liable for any Tax
imposed on Reseller's receipts and any interest and/or penalty assessed by
the applicable taxing authority on Reseller with respect to the Tax on
Reseller's receipts.
36.4.5.1 If any discount or portion of a discount in price provided to
Reseller under this Agreement (including, but not limited to, a discount
provided for in Exhibit II, Section 1.1) represents Tax savings to Bell
Atlantic which it was anticipated Bell Atlantic would receive, because it
was anticipated that receipts from sales of Bell Atlantic Services, that
would otherwise be subject to a Tax on such receipts, could be excluded
from such Tax under Applicable Law because the Bell Atlantic Services would
be sold to Reseller for resale, and Bell Atlantic is, in fact, required by
Applicable Law to pay such Tax on receipts
26
<PAGE>
from sales of Bell Atlantic Services to Reseller, then, as between Bell
Atlantic and Reseller, (a) Reseller shall be liable for, and shall
indemnify and hold harmless Bell Atlantic against (on an after-tax basis),
any such Tax, and (b) Reseller shall be liable for, and shall indemnify and
hold harmless Bell Atlantic against (on an after-tax basis), any interest
and/or penalty assessed by the applicable taxing authority on either
Reseller or Bell Atlantic with respect to the Tax on Bell Atlantic's
receipts.
36.4.5.2 Without in any way limiting Reseller's obligations under Section
36.4.5.1, in consideration of receiving the Pennsylvania gross receipts tax
related discount specified in Bell Atlantic Tariff PA. P.U.C.-No. 1,
Section l, Paragraph 8.1.C.1.c, and/or Exhibit II, Attachment 1, Reseller
agrees to reimburse Bell Atlantic for, and to indemnify and hold harmless
Bell Atlantic against any gross receipts tax imposed on Bell Atlantic with
respect to receipts from Bell Atlantic Retail Telecommunications Services
provided by Bell Atlantic to Reseller under this Agreement.
36.4.6 If Reseller fails to impose and/or collect any Tax from Reseller
Customers as required by Section 36.3, then, as between Bell Atlantic and
Reseller, Reseller shall remain liable for such uncollected Tax and any
interest and/or penalty assessed on such uncollected Tax by the applicable
taxing authority.
36.4.7 With respect to any Tax that Reseller has agreed to pay, is
responsible for because Reseller received a discount in price on Bell
Atlantic Services attributable to anticipated Tax savings by Bell Atlantic,
or is required to impose on and/or collect from Reseller Customers,
Reseller agrees to indemnify and hold Bell Atlantic harmless on an after-
tax basis for any costs incurred by Bell Atlantic as a result of actions
taken by the applicable taxing authority to recover the Tax from Bell
Atlantic due to failure of Reseller to timely remit the Tax to Bell
Atlantic, or timely pay, or collect and timely remit, the Tax to the taxing
authority.
36.5 If either Party is audited by a taxing authority, the other Party
agrees to reasonably cooperate with the Party being audited in order to
respond to any audit inquiries in a proper and timely manner so that the
audit and/or any resulting controversy may be resolved expeditiously.
36.6.1 If Applicable Law clearly exempts a purchase of Bell Atlantic
Services under this Agreement from a Tax, and if such Applicable Law also
provides an exemption procedure, such as an exemption certificate
requirement, then, if Reseller complies with such procedure, Bell Atlantic
shall not collect such Tax during the effective period of the exemption.
Such exemption shall be effective upon receipt of the exemption certificate
or affidavit in accordance with Section 36.7.
36.6.2 If Applicable Law clearly exempts a purchase of Bell Atlantic
Services under this Agreement from a Tax, but does not also provide an
exemption procedure, then Bell Atlantic shall not collect such Tax if
Reseller (a) furnishes Bell Atlantic with a letter signed by an officer of
Reseller requesting an exemption and citing the provision in the Applicable
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Law which clearly allows such exemption, and (b) supplies Bell Atlantic
with an indemnification agreement, reasonably acceptable to Bell Atlantic,
which holds Bell Atlantic harmless on an after-tax basis with respect to
forbearing to collect such Tax.
36.7 All notices, affidavits, exemption certificates or other
communications required or permitted to be given by either Party to the
other under this Section 36, shall be made in writing and shall be sent by
certified or registered mail, return receipt requested, or by a reputable
private delivery service which provides a record of delivery, to the
addressee stated in Section 23 at the address stated in Section 23 and to
the following:
To Bell Atlantic:
Tax Administration
Bell Atlantic Network Services, Inc.
1717 Arch Street, 30th Floor
Philadelphia, PA 19103
To Reseller:
OnePoint Communications Holdings, LLC
5335 Wisconsin Avenue, N.W., Suite 950
Washington, DC 20015
Attn.: William Wallace, President
Either Party may from time-to-time designate another address or
addressee by giving notice in accordance with the terms of this Section
36.7.
Any notice or other communication shall be deemed to be given
when received.
37. TELEPHONE EXCHANGE SERVICE PROVIDER SELECTION
---------------------------------------------
37.1 Without in any way limiting Reseller's obligations under Section
12, Reseller shall comply with Applicable Law with regard to end user
selection of a Telephone Exchange Service provider. Until the Commission or
the FCC adopts regulations and/or orders applicable to end user selection
of a Telephone Exchange Service provider, Reseller shall apply the rules
and procedures set forth in Section 64.1100 of the FCC Rules, 47 CFR (S)
64.1100, to the process for end user selection of a Telephone Exchange
Service provider (including, to end user selection of a Telephone Exchange
Service provider that occurs during any telemarketing contact with an end
user), and shall comply with such rules and procedures.
37.2 By submitting to Bell Atlantic an Order to install, provide,
change or terminate a Telecommunications Service, to select, change or
reassign a telephone number,
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or to select, change or terminate an end user's Telephone Exchange Service
provider, Reseller represents and warrants: (a) that Reseller has obtained
authorization for such action from the applicable end user; and, (b) that
if Applicable Law and/or this Agreement required such authorization to be
obtained in a particular manner, Reseller obtained the authorization in the
manner required by Applicable Law and this Agreement. Reseller shall upon
request by Bell Atlantic provide proof of such authorization (including, a
copy of any written authorization).
37.3 If Reseller submits an Order to Bell Atlantic to install,
provide, change or terminate a Telecommunications Service, to select,
change or reassign a telephone number, or to select, change or terminate an
end user's Telephone Exchange Service provider, and (a) when requested by
Bell Atlantic to provide a written document signed by the end user stating
the end user's Telephone Exchange Service provider selection, fails to
provide such document to Bell Atlantic, or (b) has not obtained
authorization for such installation, provision, selection, change,
reassignment or termination, from the end user in the manner required by
Applicable Law (or, in the absence of Applicable Law, in the manner
required by the rules and procedures in 47 CFR (S) 64.1100), Reseller shall
be liable to Bell Atlantic for all charges that would be applicable to the
end user for the initial installation, provision, selection, change,
reassignment or termination, of the end user's Telecommunications Service,
telephone number, and/or Telephone Exchange Service provider, and any
charges for restoring the end user's Telecommunications Service, telephone
number, and/or Telephone Exchange Service provider selection, to its end
user authorized condition.
38. TELEPHONE NUMBERS
-----------------
38.1 Reseller's use of telephone numbers shall be subject to
Applicable Law (including, but not limited to, the rules of the FCC, the
North American Numbering Council, and the North American Numbering Plan
Administrator), the applicable provisions of this Agreement (including, but
not limited to, this Section 38), and Bell Atlantic's practices and
procedures for use and assignment of telephone numbers, as amended from
time-to-time.
38.2 Subject to Sections 38.1 and 38.3, if an end user who subscribes
to a Bell Atlantic Retail Telecommunications Service dial tone line from
either Reseller or Bell Atlantic changes the Telecommunications Carrier
from whom the end user subscribes for such dial tone line (including a
change from Bell Atlantic to Reseller, from Reseller to Bell Atlantic, or
from Reseller to a Telecommunications Carrier other than Bell Atlantic),
after such change, the end user may continue to use with the dial tone line
the telephone numbers which were assigned to the dial tone line by Bell
Atlantic immediately prior to the change.
38.3 Bell Atlantic shall have the right to change the telephone
numbers used by an end user if at any time: (a) the type or class of
service subscribed to by the end user changes; (b) the end user requests
service at a new location, that is not served by the Bell Atlantic switch
and the Bell Atlantic rate center from which the end user previously had
service; or, (c) continued use of the telephone numbers is not technically
feasible.
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38.4 If service on a Bell Atlantic Retail Telecommunications Service
dial tone line subscribed to by Reseller from Bell Atlantic under this
Agreement is terminated, the telephone numbers associated with such dial
tone line shall be available for reassignment by Bell Atlantic to any
person to whom Bell Atlantic elects to assign the telephone numbers,
including, but not limited to, Bell Atlantic, Bell Atlantic end user retail
Customers, Reseller, or Telecommunications Carriers other than Bell
Atlantic and Reseller.
39. WARRANTIES
----------
EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, BELL ATLANTIC
MAKES NO WARRANTIES WITH RESPECT TO BELL ATLANTIC SERVICES, WHETHER EXPRESS
OR IMPLIED, WRITTEN OR ORAL, IN FACT OR IN LAW. THE WARRANTIES SET FORTH IN
THIS AGREEMENT ARE BELL ATLANTIC'S EXCLUSIVE WARRANTIES WITH RESPECT TO
BELL ATLANTIC SERVICES AND ARE IN LIEU OF ALL OTHER WARRANTIES, EXPRESS OR
IMPLIED, WRITTEN OR ORAL, IN FACT OR IN LAW. BELL ATLANTIC DISCLAIMS ANY
AND ALL OTHER WARRANTIES, INCLUDING, BUT NOT LIMITED TO, WARRANTIES OF
-------------
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE, WARRANTIES AGAINST
----------------------------------------------------
INFRINGEMENT, AND WARRANTIES ARISING BY TRADE CUSTOM, TRADE USAGE, COURSE
OF DEALING, OR OTHERWISE.
40. AUTHORIZATION
-------------
40.1.1 Bell Atlantic is a corporation duly organized, validly existing
and in good standing under the laws of the Commonwealth of Pennsylvania and
has full power and authority to execute and deliver this Agreement and to
perform the obligations hereunder on behalf of Bell Atlantic.
40.2 OnePoint Communications Holdings, LLC, a State of Delaware
limited liability company, d/b/a OnePoint Communications, a company duly
organized, validly existing and in good standing under the laws of the
State of Delaware, and has full power and authority to execute and deliver
this Agreement and to perform its obligations hereunder.
30
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IN WITNESS WHEREOF, intending to be legally bound, Reseller and
Bell Atlantic have caused this Agreement to be executed by their respective
authorized representatives.
VIC-RMTS-DC, L.L.C.
d/b/a OnePoint Communications
BY: _________________________________
Signature
_________________________________
Name (Printed)
ITS: _________________________________
Title
Bell Atlantic - Pennsylvania., Inc.
BY: _________________________________
Signature
_________________________________
Name (Printed)
ITS: _________________________________
Title
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EXHIBIT I
BELL ATLANTIC ANCILLARY SERVICES
--------------------------------
1. BELL ATLANTIC OSS SERVICES
--------------------------
1.1 Definitions
-----------
As used in the Principal Document, the terms listed below shall
have the meanings stated below:
1.1.1 "Bell Atlantic Operations Support Systems" means Bell Atlantic
systems for pre-ordering, ordering, provisioning, maintenance and
repair, and billing.
1.1.2 "Bell Atlantic OSS Services" means access to Bell Atlantic
Operations Support Systems functions. The term "Bell Atlantic OSS
Services" includes, but is not limited to: (a) Bell Atlantic's provision
of Reseller Usage Information to Reseller pursuant to Exhibit I, Section
1.3, below; and, (b) "Bell Atlantic OSS Information", as defined in
Exhibit I, Section 1.1.4, below.
1.1.3 "Bell Atlantic OSS Facilities" means any gateways, interfaces,
databases, facilities, equipment, software, or systems, used by Bell
Atlantic to provide Bell Atlantic OSS Services to Reseller.
1.1.4 "Bell Atlantic OSS Information" means any information accessed by,
or disclosed or provided to, Reseller through or as a part of Bell
Atlantic OSS Services. The term "Bell Atlantic OSS Information"
includes, but is not limited to: (a) any Customer Information related to
a Bell Atlantic Customer or a Reseller Customer accessed by, or
disclosed or provided to, Reseller through or as a part of Bell Atlantic
OSS Services; and, (b) any Reseller Usage Information (as defined in
Exhibit I, Section 1.1.5, below) accessed by, or disclosed or provided
to, Reseller.
1.1.5 "Reseller Usage Information" means the usage information for a
Bell Atlantic Retail Telecommunications Service purchased by Reseller
under this Agreement that Bell Atlantic would record if Bell Atlantic
was furnishing such Bell Atlantic Retail Telecommunications Service to a
Bell Atlantic end-user retail Customer.
1.2 Bell Atlantic OSS Services
--------------------------
1.2.1 Upon request by Reseller, Bell Atlantic shall provide to Reseller,
pursuant to Section 251(c)(3) of the Act, 47 U.S.C. (S) 251(c)(3), Bell
Atlantic OSS Services.
32
<PAGE>
1.2.2 Subject to the requirements of Applicable Law, Bell Atlantic
Operations Support Systems, Bell Atlantic Operations Support Systems
functions, Bell Atlantic OSS Facilities, Bell Atlantic OSS
Information, and the Bell Atlantic OSS Services that will be offered
by Bell Atlantic, shall be as determined by Bell Atlantic. To the
extent required by Applicable Law and technically feasible, Bell
Atlantic will offer to Reseller the Bell Atlantic OSS Services that
Bell Atlantic offers, under agreements approved by the Commission
pursuant to 47 U.S.C. (S) 252, to other Telecommunications Carriers
that are engaged in the resale of Bell Atlantic Retail
Telecommunications Services pursuant to 47 U.S.C. (S) 251(c)(4).
Subject to the requirements of Applicable Law, Bell Atlantic shall
have the right to change Bell Atlantic Operations Support Systems,
Bell Atlantic Operations Support Systems functions, Bell Atlantic OSS
Facilities, Bell Atlantic OSS Information, and the Bell Atlantic OSS
Services, from time-to-time, without the consent of Reseller.
1.3 Reseller Usage Information
--------------------------
1.3.1 Upon request by Reseller, Bell Atlantic shall provide to
Reseller, pursuant to Section 251(c)(3) of the Act, 47 U.S.C. (S)
251(c)(3), Reseller Usage Information.
1.3.2 Reseller Usage Information will be available to Reseller through
the following:
(a) Daily Usage File on Data Tape.
(b) Daily Usage File through Network Data Mover ("NDM").
(c) Daily Usage File through Centralized Message Distribution System
("CMDS").
1.3.3.1 Reseller Usage Information will be provided in a Bellcore
Exchange Message Records ("EMR") format.
1.3.3.2 Daily Usage File Data Tapes provided pursuant to Exhibit I,
Section 1.3.2(a) will be issued each day, Monday through Friday,
except holidays observed by Bell Atlantic.
1.3.4 Except as stated in this Exhibit I, Section 1.3, subject to the
requirements of Applicable Law, the manner in which, and the frequency
with which, Reseller Usage Information will be provided to Reseller
shall be determined by Bell Atlantic.
1.4 Prices
------
The prices for Bell Atlantic OSS Services shall be as stated in
Exhibit II, Section 2 following.
33
<PAGE>
1.5 Access to and Use of Bell Atlantic OSS Facilities
-------------------------------------------------
1.5.1 Bell Atlantic OSS Facilities may be accessed and used by Reseller
only to the extent necessary for Reseller's access to and use of Bell
Atlantic OSS Services pursuant to this Agreement.
1.5.2 Bell Atlantic OSS Facilities may be accessed and used by Reseller
only to provide Telecommunications Services to Reseller Customers.
1.5.3 Reseller shall restrict access to and use of Bell Atlantic OSS
Facilities to Reseller. This Agreement does not grant to Reseller any
right or license to grant sublicenses to other persons, or permission
to other persons (except Reseller's employees, Agents and contractors,
in accordance with Exhibit I, Section 1.5.7, below), to access or use
Bell Atlantic OSS Facilities.
1.5.4 Reseller shall not (a) alter, modify or damage the Bell Atlantic
OSS Facilities (including, but not limited to, Bell Atlantic
software), (b) copy, remove, derive, reverse engineer, or decompile,
software from the Bell Atlantic OSS Facilities, or (c) obtain access
through Bell Atlantic OSS Facilities to Bell Atlantic databases,
facilities, equipment, software, or systems, which are not offered for
Reseller's use under this Agreement.
1.5.5 Reseller shall comply with all practices and procedures
established by Bell Atlantic for access to and use of Bell Atlantic
OSS Facilities (including, but not limited to, Bell Atlantic practices
and procedures with regard to security and use of access and user
identification codes).
1.5.6 All practices and procedures for access to and use of Bell
Atlantic OSS Facilities, and all access and user identification codes
for Bell Atlantic OSS Facilities: (a) shall remain the property of
Bell Atlantic; (b) shall be used by Reseller only in connection with
Reseller's use of Bell Atlantic OSS Facilities permitted by this
Agreement; (c) shall be treated by Reseller as Confidential
Information of Bell Atlantic pursuant to Section 13; and, (d) shall be
destroyed or returned by Reseller to Bell Atlantic upon the earlier of
request by Bell Atlantic or the expiration or termination of this
Agreement.
1.5.7 Reseller's employees, Agents and contractors may access and use
Bell Atlantic OSS Facilities only to the extent necessary for
Reseller's access to and use of the Bell Atlantic OSS Facilities
permitted by this Agreement. Any access to or use of Bell Atlantic OSS
Facilities by Reseller's employees, Agents, or contractors, shall be
subject to the provisions of this Agreement, including, but not
limited to, Section 13, Exhibit I, Section 1.5.6, and Exhibit I,
Section 1.6.3.3.
34
<PAGE>
1.6 Bell Atlantic OSS Information
-----------------------------
1.6.1 Subject to the provisions of this Agreement and Applicable Law,
Bell Atlantic grants to Reseller a non-exclusive license to use Bell
Atlantic OSS Information.
1.6.2 All Bell Atlantic OSS Information shall at all times remain the
property of Bell Atlantic. Except as expressly stated in this
Agreement, Reseller shall acquire no rights in or to any Bell Atlantic
OSS Information.
1.6.3.1 The provisions of this Exhibit I, Section 1.6.3 apply to all Bell
Atlantic OSS Information, except (a) Reseller Usage Information, (b)
CPNI of Reseller, and (c) CPNI of a Bell Atlantic Customer or a
Reseller Customer, to the extent the Customer has authorized Reseller
to use the Customer Information.
1.6.3.2 Bell Atlantic OSS Information may be accessed and used by
Reseller only to provide Telecommunications Services to Reseller
Customers.
1.6.3.3 Reseller shall treat Bell Atlantic OSS Information that is
designated by Bell Atlantic, through written or electronic notice
(including, but not limited to, through the Bell Atlantic OSS
Services), as "Confidential" or "Proprietary" as Confidential
Information of Bell Atlantic pursuant to Section 13.
1.6.3.4 Except as expressly stated in this Agreement, this Agreement does
not grant to Reseller any right or license to grant sublicenses to
other persons, or permission to other persons (except Reseller's
employees, Agents or contractors, in accordance with Exhibit I,
Section 1.6.3.5), to access, use or disclose Bell Atlantic OSS
Information.
1.6.3.5 Reseller's employees, Agents and contractors may access, use and
disclose Bell Atlantic OSS Information only to the extent necessary
for Reseller's access to, and use and disclosure of, Bell Atlantic OSS
Information permitted by this Agreement. Any access to, or use or
disclosure of, Bell Atlantic OSS Information by Reseller's employees,
Agents or contractors, shall be subject to the provisions of this
Agreement, including, but not limited to, Section 13 and Exhibit I,
Section 1.6.3.3.
1.6.3.6 Reseller's license to use Bell Atlantic OSS Information shall
expire upon the earliest of: (a) the time when the Bell Atlantic OSS
Information is no longer needed by Reseller to provide
Telecommunications Services to Reseller Customers; (b) termination of
the license in accordance with this Agreement; or (c) expiration or
termination of this Agreement.
1.6.3.7 All Bell Atlantic OSS Information received by Reseller shall be
destroyed or returned by Reseller to Bell Atlantic, upon expiration,
suspension or termination of the license to use such Bell Atlantic OSS
Information.
1.6.4 Unless sooner terminated or suspended in accordance with this
Agreement (including,
35
<PAGE>
but not limited to, Section 17.1 and Exhibit I, Section 1.7.1),
Reseller's access to Bell Atlantic OSS Information through Bell
Atlantic OSS Services shall terminate upon the expiration or
termination of this Agreement.
1.6.5.1 Without in any way limiting Section 16.3, Bell Atlantic shall
have the right (but not the obligation) to audit Reseller to ascertain
whether Reseller is complying with the requirements of Applicable Law
and this Agreement, with regard to Reseller's access to, and use and
disclosure of, Bell Atlantic OSS Information.
1.6.5.2 Without in any way limiting Section 16.3, Section 16.4, or
Exhibit I, Section 1.6.5.1, Bell Atlantic shall have the right (but
not the obligation) to monitor Reseller's access to and use of Bell
Atlantic OSS Information which is made available by Bell Atlantic to
Reseller pursuant to this Agreement, to ascertain whether Reseller is
complying with the requirements of Applicable Law and this Agreement,
with regard to Reseller's access to, and use and disclosure of, such
Bell Atlantic OSS Information. The foregoing right shall include, but
not be limited to, the right (but not the obligation) to
electronically monitor Reseller's access to and use of Bell Atlantic
OSS Information which is made available by Bell Atlantic to Reseller
through Bell Atlantic OSS Facilities.
1.6.5.3 Information obtained by Bell Atlantic pursuant to this Exhibit I,
Section 1.6.5 shall be treated by Bell Atlantic as Confidential
Information of Reseller pursuant to Section 13; provided that, Bell
Atlantic shall have the right (but not the obligation) to use and
disclose information obtained by Bell Atlantic pursuant to this
Exhibit I, Section 1.6.5 to enforce Applicable Law and/or Bell
Atlantic's rights under this Agreement.
1.6.6 Reseller acknowledges that the Bell Atlantic OSS Information, by
its nature, is updated and corrected on a continuous basis by Bell
Atlantic, and therefore that Bell Atlantic OSS Information is subject
to change from time to time.
1.7 Liabilities and Remedies
------------------------
1.7.1 Any breach by Reseller, or Reseller's employees, Agents or
contractors, of the provisions of Exhibit I, Section 1.5 or Exhibit I,
Section 1.6, shall be deemed a material breach of a material provision
of this Agreement by Reseller under Section 17.1 of this Agreement. In
addition, if Reseller or an employee, Agent or contractor of Reseller
at any time breaches a provision of Exhibit I, Section 1.5 or Exhibit
I, Section 1.6, and such breach continues for more than ten (10) days
after written notice thereof from Bell Atlantic, then, except as
otherwise required by Applicable Law, Bell Atlantic shall have the
right, upon notice to Reseller, to suspend the license to use Bell
Atlantic OSS Information granted by Exhibit I, Section 1.6.1 and/or
the provision of Bell Atlantic OSS Services, in whole or in part.
1.7.2 Reseller agrees that Bell Atlantic would be irreparably injured
by a breach of Exhibit I, Section 1.5 or Exhibit I, Section 1.6 by
Reseller or the employees, Agents or contractors
36
<PAGE>
of Reseller, and that Bell Atlantic shall be entitled to seek
equitable relief, including injunctive relief and specific
performance, in the event of any breach of Exhibit I, Section 1.5 or
Exhibit I, Section 1.6 by Reseller or the employees, Agents or
contractors of Reseller. Such remedies shall not be deemed to be the
exclusive remedies for a breach of Exhibit I, Section 1.5 or Exhibit
I, Section 1.6, but shall be in addition to any other remedies
available under this Agreement or at law or in equity.
1.8 Relation to Applicable Law
--------------------------
The provisions of Exhibit I, Sections 1.5, 1.6 and 1.7 shall be
in addition to and not in derogation of any provisions of Applicable
Law, including, but not limited to, 47 U.S.C. (S) 222, and are not
intended to constitute a waiver by Bell Atlantic of any right with
regard to protection of the confidentiality of the information of Bell
Atlantic or Bell Atlantic Customers provided by Applicable Law.
1.9 Cooperation
-----------
Reseller, at Reseller's expense, shall reasonably cooperate with
Bell Atlantic in using Bell Atlantic OSS Services. Such cooperation
shall include, but not be limited to, the following:
1.9.1 Upon request by Bell Atlantic, Reseller shall by no later than
the fifteenth (15th) day of each calendar month submit to Bell
Atlantic reasonable, good faith estimates (by central office or other
Bell Atlantic office or geographic area designated by Bell Atlantic)
of the volume of each Bell Atlantic Retail Telecommunications Service
for which Reseller anticipates submitting Orders in each week of the
next calendar month.
1.9.2 Upon request by Bell Atlantic, Reseller shall submit to Bell
Atlantic reasonable, good faith estimates of other types of
transactions or use of Bell Atlantic OSS Services that Reseller
anticipates.
1.9.3 Reseller shall reasonably cooperate with Bell Atlantic in
submitting Orders for Bell Atlantic Retail Telecommunications Services
and otherwise using the Bell Atlantic OSS Services, in order to avoid
exceeding the capacity or capabilities of such Bell Atlantic OSS
Services.
1.9.4 Reseller shall participate in cooperative testing of Bell
Atlantic OSS Services and shall provide assistance to Bell Atlantic in
identifying and correcting mistakes, omissions, interruptions, delays,
errors, defects, faults, failures, or other deficiencies, in Bell
Atlantic OSS Services.
1.10 Bell Atlantic Access to Information Related to Reseller Customers
-----------------------------------------------------------------
1.10.1 Bell Atlantic shall have the right to access, use and disclose
information related to
37
<PAGE>
Reseller Customers that is in Bell Atlantic's possession (including,
but not limited to, in Bell Atlantic OSS Facilities) to the extent
such access, use and/or disclosure has been authorized by the Reseller
Customer in the manner required by Applicable Law.
1.10.2 Upon request by Bell Atlantic, Reseller shall negotiate in good
faith and enter into a contract with Bell Atlantic, pursuant to which
Bell Atlantic may obtain access to Reseller's operations support
systems (including, systems for pre-ordering, ordering, provisioning,
maintenance and repair, and billing) and information contained in such
systems, to permit Bell Atlantic to obtain information related to
Reseller Customers (as authorized by the applicable Reseller
Customer), to permit Customers to transfer service from one
Telecommunications Carrier to another, and for such other purposes as
may be permitted by Applicable Law.
2. BELL ATLANTIC PRE-OSS SERVICES
------------------------------
2.1 As used in the Principal Document, "Bell Atlantic Pre-OSS
Service" means a service which allows the performance of an activity
which is comparable to an activity to be performed through a Bell
Atlantic OSS Service and which Bell Atlantic offers to provide to
Reseller prior to, or in lieu of, Bell Atlantic's provision of the
Bell Atlantic OSS Service to Reseller. The term "Bell Atlantic Pre-OSS
Service" includes, but is not limited to, the activity of placing
Orders for Bell Atlantic Retail Telecommunications Services through a
telephone facsimile ("Fax") communication.
2.2 Subject to the requirements of Applicable Law, the Bell Atlantic
Pre-OSS Services that will be offered by Bell Atlantic shall be as
determined by Bell Atlantic and Bell Atlantic shall have the right to
change Bell Atlantic Pre-OSS Services, from time-to-time, without the
consent of Reseller.
2.3 Subject to the requirements of Applicable Law, the prices for
Bell Atlantic Pre-OSS Services shall be as determined by Bell Atlantic
and shall be subject to change by Bell Atlantic from time-to-time.
2.4 The provisions of Exhibit I, Sections 1.5 through 1.9 shall also
apply to Bell Atlantic Pre-OSS Services. For the purposes of this
Exhibit I, Section 2.4: (a) references in Exhibit I, Sections 1.5
through 1.9 to Bell Atlantic OSS Services shall be deemed to include
Bell Atlantic Pre-OSS Services; and, (b) references in Exhibit I,
Sections 1.5 through 1.9 to Bell Atlantic OSS Information shall be
deemed to include information made available to Reseller through Bell
Atlantic Pre-OSS Services.
3. E911/911 SERVICES
-----------------
3.1 Where and to the extent that Bell Atlantic provides E911/911 call
routing to a Public Safety Answering Point ("PSAP") to Bell Atlantic's
own end user retail Customers, Bell Atlantic will provide to Reseller,
for resold Bell Atlantic Retail Telecommunications Service
38
<PAGE>
dial tone lines, E911/911 call routing to the appropriate PSAP. Bell
Atlantic will provide Reseller Customer information for resold Bell
Atlantic Retail Telecommunications Service dial tone lines to the PSAP
as that information is provided to Bell Atlantic by Reseller where and
to the same extent that Bell Atlantic provides Bell Atlantic end user
retail Customer information to the PSAP. Bell Atlantic will update and
maintain, on the same schedule that Bell Atlantic uses with Bell
Atlantic's own end user retail Customers, for Reseller Customers
served by resold Bell Atlantic Retail Telecommunications Service dial
tone lines, the Reseller Customer information in Bell Atlantic's
E911/911 databases.
3.2 Reseller shall provide to Bell Atlantic the name, telephone
number and address, of all Reseller Customers, and such other
information as may be requested by Bell Atlantic, for inclusion in
E911/911 databases. Any change in Reseller Customer name, address or
telephone number information (including addition or deletion of a
Reseller Customer, or a change in Reseller Customer name, telephone
number or address), or in other E911/911 information supplied by
Reseller to Bell Atlantic, shall be reported to Bell Atlantic by
Reseller within one (1) day after the change.
3.3 To the extent that it is necessary (whether as a requirement of
Applicable Law or otherwise) for Reseller to enter into any agreements
or other arrangements with governmental entities (or governmental
entity contractors) related to E911/911 in order for Reseller to
provide Telecommunications Services, Reseller shall at Reseller's
expense enter into such agreements and arrangements.
4. Routing to Directory Assistance and Operator Services
-----------------------------------------------------
4.1 Upon request by Reseller, to the extent technically feasible,
Bell Atlantic will provide to Reseller the capability of rerouting to
Reseller's platforms directory assistance traffic (411 and 555-1212
calls) from Reseller Customers served by resold Bell Atlantic Retail
Telecommunications Service dial tone line service and operator
services traffic (O+ and 0- intraLATA calls) from Reseller Customers
served by resold Bell Atlantic Retail Telecommunications Service dial
tone line service.
4.2 A request for the rerouting service described in Exhibit I,
Section 4.1 must be made by Reseller (a) on a Bell Atlantic switch-by-
Bell Atlantic switch basis, and (b) at least ninety (90) days in
advance of the date that the rerouting capability is to be made
available in an applicable Bell Atlantic switch.
4.3 The prices for the rerouting service described in Exhibit I,
Section 4.1 shall be as stated in Exhibit II, Section 2.
5. LIDB/BVS
--------
5.1 Upon request by Reseller, Bell Atlantic will maintain information
(including calling card numbers and collect and bill to third party
billing restriction notation) for Reseller
39
<PAGE>
Customers who subscribe to resold Bell Atlantic Retail
Telecommunications Service dial tone line service, in Bell Atlantic's
Line Information Database ("LIDB"), where and to the same extent that
Bell Atlantic maintains information in Bell Atlantic's LIDB for Bell
Atlantic's own end-user retail Customers.
5.2 If an end-user terminates Bell Atlantic Retail Telecommunications
Service dial tone line service provided to the end-user by Bell
Atlantic and, in place thereof, subscribes to Reseller for resold Bell
Atlantic Retail Telecommunications Service dial tone line service,
Bell Atlantic will remove from Bell Atlantic's LIDB any Bell Atlantic-
assigned telephone line calling card number (including area code)
("TLN") and Personal Identification Number ("PIN") associated with the
terminated Bell Atlantic Retail Telecommunications Service dial tone
line service. The Bell Atlantic-assigned TLN and PIN will be removed
from Bell Atlantic's LIDB within twenty-four (24) hours after Bell
Atlantic terminates the Bell Atlantic Retail Telecommunications
Service dial tone line service with which the number was associated.
Reseller may issue a new telephone calling card to such end-user,
utilizing the same TLN, and the same or a different PIN. Upon request
by Reseller, Bell Atlantic will enter such TLN and PIN in Bell
Atlantic's LIDB for calling card validation purposes.
5.3 Reseller information which is stored in Bell Atlantic's LIDB will
be subject, to the same extent as Bell Atlantic information stored in
Bell Atlantic's LIDB, to access and use by, and disclosure to, those
persons (including, but not limited to, Bell Atlantic) to whom Bell
Atlantic allows access to information which is stored in Bell
Atlantic's LIDB. Reseller hereby grants to Bell Atlantic and the
persons to whom Bell Atlantic allows access to information which is
stored in Bell Atlantic's LIDB, a royalty free license for such
access, use and disclosure.
5.4 Reseller shall obtain contractual agreements with each of the
persons authorized to have access to Bell Atlantic's LIDB, under which
Reseller will bill Reseller Customers for calling card, third party,
collect and other calls validated by such persons through Bell
Atlantic's LIDB.
5.5 Reseller warrants that the information provided by Reseller for
inclusion in Bell Atlantic's LIDB will at all times be current,
accurate and appropriate for use for billing validation services.
5.6 Upon request by Reseller, Bell Atlantic will provide to Reseller
Bell Atlantic Billing Validation Service, in accordance with Bell
Atlantic's Tariffs, for use by Reseller in connection with Bell
Atlantic Retail Telecommunications Services purchased and provided by
Reseller pursuant to this Agreement.
5.7 Information in Bell Atlantic's LIDB provided to Reseller shall be
treated by Reseller as Confidential Information of Bell Atlantic
pursuant to Section 13.
5.8 The prices for the services described in this Exhibit I, Section
5 shall be as stated in
40
<PAGE>
Exhibit II, Section 2.
41
<PAGE>
EXHIBIT II
PRICES FOR BELL ATLANTIC SERVICES
---------------------------------
1. BELL ATLANTIC RETAIL TELECOMMUNICATIONS SERVICES
------------------------------------------------
1.1 Prices
------
The prices for Bell Atlantic Retail Telecommunications Services
shall be the Retail Prices stated in Bell Atlantic's Tariffs for such Bell
Atlantic Retail Telecommunications Services, less: (a) the applicable discount
stated in Bell Atlantic's Tariffs for Bell Atlantic Retail Telecommunications
Services purchased for resale pursuant to 47 U.S.C. (S) 251(c)(4); or, (b) in
the absence of an applicable Bell Atlantic Tariff discount for Bell Atlantic
Retail Telecommunications Services purchased for resale pursuant to 47 U.S.C.
(S) 251(c)(4), the applicable discount stated in Exhibit II, Attachment 1.
1.2 Inapplicability of Discounts
----------------------------
The discounts provided for in Exhibit II, Section 1.1, shall not be
applied to:
1.2.1 Retail Prices that are in effect for no more than ninety (90) days;
1.2.2 Charges for services and products provided by Bell Atlantic that are
not Bell Atlantic Retail Telecommunications Services, including, but not limited
to, Bell Atlantic Ancillary Services, and exchange access services as defined in
Section 3(16) of the Act, 47 U.S.C. (S) 153(16);
1.2.3 Subscriber Line Charges, Federal Line Cost Charges, end user common
line charges, carrier selection and change charges, and Audiotex Service
charges; and,
1.2.4 Any service or charge which the Commission, the FCC, or other
governmental entity of appropriate jurisdiction, determines is not subject to a
wholesale ra te discount under 47 U.S.C. (S) 251(c)(4).
1.3 Discount Changes
----------------
1.3.1 Bell Atlantic shall change the discounts provided for in Exhibit II,
Section 1.1, above, from time-to-time, to the extent such change is required by
Applicable Law, including, but not limited to, by regulation or order of the
Commission, the FCC, or other governmental entity of appropriate jurisdiction.
1.3.2 Bell Atlantic shall have the right to change the discounts provided
for in Exhibit II, Section 1.1, above, from time-to-time, to the extent such
change is required, approved or permitted by Applicable Law, including, but not
limited to, by regulation or order of the Commission, the FCC,
42
<PAGE>
or other governmental entity of appropriate jurisdiction.
1.4 Offers of Merchandise and Services which are not Bell Atlantic Retail
Telecommunications Services
Reseller shall not be eligible to participate in any Bell Atlantic
plan or program under which Bell Atlantic end user retail Customers may obtain
products or merchandise, or services which are not Bell Atlantic Retail
Telecommunications Services, in return for trying, agreeing to purchase,
purchasing, or using, Bell Atlantic Retail Telecommunications Services.
2. BELL ATLANTIC ANCILLARY SERVICES
--------------------------------
2.1 Prices
------
2.1.1 The prices for Bell Atlantic Ancillary Services shall be as stated:
(a) in Bell Atlantic's Tariffs; or, (b) in the absence of an applicable Bell
Atlantic Tariff price, in Exhibit II, Attachment 1.
2.1.2 If Bell Atlantic at any time offers a Bell Atlantic Ancillary Service
the prices for which are not stated in Bell Atlantic's Tariffs or Exhibit II,
Attachment 1, Bell Atlantic shall have the right to revise Exhibit II,
Attachment 1, to add the prices to Exhibit II, Attachment 1.
2.2 Price Changes
-------------
2.2.1 Bell Atlantic shall change the prices for Bell Atlantic Ancillary
Services, from time-to-time, to the extent such change is required by Applicable
Law, including, but not limited to, by regulation or order of the Commission,
the FCC, or other governmental entity of appropriate jurisdiction.
2.2.2 Bell Atlantic shall have the right to change the prices for Bell
Atlantic Ancillary Services, from time-to-time, to the extent such change is
required, approved or permitted by Applicable Law, including, but not limited
to, by regulation or order of the Commission, the FCC, or other governmental
entity of appropriate jurisdiction.
2.2.3 Except as otherwise required by Applicable Law, Bell Atlantic shall
give Reseller thirty (30) days advance written notice of any increase in the
prices stated in Exhibit II, Attachment 1 for Bell Atlantic Ancillary Services.
43
<PAGE>
AMENDMENT NO. 2
TO THE
RESALE AGREEMENT
BETWEEN
BELL ATLANTIC -PENNSYLVANIA, INC.
AND
VIC-RMTS-DC, L.L.C.,
D/B/A ONEPOINT COMMUNICATIONS
This Amendment No.2 is made this 11th day of December, 1997, by and between
Bell Atlantic -Pennsylvania, Inc. ("BA"), a Pennsylvania corporation with
offices at 1717 Arch Street, Philadelphia, Pennsylvania 19103, and VIC-RMTS-DC,
L.L.C., a Delaware limited liability company d/b/a OnePoint Communications, and
an affiliate of OnePoint Communications, L.L.C., with offices at 5335 Wisconsin
Avenue, NW, Suite 950, Washington, DC 20015 ("Reseller"). (BA and Reseller may
be referred to individually as a "Party" and collectively as the "Parties".)
WITNESSETH:
----------
WHEREAS, BA and Reseller are Parties to a Resale Agreement under Sections
251 and 252 of the Telecommunications Act of 1996 dated as of August l, 1997
(the " Agreement"); and
WHEREAS, the Parties now desire to amend the Agreement to reflect the
agreement between the parties regarding performance reporting under the
Agreement.
NOW, THEREFORE, in consideration of the promises and mutual agreements
herein contained, the Parties agree to amend the Agreement as follows:
1. Insert the new Section 41, in its entirety, as follows:
41.0 Performance Reporting
---------------------
4l.1 BA shall supply to Reseller quarterly performance
reports on BA's performance in the Commonwealth of Pennsylvania. The
reports shall contain the information described in, and be
substantially in the format of, the documents attached hereto as
Schedules 4lA through 41D. The content of the reports, and the
definitions of the rows and columns in the reports are set forth in
Schedule 4lE. The coverage of each report is set forth in its title,
with the additional explanations set forth in Schedule 4l.
<PAGE>
4l.2 Notwithstanding subsection 4l.1 above and in lieu of the
quarterly performance reports set forth in Schedules 4lA through 4lD,
at such time as BA makes available the Performance Monitoring Reports
set forth in the Memorandum Opinion and Order adopted by the FCC on
August 14, 1997 (the "FCC Merger Order"), to other Telecommunications
Carriers purchasing Interconnection from BA, BA shall provide Reseller
with the Performance Monitoring Reports applicable to Reseller in
accordance with the requirements of said FCC Merger Order.
4l.3 Reseller agrees that the performance information
included in these reports is confidential and proprietary to BA, and
shall be used by Reseller solely for internal performance assessment
purposes, for purposes of joint Reseller and BA assessments of service
performance, and for reporting to the Commission, the FCC, or courts
of competent jurisdiction, under cover of an agreed-upon protective
order, for the sole purpose of enforcing BA's obligations hereunder.
Reseller shall not otherwise disclose this information to third
parties.
2. Insert the new Schedules 41A through 41E in their entirety in the form
attached hereto.
3. Except for the foregoing, the terms and provisions contained in the
Agreement shall remain in full force and effect.
This Amendment may be executed in counterparts, each of which shall be
deemed an original and all of which together shall constitute one and the same
instrument.
[Intentionally Left Blank]
-2-
<PAGE>
IN WITNESS WHEREOF, the Parties hereto have caused this Amendment to be duly
executed as of the date first set forth above.
BELL ATLANTIC - VIC-RMTS-DC, L.L.C.,
PENNSYLVANIA, INC. d/b/a ONEPOINT COMMUNICATIONS
By:_________________________ By:_________________________
Title:________________________ Title:________________________
-3-
<PAGE>
SCHEDULE 4L
PERFORMANCE REPORTING
The following additional descriptions shall apply to the Schedules 4lA to
4lD that are appended hereto:
Schedule 4lA (Reseller-Specific) will report the statewide performance of BA
for the services provided to Reseller for the preceding calendar quarter for the
measures set forth in the report and defined in Schedule 4lE. The dates in the
cells in Schedule 4lA are the dates of the beginning of the first calendar
quarter for which BA will be able to provide the information in that cell.
Where the date is accompanied by the letters "TBD" ("to be determined"), the
date in that cell is BA's then-current best estimate and target, but not yet a
commitment. BA will make its best efforts to meet the "TBD" dates and will
inform Reseller of any potential change in those dates if and when that
potential appears.
Schedule 4lB (BA, including BA affiliates) will report statewide, system-
wide performance of BA, including for the services provided to affiliate
companies of BA, for the preceding calendar quarter for the measures set forth
in the report and defined in Schedule 4lE. The dates in the cells in 4lB have
the same meanings as those described above for Schedule 4lA.
Schedule 4lC (Top 3 Carriers) will report the statewide performance of BA
for the services provided to the largest three telecommunications carriers
interconnecting with or purchasing services from BA pursuant to Sections 251 and
252 of the Act, combined, for the preceding calendar quarter for the measures
set forth in the report and defined in Schedule 4lE. The dates in the cells in
Schedule 4lC have the same meanings as those described above for Schedule 4lA.
In order to preserve the confidentiality of other carriers' information, results
for a service (report column) will only be produced on this report if all three
carriers purchased the reported service in that calendar quarter.
Schedule 4l.D (10 Largest Retail Customers) will, at such time as BA is able
to collect and report such information, and upon agreement regarding
compensation for the collection and reporting of such information, if any,
report statewide performance of BA for the services provided to its ten largest
retail customers for the preceding calendar quarter for the measures set forth
in the report and defined in Schedule 4lE. The cells in Schedule 4lD are all
marked "TBD" ("to be determined") without an accompanying estimated date because
BA has not yet determined that the collection and reporting of this information
is feasible, and if it is, when such reporting might be available. BA agrees,
however, that it will continue its best efforts assessment of the feasibility of
collecting and reporting this information and will promptly report to Reseller
the results of that assessment and the availability of such information at such
time as BA develops the capability to collect and report it for BA's own
internal use.
-4-
<PAGE>
RESELLER MEASUREMENT REPORTS
RESELLER SPECIFIC
<TABLE>
<CAPTION>
Performance Measurement ACTUAL BA SERVICE PERFORMANCE (BY QUARTER)
------------------------------------------------------------------------------------------
DSO DS1 DS3 RESELLER TRUNKING POTS
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INSTALLATION
- ----------------------------------------------------------------------------------------------------------------------------
G) Number of Installations /1/ /2/ /3/ /4/ /5/ TBD
See note below See note below See note below 4-1-97 7-1-97
- ----------------------------------------------------------------------------------------------------------------------------
H) Average Interval in days /6/ /7/ /8/ /9/ /10/ TBD
See note below See note below See note below 4-1-97 7-1-97
- ----------------------------------------------------------------------------------------------------------------------------
I) Percent Install on time /11/ /12/ /13/ /14/ /15/ TBD
See note below See note below See note below 4-1-97 7-1-97
- ----------------------------------------------------------------------------------------------------------------------------
SERVICE QUALITY
- ----------------------------------------------------------------------------------------------------------------------------
J) Number of Reports /16/ /17/ /18/ /19/ /20/
See note below See note below See note below 4-1-97 See note below
- ----------------------------------------------------------------------------------------------------------------------------
K) Mean Time to Clear /21/ /22/ /23/ /24/ /25/
Reports See note below See note below See note below 4-1-97 See note below
- ----------------------------------------------------------------------------------------------------------------------------
L) Number of Failures /26/ /27/ /28/ /29/ /30/
See note below See note below See note below 4-1-97 See note below
- ----------------------------------------------------------------------------------------------------------------------------
M) Failure Frequency /31/ /32/ /33/ /34/ /35/ TBD
Percent See note below See note below See note below 4-1-97 7-1-97
- ----------------------------------------------------------------------------------------------------------------------------
N) Percent Without Report /36/ /37/ /38/ /39/ /40/ TBD
Outstanding See note below See note below See note below 4-1-97 7-1-97
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
- ---------------------------
/1/ Note: End of first full calendar quarter following initial exchange of
traffic between the Parties under this Agreement.
-5-
<PAGE>
RESELLER MEASUREMENT REPORTS
STATEWIDE, INCLUDING BA AFFILIATES
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
Performance Measurement ACTUAL BA SERVICE PERFORMANCE (BY QUARTER)
- ------------------------------------------------------------------------------------------------
DSO DS1 DS3 RESELLER TRUNKING POTS
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INSTALLATION
- ------------------------------------------------------------------------------------------------
G) Number of Installations /1/ /2/ /3/ /4/ /5/
1-1-97 1-1-97 1-1-97 4-1-97 1-1-97
- ------------------------------------------------------------------------------------------------
H) Average Interval in days /6/ /7/ /8/ /9/ /10/
1-1-97 1-1-97 1-1-97 4-1-97 1-1-97
- ------------------------------------------------------------------------------------------------
I) Percent Install on time /11/ /12/ /13/ /14/ /15/
1-1-97 1-1-97 1-1-97 4-1-97 1-1-97
- ------------------------------------------------------------------------------------------------
SERVICE QUALITY
- ------------------------------------------------------------------------------------------------
J) Number of Reports /16/ /17/ /18/ /19/ /20/
1-1-97 1-1-97 1-1-97 4-1-97 1-1-97
- ------------------------------------------------------------------------------------------------
K) Mean Time to Clear /21/ /22/ /23/ /24 /25/
Reports 1-1-97 1-1-97 1-1-97 4-1-97 1-1-97
- ------------------------------------------------------------------------------------------------
L) Number of Failures /26/ /27/ /28/ /29/ /30/
1-1-97 1-1-97 1-1-97 4-1-97 1-1-97
- ------------------------------------------------------------------------------------------------
M) Failure Frequency /31/ /32/ /33/ /34/ /35/
Percent 1-1-97 1-1-97 1-1-97 4-1-97 1-1-97
- ------------------------------------------------------------------------------------------------
N) Percent Without Report /36/ /37/ /38/ /39/ /40/
Outstanding 1-1-97 1-1-97 1-1-97 4-1-97 1-1-97
- ------------------------------------------------------------------------------------------------
</TABLE>
-6-
<PAGE>
RESELLER MEASUREMENT REPORTS
TOP 3 CARRIERS
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
Performance Measurement ACTUAL BA SERVICE PERFORMANCE (BY
QUARTER)
- ----------------------------------------------------------------------------------------------------------------
DSO DS1 DS3 RESELLER TRUNKING POTS
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INSTALLATION
- ----------------------------------------------------------------------------------------------------------------
G) Number of Installations /1/ /2/ /3/ /4/ /5/ TBD
1-1-97 1-1-97 1-1-97 4-1-97 7-1-97
- ----------------------------------------------------------------------------------------------------------------
H) Average Interval in /6/ /7/ /8/ /9/ /10/ TBD
days 1-1-97 1-1-97 1-1-97 4-1-97 7-1-97
- ----------------------------------------------------------------------------------------------------------------
I) Percent Install on time /11/ /12/ /13/ /14/ /15/ TBD
1-1-97 1-1-97 1-1-97 4-1-97 7-1-97
- ----------------------------------------------------------------------------------------------------------------
SERVICE QUALITY
- ----------------------------------------------------------------------------------------------------------------
J) Number of Reports /16/ /17/ /18/ /19/ /20/
1-1-97 1-1-97 1-1-97 4-1-97 1-1-97
- ----------------------------------------------------------------------------------------------------------------
K) Mean Time to Clear /21/ /22/ /23/ /24/ /25/
Reports 1-1-97 1-1-97 1-1-97 4-1-97 1-1-97
- ----------------------------------------------------------------------------------------------------------------
L) Number of Failures /26/ /27/ /28/ /29/ /30/
1-1-97 1-1-97 1-1-97 4-1-97 1-1-97
- ----------------------------------------------------------------------------------------------------------------
M) Failure Frequency /31/ /32/ /33/ /34/ /35/ TBD
Percent 1-1-97 1-1-97 1-1-97 4-1-97 7-1-97
- ---------------------------------------------------------------------------------------------------------------
N) Percent Without Report /36/ /37/ /38/ /39/ /40/ TBD
Outstanding 1-1-97 1-1-97 1-1-97 4-1-97 7-1-97
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
Note: Results produced when a minimum of 3 carriers purchase measured service
-7-
<PAGE>
SCHEDULE 41C
RESELLER MEASUREMENT REPORTS
10 LARGEST RETAIL CUSTOMERS
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
Performance Measurement ACTUAL BA SERVICE PERFORMANCE (BY QUARTER)
- -----------------------------------------------------------------------------------------------------------------
DSO DS1 DS3 RESELLER TRUNKING POTS
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INSTALLATION
- -----------------------------------------------------------------------------------------------------------------
G) Number of Installations /1/ /2/ /3/ /4/ /5/
TBD TBD TBD TBD TBD
- -----------------------------------------------------------------------------------------------------------------
H) Average Interval in days /6/ /7/ /8/ /9/ /10/
TBD TBD TBD TBD TBD
- -----------------------------------------------------------------------------------------------------------------
I) Percent Install on time /11/ /12/ /13/ /14/ /15/
TBD TBD TBD TBD TBD
- -----------------------------------------------------------------------------------------------------------------
SERVICE QUALITY
- -----------------------------------------------------------------------------------------------------------------
J) Number of Reports /16/ /17/ /18/ /19/ /20/
TBD TBD TBD TBD TBD
- -----------------------------------------------------------------------------------------------------------------
K) Mean Time to Clear /21/ /22/ /23/ /24/ /25/
Reports TBD TBD TBD TBD TBD
- -----------------------------------------------------------------------------------------------------------------
L) Number of Failures /26/ /27/ /28/ /29/ /30/
TBD TBD TBD TBD TBD
- -----------------------------------------------------------------------------------------------------------------
M) Failure Frequency /31/ /32/ /33/ /34/ /35/
Percent TBD TBD TBD TBD TBD
- -----------------------------------------------------------------------------------------------------------------
N) Percent Without Report /36/ /37/ /38/ /39/ /40/
Outstanding TBD TBD TBD TBD TBD
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
-1-
<PAGE>
SCHEDULE 41C
RESELLER MEASUREMENT REPORTS
COLUMN & ROW DEFINITIONS
COLUMN HEADINGS
- ---------------
A): PERFORMANCE MEASUREMENTS column defines the general description of each
measurement.
B, C, & D): DSO, DS1 AND DS3 Columns respectively are Private Line Special
Access results.
** DS1 and DS3 are discrete measurements, DSO is all other services.
---------------------------------------------------------------------
E): RESELLER TRUNKS: This column represents service for Reseller trunks that
carry traffic office to office.
F): POTS: This represents all services considered POTS which includes both
unbundled elements and resale.
INSTALLATION CATEGORIES
- -----------------------
G): NUMBER OF INSTALLATIONS: This is the total number of service orders
issued/ requested by Reseller and completed by BA. Regardless of the number of
elements or circuits ordered, each service order counts as 1.
H): AVERAGE INTERVAL IN DAYS: This is the sum of the receipt date to the
service order due date as established on the firm order confirmation (FOC) for
each service order where BA established the interval using the normal interval
with this sum being divided by the total number of service orders used in the
calculation.
Reseller will send BA a service order request (PON) and BA will return the final
order confirmation (FOC) which stipulates the scheduled completion date. The
time from the PON date to the date due established on the FOC represents the
average interval per order.
BA flags each order with an appointment flag of either "x" or "w". If the
scheduled interval reflected on the order is established by Bell Atlantic using
the normal interval process, the order will be flagged with the "x". However,
if Reseller should request a date that is further out than the normal interval,
the order will be flagged with the "w" to indicate that the long interval was
offered at the customers request.
For this category measurement, only those orders with the "x" indicator will be
counted.
If for some reason the order needs to be redated (longer or shorter), the final
FOC date is the date that will be used for measurement purposes.
-2-
<PAGE>
SCHEDULE 41C
I): PERCENT INSTALL ON TIME: This measurement is the total number of
installations (both "x" and "w" service orders) that were completed on time
(based on the service order established due date) divided by the total number of
service orders. This is the percentage of orders completed on time.
SERVICE QUALITY CATEGORIES
- --------------------------
J): NUMBER OF REPORTS: This is the total number of troubles received from
Reseller by service category. Each trouble counts as one and in cases where the
trouble is redated or subsequent reports are received for escalations or to
question status, BA will not count the subsequent reports. From receipt to
close, each trouble counts as 1, regardless of the trouble resolution (CPE, NTF
or BA Network).
K): MEAN TIME TO CLEAR REPORTS: This is the total measurable hours and minutes
from all troubles (from the time BA receives a trouble from Reseller until the
service is restored and closed with Reseller) divided by the total number of
troubles for the report period.
For DSO, DS1, DS3 and Reseller Trunking, the measurements will be "Stop Clock"
measurements where "no access" (customer access delayed) time is removed from
the measurement.
For POTS, this will be a running 24 hour clock from trouble receipt to trouble
clearance time. The BA clear time is the time service is restored. The BA work
process is for the customer (Reseller) to be notified as soon as the service is
cleared. BA does not use the "close time" because after clearing the trouble,
the technician may stay and complete another hour or so of clean up before
actually closing the trouble.
L): NUMBER OF FAILURES: The number of failures is the total number of trouble
reports (by category) where the trouble was closed out to a code indicating that
the fault was a BA service problem.
Removed from the total trouble reports will be all troubles that reflect the
cause of the trouble to be other than a Bell Atlantic Network fault. Examples
would be troubles caused by Customer Provided Equipment (CPE), errors by the
customers/end user in the use of the service or where no trouble was detected
(F/OK and T/OK).
M): FAILURE FREQUENCY PERCENT: This measurement is the total number of Network
Troubles "l", divided by the total number of circuits that Reseller has
purchased from BA. The result expressed as a percentage.
-3-
<PAGE>
SCHEDULE 41E
N): PERCENT WITHOUT REPORT OUTSTANDING: For this measurement Bell Atlantic is
to do the following:
1. Multiply the total number of circuits by the total hours in the
report period to establish the total hours of service availability possible for
the report period.
2. Add all of the measurable time (hours and minutes) for only the
Network Reports to establish the total non service availability hours for the
report period.
3. Subtract the "non service availability" hours from the "total service
availability" hours and divide the result by the "total service availability"
hours and display this as a percentage.
-4-
<PAGE>
EXHIBIT 10.15
AGREEMENT
---------
PREFACE
-------
THIS AGREEMENT is made effective as of May 7, 1997 (the "Effective Date"),
by and between VIC-RMTS-DC, L.L.C., ("Reseller"), a Delaware limited liability
company, d/b/a OnePoint Communications, and affiliate of OnePoint
Communications, L.L.C., with offices at 5335 Wisconsin Avenue, Suite 950,
Washington, D. C. 20015, and Bell Atlantic - Maryland, Inc. ("Bell Atlantic"), a
Maryland corporation, with offices at Constellation Place, 1 East Pratt Street,
8th Floor, Baltimore, Maryland 21202.
WHEREAS, pursuant to Section 251(c)(4) of the Act, 47 U.S.C. (S) 251(c)(4),
Reseller wishes to purchase Bell Atlantic Retail Telecommunications Services
from Bell Atlantic for resale by Reseller as a Telecommunications Carrier
providing Telecommunications Services in the State of Maryland; and
WHEREAS, Bell Atlantic is willing to provide such Bell Atlantic Retail
Telecommunications Services in accordance with this Agreement.
NOW THEREFORE, in consideration of the mutual promises set forth in this
Agreement, Reseller and Bell Atlantic, each on behalf of itself and its
respective successors and assigns, agree as follows:
1. DEFINITIONS
-----------
1.1 As used in the Principal Document, the terms listed below shall have
the meanings stated below:
1.1.1 "Act" means the Communications Act of 1934, 47 U.S.C. (S) 151, et
--
seq., as amended from time-to-time.
----
1.1.2 "Agent" means agent or servant.
1.1.3 "Applicable Law" means all applicable laws and government
regulations and orders.
1.1.4 "Bell Atlantic Other Service" means any service listed in Exhibit I.
1.1.5 "Bell Atlantic Retail Telecommunications Service" means any
Telecommunications Service that Bell Atlantic provides at retail to
subscribers who are not Telecommunications Carriers. The term "Bell
Atlantic Retail Telecommunications Service" does not include any exchange
access service (as defined in Section 3(16) of the Act, 47 U.S.C. (S)
153(16)) provided by Bell Atlantic.
1.1.6 "Bell Atlantic Service" means and includes any Bell Atlantic Retail
Telecommunications Service and any Bell Atlantic Other Service.
1
<PAGE>
1.1.7 "Bell Atlantic's Affiliates" means any corporations, partnerships or
other persons who control, are controlled by, or are under common control
with, Bell Atlantic.
1.1.8 "Bell Atlantic's Tariffs" and "Bell Atlantic Tariff" mean and
include:
(a) Bell Atlantic's effective Federal and state tariffs, as amended by
Bell Atlantic from time-to-time; and,
(b) to the extent Bell Atlantic Services are not subject to Bell Atlantic
tariffs, any standard agreements and other documents, as amended by Bell
Atlantic from time-to-time, that set forth the generally available terms,
conditions and prices under which Bell Atlantic offers such Bell Atlantic
Services.
The terms "Bell Atlantic's Tariffs" and "Bell Atlantic Tariff" do not
include Bell Atlantic's "Statement of Generally Available Terms and
Conditions for Interconnection, Unbundled Network Elements, Ancillary
Services and Resale of Telecommunications Services" which has been approved
by the Commission pursuant to Section 252(f) of the Act, 47 U.S.C. (S)
252(f).
1.1.9 "Commission" means the Maryland Public Service Commission.
1.1.10 "Contract Period", as used in Section 1.1.14 and Section 6.2, means
a stated period or minimum period of time for which Reseller is required by
this Agreement to subscribe to, use and/or pay for a Bell Atlantic Service.
1.1.11 "CPNI" means "Customer Proprietary Network Information" as defined
by Applicable Law, including, but not limited to, Section 222 of the Act,
47 U.S.C. (S) 222.
1.1.12 "Customer Information" means CPNI, and any other individually
identifiable information about a customer of a Party or the purchase by a
customer of a Party of the services or products of that Party.
1.1.13 "Effective Date" means the date first above written.
1.1.14 "Expiration Date Bell Atlantic Service" means: (a) any Bell
Atlantic Service being provided by Bell Atlantic under this Agreement at
the time of expiration of the term of this Agreement, that at the time of
expiration of the term of this Agreement is subject to a Contract Period
which is greater than one (1) month; and, (b) any Bell Atlantic Service
requested by Reseller under this Agreement in an Order accepted by Bell
Atlantic prior to expiration of the term of this Agreement but not yet
being provided by Bell Atlantic at the time of expiration of this
Agreement, that is subject to an initial Contract Period which is greater
than one (1) month.
1.1.15 "Jurisdiction" means the State of Maryland.
2
<PAGE>
1.1.16 "Operator Services" means: (a) services accessed by dialing 411,
555-1212, 1-555-1212, 0+ local, 0+ intraLATA, and, 0-; and, (b) any other
automated or live operator or directory assistance service.
1.1.17 "Order" means an order or application.
1.1.18 "Principal Document" means this document, including the Preface,
Sections 1 through 33, the signature page, Exhibit I, Exhibit II, and
Exhibit II, Attachment 1.
1.1.19 "Reseller Customers" means and includes customers, subscribers and
patrons, of Reseller, purchasers and users of Telecommunications Services
(including, but not limited to, resold Bell Atlantic Retail
Telecommunications Services) provided by Reseller, and purchasers and users
of other services and products provided by Reseller.
1.1.20 "Retail Prices" means the prices at which Bell Atlantic Retail
Telecommunications Services are provided by Bell Atlantic at retail to
subscribers who are not Telecommunications Carriers.
1.1.21 "Telecommunications Carrier" means "Telecommunica-tions Carrier" as
defined in Section 3(44) of the Act, 47 U.S.C. (S) 153(44).
1.1.22 "Telecommunications Service" means "Telecommun-ications Service" as
defined in Section 3(46) of the Act, 47 U.S.C. (S) 153(46).
1.1.23 "Telephone Exchange Service" means "Telephone Exchange Service" as
defined in Section 3(47) of the Act, 47 U.S.C. (S) 153(47).
1.2 Unless the context clearly indicates otherwise, any defined term which
is defined or used in the singular shall include the plural, and any
defined term which is defined or used in the plural shall include the
singular.
2. THE AGREEMENT
-------------
2.1 This Agreement includes: (a) the Principal Document; (b) Bell
Atlantic's Tariffs (which Bell Atlantic Tariffs are incorporated into this
Agreement by reference and made a part hereof); and, (c) a Reseller Order
to provide, change or terminate a Bell Atlantic Service, which has been
accepted by Bell Atlantic (including, but not limited to, any Order which
includes a commitment to purchase a stated number or minimum number of
lines or other Bell Atlantic Services, or a commitment to purchase lines or
other Bell Atlantic Services for a stated period or minimum period of
time).
2.2 Conflicts among terms in the Principal Document, Bell Atlantic's
Tariffs, and a Reseller Order which has been accepted by Bell Atlantic,
shall be resolved in accordance with the following order of precedence,
where the document identified in subsection "(a)"
3
<PAGE>
shall have the highest precedence: (a) the Principal Document; (b) Bell
Atlantic's Tariffs; and, (c) a Reseller Order which has been accepted by
Bell Atlantic. The fact that a term appears in the Principal Document but
not in a Bell Atlantic Tariff, or in a Bell Atlantic Tariff but not in the
Principal Document, shall not be interpreted as, or deemed grounds for
finding, a conflict for the purposes of this Section 2.2.
2.3 This Agreement (including the Principal Document, Bell Atlantic's
Tariffs, and Reseller Orders which have been accepted by Bell Atlantic),
constitutes the entire agreement between the Parties on the subject matter
hereof, and supersedes any prior or contemporaneous agreement,
understanding, or representation on the subject matter hereof. Except as
otherwise provided in the Principal Document, the terms in the Principal
Document may not be waived or modified except by a written document which
is signed by the Parties. Bell Atlantic shall have the right to add,
modify, or withdraw, a Bell Atlantic Tariff at any time, without the
consent of, or notice to, Reseller.
2.4 A failure or delay of either Party to enforce any of the provisions of
this Agreement, or any right or remedy available under this Agreement or at
law or in equity, or to require performance of any of the provisions of
this Agreement, or to exercise any option provided under this Agreement,
shall in no way be construed to be a waiver of such provisions, rights,
remedies, or options.
3. BELL ATLANTIC SERVICES
----------------------
3.1 Reseller may, from time-to-time, during the term of this Agreement,
submit Orders to Bell Atlantic requesting Bell Atlantic to provide Bell
Atlantic Retail Telecommunications Services for resale by Reseller as a
Telecommunications Carrier providing Telecommunications Services, pursuant
to Section 251(c)(4) of the Act, 47 U.S.C. (S) 251(c)(4).
3.2 Reseller may, from time-to-time, during the term of this Agreement,
submit Orders to Bell Atlantic requesting Bell Atlantic to provide Bell
Atlantic Other Services.
3.3 Bell Atlantic may require that Reseller's Orders requesting Bell
Atlantic to provide Bell Atlantic Services be in writing on forms specified
by Bell Atlantic or in an electronic form specified by Bell Atlantic.
3.4 Upon receipt and acceptance by Bell Atlantic of a Reseller Order
requesting Bell Atlantic to provide a Bell Atlantic Service, Bell Atlantic
shall provide, and Reseller shall subscribe to, use and pay for, the Bell
Atlantic Service, in accordance with this Agreement.
3.5 Bell Atlantic Retail Telecommunications Services may be purchased by
Reseller under this Agreement only for the purpose of resale by Reseller as
a Telecommunications Carrier providing Telecommunications Services,
pursuant to Section 251(c)(4) of the Act, 47 U.S.C. (S) 251(c)(4). Bell
Atlantic Retail Telecommunications Services to be purchased by Reseller for
other purposes (including, but not limited to, Reseller's own use) must be
purchased by
4
<PAGE>
Reseller pursuant to separate written agreements, including, but not
limited to, applicable Bell Atlantic Tariffs. Reseller warrants and agrees
that Reseller will purchase Bell Atlantic Retail Telecommunications
Services from Bell Atlantic under this Agreement only for the purpose of
resale by Reseller as a Telecommunications Carrier providing
Telecommunications Services, pursuant to Section 251(c)(4) of the Act, 47
U.S.C. (S) 251(c)(4).
3.6 Except as otherwise provided in this Agreement, Bell Atlantic shall
have the right to add, modify, grandfather, discontinue or terminate Bell
Atlantic Services at any time, without the consent of Reseller.
4. PRICES
------
4.1 Reseller shall pay Bell Atlantic for Bell Atlantic Services at the
prices stated in this Agreement, including, but not limited to, in Exhibit
I and Exhibit II.
4.2 If, prior to establishment of a Bell Atlantic Service, Reseller
cancels or changes its Order for the Bell Atlantic Service, Reseller shall
reimburse Bell Atlantic for the costs associated with such cancellation or
changes as required by this Agreement (including, but not limited to, Bell
Atlantic's Tariffs).
4.3 Upon request by Bell Atlantic, Reseller shall provide to Bell Atlantic
adequate assurance of payment of charges due to Bell Atlantic. Assurance
of payment of charges may be requested by Bell Atlantic: (a) if Reseller,
in Bell Atlantic's reasonable judgment, at the Effective Date or at any
time thereafter, is unable to show itself to be creditworthy; (b) if
Reseller, in Bell Atlantic's reasonable judgment, at the Effective Date or
at any time thereafter, is not creditworthy; or, (c) if Reseller fails to
timely pay a bill rendered to Reseller by Bell Atlantic. Unless otherwise
agreed by the Parties, the assurance of payment shall be in the form of a
cash deposit and shall be in an amount equal to the charges for Bell
Atlantic Services that Reseller may reasonably be expected to incur during
a period of two (2) months. Bell Atlantic may at any time use the deposit
or other assurance of payment to pay amounts due from Reseller.
5. BILLING AND PAYMENT
-------------------
5.1 Except as otherwise permitted or required by this Agreement, or agreed
in writing by the Parties, Bell Atlantic shall render bills to Reseller
monthly. Except as otherwise agreed in writing by the Parties, Bell
Atlantic will render bills to Reseller in a paper form.
5.2 Reseller shall pay Bell Atlantic's bills in immediately available U.S.
funds. Payments shall be transmitted by electronic funds transfer.
5.3 Payment of charges shall be due by the due date stated on Bell
Atlantic's bills. Except as otherwise required by Bell Atlantic's Tariffs
or agreed in writing by the Parties, the due date shall not be sooner than
fifteen (15) days after the date the bill is received by Reseller.
5
<PAGE>
5.4 Charges which are not paid by the due date stated on Bell Atlantic's
bill shall be subject to a late payment charge. The late payment charge
shall be in the amount provided in the applicable Bell Atlantic Tariff;
provided, that in the absence of an applicable Bell Atlantic Tariff late
payment charge, the late payment charge shall be in an amount specified by
Bell Atlantic, which shall not exceed a rate of one and one-half percent
(1.5%) of the over-due amount (including any unpaid, previously billed late
payment charges) per month.
5.5 Reseller acknowledges and agrees that:
5.5.1 During the term of this Agreement, Bell Atlantic will be engaged in
developing and deploying new or modified forms of bills for
Telecommunications Carriers who are engaged in the resale of Bell Atlantic
Retail Telecommunications Services and new or modified systems and methods
for computing and rendering such bills.
5.5.2 Prior to the completion of deployment of such new or modified forms
of bills and such new or modified systems and methods for computing and
rendering bills, Bell Atlantic's form of bill and systems and methods for
computing and rendering bills may be subject to limitations and
restrictions, including, but not limited to, the limitations stated in
Section 5.5.3, below, the inability to provide Reseller with a single,
consolidated bill for all Bell Atlantic Services purchased by Reseller, and
the unavailability of bills and billing information in an electronic form
(e.g., bills may be rendered in a paper form).
5.5.3 Prior to the completion of deployment of the new or modified forms
of bills and the new or modified systems and methods for computing and
rendering bills, Bell Atlantic may apply the discount identified in Exhibit
II, Section 1.1, in a manner (including, but not limited to, in a "bottom-
of-the-bill" format) that results in the Exhibit II, Section 1.1 discount
being applied to charges stated in the bill (including, but not limited to,
Subscriber Line Charges, Federal Line Cost Charges, end user common line
charges, carrier selection and change charges, Audiotex Service charges,
and charges for services which are not Bell Atlantic Retail
Telecommunications Services) which are not subject to the Exhibit II,
Section 1.1 discount. Bell Atlantic will implement a "true-up" process and
within six (6) months after the due date of each monthly bill, issue to
Reseller a "true-up" bill for amounts which were not collected from
Reseller under the monthly bill because of the application of the Exhibit
II, Section 1.1 discount to charges which are not subject to the Exhibit
II, Section 1.1 discount. The "true-up" bill may be issued as a part of or
an entry on a monthly bill, as a bill separate from a monthly bill, or in
such other form as Bell Atlantic may determine.
5.6 Although it is the intent of Bell Atlantic to submit timely and
accurate bills, failure by Bell Atlantic to present bills (including, but
not limited to, monthly bills and "true-up" bills) to Reseller in a timely
or accurate manner shall not constitute a breach or default of this
Agreement, or a waiver of a right of payment of the incurred charges, by
Bell Atlantic. Reseller shall not be entitled to dispute charges for Bell
Atlantic Services provided by Bell Atlantic based on Bell Atlantic's
failure to submit a bill for the charges in a timely fashion.
Notwithstanding the foregoing, closure of a specific billing period shall
occur by joint
6
<PAGE>
agreement of Bell Atlantic and Reseller whereby such billing period is
closed to further charges, analysis and financial transactions, within one
(l) year of the bill date.
6. TERM
----
6.1 The term of this Agreement shall commence on the Effective Date, and,
except as otherwise provided in this Agreement, shall remain in effect
through May 7, 1998.
6.2 Following the expiration of the term of this Agreement specified in
Section 6.1, this Agreement, as amended from time to time, shall remain in
effect as to any Expiration Date Bell Atlantic Service for the remainder of
the Contract Period applicable to such Expiration Date Bell Atlantic
Service at the time of the expiration of this Agreement. If an Expiration
Date Bell Atlantic Service is terminated prior to the expiration of the
Contract Period applicable to such Expiration Date Bell Atlantic Service,
Reseller shall pay any termination charge provided for in this Agreement,
as amended from time-to-time. Following expiration of the applicable
Contract Period for an Expiration Date Bell Atlantic Service, the
Expiration Date Bell Atlantic Service, until terminated, shall be subject
to any applicable new agreement executed by the Parties, or, to the extent
such Expiration Date Bell Atlantic Service is not covered by a new
agreement executed by the Parties, to applicable Bell Atlantic Tariffs.
7. SERVICE INSTALLATION AND MAINTENANCE
------------------------------------
Reseller shall comply with Bell Atlantic's processes and procedures
(including, but not limited to, requirements by Bell Atlantic that Reseller
use Bell Atlantic OSS Services or Bell Atlantic Pre-OSS Services) for the
communication to Bell Atlantic of (a) Reseller's Orders to provide, change
or terminate, Bell Atlantic Services, and (b) Reseller's requests for
information about, assistance in using, or repair or maintenance of, Bell
Atlantic Services. Bell Atlantic may, from time-to-time, upon notice to
Reseller, change these processes and procedures.
8. ASSIGNMENT
----------
8.1 Reseller shall not assign this Agreement or any right or interest
under this Agreement, nor delegate any obligation under this Agreement,
without the prior written approval of Bell Atlantic, which approval shall
not be unreasonably withheld, conditioned or delayed. Any attempted
assignment or delegation in contravention of the foregoing shall be void
and ineffective.
8.2 Bell Atlantic may, without the consent of Reseller, assign this
Agreement or any right or interest under this Agreement, and/or delegate
any obligation under this Agreement, to any of Bell Atlantic's Affiliates,
or to a person with which Bell Atlantic merges or which acquires
substantially all of Bell Atlantic's assets.
9. AVAILABILITY OF SERVICE
-----------------------
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9.1 Except as otherwise stated in Bell Atlantic's Tariffs, Bell Atlantic
shall be obligated to provide Bell Atlantic Services to Reseller under this
Agreement only where Bell Atlantic is able, without unreasonable expense
(as determined by Bell Atlantic in its reasonable judgment), (a) to obtain,
retain, install and maintain suitable facilities for the provision of such
Bell Atlantic Services, and (b) to obtain, retain and maintain suitable
rights for the provision of such Bell Atlantic Services.
9.2 Bell Atlantic's obligation to provide a Bell Atlantic Retail
Telecommunications Service to Reseller under this Agreement shall be
limited to providing the Bell Atlantic Retail Telecommunications Service to
Reseller where, and to the same extent, that Bell Atlantic provides such
Bell Atlantic Retail Telecommunications Service to Bell Atlantic's own end
user retail customers.
10. BRANDING
--------
10.1 Except as stated in Section 10.2, in providing Bell Atlantic Services
to Reseller, Bell Atlantic shall have the right, but not the obligation, to
identify the Bell Atlantic Services with Bell Atlantic's trade names,
trademarks and service marks. Any such identification of the Bell Atlantic
Services shall not constitute the grant of a license or other right to
Reseller to use Bell Atlantic's trade names, trade marks or service marks.
10.2 To the extent required by Applicable Law, upon request by Reseller
and at prices, terms and conditions to be negotiated by Reseller and Bell
Atlantic, Bell Atlantic shall provide Bell Atlantic Retail
Telecommunications Services that are identified by Reseller's trade name,
or that are not identified by trade name, trademark or service mark.
11. CHOICE OF LAW
-------------
11.1 The construction, interpretation and performance of this Agreement
shall be governed by the laws of the United States of America and the laws
of Jurisdiction (without regard to Jurisdiction's conflicts of laws rules).
All disputes relating to this Agreement shall be resolved through the
application of such laws.
11.2 Reseller agrees to submit to the jurisdiction of any court,
commission or other governmental entity in which a claim, suit or
proceeding which arises out of or in connection with this Agreement or Bell
Atlantic Services provided under this Agreement and in which Bell Atlantic
is a party, is brought.
12. COMPLIANCE WITH APPLICABLE LAW
------------------------------
12.1 Each Party shall in its performance of this Agreement comply with
Applicable Law, including, but not limited to, all applicable regulations
and orders of the Commission and the Federal Communications Commission.
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12.2 Reseller shall in providing Bell Atlantic Retail Telecommunications
Services to Reseller Customers comply with Applicable Law, including, but
not limited to, all applicable regulations and orders of the Commission and
the Federal Communications Commission.
13. CONTINGENCIES
-------------
Neither Party shall be liable for any delay or failure in performance by it
which results from strikes, labor slowdowns, or other labor disputes,
fires, explosions, floods, earthquakes, volcanic action, delays in
obtaining or inability to obtain necessary services, facilities, equipment,
parts or repairs thereof, power failures, embargoes, boycotts, unusually
severe weather conditions, revolution, riots or other civil disturbances,
war or acts of the public enemy, acts of God, or causes beyond the Party's
reasonable control.
14. RESELLER'S PROVISION OF SERVICE
-------------------------------
14.1 Prior to providing Bell Atlantic Retail Telecommunications Services
purchased by Reseller under this Agreement to Reseller Customers, Reseller
shall obtain from the Commission, the Federal Communications Commission,
and any other applicable governmental entities, any certificates or other
authorizations required by Applicable Law for Reseller to provide
Telecommunications Services. Reseller shall promptly notify Bell Atlantic
in writing of any governmental action which suspends, cancels or withdraws
any such certificate or authorization, or otherwise limits or affects
Reseller's right to provide Telecommunications Services.
14.2 To the extent required by Applicable Law, Reseller shall: (a) file
with the Commission, the Federal Communications Commission, and/or other
applicable governmental entities, the tariffs, arrangements and other
documents that set forth the terms, conditions and prices under which
Reseller provides Telecommunications Services; and, (b) make available for
public inspection, the tariffs, arrangements and other documents that set
forth the terms, conditions and prices under which Reseller provides
Telecommunications Services.
15. RESELLER'S RESALE AND USE OF SERVICE
------------------------------------
15.1 Reseller shall comply with the provisions of this Agreement
(including, but not limited to, Bell Atlantic's Tariffs) regarding resale
or use of Bell Atlantic Services, including, but not limited to, any
restrictions on resale or use of Bell Atlantic Services.
15.2 Without in any way limiting Section 15.1, (a) Reseller shall not
resell residential service to persons not eligible to subscribe to such
service from Bell Atlantic (including, but not limited to, business
Reseller Customers and other nonresidential Reseller Customers), and (b)
Reseller shall not resell Lifeline or other means-tested service offerings,
or grandfathered or discontinued service offerings, to persons not eligible
to subscribe to such service offerings from Bell Atlantic.
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15.3 Reseller shall undertake in good faith to ensure that Reseller
Customers comply with the provisions of Bell Atlantic's Tariffs applicable
to their use of Bell Atlantic Retail Telecommunications Services.
15.4.1 Without in any way limiting Reseller's obligations under Section
12, Reseller shall comply with Applicable Law with regard to end user
selection of a primary Telephone Exchange Service provider. Until the
Commission or the Federal Communications Commission adopts regulations
and/or orders applicable to end user selection of a primary Telephone
Exchange Service provider, Reseller shall apply the rules and procedures
set forth in Section 64.1100 of the FCC Rules, 47 CFR (S) 64.1100, to the
process for end user selection of a primary Telephone Exchange Service
provider (including, to end user selection of a primary Telephone Exchange
Service provider that occurs during any telemarketing contact with an end
user), and shall comply with such rules and procedures.
15.4.2 By submitting to Bell Atlantic an Order to install, provide, change
or terminate a Telecommunications Service, to select, change or reassign a
telephone number, or to select, change or terminate an end user's primary
Telephone Exchange Service provider, Reseller represents and warrants: (a)
that Reseller has obtained authorization for such action from the
applicable end user; and, (b) that if Applicable Law and/or this Agreement
required such authorization to be obtained in a particular manner, Reseller
obtained the authorization in the manner required by Applicable Law and
this Agreement. Reseller shall upon request by Bell Atlantic provide proof
of such authorization (including, a copy of any written authorization).
15.4.3 If Reseller submits an Order to Bell Atlantic to install, provide,
change or terminate a Telecommunications Service, to select, change or
reassign a telephone number, or to select, change or terminate an end
user's primary Telephone Exchange Service provider, and (a) when requested
by Bell Atlantic to provide a written document signed by the end user
stating the end user's primary Telephone Exchange Service provider
selection, fails to provide such document to Bell Atlantic, or (b) has not
obtained authorization for such installation, provision, selection, change,
reassignment or termination, from the end user in the manner required by
Applicable Law (or, in the absence of Applicable Law, in the manner
required by the rules and procedures in 47 CFR (S) 64.1100), Reseller shall
be liable to Bell Atlantic for all charges that would be applicable to the
end user for the initial installation, provision, selection, change,
reassignment or termination, of the end user's Telecommunications Service,
telephone number, and/or primary Telephone Exchange Service provider, and
any charges for restoring the end user's Telecommunications Service,
telephone number, and/or primary Telephone Exchange Service provider
selection, to its end user authorized condition.
15.5.1 Without in any way limiting Reseller's obligations under Section 12,
Reseller shall comply with Applicable Law with regard to Customer
Information, including, but not limited to, 47 U.S.C. (S) 222. Reseller
shall not access (including, but not limited to, through Bell Atlantic OSS
Services and Bell Atlantic Pre-OSS Services), use or disclose Customer
Information made available to Reseller by Bell Atlantic pursuant to this
Agreement unless Reseller has obtained any customer authorization for such
access, use and/or disclosure required by Applicable Law. By accessing,
using or disclosing Customer Information,
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Reseller represents and warrants that Reseller has obtained authorization
for such action from the applicable customer in the manner required by
Applicable Law and this Agreement. Reseller shall upon request by Bell
Atlantic provide proof of such authorization (including, a copy of any
written authorization).
15.5.2 Bell Atlantic shall have the right to audit Reseller to ascertain
whether Reseller is complying with the requirements of Applicable Law and
this Agreement, with regard to Reseller's access to, and use and disclosure
of, Customer Information which is made available to Reseller by Bell
Atlantic pursuant to this Agreement.
15.5.3 Without in any way limiting Section 15.5.2, to the extent permitted
by Applicable Law, Bell Atlantic shall have the right to monitor Reseller's
access to and use of Customer Information which is made available by Bell
Atlantic to Reseller pursuant to this Agreement, to ascertain whether
Reseller is complying with the requirements of Applicable Law and this
Agreement, with regard to Reseller's access to, and use and disclosure of,
such Customer Information. The foregoing right shall include, but not be
limited to, to the extent permitted by Applicable Law, the right to
electronically monitor Reseller's access to and use of Customer Information
which is made available by Bell Atlantic to Reseller pursuant to this
Agreement through electronic interfaces or gateways.
15.6.1 Reseller shall be the single point of contact for Reseller
Customers and other persons with regard to Telecommunications Services and
other services and products which they wish to purchase from Reseller or
which they have purchased from Reseller. Communications by Reseller
Customers and other persons with regard to Telecommunications Services and
other services and products which they wish to purchase from Reseller or
which they have purchased from Reseller, shall be made to Reseller, and not
to Bell Atlantic. Reseller shall instruct Reseller Customers and other
persons that such communications shall be directed to Reseller.
15.6.2 Without in any way limiting Section 15.6.1, Reseller shall be the
single point of contact for Reseller Customers (a) to request information
about or provision of Telecommunications Services which they wish to
purchase from Reseller, (b) to change, terminate, or request information
about, assistance in using, or repair or maintenance of, Telecommunications
Services which they have purchased from Reseller, and (c) to make inquiries
concerning Reseller's bills, charges for Reseller's Telecommunications
Services, and, if the Reseller Customers receive dial tone line service
from Reseller, annoyance calls. Requests by Reseller Customers for
information about or provision of Telecommunications Services which they
wish to purchase from Reseller, requests by Reseller Customers to change,
terminate, or obtain information about, assistance in using, or repair or
maintenance of, Telecommunications Services which they have purchased from
Reseller, and inquiries by Reseller Customers concerning Reseller's bills,
charges for Reseller's Telecommunications Services, and, if the Reseller
Customers receive dial tone line service from Reseller, annoyance calls,
shall be made by the Reseller Customers to Reseller, and not to Bell
Atlantic.
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15.6.3 Reseller shall establish telephone numbers at which Reseller
Customers and other persons may communicate with Reseller and shall advise
Reseller Customers and other persons who may wish to communicate with
Reseller of these telephone numbers.
15.7.1 Reseller's use of telephone numbers shall be subject to Applicable
Law (including, but not limited to, the rules of the Federal Communications
Commission, the North American Numbering Council, and the North American
Numbering Plan Administrator), the applicable provisions of this Agreement
(including, but not limited to, this Section 15.7), and Bell Atlantic's
practices and procedures for use and assignment of telephone numbers, as
amended from time-to-time.
15.7.2 Subject to Sections 15.7.1 and 15.7.3, if an end user who
subscribes to a Bell Atlantic Retail Telecommunications Service dial tone
line from either Reseller or Bell Atlantic changes the Telecommunications
Carrier from whom the end user subscribes for such dial tone line
(including a change from Bell Atlantic to Reseller, from Reseller to Bell
Atlantic, or from Reseller to a Telecommunications Carrier other than Bell
Atlantic), after such change, the end user may continue to use with the
dial tone line the telephone numbers which were assigned to the dial tone
line by Bell Atlantic immediately prior to the change.
15.7.3 Bell Atlantic shall have the right to change the telephone numbers
used by an end user if at any time: (a) the type or class of service
subscribed to by the end user changes; (b) the end user requests service at
a new location, that is not served by the Bell Atlantic switch and the Bell
Atlantic rate center from which the end user previously had service; or,
(c) continued use of the telephone numbers is not technically feasible.
15.7.4 If service on a Bell Atlantic Retail Telecommunications Service
dial tone line subscribed to by Reseller from Bell Atlantic under this
Agreement is terminated, the telephone numbers associated with such dial
tone line shall be available for reassignment by Bell Atlantic to any
person to whom Bell Atlantic elects to assign the telephone numbers,
including, but not limited to, Bell Atlantic, Bell Atlantic end user retail
customers, Reseller, or Telecommunications Carriers other than Bell
Atlantic and Reseller.
15.8 Reseller shall comply with Applicable Law, and Bell Atlantic's
procedures, for handling requests from law enforcement and other government
agencies for service termination, assistance with electronic surveillance,
and provision of information.
16. COUNTERPARTS
------------
This Agreement may be executed in two or more counterparts, each of which
shall be deemed an original and all of which shall together constitute one
and the same instrument.
17. DEFAULT
-------
17.1 If Reseller materially breaches a material provision of this
Agreement (other than an obligation to make payment of any amount billed
under this Agreement), and such breach
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continues for more than thirty (30) days after written notice thereof from
Bell Atlantic, then, except as otherwise required by Applicable Law, Bell
Atlantic shall have the right, upon notice to Reseller, to terminate or
suspend this Agreement and/or provision of Bell Atlantic Services, in whole
or in part.
17.2.1 If Reseller fails to make a payment of any amount billed under this
Agreement by the due date stated on the bill and such failure continues for
more than thirty (30) days after written notice thereof from Bell Atlantic,
then, except as provided in Section 17.2.2, below, or as otherwise required
by Applicable Law, Bell Atlantic shall have the right, upon notice to
Reseller, to terminate or suspend this Agreement and/or provision of Bell
Atlantic Services, in whole or in part.
17.2.2 If a good faith dispute arises between the Parties concerning the
obligation of Reseller to make payment of an amount billed under this
Agreement, the failure to pay the amount in dispute shall not constitute
cause for termination or suspension of this Agreement or provision of Bell
Atlantic Services, if, within thirty (30) days of the date that Bell
Atlantic gives Reseller written notice of the failure to pay the amount in
dispute, Reseller (a) gives Bell Atlantic written notice of the dispute
stating the basis of the dispute, and (b) furnishes to Bell Atlantic an
irrevocable letter of credit or other security arrangement acceptable to
Bell Atlantic, guaranteeing payment to Bell Atlantic of any portion of the
disputed amount (including the whole of the disputed amount) which is
thereafter agreed by Bell Atlantic and Reseller, or determined by a court
or other governmental entity of appropriate jurisdiction, to be due to Bell
Atlantic. The existence of such a dispute shall not relieve Reseller of
its obligations to pay any undisputed amount which is due to Bell Atlantic
and to otherwise comply with this Agreement.
18. FACILITIES
----------
18.1 Bell Atlantic or its suppliers shall retain all right, title and
interest in, and ownership of, all facilities, equipment, software,
information, and wiring, used to provide Bell Atlantic Services. During
the period in which Bell Atlantic Services are provided, Bell Atlantic
shall have free and unimpeded access at all reasonable times to Reseller
and Reseller Customer locations for the purpose of installing, inspecting,
maintaining, and repairing, all facilities, equipment, software, and
wiring, used to provide the Bell Atlantic Services. At the conclusion of
the period in which Bell Atlantic Services are provided, Bell Atlantic
shall have free and unimpeded access at Reseller and Reseller Customer
locations at all reasonable times to remove all facilities, equipment,
software, and wiring, used to provide the Bell Atlantic Services. Reseller
shall, at Reseller's expense, obtain any rights and authorizations
necessary for such access.
18.2 Except as otherwise agreed to in writing by Bell Atlantic, Bell
Atlantic shall not be responsible for the installation, inspection, repair,
maintenance, or removal, of facilities, equipment, software, or wiring,
provided by Reseller or Reseller Customers for use with Bell Atlantic
Services.
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19. INTELLECTUAL PROPERTY
---------------------
Except as expressly stated in this Agreement, nothing contained within this
Agreement shall be construed as the grant of a license, either express or
implied, with respect to any patent, copyright, trade name, trade mark,
service mark, trade secret, or other proprietary interest or intellectual
property, now or hereafter owned, controlled or licensable by either Party.
20. JOINT WORK PRODUCT
------------------
The Principal Document is the joint work product of the representatives of
the Parties. For convenience, the Principal Document has been drafted in
final form by Bell Atlantic. Accordingly, in the event of ambiguities, no
inferences shall be drawn against either Party solely on the basis of
authorship of the Principal Document.
21. LIABILITY
---------
21.1.1 AS USED IN THIS SECTION 21, "OTHER BELL ATLANTIC PERSONS" MEANS
BELL ATLANTIC'S AFFILIATES, AND THE DIRECTORS, OFFICERS, EMPLOYEES, AGENTS
AND CONTRACTORS, OF BELL ATLANTIC AND BELL ATLANTIC'S AFFILIATES.
21.1.2 AS USED IN THIS SECTION 21, "BELL ATLANTIC SERVICE FAILURE" MEANS
ANY FAILURE TO INSTALL, RESTORE, PROVIDE OR TERMINATE A BELL ATLANTIC
SERVICE, OR ANY MISTAKE, OMISSION, INTERRUPTION, DELAY, ERROR, DEFECT,
FAULT, FAILURE, OR DEFICIENCY, IN A BELL ATLANTIC SERVICE.
21.2 THE LIABILITY, IF ANY, OF BELL ATLANTIC AND OTHER BELL ATLANTIC
PERSONS, TO RESELLER, RESELLER CUSTOMERS AND/OR ANY OTHER PERSON, FOR ANY
CLAIM, LOSS OR DAMAGES ARISING OUT OF OR IN CONNECTION WITH A BELL ATLANTIC
SERVICE FAILURE, SHALL BE LIMITED AND/OR EXCLUDED AS SET FORTH IN BELL
ATLANTIC'S TARIFFS.
21.3.1 TO THE EXTENT THE BELL ATLANTIC TARIFFS APPLICABLE TO A BELL
ATLANTIC SERVICE DO NOT CONTAIN A PROVISION WHICH LIMITS OR EXCLUDES THE
LIABILITY OF BELL ATLANTIC AND/OR OTHER BELL ATLANTIC PERSONS TO RESELLER,
RESELLER CUSTOMERS AND/OR ANY OTHER PERSON, FOR ANY CLAIM, LOSS OR DAMAGES
ARISING OUT OF OR IN CONNECTION WITH A BELL ATLANTIC SERVICE FAILURE,
SECTION 21.3.3 SHALL APPLY.
21.3.2 TO THE EXTENT A BELL ATLANTIC SERVICE IS NOT SUBJECT TO A BELL
ATLANTIC TARIFF, SECTION 21.3.3 SHALL APPLY.
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21.3.3 THE LIABILITY, IF ANY, OF BELL ATLANTIC AND OTHER BELL ATLANTIC
PERSONS, TO RESELLER, RESELLER CUSTOMERS AND/OR ANY OTHER PERSON, FOR ANY
CLAIM, LOSS OR DAMAGES ARISING OUT OF OR IN CONNECTION WITH A BELL ATLANTIC
SERVICE FAILURE, SHALL BE LIMITED TO A TOTAL AMOUNT NOT IN EXCESS OF: (A)
TWICE THE PROPORTIONATE CHARGE FOR THE BELL ATLANTIC SERVICE AFFECTED
DURING THE PERIOD OF THE BELL ATLANTIC SERVICE FAILURE; OR, (B) IF THERE IS
NO CHARGE FOR THE BELL ATLANTIC SERVICE AFFECTED, FIVE HUNDRED DOLLARS
($500.00).
21.4 NOTWITHSTANDING ANYTHING CONTAINED IN SECTION 21.2, SECTION 21.3.1,
SECTION 21.3.2, OR SECTION 21.3.3, ABOVE, BELL ATLANTIC AND OTHER BELL
ATLANTIC PERSONS SHALL HAVE NO LIABILITY TO RESELLER, RESELLER CUSTOMERS,
AND/OR ANY OTHER PERSON, FOR ANY SPECIAL, INDIRECT, INCIDENTAL, OR
CONSEQUENTIAL, DAMAGES (INCLUDING, BUT NOT LIMITED TO, DAMAGES FOR HARM TO
BUSINESS, LOST REVENUES, LOST PROFITS, LOST SAVINGS, OR OTHER COMMERCIAL OR
ECONOMIC LOSS), ARISING OUT OF OR IN CONNECTION WITH A BELL ATLANTIC
SERVICE FAILURE OR ANY BREACH OR FAILURE IN PERFORMANCE OF THIS AGREEMENT
BY BELL ATLANTIC.
21.5 THE LIMITATIONS AND EXCLUSIONS FROM LIABILITY STATED IN SECTIONS 21.2
THROUGH 21.4 SHALL APPLY REGARDLESS OF THE FORM OF A CLAIM OR ACTION,
WHETHER IN CONTRACT, WARRANTY, TORT (INCLUDING, BUT NOT LIMITED TO, THE
NEGLIGENCE OF BELL ATLANTIC AND/OR OTHER BELL ATLANTIC PERSONS), STRICT
LIABILITY, OR OTHERWISE, AND REGARDLESS OF WHETHER BELL ATLANTIC HAS BEEN
ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
21.6 Reseller shall, in its tariffs or other contracts with Reseller
Customers, provide that in no case shall Bell Atlantic or Other Bell
Atlantic Persons be liable to Reseller Customers or to any other third
parties for any indirect, special, incidental, consequential, or other
damages, including, but not limited to, harm to business, lost revenues,
lost profits, lost savings, or other commercial or economic loss, whether
foreseeable or not, and regardless of notification of the possibility of
such damages. Reseller shall indemnify, defend and hold Bell Atlantic and
Other Bell Atlantic Persons harmless from claims by Reseller Customers and
other third parties as provided in Bell Atlantic's Tariffs.
21.7 Bell Atlantic's obligations under this Agreement shall extend only to
Reseller. Bell Atlantic shall have no liability under this Agreement to
Reseller Customers or to any other third party. Nothing in this Agreement
shall be deemed to create a third party beneficiary relationship between
Bell Atlantic and Reseller Customers or any other third party.
21.8 Reseller shall indemnify, defend and hold harmless Bell Atlantic,
Bell Atlantic's Affiliates, and the directors, officers and employees of
Bell Atlantic and Bell Atlantic's
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Affiliates, from any claims, suits, government proceedings, judgments,
fines, liabilities, losses, damages, costs or expenses (including
reasonable attorneys fees) arising out of or resulting from: (a) the
failure of Reseller to transmit to Bell Atlantic a request by a Reseller
Customer to install, provide, change or terminate, a Bell Atlantic Retail
Telecommunications Service; (b) the transmission by Reseller to Bell
Atlantic of an Order to install, provide, change or terminate, a Bell
Atlantic Retail Telecommunications Service, which Order was not authorized
by the applicable Reseller Customer; (c) erroneous or inaccurate
information in an Order transmitted by Reseller to Bell Atlantic; (d) the
transmission by Reseller to Bell Atlantic of an Order to change or
terminate a Telecommunications Service provided to an end user by Bell
Atlantic or another Telecommunications Service provider, or to install or
provide a Telecommunications Service for an end user, which Order was not
authorized by the applicable end user; (e) the transmission by Reseller to
Bell Atlantic of an Order to select, change or reassign a telephone number
for an end user, which Order was not authorized by the applicable end user;
(f) the transmission by Reseller to Bell Atlantic of an Order to select a
primary Telephone Exchange Service provider for an end user, or to change
or terminate an end user's selection of a primary Telephone Exchange
Service provider, which Order was not authorized by the applicable end user
in the manner required by Applicable Law (or, in the absence of such
Applicable Law, in the manner required by the rules and procedures in 47
CFR (S) 64.1100); (g) access to, or use or disclosure of, Customer
Information or Bell Atlantic OSS Information by Reseller or Reseller's
employees, Agents or contractors; (h) the failure of Reseller to transmit,
or to transmit in a timely manner, E911/911 information to Bell Atlantic;
(i) erroneous or inaccurate E911/911 information transmitted by Reseller to
Bell Atlantic; (j) any information provided by Reseller for inclusion in
Bell Atlantic's LIDB; or, (k) the marketing, advertising or sale of
Reseller's services and/or products (including, but not limited to, resold
Bell Atlantic Retail Telecommunications Services), or the billing or
collection of charges for Reseller's services and/or products (including,
but not limited to, resold Bell Atlantic Retail Telecommunications
Services). For the purposes of Section 21.8(b), (d) and (e), an Order shall
be deemed not to have been authorized by a Reseller Customer or end user if
Applicable Law and/or this Agreement required such authorization to be
obtained in a particular manner, and Reseller did not obtain the
authorization in the manner required by Applicable Law and this Agreement.
22. NON-EXCLUSIVE REMEDIES
----------------------
Except as otherwise expressly provided in this Agreement, each of the
remedies provided under this Agreement is cumulative and is in addition to
any other remedies that may be available under this Agreement or at law or
in equity.
23. NOTICES
-------
All notices and other communications under this Agreement shall be deemed
effective upon receipt by the Party being notified, provided such notices
or communications are in writing and are sent by certified or registered
mail, return receipt requested, or by a reputable private delivery service
which provides a record of delivery, and addressed as shown below:
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TO BELL ATLANTIC: Bell Atlantic - Maryland, Inc.
c/o Bell Atlantic Network Services, Inc.
1320 North Courthouse Road, 9th Floor
Arlington, Virginia 22201
Attn.: Director, Resale
Initiatives
TO RESELLER: VIC-RMTS-DC, L.L.C.
c/o OnePoint Communications, L.L.C.
5335 Wisconsin Avenue
Suite 950
Washington, D.C. 20015
Attn: President
Either Party may from time-to-time designate another address or addressee
by giving notice in accordance with this Section 23.
24. REGULATORY APPROVALS
--------------------
24.1 Within thirty (30) days after execution of this Agreement by the
Parties, Bell Atlantic shall file the Agreement with the Commission for
approval by the Commission.
24.2 Each Party shall exercise reasonable efforts (including reasonably
cooperating with the other Party) to secure approval of this Agreement, and
any amendment to this Agreement agreed to by the Parties, from the
Commission, the Federal Communications Commission, and other applicable
governmental entities.
24.3 Upon request by Bell Atlantic, Reseller shall, at Reseller's expense,
provide reasonable, good-faith support and assistance to Bell Atlantic in
obtaining any governmental approvals necessary for (a) this Agreement and
any amendment to this Agreement agreed to by the Parties, and/or (b) the
provision of Bell Atlantic Services by Bell Atlantic to Reseller. Without
in any way limiting the foregoing, upon request by Bell Atlantic, Reseller
shall (a) join in petitions requesting approval of this Agreement, or an
amendment to this Agreement agreed to by the Parties, to be filed with the
Commission, the Federal Communications Commission, or other applicable
governmental entities, and (b) file other documents with and present
testimony to the Commission, the Federal Communications Commission, or
other applicable governmental entities, requesting approval of this
Agreement or an amendment to this Agreement agreed to by the Parties.
25. REGULATORY CONTINGENCIES
------------------------
25.1 Neither Party shall be liable for any delay or failure in performance
by it which results from requirements of Applicable Law, or acts or
failures to act of any governmental entity or official.
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25.2 In the event that any provision of this Agreement shall be invalid or
unenforceable, such invalidity or unenforceability shall not invalidate or
render unenforceable any other provision of this Agreement, and this
Agreement shall be construed as if it did not contain such invalid or
unenforceable provision.
25.3 In the event that any legislative, regulatory, judicial or other
governmental action materially affects any material terms of this
Agreement, the ability of either Party to perform any material terms of
this Agreement, or the rights or obligations of either Party under this
Agreement, the Parties shall take such action as shall be necessary to
conform this Agreement to the governmental action and/or to permit Bell
Atlantic to continue to provide and Reseller to continue to purchase Bell
Atlantic Services, including, but not limited to, conducting good faith
negotiations to enter into a mutually acceptable modified or substitute
agreement, filing tariffs, or additional, supplemental or modified tariffs,
and making other required filings with governmental entities.
25.4 In the event of a governmental action described in Section 25.3,
above, to the extent permitted by Applicable Law, Bell Atlantic shall
continue to provide and Reseller shall continue to subscribe to, use and
pay for, any Bell Atlantic Services affected by the governmental action
until the action to be taken by Bell Atlantic and Reseller under Section
25.3, above, is taken and becomes effective in accordance with Applicable
Law. Such provision of and subscription to, use of and payment for, the
affected Bell Atlantic Services shall be in accordance with the terms
(including prices) of this Agreement, unless other terms, including but not
limited to the terms of a Bell Atlantic Tariff, are required by Applicable
Law.
25.5 If suspension or termination of the provision of any Bell Atlantic
Service is required by or as a result of a governmental action, such
suspension or termination shall not affect Reseller's subscription to, use
or obligation to pay for, other Bell Atlantic Services, unless such
suspension or termination has a material, adverse effect on Reseller's
ability to use the other Bell Atlantic Services.
25.6 If any of the Bell Atlantic Services to be provided by Bell Atlantic
pursuant to a tariff shall at any time become detariffed or deregulated,
Bell Atlantic may transfer the provisions of the tariff relative to such
Bell Atlantic Services to a Bell Atlantic "Guide for Detariffed Services"
or similar document, and such "Guide for Detariffed Services" or similar
document, as amended by Bell Atlantic from time-to-time, shall become a
part of this Agreement.
26. RELATIONSHIP OF THE PARTIES
---------------------------
26.1 The relationship between the Parties under this Agreement shall be
that of independent contractors.
26.2 Nothing contained in this Agreement shall:
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(a) make either Party the Agent or employee of the other Party;
(b) grant either Party the authority to enter into a contract on
behalf of, or otherwise legally bind, the other Party in any way;
(c) create a partnership, joint venture or other similar relationship
between the parties; or
(d) grant to Reseller a franchise, distributorship or similar
interest.
26.3 Each Party shall be solely responsible for selection, supervision,
termination, and compensation, of its respective employees, Agents and
contractors.
26.4 Each Party shall be solely responsible for payment of any Social
Security or other taxes which it is required by Applicable Law to pay in
conjunction with its employees, Agents or contractors, and for collecting
and remitting to applicable taxing authorities any taxes which it is
required by Applicable Law to collect from its employees, Agents or
contractors.
26.5 The relationship of the Parties under this Agreement is a non-
exclusive relationship. Bell Atlantic shall have the right to provide
services to be provided by Bell Atlantic under this Agreement to persons
other than Reseller. Reseller shall have the right to purchase services to
be purchased by Reseller under this Agreement from persons other than Bell
Atlantic.
27. RESPONSIBILITY FOR CHARGES
--------------------------
27.1 Reseller shall be responsible for and pay all charges for any Bell
Atlantic Service provided by Bell Atlantic to Reseller, whether the Bell
Atlantic Service is ordered, activated or used by Reseller, a Reseller
Customer, or another person.
27.2 In addition to the charges for Bell Atlantic Services, Reseller
agrees to pay, and to indemnify, defend and hold Bell Atlantic harmless
from, any charges for Telecommunications Services, facilities, equipment,
software, wiring, or other services or products, ordered, activated or used
by Reseller, Reseller Customers or other persons, through, by means of, or
in association with, Bell Atlantic Services provided by Bell Atlantic to
Reseller, whether provided or billed for by Bell Atlantic or persons other
than Bell Atlantic (including, but not limited to, charges billed to any
line, telephone number or other Bell Atlantic Service provided by Bell
Atlantic, or to any Reseller account with Bell Atlantic, and charges for
intraLATA and interLATA toll calls, 1+ calls, 10XXX calls, 101XXXX calls,
900, 888, 800, 700, 555, 500 and N11 number calls, Audiotex Service, Dial-
It, 976, 915 and 556 calls, "pay-per-call" services, Operator Services
calls, Directory Assistance calls, and calling card, collect, and bill-to-
third-number calls).
27.3 Without in any way limiting Reseller's obligations under Section 27.1
and Section
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27.2, Reseller shall pay, or collect and remit to Bell Atlantic, without
discount, all Subscriber Line Charges, Federal Line Cost Charges, end user
common line charges, and carrier selection and change charges, associated
with Bell Atlantic Services provided by Bell Atlantic to Reseller.
27.4 Upon request by Reseller, Bell Atlantic will provide for use on
resold Bell Atlantic Retail Telecommunications Service dial tone lines
purchased by Reseller such Bell Atlantic Retail Telecommunications Service
call blocking services as Bell Atlantic provides to Bell Atlantic's own end
user retail customers, where and to the extent Bell Atlantic provides such
Bell Atlantic Retail Telecommunications Service call blocking services to
Bell Atlantic's own end user retail customers.
28. SECTION HEADINGS
----------------
The section headings in the Principal Document are for convenience only and
are not intended to affect the meaning or interpretation of the Principal
Document.
29. SERVICES NOT COVERED BY THIS AGREEMENT
--------------------------------------
29.1 This Agreement applies only to Bell Atlantic Services (as the term
"Bell Atlantic Service" is defined in Section 1.1.6) provided, or to be
provided, by Bell Atlantic to Reseller, as specified in Section 3. Any
Telecommunications Services, facilities, equipment, software, wiring, or
other services or products (including, but not limited to,
Telecommunications Services, facilities, equipment, software, wiring, or
other services or products, interconnected or used with Bell Atlantic
Services provided, or to be provided, by Bell Atlantic to Reseller)
provided, or to be provided, by Bell Atlantic to Reseller, which are not
subscribed to by Reseller under this Agreement, must be subscribed to by
Reseller separately, pursuant to other written agreements (including, but
not limited to, applicable Bell Atlantic Tariffs). Reseller shall use and
pay for any Telecommunications Services, facilities, equipment, software,
wiring, or other services or products, provided, or to be provided, by Bell
Atlantic to Reseller, which are not subscribed to by Reseller under this
Agreement, in accordance with such other written agreements (including, but
not limited to, applicable Bell Atlantic Tariffs).
29.2 Without in any way limiting Section 29.1 and without attempting to
list all Bell Atlantic products and services that are not subject to this
Agreement, the Parties agree that this Agreement does not apply to the
purchase by Reseller of the following Bell Atlantic services and products:
except as expressly stated in the Principal Document, exchange access
services as defined in Section 3(16) of the Act, 47 U.S.C. (S) 153(16)
(including, but not limited to, primary interLATA toll carrier and primary
intraLATA toll carrier choice or change); Bell Atlantic Answer Call, Bell
Atlantic Answer Call Plus, Bell Atlantic Home Voice Mail, Bell Atlantic
Home Voice Mail Plus, Bell Atlantic Voice Mail, Bell Atlantic Basic
Mailbox, Bell Atlantic OptiMail Service, and other voice mail, fax mail,
voice messaging, and fax messaging, services; Bell Atlantic Optional Wire
Maintenance Plan; Bell Atlantic Guardian Enhanced Maintenance Service; Bell
Atlantic Sentry I Enhanced
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Maintenance Service; Bell Atlantic Sentry II Enhanced Maintenance Service;
Bell Atlantic Sentry III Enhanced Maintenance Service; Bell Atlantic Call
54 Service; Bell Atlantic Public Telephone Service; customer premises
equipment; Bell Atlantic telephone directory listings offered under
agreements or arrangements other than Bell Atlantic Tariffs filed with the
Commission; and, Bell Atlantic telephone directory advertisements.
29.3 Without in any way limiting Section 29.1, the Parties also agree that
this Agreement does not apply to the installation, inspection, maintenance,
repair, removal, or use of any facilities, equipment, software, or wiring,
located on Reseller's side of the Network Rate Demarcation Point applicable
to Reseller and does not grant to Reseller or Reseller Customers a right to
installation, inspection, maintenance, repair, or removal, by Bell
Atlantic, or use, by Reseller or Reseller Customers, of any such
facilities, equipment, software, or wiring.
29.4 Without in any way limiting Section 30.1, the Parties agree that this
Agreement does not apply to the purchase by Reseller of Bell Atlantic
Audiotex Services, including, but not limited to, Dial-It, 976, 915 and 556
services. Reseller shall block, and Bell Atlantic shall have the right
(but not the obligation) to block, calls made to Audiotex Service numbers
(including, but not limited to, Dial-It numbers and 976, 915 and 556
numbers) through Bell Atlantic Services purchased by Reseller under this
Agreement until Reseller enters into a separate written agreement with Bell
Atlantic for the billing and collection of charges for such calls.
29.5 Nothing contained within this Agreement shall obligate Bell Atlantic
to provide any service or product which is not a Bell Atlantic Service
(including, but not limited to, the services listed in Sections 29.2, 29.3
and 29.4, above) to Reseller.
29.6 Nothing contained within this Agreement shall obligate Bell Atlantic
to provide a Bell Atlantic Service or any other service or product to a
Reseller Customer. Without in any way limiting the foregoing, except as
otherwise required by Applicable Law, Bell Atlantic reserves the right to
terminate provision of services and products (including, but not limited
to, Telecommunications Services and the services listed in Sections 29.2
and 29.3, above) to any person who ceases to purchase Bell Atlantic Retail
Telecommunications Service dial tone line service from Bell Atlantic.
29.7 Nothing contained in this Section 29 shall in any way exclude or
limit Reseller's obligations and liabilities under Section 27, including,
but not limited to Reseller's obligations and liabilities to pay charges
for services and products as required by Section 27.
30. SERVICE QUALITY
---------------
Bell Atlantic Retail Telecommunications Services provided by Bell Atlantic
to Reseller under this Agreement shall comply with the quality requirements
for such Bell Atlantic Retail Telecommunications Services specified by
Applicable Law.
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31. SURVIVAL
--------
Any liabilities or obligations of a Party for acts or omissions of the
Party prior to the termination, cancellation or expiration of this
Agreement, any liabilities or obligations of a Party under any provision of
this Agreement regarding indemnification, Customer Information, Bell
Atlantic OSS Information, confidential information, or limitation or
exclusion of liability, and any liabilities or obligations of a Party under
any provision of this Agreement which by its terms is contemplated to
survive (or be performed after) termination, cancellation or expiration of
this Agreement, shall survive termination, cancellation or expiration of
this Agreement.
32. TAXES
-----
32.1 With respect to any purchase of Bell Atlantic Services under this
Agreement, if any Federal, state or local government tax, fee, duty,
surcharge (including, but not limited to any 911, telecommunications relay
service, or universal service fund, surcharge), or other tax-like charge (a
"Tax") is required or permitted by Applicable Law to be collected from
Reseller by Bell Atlantic, then (a) to the extent required by Applicable
Law, Bell Atlantic shall bill Reseller for such Tax, (b) Reseller shall
timely remit such Tax to Bell Atlantic (including both Taxes billed by Bell
Atlantic and Taxes Reseller is required by Applicable Law to remit without
billing by Bell Atlantic), and (c) Bell Atlantic shall remit such collected
Tax to the applicable taxing authority.
32.2 With respect to any purchase of Bell Atlantic Services under this
Agreement, if any Tax is imposed by Applicable Law on the receipts of Bell
Atlantic, which Applicable Law permits Bell Atlantic to exclude certain
receipts received from sales of Bell Atlantic Services for resale by
Reseller, such exclusion being based on the fact that Reseller is also
subject to a Tax based upon receipts ("Receipts Tax"), then Reseller (a)
shall provide Bell Atlantic with notice in writing in accordance with
Section 32.7 of its intent to pay the Receipts Tax, and (b) shall timely
pay the Receipts Tax to the applicable taxing authority.
32.3 With respect to any purchase of Bell Atlantic Services under this
Agreement, that are resold by Reseller to a Reseller Customer, if any Tax
is imposed by Applicable Law on the Reseller Customer in connection with
the Reseller Customer's purchase of the resold Bell Atlantic Services which
Reseller is required to impose and/or collect from the Reseller Customer,
then Reseller (a) shall impose and/or collect such Tax from the Reseller
Customer, and (b) shall timely remit such Tax to the applicable taxing
authority.
32.4.1 If Bell Atlantic has not received an exemption certificate from
Reseller and fails to bill Reseller for any Tax as required by Section
32.1, then, as between Bell Atlantic and Reseller, (a) Reseller shall
remain liable for such unbilled Tax, and (b) Bell Atlantic shall be liable
for any interest and/or penalty assessed on the unbilled Tax by the
applicable taxing authority.
32.4.2 If Reseller fails to remit any Tax to Bell Atlantic as required by
Section 32.1, then,
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as between Bell Atlantic and Reseller, Reseller shall be liable for such
uncollected Tax and any interest and/or penalty assessed on the uncollected
Tax by the applicable taxing authority.
32.4.3 If Bell Atlantic does not collect a Tax because Reseller has
provided Bell Atlantic with an exemption certificate which is later found
to be inadequate by the applicable taxing authority, then, as between Bell
Atlantic and Reseller, Reseller shall be liable for such uncollected Tax
and any interest and/or penalty assessed on the uncollected Tax by the
applicable taxing authority.
32.4.4 Except as provided in Section 32.4.5, if Reseller fails to pay the
Receipts Tax as required by Section 32.2, then, as between Bell Atlantic
and Reseller, (a) Bell Atlantic shall be liable for any Tax imposed on Bell
Atlantic's receipts, (b) Reseller shall be liable for any interest and/or
penalty imposed on Bell Atlantic with respect to the Tax on Bell Atlantic's
receipts, and (c) Reseller shall be liable for any Tax imposed on
Reseller's receipts and any interest and/or penalty assessed by the
applicable taxing authority on Reseller with respect to the Tax on
Reseller's receipts.
32.4.5 If any discount or portion of a discount in price provided to
Reseller under this Agreement (including, but not limited to, a discount
provided for in Exhibit II, Section 1) represents Tax savings to Bell
Atlantic which it was anticipated Bell Atlantic would receive, because it
was anticipated that receipts from sales of Bell Atlantic Services, that
would otherwise be subject to a Tax on such receipts, could be excluded
from such Tax under Applicable Law because the Bell Atlantic Services would
be sold to Reseller for resale, and Bell Atlantic is, in fact, required by
Applicable Law to pay such Tax on receipts from sales of Bell Atlantic
Services to Reseller, then, as between Bell Atlantic and Reseller, (a)
Reseller shall be liable for any such Tax, and (b) Reseller shall be liable
for any interest and/or penalty assessed by the applicable taxing authority
on either Reseller or Bell Atlantic with respect to the Tax on Bell
Atlantic's receipts.
32.4.6 If Reseller fails to impose and/or collect any Tax from Reseller
Customers as required by Section 32.3, then, as between Bell Atlantic and
Reseller, Reseller shall remain liable for such uncollected Tax and any
interest and/or penalty assessed on such uncollected Tax by the applicable
taxing authority.
32.4.7 With respect to any Tax that Reseller has agreed to pay, is
responsible for because Reseller received a discount in price on Bell
Atlantic Services attributable to anticipated Tax savings by Bell Atlantic,
or is required to impose on and/or collect from Reseller Customers,
Reseller agrees to indemnify and hold Bell Atlantic harmless on an after-
tax basis for any costs incurred by Bell Atlantic as a result of actions
taken by the applicable taxing authority to recover the Tax from Bell
Atlantic due to failure of Reseller to timely remit the Tax to Bell
Atlantic, or timely pay, or collect and timely remit, the Tax to the taxing
authority.
32.5 If either Party is audited by a taxing authority, the other Party
agrees to reasonably cooperate with the Party being audited in order to
respond to any audit inquiries in a proper
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and timely manner so that the audit and/or any resulting controversy may be
resolved expeditiously.
32.6.1 If Applicable Law clearly exempts a purchase of Bell Atlantic
Services under this Agreement from a Tax, and if such Applicable Law also
provides an exemption procedure, such as an exemption certificate
requirement, then, if Reseller complies with such procedure, Bell Atlantic
shall not collect such Tax during the effective period of the exemption.
Such exemption shall be effective upon receipt of the exemption certificate
or affidavit in accordance with Section 32.7.
32.6.2 If Applicable Law clearly exempts a purchase of Bell Atlantic
Services under this Agreement from a Tax, but does not also provide an
exemption procedure, then Bell Atlantic shall not collect such Tax if
Reseller (a) furnishes Bell Atlantic with a letter signed by an officer of
Reseller requesting an exemption and citing the provision in the Applicable
Law which clearly allows such exemption, and (b) supplies Bell Atlantic
with an indemnification agreement, reasonably acceptable to Bell Atlantic,
which holds Bell Atlantic harmless on an after-tax basis with respect to
forbearing to collect such Tax.
32.7 All notices, affidavits, exemption certificates or other
communications required or permitted to be given by either Party to the
other under this Section 32, shall be made in writing and shall be sent by
certified or registered mail, return receipt requested, or by a reputable
private delivery service which provides a record of delivery, to the
addressee stated in Section 23 at the address stated in Section 23 and to
the following:
To Bell Atlantic: Tax Administration
Bell Atlantic Network Services, Inc.
1717 Arch Street, 30th Floor
Philadelphia, PA 19103
To Reseller: OnePoint Communications, L.L.C.
2201 Waukegan Road
Suite E-200
Bannockburn, Illinois 60015
Either Party may from time-to-time designate another address or addressee
by giving notice in accordance with the terms of this Section 32.7.
Any notice or other communication shall be deemed to be given when
received.
33. WARRANTIES
----------
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EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, BELL ATLANTIC MAKES NO
WARRANTIES WITH RESPECT TO BELL ATLANTIC SERVICES, WHETHER EXPRESS OR
IMPLIED, WRITTEN OR ORAL, IN FACT OR IN LAW. THE WARRANTIES SET FORTH IN
THIS AGREEMENT ARE BELL ATLANTIC'S EXCLUSIVE WARRANTIES WITH RESPECT TO
BELL ATLANTIC SERVICES AND ARE IN LIEU OF ALL OTHER WARRANTIES, EXPRESS OR
IMPLIED, WRITTEN OR ORAL, IN FACT OR IN LAW. BELL ATLANTIC DISCLAIMS ANY
AND ALL OTHER WARRANTIES, INCLUDING, BUT NOT LIMITED TO, WARRANTIES OF
-------------
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE, WARRANTIES AGAINST
----------------------------------------------------
INFRINGEMENT, AND WARRANTIES ARISING BY TRADE CUSTOM, TRADE USAGE, COURSE
OF DEALING, OR OTHERWISE.
34. AUTHORIZATION
-------------
34.1 Bell Atlantic is a corporation duly organized, validly existing and
in good standing under the laws of the State of Maryland and has full power
and authority to execute and deliver this Agreement and to perform the
obligations hereunder on behalf of Bell Atlantic.
34.2 VIC-RMTS-DC, L.L.C., a State of Delaware limited liability company,
d/b/a OnePoint Communications, an affiliate of and trade name licenseee of
OnePoint Comunications, L.L.C., a company duly organized, validly existing
and in good standing under the laws of the State of Delaware, and has full
power and authority to execute and deliver this Agreement and to perform
its obligations hereunder, as the case may be.
25
<PAGE>
IN WITNESS WHEREOF, intending to be legally bound, Reseller and Bell
Atlantic have caused this Agreement to be executed by their respective
authorized representatives.
VIC-RMTS-DC, L.L.C.
d/b/a OnePoint Comunications
BY: _________________________________
Signature
_________________________________
Name (Printed)
ITS: _________________________________
Title
BELL ATLANTIC - MARYLAND, INC.
BY: _________________________________
Signature
_________________________________
Name (Printed)
ITS: _________________________________
Title
26
<PAGE>
EXHIBIT I
BELL ATLANTIC OTHER SERVICES
----------------------------
1. BELL ATLANTIC OSS SERVICES
--------------------------
1.1 Definitions
-----------
As used in the Principal Document, the terms listed below shall have the
meanings stated below:
1.1.1 "Bell Atlantic Operations Support Systems" means Bell Atlantic
systems for pre-ordering, ordering, provisioning, maintenance and repair,
and billing.
1.1.2 "Bell Atlantic OSS Services" means access to Bell Atlantic
Operations Support Systems functions. The term "Bell Atlantic OSS
Services" includes, but is not limited to: (a) Bell Atlantic's provision
of Usage Information to Reseller pursuant to Exhibit I, Section 1.3, below;
and, (b) "Bell Atlantic OSS Information", as defined in Exhibit I, Section
1.1.4, below.
1.1.3 "Bell Atlantic OSS Facilities" means any gateways, interfaces,
databases or other facilities, used by Bell Atlantic to provide Bell
Atlantic OSS Services to Reseller.
1.1.4 "Bell Atlantic OSS Information" means any information accessed by,
or disclosed or provided to, Reseller through or as a part of Bell Atlantic
OSS Services. The term "Bell Atlantic OSS Information" includes, but is
not limited to: (a) any Customer Information related to a present or
former customer of Bell Atlantic accessed by, or disclosed or provided to,
Reseller through or as a part of Bell Atlantic OSS Services; and, (b) any
Usage Information (as defined in Exhibit I, Section 1.1.5, below) accessed
by, or disclosed or provided to, Reseller.
1.1.5 "Usage Information" means the usage information and other billing
information for a Bell Atlantic Retail Telecommunications Service purchased
by Reseller under this Agreement that Bell Atlantic would record if Bell
Atlantic was furnishing such Bell Atlantic Retail Telecommunications
Service to a Bell Atlantic end-user retail customer.
1.1.6 "Reseller OSS Information" means the following Bell Atlantic OSS
Information: (a) Usage Information provided to Reseller pursuant to
Exhibit I, Section 1.3, below; (b) CPNI of Reseller; and, (c) CPNI of a
customer of Reseller or Bell Atlantic, to the extent the customer, in the
manner required by Applicable Law, has consented to Reseller's access to,
or use or disclosure of, such CPNI.
1.2 Bell Atlantic OSS Services
--------------------------
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1.2.1 Upon request by Reseller, Bell Atlantic shall provide to Reseller
Bell Atlantic OSS Services.
1.2.2 Bell Atlantic Operations Support Systems, Bell Atlantic Operations
Support Systems functions, gateways and interfaces for accessing Bell
Atlantic Operations Support Systems functions, Bell Atlantic OSS
Information, and the Bell Atlantic OSS Services that will be offered by
Bell Atlantic, subject to the requirements of Applicable Law, shall be as
determined by Bell Atlantic. Except as otherwise agreed in writing by the
Parties, to the extent required by Applicable Law, the Bell Atlantic OSS
Services that will be offered by Bell Atlantic to Reseller shall be the
same as the Bell Atlantic OSS Services Bell Atlantic offers, under
agreements approved by the Commission pursuant to 47 U.S.C. (S) 252, to
other Telecommunications Carriers that are engaged in the resale of Bell
Atlantic Retail Telecommunications Services pursuant to 47 U.S.C. (S)
251(c)(4). Subject to the requirements of Applicable Law, Bell Atlantic
shall have the right to change Bell Atlantic Operations Support Systems,
Bell Atlantic Operations Support Systems functions, the gateways and
interfaces for accessing Bell Atlantic Operations Support Systems
functions, Bell Atlantic OSS Information, and the Bell Atlantic OSS
Services, from time-to-time, without the consent of Reseller.
1.3 Usage Information
-----------------
1.3.1 Upon request by Reseller, Bell Atlantic shall provide Usage
Information to Reseller.
1.3.2 Bell Atlantic Usage Information will be available to Reseller
through the following:
(a) Daily Usage File on Data Tape.
(b) Daily Usage File through Network Data Mover ("NDM").
(c) Daily Usage File through Centralized Message Distribution System
("CMDS").
1.3.3.1 Bell Atlantic Usage Information will be provided in a BeL.L.C.ore
Exchange Message Records ("EMR") format.
1.3.3.2 Daily Usage File Data Tapes will be issued each day, Monday through
Friday, except holidays observed by Bell Atlantic.
1.3.4 Except as stated in this Exhibit I, Section 1.3 or agreed in writing
by the Parties, the manner in which, and the frequency with which, Bell
Atlantic Usage Information will be provided to Reseller shall be determined
by Bell Atlantic.
1.4 Prices
------
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<PAGE>
The prices for Bell Atlantic OSS Services shall be as stated in Exhibit II,
Section 2.
1.5 Access to and Use of Bell Atlantic OSS Facilities
-------------------------------------------------
1.5.1 Bell Atlantic OSS Facilities may be accessed and used by Reseller
only to: (a) purchase and provide Bell Atlantic Retail Telecommunications
Services pursuant to this Agreement; and (b) obtain Reseller OSS
Information.
1.5.2 Reseller shall restrict access to and use of Bell Atlantic OSS
Facilities to Reseller. This Agreement does not grant to Reseller any
right or license to grant sublicenses or permission to other persons
(except Reseller's employees, Agents and contractors in accordance with
Exhibit I, Section 1.5.5) to access or use Bell Atlantic OSS Facilities.
1.5.3 Reseller shall comply with all practices and procedures established
by Bell Atlantic for access to and use of Bell Atlantic OSS Facilities
(including, but not limited to, Bell Atlantic practices and procedures with
regard to security and use of access and user identification codes).
1.5.4 All practices and procedures for access to and use of Bell Atlantic
OSS Facilities, and all access and user identification codes for Bell
Atlantic OSS Facilities: (a) shall remain the property of Bell Atlantic;
(b) shall be used by Reseller only in connection with Reseller's use of
Bell Atlantic OSS Facilities permitted by this Agreement; (c) shall be held
in confidence by Reseller and not disclosed by Reseller to any other person
(except Reseller's employees, Agents and contractors, in accordance with
Exhibit I, Section 1.5.5); and, (d) shall be destroyed or returned by
Reseller to Bell Atlantic upon the earlier of request by Bell Atlantic or
the expiration or termination of this Agreement.
1.5.5 Reseller's employees, Agents and contractors may access and use Bell
Atlantic OSS Facilities only to the extent necessary for Reseller's use of
the Bell Atlantic OSS Facilities permitted by this Agreement. Reseller may
disclose practices and procedures for access to and use of Bell Atlantic
OSS Facilities, and access and user identification codes for Bell Atlantic
OSS Facilities, to Reseller's employees, Agents and contractors, and
Reseller's employees, Agents and contractors may receive and use such
practices, procedures and codes, only to the extent necessary for
Reseller's use of Bell Atlantic OSS Facilities permitted by this Agreement.
Reseller's employees, Agents and contractors shall hold the practices,
procedures and codes in confidence and shall not disclose the practices,
procedures and codes to any other person (provided, that an employee, Agent
or contractor of Reseller, may disclose the practices, procedures and codes
to other employees, Agents or contractors of Reseller, to the extent
necessary for Reseller's use of the Bell Atlantic OSS Facilities permitted
by this Agreement).
1.6 Bell Atlantic OSS Information
-----------------------------
1.6.1 Subject to the provisions of this Agreement, Bell Atlantic grants to
Reseller a non-exclusive license to use OSS Information.
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<PAGE>
1.6.2 All OSS Information shall at all times remain the property of Bell
Atlantic. Except as expressly stated in this Agreement, Reseller shall
acquire no rights in or to any OSS Information.
1.6.3 Reseller and Reseller's employees, Agents and contractors, shall not
access, use or disclose OSS Information if such access, use or disclosure
is prohibited by Applicable Law.
1.6.4.1 The provisions of this Exhibit I, Section 1.6.4 apply to all OSS
Information, except Reseller's OSS Information.
1.6.4.2 Reseller may access and use Bell Atlantic OSS Information only to
purchase and provide Bell Atlantic Retail Telecommunications Services
pursuant to this Agreement. If Bell Atlantic OSS Information is Customer
Information related to a customer of a Party, Reseller may access and use
the Bell Atlantic OSS Information only to purchase Bell Atlantic Retail
Telecommunications Services for and provide Bell Atlantic Retail
Telecommunications Services to, the customer to whom that Customer
Information is related, pursuant to this Agreement.
1.6.4.3 Reseller shall hold Bell Atlantic OSS Information in confidence
and shall not disclose Bell Atlantic OSS Information to any other person
(except Reseller's employees, Agents and contractors, in accordance with
Exhibit I, Section 1.6.4.7).
1.6.4.4 Except as expressly stated in this Agreement, this Agreement does
not grant to Reseller any right or license to grant sublicenses or
permission to other persons to access, use or disclose Bell Atlantic OSS
Information.
1.6.4.5 Reseller's license to use Bell Atlantic OSS Information shall
expire upon the earliest of: (a) the time when the Bell Atlantic OSS
Information is no longer needed by Reseller to provide Bell Atlantic Retail
Telecommunications Services; (b) termination of the license in accordance
with this Agreement; or (c) expiration or termination of this Agreement.
1.6.4.6 All Bell Atlantic OSS Information received by Reseller shall be
destroyed or returned by Reseller to Bell Atlantic, upon expiration,
suspension or termination of the license to use such Bell Atlantic OSS
Information.
1.6.4.7 Reseller may disclose Bell Atlantic OSS Information to Reseller's
employees, Agents and contractors, and Reseller's employees, Agents and
contractors may access, receive and use Bell Atlantic OSS Information, only
to the extent necessary for Reseller's access to and use of Bell Atlantic
OSS Information permitted by this Agreement. Reseller's employees, Agents
and contractors shall hold Bell Atlantic OSS Information in confidence and
shall not disclose Bell Atlantic OSS Information to any other person
(except other employees, Agents or contractors of Reseller, to the extent
necessary for Reseller's use of the Bell Atlantic OSS Information permitted
by this Agreement).
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<PAGE>
1.6.5 Unless sooner terminated or suspended in accordance with this
Agreement (including, but not limited to, Section 17.1 and Exhibit I,
Section 1.7.2), Reseller's access to Bell Atlantic OSS Information through
Bell Atlantic OSS Services shall terminate upon the expiration or
termination of this Agreement.
1.6.6.1 Without in any way limiting Section 15.5.2, Bell Atlantic shall
have the right to audit Reseller to ascertain whether Reseller is complying
with the requirements of Applicable Law and this Agreement, with regard to
Reseller's access to, and use and disclosure of, Bell Atlantic OSS
Information.
1.6.6.2 Without in any way limiting Section 15.5.2, Section 15.5.3, or
Exhibit I, Section 1.6.6.1, to the extent permitted by Applicable Law, Bell
Atlantic shall have the right to monitor Reseller's access to and use of
Bell Atlantic OSS Information which is made available by Bell Atlantic to
Reseller pursuant to this Agreement, to ascertain whether Reseller is
complying with the requirements of Applicable Law and this Agreement, with
regard to Reseller's access to, and use and disclosure of, such Bell
Atlantic OSS Information. The foregoing right shall include, but not be
limited to, to the extent permitted by Applicable Law, the right to
electronically monitor Reseller's access to and use of Bell Atlantic OSS
Information which is made available by Bell Atlantic to Reseller through
electronic interfaces or gateways.
1.6.7 Reseller acknowledges that the Bell Atlantic OSS Information, by its
nature, is updated and corrected on a continuous basis by Bell Atlantic,
and therefore that Bell Atlantic OSS Information is subject to change from
time to time.
1.7 Liabilities and Remedies
------------------------
1.7.1 Reseller shall be liable for any breach of Exhibit I, Section 1.5 or
Exhibit I, Section 1.6 by an employee, Agent or contractor of Reseller.
1.7.2 Any breach by Reseller, or Reseller's employees, Agents or
contractors, of the provisions of Exhibit I, Section 1.5 or Exhibit I,
Section 1.6, shall be deemed a material breach of a material provision of
this Agreement by Reseller under Section 17.1 of this Agreement. In
addition, if Reseller or an employee, Agent or contractor of Reseller at
any time breaches a provision of Exhibit I, Section 1.5 or Exhibit I,
Section 1.6, and such breach continues for more than ten (10) days after
written notice thereof from Bell Atlantic, then, except as otherwise
required by Applicable Law, Bell Atlantic shall have the right, upon notice
to Reseller, to suspend the license to use Bell Atlantic OSS Information
granted by Exhibit I, Section 1.6.1, and/or the provision of Bell Atlantic
OSS Services, in whole or in part.
1.7.3 Reseller agrees that Bell Atlantic would be irreparably injured by a
breach of Exhibit I, Section 1.5 or Exhibit I, Section 1.6 by Reseller or
the employees, Agents or contractors of Reseller, and that Bell Atlantic
shall be entitled to seek equitable relief, including injunctive relief and
specific performance, in the event of any breach of Exhibit I, Section
31
<PAGE>
1.5 or Exhibit I, Section 1.6 by Reseller or the employees, Agents or
contractors of Reseller. Such remedies shall not be deemed to be the
exclusive remedies for a breach of Exhibit I, Section 1.5 or Exhibit I,
Section 1.6, but shall be in addition to any other remedies available under
this Agreement or at law or equity.
1.8 Relation to Applicable Law
--------------------------
The provisions of Exhibit I, Sections 1.5, 1.6 and 1.7 shall be in addition
to and not in derogation of any provisions of Applicable Law, including,
but not limited to, 47 U.S.C. (S) 222, and are not intended to constitute a
waiver by Bell Atlantic of any right with regard to protection of the
confidentiality of the information of Bell Atlantic or Bell Atlantic's
customers provided by Applicable Law.
1.9 Cooperation
-----------
Reseller, at Reseller's expense, shall reasonably cooperate with Bell
Atlantic in using Bell Atlantic OSS Services. Such cooperation shall
include, but not be limited to, the following:
1.9.1 Upon request by Bell Atlantic, Reseller shall by no later than the
fifteenth (15th) day of each calendar month submit to Bell Atlantic
reasonable, good faith estimates (by central office or other Bell Atlantic
office or geographic area designated by Bell Atlantic) of the volume of
each Bell Atlantic Retail Telecommunications Service for which Reseller
anticipates submitting Orders in each week of the next calendar month.
1.9.2 Upon request by Bell Atlantic, Reseller shall submit to Bell
Atlantic reasonable, good faith estimates of other types of transactions or
use of Bell Atlantic OSS Services that Reseller anticipates.
1.9.3 Reseller shall reasonably cooperate with Bell Atlantic in submitting
Orders for Bell Atlantic Retail Telecommunications Services and otherwise
using the Bell Atlantic OSS Services, in order to avoid exceeding the
capacity or capabilities of such Bell Atlantic OSS Services.
1.9.4 Reseller shall participate in cooperative testing of Bell Atlantic
OSS Services and shall provide assistance to Bell Atlantic in identifying
and correcting mistakes, omissions, interruptions, delays, errors, defects,
faults, failures, or other deficiencies, in Bell Atlantic OSS Services.
1.10 Reseller Operations Support Systems
-----------------------------------
Upon request by Bell Atlantic, Reseller shall negotiate in good faith and
enter into a contract with Bell Atlantic, pursuant to which Bell Atlantic
may obtain access to Reseller's operations support systems (including,
systems for pre-ordering, ordering, provisioning, maintenance and repair,
and billing) and information contained in such systems, to permit Bell
Atlantic to obtain Reseller Customer CPNI (as authorized by the applicable
Reseller
32
<PAGE>
Customer), to permit customers to transfer service from one
Telecommunications Carrier to another, and for such other purposes as may
be permitted by Applicable Law.
2. BELL ATLANTIC PRE-OSS SERVICES
------------------------------
2.1 As used in the Principal Document, "Bell Atlantic Pre-OSS Service"
means a service which allows the performance of an activity which is
comparable to an activity to be performed through a Bell Atlantic OSS
Service and which Bell Atlantic offers to provide to Reseller prior to, or
in lieu of, Bell Atlantic's provision of the Bell Atlantic OSS Service to
Reseller. "Bell Atlantic Pre-OSS Services" include, but are not limited
to, the activity of placing Orders for Bell Atlantic Retail
Telecommunications Services through a telephone facsimile ("Fax")
communication.
2.2 The Bell Atlantic Pre-OSS Services that will be offered by Bell
Atlantic, shall be as determined by Bell Atlantic. Subject to the
requirements of Applicable Law, Bell Atlantic shall have the right to
change Bell Atlantic Pre-OSS Services, from time-to-time, without the
consent of Reseller.
2.3 Subject to the requirements of Applicable Law, the prices for Bell
Atlantic Pre-OSS Services shall be as determined by Bell Atlantic and shall
be subject to change by Bell Atlantic from time-to-time.
2.4 The provisions of Exhibit I, Sections 1.5 through 1.9 shall also apply
to Bell Atlantic Pre-OSS Services. For the purposes of this Exhibit I,
Section 2.4: (a) references in Exhibit I, Sections 1.5 through 1.9 to Bell
Atlantic OSS Services shall be deemed to include Bell Atlantic Pre-OSS
Services; and, (b) references in Exhibit I, Sections 1.5 through 1.9 to
Bell Atlantic OSS Information shall be deemed to include information made
available to Reseller through Bell Atlantic Pre-OSS Services.
3. E911/911 SERVICES
-----------------
3.1 Where and to the extent that Bell Atlantic provides E911/911 call
routing to a Public Safety Answering Point ("PSAP") to Bell Atlantic's own
end user retail customers, Bell Atlantic will provide to Reseller, for
resold Bell Atlantic Retail Telecommunications Service dial tone lines,
E911/911 call routing to the appropriate PSAP. Bell Atlantic will provide
Reseller Customer information for resold Bell Atlantic Retail
Telecommunications Service dial tone lines to the PSAP as that information
is provided to Bell Atlantic by Reseller where and to the same extent that
Bell Atlantic provides Bell Atlantic end user retail customer information
to the PSAP. Bell Atlantic will update and maintain, on the same schedule
that Bell Atlantic uses with Bell Atlantic's own end user retail customers,
the Reseller Customer information in Bell Atlantic's E911/911 databases.
3.2 Reseller shall provide to Bell Atlantic the name, telephone number and
address, of all Reseller Customers, and such other information as may be
requested by Bell Atlantic, for inclusion in E911/911 databases. Any change
in Reseller Customer name, address or
33
<PAGE>
telephone number information (including addition or deletion of a Reseller
Customer, or a change in Reseller Customer name, telephone number or
address), or in other E911/911 information supplied by Reseller to Bell
Atlantic, shall be reported to Bell Atlantic by Reseller within one (1) day
after the change.
4. Routing to Directory Assistance and Operator Services
-----------------------------------------------------
4.1 Upon request by Reseller, to the extent technically feasible, Bell
Atlantic will provide to Reseller the capability of rerouting to Reseller's
platforms directory assistance traffic (411 and 555-1212 calls) from
Reseller Customers served by resold Bell Atlantic Retail Telecommunications
Service dial tone line service and operator services traffic (O+ and 0-
intraLATA calls) from Reseller Customers served by resold Bell Atlantic
Retail Telecommunications Service dial tone line service.
4.2 A request for the rerouting service described in Exhibit I, Section
4.1 must be made by Reseller (a) on a switch-by-switch basis, and (b) at
least ninety (90) days in advance of the date that the rerouting capability
is to be made available in an applicable Bell Atlantic switch.
4.3 The prices for the rerouting service described in Exhibit I, Section
4.1 shall be as stated in Exhibit II, Section 2.
5. LIDB/BVS
--------
5.1 Upon request by Reseller, Bell Atlantic will maintain information
(including calling card numbers and collect and bill to third party billing
restriction notation) for Reseller Customers who subscribe to resold Bell
Atlantic Retail Telecommunications Service dial tone line service, in Bell
Atlantic's Line Information Database ("LIDB"), where and to the same extent
that Bell Atlantic maintains information in Bell Atlantic's LIDB for Bell
Atlantic's own end-user retail customers.
5.2 If an end-user terminates Bell Atlantic Retail Telecommunications
Service dial tone line service provided to the end-user by Bell Atlantic
and, in place thereof, subscribes to Reseller for resold Bell Atlantic
Retail Telecommunications Service dial tone line service, Bell Atlantic
will remove from Bell Atlantic's LIDB any Bell Atlantic-assigned telephone
line calling card number (including area code) ("TLN") and Personal
Identification Number ("PIN") associated with the terminated Bell Atlantic
Retail Telecommunications Service dial tone line service. The Bell
Atlantic-assigned TLN and PIN will be removed from Bell Atlantic's LIDB
within twenty-four (24) hours after Bell Atlantic terminates the Bell
Atlantic Retail Telecommunications Service dial tone line service with
which the number was associated. Reseller may issue a new telephone
calling card to such end-user, utilizing the same TLN, and the same or a
different PIN. Upon request by Reseller, Bell Atlantic will enter such TLN
and PIN in Bell Atlantic's LIDB for calling card validation purposes.
5.3 Reseller information which is stored in Bell Atlantic's LIDB will be
subject, to the same
34
<PAGE>
extent as Bell Atlantic information stored in Bell Atlantic's LIDB, to
access and use by, and disclosure to, those persons (including, but not
limited to, Bell Atlantic) to whom Bell Atlantic allows access to
information which is stored in Bell Atlantic's LIDB. Reseller hereby grants
to Bell Atlantic and the persons to whom Bell Atlantic allows access to
information which is stored in Bell Atlantic's LIDB, a royalty free license
for such access, use and disclosure.
5.4 Reseller shall obtain contractual agreements with each of the persons
authorized to have access to Bell Atlantic's LIDB, under which Reseller
will bill Reseller Customers for calling card, third party, collect and
other calls validated by such persons through Bell Atlantic's LIDB.
5.5 Reseller warrants that the information provided by Reseller for
inclusion in Bell Atlantic's LIDB will at all times be current, accurate
and appropriate for use for billing validation services.
5.6 Upon request by Reseller, Bell Atlantic will provide to Reseller Bell
Atlantic Billing Validation Service, in accordance with Bell Atlantic's
Tariffs, for use by Reseller in connection with Bell Atlantic Retail
Telecommunications Services purchased and provided by Reseller pursuant to
this Agreement.
5.7 Reseller's use of information in Bell Atlantic's LIDB shall be subject
to the provisions of Exhibit I, Sections 1.5 through 1.8 with regard to
Bell Atlantic OSS Information. For the purposes of this Exhibit I, Section
5.7, references in Exhibit I, Sections 1.5 through 1.8 to Bell Atlantic OSS
Information shall be deemed to be references to information in Bell
Atlantic's LIDB.
5.8 The prices for the services described in this Exhibit I, Section 5
shall be as stated in Exhibit II, Section 2.
35
<PAGE>
EXHIBIT II
PRICES FOR BELL ATLANTIC SERVICES
---------------------------------
1. BELL ATLANTIC RETAIL TELECOMMUNICATIONS SERVICES
------------------------------------------------
1.1 Prices
------
The prices for Bell Atlantic Retail Telecommunications Services shall be
the Retail Prices stated in Bell Atlantic's Tariffs for such Bell Atlantic
Retail Telecommunications Services, less: (a) the applicable discount
stated in Bell Atlantic's Tariffs for Bell Atlantic Retail
Telecommunications Services purchased for resale pursuant to 47 U.S.C. (S)
251(c)(4); or, (b) in the absence of an applicable Bell Atlantic Tariff
discount for Bell Atlantic Retail Telecommunications Services purchased for
resale pursuant to 47 U.S.C. (S) 251(c)(4), the applicable discount stated
in Exhibit II, Attachment 1.
1.2 Inapplicability of Discounts
----------------------------
The discounts provided for in Exhibit II, Section 1.1, shall not be applied
to:
1.2.1 Retail Prices that are in effect for no more than ninety (90)
days;
1.2.2 Charges for services and products provided by Bell Atlantic that
are not Bell Atlantic Retail Telecommunications Services, including, but
not limited to, Bell Atlantic Other Services, and exchange access
services as defined in Section 3(16) of the Act, 47 U.S.C. (S) 153(16);
1.2.3 Subscriber Line Charges, Federal Line Cost Charges, end user
common line charges, carrier selection and change charges, and Audiotex
Service charges; and,
1.2.4 Any service or charge which the Commission, the Federal
Communications Commission, or other governmental entity of appropriate
jurisdiction, determines is not subject to a wholesale rate discount
under 47 U.S.C. (S) 251(c)(4).
1.3 Discount Changes
----------------
1.3.1 Bell Atlantic shall change the discounts provided for in Exhibit II,
Section 1.1, above, from time-to-time, to the extent such change is
required by Applicable Law, including, but not limited to, by regulation or
order of the Commission, the Federal Communications Commission, or other
governmental entity of appropriate jurisdiction.
1.3.2 Bell Atlantic shall have the right to change the discounts provided
for in Exhibit II, Section 1.1, above, from time-to-time, to the extent
such change is required, approved or permitted by Applicable Law,
including, but not limited to, by regulation or order of the
36
<PAGE>
Commission, the Federal Communications Commission, or other governmental
entity of appropriate jurisdiction.
1.4 Best Discount
-------------
Should Bell Atlantic at any time, in an agreement approved by the
Commission pursuant to 47 U.S.C. (S) 252, offer discounts pursuant to 47
U.S.C. (S)(S) 251(c)(4) to another Telecommunications Carriers which are
greater than the discounts then being offered to Reseller pursuant to
Exhibit II, Section 1.1, above, Bell Atlantic, to the extent required by
Applicable Law, shall offer such greater discounts to Reseller under this
Agreement. Except as otherwise required by Applicable Law or agreed in
writing by the Parties, the new, greater discounts: (a) shall become
effective for each Reseller billing account at the commencement of the
first billing cycle for such Reseller billing account following execution
of an amendment to this Agreement specifying the new discounts; and, (b)
shall apply on a prospective basis only and shall not apply to charges
incurred by Reseller prior to the time the new discounts become effective
under Part "(a)" of this sentence.
1.5 Offers of Merchandise and Services which are not Bell Atlantic Retail
---------------
Telecommunications Services
---------------------------
Reseller shall not be eligible to participate in any Bell Atlantic plan or
program under which Bell Atlantic end user retail customers may obtain
products or merchandise, or services which are not Bell Atlantic Retail
Telecommunications Services, in return for trying, agreeing to purchase,
purchasing, or using, Bell Atlantic Retail Telecommunications Services.
2. BELL ATLANTIC OTHER SERVICES
----------------------------
2.1 Prices
------
2.1.1 The prices for Bell Atlantic Other Services shall be as stated: (a)
in Bell Atlantic's Tariffs; or, (b) in the absence of an applicable Bell
Atlantic Tariff price, in Exhibit II, Attachment 1.
2.1.2 If Bell Atlantic at any time offers a Bell Atlantic Other Service
the prices for which are not stated in Bell Atlantic's Tariffs or Exhibit
II, Attachment 1, Bell Atlantic shall have the right to revise Exhibit II,
Attachment 1, to add the prices to Exhibit II, Attachment 1.
2.2 Price Changes
-------------
2.2.1 Bell Atlantic shall change the prices for Bell Atlantic Other
Services, from time-to-time, to the extent such change is required by
Applicable Law, including, but not limited to, by regulation or order of
the Commission, the Federal Communications Commission, or other
governmental entity of appropriate jurisdiction.
37
<PAGE>
2.2.2 Bell Atlantic shall have the right to change the prices for Bell
Atlantic Other Services, from time-to-time, to the extent such change is
required, approved or permitted by Applicable Law, including, but not
limited to, by regulation or order of the Commission, the Federal
Communications Commission, or other governmental entity of appropriate
jurisdiction.
2.2.3 Except as otherwise required by Applicable Law, Bell Atlantic shall
give Reseller thirty (30) days advance written notice of any increase in
the prices stated in Exhibit II, Attachment 1 for Bell Atlantic Other
Services.
38
<PAGE>
ATTACHMENT 1
TO EXHIBIT II
BELL ATLANTIC - MARYLAND, INC.
DETAILED SCHEDULE OF ITEMIZED CHARGES/1/
----------------------------------------
A. BA SERVICES, FACILITIES, AND ARRANGEMENTS: /2/
<TABLE>
<CAPTION>
SERVICE OR ELEMENT DESCRIPTION: RECURRING CHARGES: NON-RECURRING
- ------------------------------- ------------------ -------------
CHARGE:
-------
<S> <C> <C>
I. LIDB INTERCONNECTION Per tariff [BA FCC 1 Per tariff [BA FCC 1
sec. 6.9.1M] sec. 6.9.1M]
Illustrative: Illustrative:
Query validation Originating point
$.04/query code, $125
Query transport
$.0002/query
II. ACCESS TO OPERATION SUPPORT SYSTEMS
A. Pre-Ordering $.27/Query Not Applicable
B. Ordering $4.57/Transaction Not Applicable
C. Provisioning Included in Ordering Not Applicable
D. Maintenance & Repair
1. ECG Access $.27/Query Not Applicable
2. EB/OSI Access $1.24/Trouble Ticket Not Applicable
</TABLE>
__________________________
/1/ All rates set forth herein shall be interim and shall be replaced on a
prospective basis by such final rates as may be approved by the Commission and,
if appealed, as may be ordered at the conclusion of such appeal. At such time as
such final rates have been approved by the Commission, the Parties shall append
to this Attachment an Attachment 2.1.1, setting forth such rates, which
Attachment 2.1.1 the Parties shall update periodically as necessary.
/2/ Unless a citation is provided to a generally applicable BA tariff, all
listed rates and services available only to Competitive Local Exchange Carriers
("CLECs") purchasing these services for use in the provision of Telephone
Exchange Service, and apply only to Local Traffic and local Ancillary Traffic.
BA rates and services for use by CLECs and other carriers in the carriage of
Toll Traffic shall be subject to BA's tariffs for Exchange Access Service.
Adherence to these limitations is subject to a reasonable periodic audit by BA.
<PAGE>
<TABLE>
<CAPTION>
SERVICE OR ELEMENT DESCRIPTION: RECURRING CHARGES: NON-RECURRING CHARGE:
- ------------------------------- ------------------ ---------------------
<S> <C> <C>
II. ACCESS TO OPERATION SUPPORT SYSTEMS (CONTINUED)
E. Billing
1. CD -ROM $263.31/CD-ROM/ Not Applicable
Month
2. Daily Usage File
a) Existing Message Recording $.000276/Message Not Applicable
b) Delivery of DUF
Data Tape $20.29/Tape $65.53/Programming
Hour
Network Data Mover $.000100/Message Not Applicable
CMDS $.000100/Message $65.53/Programming Hour
c) DUF Transport
9.6 kb Communications Port $10.94/Month $8,407.75/Port
56 kb Communications Port $30.19/Month $34,794.57/Port
256 kb Communications Port $30.19/Month $57,922.20/Port
T1 Communications Port $383.48/Month $206,683.14/Port
Line Installation Not Applicable $65.53/Programming
Hour
Port Set-up Not Applicable $10.52/Port
Network Control Programming Coding Not Applicable $65.53/Programming Hour
III. CUSTOMIZED ROUTING
To Reseller Platform $.29/Line/Month $4.25/Line
To BA Platform for Re-Branding $.09636/Call $4.25/Line
Customized Routing Transport As per applicable intrastate and interstate tariffs.
See generally BA-MD tariff 217 and BA FCC tariff
number 1.
</TABLE>
-2-
<PAGE>
IV. WHOLESALE DISCOUNT FOR RESALE OF RETAIL TELECOMMUNICATIONS SERVICES/3/
Resale of retail services as per Commission 19.87%
Order dated November 8, 1996. Assumes
RESELLER will provide own operator and
directory assistance services./4/
____________________
/3/ Excludes telecommunications services designed primarily for wholesale,
such as switched and special exchange access service, the following additional
arrangements that are not subject to resale: limited duration (90 days or less)
promotional offerings, public coin telephone service, and technical and market
trials. Taxes shall be collected and remitted by the reseller and BA in
accordance with legal requirements and as agreed between the Parties. Surcharges
(e.g., 911, telecommunications relay service, universal service fund) shall be
collected by the reseller and either remitted to the recipient agency or NECA,
or passed through to BA for remittance to the recipient agency or NECA, as
appropriate and agreed between the Parties. End user common line charges shall
be collected by the reseller and remitted to BA.
Pending establishment of mechanized billing procedures adapted to
resale, BA will apply the wholesale discount for resale as a "bottom-of-the-
bill" discount rate and will utilize a "true-up" process to correct possible
inadvertent application of the wholesale discount to the exclusions identified
herein and to reflect other adjustments as the Parties agree.
/3/ Any provision of operator and/or directory assistance services by BA
to RESELLER in connection with RESELLER's resale of BA retail services shall be
in accordance with the terms, conditions, and rates contained in applicable BA
Tariffs.
-3-
<PAGE>
ATTACHMENT 2.1
BELL ATLANTIC - MARYLAND, INC.
DETAILED SCHEDULE OF ITEMIZED CHARGES/1/
----------------------------------------
A. BA SERVICES, FACILITIES, AND ARRANGEMENTS: /2/
<TABLE>
<CAPTION>
SERVICE OR ELEMENT DESCRIPTION: RECURRING CHARGES: NON-RECURRING
- ------------------------------------------ -------------------- -------------
CHARGE:
-------
<S> <C> <C>
I. LIDB INTERCONNECTION Per tariff [BA FCC 1 Per tariff [BA FCC 1
sec. 6.9.1M] sec. 6.9.1M]
Illustrative: Illustrative:
Query validation Originating point
$.04/query code, $125
Query transport
$.0002/query
II. ACCESS TO OPERATION SUPPORT SYSTEMS
A. Pre-Ordering $.27/Query Not Applicable
B. Ordering $4.57/Transaction Not Applicable
C. Provisioning Included in Ordering Not Applicable
D. Maintenance & Repair
1. ECG Access $.27/Query Not Applicable
2. EB/OSI Access $1.24/Trouble Ticket Not Applicable
</TABLE>
_______________________
/1/ All rates set forth herein shall be interim and shall be replaced on a
prospective basis by such final rates as may be approved by the Commission and,
if appealed, as may be ordered at the conclusion of such appeal. At such time as
such final rates have been approved by the Commission, the Parties shall append
to this Attachment an Attachment 2.1.1, setting forth such rates, which
Attachment 2.1.1 the Parties shall update periodically as necessary.
/2/ Unless a citation is provided to a generally applicable BA tariff, all
listed rates and services available only to CLECs purchasing these services for
use in the provision of Telephone Exchange Service, and apply only to Local
Traffic and local Ancillary Traffic. BA rates and services for use by CLECs and
other carriers in the carriage of Toll Traffic shall be subject to BA's tariffs
for Exchange Access Service. Adherence to these limitations is subject to a
reasonable periodic audit by BA.
<PAGE>
<TABLE>
<CAPTION>
SERVICE OR ELEMENT DESCRIPTION: RECURRING CHARGES: NON-RECURRING CHARGE:
- ------------------------------- ------------------ ---------------------
<S> <C> <C>
II. ACCESS TO OPERATION SUPPORT SYSTEMS (CONTINUED)
E. Billing
1. CD -ROM $263.31/CD-ROM/ Not Applicable
Month
2. Daily Usage File
a) Existing Message Recording $.000276/Message Not Applicable
b) Delivery of DUF
Data Tape $20.29/Tape $65.53/Programming
Hour
Network Data Mover $.000100/Message Not Applicable
CMDS $.000100/Message $65.53/Programming
Hour
c) DUF Transport
9.6 kb Communications Port $10.94/Month $8,407.75/Port
56 kb Communications Port $30.19/Month $34,794.57/Port
256 kb Communications Port $30.19/Month $57,922.20/Port
T1 Communications Port $383.48/Month $206,683.14/Port
Line Installation Not Applicable $65.53/Programming
Hour
Port Set-up Not Applicable $10.52/Port
Network Control Programming Coding Not Applicable $65.53/Programming
Hour
III. CUSTOMIZED ROUTING
To Reseller Platform $.29/Line/Month $4.25/Line
To BA Platform for Re-Branding $.09636/Call $4.25/Line
Customized Routing Transport As per applicable intrastate and interstate
tariffs. See generally BA-MD tariff 217 and
BA FCC tariff number 1.
</TABLE>
-2-
<PAGE>
IV. WHOLESALE DISCOUNT FOR RESALE OF RETAIL TELECOMMUNICATIONS SERVICES/3/
Resale of retail services as per Commission 19.87%
Order dated November 8, 1996. Assumes
[CLEC] will provide own operator and
directory assistance services./4/
____________________
/3/ Excludes telecommunications services designed primarily for wholesale,
such as switched and special exchange access service, and, subject to Section 12
of the Agreement, the following additional arrangements that are not subject to
resale: limited duration (90 days or less) promotional offerings, public coin
telephone service, and technical and market trials. Taxes shall be collected and
remitted by the reseller and BA in accordance with legal requirements and as
agreed between the Parties. Surcharges (e.g., 911, telecommunications relay
service, universal service fund) shall be collected by the reseller and either
remitted to the recipient agency or NECA, or passed through to BA for remittance
to the recipient agency or NECA, as appropriate and agreed between the Parties.
End user common line charges shall be collected by the reseller and remitted to
BA.
Pending establishment of mechanized billing procedures adapted to
resale, BA will apply the wholesale discount for resale as a "bottom-of-the-
bill" discount rate and will utilize a "true-up" process to correct possible
inadvertent application of the wholesale discount to the exclusions identified
herein and to reflect other adjustments as the Parties agree.
/4/ Any provision of operator and/or directory assistance services by BA
to [CLEC] in connection with [CLEC]'s resale of BA retail services shall be in
accordance with the terms, conditions, and rates contained in applicable BA
Tariffs.
-3-
<PAGE>
EXHIBIT 10.16
RESALE AGREEMENT
----------------
(Delaware)
PREFACE
-------
THIS RESALE AGREEMENT (this "Agreement") is made effective as of March
25, 1998 (the "Effective Date") by and between VIC-RMTS-DC, L.L.C., d/b/a
OnePoint Communications ("Reseller"), a Delaware limited liability company, with
offices at 2201 Waukegan Road, Suite E-200, Bannockburn, Illinois 60015, and
Bell Atlantic - Delaware, Inc. ("Bell Atlantic"), a Delaware corporation, with
offices at 901 Tatnall Street, 2nd Floor, Wilmington, Delaware 19801.
WHEREAS, pursuant to Section 251(c)(4) of the Act, 47 U.S.C. (S)
251(c)(4), Reseller wishes to purchase Bell Atlantic Retail Telecommunications
Services from Bell Atlantic for resale by Reseller as a Telecommunications
Carrier providing Telecommunications Services in the State of Delaware; and
WHEREAS, Bell Atlantic is willing to provide such Bell Atlantic Retail
Telecommunications Services in accordance with this Agreement.
NOW THEREFORE, in consideration of the mutual promises set forth in
this Agreement, Reseller and Bell Atlantic, each on behalf of itself and its
respective successors and assigns, agree as follows:
1. DEFINITIONS
-----------
1.1 As used in the Principal Document, the terms listed below shall
have the meanings stated below:
1.1.1 "Act" means the Communications Act of 1934, 47 U.S.C. (S) 151, et
--
seq., as amended from time-to-time.
----
1.1.2 "Agent" means agent or servant.
1.1.3 "Applicable Law" means all applicable laws and government
regulations and orders.
1.1.4 "Bell Atlantic Ancillary Service" means any service offered by
Bell Atlantic to Reseller in Exhibit I.
1.1.5 "Bell Atlantic Retail Telecommunications Service" means any
Telecommunications Service that Bell Atlantic provides at retail to
subscribers who are not Telecommunications Carriers. The term "Bell
Atlantic Retail Telecommunications Service" does not include any exchange
access service (as defined in Section 3(16) of the Act, 47 U.S.C. (S)
153(16)) provided by Bell Atlantic.
1.1.6 "Bell Atlantic Service" means and includes any Bell Atlantic
Retail Telecommunications Service and any Bell Atlantic Ancillary Service.
1.1.7 "Bell Atlantic's Affiliates" means any corporations, partnerships
or other persons who control, are controlled by, or are under common
control with, Bell Atlantic.
<PAGE>
1.1.8 "Bell Atlantic's Tariffs" and "Bell Atlantic Tariff" mean and
include:
(a) Bell Atlantic's effective Federal and state tariffs, as
amended by Bell Atlantic from time-to-time; and,
(b) to the extent Bell Atlantic Services are not subject to Bell
Atlantic tariffs, any standard agreements and other documents, as amended
by Bell Atlantic from time-to-time, that set forth the generally available
terms, conditions and prices under which Bell Atlantic offers such Bell
Atlantic Services.
The terms "Bell Atlantic's Tariffs" and "Bell Atlantic Tariff" do
not include Bell Atlantic's "Statement of Generally Available Terms and
Conditions for Interconnection, Unbundled Network Elements, Ancillary
Services and Resale of Telecommunications Services" which has been approved
by the Commission pursuant to Section 252(f) of the Act, 47 U.S.C. (S)
252(f).
1.1.9 "Commission" means the Delaware Public Service Commission.
1.1.10 "Contract Period", as used in Section 1.1.25 and Section 6.2,
means a stated period or minimum period of time for which Reseller is
required by this Agreement to subscribe to, use and/or pay for a Bell
Atlantic Service.
1.1.11 "Customer" means and includes customers, subscribers and patrons,
of a Party, purchasers and users of Telecommunications Services (including,
but not limited to, resold Bell Atlantic Retail Telecommunications
Services) provided by a Party, and purchasers and users of other services
and products provided by a Party. The term "Customer" does not include a
Party.
1.1.12 "Bell Atlantic Customer" means a Customer of Bell Atlantic.
1.1.13 "Customer Information" means CPNI of a Customer and any other
non-public, individually identifiable information about a Customer or the
purchase by a Customer of the services or products of a Party.
1.1.14 "Customer Proprietary Network Information" ("CPNI") means
"Customer Proprietary Network Information" as defined in Section 222 of the
Act, 47 U.S.C. (S) 222.
1.1.15 "Effective Date" means the date first above written.
1.1.16 "Jurisdiction" means the State of Delaware.
1.1.17 "Operator Services" means: (a) services accessed by dialing 411,
555-1212, 1-555-1212, 0+ local, 0+ intraLATA, and, 0-; and, (b) any other
automated or live operator or directory assistance service.
1.1.18 "Order" means an order or application.
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1.1.19 "Principal Document" means this document, including the Preface,
Sections 1 through 39, the signature page, Exhibit I, Exhibit II, and
Exhibit II, Attachment 1.
1.1.20 "Reseller Customer" means a Customer of Reseller.
1.1.21 "Retail Prices" means the prices at which Bell Atlantic Retail
Telecommunications Services are provided by Bell Atlantic at retail to
subscribers who are not Telecommunications Carriers.
1.1.22 "Telecommunications Carrier" means "Telecommunications Carrier"
as defined in Section 3(44) of the Act, 47 U.S.C. (S) 153(44).
1.1.23 "Telecommunications Service" means "Telecommunications Service"
as defined in Section 3(46) of the Act, 47 U.S.C. (S) 153(46).
1.1.24 "Telephone Exchange Service" means "Telephone Exchange Service"
as defined in Section 3(47) of the Act, 47 U.S.C. (S) 153(47).
1.1.25 "Termination Date Bell Atlantic Service" means: (a) any Bell
Atlantic Service being provided by Bell Atlantic under this Agreement at
the time of termination of this Agreement, that at the time of termination
of this Agreement is subject to a Contract Period which is greater than one
(1) month; and, (b) any Bell Atlantic Service requested by Reseller under
this Agreement in an Order accepted by Bell Atlantic prior to termination
of this Agreement but not yet being provided by Bell Atlantic at the time
of termination of this Agreement, that is subject to an initial Contract
Period which is greater than one (1) month.
1.2 Unless the context clearly indicates otherwise, any defined term
which is defined or used in the singular shall include the plural, and any
defined term which is defined or used in the plural shall include the
singular.
2. THE AGREEMENT
-------------
2.1 This Agreement includes: (a) the Principal Document; (b) Bell
Atlantic's Tariffs (which Bell Atlantic Tariffs are incorporated into this
Agreement by reference and made a part hereof); and, (c) a Reseller Order
to provide, change or terminate a Bell Atlantic Service, which has been
accepted by Bell Atlantic (including, but not limited to, any Order which
includes a commitment to purchase a stated number or minimum number of
lines or other Bell Atlantic Services, or a commitment to purchase lines or
other Bell Atlantic Services for a stated period or minimum period of
time).
2.2 Conflicts among terms in the Principal Document, Bell Atlantic's
Tariffs, and a Reseller Order which has been accepted by Bell Atlantic,
shall be resolved in accordance with the following order of precedence,
where the document identified in subsection "(a)" shall have the highest
precedence: (a) the Principal Document; (b) Bell Atlantic's Tariffs; and,
(c) a Reseller Order
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which has been accepted by Bell Atlantic. The fact that a term appears in
the Principal Document but not in a Bell Atlantic Tariff, or in a Bell
Atlantic Tariff but not in the Principal Document, shall not be interpreted
as, or deemed grounds for finding, a conflict for the purposes of this
Section 2.2.
2.3 This Agreement (including the Principal Document, Bell Atlantic's
Tariffs, and Reseller Orders which have been accepted by Bell Atlantic),
constitutes the entire agreement between the Parties on the subject matter
hereof, and supersedes any prior or contemporaneous agreement,
understanding, or representation on the subject matter hereof. Except as
otherwise provided in the Principal Document, the terms in the Principal
Document may not be waived or modified except by a written document which
is signed by the Parties. Subject to the requirements of Applicable Law,
Bell Atlantic shall have the right to add, modify, or withdraw, a Bell
Atlantic Tariff at any time, without the consent of, or notice to,
Reseller.
2.4 A failure or delay of either Party to enforce any of the
provisions of this Agreement, or any right or remedy available under this
Agreement or at law or in equity, or to require performance of any of the
provisions of this Agreement, or to exercise any option provided under this
Agreement, shall in no way be construed to be a waiver of such provisions,
rights, remedies, or options.
3. BELL ATLANTIC SERVICES
----------------------
3.1 During the term of this Agreement, Reseller, pursuant to Section
251(c)(4) of the Act, 47 U.S.C. (S) 251(c)(4), may submit Orders to Bell
Atlantic requesting Bell Atlantic to provide Bell Atlantic Retail
Telecommunications Services for resale by Reseller as a Telecommunications
Carrier providing Telecommunications Services.
3.2 During the term of this Agreement, Reseller may submit Orders to
Bell Atlantic requesting Bell Atlantic to provide Bell Atlantic Ancillary
Services for use by Reseller as a Telecommunications Carrier providing
Telecommunications Services.
3.3 Bell Atlantic may require that Reseller's Orders requesting Bell
Atlantic to provide Bell Atlantic Services be in writing on forms specified
by Bell Atlantic or in an electronic form specified by Bell Atlantic.
3.4 Upon receipt and acceptance by Bell Atlantic of a Reseller Order
requesting Bell Atlantic to provide a Bell Atlantic Service, Bell Atlantic
shall provide, and Reseller shall subscribe to, use and pay for, the Bell
Atlantic Service, in accordance with this Agreement.
3.5 Bell Atlantic Retail Telecommunications Services may be purchased
by Reseller under this Agreement only for the purpose of resale by Reseller
as a Telecommunications Carrier providing Telecommunications Services,
pursuant to Section 251(c)(4) of the Act, 47 U.S.C. (S) 251(c)(4). Bell
Atlantic Retail Telecommunications Services to be purchased by Reseller for
other purposes (including, but not limited to, Reseller's own use) must be
purchased by Reseller pursuant to separate written agreements, including,
but not limited to, applicable Bell Atlantic Tariffs.
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Reseller warrants and agrees that Reseller will purchase Bell Atlantic
Retail Telecommunications Services from Bell Atlantic under this Agreement
only for the purpose of resale by Reseller as a Telecommunications Carrier
providing Telecommunications Services, pursuant to Section 251(c)(4) of the
Act, 47 U.S.C. (S) 251(c)(4).
3.6 Bell Atlantic Ancillary Services may be purchased by Reseller
under this Agreement only for use by Reseller as a Telecommunications
Carrier providing Telecommunications Services. Bell Atlantic Ancillary
Services to be purchased by Reseller for other purposes must be purchased
by Reseller pursuant to separate written agreements, including, but not
limited to, applicable Bell Atlantic Tariffs. Reseller warrants and agrees
that Reseller will purchase Bell Atlantic Ancillary Services from Bell
Atlantic under this Agreement only for use by Reseller as a
Telecommunications Carrier providing Telecommunications Services.
3.7 Subject to the requirements of Applicable Law, Bell Atlantic
shall have the right to add, modify, grandfather, discontinue or terminate
Bell Atlantic Services at any time, without the consent of Reseller.
4. PRICES
------
4.1 Reseller shall pay Bell Atlantic for Bell Atlantic Services at
the prices stated in this Agreement, including, but not limited to, in
Exhibit II, Attachment 1.
4.2 If, prior to establishment of a Bell Atlantic Service, Reseller
cancels or changes its Order for the Bell Atlantic Service, Reseller shall
reimburse Bell Atlantic for the costs associated with such cancellation or
changes as required by this Agreement (including, but not limited to, Bell
Atlantic's Tariffs).
4.3 Upon request by Bell Atlantic, Reseller shall provide to Bell
Atlantic adequate assurance of payment of charges due to Bell Atlantic.
Assurance of payment of charges may be requested by Bell Atlantic: (a) if
Reseller, in Bell Atlantic's reasonable judgment, at the Effective Date or
at any time thereafter, is unable to show itself to be creditworthy; (b) if
Reseller, in Bell Atlantic's reasonable judgment, at the Effective Date or
at any time thereafter, is not creditworthy; or, (c) if Reseller fails to
timely pay a bill rendered to Reseller by Bell Atlantic. Unless otherwise
agreed by the Parties, the assurance of payment shall be in the form of a
cash deposit and shall be in an amount equal to the charges for Bell
Atlantic Services that Reseller may reasonably be expected to incur during
a period of two (2) months. Bell Atlantic may at any time use the deposit
or other assurance of payment to pay amounts due from Reseller.
5. BILLING AND PAYMENT
-------------------
5.1 Except as otherwise permitted or required by this Agreement, or
agreed in writing by the Parties, Bell Atlantic shall render bills to
Reseller monthly. Except as otherwise agreed in writing by the Parties,
Bell Atlantic will render bills to Reseller in a paper form.
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5.2 Reseller shall pay Bell Atlantic's bills in immediately available
U.S. funds. Except as otherwise agreed in writing by the Parties, payments
shall be transmitted by electronic funds transfer.
5.3 Payment of charges shall be due by the due date stated on Bell
Atlantic's bills. Except as otherwise required by Bell Atlantic's Tariffs
or agreed in writing by the Parties, the due date shall not be sooner than
twenty (20) days after the date the bill is received by Reseller.
5.4 Charges which are not paid by the due date stated on Bell
Atlantic's bill shall be subject to a late payment charge. The late payment
charge shall be in an amount specified by Bell Atlantic, which shall not
exceed a rate of one-and-one-half percent (1.5%) of the over-due amount
(including any unpaid, previously billed late payment charges) per month.
5.5 Reseller acknowledges and agrees that:
5.5.1 During the term of this Agreement, Bell Atlantic will be engaged
in developing and deploying new or modified forms of bills for
Telecommunications Carriers who are engaged in the resale of Bell Atlantic
Retail Telecommunications Services and new or modified systems and methods
for computing and rendering such bills.
5.5.2 Prior to the completion of deployment of such new or modified
forms of bills and such new or modified systems and methods for computing
and rendering bills, Bell Atlantic's form of bill and systems and methods
for computing and rendering bills may be subject to limitations and
restrictions, including, but not limited to, the limitations stated in
Section 5.5.3, below, the inability to provide Reseller with a single,
consolidated bill for all Bell Atlantic Services purchased by Reseller, and
the unavailability of bills and billing information in an electronic form
(e.g., bills may be rendered in a paper form).
5.5.3 Prior to the completion of deployment of the new or modified
forms of bills and the new or modified systems and methods for computing
and rendering bills, Bell Atlantic may apply the discount identified in
Exhibit II, Section 1.1, in a manner (including, but not limited to, in a
"bottom-of-the-bill" format) that results in the Exhibit II, Section 1.1
discount being applied to charges stated in the bill (including, but not
limited to, Subscriber Line Charges, Federal Line Cost Charges, end user
common line charges, carrier selection and change charges, Audiotex Service
charges, and charges for services which are not Bell Atlantic Retail
Telecommunications Services) which are not subject to the Exhibit II,
Section 1.1 discount. Bell Atlantic will implement a "true-up" process and
within six (6) months after the due date of each monthly bill, issue to
Reseller a "true-up" bill for amounts which were not collected from
Reseller under the monthly bill because of the application of the Exhibit
II, Section 1.1 discount to charges which are not subject to the Exhibit
II, Section 1.1 discount. The "true-up" bill may be issued as a part of or
an entry on a monthly bill, as a bill separate from a monthly bill, or in
such other form as Bell Atlantic may determine.
5.6 Although it is the intent of Bell Atlantic to submit timely and
accurate bills, failure
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by Bell Atlantic to present bills (including, but not limited to, monthly
bills and "true-up" bills) to Reseller in a timely or accurate manner shall
not constitute a breach or default of this Agreement, or a waiver of a
right of payment of the incurred charges, by Bell Atlantic. Reseller shall
not be entitled to dispute charges for Bell Atlantic Services provided by
Bell Atlantic based on Bell Atlantic's failure to submit a bill for the
charges in a timely fashion.
6. TERM
----
6.1 The term of this Agreement shall commence on the Effective Date,
and, except as otherwise provided in this Agreement, shall remain in effect
through March 25, 1999 (the "Initial Term Ending Date"). After the Initial
Term Ending Date, this Agreement shall continue in force and effect unless
and until terminated as provided in this Agreement. Following the Initial
Term Ending Date, either Party may terminate this Agreement by providing
written notice of termination to the other Party, such written notice to be
provided at least ninety (90) days in advance of the date of termination.
6.2 Following termination of this Agreement pursuant to Section 6.1,
this Agreement, as amended from time to time, shall remain in effect as to
any Termination Date Bell Atlantic Service for the remainder of the
Contract Period applicable to such Termination Date Bell Atlantic Service
at the time of the termination of this Agreement. If a Termination Date
Bell Atlantic Service is terminated prior to the expiration of the Contract
Period applicable to such Termination Date Bell Atlantic Service, Reseller
shall pay any termination charge provided for in this Agreement.
7. SERVICE INSTALLATION AND MAINTENANCE
------------------------------------
Reseller shall comply with Bell Atlantic's processes and
procedures (including, but not limited to, requirements by Bell Atlantic
that Reseller use Bell Atlantic OSS Services or Bell Atlantic Pre-OSS
Services) for the communication to Bell Atlantic of (a) Reseller's Orders
to provide, change or terminate, Bell Atlantic Services, and (b) Reseller's
requests for information about, assistance in using, or repair or
maintenance of, Bell Atlantic Services. Bell Atlantic may, from time-to-
time, upon notice to Reseller, change these processes and procedures.
8. ASSIGNMENT
----------
8.1 Reseller shall not assign this Agreement or any right or interest
under this Agreement, nor delegate any obligation under this Agreement,
without the prior written approval of Bell Atlantic, which approval shall
not be unreasonably withheld, conditioned or delayed. Any attempted
assignment or delegation in contravention of the foregoing shall be void
and ineffective.
8.2 Bell Atlantic may, without the consent of Reseller, assign this
Agreement or any right or interest under this Agreement, and/or delegate
any obligation under this Agreement, to any of Bell Atlantic's Affiliates,
or to a person with which Bell Atlantic merges or which acquires
substantially all of Bell Atlantic's assets.
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9. AVAILABILITY OF SERVICE
-----------------------
9.1 Subject to the requirements of Applicable Law, Bell Atlantic
shall be obligated to provide Bell Atlantic Services to Reseller under this
Agreement only where Bell Atlantic is able, without unreasonable expense
(as determined by Bell Atlantic in its reasonable judgment), (a) to obtain,
retain, install and maintain suitable facilities for the provision of such
Bell Atlantic Services, and (b) to obtain, retain and maintain suitable
rights for the provision of such Bell Atlantic Services.
9.2 Bell Atlantic's obligation to provide a Bell Atlantic Retail
Telecommunications Service to Reseller under this Agreement shall be
limited to providing the Bell Atlantic Retail Telecommunications Service to
Reseller where, and to the same extent, that Bell Atlantic provides such
Bell Atlantic Retail Telecommunications Service to Bell Atlantic's own end
user retail Customers.
10. BRANDING
--------
10.1 Except as stated in Section 10.2, in providing Bell Atlantic
Services to Reseller, Bell Atlantic shall have the right, but not the
obligation, to identify the Bell Atlantic Services with Bell Atlantic's
trade names, trademarks and service marks. Any such identification of the
Bell Atlantic Services shall not constitute the grant of a license or other
right to Reseller to use Bell Atlantic's trade names, trade marks or
service marks.
10.2 To the extent required by Applicable Law, upon request by
Reseller and at prices, terms and conditions to be negotiated by Reseller
and Bell Atlantic, Bell Atlantic shall provide Bell Atlantic Retail
Telecommunications Services that are identified by Reseller's trade name,
or that are not identified by trade name, trademark or service mark.
11. CHOICE OF LAW
-------------
11.1 The construction, interpretation and performance of this
Agreement shall be governed by the laws of the United States of America and
the laws of Jurisdiction (without regard to Jurisdiction's conflicts of
laws rules). All disputes relating to this Agreement shall be resolved
through the application of such laws.
11.2 Reseller agrees to submit to the jurisdiction of any court,
commission or other governmental entity in which a claim, suit or
proceeding which arises out of or in connection with this Agreement or Bell
Atlantic Services provided under this Agreement and in which Bell Atlantic
is a party, is brought.
12. COMPLIANCE WITH APPLICABLE LAW
------------------------------
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12.1 Each Party shall in its performance of this Agreement comply with
Applicable Law, including, but not limited to, all applicable regulations
and orders of the Commission and the Federal Communications Commission
(hereinafter the "FCC").
12.2 Reseller shall in providing Bell Atlantic Retail
Telecommunications Services to Reseller Customers comply with Applicable
Law, including, but not limited to, all applicable regulations and orders
of the Commission and the FCC.
13. CONFIDENTIAL INFORMATION
------------------------
13.1 For the purposes of this Section 13, "Confidential Information"
means the following information disclosed by one Party ("Discloser") to the
other Party ("Recipient") in connection with this Agreement:
(a) Customer Information related to a Reseller Customer which is
disclosed by Reseller to Bell Atlantic (except to the extent that (i) the
Customer Information is subject to publication in a directory, (ii) the
Customer Information is subject to disclosure through an Operator Service
or other Telecommunications Service, or in the course of furnishing
Telecommunications Services, or (iii) the Reseller Customer to whom the
Customer Information is related, in the manner required by Applicable Law,
has given Bell Atlantic permission to use and/or disclose the Customer
Information);
(b) Customer Information related to a Bell Atlantic Customer
which is disclosed by Bell Atlantic to Reseller (except to the extent that
the Bell Atlantic Customer to whom the Customer Information is related, in
the manner required by Applicable Law, has given Reseller permission to use
and/or disclose the Customer Information);
(c) Information related to specific Bell Atlantic facilities and
equipment (including, but not limited to, cable-and-pair information) which
is disclosed by Bell Atlantic to Reseller; and
(d) Any other information which is identified by the Discloser
as Confidential Information in accordance with Section 13.2.
13.2 All information which is to be treated as Confidential
Information under Section 13.1(d) shall:
(a) if in written, graphic, electromagnetic, or other tangible
form, be marked as "Confidential" or "Proprietary"; and
(b) if oral, (i) be identified by the Discloser at the time of
disclosure to be "Confidential" or "Proprietary", and (ii) be set forth in
a written summary which identifies the information as "Confidential" or
"Proprietary" and is delivered by the Discloser to the Recipient within ten
(10) days after the oral disclosure.
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Each Party shall have the right to correct an inadvertent failure
to identify information as Confidential Information pursuant to Section
13.1(d) by giving written notification within thirty (30) days after the
information is disclosed. The Recipient shall, from that time forward,
treat such information as Confidential Information.
Notwithstanding any other provision of this Agreement, a Party
shall have the right to refuse to accept receipt of information which the
other Party has identified as Confidential Information pursuant to Section
13.1(d).
13.3 In addition to any requirements imposed by law, including, but
not limited to, 47 U.S.C. (S) 222, for a period of five years from the
receipt of Confidential Information from the Discloser, except as otherwise
specified in this Agreement, the Recipient agrees:
(a) to use the Confidential Information only for the purpose of
performing under this Agreement;
(b) using the same degree of care that it uses with similar
confidential information of its own, to hold the Confidential Information
in confidence and restrict disclosure of the Confidential Information
solely to the Recipient's Affiliates, and the directors, officers and
employees of the Recipient and the Recipient's Affiliates, having a need to
know the Confidential Information for the purpose of performing under this
Agreement. The Recipient's Affiliates and the directors, officers and
employees of the Recipient and the Recipient's Affiliates, shall be
required by the Recipient to comply with the provisions of this Section 13
in the same manner as the Recipient. The Recipient shall be liable for any
failure of the Recipient's Affiliates and the directors, officers and
employees of the Recipient and the Recipient's Affiliates, to comply with
the provisions of this Section 13.
13.4 If the Recipient wishes to disclose the Discloser's Confidential
Information to a third party Agent or contractor, such disclosure must be
mutually agreed to in writing by the Parties to this Agreement, and the
Agent or contractor must have executed a written agreement of non-
disclosure and non-use comparable in scope to the terms of this Section 13.
13.5 The Recipient may make copies of Confidential Information only as
reasonably necessary to perform its obligations under this Agreement. All
such copies shall bear the same copyright and proprietary rights notices as
are contained on the original.
13.6 The Recipient shall return or destroy all Confidential
Information received from the Discloser, including any copies made by the
Recipient, within thirty (30) days after a written request by the Discloser
is delivered to the Recipient, except for (a) Confidential Information that
the Recipient reasonably requires to perform its obligations under this
Agreement, and (b) Customer Information related to a Reseller Customer that
is to be treated by Bell Atlantic as Confidential Information pursuant to
Section 13.1(a). If the Recipient loses or makes an unauthorized disclosure
of the Discloser's Confidential Information, it shall notify the Discloser
immediately and use
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reasonable efforts to retrieve the lost or improperly disclosed
information.
13.7 The requirements of this Section 13 shall not apply to
Confidential Information:
(a) which was in the possession of the Recipient free of
restriction prior to its receipt from the Discloser;
(b) after it becomes publicly known or available through no
breach of this Agreement by the Recipient, the Recipient's Affiliates, or
the directors, officers, employees, Agents, or contractors, of the
Recipient or the Recipient's Affiliates;
(c) after it is rightfully acquired by the Recipient free of
restrictions on its disclosure;
(d) after it is independently developed by the Recipient; or
(e) to the extent the disclosure is required by Applicable Law,
a court, or governmental agency; provided, the Discloser has been notified
of the required disclosure promptly after the Recipient becomes aware of
the required disclosure, the Recipient undertakes reasonable lawful
measures to avoid disclosing the Confidential Information until the
Discloser has had reasonable time to seek a protective order, and the
Recipient complies with any protective order that covers the Confidential
Information to be disclosed.
13.8 Each Party's obligations to safeguard Confidential Information
disclosed prior to expiration, cancellation or termination of this
Agreement shall survive such expiration, cancellation or termination.
13.9 Confidential Information shall remain the property of the
Discloser, and the Discloser shall retain all of the Discloser's right,
title and interest in any Confidential Information disclosed by the
Discloser to the Recipient. Except as otherwise expressly provided
elsewhere in this Agreement, no license is granted by this Agreement with
respect to any Confidential Information (including, but not limited to,
under any patent, trademark, or copyright), nor is any such license to be
implied, solely by virtue of the disclosure of any Confidential
Information.
13.10 Each Party agrees that the Discloser would be irreparably injured
by a breach of this Section 13 by the Recipient, the Recipient's
Affiliates, or the directors, officers, employees, Agents or contractors of
the Recipient or the Recipient's Affiliates, and that the Discloser shall
be entitled to seek equitable relief, including injunctive relief and
specific performance, in the event of any breach of the provisions of this
Section 13. Such remedies shall not be deemed to be the exclusive remedies
for a breach of this Section 13, but shall be in addition to any other
remedies available under this Agreement or at law or in equity.
13.11 The provisions of this Section 13 shall be in addition to and not
in derogation of any provisions of Applicable Law, including, but not
limited to, 47 U.S.C. (S) 222, and are not intended
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to constitute a waiver by a Party of any right with regard to protection of
the confidentiality of information of the Party or its Customers provided
by Applicable Law. In the event of a conflict between a provision of this
Section 13 and a provision of Applicable Law, the provision of Applicable
Law shall prevail.
14. CONTINGENCIES
-------------
Neither Party shall be liable for any delay or failure in
performance by it which results from strikes, labor slowdowns, or other
labor disputes, fires, explosions, floods, earthquakes, volcanic action,
delays in obtaining or inability to obtain necessary services, facilities,
equipment, parts or repairs thereof, power failures, embargoes, boycotts,
unusually severe weather conditions, revolution, riots or other civil
disturbances, war or acts of the public enemy, acts of God, or causes
beyond the Party's reasonable control.
15. COUNTERPARTS
------------
This Agreement may be executed in two or more counterparts, each
of which shall be deemed an original and all of which shall together
constitute one and the same instrument.
16. CUSTOMER INFORMATION
--------------------
16.1 Without in any way limiting Section 12, each Party shall comply
with Applicable Law with regard to Customer Information, including, but not
limited to, 47 U.S.C. (S) 222.
16.2 A Party ("Accessing Party") shall not access (including, but not
limited to, in the case of Reseller, through Bell Atlantic OSS Services and
Bell Atlantic Pre-OSS Services), use or disclose Customer Information made
available to the Accessing Party by the other Party pursuant to this
Agreement unless the Accessing Party, in the manner required by Applicable
Law, has obtained any Customer authorization for such access, use and/or
disclosure required by Applicable Law. By accessing, using or disclosing
Customer Information made available to the Accessing Party by the other
Party pursuant to this Agreement, the Accessing Party represents and
warrants that the Accessing Party has obtained, in the manner required by
Applicable Law, any Customer authorization for such action required by
Applicable Law. The Accessing Party shall upon request by the other Party
provide proof of such authorization (including, a copy of any written
authorization).
16.3 Bell Atlantic shall have the right (but not the obligation) to
audit Reseller to ascertain whether Reseller is complying with the
requirements of Applicable Law and this Agreement, with regard to
Reseller's access to, and use and disclosure of, Customer Information which
is made available to Reseller by Bell Atlantic pursuant to this Agreement.
16.4 In addition to Bell Atlantic's audit rights under Section 16.3,
Bell Atlantic shall have the right (but not the obligation) to monitor
Reseller's access to and use of Customer Information which is made
available by Bell Atlantic to Reseller pursuant to this Agreement, to
ascertain whether
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Reseller is complying with the requirements of Applicable Law and this
Agreement, with regard to Reseller's access to, and use and disclosure of,
such Customer Information. The foregoing right shall include, but not be
limited to, the right (but not the obligation) to electronically monitor
Reseller's access to and use of Customer Information which is made
available by Bell Atlantic to Reseller pursuant to this Agreement through
Bell Atlantic OSS Facilities or other electronic interfaces or gateways.
16.5 Information obtained by Bell Atlantic pursuant to Section 16.3 or
Section 16.4 shall be treated by Bell Atlantic as Confidential Information
of Reseller pursuant to Section 13; provided that, Bell Atlantic shall have
the right (but not the obligation) to use and disclose information obtained
by Bell Atlantic pursuant to this Section 16 to enforce Applicable Law
and/or Bell Atlantic's rights under this Agreement.
17. DEFAULT
-------
17.1 If Reseller materially breaches a material provision of this
Agreement (other than an obligation to make payment of any amount billed
under this Agreement), and such breach continues for more than thirty (30)
days after written notice thereof from Bell Atlantic, then, except as
otherwise required by Applicable Law, Bell Atlantic shall have the right,
upon notice to Reseller, to terminate or suspend this Agreement and/or
provision of Bell Atlantic Services, in whole or in part.
17.2.1 If Reseller fails to make a payment of any amount billed under
this Agreement by the due date stated on the bill and such failure
continues for more than thirty (30) days after written notice thereof from
Bell Atlantic, then, except as provided in Section 17.2.2, below, or as
otherwise required by Applicable Law, Bell Atlantic shall have the right,
upon notice to Reseller, to terminate or suspend this Agreement and/or
provision of Bell Atlantic Services, in whole or in part.
17.2.2 If a good faith dispute arises between the Parties concerning the
obligation of Reseller to make payment of an amount billed under this
Agreement, the failure to pay the amount in dispute shall not constitute
cause for termination or suspension of this Agreement or provision of Bell
Atlantic Services, if, within thirty (30) days of the date that Bell
Atlantic gives Reseller written notice of the failure to pay the amount in
dispute, Reseller (a) gives Bell Atlantic written notice of the dispute
stating the basis of the dispute, and (b) furnishes to Bell Atlantic an
irrevocable letter of credit in a form acceptable to Bell Atlantic or other
security arrangement acceptable to Bell Atlantic, guaranteeing payment to
Bell Atlantic of any portion of the disputed amount (including the whole of
the disputed amount) which is thereafter agreed by Bell Atlantic and
Reseller, or determined by a court or other governmental entity of
appropriate jurisdiction, to be due to Bell Atlantic. The existence of
such a dispute shall not relieve Reseller of its obligations to pay any
undisputed amount which is due to Bell Atlantic and to otherwise comply
with this Agreement.
18. FACILITIES
----------
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18.1 Bell Atlantic or its suppliers shall retain all right, title and
interest in, and ownership of, all facilities, equipment, software,
information, and wiring, used to provide Bell Atlantic Services. Bell
Atlantic shall have access at all reasonable times to Reseller and Reseller
Customer locations for the purpose of installing, inspecting, maintaining,
repairing, and removing, facilities, equipment, software, and wiring, used
to provide the Bell Atlantic Services. Reseller shall, at Reseller's
expense, obtain any rights and authorizations necessary for such access.
18.2 Except as otherwise agreed to in writing by Bell Atlantic, Bell
Atlantic shall not be responsible for the installation, inspection, repair,
maintenance, or removal, of facilities, equipment, software, or wiring,
provided by Reseller or Reseller Customers for use with Bell Atlantic
Services.
19. INTELLECTUAL PROPERTY
---------------------
Except as expressly stated in this Agreement, nothing contained
within this Agreement shall be construed as the grant of a license, either
express or implied, with respect to any patent, copyright, trade name,
trade mark, service mark, trade secret, or other proprietary interest or
intellectual property, now or hereafter owned, controlled or licensable by
either Party.
20. JOINT WORK PRODUCT
------------------
The Principal Document is the joint work product of the
representatives of the Parties. For convenience, the Principal Document has
been drafted in final form by Bell Atlantic. Accordingly, in the event of
ambiguities, no inferences shall be drawn against either Party solely on
the basis of authorship of the Principal Document.
21. LIABILITY
---------
21.1.1 AS USED IN THIS SECTION 21, "OTHER BELL ATLANTIC PERSONS" MEANS
BELL ATLANTIC'S AFFILIATES, AND THE DIRECTORS, OFFICERS, EMPLOYEES, AGENTS
AND CONTRACTORS, OF BELL ATLANTIC AND BELL ATLANTIC'S AFFILIATES.
21.1.2 AS USED IN THIS SECTION 21, "BELL ATLANTIC SERVICE FAILURE" MEANS
AND INCLUDES ANY FAILURE TO INSTALL, RESTORE, PROVIDE OR TERMINATE A BELL
ATLANTIC SERVICE, AND ANY MISTAKE, OMISSION, INTERRUPTION, DELAY, ERROR,
DEFECT, FAULT, FAILURE, OR DEFICIENCY, IN A BELL ATLANTIC SERVICE.
21.2 THE LIABILITY, IF ANY, OF BELL ATLANTIC AND OTHER BELL ATLANTIC
PERSONS, TO RESELLER, RESELLER CUSTOMERS AND/OR ANY OTHER PERSON, FOR ANY
CLAIM, LOSS OR DAMAGES ARISING OUT OF OR IN CONNECTION WITH A BELL ATLANTIC
SERVICE FAILURE, SHALL BE LIMITED AND/OR EXCLUDED AS SET FORTH IN BELL
ATLANTIC'S TARIFFS.
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21.3.1 TO THE EXTENT THE BELL ATLANTIC TARIFFS APPLICABLE TO A BELL
ATLANTIC SERVICE DO NOT CONTAIN A PROVISION WHICH LIMITS OR EXCLUDES THE
LIABILITY OF BELL ATLANTIC AND/OR OTHER BELL ATLANTIC PERSONS TO RESELLER,
RESELLER CUSTOMERS AND/OR ANY OTHER PERSON, FOR ANY CLAIM, LOSS OR DAMAGES
ARISING OUT OF OR IN CONNECTION WITH A BELL ATLANTIC SERVICE FAILURE,
SECTION 21.3.3 SHALL APPLY.
21.3.2 TO THE EXTENT A BELL ATLANTIC SERVICE IS NOT SUBJECT TO A BELL
ATLANTIC TARIFF, SECTION 21.3.3 SHALL APPLY.
21.3.3 THE LIABILITY, IF ANY, OF BELL ATLANTIC AND OTHER BELL ATLANTIC
PERSONS, TO RESELLER, RESELLER CUSTOMERS AND/OR ANY OTHER PERSON, FOR ANY
CLAIM, LOSS OR DAMAGES ARISING OUT OF OR IN CONNECTION WITH A BELL ATLANTIC
SERVICE FAILURE, SHALL BE LIMITED TO A TOTAL AMOUNT NOT IN EXCESS OF: (A)
TWICE THE PROPORTIONATE CHARGE FOR THE BELL ATLANTIC SERVICE AFFECTED
DURING THE PERIOD OF THE BELL ATLANTIC SERVICE FAILURE; OR, (B) IF THERE IS
NO CHARGE FOR THE BELL ATLANTIC SERVICE AFFECTED, FIVE HUNDRED DOLLARS
($500.00).
21.4 NOTWITHSTANDING ANYTHING CONTAINED IN SECTION 21.2, SECTION
21.3.1, SECTION 21.3.2, OR SECTION 21.3.3, ABOVE, BELL ATLANTIC AND OTHER
BELL ATLANTIC PERSONS SHALL HAVE NO LIABILITY TO RESELLER, RESELLER
CUSTOMERS, AND/OR ANY OTHER PERSON, FOR ANY SPECIAL, INDIRECT, INCIDENTAL,
OR CONSEQUENTIAL, DAMAGES (INCLUDING, BUT NOT LIMITED TO, DAMAGES FOR HARM
TO BUSINESS, LOST REVENUES, LOST PROFITS, LOST SAVINGS, OR OTHER COMMERCIAL
OR ECONOMIC LOSS), ARISING OUT OF OR IN CONNECTION WITH A BELL ATLANTIC
SERVICE FAILURE OR ANY BREACH OR FAILURE IN PERFORMANCE OF THIS AGREEMENT
BY BELL ATLANTIC.
21.5 THE LIMITATIONS AND EXCLUSIONS FROM LIABILITY STATED IN SECTIONS
21.2 THROUGH 21.4 SHALL APPLY REGARDLESS OF THE FORM OF A CLAIM OR ACTION,
WHETHER IN CONTRACT, WARRANTY, TORT (INCLUDING, BUT NOT LIMITED TO, THE
NEGLIGENCE OF BELL ATLANTIC AND/OR OTHER BELL ATLANTIC PERSONS), STRICT
LIABILITY, OR OTHERWISE, AND REGARDLESS OF WHETHER BELL ATLANTIC HAS BEEN
ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
21.6 Reseller shall, in its tariffs or other contracts with Reseller
Customers, provide that in no case shall Bell Atlantic or Other Bell
Atlantic Persons be liable to Reseller Customers or to any other third
parties for any indirect, special, incidental, consequential, or other
damages, including, but not limited to, harm to business, lost revenues,
lost profits, lost savings, or other commercial or economic loss, whether
foreseeable or not, and regardless of notification of the possibility of
such damages. Reseller shall indemnify, defend and hold Bell Atlantic and
Other Bell Atlantic Persons
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harmless from claims by Reseller Customers and other third parties as
provided in Bell Atlantic's Tariffs.
21.7 Bell Atlantic's obligations under this Agreement shall extend
only to Reseller. Bell Atlantic shall have no liability under this
Agreement to Reseller Customers or to any other third party. Nothing in
this Agreement shall be deemed to create a third party beneficiary
relationship between Bell Atlantic and Reseller Customers or any other
third party.
21.8 Reseller shall indemnify, defend and hold harmless Bell Atlantic,
Bell Atlantic's Affiliates, and the directors, officers and employees of
Bell Atlantic and Bell Atlantic's Affiliates, from any claims, suits,
government proceedings, judgments, fines, liabilities, losses, damages,
costs or expenses (including reasonable attorneys fees) arising out of or
in connection with: (a) the failure of Reseller to transmit to Bell
Atlantic a request by a Reseller Customer to install, provide, change or
terminate, a Bell Atlantic Retail Telecommunications Service; (b) the
transmission by Reseller to Bell Atlantic of an Order to install, provide,
change or terminate, a Bell Atlantic Retail Telecommunications Service,
which Order was not authorized by the applicable Reseller Customer; (c)
erroneous or inaccurate information in an Order transmitted by Reseller to
Bell Atlantic; (d) the transmission by Reseller to Bell Atlantic of an
Order to change or terminate a Telecommunications Service provided to an
end user by Bell Atlantic or another Telecommunications Service provider,
or to install or provide a Telecommunications Service for an end user,
which Order was not authorized by the applicable end user; (e) the
transmission by Reseller to Bell Atlantic of an Order to select, change or
reassign a telephone number for an end user, which Order was not authorized
by the applicable end user; (f) the transmission by Reseller to Bell
Atlantic of an Order to select a Telephone Exchange Service provider for an
end user, or to change or terminate an end user's selection of a Telephone
Exchange Service provider, which Order was not authorized by the applicable
end user in the manner required by Applicable Law (or, in the absence of
such Applicable Law, in the manner required by the rules and procedures in
47 CFR (S) 64.1100); (g) access to, or use or disclosure of, Customer
Information or Bell Atlantic OSS Information by Reseller or Reseller's
employees, Agents or contractors; (h) the failure of Reseller to transmit,
or to transmit in a timely manner, E911/911 information to Bell Atlantic;
(i) erroneous or inaccurate E911/911 information transmitted by Reseller to
Bell Atlantic; (j) any information provided by Reseller for inclusion in
Bell Atlantic's LIDB; or, (k) the marketing, advertising or sale of
Reseller's services and/or products (including, but not limited to, resold
Bell Atlantic Retail Telecommunications Services), or the billing or
collection of charges for Reseller's services and/or products (including,
but not limited to, resold Bell Atlantic Retail Telecommunications
Services). For the purposes of Section 21.8(b), (d) and (e), an Order
shall be deemed not to have been authorized by a Reseller Customer or end
user if Applicable Law and/or this Agreement required such authorization to
be obtained in a particular manner, and Reseller did not obtain the
authorization in the manner required by Applicable Law and this Agreement.
22. NON-EXCLUSIVE REMEDIES
----------------------
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Except as otherwise expressly provided in this Agreement, each of
the remedies provided under this Agreement is cumulative and is in addition
to any other remedies that may be available under this Agreement or at law
or in equity.
23. NOTICES
-------
All notices and other communications under this Agreement shall
be deemed effective upon receipt by the Party being notified, provided such
notices or communications are in writing and are sent by certified or
registered mail, return receipt requested, or by a reputable private
delivery service which provides a record of delivery, and addressed as
shown below:
To Bell Atlantic:
Bell Atlantic - Delaware, Inc.
c/o Bell Atlantic Network Services, Inc.
1320 North Courthouse Road
Arlington, Virginia 22201
Attn.: Director, Resale
Initiatives
To Reseller: VIC-RMTS-DC,L.L.C.
d/b/a OnePoint Communications
c/o Corporation Trust Company
1209 Orange Street
Wilmington, Delaware 19801
Tel: (302) 658-7581
Fax: (302) 655-5049
Either Party may from time-to-time designate another address or
addressee by giving notice in accordance with this Section 23.
24. OPTION TO OBTAIN BELL ATLANTIC SERVICE UNDER OTHER AGREEMENTS
-------------------------------------------------------------
24.1 If, at any time while this Agreement is in effect, Bell Atlantic
is a party to an agreement with a Telecommunications Carrier other than
Reseller ("Third-Person Telecommunications Carrier) to provide Bell
Atlantic Services to the Third-Person Telecommunications Carrier, which
agreement has been approved by the Commission pursuant to 47 U.S.C. (S)
252, upon request by Reseller, Bell Atlantic, to the extent required by
Applicable Law (including, but not limited to 47 U.S.C. (S) 252(i)), shall
make available to Reseller any Bell Atlantic Service offered by Bell
Atlantic under the agreement with the Third-Person Telecommunications
Carrier upon the same terms and conditions (including prices) provided in
the agreement with the Third-Person Telecommunications Carrier, but (except
as otherwise expressly agreed in writing by the Parties) only on a
prospective basis. Following such request by Reseller and prior to
provision of the Bell Atlantic Service by Bell Atlantic to Reseller
pursuant to the terms and conditions
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(including prices) of the Third-Person Telecommunications Carrier
agreement, this Agreement shall be amended to incorporate the terms and
conditions (including prices) from the Third-Person Telecommunications
Carrier agreement applicable to the Bell Atlantic Service Reseller has
elected to purchase pursuant to the terms and conditions (including prices)
of the Third-Person Telecommunications Carrier agreement. Except as
otherwise expressly agreed in writing by the Parties, the amendment shall
apply on a prospective basis only and shall not apply with regard to any
Bell Atlantic Service provided by Bell Atlantic to Reseller prior to the
effective date of the amendment.
24.2 To the extent the exercise of the foregoing option requires a
rearrangement of facilities by Bell Atlantic, Reseller shall be liable for
the non-recurring charges associated therewith, as well as for any
termination charges associated with the termination of existing facilities
or Bell Atlantic Services.
25. REGULATORY APPROVALS
--------------------
25.1 Within thirty (30) days after execution of this Agreement by the
Parties, Bell Atlantic shall file the Agreement with the Commission for
approval by the Commission.
25.2 Each Party shall exercise reasonable efforts (including
reasonably cooperating with the other Party) to secure approval of this
Agreement, and any amendment to this Agreement agreed to by the Parties,
from the Commission, the FCC, and other applicable governmental entities.
25.3 Upon request by Bell Atlantic, Reseller shall, at Reseller's
expense, provide reasonable, good-faith support and assistance to Bell
Atlantic in obtaining any governmental approvals necessary for (a) this
Agreement and any amendment to this Agreement agreed to by the Parties,
and/or (b) the provision of Bell Atlantic Services by Bell Atlantic to
Reseller. Without in any way limiting the foregoing, upon request by Bell
Atlantic, Reseller shall (a) join in petitions requesting approval of this
Agreement, or an amendment to this Agreement agreed to by the Parties, to
be filed with the Commission, the FCC, or other applicable governmental
entities, and (b) file other documents with and present testimony to the
Commission, the FCC, or other applicable governmental entities, requesting
approval of this Agreement or an amendment to this Agreement agreed to by
the Parties.
26. REGULATORY CONTINGENCIES
------------------------
26.1 Neither Party shall be liable for any delay or failure in
performance by it which results from requirements of Applicable Law, or
acts or failures to act of any governmental entity or official.
26.2 In the event that any provision of this Agreement shall be
invalid or unenforceable, such invalidity or unenforceability shall not
invalidate or render unenforceable any other provision of this Agreement,
and this Agreement shall be construed as if it did not contain such invalid
or unenforceable provision.
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26.3 In the event that any legislative, regulatory, judicial or other
governmental action materially affects any material terms of this
Agreement, the ability of either Party to perform any material terms of
this Agreement, or the rights or obligations of either Party under this
Agreement, the Parties shall take such action as shall be necessary to
conform this Agreement to the governmental action and/or to permit Bell
Atlantic to continue to provide and Reseller to continue to purchase Bell
Atlantic Services, including, but not limited to, conducting good faith
negotiations to enter into a mutually acceptable modified or substitute
agreement, filing tariffs, or additional, supplemental or modified tariffs,
and making other required filings with governmental entities.
26.4 In the event of a governmental action described in Section 26.3,
above, to the extent permitted by Applicable Law, Bell Atlantic shall
continue to provide and Reseller shall continue to subscribe to, use and
pay for, any Bell Atlantic Services affected by the governmental action
until the action to be taken by Bell Atlantic and Reseller under Section
26.3, above, is taken and becomes effective in accordance with Applicable
Law. Such continued provision of and subscription to, use of and payment
for, the affected Bell Atlantic Services shall be in accordance with the
terms (including prices) of this Agreement, unless other terms, including
but not limited to the terms of a Bell Atlantic Tariff, are required by
Applicable Law.
26.5 If suspension or termination of the provision of any Bell
Atlantic Service is required by or as a result of a governmental action,
such suspension or termination shall not affect Reseller's subscription to,
use or obligation to pay for, other Bell Atlantic Services, unless such
suspension or termination has a material, adverse effect on Reseller's
ability to use the other Bell Atlantic Services.
26.6 If any of the Bell Atlantic Services to be provided by Bell
Atlantic pursuant to a tariff shall at any time become detariffed or
deregulated, Bell Atlantic may transfer the provisions of the tariff
relative to such Bell Atlantic Services to a Bell Atlantic "Guide for
Detariffed Services" or similar document, and such "Guide for Detariffed
Services" or similar document, as amended by Bell Atlantic from time-to-
time, shall become a part of this Agreement.
27. RELATIONSHIP OF THE PARTIES
---------------------------
27.1 The relationship between the Parties under this Agreement shall
be that of independent contractors.
27.2 Nothing contained in this Agreement shall:
(a) make either Party the Agent or employee of the other Party;
(b) grant either Party the authority to enter into a contract on
behalf of, or otherwise legally bind, the other Party in any way;
(c) create a partnership, joint venture or other similar
relationship between the parties; or
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(d) grant to Reseller a franchise, distributorship or similar
interest.
27.3 Each Party shall be solely responsible for selection,
supervision, termination, and compensation, of its respective employees,
Agents and contractors.
27.4 Each Party shall be solely responsible for payment of any Social
Security or other taxes which it is required by Applicable Law to pay in
conjunction with its employees, Agents or contractors, and for collecting
and remitting to applicable taxing authorities any taxes which it is
required by Applicable Law to collect from its employees, Agents or
contractors.
27.5 The relationship of the Parties under this Agreement is a non-
exclusive relationship. Bell Atlantic shall have the right to provide
services offered by Bell Atlantic under this Agreement to persons other
than Reseller. Reseller shall have the right to purchase services that may
be purchased by Reseller under this Agreement from persons other than Bell
Atlantic.
28. RESELLER'S PROVISION OF SERVICE
-------------------------------
28.1 Prior to providing Bell Atlantic Retail Telecommunications
Services purchased by Reseller under this Agreement to Reseller Customers,
Reseller shall obtain from the Commission, the FCC, and any other
applicable governmental entities, any certificates or other authorizations
required by Applicable Law for Reseller to provide Telecommunications
Services. Reseller shall promptly notify Bell Atlantic in writing of any
governmental action which suspends, cancels or withdraws any such
certificate or authorization, or otherwise limits or affects Reseller's
right to provide Telecommunications Services.
28.2 To the extent required by Applicable Law, Reseller shall: (a)
file with the Commission, the FCC, and/or other applicable governmental
entities, the tariffs, arrangements and other documents that set forth the
terms, conditions and prices under which Reseller provides
Telecommunications Services; and, (b) make available for public inspection,
the tariffs, arrangements and other documents that set forth the terms,
conditions and prices under which Reseller provides Telecommunications
Services.
29. RESELLER'S RESALE AND USE OF SERVICE
------------------------------------
29.1 Reseller shall comply with the provisions of this Agreement
(including, but not limited to, Bell Atlantic's Tariffs) regarding resale
or use of Bell Atlantic Services, including, but not limited to, any
restrictions on resale or use of Bell Atlantic Services.
29.2 Without in any way limiting Section 29.1, (a) Reseller shall not
resell residential service to persons not eligible to subscribe to such
service from Bell Atlantic (including, but not limited to, business
Reseller Customers and other nonresidential Reseller Customers), and (b)
Reseller shall not resell Lifeline or other means-tested service offerings,
or grandfathered or discontinued service offerings, to persons not eligible
to subscribe to such service offerings from Bell Atlantic.
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29.3 Reseller shall undertake in good faith to ensure that Reseller
Customers comply with the provisions of Bell Atlantic's Tariffs applicable
to their use of Bell Atlantic Retail Telecommunications Services.
29.4 Reseller shall comply with Applicable Law, and Bell Atlantic's
procedures, for handling requests from law enforcement and other government
agencies for service termination, assistance with electronic surveillance,
and provision of information.
30. RESPONSIBILITY FOR CHARGES
--------------------------
30.1 Reseller shall be responsible for and pay all charges for any
Bell Atlantic Service provided by Bell Atlantic to Reseller, whether the
Bell Atlantic Service is ordered, activated or used by Reseller, a Reseller
Customer, or another person.
30.2 In addition to the charges for Bell Atlantic Services, Reseller
agrees to pay any charges for Telecommunications Services, facilities,
equipment, software, wiring, or other services or products, provided by
Bell Atlantic, or provided by persons other than Bell Atlantic and billed
for by Bell Atlantic, that are ordered, activated or used by Reseller,
Reseller Customers or other persons, through, by means of, or in
association with, Bell Atlantic Services provided by Bell Atlantic to
Reseller.
30.3 Reseller agrees to indemnify, defend and hold Bell Atlantic
harmless from, any charges for Telecommunications Services, facilities,
equipment, software, wiring, or other services or products, provided by
persons other than Bell Atlantic that are ordered, activated or used by
Reseller, Reseller Customers or other persons, through, by means of, or in
association with, Bell Atlantic Services provided by Bell Atlantic to
Reseller.
30.4 Without in any way limiting Reseller's obligations under Section
30.1, Section 30.2 and Section 30.3, Reseller shall pay, or collect and
remit to Bell Atlantic, without discount, all Subscriber Line Charges,
Federal Line Cost Charges, end user common line charges, and carrier
selection and change charges, associated with Bell Atlantic Services
provided by Bell Atlantic to Reseller.
30.5 Upon request by Reseller, Bell Atlantic will provide for use on
resold Bell Atlantic Retail Telecommunications Service dial tone lines
purchased by Reseller such Bell Atlantic Retail Telecommunications Service
call blocking services as Bell Atlantic provides to Bell Atlantic's own end
user retail Customers, where and to the extent Bell Atlantic provides such
Bell Atlantic Retail Telecommunications Service call blocking services to
Bell Atlantic's own end user retail Customers.
31. SECTION HEADINGS
----------------
The section headings in the Principal Document are for
convenience only and are not intended to affect the meaning or
interpretation of the Principal Document.
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32. SERVICES NOT COVERED BY THIS AGREEMENT
--------------------------------------
32.1 This Agreement applies only to Bell Atlantic Services (as the
term "Bell Atlantic Service" is defined in Section 1.1.6) provided, or to
be provided, by Bell Atlantic to Reseller, as specified in Section 3. Any
Telecommunications Services, facilities, equipment, software, wiring, or
other services or products (including, but not limited to,
Telecommunications Services, facilities, equipment, software, wiring, or
other services or products, interconnected or used with Bell Atlantic
Services provided, or to be provided, by Bell Atlantic to Reseller)
provided, or to be provided, by Bell Atlantic to Reseller, which are not
subscribed to by Reseller under this Agreement, must be subscribed to by
Reseller separately, pursuant to other written agreements (including, but
not limited to, applicable Bell Atlantic Tariffs). Reseller shall use and
pay for any Telecommunications Services, facilities, equipment, software,
wiring, or other services or products, provided, or to be provided, by Bell
Atlantic to Reseller, which are not subscribed to by Reseller under this
Agreement, in accordance with such other written agreements (including, but
not limited to, applicable Bell Atlantic Tariffs).
32.2 Without in any way limiting Section 32.1 and without attempting
to list all Bell Atlantic products and services that are not subject to
this Agreement, the Parties agree that this Agreement does not apply to the
purchase by Reseller of the following Bell Atlantic services and products:
except as expressly stated in the Principal Document, exchange access
services as defined in Section 3(16) of the Act, 47 U.S.C. (S) 153(16)
(including, but not limited to, primary interLATA toll carrier and primary
intraLATA toll carrier choice or change); Bell Atlantic Answer Call, Bell
Atlantic Answer Call Plus, Bell Atlantic Home Voice Mail, Bell Atlantic
Home Voice Mail Plus, Bell Atlantic Voice Mail, Bell Atlantic Basic
Mailbox, Bell Atlantic OptiMail Service, and other voice mail, fax mail,
voice messaging, and fax messaging, services; Bell Atlantic Optional Wire
Maintenance Plan; Bell Atlantic Guardian Enhanced Maintenance Service; Bell
Atlantic Sentry I Enhanced Maintenance Service; Bell Atlantic Sentry II
Enhanced Maintenance Service; Bell Atlantic Sentry III Enhanced Maintenance
Service; Bell Atlantic Call 54 Service; Bell Atlantic Public Telephone
Service; customer premises equipment; Bell Atlantic telephone directory
listings offered under agreements or arrangements other than Bell Atlantic
Tariffs filed with the Commission; and, Bell Atlantic telephone directory
advertisements.
32.3 Without in any way limiting Section 32.1, the Parties also agree
that this Agreement does not apply to the installation, inspection,
maintenance, repair, removal, or use of any facilities, equipment,
software, or wiring, located on Reseller's side of the Network Rate
Demarcation Point applicable to Reseller and does not grant to Reseller or
Reseller Customers a right to installation, inspection, maintenance,
repair, or removal, by Bell Atlantic, or use, by Reseller or Reseller
Customers, of any such facilities, equipment, software, or wiring.
32.4 Without in any way limiting Section 32.1, the Parties agree that
this Agreement does not apply to the purchase by Reseller of Audiotex
Services (including, but not limited to, Dial-It, 976, 915 and 556
services) for resale to Audiotex Service providers or other information
service providers. Bell Atlantic shall have the right (but not the
obligation) to block calls made to Audiotex Service numbers (including, but
not limited to, Dial-It numbers and 976, 915 and 556 numbers)
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through Bell Atlantic Services purchased by Reseller under this Agreement.
Notwithstanding the foregoing, Reseller shall pay, without discount, any
charges for Audiotex Services (including, but not limited to, Dial-It, 976,
915 and 556 services) that are ordered, activated or used by Reseller,
Reseller Customers or other persons, through, by means of, or in
association with, Bell Atlantic Services provided by Bell Atlantic to
Reseller.
32.5 Nothing contained within this Agreement shall obligate Bell
Atlantic to provide any service or product which is not a Bell Atlantic
Service (including, but not limited to, the services listed in Sections
32.2, 32.3 and 32.4, above) to Reseller.
32.6 Nothing contained within this Agreement shall obligate Bell
Atlantic to provide a Bell Atlantic Service or any other service or product
to a Reseller Customer. Without in any way limiting the foregoing, except
as otherwise required by Applicable Law, Bell Atlantic reserves the right
to terminate provision of services and products (including, but not limited
to, Telecommunications Services and the services listed in Sections 32.2
and 32.3, above) to any person who ceases to purchase Bell Atlantic Retail
Telecommunications Service dial tone line service from Bell Atlantic.
32.7 Nothing contained in this Section 32 shall in any way exclude or
limit Reseller's obligations and liabilities under Section 30, including,
but not limited to Reseller's obligations and liabilities to pay charges
for services and products as required by Section 30.
33. SERVICE QUALITY
---------------
Bell Atlantic Services provided by Bell Atlantic to Reseller
under this Agreement shall comply with the quality requirements for such
Bell Atlantic Services specified by Applicable Law (including, but not
limited to, any applicable provisions of 47 CFR (S)(S) 51.311 and
51.603(b)).
34. SINGLE POINT OF CONTACT
-----------------------
34.1 Reseller shall be the single point of contact for Reseller
Customers and other persons with regard to Telecommunications Services and
other services and products which they wish to purchase from Reseller or
which they have purchased from Reseller. Communications by Reseller
Customers and other persons with regard to Telecommunications Services and
other services and products which they wish to purchase from Reseller or
which they have purchased from Reseller, shall be made to Reseller, and not
to Bell Atlantic. Reseller shall instruct Reseller Customers and other
persons that such communications shall be directed to Reseller.
34.2 Without in any way limiting Section 34.1, requests by Reseller
Customers for information about or provision of Telecommunications Services
which they wish to purchase from Reseller, requests by Reseller Customers
to change, terminate, or obtain information about, assistance in using, or
repair or maintenance of, Telecommunications Services which they have
purchased from Reseller, and inquiries by Reseller Customers concerning
Reseller's bills, charges for Reseller's Telecommunications Services, and,
if the Reseller Customers receive dial tone line
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service from Reseller, annoyance calls, shall be made by the Reseller
Customers to Reseller, and not to Bell Atlantic.
34.3 Reseller shall establish telephone numbers and mailing addresses
at which Reseller Customers and other persons may communicate with Reseller
and shall advise Reseller Customers and other persons who may wish to
communicate with Reseller of these telephone numbers and mailing addresses.
35. SURVIVAL
--------
The liabilities and obligations of a Party for acts or omissions
of the Party prior to the termination, cancellation or expiration of this
Agreement, the rights, liabilities and obligations of a Party under any
provision of this Agreement regarding indemnification or defense, Customer
Information, confidential information, or limitation or exclusion of
liability, the rights of Bell Atlantic and the liabilities and obligations
of Reseller under Section 18.1, and the rights, liabilities and obligations
of a Party under any provision of this Agreement which by its terms is
contemplated to survive (or be performed after) termination, cancellation
or expiration of this Agreement, shall survive termination, cancellation or
expiration of this Agreement.
36. TAXES
-----
36.1 With respect to any purchase of Bell Atlantic Services under this
Agreement, if any Federal, state or local government tax, fee, duty,
surcharge (including, but not limited to any E911/911, telecommunications
relay service, or universal service fund, surcharge), or other tax-like
charge (a "Tax") is required or permitted by Applicable Law to be collected
from Reseller by Bell Atlantic, then (a) to the extent required by
Applicable Law, Bell Atlantic shall bill Reseller for such Tax, (b)
Reseller shall timely remit such Tax to Bell Atlantic (including both Taxes
billed by Bell Atlantic and Taxes Reseller is required by Applicable Law to
remit without billing by Bell Atlantic), and (c) Bell Atlantic shall remit
such collected Tax to the applicable taxing authority.
36.2 With respect to any purchase of Bell Atlantic Services under this
Agreement, if any Tax is imposed by Applicable Law on the receipts of Bell
Atlantic, which Applicable Law permits Bell Atlantic to exclude certain
receipts received from sales of Bell Atlantic Services for resale by
Reseller, such exclusion being based on the fact that Reseller is also
subject to a Tax based upon receipts ("Receipts Tax"), then Reseller (a)
shall provide Bell Atlantic with notice in writing in accordance with
Section 36.7 of its intent to pay the Receipts Tax, and (b) shall timely
pay the Receipts Tax to the applicable taxing authority.
36.3 With respect to any purchase of Bell Atlantic Services under this
Agreement, that are resold by Reseller to a Reseller Customer, if any Tax
is imposed by Applicable Law on the Reseller Customer in connection with
the Reseller Customer's purchase of the resold Bell Atlantic Services which
Reseller is required to impose and/or collect from the Reseller Customer,
then Reseller (a) shall impose and/or collect such Tax from the Reseller
Customer, and (b) shall timely remit such Tax to the applicable taxing
authority.
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36.4.1 If Bell Atlantic has not received an exemption certificate from
Reseller and fails to bill Reseller for any Tax as required by Section
36.1, then, as between Bell Atlantic and Reseller, (a) Reseller shall
remain liable for such unbilled Tax, and (b) Bell Atlantic shall be liable
for any interest and/or penalty assessed on the unbilled Tax by the
applicable taxing authority.
36.4.2 If Reseller fails to remit any Tax to Bell Atlantic as required
by Section 36.1, then, as between Bell Atlantic and Reseller, Reseller
shall be liable for such uncollected Tax and any interest and/or penalty
assessed on the uncollected Tax by the applicable taxing authority.
36.4.3 If Bell Atlantic does not collect a Tax because Reseller has
provided Bell Atlantic with an exemption certificate which is later found
to be inadequate by the applicable taxing authority, then, as between Bell
Atlantic and Reseller, Reseller shall be liable for such uncollected Tax
and any interest and/or penalty assessed on the uncollected Tax by the
applicable taxing authority.
36.4.4 Except as provided in Section 36.4.5, if Reseller fails to pay
the Receipts Tax as required by Section 36.2, then, as between Bell
Atlantic and Reseller, (a) Bell Atlantic shall be liable for any Tax
imposed on Bell Atlantic's receipts, (b) Reseller shall be liable for any
interest and/or penalty imposed on Bell Atlantic with respect to the Tax on
Bell Atlantic's receipts, and (c) Reseller shall be liable for any Tax
imposed on Reseller's receipts and any interest and/or penalty assessed by
the applicable taxing authority on Reseller with respect to the Tax on
Reseller's receipts.
36.4.5 If any discount or portion of a discount in price provided to
Reseller under this Agreement (including, but not limited to, a discount
provided for in Exhibit II, Section 1.1) represents Tax savings to Bell
Atlantic which it was anticipated Bell Atlantic would receive, because it
was anticipated that receipts from sales of Bell Atlantic Services, that
would otherwise be subject to a Tax on such receipts, could be excluded
from such Tax under Applicable Law because the Bell Atlantic Services would
be sold to Reseller for resale, and Bell Atlantic is, in fact, required by
Applicable Law to pay such Tax on receipts from sales of Bell Atlantic
Services to Reseller, then, as between Bell Atlantic and Reseller, (a)
Reseller shall be liable for, and shall indemnify and hold harmless Bell
Atlantic against (on an after-tax basis), any such Tax, and (b) Reseller
shall be liable for, and shall indemnify and hold harmless Bell Atlantic
against (on an after-tax basis), any interest and/or penalty assessed by
the applicable taxing authority on either Reseller or Bell Atlantic with
respect to the Tax on Bell Atlantic's receipts.
36.4.6 If Reseller fails to impose and/or collect any Tax from Reseller
Customers as required by Section 36.3, then, as between Bell Atlantic and
Reseller, Reseller shall remain liable for such uncollected Tax and any
interest and/or penalty assessed on such uncollected Tax by the applicable
taxing authority.
36.4.7 With respect to any Tax that Reseller has agreed to pay, is
responsible for because Reseller received a discount in price on Bell
Atlantic Services attributable to anticipated Tax savings by Bell Atlantic,
or is required to impose on and/or collect from Reseller Customers,
Reseller agrees
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to indemnify and hold Bell Atlantic harmless on an after-tax basis for any
costs incurred by Bell Atlantic as a result of actions taken by the
applicable taxing authority to recover the Tax from Bell Atlantic due to
failure of Reseller to timely remit the Tax to Bell Atlantic, or timely
pay, or collect and timely remit, the Tax to the taxing authority.
36.5 If either Party is audited by a taxing authority, the other Party
agrees to reasonably cooperate with the Party being audited in order to
respond to any audit inquiries in a proper and timely manner so that the
audit and/or any resulting controversy may be resolved expeditiously.
36.6.1 If Applicable Law clearly exempts a purchase of Bell Atlantic
Services under this Agreement from a Tax, and if such Applicable Law also
provides an exemption procedure, such as an exemption certificate
requirement, then, if Reseller complies with such procedure, Bell Atlantic
shall not collect such Tax during the effective period of the exemption.
Such exemption shall be effective upon receipt of the exemption certificate
or affidavit in accordance with Section 36.7.
36.6.2 If Applicable Law clearly exempts a purchase of Bell Atlantic
Services under this Agreement from a Tax, but does not also provide an
exemption procedure, then Bell Atlantic shall not collect such Tax if
Reseller (a) furnishes Bell Atlantic with a letter signed by an officer of
Reseller requesting an exemption and citing the provision in the Applicable
Law which clearly allows such exemption, and (b) supplies Bell Atlantic
with an indemnification agreement, reasonably acceptable to Bell Atlantic,
which holds Bell Atlantic harmless on an after-tax basis with respect to
forbearing to collect such Tax.
36.7 All notices, affidavits, exemption certificates or other
communications required or permitted to be given by either Party to the
other under this Section 36, shall be made in writing and shall be sent by
certified or registered mail, return receipt requested, or by a reputable
private delivery service which provides a record of delivery, to the
addressee stated in Section 23 at the address stated in Section 23 and to
the following:
To Bell Atlantic: Tax Administration
Bell Atlantic Network Services, Inc.
1717 Arch Street, 30th Floor
Philadelphia, PA 19103
To Reseller: VIC-RMTS-DC, L.L.C.
d/b/a OnePoint Communications
5335 Wisconsin Avenue NW
Suite 950
Washington, DC 20015
Attn: William McMoil, Controller
Tel: (202) 895-2500
Fax: (202) 895-250l
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Either Party may from time-to-time designate another address or
addressee by giving notice in accordance with the terms of this Section
36.7.
Any notice or other communication shall be deemed to be given
when received.
37. TELEPHONE EXCHANGE SERVICE PROVIDER SELECTION
---------------------------------------------
37.1 Without in any way limiting Reseller's obligations under Section
12, Reseller shall comply with Applicable Law with regard to end user
selection of a Telephone Exchange Service provider. Until the Commission or
the FCC adopts regulations and/or orders applicable to end user selection
of a Telephone Exchange Service provider, Reseller shall apply the rules
and procedures set forth in Section 64.1100 of the FCC Rules, 47 CFR (S)
64.1100, to the process for end user selection of a Telephone Exchange
Service provider (including, to end user selection of a Telephone Exchange
Service provider that occurs during any telemarketing contact with an end
user), and shall comply with such rules and procedures.
37.2 By submitting to Bell Atlantic an Order to install, provide,
change or terminate a Telecommunications Service, to select, change or
reassign a telephone number, or to select, change or terminate an end
user's Telephone Exchange Service provider, Reseller represents and
warrants: (a) that Reseller has obtained authorization for such action from
the applicable end user; and, (b) that if Applicable Law and/or this
Agreement required such authorization to be obtained in a particular
manner, Reseller obtained the authorization in the manner required by
Applicable Law and this Agreement. Reseller shall upon request by Bell
Atlantic provide proof of such authorization (including, a copy of any
written authorization).
37.3 If Reseller submits an Order to Bell Atlantic to install,
provide, change or terminate a Telecommunications Service, to select,
change or reassign a telephone number, or to select, change or terminate an
end user's Telephone Exchange Service provider, and (a) when requested by
Bell Atlantic to provide a written document signed by the end user stating
the end user's Telephone Exchange Service provider selection, fails to
provide such document to Bell Atlantic, or (b) has not obtained
authorization for such installation, provision, selection, change,
reassignment or termination, from the end user in the manner required by
Applicable Law (or, in the absence of Applicable Law, in the manner
required by the rules and procedures in 47 CFR (S) 64.1100), Reseller shall
be liable to Bell Atlantic for all charges that would be applicable to the
end user for the initial installation, provision, selection, change,
reassignment or termination, of the end user's Telecommunications Service,
telephone number, and/or Telephone Exchange Service provider, and any
charges for restoring the end user's Telecommunications Service, telephone
number, and/or Telephone Exchange Service provider selection, to its end
user authorized condition.
38. TELEPHONE NUMBERS
-----------------
38.1 Reseller's use of telephone numbers shall be subject to
Applicable Law (including, but not limited to, the rules of the FCC, the
North American Numbering Council, and the North American Numbering Plan
Administrator), the applicable provisions of this Agreement (including,
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but not limited to, this Section 38), and Bell Atlantic's practices and
procedures for use and assignment of telephone numbers, as amended from
time-to-time.
38.2 Subject to Sections 38.1 and 38.3, if an end user who subscribes
to a Bell Atlantic Retail Telecommunications Service dial tone line from
either Reseller or Bell Atlantic changes the Telecommunications Carrier
from whom the end user subscribes for such dial tone line (including a
change from Bell Atlantic to Reseller, from Reseller to Bell Atlantic, or
from Reseller to a Telecommunications Carrier other than Bell Atlantic),
after such change, the end user may continue to use with the dial tone line
the telephone numbers which were assigned to the dial tone line by Bell
Atlantic immediately prior to the change.
38.3 Bell Atlantic shall have the right to change the telephone
numbers used by an end user if at any time: (a) the type or class of
service subscribed to by the end user changes; (b) the end user requests
service at a new location, that is not served by the Bell Atlantic switch
and the Bell Atlantic rate center from which the end user previously had
service; or, (c) continued use of the telephone numbers is not technically
feasible.
38.4 If service on a Bell Atlantic Retail Telecommunications Service
dial tone line subscribed to by Reseller from Bell Atlantic under this
Agreement is terminated, the telephone numbers associated with such dial
tone line shall be available for reassignment by Bell Atlantic to any
person to whom Bell Atlantic elects to assign the telephone numbers,
including, but not limited to, Bell Atlantic, Bell Atlantic end user retail
Customers, Reseller, or Telecommunications Carriers other than Bell
Atlantic and Reseller.
39. WARRANTIES
----------
EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, BELL ATLANTIC
MAKES NO WARRANTIES WITH RESPECT TO BELL ATLANTIC SERVICES, WHETHER EXPRESS
OR IMPLIED, WRITTEN OR ORAL, IN FACT OR IN LAW. THE WARRANTIES SET FORTH IN
THIS AGREEMENT ARE BELL ATLANTIC'S EXCLUSIVE WARRANTIES WITH RESPECT TO
BELL ATLANTIC SERVICES AND ARE IN LIEU OF ALL OTHER WARRANTIES, EXPRESS OR
IMPLIED, WRITTEN OR ORAL, IN FACT OR IN LAW. BELL ATLANTIC DISCLAIMS ANY
AND ALL OTHER WARRANTIES, INCLUDING, BUT NOT LIMITED TO, WARRANTIES OF
-------------
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE, WARRANTIES AGAINST
----------------------------------------------------
INFRINGEMENT, AND WARRANTIES ARISING BY TRADE CUSTOM, TRADE USAGE, COURSE
OF DEALING, OR OTHERWISE.
40. AUTHORIZATION
-------------
40.1.1 Bell Atlantic is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware and has full
power and authority to execute and deliver this Agreement and to perform
the obligations hereunder on behalf of Bell Atlantic.
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40.2 VIC-RMTS-DC, L.L.C. d/b/a OnePoint Communications is a limited
liability company, duly organized, validly existing and in good standing
under the laws of the State of Delaware and has full power and authority to
execute and deliver this Agreement and to perform its obligations
hereunder.
41. PERFORMANCE REPORTING
---------------------
41.1 BA shall supply to Reseller quarterly performance reports on BA's
performance in the Commonwealth of Virginia. The reports shall contain the
information described in, and be substantially in the format of, the
documents attached hereto as Schedules 41A through 41D. The content of the
reports, and the definitions of the rows and columns in the reports are set
forth in Schedule 41E. The coverage of each report is set forth in its
title, with the additional explanations set forth in Schedule 41.
41.2 Notwithstanding subsection 41.1 above and in lieu of the
quarterly performance reports set forth in Schedules 41A through 41D, at
such time as BA makes available the Performance Monitoring Reports set
forth in the Memorandum Opinion and Order adopted by the FCC on August 14,
1997 (the "FCC Merger Order"), to other Telecommunications Carriers
purchasing Interconnection from BA, BA shall provide Reseller with the
Performance Monitoring Reports applicable to Reseller in accordance with
the requirements of said FCC Merger Order.
41.3 Reseller agrees that the performance information included in
these reports is confidential and proprietary to BA, and shall be used by
Reseller solely for internal performance assessment purposes, for purposes
of joint Reseller and BA assessments of service performance, and for
reporting to the Commission, the FCC, or courts of competent jurisdiction,
under cover of an agreed-upon protective order, for the sole purpose of
enforcing BA's obligations hereunder. Reseller shall not otherwise disclose
this information to third parties.
[Intentionally Left Blank]
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IN WITNESS WHEREOF, intending to be legally bound, Reseller and Bell
Atlantic have caused this Agreement to be executed by their respective
authorized representatives.
VIC-RMTS-DC, L.L.C.,
d/b/a OnePoint Communications
BY: _________________________________
Signature
_________________________________
Name (Printed)
ITS: _________________________________
Title
BELL ATLANTIC - DELAWARE, INC.
BY: _________________________________
Signature
_________________________________
Name (Printed)
TITLE: _________________________________
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EXHIBIT I
BELL ATLANTIC ANCILLARY SERVICES
--------------------------------
1. BELL ATLANTIC OSS SERVICES
--------------------------
1.1 Definitions
-----------
As used in the Principal Document, the terms listed below shall
have the meanings stated below:
1.1.1 "Bell Atlantic Operations Support Systems" means Bell Atlantic
systems for pre-ordering, ordering, provisioning, maintenance and
repair, and billing.
1.1.2 "Bell Atlantic OSS Services" means access to Bell Atlantic
Operations Support Systems functions. The term "Bell Atlantic OSS
Services" includes, but is not limited to: (a) Bell Atlantic's
provision of Reseller Usage Information to Reseller pursuant to Exhibit
I, Section 1.3, below; and, (b) "Bell Atlantic OSS Information", as
defined in Exhibit I, Section 1.1.4, below.
1.1.3 "Bell Atlantic OSS Facilities" means any gateways, interfaces,
databases, facilities, equipment, software, or systems, used by Bell
Atlantic to provide Bell Atlantic OSS Services to Reseller.
1.1.4 "Bell Atlantic OSS Information" means any information accessed by,
or disclosed or provided to, Reseller through or as a part of Bell
Atlantic OSS Services. The term "Bell Atlantic OSS Information"
includes, but is not limited to: (a) any Customer Information related
to a Bell Atlantic Customer or a Reseller Customer accessed by, or
disclosed or provided to, Reseller through or as a part of Bell
Atlantic OSS Services; and, (b) any Reseller Usage Information (as
defined in Exhibit I, Section 1.1.5, below) accessed by, or disclosed
or provided to, Reseller.
1.1.5 "Reseller Usage Information" means the usage information for a Bell
Atlantic Retail Telecommunications Service purchased by Reseller under
this Agreement that Bell Atlantic would record if Bell Atlantic was
furnishing such Bell Atlantic Retail Telecommunications Service to a
Bell Atlantic end-user retail Customer.
1.2 Bell Atlantic OSS Services
--------------------------
1.2.1 Upon request by Reseller, Bell Atlantic shall provide to Reseller,
pursuant to Section 251(c)(3) of the Act, 47 U.S.C. (S) 251(c)(3), Bell
Atlantic OSS Services.
1.2.2 Subject to the requirements of Applicable Law, Bell Atlantic
Operations Support Systems, Bell Atlantic Operations Support Systems
functions, Bell Atlantic OSS Facilities, Bell Atlantic OSS
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Information, and the Bell Atlantic OSS Services that will be offered
by Bell Atlantic, shall be as determined by Bell Atlantic. To the
extent required by Applicable Law and technically feasible, Bell
Atlantic will offer to Reseller the Bell Atlantic OSS Services that
Bell Atlantic offers, under agreements approved by the Commission
pursuant to 47 U.S.C. (S) 252, to other Telecommunications Carriers
that are engaged in the resale of Bell Atlantic Retail
Telecommunications Services pursuant to 47 U.S.C. (S) 251(c)(4).
Subject to the requirements of Applicable Law, Bell Atlantic shall
have the right to change Bell Atlantic Operations Support Systems,
Bell Atlantic Operations Support Systems functions, Bell Atlantic OSS
Facilities, Bell Atlantic OSS Information, and the Bell Atlantic OSS
Services, from time-to-time, without the consent of Reseller.
1.3 Reseller Usage Information
--------------------------
1.3.1 Upon request by Reseller, Bell Atlantic shall provide to
Reseller, pursuant to Section 251(c)(3) of the Act, 47 U.S.C. (S)
251(c)(3), Reseller Usage Information.
1.3.2 Reseller Usage Information will be available to Reseller through
the following:
(a) Daily Usage File on Data Tape.
(b) Daily Usage File through Network Data Mover ("NDM").
(c) Daily Usage File through Centralized Message Distribution System
("CMDS").
1.3.3.1 Reseller Usage Information will be provided in a Bellcore
Exchange Message Records ("EMR") format.
1.3.3.2 Daily Usage File Data Tapes provided pursuant to Exhibit I,
Section 1.3.2(a) will be issued each day, Monday through Friday,
except holidays observed by Bell Atlantic.
1.3.4 Except as stated in this Exhibit I, Section 1.3, subject to the
requirements of Applicable Law, the manner in which, and the frequency
with which, Reseller Usage Information will be provided to Reseller
shall be determined by Bell Atlantic.
1.4 Prices
------
The prices for Bell Atlantic OSS Services shall be as stated in
Exhibit II, Section 2 following.
1.5 Access to and Use of Bell Atlantic OSS Facilities
-------------------------------------------------
1.5.1 Bell Atlantic OSS Facilities may be accessed and used by Reseller
only to the extent necessary for Reseller's access to and use of Bell
Atlantic OSS Services pursuant to this Agreement.
1.5.2 Bell Atlantic OSS Facilities may be accessed and used by Reseller
only to provide Telecommunications Services to Reseller Customers.
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1.5.3 Reseller shall restrict access to and use of Bell Atlantic OSS
Facilities to Reseller. This Agreement does not grant to Reseller any
right or license to grant sublicenses to other persons, or permission
to other persons (except Reseller's employees, Agents and contractors,
in accordance with Exhibit I, Section 1.5.7, below), to access or use
Bell Atlantic OSS Facilities.
1.5.4 Reseller shall not (a) alter, modify or damage the Bell Atlantic
OSS Facilities (including, but not limited to, Bell Atlantic
software), (b) copy, remove, derive, reverse engineer, or decompile,
software from the Bell Atlantic OSS Facilities, or (c) obtain access
through Bell Atlantic OSS Facilities to Bell Atlantic databases,
facilities, equipment, software, or systems, which are not offered for
Reseller's use under this Agreement.
1.5.5 Reseller shall comply with all practices and procedures
established by Bell Atlantic for access to and use of Bell Atlantic
OSS Facilities (including, but not limited to, Bell Atlantic practices
and procedures with regard to security and use of access and user
identification codes).
1.5.6 All practices and procedures for access to and use of Bell
Atlantic OSS Facilities, and all access and user identification codes
for Bell Atlantic OSS Facilities: (a) shall remain the property of
Bell Atlantic; (b) shall be used by Reseller only in connection with
Reseller's use of Bell Atlantic OSS Facilities permitted by this
Agreement; (c) shall be treated by Reseller as Confidential
Information of Bell Atlantic pursuant to Section 13; and, (d) shall be
destroyed or returned by Reseller to Bell Atlantic upon the earlier of
request by Bell Atlantic or the expiration or termination of this
Agreement.
1.5.7 Reseller's employees, Agents and contractors may access and use
Bell Atlantic OSS Facilities only to the extent necessary for
Reseller's access to and use of the Bell Atlantic OSS Facilities
permitted by this Agreement. Any access to or use of Bell Atlantic OSS
Facilities by Reseller's employees, Agents, or contractors, shall be
subject to the provisions of this Agreement, including, but not
limited to, Section 13, Exhibit I, Section 1.5.6, and Exhibit I,
Section 1.6.3.3.
1.6 Bell Atlantic OSS Information
-----------------------------
1.6.1 Subject to the provisions of this Agreement and Applicable Law,
Bell Atlantic grants to Reseller a non-exclusive license to use Bell
Atlantic OSS Information.
1.6.2 All Bell Atlantic OSS Information shall at all times remain the
property of Bell Atlantic. Except as expressly stated in this
Agreement, Reseller shall acquire no rights in or to any Bell Atlantic
OSS Information.
1.6.3.1 The provisions of this Exhibit I, Section 1.6.3 apply to all Bell
Atlantic OSS Information, except (a) Reseller Usage Information, (b)
CPNI of Reseller, and (c) CPNI of a Bell Atlantic Customer or a
Reseller Customer, to the extent the Customer has authorized Reseller
to use the Customer Information.
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<PAGE>
1.6.3.2 Bell Atlantic OSS Information may be accessed and used by
Reseller only to provide Telecommunications Services to Reseller
Customers.
1.6.3.3 Reseller shall treat Bell Atlantic OSS Information that is
designated by Bell Atlantic, through written or electronic notice
(including, but not limited to, through the Bell Atlantic OSS
Services), as "Confidential" or "Proprietary" as Confidential
Information of Bell Atlantic pursuant to Section 13.
1.6.3.4 Except as expressly stated in this Agreement, this Agreement does
not grant to Reseller any right or license to grant sublicenses to
other persons, or permission to other persons (except Reseller's
employees, Agents or contractors, in accordance with Exhibit I,
Section 1.6.3.5), to access, use or disclose Bell Atlantic OSS
Information.
1.6.3.5 Reseller's employees, Agents and contractors may access, use and
disclose Bell Atlantic OSS Information only to the extent necessary
for Reseller's access to, and use and disclosure of, Bell Atlantic OSS
Information permitted by this Agreement. Any access to, or use or
disclosure of, Bell Atlantic OSS Information by Reseller's employees,
Agents or contractors, shall be subject to the provisions of this
Agreement, including, but not limited to, Section 13 and Exhibit I,
Section 1.6.3.3.
1.6.3.6 Reseller's license to use Bell Atlantic OSS Information shall
expire upon the earliest of: (a) the time when the Bell Atlantic OSS
Information is no longer needed by Reseller to provide
Telecommunications Services to Reseller Customers; (b) termination of
the license in accordance with this Agreement; or (c) expiration or
termination of this Agreement.
1.6.3.7 All Bell Atlantic OSS Information received by Reseller shall be
destroyed or returned by Reseller to Bell Atlantic, upon expiration,
suspension or termination of the license to use such Bell Atlantic OSS
Information.
1.6.4 Unless sooner terminated or suspended in accordance with this
Agreement (including, but not limited to, Section 17.1 and Exhibit I,
Section 1.7.1), Reseller's access to Bell Atlantic OSS Information
through Bell Atlantic OSS Services shall terminate upon the expiration
or termination of this Agreement.
1.6.5.1 Without in any way limiting Section 16.3, Bell Atlantic shall
have the right (but not the obligation) to audit Reseller to ascertain
whether Reseller is complying with the requirements of Applicable Law
and this Agreement, with regard to Reseller's access to, and use and
disclosure of, Bell Atlantic OSS Information.
1.6.5.2 Without in any way limiting Section 16.3, Section 16.4, or
Exhibit I, Section 1.6.5.1, Bell Atlantic shall have the right (but
not the obligation) to monitor Reseller's access to and use of Bell
Atlantic OSS Information which is made available by Bell Atlantic to
Reseller pursuant to this Agreement, to ascertain whether Reseller is
complying with the requirements of Applicable Law and this Agreement,
with regard to Reseller's access to, and use and disclosure of, such
Bell Atlantic OSS Information. The foregoing right shall include, but
not be limited to, the right (but not the
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obligation) to electronically monitor Reseller's access to and use of
Bell Atlantic OSS Information which is made available by Bell Atlantic
to Reseller through Bell Atlantic OSS Facilities.
1.6.5.3 Information obtained by Bell Atlantic pursuant to this Exhibit I,
Section 1.6.5 shall be treated by Bell Atlantic as Confidential
Information of Reseller pursuant to Section 13; provided that, Bell
Atlantic shall have the right (but not the obligation) to use and
disclose information obtained by Bell Atlantic pursuant to this
Exhibit I, Section 1.6.5 to enforce Applicable Law and/or Bell
Atlantic's rights under this Agreement.
1.6.6 Reseller acknowledges that the Bell Atlantic OSS Information, by
its nature, is updated and corrected on a continuous basis by Bell
Atlantic, and therefore that Bell Atlantic OSS Information is subject
to change from time to time.
1.7 Liabilities and Remedies
------------------------
1.7.1 Any breach by Reseller, or Reseller's employees, Agents or
contractors, of the provisions of Exhibit I, Section 1.5 or Exhibit I,
Section 1.6, shall be deemed a material breach of a material provision
of this Agreement by Reseller under Section 17.1 of this Agreement. In
addition, if Reseller or an employee, Agent or contractor of Reseller
at any time breaches a provision of Exhibit I, Section 1.5 or Exhibit
I, Section 1.6, and such breach continues for more than ten (10) days
after written notice thereof from Bell Atlantic, then, except as
otherwise required by Applicable Law, Bell Atlantic shall have the
right, upon notice to Reseller, to suspend the license to use Bell
Atlantic OSS Information granted by Exhibit I, Section 1.6.1 and/or
the provision of Bell Atlantic OSS Services, in whole or in part.
1.7.2 Reseller agrees that Bell Atlantic would be irreparably injured
by a breach of Exhibit I, Section 1.5 or Exhibit I, Section 1.6 by
Reseller or the employees, Agents or contractors of Reseller, and that
Bell Atlantic shall be entitled to seek equitable relief, including
injunctive relief and specific performance, in the event of any breach
of Exhibit I, Section 1.5 or Exhibit I, Section 1.6 by Reseller or the
employees, Agents or contractors of Reseller. Such remedies shall not
be deemed to be the exclusive remedies for a breach of Exhibit I,
Section 1.5 or Exhibit I, Section 1.6, but shall be in addition to any
other remedies available under this Agreement or at law or in equity.
1.8 Relation to Applicable Law
--------------------------
The provisions of Exhibit I, Sections 1.5, 1.6 and 1.7 shall be
in addition to and not in derogation of any provisions of Applicable
Law, including, but not limited to, 47 U.S.C. (S) 222, and are not
intended to constitute a waiver by Bell Atlantic of any right with
regard to protection of the confidentiality of the information of Bell
Atlantic or Bell Atlantic Customers provided by Applicable Law.
1.9 Cooperation
-----------
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Reseller, at Reseller's expense, shall reasonably cooperate with
Bell Atlantic in using Bell Atlantic OSS Services. Such cooperation
shall include, but not be limited to, the following:
1.9.1 Upon request by Bell Atlantic, Reseller shall by no later than
the fifteenth (15th) day of each calendar month submit to Bell
Atlantic reasonable, good faith estimates (by central office or other
Bell Atlantic office or geographic area designated by Bell Atlantic)
of the volume of each Bell Atlantic Retail Telecommunications Service
for which Reseller anticipates submitting Orders in each week of the
next calendar month.
1.9.2 Upon request by Bell Atlantic, Reseller shall submit to Bell
Atlantic reasonable, good faith estimates of other types of
transactions or use of Bell Atlantic OSS Services that Reseller
anticipates.
1.9.3 Reseller shall reasonably cooperate with Bell Atlantic in
submitting Orders for Bell Atlantic Retail Telecommunications Services
and otherwise using the Bell Atlantic OSS Services, in order to avoid
exceeding the capacity or capabilities of such Bell Atlantic OSS
Services.
1.9.4 Reseller shall participate in cooperative testing of Bell
Atlantic OSS Services and shall provide assistance to Bell Atlantic in
identifying and correcting mistakes, omissions, interruptions, delays,
errors, defects, faults, failures, or other deficiencies, in Bell
Atlantic OSS Services.
1.10 Bell Atlantic Access to Information Related to Reseller Customers
---------
1.10.1 Bell Atlantic shall have the right to access, use and disclose
information related to Reseller Customers that is in Bell Atlantic's
possession (including, but not limited to, in Bell Atlantic OSS
Facilities) to the extent such access, use and/or disclosure has been
authorized by the Reseller Customer in the manner required by
Applicable Law.
1.10.2 Upon request by Bell Atlantic, Reseller shall negotiate in good
faith and enter into a contract with Bell Atlantic, pursuant to which
Bell Atlantic may obtain access to Reseller's operations support
systems (including, systems for pre-ordering, ordering, provisioning,
maintenance and repair, and billing) and information contained in such
systems, to permit Bell Atlantic to obtain information related to
Reseller Customers (as authorized by the applicable Reseller
Customer), to permit Customers to transfer service from one
Telecommunications Carrier to another, and for such other purposes as
may be permitted by Applicable Law.
2. BELL ATLANTIC PRE-OSS SERVICES
------------------------------
2.1 As used in the Principal Document, "Bell Atlantic Pre-OSS
Service" means a service which allows the performance of an activity
which is comparable to an activity to be performed through a Bell
Atlantic OSS Service and which Bell Atlantic offers to provide to
Reseller prior to, or in lieu of, Bell Atlantic's provision of the
Bell Atlantic OSS Service to Reseller. The term "Bell Atlantic Pre-OSS
Service" includes, but is not limited to, the activity of placing
Orders for Bell Atlantic Retail Telecommunications Services through a
telephone facsimile ("Fax") communication.
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2.2 Subject to the requirements of Applicable Law, the Bell Atlantic
Pre-OSS Services that will be offered by Bell Atlantic shall be as
determined by Bell Atlantic and Bell Atlantic shall have the right to
change Bell Atlantic Pre-OSS Services, from time-to-time, without the
consent of Reseller.
2.3 Subject to the requirements of Applicable Law, the prices for
Bell Atlantic Pre-OSS Services shall be as determined by Bell Atlantic
and shall be subject to change by Bell Atlantic from time-to-time.
2.4 The provisions of Exhibit I, Sections 1.5 through 1.9 shall also
apply to Bell Atlantic Pre-OSS Services. For the purposes of this
Exhibit I, Section 2.4: (a) references in Exhibit I, Sections 1.5
through 1.9 to Bell Atlantic OSS Services shall be deemed to include
Bell Atlantic Pre-OSS Services; and, (b) references in Exhibit I,
Sections 1.5 through 1.9 to Bell Atlantic OSS Information shall be
deemed to include information made available to Reseller through Bell
Atlantic Pre-OSS Services.
3. E911/911 SERVICES
-----------------
3.1 Where and to the extent that Bell Atlantic provides E911/911 call
routing to a Public Safety Answering Point ("PSAP") to Bell Atlantic's
own end user retail Customers, Bell Atlantic will provide to Reseller,
for resold Bell Atlantic Retail Telecommunications Service dial tone
lines, E911/911 call routing to the appropriate PSAP. Bell Atlantic
will provide Reseller Customer information for resold Bell Atlantic
Retail Telecommunications Service dial tone lines to the PSAP as that
information is provided to Bell Atlantic by Reseller where and to the
same extent that Bell Atlantic provides Bell Atlantic end user retail
Customer information to the PSAP. Bell Atlantic will update and
maintain, on the same schedule that Bell Atlantic uses with Bell
Atlantic's own end user retail Customers, for Reseller Customers
served by resold Bell Atlantic Retail Telecommunications Service dial
tone lines, the Reseller Customer information in Bell Atlantic's
E911/911 databases.
3.2 Reseller shall provide to Bell Atlantic the name, telephone
number and address, of all Reseller Customers, and such other
information as may be requested by Bell Atlantic, for inclusion in
E911/911 databases. Any change in Reseller Customer name, address or
telephone number information (including addition or deletion of a
Reseller Customer, or a change in Reseller Customer name, telephone
number or address), or in other E911/911 information supplied by
Reseller to Bell Atlantic, shall be reported to Bell Atlantic by
Reseller within one (1) day after the change.
3.3 To the extent that it is necessary (whether as a requirement of
Applicable Law or otherwise) for Reseller to enter into any agreements
or other arrangements with governmental entities (or governmental
entity contractors) related to E911/911 in order for Reseller to
provide Telecommunications Services, Reseller shall at Reseller's
expense enter into such agreements and arrangements.
4. Routing to Directory Assistance and Operator Services
-----------------------------------------------------
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<PAGE>
4.1 Upon request by Reseller, to the extent technically feasible,
Bell Atlantic will provide to Reseller the capability of rerouting to
Reseller's platforms directory assistance traffic (411 and 555-1212
calls) from Reseller Customers served by resold Bell Atlantic Retail
Telecommunications Service dial tone line service and operator
services traffic (O+ and 0-intraLATA calls) from Reseller Customers
served by resold Bell Atlantic Retail Telecommunications Service dial
tone line service.
4.2 A request for the rerouting service described in Exhibit I,
Section 4.1 must be made by Reseller (a) on a Bell Atlantic switch-by-
Bell Atlantic switch basis, and (b) at least ninety (90) days in
advance of the date that the rerouting capability is to be made
available in an applicable Bell Atlantic switch.
4.3 The prices for the rerouting service described in Exhibit I,
Section 4.1 shall be as stated in Exhibit II, Section 2.
5. LIDB/BVS
--------
5.1 Upon request by Reseller, Bell Atlantic will maintain information
(including calling card numbers and collect and bill to third party
billing restriction notation) for Reseller Customers who subscribe to
resold Bell Atlantic Retail Telecommunications Service dial tone line
service, in Bell Atlantic's Line Information Database ("LIDB"), where
and to the same extent that Bell Atlantic maintains information in
Bell Atlantic's LIDB for Bell Atlantic's own end-user retail
Customers.
5.2 If an end-user terminates Bell Atlantic Retail Telecommunications
Service dial tone line service provided to the end-user by Bell
Atlantic and, in place thereof, subscribes to Reseller for resold Bell
Atlantic Retail Telecommunications Service dial tone line service,
Bell Atlantic will remove from Bell Atlantic's LIDB any Bell Atlantic-
assigned telephone line calling card number (including area code)
("TLN") and Personal Identification Number ("PIN") associated with the
terminated Bell Atlantic Retail Telecommunications Service dial tone
line service. The Bell Atlantic-assigned TLN and PIN will be removed
from Bell Atlantic's LIDB within twenty-four (24) hours after Bell
Atlantic terminates the Bell Atlantic Retail Telecommunications
Service dial tone line service with which the number was associated.
Reseller may issue a new telephone calling card to such end-user,
utilizing the same TLN, and the same or a different PIN. Upon request
by Reseller, Bell Atlantic will enter such TLN and PIN in Bell
Atlantic's LIDB for calling card validation purposes.
5.3 Reseller information which is stored in Bell Atlantic's LIDB will
be subject, to the same extent as Bell Atlantic information stored in
Bell Atlantic's LIDB, to access and use by, and disclosure to, those
persons (including, but not limited to, Bell Atlantic) to whom Bell
Atlantic allows access to information which is stored in Bell
Atlantic's LIDB. Reseller hereby grants to Bell Atlantic and the
persons to whom Bell Atlantic allows access to information which is
stored in Bell Atlantic's LIDB, a royalty free license for such
access, use and disclosure.
5.4 Reseller shall obtain contractual agreements with each of the
persons authorized to have
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<PAGE>
access to Bell Atlantic's LIDB, under which Reseller will bill
Reseller Customers for calling card, third party, collect and other
calls validated by such persons through Bell Atlantic's LIDB.
5.5 Reseller warrants that the information provided by Reseller for
inclusion in Bell Atlantic's LIDB will at all times be current,
accurate and appropriate for use for billing validation services.
5.6 Upon request by Reseller, Bell Atlantic will provide to Reseller
Bell Atlantic Billing Validation Service, in accordance with Bell
Atlantic's Tariffs, for use by Reseller in connection with Bell
Atlantic Retail Telecommunications Services purchased and provided by
Reseller pursuant to this Agreement.
5.7 Information in Bell Atlantic's LIDB provided to Reseller shall be
treated by Reseller as Confidential Information of Bell Atlantic
pursuant to Section 13.
5.8 The prices for the services described in this Exhibit I, Section
5 shall be as stated in Exhibit II, Section 2.
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<PAGE>
EXHIBIT II
PRICES FOR BELL ATLANTIC SERVICES
---------------------------------
1. BELL ATLANTIC RETAIL TELECOMMUNICATIONS SERVICES
------------------------------------------------
1.1 Prices
------
The prices for Bell Atlantic Retail Telecommunications Services
shall be the Retail Prices stated in Bell Atlantic's Tariffs for such Bell
Atlantic Retail Telecommunications Services, less: (a) the applicable discount
stated in Bell Atlantic's Tariffs for Bell Atlantic Retail Telecommunications
Services purchased for resale pursuant to 47 U.S.C. (S) 251(c)(4); or, (b) in
the absence of an applicable Bell Atlantic Tariff discount for Bell Atlantic
Retail Telecommunications Services purchased for resale pursuant to 47 U.S.C.
(S) 251(c)(4), the applicable discount stated in Exhibit II, Attachment 1.
1.2 Inapplicability of Discounts
----------------------------
The discounts provided for in Exhibit II, Section 1.1, shall not
be applied to:
1.2.1 Retail Prices that are in effect for no more than ninety (90) days;
1.2.2 Charges for services and products provided by Bell Atlantic that
are not Bell Atlantic Retail Telecommunications Services, including, but not
limited to, Bell Atlantic Ancillary Services, and exchange access services as
defined in Section 3(16) of the Act, 47 U.S.C. (S) 153(16);
1.2.3 Subscriber Line Charges, Federal Line Cost Charges, end user common
line charges, carrier selection and change charges, and Audiotex Service
charges; and,
1.2.4 Any service or charge which the Commission, the FCC, or other
governmental entity of appropriate jurisdiction, determines is not subject to a
wholesale rate discount under 47 U.S.C. (S) 251(c)(4).
1.3 Discount Changes
----------------
1.3.1 Bell Atlantic shall change the discounts provided for in Exhibit II,
Section 1.1, above, from time-to-time, to the extent such change is required by
Applicable Law, including, but not limited to, by regulation or order of the
Commission, the FCC, or other governmental entity of appropriate jurisdiction.
1.3.2 Bell Atlantic shall have the right to change the discounts provided
for in Exhibit II, Section 1.1, above, from time-to-time, to the extent such
change is required, approved or permitted by Applicable Law, including, but not
limited to, by regulation or order of the Commission, the FCC, or other
governmental entity of appropriate jurisdiction.
-40-
<PAGE>
1.4 Offers of Merchandise and Services which are not Bell Atlantic
Retail Telecommunications Services
Reseller shall not be eligible to participate in any Bell Atlantic
plan or program under which Bell Atlantic end user retail Customers may obtain
products or merchandise, or services which are not Bell Atlantic Retail
Telecommunications Services, in return for trying, agreeing to purchase,
purchasing, or using, Bell Atlantic Retail Telecommunications Services.
2. BELL ATLANTIC ANCILLARY SERVICES
--------------------------------
2.1 Prices
------
2.1.1 The prices for Bell Atlantic Ancillary Services shall be as stated:
(a) in Bell Atlantic's Tariffs; or, (b) in the absence of an applicable Bell
Atlantic Tariff price, in Exhibit II, Attachment 1.
2.1.2 If Bell Atlantic at any time offers a Bell Atlantic Ancillary
Service the prices for which are not stated in Bell Atlantic's Tariffs or
Exhibit II, Attachment 1, Bell Atlantic shall have the right to revise Exhibit
II, Attachment 1, to add the prices to Exhibit II, Attachment 1.
2.2 Price Changes
-------------
2.2.1 Bell Atlantic shall change the prices for Bell Atlantic Ancillary
Services, from time-to-time, to the extent such change is required by Applicable
Law, including, but not limited to, by regulation or order of the Commission,
the FCC, or other governmental entity of appropriate jurisdiction.
2.2.2 Bell Atlantic shall have the right to change the prices for Bell
Atlantic Ancillary Services, from time-to-time, to the extent such change is
required, approved or permitted by Applicable Law, including, but not limited
to, by regulation or order of the Commission, the FCC, or other governmental
entity of appropriate jurisdiction.
2.2.3 Except as otherwise required by Applicable Law, Bell Atlantic shall
give Reseller thirty (30) days advance written notice of any increase in the
prices stated in Exhibit II, Attachment 1 for Bell Atlantic Ancillary Services.
-41-
<PAGE>
SCHEDULE 41
PERFORMANCE REPORTING
The following additional descriptions shall apply to the Schedules 41A to
41D that are appended hereto:
Schedule 41A (Reseller-Specific) will report the statewide performance of
BA for the services provided to Reseller for the preceding calendar quarter for
the measures set forth in the report and defined in Schedule 41E. The dates in
the cells in Schedule 4lA are the dates of the beginning of the first calendar
quarter for which BA will be able to provide the information in that cell. Where
the date is accompanied by the letters "TBD" ("to be determined"), the date in
that cell is BA's then-current best estimate and target, but not yet a
commitment. BA will make its best efforts to meet the "TBD" dates and will
inform Reseller of any potential change in those dates if and when that
potential appears.
Schedule 41B (BA, including BA affiliates) will report statewide, system-
wide performance of BA, including for the services provided to affiliate
companies of BA, for the preceding calendar quarter for the measures set forth
in the report and defined in Schedule 41E. The dates in the cells in 41lB have
the same meanings as those described above for Schedule 41A.
Schedule 41C (Top 3 Carriers) will report the statewide performance of BA
for the services provided to the largest three telecommunications carriers
interconnecting with or purchasing services from BA pursuant to Sections 251 and
252 of the Act, combined, for the preceding calendar quarter for the measures
set forth in the report and defined in Schedule 41E. The dates in the cells in
Schedule 41C have the same meanings as those described above for Schedule 41A.
In order to preserve the confidentiality of other carriers' information, results
for a service (report column) will only be produced on this report if all three
carriers purchased the reported service in that calendar quarter.
Schedule 41.D (10 Largest Retail Customers) will, at such time as BA is
able to collect and report such information, and upon agreement regarding
compensation for the collection and reporting of such information, if any,
report statewide performance of BA for the services provided to its ten largest
retail customers for the preceding calendar quarter for the measures set forth
in the report and defined in Schedule 41E. The cells in Schedule 41D are all
marked "TBD" ("to be determined") without an accompanying estimated date because
BA has not yet determined that the collection and reporting of this information
is feasible, and if it is, when such reporting might be available. BA agrees,
however, that it will continue its best efforts assessment of the feasibility of
collecting and reporting this information and will promptly report to Reseller
the results of that assessment and the availability of such information at such
time as BA develops the capability to collect and report it for BA's own
internal use.
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<PAGE>
ATTACHMENT I
TO EXHIBIT II
BELL ATLANTIC - DELAWARE, INC.
DETAILED SCHEDULE OF ITEMIZED CHARGES/1/
----------------------------------------
I. WHOLESALE DISCOUNT FOR RESALE OF BELL ATLANTIC RETAIL TELECOMMUNICATIONS
SERVICES
Resale of Bell Atlantic Retail 20.0% or discount rate as established
Telecommunications Services if RESELLER by further Commission Order.
provides its own Operator Services.
Resale of Bell Atlantic Retail 16.0% or discount rate as established
Telecommunications Services if RESELLER by further Commission Order.
uses Bell Atlantic Operator Services.
___________________
/1/ All rates and charges set forth in this Exhibit II, Attachment 1 are
subject to change from time-to-time as provided in this Agreement, including,
but not limited to, in Section 2.3 and Exhibit II of this Agreement. The rates
and charges set forth in this Exhibit II, Attachment 1 shall apply until such
time as they are replaced by new rates as may be approved or allowed into effect
by the Commission from time to time, subject to a stay or other order issued by
any court of competent jurisdiction. At such time(s) as such new rates have been
approved or allowed into effect by the Commission, the Parties shall amend this
Exhibit II, Attachment 1 to reflect the new approved rates.
Except for citations to generally available services and rates offered
under Bell Atlantic's Tariffs, all services and rates listed in this Exhibit II,
Attachment 1 are available to Reseller only in connection with the purchase and
resale of Bell Atlantic Retail Telecommunications Services by Reseller under
this Agreement. Adherence to this limitation shall be subject to reasonable
audit by Bell Atlantic.
The rates set forth in Sections II through IV of this Exhibit II,
Attachment 1, are in addition to, and not in lieu of, any other rates set forth
in this Agreement.
In addition to charges for Bell Atlantic Services, Reseller shall pay, or
collect and remit, applicable taxes and surcharges (including, but not limited
to, E911/911, telecommunications relay service, and universal service fund,
surcharges), as required by Applicable Law and this Agreement.
<PAGE>
<TABLE>
<CAPTION>
SERVICE OR ELEMENT DESCRIPTION: RECURRING CHARGES: NON-RECURRING CHARGE:
- ------------------------------- ------------------ ---------------------
<S> <C> <C>
II. ACCESS TO OPERATION SUPPORT SYSTEMS
A. Pre-Ordering $.2256/Query Not Applicable
B. Ordering $2.734/Transaction Not Applicable
C. Provisioning Included in Ordering Not Applicable
D. Maintenance & Repair
1. ECG Access $.2256/Query Not Applicable
2. EB/OSI Access $1.18/Trouble Ticket Not Applicable
E. Billing
1. CD-ROM $249.69/CD-ROM/Month Not Applicable
2. Daily Usage File
a) Existing Message Recording $.0002618/Message Not Applicable
b) Delivery of DUF
Data Tape $17.25/Tape $62.14/Programming Hour
Network Data Mover $.0000957/Message Not Applicable
CMDS $.0000957/Message $62.14/Programming Hour
c) DUF Transport
9.6 kb Communications Port $10.37/Month $6,185.60/Port
56 kb Communications Port $28.63/Month $25,600.86/Port
256 kb Communications Port $28.63/Month $42,613.35/Port
T1 Communications Port $363.65/Month $152,056.67/Port
Line Installation Not Applicable $62.14/Programming Hour/Port
Port Set-up Not Applicable $9.98/Port
Network Control Programming Coding Not Applicable $62.14/Programming Hour/Port
</TABLE>
-2-
<PAGE>
<TABLE>
<CAPTION>
SERVICE OR ELEMENT DESCRIPTION: RECURRING CHARGES: NON-RECURRING CHARGE:
- ------------------------------- ------------------ ---------------------
<S> <C> <C>
III. DIRECTORY ASSISTANCE/OPERATOR SERVICES
ROUTING
To RESELLER Platform $.073942/Line/Month $3.78/Line
To BA Platform for Re-Branding $.069/Call $3.78/Line
IV. LIDB VALIDATION
LIDB Point Codes Not Applicable $86.88/Point Code
Calling Card $.01551/Query Not Applicable
Billed Number Screening $.01551/Query Not Applicable
Storage of RESELLER's Data in LIDB Database Not Applicable $1,487.64/Service Establishment
</TABLE>
-3-
<PAGE>
EXHIBIT 10.17
Agreement Between BellSouth Telecommunications, Inc. and OnePoint
Communications - Georgia, LLC Regarding The Sale of BellSouth Telecommunications
Services to OnePoint Communications - Georgia, LLC For The Purposes of Resale
THIS AGREEMENT is by and between BellSouth Telecommunications, Inc.,
("BellSouth or Company"), a Georgia corporation, and OnePoint Communications -
Georgia, LLC ("Reseller"), a Delaware limited liability company, and shall be
deemed effective as of July 21, 1997.
WITNESSETH
WHEREAS, BellSouth is a local exchange telecommunications company
authorized to provide telecommunications services in the states of Alabama,
Florida, Georgia, Kentucky, Louisiana, Mississippi, North Carolina, South
Carolina, and Tennessee; and
WHEREAS, Reseller is or seeks to become an alternative local exchange
telecommunications company authorized to provide telecommunications services in
the states of Florida, Georgia and North Carolina; and
WHEREAS, Reseller desires to resell BellSouth's telecommunications
services; and
WHEREAS, BellSouth has agreed to provide such services to Reseller for
resale purposes and pursuant to the terms and conditions set forth herein;
NOW, THEREFORE, for and in consideration of the mutual premises and
promises contained herein, BellSouth and Reseller do hereby agree as follows:
I. TERM OF THE AGREEMENT
A. The term of this Agreement shall be two years beginning July 21, 1997
and shall apply to all of BellSouth's serving territory as of January 1,
1996 in the state(s) of Florida, Georgia and North Carolina.
B. This Agreement shall be automatically renewed for two additional one
year periods unless either party indicates its intent not to renew the
Agreement. Notice of such intent must be provided, in writing, to the other
party no later than 60 days prior to the end of the then existing contract
period. The terms of this Agreement shall remain in effect after the term
of the existing agreement has expired and while a new agreement is being
negotiated.
C. The rates pursuant by which Reseller is to purchase services from
BellSouth for resale shall be at a discount rate off of the retail rate for
the telecommunications service. The discount rates shall be as set forth in
Exhibit A, attached hereto and incorporated herein by this reference. Such
discount shall reflect the costs avoided by BellSouth when selling a
service for wholesale purposes.
II. DEFINITION OF TERMS
A. CUSTOMER OF RECORD means the entity responsible for placing
application for service; requesting additions, rearrangements, maintenance
or discontinuance of service; payment in full of charges incurred such as
non-recurring, monthly recurring, toll, directory assistance, etc.
B. DEPOSIT means assurance provided by a customer in the form of cash,
surety bond or bank letter of credit to be held by the Company.
C. END USER means the ultimate user of the telecommunications services.
<PAGE>
D. END USER CUSTOMER LOCATION means the physical location of the premises
where and end user makes use of the telecommunications services.
E. NEW SERVICES means functions, features or capabilities that are not
currently offered by BellSouth. This includes packaging of existing services or
combining a new function, feature or capability with an existing service.
F. OTHER LOCAL EXCHANGE COMPANY (OLEC) means a telephone company
certificated by the public service commissions of the Company's franchised area
to provide local exchange service within the Company's franchised area.
G. RESALE means an activity wherein a certificated OLEC, such as Reseller
subscribes to the telecommunications services of the Company and then reoffers
those telecommunications services to the public (with or without"adding value").
H. RESALE SERVICE AREA means the area, as defined in a public service
commission approved certificate of operation, within which an OLEC, such as
Reseller, may offer resold local exchange telecommunications service.
III. General Provisions
A. Reseller may resell the tariffed local exchange and toll
telecommunications services of BellSouth contained in the General Subscriber
Service Tariff and Private Line Service Tariff subject to the terms and
conditions specifically set forth herein. Notwithstanding the foregoing, the
exclusions and limitations on services available for resale will be as set forth
in Exhibit B, attached hereto and incorporated herein by this reference. In
addition Reseller may not purchase telecommunications services at the
wholesale rate for its own use.
BellSouth shall make available telecommunications services for resale at the
rates set forth in Exhibit A to this agreement and subject to the exclusions and
limitations set forth in Exhibit B to this agreement. It does not however waive
its rights to appeal or otherwise challenge any decision regarding resale that
resulted in the discount rates contained in Exhibit A or the exclusions and
limitations contained in Exhibit B. BellSouth reserves the right to pursue any
and all legal and/or equitable remedies, including appeals of any decisions. If
such appeals or challenges result in changes in the discount rates or exclusions
and limitations, the parties agree the appropriate modifications to this
Agreement will be made promptly to make its terms consistent with the outcome of
the appeal.
B. The provision of services by the Company to Reseller does not
constitute a joint undertaking for the furnishing of any service.
C. Reseller will be the customer of record for all services purchased
from BellSouth. Except as specified herein, the Company will take orders from,
bill and except payment from Reseller for all services.
D. Reseller will be the Company's single point of contact for all
services purchased pursuant to this Agreement. The Company shall have no contact
with the end user except to the extent provided for herein.
<PAGE>
E. The Company will continue to bill the end user for any services that the
end user specifies it wishes to receive directly from the Company.
F. The Company maintains the right to serve directly any end user within the
service area of Reseller. The Company will continue to directly market its own
telecommunications products and services and in doing so may establish
independent relationships with end users of Reseller.
G. Neither Party shall interfere with the right of any person or entity to
obtain service directly from the other party.
H. Current telephone numbers may normally be retained by the end user.
However, telephone numbers are the property of the Company and are assigned to
the service furnished. Reseller has no property right to the telephone number or
any other call number designation associated with services furnished by the
Company, and no right to the continuance of service through any particular
central office. The Company reserves the right to change such numbers, or the
central office designation associated with such numbers, or both, whenever the
Company deems it necessary to do so in the conduct of its business.
L. The Company may provide any service or facility for which a charge is not
established herein, as long as it is offered on the same terms to Reseller.
J. Service is furnished subject to the condition that it will not be used for
any unlawful purpose.
K. Service will be discontinued if any law enforcement agency advises that the
service being used is in violation of the law.
L. The Company can refuse service when it has grounds to believe that service
will be used in violation of the law.
M. The Company accepts no responsibility to any person for any unlawful act
committed by Reseller or its end users as part of providing service to Reseller
for purposes of resale or otherwise.
N. The Company will cooperate fully with law enforcement agencies with
subpoenas and court orders for assistance with the Company's customers. Law
enforcement agency subpoenas and court orders regarding end users of Reseller
will be directed to Reseller. The Company will bill Reseller for implementing
any requests by law enforcement agencies regarding Reseller end users.
O. The characteristics and methods of operation of any circuits, facilities or
equipment provided by any person or entity other than the Company shall not:
1. Interfere with or impair service over any facilities of the Company,
its affiliates, or its connecting and concurring carriers involved in its
service:
2. Cause damage to their plant;
<PAGE>
3. Impair the privacy of any communications; or
4. Create hazards to any employees or the public.
P. Reseller assumes the responsibility of notifying the Company regarding
less than standard operations with respect to services provided by
Reseller.
Q. Facilities and/or equipment utilized by BellSouth to provide service
to Reseller remain the property of BellSouth.
R. White page directory listings will be provided in accordance with
regulations set forth in Section A6 of the General Subscriber Service
Tariff and will be available for resale.
S. BellSouth will provide customer record information to the Reseller
provided the Reseller has the appropriate Letter(s) of Authorization.
BellSouth may provide customer record information via one of the following
methods: US mail, fax, or by electronic interface. BellSouth will provide
customer record information via US mail or fax on an interim basis only.
Reseller agrees to compensate BellSouth for all BellSouth incurred
expenditures associated with providing such information to Reseller.
Reseller will adopt and adhere to the BellSouth guidelines associated with
each method of providing customer record information.
T. BellSouth's messaging services may be made available for resale
subject to the execution of BellSouth's Messaging Agreement and without the
wholesale discount.
U. BellSouth's Inside Wire Maintenance Plans may be made available for
resale at rates, terms and conditions as set forth by BellSouth and without
the wholesale discount.
IV. BELLSOUTH'S PROVISION OF SERVICES TO RESELLER
A. Reseller agrees that its resale of BellSouth services shall be as
follows:
1. The resale of telecommunications services shall be limited to
users and uses conforming to the class of service restrictions.
2. To the extent Reseller is a telecommunications carrier that serves
greater than 5 percent of the Nation's presubscribed access lines,
Reseller shall not jointly market its interLATA services with the
telecommunications services purchased from BellSouth pursuant to this
Agreement in any of the states covered under this Agreement. For the
purposes of this subsection, to jointly market means any
advertisement, marketing effort or billing in which the
telecommunications services purchased from BellSouth for purposes of
resale to customers and interLATA services offered by Reseller are
packaged, tied, bundled, discounted or offered together in any way to
the end user. Such efforts include, but are not limited to, sales
referrals, resale arrangements, sales agencies or billing agreements.
This subsection shall be void of no effect for a particular state
covered under this Agreement as of February 8, 1999 or on the date
BellSouth is authorized to offer interLATA services in that state,
whichever is earlier.
<PAGE>
3. Hotel and Hospital PBX service are the only telecommunications
services available for resale to Hotel/Motel and Hospital end users,
respectively. Similarly, Access Line Service for Customer Provided
Coin Telephones is the only local service available for resale to
Independent Payphone Provider (IPP) customers. Shared Tenant Service
customers can only be sold those telecommunications services available
in the Company's A23 Shared Tenant Service Tariff.
4. Reseller is prohibited from furnishing both flat and measured rate
service on the same business premises to the same subscribers (end
users) as stated in A2 of the Company's Tariff except for backup
service as indicated in the applicable state tariff Section A3.
5. If telephone service is established and it is subsequently
determined that the class of service restriction has been violated,
Reseller will be notified and billing for that service will be
immediately changed to the appropriate class of service. Service
charges for changes between class of service, back billing, and
interest as described in this subsection shall apply at the Company's
sole discretion. Interest at a rate as set forth in Section A2 of the
General Subscriber Service Tariff and Section B2 of the Private Line
Service Tariff for the applicable state, compounded daily for the
number of days from the back billing date to and including the date
that Reseller actually makes the payment to the Company may be
assessed.
6. The Company reserves the right to periodically audit services
purchased by Reseller to establish authenticity of use. Such audit
shall not occur more than once in a calendar year. Reseller shall make
any and all records and data available to the Company or the Company's
auditors on a reasonable basis. The Company shall bear the cost of
said audit.
B. Resold services can only be used in the same manner as specified in
the Company's Tariff. Resold services are subject to the same terms and
conditions as are specified for such services when furnished to an
individual end user of the Company in the appropriate section of the
Company's Tariffs. Specific tariff features, e.g. a usage allowance per
month, shall not be aggregated across multiple resold services. Resold
services cannot be used to aggregate traffic from more than one end user
customer except as specified in Section A23, of the Company's Tariff
referring to Shared Tenant Service.
C. Reseller may resell services only within the specific resale service
area as defined in its certificate.
D. Telephone numbers transmitted via any resold service feature are
intended solely for the use of the end user of the feature. Resale of this
information is prohibited.
E. No patent, copyright, trademark or other proprietary right is
licensed, granted or otherwise transferred by this Agreement. Reseller is
strictly prohibited from any use, including but not limited to sales,
marketing or advertising, of any BellSouth name or trademark.
V. MAINTENANCE OF SERVICES
A. Reseller will adopt and adhere to the standards contained in the
applicable BellSouth Work Center Interface Agreement regarding maintenance
and installation of service.
B. Services resold under the Company's Tariffs and facilities and
equipment provided by the Company shall be maintained by the Company.
<PAGE>
C. Reseller or its end users may not rearrange, move, disconnect, remove
or attempt to repair any facilities owned by the Company, other than by
connection or disconnection to any interface means used, except with the
written consent of the Company.
D. Reseller accepts responsibility to notify the Company of situations
that arise that may result in a service problem.
E. Reseller will be the Company's single point of contract for all repair
calls on behalf of Reseller's end users. THE PARTIES AGREE TO PROVIDE ONE
ANOTHER WITH TOLL-FREE CONTACT NUMBERS FOR SUCH PURPOSES.
F. Reseller will contact the appropriate repair centers in accordance
with procedures established by the Company.
G. For all repair requests, Reseller accepts responsibility for adhering
to the Company's prescreening guidelines prior to referring the trouble to
the Company.
H. The Company will bill Reseller for handling troubles that are found
not to be in the Company's network pursuant to its standard time and
material charges. The standard time and material charges will be no more
than what BellSouth charges to its retail customers for the same services.
I. The Company reserves the right to contact Reseller's customers, if
deemed necessary, for maintenance purposes. The Company shall not market
its own services during contact with Reseller's end users while performing
its obligations under this section.
VI. ESTABLISHMENT OF SERVICE
A. After receiving certification as a local exchange company from the
appropriate regulatory agency, Reseller will provide the appropriate
Company service center the necessary documentation to enable the Company to
establish a master account for Reseller. Such documentation shall include
the Application for Master Account, proof of authority to provide
telecommunications services, an Operating Company Number ("OCN") assigned
by the National Exchange Carriers Association ("NECA") and a tax exemption
certificate, if applicable. When necessary deposit requirements are met,
the Company will begin taking orders for the resale of service.
B. Service orders will be in a standard format designated by the Company.
C. When notification is received from Reseller that a current customer of
the Company will subscribe to Reseller's service, standard service order
intervals for the appropriate class of service will apply.
D. The Company will not require end user confirmation prior to
establishing service for Reseller's end user customer. Reseller must,
however, be able to demonstrate end user authorization upon request.
E. Reseller will be the single point of contact with the Company for all
subsequent ordering activity resulting in additions or changes to resold
services except that the Company will accept a request directly from the
end user for conversion of the end user's service from Reseller to the
Company or will accept a request from
<PAGE>
another OLEC for conversion of the end user's service from the Reseller to
the other LEC. The Company will notify Reseller that such a request has
been processed.
F. if the Company determines that an unauthorized change in local service
to Reseller has occurred, the Company will reestablish service with the
appropriate local service provider and will assess Reseller as the OLEC
initiating the unauthorized change, the unauthorized change charge
described in F.C.C, Tariff No. 1. Section 13. Appropriate nonrecurring
charges, as set forth in Section A4. of the General Subscriber Service
Tariff, will also be assessed to Reseller. These charges can be adjusted if
Reseller provides satisfactory proof of authorization.
G. The Company may, in order to safeguard its interest, require Reseller
to make a deposit to be held by the Company as a guarantee of the payment
of rates and charges, unless satisfactory credit has already been
established. Any such deposit may be held during the continuance of the
service as security for the payment of any and all amounts accruing for the
service.
H. Such deposit may not exceed two months' estimated billing.
L. The fact that a deposit has been made in no way relieves Reseller from
complying with the Company's regulations as to advance payments and the
prompt payment of bills on presentation nor does it constitute a waiver or
modification of the regular practices of the Company providing for the
discontinuance of service for non-payment of any sums due the Company.
J. The Company reserves the right to increase the deposit requirements
when, in its sole judgment, the conditions justify such action.
K. In the event that Reseller defaults on its account, service to Reseller
will be terminated and any deposits held will be applied to its account.
L. In the case of a cash deposit, interest at the rate of six percent per
annum shall be paid to Reseller during the continuance of the deposit.
Interest on a deposit accrue annually and, if requested, shall be annually
credited to Reseller by the accrual date.
VII. PAYMENT AND BILLING ARRANGEMENTS
A. When the initial service is ordered by Reseller, the Company will
establish an accounts receivable master account for Reseller.
B. The Company shall bill Reseller on a current basis all applicable
charges and credits.
C. Payment of all charges will be the responsibility of Reseller. Reseller
shall make payment to the Company for all services billed. The Company is
not responsible for payments not received by Reseller from Reseller's
customer. The Company will not become involved in billing disputes that may
arise between Reseller and its customer. Payments made to the Company as
payment on account will be credited to an accounts receivable master
account and not to an end user's account.
<PAGE>
D. The Company will render bills each month on established bill days for each
of Reseller's accounts.
E. The Company will bill Reseller, in advance, charges for all services to be
provided during the ensuing billing period except charges associated with
service usage, which charges will be billed in arrears. Charges will be
calculated on an individual end user account level, including, if applicable,
any charges for usage or usage allowances. BellSouth will also bill all
charges, including but not limited to 911 and E911 charges, telecommunications
relay charges, and franchise fees, TO RESELLER.
F. The payment will be due by the next bill date (i.e., same date in the
following month as the bill date) and is payable in immediately available funds.
Payment is considered to have been made when received by the Company.
If the payment due date falls on a Sunday or on a Holiday which is
observed on a Monday, the payment due date shall be the first non-Holiday day
following such Sunday or Holiday. If the payment due date falls on a Saturday
or on a Holiday which is observed on Tuesday, Wednesday, Thursday, or Friday,
the payment due date shall be the last non-Holiday day preceding such Saturday
or HOliday. If payment is not received by the payment due date, a late payment
penalty, as set forth in I. following, shall apply.
G. Upon proof of tax exempt certification from Reseller, the total amount
billed to Reseller will not include any taxes due from the end user. Reseller
will be solely responsible for the computation, tracking, reporting and payment
of all federal, state and/or local jurisdiction taxes associated with the
services resold to the end user.
H. As the customer of record, Reseller will be responsible for, and remit to
the Company, all charges applicable to its resold services for emergency
services (E911 and 911) and Telecommunications Relay Service (TRS) as well as
any other charges of a similar nature.
I. If any portion of the payment is received by the Company after the payment
due date as set forth preceding, or if any portion of the payment is received by
the Company in funds that are not immediately available to the Company, then a
late payment penalty shall be due to the Company. The late payment penalty shall
be the portion of the payment not received by the payment due date times a late
factor. The late factor shall be as set forth in Section A2 of the General
Subscriber Service Tariff and Section B2 of the Private Line Service Tariff.
J. Any switched access charges associated with interexchange carrier access to
the resold local exchange lines will be billed by, and due to, the Company. No
additional charges are to be assessed to Reseller.
K. The Company will not perform billing and collection services for Reseller
as a result of the execution of this Agreement. All requests for billing
services should be referred to the appropriate entity or operational group
within the Company.
L. Pursuant to 47 CFR Section 51.617, the Company will bill Reseller end user
common line charges identical to the end user common line charge the Company
bills its end users.
M. In general, the Company will not become involved in disputes between
Reseller and Reseller's end user customers over resold services. If a dispute
does arise that cannot be settled without the involvement of the Company,
Reseller shall contact the designated Service Center for resolution. The Company
will make every effort to assist in the resolution of the dispute and will work
with Reseller to resolve the matter in as timely a manner as possible. Reseller
may be required to submit documentation to substantiate the claim.
<PAGE>
VIII. DISCONTINUANCE OF SERVICE
A. The procedures for discontinuing service to an end user are as
follows:
1. Where possible, the Company will deny service to Reseller's end
user on behalf of, and at the request of Reseller. Upon restoration of
the end user's service restoral charges will apply and will be the
responsibility of Reseller.
2. At the request of Reseller, the Company will disconnect a
Reseller end user customer.
3. All requests by Reseller for denial or disconnection of an end
user for nonpayment must be in writing.
4. Reseller will be made solely responsible for notifying the end
user of the proposed disconnection of the service.
5. The Company will continue to process calls made to the Annoyance
Call Center and will advise Reseller when it is determined that
annoyance calls are originated from one of their end user's locations.
The Company shall be indemnified, defended and held harmless by
Reseller and/or the end user against any claim, loss or damage arising
from providing this information to Reseller. It is the responsibility
of Reseller to take the corrective action necessary with its customers
who make annoying calls. Failure to do so will result in the Company's
disconnecting the end user's service.
B. The procedures for discontinuing service to Reseller are as follows:
1. The Company reserves the right to suspend or terminate service
for nonpayment or in the event of prohibited, unlawful or improper use
of the facilities or service, abuse of the facilities, or any other
violation or noncompliance by Reseller of the rules and regulations of
the Company's Tariffs.
2. If payment of account is not received by the bill day in the
month after the original bill day, the Company may provide written
notice to Reseller, that additional applications for service will be
refused and that any pending orders for service will not be completed
if payment is not received by the fifteenth day following the date of
the notice. If the Company does not refuse additional applications for
service on the date specified in the notice, and Reseller's
noncompliance continues, nothing contained herein shall preclude the
Company's right to refuse additional applications for service without
further notice.
3. If payment of account is not received, or arrangements made, by
the bill day in the second consecutive month, the account will be
considered in default and will be subject to denial or disconnection,
or both.
4. If Reseller fails to comply with the provisions of this
Agreement, including any payments to be made by it on the dates and
times herein specified, the Company may, on thirty days written notice
to the person designated by Reseller to receive notices of
noncompliance, discontinue the provision of existing services to
Reseller at any time thereafter. In the case of such discontinuance,
all billed charges, as well as applicable termination charges, shall
become due. If the Company does not discontinue the provision
<PAGE>
of the services involved on the date specified in the thirty days
notice, and Reseller's noncompliance continues, nothing contained
herein shall preclude the Company's right to discontinue the provision
of the services to Reseller without further notice.
5. If payment is not received or arrangements made for payment by the
date given in the written notification, Reseller's services will be
discontinued. Upon discontinuance of service on a Reseller's account,
service to Reseller's end users will be denied. The Company will also
reestablish service at the request of the end or user Reseller upon
payment of the appropriate connection fee and subject to the Company's
normal application procedures. Reseller is solely responsible for
notifying the end user of the proposed disconnection of the service.
6. If within fifteen days after an end user's service has been denied
no contact has been made in reference to restoring service, the end
user's will be disconnected.
IX. LIABILITY
A. The liability of the Company for damages arising out of mistakes,
omissions, interruptions, preemptions, delays errors or defects in
transmission, or failures or defects in facilities furnished by the
Company, occurring in the course of furnishing service or other facilities
and not caused by the negligence of Reseller, or of the Company in failing
to maintain proper standards of maintenance and operation and to exercise
reasonable supervision shall in no event exceed an amount equivalent to the
proportionate charge to Reseller for the period of service during which
such mistake, omission, interruption, preemption, delay, error or defect in
transmission or defect or failure in facilities occur. The Company shall
not be liable for damage arising out of mistakes, omission, interruptions,
preemptions, delays, errors or defects in transmission or other injury,
including but not limited to injuries to persons or property from voltages
or currents transmitted over the service of the Company, (1) caused by
customer-provided equipment (except where a contributing cause is the
malfunctioning of a Company-provided connecting arrangement, in which event
the liability of the Company shall not exceed an amount equal to a
proportional amount of the Company billing for the period of service during
which such mistake, omission, interruption, preemption, delay, error,
defect in transmission or injury occurs), or (2) not prevented by customer-
provided equipment but which would have been prevented had Company-provided
equipment been used.
B. The Company shall be indemnified and saved harmless by Reseller
against any and all claims, actions causes of action, damages, liabilities,
or demands (including the costs, expenses and reasonable attorney's fees on
account thereof) of whatever kind or nature that may be made by any third
party as result of the Company's furnishing of service to Reseller.
C. The Company shall be indemnified, defended and held harmless by
Reseller and/or the end user against any claim, loss or damage arising from
the use of services offered for resale involving:
1. Claims for libel, slander, invasion of privacy or infringement of
copyright arising from Reseller's or end user's own communications.
2. Claims for patent infringement arising from acts combining or
using Company services in connection with facilities or equipment
furnished by the end user or Reseller.
3. All other claims arising out of an act or omission of Reseller or
its end user in the course of using services.
<PAGE>
D. Reseller accepts responsibility for providing access for maintenance
purposes of any service resold under the provisions of this Tariff. The
Company shall not be responsible for any failure on the part of Reseller
with respect to any end user of Reseller.
X. TREATMENT OF PROPRIETARY AND CONFIDENTIAL INFORMATION
A. Both parties agree that it may be necessary to provide each other
during the term of this Agreement with certain confidential information,
including trade secret information, including but not limited to,
technical and business plans, technical information, proposals,
specifications, drawings, procedures, customer account data and like
information (hereinafter collectively referred to as "Information"). Both
parties agree that all Information shall either be in writing or other
tangible format and clearly marked with a confidential, private or
proprietary legend, or, when the Information is communicated orally, it
shall also be communicated that the Information is confidential, private
or proprietary. The Information will be returned to the owner within a
reasonable time. Both parties agree that the Information shall not be
copied or reproduced in any form. Both parties agree to receive such
information and not disclose such Information. Both parties agree to
protect the Information received from distribution, disclosure or
dissemination to anyone except employees of the parties with a need to
know such Information and which employees agree to be bound by the terms
of this Section. Both parties will use the same standard of care to
protect Information received as they would use to protect their own
confidential and proprietary Information.
B. Notwithstanding the foregoing, both parties agree that there will be
no obligation to protect any portion of the Information that is either;
1) made publicly available by the owner of the Information or lawfully
disclosed by a nonparty to this Agreement; 2) lawfully obtained from any
source other than the owner of the Information; or 3) previously known to
the receiving party without an obligation to keep it confidential.
XI. RESOLUTION OF DISPUTES
Except as otherwise stated in this Agreement, the parties agree that if
any dispute arises as to the interpretation of any provision of this Agreement
or as to the proper implementation of this Agreement, the parties will petition
the applicable state Public Service Commission for a resolution of the dispute.
However, each party reserves any rights it may have to seek judicial review of
any ruling made by that Public Service Commission concerning this Agreement.
XII. LIMITATION OF USE
The parties agree that this Agreement shall not be proffered by either
party in another jurisdiction as evidence of any concession or as a waiver of
any position taken by the other party in that jurisdiction or for any other
purpose.
XIII. WAIVERS
Any failure by either party to insist upon the strict performance by the
other party of any of the provisions of this Agreement shall not be deemed a
waiver of any of the provisions of this Agreement, and each party,
notwithstanding such failure, shall have the right thereafter to insist upon the
specific performance of any and all of the provisions of this Agreement.
<PAGE>
XIV. GOVERNING LAW
This Agreement shall be governed by, and construed and enforced in
accordance with, the laws of the State of Georgia, without regard to its
conflict of laws principles.
XV. ARM'S LENGTH NEGOTIATIONS
This Agreement was executed after arm's length negotiations between the
undersigned parties and reflects the conclusion of the undersigned that this
Agreement is in the best interests of all parties.
XVI. MORE FAVORABLE PROVISIONS
A. The parties agree that if --
1. the Federal Communications Commission ("FCC") or the Commission
finds that the terms of this Agreement are inconsistent in one or more
material respects with any of its or their respective decisions, rules
or regulations, or
2. the FCC or the Commission preempts the effect of this Agreement,
then, in either case, upon such occurrence becoming final and no
longer subject to administrative or judicial review, the parties shall
immediately commence good faith negotiations to conform this Agreement
to the requirements of any such decision, rule, regulation or
preemption. The revised agreement shall have an effective date that
coincides with the effective date of the original FCC or Commission
action giving rise to such negotiations. The parties agree that the
rates, terms and conditions of any new agreement shall not be applied
retroactively to any period to such effective date except to the
extent that such retroactive effect is expressly required by such FCC
or Commission decision, rule, regulation or preemption.
B. In the event that BellSouth, either before or after the effective date
of this Agreement, enters into an agreement with any other
telecommunications carrier (an "Other Resale Agreement") which provides for
the provision within the state(s) of Florida, Georgia and North Carolina of
any of the arrangements covered by this Agreement upon rates, terms or
conditions that differ in any material respect from the rates, terms and
conditions for such arrangements set forth in this Agreement ("Other
Terms"), BellSouth shall be deemed thereby to have offered such other
Resale Agreement to Reseller in its entirety. In the event that Reseller
accepts such offer, such Other Terms shall be effective between BellSouth
and Reseller as of the date on which Reseller accepts such offer.
C. In the event that after the effective date of this Agreement the FCC
or the Commission enters an order (a "Resale Order") requiring BellSouth to
provide within the state(s) of Florida, Georgia and North Carolina any of
the arrangements covered by this agreement upon Other Terms, then upon such
Resale Order becoming final and not subject to further administrative or
judicial review, BellSouth shall be deemed to have offered such
arrangements to Reseller upon such Other Terms, in their entirety, which
Reseller may only accept in their entirety, as provided in Section XVI.E.
In the event that Reseller accepts such offer, such Other Terms shall be
effective between BellSouth and Reseller as of the date on which Reseller
accepts such offer.
D. In the event that after the effective date of this Agreement BellSouth
files and subsequently receives approval for one or more intrastate tariffs
(each, a "Resale Tariff") offering to provide within the state(s) of
<PAGE>
Florida, Georgia and North Carolina any of the arrangements covered by
this Agreement upon Other Terms, then upon such Resale Tariff becoming
effective, BellSouth shall be deemed thereby to have offered such
arrangements to Reseller upon such Other Terms, which Reseller may accept
as provided in Section XVI.E. In the event that Reseller accepts such
offer, such Other Terms shall be effective between BellSouth and Reseller
as of the date on which Reseller accepts such offer.
E. The terms of this Agreement, other than those affected by the Other
Terms accepted by Reseller, shall remain in full force and effect.
F. CORRECTIVE PAYMENT. In the event that --
1. BellSouth and Reseller revise this Agreement pursuant to Section
XVI.A, or
2. Reseller accepts a deemed offer of an Other Resale Agreement or
Other Terms, then BellSouth or Reseller, as applicable, shall make a
corrective payment to the other party to correct for the difference
between the rates set forth herein and the rates in such revised
agreement or Other Terms for substantially similar services for the
period from the effective date of such revised agreement or Other
Terms until the date that the parties execute such revised agreement
or Reseller accepts such Other Terms, plus simple interest at a rate
equal to the thirty (30) day commercial paper rate for high-grade,
unsecured notes sold through dealers by major corporations in
multiples of $1,000.00 as regularly published in The Wall Street
Journal.
XVII. NOTICES
A. Every notice, consent, approval, or other communications required or
contemplated by this Agreement shall be in writing and shall be delivered
in person or given by postage prepaid mail, address to:
BellSouth Telecommunications, Inc. OnePoint Communications - Georgia, LLC
OLEC Account Team Director - Carrier Services
3535 Colonnade Parkway, Room E4E1 4550 North Point Pkwy, Suite 350
Birmingham, AL 35243 Alpharetta, GA 30022
or at such other address as the intended recipient previously shall have
designated by written notice to the other party. Copy will also be
provided to Reseller at the following address:
Mr. Bill Wallace
President - OnePoint Communications, LLC
2201 Waukegan Road
Suite E-200
Bannockburn, IL 60015
B. Where specifically required, notices shall be certified or registered
mail. Unless otherwise provided in this Agreement, notice by mail shall
be effective on the date it is officially recorded as delivered by
return
<PAGE>
receipt or equivalent, and in the absence of such record of delivery, it
shall be presumed to have been delivered the fifth day, or next business
day after the fifth day, after it was deposited in the mails.
XVIII. AMENDMENTS
This Agreement may be amended at any time upon written agreement of both
parties.
XIX. ENTIRE AGREEMENT
This Agreement sets forth the entire understanding and supersedes prior
agreements between the parties relating to the subject matter contained herein
and merges all prior discussions between them, and neither party shall be bound
by any definition, condition, provision, representation, warranty, covenant or
promise other than as expressly stated in this Agreement or as is
contemporaneously or subsequently set forth in writing and executed by a duly
authorized officer or representative of the party to be bound thereby.
BELLSOUTH TELECOMMUNICATIONS, INC. RESELLER
BY: /s/ Jerry Hendrix BY: /s/ William F. Wallace
------------------------------- --------------------------------
SIGNATURE SIGNATURE
NAME: Jerry Hendrix NAME: William F. Wallace
----------------------------- ------------------------------
PRINTED NAME PRINTED NAME
TITLE: Director TITLE: President
---------------------------- -----------------------------
DATE: 7/30/97 DATE: JULY 21, 1997
----------------------------- ------------------------------
<PAGE>
EXHIBIT "A"
APPLICABLE DISCOUNTS
The telecommunications services available for purchase by Reseller for the
purposes of resale to Reseller end users shall be available at the following
discount off of the retail rate.
DISCOUNT
--------
STATE RESIDENCE BUSINESS
----- --------- --------
ALABAMA 17% 17%
FLORIDA 21.83% 16.81%
GEORGIA 20.3% 17.3%
KENTUCKY 16.79% 15.54%
LOUISIANA* 20.72% 20.72%
MISSISSIPPI 15.75% 15.75%
NORTH CAROLINA 21.5% 17.6%
SOUTH CAROLINA 14.8% 14.8%
TENNESSEE** 16% 16%
* Effective as of the Commission's Order in the Louisiana Docket No. U-22020
dated November 12, 1996.
** The Wholesale Discount is set as a percentage off the tariffed rates. If OLEC
provides is own operator services and directory services, the discount shall be
21.56%. These rates are effective as of the Tennessee Regulatory Authority's
Order in Tennessee Docket No.90-01331 dated January 17, 1997.
<PAGE>
EXHIBIT B
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Type of AL FL GA KY LA
------------------------------------------------------------------------------------------------------
Service Resale? Discount? Resale? Discount? Resale? Discount? Resale? Discount? Resale? Discount?
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 Grandfathered Services Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes
- ------------------------------------------------------------------------------------------------------------------------------------
2 Contract Service Arrangements Yes Yes Yes Yes Yes No Yes No Yes No
- ------------------------------------------------------------------------------------------------------------------------------------
3 Promotions - greater than 90 Days Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes
- ------------------------------------------------------------------------------------------------------------------------------------
4 Promotions - less than 90 Days Yes No Yes No Yes No No No Yes No
- ------------------------------------------------------------------------------------------------------------------------------------
5 Lifeline/Link Up Services Yes Yes Yes Yes Yes Yes No No Yes Yes
- ------------------------------------------------------------------------------------------------------------------------------------
6 911/E911 Services Yes Yes Yes Yes Yes Yes Yes Yes No No
- ------------------------------------------------------------------------------------------------------------------------------------
7 N11 Services Yes Yes Yes Yes Yes Yes No No No No
- ------------------------------------------------------------------------------------------------------------------------------------
8 Non-Recurring Charges Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
Type of MS NC SC TN
------------------------------------------------------------------------------------
Service Resale? Discount? Resale? Discount? Resale? Discount? Resale? Discount?
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 Grandfathered Services Yes Yes Yes Yes Yes Yes Yes Yes
- ----------------------------------------------------------------------------------------------------------------------------
2 Contract Service Arrangements Yes No Yes Yes Yes No Yes Yes
- ----------------------------------------------------------------------------------------------------------------------------
3 Promotions - greater than 90 Days Yes Yes Yes Yes Yes Yes Yes No
- ----------------------------------------------------------------------------------------------------------------------------
4 Promotions - less than 90 Days Yes No No No Yes No No No
- ----------------------------------------------------------------------------------------------------------------------------
5 Lifeline/Link Up Services Yes Yes Yes Yes Yes Yes No No
- ----------------------------------------------------------------------------------------------------------------------------
6 911/E911 Services Yes Yes Yes Yes Yes Yes Yes Yes
- ----------------------------------------------------------------------------------------------------------------------------
7 N11 Services No No No No Yes Yes Yes Yes
- ----------------------------------------------------------------------------------------------------------------------------
8 Non-Recurring Charges Yes Yes Yes Yes Yes Yes Yes No
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
Additional Comments:
1 Grandfathered services can be resold only to existing subscribers of the
grandfathered service.
2 Where available for resale, promotions will be made available only to end
users who would have qualified for the promotion had it been provided by
BellSouth directly.
3 Life/Link Up services may be offered only to those subscribers who meet the
criteria that BellSouth currently applies to subscribers of these
services.
4 In Louisiana and Mississippi, all Contract Service Arrangements entered
into by BellSouth or terminating after the effective date of the
Commission Order will be subject to resale without the wholesale discount.
All CSAs which are in place as of the effective date of the commission
order will not be eligible for resale.
5 In North Carolina, only those Contract Service Arrangements entered into
after April 15, 1997 will be available for resale.
Version: April 24, 1997
<PAGE>
EXHIBIT 10.18
AGREEMENT
FOR SERVICE RESALE
BETWEEN
ONEPOINT COMMUNICATIONS-COLORADO, L.L.C.
AND
U S WEST COMMUNICATIONS, INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
I. RECITALS & PRINCIPLES 3
II. SCOPE OF AGREEMENT 3
III. DEFINITIONS 4
IV. RESALE SERVICES 5
A. DESCRIPTION 5
B. SCOPE 5
C. ORDERING AND MAINTENANCE 6
D. RESELLER RESPONSIBILITIES 8
E. RATES AND CHARGES 9
F. COLLATERAL AND TRAINING 10
V. ACCESS TO OPERATIONAL SUPPORT SYSTEMS (OSS) 10
VI. DIRECTORY LISTINGS 10
VII. GENERAL PROVISIONS 10
A. TERM 10
B. BILLING 11
C. PAYMENT 11
D. DEPOSIT 12
E. TAXES 12
F. FORCE MAJEURE 12
G. RESPONSIBILITY OF EACH PARTY 13
</TABLE>
Page 1
<PAGE>
<TABLE>
<S> <C>
H. LIMITATION OF LIABILITY 13
I. INDEMNIFICATION 14
J. INTELLECTUAL PROPERTY 14
K. WARRANTIES 16
L. ASSIGNMENT 16
M. DEFAULT 17
N. SEVERABILITY 17
O. NONDISCLOSURE 17
P. SURVIVAL 18
Q. DISPUTE RESOLUTION 18
R. CONTROLLING LAW 19
S. JOINT WORK PRODUCT 19
T. NOTICES 19
U. NO THIRD PARTY BENEFICIARIES 19
V. PUBLICITY AND ADVERTISING 19
W. AMENDMENTS OR WAIVERS 19
X. EXECUTED IN COUNTERPARTS 20
Y. HEADINGS OF NO FORCE OR EFFECT 20
Z. COOPERATION 20
AA. ENTIRE AGREEMENT 20
</TABLE>
Page 2
<PAGE>
AGREEMENT FOR SERVICE RESALE
This is an Agreement for Service Resale ("Agreement"), between OnePoint
Communications-Colorado, L.L.C. ("Reseller"), a Certified Reseller, and U S WEST
Communications, Inc. ("USWC") (collectively, "the Parties") in which USWC will
provide certain services to Reseller within the state of Arizona and such
additional states as the Parties may mutually agree upon. Where required, this
Agreement or the portions of this Agreement relative to a particular state, will
be submitted to the appropriate Public Utilities Commission ("Commission") and
the Parties will specifically request that the Commission promptly approve this
Agreement and refrain from taking any action to change, suspend or otherwise
delay implementation of this Agreement. The Parties enter into this Agreement
without prejudice to any positions they have taken previously, or may take in
the future in any legislative, regulatory, or other public forum addressing any
matters, including matters related to the types of arrangements prescribed by
this Agreement.
The Parties agree and understand that USWC is proposing certain provisions in
this Agreement based, in large part, on the FCC's First Report and Order, In the
------
Matter of Implementing of the Local Competition Provisions in the
- -----------------------------------------------------------------
Telecommunications Act of 1996, CC Docket No. 96-98, rel. Aug. 8, 1996 ("FCC
- ------------------------------
1/st/ Order) and the Second Report and Order and Memorandum Opinion and Order,
In the Matter of Implementation of the Local Competition Provisions of the
- --------------------------------------------------------------------------
Telecommunications Act of 1996, CC Docket No. 96-98, rel. Aug. 8, 1996 ("FCC
- ------------------------------
2/nd/ Order"). To the extent that certain of the rules contained in the FCC 1
/st/ Order and the FCC 2/nd/ Order are deemed by the courts to be not effective,
this Agreement shall be modified to comport with the final court decisions and
subsequent FCC or state Commission decisions or rules issued to comply with the
courts' decisions.
I. RECITALS & PRINCIPLES
WHEREAS, the Telecommunications Act of 1996 (the "Act") was signed into law
on February 8, 1996; and
WHEREAS, the Act places certain duties and obligations upon, and grants
certain rights to, Telecommunications Carriers; and
WHEREAS, USWC is an Incumbent Local Exchange Carrier or has a majority
ownership interest in local exchange companies which are Incumbent Local
Exchange Carriers; and
WHEREAS, the Telecommunications Act of 1996 has specific requirements for
service resale, commonly referred to as a part of the "checklist" and USWC
desires that this Agreement meet those checklist requirements; and
WHEREAS, USWC, for itself and its Affiliates, is willing to sell services
for resale, on the terms and subject to the conditions of this Agreement; and
WHEREAS, Reseller is a Telecommunications Carrier and has requested that
USWC negotiate an Agreement with Reseller for the provision of USWC services for
resale pursuant to the Act and in conformance with USWC'S duties under the Act;
and
WHEREAS, the Parties have arrived at this Agreement through voluntary
negotiations undertaken pursuant to the Act.
NOW, THEREFORE, in consideration of the mutual provisions contained herein
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, Reseller and USWC hereby covenant and agree as follows:
II. SCOPE OF AGREEMENT
A. This Agreement sets forth the terms, conditions and prices under which
USWC agrees to provide telecommunications services for resale. Unless
otherwise
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provided in this Agreement, USWC will perform all of its obligations
hereunder to the extent provided in the Appendices attached hereto.
The Agreement includes all accompanying appendices.
B. In the performance of their obligations under this Agreement, the
Parties shall act in good faith and consistently with the intent of
the Act. Where notice, approval or similar action by a Party is
permitted or required by any provision of this Agreement, the Act, FCC
1/st/ and 2/nd/ Orders, or a state Commission, (including without
limitation, the obligation of the Parties to further negotiate the
resolution of new or open issues under this Agreement) such action
shall not be unreasonably delayed, withheld or conditioned.
C. The Parties have agreed to certain provisions in this Agreement,
based, in large part, on the existing state of the law, rules,
regulations and interpretations thereof, as of the date hereof (the
"Existing Rules"). To the extent that certain of the Existing Rules
are changed and modified, and it reasonably appears that the Parties
would have negotiated and agreed to different term(s), and
conditions(s), or covenant(s) than as contained herein had such change
or modification been in existence before execution hereof, then this
Agreement shall be amended to reflect such different term(s),
condition(s), or covenant(s). Where the Parties fail to agree upon
such an amendment, it shall be resolved in accordance with the Dispute
Resolution provision of this Agreement.
D. This Agreement is entered into as a result of both private
negotiations between the Parties and the incorporation of some of the
results of arbitrated decisions by the Commission, acting pursuant to
Section 252 (b) of the Act, and involving interconnection/resale
agreements of other parties. The Parties have included for convenience
certain rates, terms or conditions in this Agreement which reflect
rates, terms or conditions established in some or all of those other
arbitrations. Reseller acknowledges: (1) that those rates, terms or
conditions are extended only because of the arbitrated results in
other dockets, (2) that USWC intends to appeal certain of those
decisions, and (3) that any negotiations, appeal, stay, injunction or
similar proceeding impacting the applicability of those rates, terms
or conditions to the local service providers who were parties to those
arbitrations will similarly impact the applicability of those rates,
terms or conditions to Reseller. The Parties further recognize that
this Agreement is subject to the generic proceedings by the Commission
addressing the services in the Agreement.
III. DEFINITIONS
A. "Basic Exchange Telecommunications Service" means a service offered to
end users which provides the end user with a telephonic connection to,
and a unique local telephone number address on, the public switched
telecommunications network, and which enables such end user to
generally place calls to, or receive calls from, other stations on the
public switched telecommunications network. Basic residence and
business line services are Basic Exchange Telecommunication Services.
As used solely in the context of the Agreement and unless otherwise
agreed, Basic Exchange Telecommunication Services includes access to
ancillary services such as 911, directory assistance and operator
services.
B. "Basic Exchange Switched Features" are optional end user switched
service features which include, but are not necessarily limited to:
Automatic Call Back;
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Call Trace; Caller ID and Related Blocking Features; Distinctive
Ringing/Call Waiting; Selective Call Forward; Selective Call
Rejection.
C. "Commission" means the Public Utilities Commission(s) in the State of
Arizona.
D. "Enhanced Services" means any service offered over common carrier
transmission facilities that employ computer processing applications
that act on format, content, code, protocol or similar aspects of the
subcriber's transmitted information; that provide the subcriber with
additional different or restructured information; or involve end user
interaction with stored information.
E. "Reseller" is a category of Local Exchange service providers that are
certified to obtain dial tone and associated telecommunications
services from another provider through the purchase of bundled
finished services for resale to its end users.
F. "Tariff" as used throughout this Agreement refers to USWC state
tariffs, price lists, price schedules and catalogs.
G. "Telecommunications Carrier" means any provider of telecommunications
services, except that such term does not include aggregators of
telecommunications services (as defined in Section 226 of the Act). A
Telecommunications Carrier shall be treated as a common carrier under
the Act only to the extent that it is engaged in providing
telecommunication services, except that the Commission shall determine
whether the provision of fixed and mobile satellite service shall be
treated as common carriage.
IV. RESALE SERVICES
A. Description.
1. USWC services (as defined in Section III.A. and B.) and
intraLATA toll originating from USWC exchanges (hereinafter
"intraLATA toll") will be available for resale by USWC pursuant
to the Act and will reference terms and conditions (expect
prices) in USWC tariffs, where applicable. Appendix A lists
services which are available for resale under this Agreement and
the applicable discounts, and is attached and incorporated herein
by this reference.
2. The Parties agree that, at this time, certain USWC services are
not available for resale under this Agreement, and certain other
USWC services are available for resale but at no discount, as
identified in Appendix A or in individual state tariffs. The
availability of services and applicable discounts indentified in
Appendix A or in individual tariffs are subject to change
pursuant to Section IV E.1.
B. Scope.
1. Basic Exchange Telecommunications Service, Basic Exchange
Switched Features and IntraLATA toll may be resold only for their
intended or disclosed use and only to the same class of end user
to whom USWC sells such services; e.g., residence service may not
be resold to business end users.
2. USWC shall provide to Reseller services for resale that are equal
in quality subject to the same conditions (including the
conditions in USWC's effective tariffs), within provisioning time
intervals that are substantially
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equal to the intervals USWC provides these services to others,
including end users, and in accordance with any applicable state
Commission service quality standards, including standards a state
Commission may impose pursuant to Section 252 (e)(3) of the Act.
C. Ordering and Maintenance.
1. Reseller or Reseller's agent shall act as the single point of
contact for its end users' service needs, including without
limitation, sales, service design, order taking, provisioning,
change orders, training, maintenance, trouble reports, repair,
post-sale servicing, billing, collection and inquiry. Reseller
shall make it clear to its end users that they are end users of
the Reseller for resold services. Reseller's end users contacting
USWC will be instructed to contact the Reseller; however, nothing
in this Agreement, except as provided in Section IV.C.7(e), shall
be deemed to prohibit USWC from discussing its products and
services with Reseller's end users who call USWC for any reason.
2. Reseller shall transmit to USWC all information necessary for the
installation (billing, listing and other information), repair,
maintenance and post-installation servicing according to USWC's
standard procedures, as described in the USWC resale operations
guide that will be provided to Reseller.
When USWC's end user or the end user's new service provider
discontinues the end user's service in anticipation of moving to
another service provider, USWC will render its closing bill to
end user effective with the disconnection. If USWC is not the
local service provider, USWC will issue a bill to Reseller for
that portion of the service provided to the Reseller should
Reseller's end user, a new service provider, or Reseller request
service be discontinued to the end user. USWC will notify
Reseller by FAX, OSS, or other other processes when end user
moves to another service provider. USWC will not provide Reseller
with the name of the other reseller or service provider selected
by the end user.
The Parties agree that they will not transfer their respective
end users whose accounts are in arrears between each other. The
Parties further agree that they will work cooperatively together
to develop the standards and processes applicable to the transfer
of such accounts.
3. Reseller shall provide USWC and USWC shall provide Reseller with
points of contract for order entry, problem resolution and repair
of the resold services.
4. Prior to placing orders on behalf of the end user, Reseller shall
be responsible for obtaining and have in its possession Proof of
Authorization ("POA"), POA shall consist of documentation
acceptable to USWC of the end user's selection of Reseller. Such
selection may be obtained in the following ways:
a. The end user's written Letter of Authorization or LOA.
b. The end user's electronic authorization by use of an 800
number.
c. The end user's oral authorization verified by an independent
third party (with third party verification as POA).
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d. A prepaid returnable postcard supplied by Reseller which has
been signed and returned by end user. Reseller will wait
fourteen (14) days after mailing the postcard before placing
an order to change.
Reseller shall make POAs available to USWC upon request. Prior to
placing orders that will disconnect a line from another
reseller's account the Reseller is responsible for obtaining all
information needed to process the disconnect order and re-
establish the service on behalf of the end user. Should an end
user dispute or a discrepancy arise regarding the authority of
Reseller to act on behalf of the end user, the Reseller is
responsible for providing written evidence of its authority to
USWC within three (3) business days. If there is a conflict
between the end user designation and Reseller's written evidence
of its authority, USWC shall honor the designation of the end
user and change the end user back to the previous service
provider. If the Reseller does not provide the POA within three
(3) business days, or if the end user disputes the authority of
the POA, then the Reseller must, by the end of the third business
day:
. notify USWC to change the end user back to the previous
reseller of service provider, and
. provide any end user information and billing records the
Reseller has obtained relating to the end user to the
previous reseller, and
. notify the end user and USWC that the change has been made,
. remit to USWC a charge of $100.00 ("slamming charge") as
compensation for the change back to the previous reseller or
service provider.
If an end user is switched from Reseller back to USWC and there
is a dispute or discrepancy with respect to such change in
service provider, Reseller may request to see a copy of the POA
which USWC has obtained from the end user to effectuate a return
to USWC as the end user's service provider. If USWC is unable to
produce a POA within three (3) business days, USWC shall change
the end user back to Reseller (or other previous reseller)
without imposition of any Customer Transfer Charge.
5. Reseller shall designate Primary Interexchange Carrier (PIC)
assignments on behalf of its end-users for interLATA services and
intraLATA services when intraLATA presubscription is implemented.
6. When end users switch from USWC to Reseller, or to Reseller from
any other reseller, such end users shall be permitted to retain
their current telephone numbers if they so desire and do not
change their service address to an address served by a different
central office. USWC shall take no action to prevent Reseller end
users from retaining their current telephone numbers.
7. Reseller and USWC will employ the following procedures for
handling misdirected repair calls:
a. Reseller and USWC will provide their respective end users
with the correct telephone numbers to call for access to
their respective repair bureaus.
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b. End users of Reseller shall be instructed to report all
cases of trouble to Reseller. End users of USWC shall be
instructed to report all cases of trouble to USWC.
c. To the extent the correct provider can be determined,
misdirected repair calls will be referred to the proper
provider of Basic Exchange Telecommunications Service.
d. Reseller and USWC will provide their respective repair
contact numbers to one another on a reciprocal basis.
e. In responding to repair calls, neither Party shall make
disparaging remarks about each other, nor shall they use
these repair calls as the basis for internal referrals or to
solicit end users to market services. Either Party may
respond with accurate information in answering end user
questions.
D. Reseller Responsibilities.
1. Reseller must send USWC complete and accurate end-user listing
information for directory assistance, directory listings, and 911
Emergency Services using USWC's resale order form and process.
Reseller must provide to USWC accurate end-user information to
ensure appropriate listings in any databases in which USWC is
required to retain and/or maintain end-user information. USWC
assumes no liability for the accuracy of information provided by
Reseller.
2. Reseller may not reserve blocks of USWC telephone numbers, except
as allowed by tariffs.
3. Reseller is liable for all fraud associated with service to its
end-users and accounts. USWC takes no responsibility, will not
investigate, and will make no adjustments to Reseller's account
in cases of fraud unless such fraud is the result of any
intentional act or gross negligence of USWC. Notwithstanding the
above, if USWC becomes aware of potential fraud with respect to
Reseller's accounts, USWC will promptly inform Reseller and,at
the direction of Reseller, take reasonable action to mitigate the
fraud where such action is possible.
4. Reseller will indicate the date it will offer to residential and
business subscribers telephone exchange services. The Reseller
will provide a two year forecast within ninety (90) days of
signing this Agreement. During the first year of the term of this
Agreement, the forecast shall be updated and provided to USWC on
a quarterly basis. Thereafter, during the term of this Agreement,
Reseller will provide updated forecasts from time to time, as
requested by USWC. The initial forecast will provide:
. The date service will be offered (by city and/or state)
. The type and quantity of service(s) which will be offered
. Reseller's anticipated order volume
. Reseller's key contact personnel
The information provided pursuant to this paragraph shall be
considered Proprietary Information under Section VII.O. of this
Agreement.
5. In the event USWC terminates the provisioning of any resold
services to Reseller for any reason, Reseller shall be
responsible for providing any and
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all necessary notice to its end users of the termination. In no
case shall USWC be responsible for providing notice to Reseller's
end users. USWC will provide notice to Reseller of its
termination of a resold service on a timely basis consistent with
Commission rules and notice requirements.
E. Rates and Charges
1. Resold services as listed in Appendix A are available for resale
at the applicable discount percentage or rate per minute set
forth in Appendix A or at the retail tariff rates for services
available for resale.
The wholesale discount rates (the "Rates") in Appendix A were
established in Docket Nos. U-3021-96-448, et al. The Parties
agree that the Rates in this Agreement will remain in effect as
described below until the exhaustion of all appeals, if any, of
the final order in this docket.
If the Rates or the applicability of the Rates to the services in
Appendix A are changed by a nonappealable administrative or
judicial order following a decision on rehearing or appeal or
other similar proceeding, such changed rate(s) will be available
to Reseller, effective as of the date of the order. No true-up of
the Rates will occur unless ordered as a part of the
nonappealable administrative or judicial order.
USWC shall have a reasonable time necessary to make the system
changes necessary to implement and bill the changed rates.
2. If the resold services are purchased pursuant to Tariffs and the
Tariff rates change, charges billed to Reseller for such services
will be based upon the new Tariff rates less the applicable
wholesale discount as agreed to herein or established by resale
Tariff. The new rate will be effective upon the Tariff effective
date.
3. A Customer Transfer Charge (CTC) as specified in Appendix A
applies when transferring any existing account or lines to a
Reseller. Tariffed non-recurring charges will apply to new
installations.
4. A Subscriber Line Charge (SLC) will continue to be paid by the
Reseller without discount to USWC for each local exchange line
resold under this Agreement. All federal and state rules and
regulations associated with SLC as found in the applicable
tariffs also apply.
5. Reseller will pay to USWC the PIC change charge without discount
associated with Reseller end user changes of inter-exchange or
intraLATA carriers.
6. Reseller agrees to pay USWC when its end user activates any
services or features that are billed on a per use or per
activation basis subject to the applicable discount in Appendix A
as such may be amended pursuant to Section IV.E.1 (e.g.,
continuous redial, last call return, call back calling, call
trace, etc.).
7. Resold services are available only where facilities currently
exist and are capable of providing such services without
construction of additional facilities or enhancement of existing
facilities. However, if Reseller requests that facilities be
constructed or enhanced to provide resold services, USWC will
review such requests on a case-by-case basis and
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determine, in its sole discretion, if it is economically feasible
for USWC to build or enhance facilities. If USWC decides to
build or enhance the requested facilities, USWC will develop and
provide to Reseller a price quote for the construction. If the
quote is accepted, Reseller will be billed the quoted price and
construction will commence after receipt of payment.
8. Nonrecurring charges will not be discounted and will be billed at
the applicable Tariff rates.
9. As part of the resold line, USWC provides and Reseller accepts,
at this time, operator services, directory assistance, and
IntraLATA long distance with standard USWC branding. Reseller is
not permitted to alter the branding of these services in any
manner when the services are a part of the resold line without
the prior written approval of USWC. However, at the request of
Reseller and where technically feasible, USWC will rebrand
operator services and directory assistance in the Reseller's
name, provided the costs associated with such rebranding are paid
by Reseller.
F. Collateral and Training
The Parties will jointly develop procedures regarding Reseller's use
of USWC's retail product training materials. Except for any rights
granted by USWC to Reseller for the use or copying of product training
material, product training provided under this Agreement shall be
considered "Proprietary Information" as described in Section VII. O.,
and shall be subject to the terms and conditions specified therein.
V. ACCESS TO OPERATIONAL SUPPORT SYSTEMS (OSS)
Access to OSS is described in Appendix C to this Agreement, which
Appendix is attached hereto and incorporated herein by this reference.
VI. DIRECTORY LISTING.
USWC will accept at no charge one primary listing for each main
telephone number belonging to Reseller's end user based on end user
information provided to USWC by Reseller. USWC will place Reseller's
listings in USWC's directory listing database for directory assistance
purposes and will make listings available to directory publishers and
other third parties. Additional terms and conditions with respect to
directory listings are described in Appendix B which by this reference
is incorporated and made a part of this Agreement.
VII. GENERAL PROVISIONS
A. TERM.
This Agreement shall become effective upon Commission approval,
pursuant to Section 251 and 252 of the Act, and shall terminate on May
1, 2000, and shall be binding upon the Parties during that term,
notwithstanding Section 252(i) of the Act. The Parties agree to
commence negotiations on a new agreement no later than 135 calendar
days prior to the termination date specified above; provided that
Reseller, consistent with Section 252(i) of the Act, may opt into a
then-existing, valid interconnection or resale agreement, in its
entirely, at the conclusion of the said term of this Agreement. In the
event that negotiations are not concluded as of the termination date
specified above, the window of opportunity to file for
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arbitration to resolve outstanding contractual issues in accordance
with the Act will open upon the termination date specified above.
B. Billing.
1. USWC shall bill Reseller and Reseller is responsible for all
applicable charges for the resold services as provided herein.
The Reseller shall also be responsible for all tariffed charges
and charges separately identified in this Agreement associated
with services that the Reseller resells to an end user under this
Agreement.
2. USWC shall provide Reseller, on a monthly basis, within 7-10 days
of the last day of the most recent billing period, in an agreed
upon standard electronic billing format, billing information
including (1) a summary bill, and (2) individual end user sub-
account information consistent with the samples provided to
Reseller for Reseller to render end user bills indicating all
recurring and nonrecurring charges associated with each
individual end user's account for the most recent billing period.
C. Payment.
1. Amounts payable under this Agreement are due and payable within
thirty (30) days after the bill date of USWC's invoice. During
the initial three billing cycles of this Agreement, Reseller and
USWC agree that undisputed amounts shall be paid as provided
herein, Reseller and USWC further agree that, during said three
billing cycle period, they will cooperate to resolve amounts in
dispute or billing process issues in a timely manner but no later
than sixty (60) days after the bill date of USWC's invoice or
identification and notice of the billing process issue. Disputed
amounts will be paid within thirty (30) days following resolution
of the dispute.
2. After the three (3) month period outlined in Section C.1. above,
the Reseller will pay the bill in full within 30 days after the
bill date of the invoice. Billing disputes will be processed and
jointly resolved. Any disputed amounts that USWC remits to the
Reseller will be credited on the next billing cycle including an
interest credit of 1.5% per month compounded.
3. A late payment charge of 1.5% applies to all billed balances
which are not paid by 30 days after the bill date shown on the
invoice. USWC agrees, however, that the application of this
provision will be suspended for the initial three billing cycles
of this Agreement and will not apply to amounts billed during
those three cycles.
4. USWC may discontinue processing orders for the failure by
Reseller to make full payment for the resold services provided
under this Agreement within thirty (30) days of the due date on
Reseller's bill. USWC agrees, however, that the application of
this provision will be suspended for the initial three billing
cycles of this Agreement and will not apply to amounts billed
during those three cycles.
5. USWC may disconnect for the failure by Reseller to make full
payment for the resold services provided under this Agreement
within sixty (60) days of the due date on Reseller's bill.
Reseller will pay the tariff charge required to reconnect each
end user line disconnected pursuant to this paragraph. USWC
agrees, however, that the application of this provision will be
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suspended for the first three billing cycles under this Agreement
and will not apply to amounts billed during those three cycles.
6. Collection procedures and the requirements for deposit are
unaffected by the application of a late payment charge.
7. USWC shall credit Reseller's account the amount due for any
trouble or out-of-service conditions in the same manner that USWC
credits the accounts of its own end-user and pursuant to any
applicable provisions in USWC's tariffs. USWC shall reflect the
amount of such credits on an individual end user telephone
number basis in the billing information USWC provides Reseller.
8. In the event billing disputes relate to service quality issues,
the dispute shall be referred to the USWC account executive
assigned to Reseller who will evaluate the facts and
circumstances of the service quality issues and will work with
Reseller to resolve the dispute.
D. Deposit
1. USWC may require Reseller to make a suitable deposit to be held
by USWC as a guarantee of the payment of charges. Any deposit
required of an existing reseller is due and payable within ten
days after the requirement is imposed. The amount of the deposit
shall be the estimated charges for the resold Service which will
accrue for a two-month period.
2. When the service is terminated, or when Reseller has established
satisfactory credit, the amount of the initial or additional
deposit, with any interest due as set forth in applicable
tariffs, will, at Reseller's option, either be credited to
Reseller's account or refunded. Satisfactory credit for a
reseller is defined as twelve consecutive months service as a
reseller without a termination for nonpayment and with no more
than one notification of intent to terminate Service for
nonpayment. Interest on the deposit shall be accumulated by USWC
at a rate equal to the federal discount rate, as published in the
Wall Street Journal.
E. Taxes.
Each party purchasing services hereunder shall pay or otherwise be
responsible for all federal, state, or local sales, use, excise, gross
receipts, transaction or similar taxes, fees or surcharges levied
against or upon such purchasing Party (or the providing Party when
such providing Party is permitted to pass along to the purchasing
Party such taxes, fees or surcharges), except for any tax on either
Party's corporate existence, status or income. Whenever possible,
these amounts shall be billed as a separate item on the invoice. To
the extent a sale is claimed to be for resale tax exemption, the
purchasing Party shall furnish the providing Party a proper resale tax
exemption certificate as authorized or required by statute or
regulation by the jurisdiction providing said resale tax exemption.
Failure to timely provide said resale tax exemption certificate will
result in no exemption being available to the purchasing Party.
F. Force Majeure.
Neither Party shall be responsible for delays or failures in
performance resulting from acts or occurrences beyond the reasonable
control of such Party, regardless of whether such delays or failures
in performance were foreseen or foreseeable as
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of the date of this Agreement, including, without limitation: fire,
explosion, power failure, acts of God, war, revolution, civil commotion, or
acts of public enemies; any law, order, regulation, ordinance or
requirement of any government or legal body; or labor unrest, including,
without limitation, strikes, slowdowns, picketing or boycotts; or delays
caused by the other Party or by other service or equipment vendors; or any
other circumstances beyond the Party's reasonable control. In such event,
the Party affected shall, upon giving prompt notice to the other Party, be
excused from such performance on a day-to-day basis to the extent of such
interference (and the other Party shall likewise be excused from
performance of its obligations on a day-to-day basis to the extent such
Party's obligations relate to the performance so interfered with). The
affected Party shall use its best effort to avoid or remove the cause of
non-performance and both parties shall proceed to perform with dispatch
once the causes are removed or cease.
G. Responsibility of Each Party.
Each Party is an independent contractor, and has and hereby retains the
right to exercise full control of and supervision over its own performance
of its obligations under this Agreement and retains full control over the
employment, direction, compensation and discharge of all employees
assisting in the performance of such obligations. Each Party will be solely
responsible for all matters relating to payment of such employees,
including compliance with social security taxes, withholding taxes and all
other regulations governing such matters. Each Party will be solely
responsible for proper handling, storage, transport and disposal at its own
expense of all (i) substances or materials that it or its contractors or
agents bring to, create or assume control over at work locations or, (ii)
waste resulting therefrom or otherwise generated in connection with its or
its contractors' or agents' activities at the work locations. Subject to
the limitations on liability and except as otherwise provided in this
Agreement, each Party shall be responsible for (i) its own acts and
performance of all obligations imposed by applicable law in connection with
its activities, legal status and property, real or personal and, (ii) the
acts of its own affiliates, employees, agents and contractors during the
performance of that Party's obligations hereunder.
H. Limitation of Liability.
Except for indemnity obligations, each Party's liability to the other Party
for any loss relating to or arising out of any negligent act or omission in
its performance of this Agreement, whether in contract or in tort, shall be
limited to the total amount that is or would have been charged to the other
Party by such negligent or breaching Party for the service(s) or
function(s) not permitted or improperly performed.
Neither Party shall be liable to the other under this Agreement for
indirect, incidental, consequential, or special damages, including (without
limitation) damages for lost profits, lost revenues, lost savings suffered
by the other Party regardless of the form of action, whether in contract,
warranty, strict liability, tort, including (without limitation) negligence
of any kind and regardless of whether the Parties know the possibility that
such damages could result.
Nothing contained in this Section shall limit either Party's liability to
the other for intentional, malicious misconduct.
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I. Indemnification.
1. With respect to third party claims, each of the Parties agrees to
release, indemnify, defend and hold harmless the other Party and
each of its officers, directors, employees and agents (each an
"Indemnitee") from and against and in respect of any loss, debt,
liability, damage, obligation, claim, demand, judgment or
settlement of any nature or kind, known or unknown, liquidated or
unliquidated including, but not limited to, costs and attorneys'
fees, whether suffered, made, instituted, or asserted by any
other party or person, for invasion of privacy, personal injury
to or death of any person or persons,or for loss, damage to, or
destruction of property, whether or not owned by others,
resulting from the indemnifying Party's performance, breach of
applicable law, or status of its employees, agents and
subcontractors; or for failure to perform under this Agreement,
regardless of the form of action.
2. The indemnification provided herein shall be conditioned upon:
a. The indemnified Party shall promptly notify the indemnifying
Party of any action taken against the indemnified Party
relating to the indemnification. Failure to so notify the
Indemnifying Party shall not relieve the Indemnifying Party
of any liability that the Indemnifying Party might have,
except to the extent that such failure prejudices the
Indemnifying Party's ability to defend such claim.
b. The indemnifying Party shall have sole authority to defend
any such action, including the selection of legal counsel,
and the indemnified Party may engage separate legal counsel
only at its sole cost and expense.
c. In no event shall the indemnifying Party settle or consent
to any judgment pertaining to any such action without the
prior written consent of the indemnified Party.
J. Intellectual Property
1. Each Party hereby grants to the other Party the limited, personal
and nonexclusive right and license to use its patents, copyrights
and trade secrets but only to the extent necessary to implement
this Agreement or specifically required by the then applicable
federal and state rules and regulations relating to Resale and
access to telecommunications facilities and services, and for no
other purposes. Nothing in this Agreement shall be construed as
the grant to the other Party of any rights or licenses to
trademarks.
2. The rights and licenses above are granted "AS IS" and the other
Party's exercise of any such right and license shall be at the
sole and exclusive risk of the other Party. Neither Party shall
have any obligation to defend, indemnify or hold harmless, or
acquire any license or right for the benefit of, or owe any other
obligation or have any liability to, the other based on or
arising from any claim, demand, or proceeding (hereinafter
"claim") by any third party alleging or asserting that the use of
any circuit, apparatus, or system, or the use of any software, or
the performance of any service or method, or the provision of any
facilities by either Party under this Agreement constitutes
infringement, or misuse or misappropriation of any
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patent, copyright, trade secret, or any other proprietary or
intellectual property right of any third party.
3. As a condition to the access or use of patents, copyrights, trade
secrets and other intellectual property (including software)
owned or controlled by a third party to the extent necessary to
implement this Agreement or specifically required by the then
applicable federal and state rules and regulations relating to
resale and access to telecommunications facilities and services,
the Party providing access may require the other upon written
notice, from time to time, to obtain a license or permission for
such access or use, make all payments in connection with
obtaining such license, and provide evidence of such license.
4. Except as expressly provided in this Intellectual Property
Section, nothing in this Agreement shall be construed as the
grant of a license, either express or implied, with respect to
any patent, copyright, logo, trademark, tradename, trade secret
or any other intellectual property right now or hereafter owned,
controlled or licensable by either Party. Reseller may not use
any patent, copyright, logo, trademark, tradename, trade secret
or other intellectual property right of USWC or its affiliates
without execution of a separate agreement between the Parties.
5. Reseller shall not, without the express written permission of
USWC, state or imply that; 1) Reseller is connected, or in any
way affiliated with USWC or its affiliates or, 2) Reseller is
part of a joint business association or any similar arrangement
with USWC or its affiliates or, 3) USWC and its affiliates are in
any way sponsoring, endorsing or certifying Reseller and its
goods and services or, 4) with respect to Reseller advertising or
promotional activities or materials, that the resold goods and
services are in any way associated with or originated from USWC
or any of its affiliates. Notwithstanding the above, Reseller may
state in response to a specific end user injury concerning the
origin of the resold services that "Reseller is reselling USWC
services." No other statements may be made.
6. Notwithstanding the above, unless otherwise prohibited by USWC
pursuant to an applicable provision herein, Reseller may use the
phrase "(Name of Reseller) is a reseller of U S WEST
Communications services" (the "Authorized Phrase") in Reseller's
printed materials provided:
a) The Authorized Phrase is not used in connection with any
goods or services other than USWC services resold by
Reseller.
b) Reseller's use of the Authorized Phrase does not, in USWC's
sole discretion, cause end users to believe that Reseller is
USWC.
c) The Authorized Phrase, when displayed, appears only in text
form (Reseller may not use the U S WEST logo) with all
letters being the same font and point size. The point size
of the Authorized Phrase shall be no greater than one fourth
the point size of the smallest use of Reseller's name and in
no event shall exceed 8 point size.
d) Reseller shall provide all printed materials to USWC for its
prior written approval.
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(e) If USWC determines that Reseller's use of the Authorized
Phrase cause end user confusion, USWC may in its sole
discretion, immediately terminate Reseller's right to use
the Authorized Phrase.
(f) Upon termination of the Reseller's right to use the
Authorized Phrase or termination of this Agreement, all
permission or right to use the Authorized Phrase shall
immediately cease to exist and Reseller shall immediately
cease any and all such use of the Authorized phrase.
Reseller shall either promptly return to USWC or destroy all
materials in its possession or control displaying the
Authorized Phrase.
7. Reseller acknowledges the value of the marks "U S WEST" and "U S
WEST Communications" (the "Marks") and the goodwill associated
therewith and acknowledges that such goodwill is a property right
belonging to U S WEST, Inc. and USWC respectively (the "Owners").
Reseller recognizes that nothing contained in this Agreement is
intended as an assignment or grant to Reseller of any right,
title or interest in or to the Marks and that this Agreement does
not confer any right or license to grant sublicenses or
permission to third parties to use the Marks and is not
assignable. Reseller will do nothing inconsistent with the
Owners' ownership of the Marks, and all rights, if any, that may
be acquired by use of the Marks shall inure to the benefit of the
Owners. Reseller will not adopt, use (other than as authorized in
Section 3 herein), register or seek to register any mark anywhere
in the world which is identical or confusingly similar to the
Marks or which is so similar thereto as to constitute a deceptive
colorable imitation thereof or to suggest or imply some
association, sponsorship, or endorsement by the Owners. The
Owners make no warranties regarding its ownership of any rights
in or the validity of the Marks.
K. Warranties.
NOTWITHSTANDING ANY OTHER PROVISION OF THIS AGREEMENT, THE PARTIES
AGREE THAT NEITHER PARTY HAS MADE, AND THAT THERE DOES NOT EXIST, ANY
WARRANTY, EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED TO WARRANTIES
OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
L. Assignment.
Neither Party may assign or transfer (whether by operation of law or
otherwise) this Agreement (or any rights or obligations hereunder) to
a third party without the prior written consent of the other Party
provided that each Party may assign this Agreement to a corporate
affiliate or an entity under its common control or an entity acquiring
all or substantially all of its assets or equity by providing prior
written notice to the other Party of such assignment or transfer. Any
attempted assignment or transfer that is not permitted is void ab
--
initio. Without limiting the generality of the foregoing, this
------
Agreement shall be binding upon and shall inure to the benefit of the
Parties' respective successors and assigns.
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M. Default.
If either Party defaults in the payment of any amount due
hereunder, or if either Party violates any other provision of
this Agreement, and such default or violation shall continue for
thirty (30) days after written notice thereof, the other Party
may seek legal and/or regulatory relief. The failure of either
Party to enforce any of the provisions of this Agreement or the
waiver thereof in any instance shall not be construed as a
general waiver or relinquishment on its part of any such
provision, but the same shall, nevertheless, be and remain in
full force and effect.
N. Severability.
In accordance with this Agreement, if one or more of the
provisions contained herein must be modified because of changes
in Existing Rules or modifications to arbitration proceedings,
the Parties will negotiate in good faith for replacement
language. If replacement language cannot be agreed upon, either
Party may seek regulatory intervention, including negotiations
pursuant to Sections 251 and 252 of the Act. In all other
respects, the provisions of this Agreement are not severable.
O. Nondisclosure.
1. All information including, but not limited to,
specifications, microfilm, photocopies, magnetic disks,
magnetic tapes, drawings, sketches, models, samples, tools,
technical information, data, employee records, maps,
financial reports, and market data, (i) furnished by one
Party to the other Party dealing with end user specific,
facility specific, or usage specific information other than
end user information communicated for the purpose of
publication of directory database inclusion, or (ii) in
written, graphic, electromagnetic, or other tangible form
and marked at the time of delivery as "Confidential",
"Proprietary", or (iii) communicated and declared to the
receiving Party within ten (10) days after delivery, to be
"Confidential" or "Proprietary" (collectively referred to as
"Proprietary Information"), shall remain the property of the
disclosing Party. A Party who receives Proprietary
Information via an oral communication may request written
confirmation that the material is Proprietary Information. A
Party who delivers Proprietary Information via an oral
communication may request written confirmation that the
Party receiving the information understands that the
material is Proprietary Information.
2. Upon request by the disclosing Party, the receiving Party
shall return all tangible copies of Proprietary Information,
whether written, graphic or otherwise, except that the
receiving Party may retain one copy for archival purposes.
3. Each party shall keep all of the other Party's Proprietary
Information confidential and shall use the other Party's
Proprietary Information only in connection with this
Agreement. Neither Party shall sue the other Party's
Proprietary Information for any other purpose except upon
such terms and conditions as may be agreed upon between the
Parties in writing.
4. Unless otherwise agreed, the obligations of confidentiality
and non-use set forth in this Agreement do not apply to the
extent that such Proprietary Information:
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a. was at the time of receipt already known to the receiving
Party free of any obligation to keep it confidential
(evidenced by written records prepared prior to delivery by
the disclosing Party); or
b. is or becomes publicly known through no wrongful act of the
receiving Party; or
c. is rightfully received from a third person having no direct
or indirect secrecy or confidentiality obligation to the
disclosing Party with respect to such information; or
d. is independently developed by an employee, agent, or
contractor of the receiving Party which individual is not
involved in any manner with the provision of services
pursuant to the Agreement and does not have any direct or
indirect access to the Proprietary information; or
e. is disclosed to a third person by the disclosing Party
without restrictions on such third person's rights; or
f. is approved for release by written authorization of the
disclosing Party; or
g. is required to be made public by the receiving Party
pursuant to applicable law or regulation provided that the
receiving Party shall give sufficient notice of the
requirement to the disclosing Party to enable the disclosing
Party to seek protective orders where possible.
h. Effective Date Of This Section. Notwithstanding any other
provision of this Agreement, the Proprietary Information
provisions of this Agreement shall apply to all information
furnished by either Party to the other in furtherance of the
purpose of this Agreement, even if furnished before the date
of this Agreement.
P. Survival.
The Parties' obligations under this Agreement which by their nature
are intended to continue beyond the termination or expiration of this
Agreement shall survive the termination or expiration of this
Agreement.
Q. Dispute Resolution.
If any claim, controversy or dispute between the Parties, their
agents, employees, officers, directors or affiliated agents
("Dispute") cannot be settled through negotiation, it shall be
resolved by arbitration conducted by a single arbitrator engaged in
the practice of law, under the then current rules of the American
Arbitration Association ("AAA"). The Federal Arbitration Act, 9
U.S.C. Secs. 1-16, not state law, shall govern the arbitrability of
all Disputes. The arbitrator shall not have authority to award
punitive damages. All expedited procedures prescribed by the AAA rules
shall apply. The arbitrator's award shall be final and binding and may
be entered in any court having jurisdiction thereof. The prevailing
Party, as determined by the arbitrator, shall be entitled to an award
of reasonable attorneys' fees and costs. The arbitration shall occur
in Denver, Colorado. Nothing in this Section shall be construed to
waive or limit either Party's right to seek relief from the Commission
or the Federal Communications Commission as provided by state or
federal law.
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No Dispute, regardless of the form of action, arising out of this
Agreement, may be brought by either Party more than two (2) years
after the cause of action accrues.
R. Controlling Law.
This Agreement was negotiated by the Parties in accordance with
the terms of the Act and the laws of the state where service is
provided hereunder. It shall be interpreted solely in accordance
with the terms of the Act and the applicable state law in the
state where the service is provided.
S. Joint Work Product.
This Agreement is the joint work product of the Parties and has
been negotiated by the Parties and their respective counsel and
shall be fairly interpreted in accordance with its terms and, in
the event of any ambiguities, no inferences shall be drawn
against either Party.
T. Notices.
Any notices required by or concerning this Agreement shall be
sent to the Parties at the addresses shown below:
USWC RESELLER
---- --------
U S WEST Communications, Inc. OnePoint Communications -
Lori Simpson Colorado, L.L.C.
Director-Interconnection Compliance Steve Renne
150 South 5/th/ Street 14001 East Iliff Avenue
Room 2800 Suite 320
Minneapolis, Minnesota 55402 Aurora, Colorado 80014-1426
612-663-3425 (phone) 303-306-4300 (phone)
612-663-3551 (fax) 303-306-4301 (fax)
Each Party shall inform the other of any changes in the above
addresses.
U. No Third-Party Beneficiaries.
Except as may be specifically set forth in this Agreement, this
Agreement does not provide and shall not be construed to provide
third parties with any remedy, claim, liability, reimbursement,
cause of action, or other privilege.
V. Publicity and Advertising.
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.
W. Amendment
Reseller and USWC may mutually agree to amend this Agreement in
writing. Since it is possible that amendments to this Agreement
may be needed to fully satisfy the purposes and objectives of
this Agreement, the Parties agree to work cooperatively, promptly
and in good faith to negotiate and implement any such additions,
changes and corrections to this Agreement.
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X. Executed in Counterparts
This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original; but such counterparts shall
together constitute one and the same instrument.
Y. Headings of No Force or Effect
The headings of Sections of this Agreement are for convenience of
reference only, and shall in no way define, modify or restrict the
meaning or interpretation of the terms of provisions of this
Agreement.
Z. Cooperation
The Parties agree that this Agreement involves the provision of USWC
services in ways such services were not previously available and the
introduction of new processes and procedures to provide and bill such
services. Accordingly, the Parties agree to work jointly and
cooperatively in testing and implementing processes for pre-ordering,
ordering, maintenance, provisioning and billing and in reasonably
resolving issues which result from such implementation on a timely
basis.
AA. Entire Agreement.
This Agreement constitutes the entire agreement between the Parties
and supersedes all prior oral or written agreements, representations,
statements, negotiations, understandings, proposals and undertakings
with respect to the subject matter hereof. This Agreement shall
prevail in the event of any conflict between the "Resale Resource
Guide" and the terms and conditions of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by their respective duly authorized representatives.
ONEPOINT COMMUNICATIONS-COLORADO, L.L.C. U S WEST COMMUNICATIONS, INC.
/s/ William F. Wallace /s/ [SIGNATURE ILLEGIBLE]^^
- -------------------------- ----------------------------------
Signature Signature
William F. Wallace For Katherine L. Fleming
- -------------------------- ----------------------------------
Name Printed/Typed Name Printed/Typed
President Executive Director-Interconnection
- -------------------------- ----------------------------------
Title Title
2/6/98 2/17/98
- -------------------------- ----------------------------------
Date Date
SIGNATURE DOES NOT WAIVE ANY RIGHTS OF EITHER PARTY TO SEEK
ADMINISTRATIVE/JUDICIAL REVIEW OF ALL OR PART OF THIS AGREEMENT OR TO REFORM
THIS AGREEMENT AS A RESULT OF SUCCESSFUL ADMINISTRATIVE/JUDICIAL REVIEW AND/OR
FUTURE SETTLEMENT AGREEMENTS BETWEEN THE PARTIES TO THIS AGREEMENT.
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APPENDIX A - ARIZONA
LOCAL EXCHANGE SERVICES
RESALE OF SERVICES
The Parties agree the following charges apply to the Resale of Local Services:
1. Nonrecurring Charges.
a. Customer Transfer Charge (CTC): The following nonrecurring charges
apply when converting a USWC account to a Reseller account or when
changing an end user from one reseller to another.
CATEGORY OF SERVICE USOC NONRECURRING CHARGE
. Residence $5.00 per line
. Business $5.00 per line
. ISDN $5.00 per line
b. Product Specific Nonrecurring Charge: As set forth in USWC tariffs, the
product specific nonrecurring charges, without discount, will apply when
additional lines or trunks are added or when the end user adds features or
services to existing lines or trunks.
2. Basic Residential Line service 12%, Basic Business Line Service 18%. Except
as qualified below, all other USWC telecommunications services shall be
available for resale at an 18% discount.
(a) The following services are not available for resale:
. Customer Premises Equipment (separately or in a package)
. Enhanced Services
. Inside Wire (including installation, sale or maintenance)
. USWC Calling Card
. Concession Service
. Promotions of less than 90 days
(b) The following services are available only to the same class of
customer eligible to purchase that service from USWC:
. Grandfathered
. Residence
. Lifeline/Link-up
(c) The following services are available for resale under this
Agreement but are not included in the wholesale pricing reflected
above:
. Public Access Lines . Private Line Used For Special Access
(c) IntraLATA Toll Charges: Reseller shall have the choice of
obtaining intraLATA toll resale at the contract toll rates listed
below without application of a further wholesale discount, at an 18%
discount or, in Arizona, not at all. Whichever toll discount Reseller
selects shall apply uniformly to all toll services resold by the
Reseller.
STATE: RATE PER MINUTE OF USE
----- ----------------------
Arizona $ .125
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APPENDIX B
DIRECTORY LISTINGS
1. Scope.
a. Reseller White Pages Listing Service ("Listings") consists of USWC placing
the names, addresses and telephone numbers of Reseller's end users in USWC's
listing database, based on end user information provided to USWC by Reseller.
USWC is authorized to use Listings in Directory Assistance (DA) and as noted in
1.D.i or 1.D.ii.
b. Reseller will provide in standard, format, and USWC will accept at no
charge, one primary listing for each main telephone number belonging to
Reseller's end users. Primary listings are as defined for USWC end users in
USWC's general exchange tariffs. Reseller will be charged for privacy listings
and premium listings, e.g., additional, foreign, cross reference, informational,
etc., at USWC's general exchange listing tariff rates minus the applicable
standard resale discount in each state.
c. USWC will furnish Reseller the Listings format specifications. USWC cannot
accept Listing with advance completion dates.
d. Reseller grants USWC a non-exclusive license to incorporate Listings
information into its directory assistance database. Reseller hereby selects one
of two options for USWC's use of Listings and dissemination of Listings to third
parties.
EITHER:
i. TREAT THE SAME AS USWC'S END USER LISTINGS -- NO PRIOR AUTHORIZATION is
needed for USWC to release Listings to directory publishers or other third
parties. USWC will incorporate Listings information in all existing and future
directory assistance applications developed by USWC. Reseller will authorize
USWC to sell and otherwise make Listings available to directory publishers
including USWC's publisher affiliate for inclusion in white pages published on
USWC's behalf. USWC shall be entitled to retain all revenue associated with any
such sales. Listings shall not be provided or sold in such a manner as to
segregate end users by carrier.
OR:
ii. RESTRICT TO USWC'S DIRECTORY ASSISTANCE -- PRIOR AUTHORIZATION REQUIRED BY
RESELLER FOR ALL OTHER USES. Reseller makes its own, separate agreements with
USWC, third parties and directory publishers for all uses of its listings beyond
D?. USWC will sell Listings to directory publishers (including USWC's publisher
affiliate for inclusion in white pages published on USWC's behalf), other third
parties and USWC products only after third party presents proof of Reseller's
authorization. USWC shall be entitled to retain all revenue associated with any
such sales. Listings shall not be provided or sold in such a manner as to
segregate end users by carrier.
- --------------------------------------------------------------------------------
RESELLER HEREBY SELECTS OPINION: I or II
- --------------------------------------------------------------------------------
e. To the extent that state tariffs limit USWC's liability with regard to
Listings, the applicable state tariff(s) is incorporated herein and supersedes
Section VII.G., "Limitation of Liability", of this Agreement with respect to
Listings only.
2. USWC Responsibilities.
USWC is responsible for maintaining Listings, including entering, changing,
correcting, rearranging and removing Listings in accordance with Reseller
orders. USWC will take reasonable steps in accordance with industry practices to
accommodate non-published and non-
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listed listings provided that Reseller has supplied USWC the necessary privacy
indicators on such Listings.
USWC will include Reseller's Listings in USWC's Directory Assistance service to
ensure that callers to USWC's Directory Assistance service have
non-discriminatory access to Reseller's Listings.
USWC will incorporate Reseller's Listings provided to USWC in the white pages
directory published on USWC's behalf, in accordance with Reseller's selection
under Section 1.d. above.
3. Reseller Responsibilities.
a. Reseller agrees to provide to USWC its end user names, addresses and
telephone numbers in a standard format, as specified by USWC.
b. Reseller will supply its ACNA/CIC or CLCC/OCN, as appropriate, with each
order to provide USWC the means of identifying Listings ownership.
c. Reseller represents and warrants the end user information provided to USWC
is accurate and correct. Reseller further represents and warrants that it has
reviewed all Listings provided to USWC, including end user requested
restrictions on use such as non-published and non-listed. Reseller shall be
solely responsible for knowing and adhering to state laws or rulings regarding
Listings (e.g., no solicitation requirements in the states of Arizona and
Oregon, privacy requirements in Colorado), and for supplying USWC the applicable
Listing Information.
d. Reseller is responsible for all dealings with and on behalf of Reseller's
end uses, including:
i. All end user account activity, e.g., end user queries and complaints.
ii. All account maintenance activity, e.g., additions, changes, issuance of
orders for Listings to USWC.
iii. Determining privacy requirements and accurately coding the privacy
indicators for Reseller's end user information. If end user information provided
by Reseller to USWC does not contain a privacy indicator, no privacy
restrictions will apply.
iv. Any additional services requested by Reseller's end users.
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APPENDIX C
ACCESS TO OPERATIONAL SUPPORT SYSTEMS (OSS)
USWC is developing a proposal for access to its Operational Support
Systems(OSS) to meet the requirements of the FCC's 1st and 2nd Orders and to
provide Reseller with electronic interfaces for pre-ordering, ordering,
demand repairs and billing functions for Plain Old Telephone Services (POTS).
These interfaces will also have the necessary mediation to protect the
integrity of the network as well as allay any privacy concerns for end user
information. The components described in this section are conceptual in
nature and will be subject to changes as the implementation process proceeds.
There will be charges associated with the introduction of the interface and
ongoing access to OSS operations which will include an initial access fee
and an ongoing charge as described more fully below.
C.1 Operational Systems Interfaces - Interface Implementation Timetable
USWC's initial operational systems interfaces have been deployed and will
support Pre-ordering, Ordering, Provisioning and Repair capabilities for
POTS (non-design) services and Billing capabilities for most USWC product
offerings. Subsequent phases of the plan incorporate the capabilities to
support designed services for Pre-ordering, Ordering, Provisioning, and
Maintenance and Repair. The specific features and functions are not
discussed in this Agreement.
C.2 OSS Interface Design
C.2.1 USWC will develop OSS Interfaces using an electronic gateway
solution consistent with the design prescribed by the FCC, Docket
96-98, FCC 96-325, paragraph 527. These gateways will act as a
mediation or control point between Reseller's and USWC's
Operations Systems. Additionally, these gateways will provide
security for the interface, protecting the integrity of the USWC
network and its databases.
C.2.2 USWC proposes the use of the existing Electronic Data Interchange
("EDI") standard for the transmission of monthly local billing
information. EDI is an established standard under the auspices of
the American National Standards Institute/Accredited Standards
Committee (ANSI/ASC) X12 Committee. A proper subset of this
specification has been adopted by the Telecommunications Industry
Forum (TCIF) as the "811 Guidelines" specifically for the
purposes of telecommunications billing.
C.2.3 For the exchange of daily usage data, including third party
billed, collect, and card calls, USWC will use the Bellcore EMR
format for the records, using the Network Data Mover ("NDM"),
otherwise also known as the Connect:Direct method to transmit the
information to carriers.
C.3 Accessible OSS Functions
C.3.1 Pre-Ordering
"Pre-Ordering" refers to the set of activities whereby a
service representative dialogs with Reseller in order to obtain
service availability. In today's environment, the pre-order
process is performed in conjunction with placing an order.
Packaged as a separate activity, pre-order consists of the
following functions: verify an address, check service
availability, and return end user service information. USWC
will provide on-line capabilities to perform these functions.
These functions are described as follows.
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C.3.1.1 Address Verification
This transaction will verify the end user's address.
If the address does not match USWC records, the AVR
transaction will return "partial match" addresses and/or help
as appropriate to assist Reseller to properly identify the end
user's address for verification.
Once the address is verified, the AVR transaction will return
the valid address and the current status (working, non-
working, or pending out) and the date the status was posted
for each line at the address.
If USWC does not have a record of the address, Reseller will
have to contact USWC to input the record before the order can
be submitted.
Note:
C.3.1.1.1 No detailed facility information (i.e., cable pair) will be
returned as part of this transaction.
C.3.1.1.2 Rural addresses will not be supported.
C.3.1.1.3 The AVQ/AVR transaction attributes currently don't reflect the
attributes required to support the error scenarios.
C.3.1.2 Service Availability
This transaction will return the list of products and
services available for resale in the central office serving a
particular end user address. The USWC rates for the products
and services will also be returned, but the Reseller discount
will not be applied.
C.3.1.3 End User Service Information Request
Gives Reseller the ability to request a listing of services
and features USWC is currently providing to an end user and
the rates USWC is charging for such services.
C.3.1.4 View/Update Service Query/Service Request Response
Gives Reseller the ability to view or update an existing
Service Request (SR).
C.3.1.5 Store Service Request
This transaction allows an Reseller user to store a new or
existing SR.
This SR can be stored for the number of days specified in
USWC's methods and procedures before the SR must be submitted
to USWC as a Work Order.
USWC will store the SR on-line until the associated Work Order
is canceled by Reseller or completely by USWC.
C.3.2 Ordering
With the pre-ordering steps completed, the requisite
information will have been obtained from Reseller and the
initiation of a service order can being. Submitting a service
order will result in the provisioning and installation, if
necessary, of an end user's service. The functional set
required to order service is: open a service order, check
facility availability, reserve an appointment if technician
work is required in the field or at the end user's premises,
reserve a telephone number if appropriate, cancel a service
order, change a service order, send a firm order confirmation,
support for work order status queries, and send notification
of order completion.
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C.3.2.1 Facility Availability
For each new line requested, this transaction will indicate if
existing facilities are available or if new facilities are
required, and if a technician must be dispatched to provide
the facilities requested at the end user's address.
This transaction must be executed for any new line(s)
requested.
Note:
C.3.2.1.1 This transaction does not reserve facilities and does not
guarantee that facilities will be available when the work order
is submitted.
C.3.2.1.2 USWC will automatically execute this transaction as part of
order processing, any time a new line or transfer line is
requested.
C.3.2.2 Telephone Number Availability
Enables a telephone number (TN) to be assigned to a line.
Reseller will be able to accept the TN or exchange the TN for
two other TNs. If the end user requests a specific number or a
vanity number, Reseller must call the USWC Number Assignment
Center (NAC) and the request will be handled manually.
Reseller will not have direct access to the telephone number
assignment system.
C.3.2.3 Exchange Telephone Numbers/Response
Enables Reseller to exchange the TN returned by the Telephone
Number Availability Transaction for two more TNs. Reseller
must select one of the three TNs to proceed with the Work
Order.
C.3.2.4 Return Telephone Numbers
Enables Reseller to reject the TNs returned by the Telephone
Number Availability transaction and the TNs will be returned
to the pool.
C.3.2.5 Telephone Number Accept
Allows Reseller to reserve one telephone number returned by
the Telephone Number Availability transaction for a period of
one (1) day so that the end user can be informed of the TN(s)
prior to the actual submission of a Work Order. The Work Order
must be submitted before the TN expires, otherwise the TN will
be returned to the available pool of TNs.
C.3.2.6 Appointment Availability
Allows Reseller to select an appointment from a calender of
available appointments. Reseller will not have direct access
to the system but USWC will automatically execute this
transaction after the Work Order has been submitted and a
technician must be dispatched.
C.3.2.7 Appointment Reservation
Enables Reseller to reserve an available appointment after the
appointment availability calender had been returned to
Reseller by USWC. USWC will return a confirmation number.
C.3.2.8 Work Order/Firm Order Completion
The work order provides the information and actions required
for USWC to provision products, services and features. This
transaction will also be used to cancel and change existing
work orders. The information contained in a work order
identifies Reseller, the end user desired due date, the
service
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being requested, the order type (only change and migration to
Reseller), POA (Proof of Authorization), class of service,
telephone number and additional information needed to
successfully provision the requested service to the end user.
Once a work order is accepted by USWC, the assigned service
order number will be return to Reseller. This may not happen
in real time. Reseller can then use the service order number
to status the work order. Firm Order Confirmation means that
USWC has received the order and assigned an order number for
tracking. It does not mean that edits have been applied, so
errors may still exist on the order.
C.3.2.9 Status Query/Response
This transaction will allow Reseller to obtain the status of
a work order, USWC will return the current status, remarks
and due date for specified work order.
Note: This status request is issued by Reseller on demand.
Real Time Order Completion and Jeopardy Notification is not
proactively issued by USWC.
C.3.2.10 Order Completion Report
Provides Reseller with a daily (Monday - Saturday) report,
electronically, that identifies all work orders that were
completed by USWC on that date. This report is called the Co-
Provider Completion Report.
C.3.3 Repair
Repair functions allow Reseller to report trouble with
communications circuits and services provided by USWC. The
functions, processes and systems used in repair are based on
a Trouble Report (TR), which is an electronic document
maintained in one or more Operations Systems. A TR contains
information about the end user, the trouble, the status of
the work on the trouble and the results of the investigation
and resolution efforts. These business processes have been
summarized and will be made available to Reseller in the
following functional set: open a trouble report, cancel a
trouble report, send notification of status change and close
a trouble report.
C.3.3.1 Verify Request
This transaction will be used to verify vertical features the
end user currently owns. Technical discussions (e.g.,
Security) are currently ongoing within USWC as to how to
provide this capability.
C.3.3.2 Open Trouble Report
Gives Reseller the capability to open a TR with USWC.
C.3.3.3 Open Trouble Report Response
Gives Reseller the capability to the Open TR request and
contains information about the TR that Reseller needs to
track or to convey to Reseller's end user.
C.3.3.4 Completion Notification
Provides notification to Reseller that a TR has been closed
because the trouble was resolved.
Page 27
<PAGE>
C.3.3.5 Cancel Trouble Report Instruction
Allows Reseller to cancel a previous opened TR.
C.3.3.6 Status Change Notificaton
Provides Notification to Reseller that the status of a
previously opened TR has changed.
C.4 Billing Interfaces
USWC offers interfaces for the exchange of several types of billing data:
. Monthly Billing Information,
. Daily Usage Data,
. Local Account Maintenance Report,
. Centralized Message Distribution System (CMDS) messages,
. Routing of in-region intraLATA collect, calling card, and third
number billed messages.
C.4.1 Monthly Billing Information
Includes all connectivity charges, credits and adjustments
related to network elements and USWC-provided local service.
C.4.2 Daily Usage Data
The accumulated set of call information for a given day as
captured, or "recorded," by the network switches. USWC will
provide this data to Reseller with the same level of precision
and accuracy it provides itself. Such precision cannot and will
not exceed the current capabilities of the software in the
switches today.
C.4.3 Local Account Maintenance Report
The list of phone numbers to which the carrier is no longer
providing service since the last report.
C.4.4 Centralized Message Distribution System ("CMDS")
Distribution of CMDS messages for Reseller end users.
C.4.5 Routing of In-region IntraLATA Collect, Calling Card, and Third
Number Billed Messages
USWC will distribute in-region intraLATA collect, calling card,
and third number billed messages to Reseller and exchange with
other Co-Providers operating in region in a manner consistent
with existing inter-company processing agreements. Whenever the
daily usage information is transmitted to a carrier, it will
contain the records for these types of calls as well.
C.5 Compensation
C.5.1 Compensation for OSS access will consist of an initial access
fee which will be determined based on the specific access
engineered and implemented for Reseller and is a function of the
numbers of Reseller business office and repair service
representatives accessing the system. The fee will include costs
for hardware (if purchased through USWC), software (which must be
purchased through USWC), telecommunications links and labor
incurred to establish the interfaces to USWC's OSS for Reseller.
The costs will be substantiated by purchasing invoices for the
communications and computing hardware and software, and by time
reports for the labor expended in their design and
Page 28
<PAGE>
implementation. Labor will be billed at the prevailing rates for
contract labor for similar services.
C.5.2. The ongoing charge will be billed at a rate to be specified by the
Commission at the completion of an appropriate cost study hearing.
Page 29
<PAGE>
EXHIBIT 21.1
Subsidiaries of the Company
Name State of Organization
- ---- ---------------------
OnePoint Communications Holdings, LLC Delaware
OnePoint Communications-Georgia, LLC Delaware
OnePoint Communications-Illinois, LLC Delaware
OnePoint Communications-Colorado, LLC Delaware
VIC-RMTS-DC, LLC Delaware
<PAGE>
Exhibit 25.1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM T-1
Statement of Eligibility
Under the Trust Indenture Act of 1939
of a Corporation Designated to Act as
Trustee
Check if an Application to Determine
Eligibility of a Trustee Pursuant to Section
305(b)(2) _______________
HARRIS TRUST AND SAVINGS BANK
(Name of Trustee)
Illinois 23-1614034
(I.R.S. Employer
(State of Incorporation) Identification No.)
111 West Monroe Street, Chicago, Illinois 60603
(Address of principal executive offices)
Daniel G. Donovan, Harris Trust and Savings Bank,
111 West Monroe Street, Chicago, Illinois, 60603
312-461-2908
(Name, address and telephone number for agent for service)
OnePoint Communications Corp.
(Name of Obligor)
Delaware 36-4225811
(I.R.S. Employer
(State of Incorporation) Identification No.)
2201 Waukegan Road
Suite E200
Bannockburn, Illinois 60615
(Address of principal executive offices)
14 1/2% Senior Notes, due 2008, Series B
(Title of indenture securities)
<PAGE>
1. GENERAL INFORMATION. Furnish the following information as to the Trustee:
(a) Name and address of each examining or supervising authority to which
it is subject.
Commissioner of Banks and Trust Companies, State of Illinois,
Springfield, Illinois; Chicago Clearing House Association, 164
West Jackson Boulevard, Chicago, Illinois; Federal Deposit
Insurance Corporation, Washington, D.C.; The Board of Governors
of the Federal Reserve System,Washington, D.C.
(b) Whether it is authorized to exercise corporate trust powers.
Harris Trust and Savings Bank is authorized to exercise corporate
trust powers.
2. AFFILIATIONS WITH OBLIGOR. If the Obligor is an affiliate of the Trustee,
describe each such affiliation.
The Obligor is not an affiliate of the Trustee.
3. thru 15.
NO RESPONSE NECESSARY
16. LIST OF EXHIBITS.
1. A copy of the articles of association of the Trustee as now in effect
which includes the authority of the trustee to commence business and to
exercise corporate trust powers.
A copy of the Certificate of Merger dated April 1, 1972 between Harris
Trust and Savings Bank, HTS Bank and Harris Bankcorp, Inc. which
constitutes the articles of association of the Trustee as now in effect
and includes the authority of the Trustee to commence business and to
exercise corporate trust powers was filed in connection with the
Registration Statement of Louisville Gas and Electric Company, File No.
2-44295, and is incorporated herein by reference.
2. A copy of the existing by-laws of the Trustee.
A copy of the existing by-laws of the Trustee was filed in connection
with the Registration Statement of Commercial Federal Corporation, File
No. 333-20711, and is incorporated herein by reference.
3. The consents of the Trustee required by Section 321(b) of the Act.
(included as Exhibit A on page 2 of this statement)
4. A copy of the latest report of condition of the Trustee published
pursuant to law or the requirements of its supervising or examining
authority.
(included as Exhibit B on page 3 of this statement)
<PAGE>
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, the Trustee,
HARRIS TRUST AND SAVINGS BANK, a corporation organized and existing under the
laws of the State of Illinois, has duly caused this statement of eligibility to
be signed on its behalf by the undersigned, thereunto duly authorized, all in
the City of Chicago, and State of Illinois, on the 10th day of September, 1998.
Harris Trust and Savings Bank
By: /s/ DGDonovan
--------------------------
D. G. Donovan
Assistant Vice President
EXHIBIT A
The consents of the Trustee required by Section 321(b) of the Act.
Harris Trust and Savings Bank, as the Trustee herein named, hereby consents that
reports of examinations of said trustee by Federal and State authorities may be
furnished by such authorities to the Securities and Exchange Commission upon
request therefor.
Harris Trust and Savings Bank
By: /s/ DGDonovan
--------------------------
D.G. Donovan
Assistant Vice President
2
<PAGE>
EXHIBIT B
Attached is a true and correct copy of the statement of condition of Harris
Trust and Savings Bank as of March 31, 1998, as published in accordance with a
call made by the State Banking Authority and by the Federal Reserve Bank of the
Seventh Reserve District.
[LOGO] HARRIS BANK
Harris Trust and Savings Bank
111 West Monroe Street
Chicago, Illinois 60603
of Chicago, Illinois, And Foreign and Domestic Subsidiaries, at the close of
business on March 31, 1998, a state banking institution organized and operating
under the banking laws of this State and a member of the Federal Reserve System.
Published in accordance with a call made by the Commissioner of Banks and Trust
Companies of the State of Illinois and by the Federal Reserve Bank of this
District.
Bank's Transit Number 71000288
<TABLE>
<CAPTION>
THOUSANDS
ASSETS OF DOLLARS
<S> <C> <C>
Cash and balances due from depository institutions:
Non-interest bearing balances and currency and coin..................... $ 1,039,854
Interest bearing balances............................................... $ 290,921
Securities:....................................................................
a. Held-to-maturity securities $ 0
b. Available-for-sale securities $ 4,266,201
Federal funds sold and securities purchased under agreements to resell $ 82,000
Loans and lease financing receivables:
Loans and leases, net of unearned income................................ $ 8,726,578
LESS: Allowance for loan and lease losses.............................. $ 101,318
-------------------
Loans and leases, net of unearned income, allowance, and reserve
(item 4.a minus 4.b).................................................... $ 8,625,260
Assets held in trading accounts................................................ $ 120,674
Premises and fixed assets (including capitalized leases)....................... $ 219,475
Other real estate owned........................................................ $ 699
Investments in unconsolidated subsidiaries and associated companies............ $ 120
Customer's liability to this bank on acceptances outstanding................... $ 46,688
Intangible assets.............................................................. $ 266,411
Other assets................................................................... $ 773,386
---------------------
TOTAL ASSETS $15,731,689
=====================
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
LIABILITIES
Deposits:
In domestic offices.......................................................... $ 8,270,648
Non-interest bearing.................................................... $2,684,862
Interest bearing........................................................ $5,585,786
In foreign offices, Edge and Agreement subsidiaries, and IBF's............... $ 1,307,928
Non-interest bearing.................................................... $ 23,432
Interest bearing........................................................ $1,284,496
Federal funds purchased and securities sold under agreements to repurchase in
domestic offices of the bank and of its Edge and Agreement subsidiaries, and
in IBF's:
Federal funds purchased & securities sold under agreements to repurchase....... $ 3,599,510
Trading Liabilities 74,487
Other borrowed money:..........................................................
a. With remaining maturity of one year or less $ 471,692
b. With remaining maturity of more than one year $ 0
Bank's liability on acceptances executed and outstanding $ 46,688
Subordinated notes and debentures.............................................. $ 325,000
Other liabilities.............................................................. $ 386,442
--------------------------
TOTAL LIABILITIES $14,482,395
==========================
EQUITY CAPITAL
Common stock................................................................... $ 100,000
Surplus........................................................................ $ 601,026
a. Undivided profits and capital reserves..................................... $ 545,185
b. Net unrealized holding gains (losses) on available-for-sale securities $ 2,802
--------------------------
TOTAL EQUITY CAPITAL $ 1,249,294
==========================
Total liabilities, limited-life preferred stock, and equity capital............ $15,731,689
==========================
</TABLE>
I, Pamela Piarowski, Vice President of the above-named bank, do hereby
declare that this Report of Condition has been prepared in conformance with the
instructions issued by the Board of Governors of the Federal Reserve System and
is true to the best of my knowledge and belief.
PAMELA PIAROWSKI
1/30/98
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us and, to the best of our
knowledge and belief, has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and the
Commissioner of Banks and Trust Companies of the State of Illinois and is true
and correct.
EDWARD W. LYMAN,
ALAN G. McNALLY,
RICHARD E. TERRY
Directors.
4
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial information extracted from
THE CONSOLIDATED STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 1998
AND BY THE CONSOLIDATED BALANCE SHEET AS OF JUNE 30, 1998 and is qualified in
its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 562
<SECURITIES> 161,622
<RECEIVABLES> 980
<ALLOWANCES> 30
<INVENTORY> 0
<CURRENT-ASSETS> 84,297
<PP&E> 4,424
<DEPRECIATION> 493
<TOTAL-ASSETS> 186,901
<CURRENT-LIABILITIES> 9,227
<BONDS> 175,000
0
35
<COMMON> 10
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 186,901
<SALES> 675
<TOTAL-REVENUES> 675
<CGS> 1,906
<TOTAL-COSTS> 8,865
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,391
<INCOME-PRETAX> (14,279)
<INCOME-TAX> 0
<INCOME-CONTINUING> (14,279)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (14,279)
<EPS-PRIMARY> (14.28)
<EPS-DILUTED> (14.28)
</TABLE>
<PAGE>
EXHIBIT 99.1
LETTER OF TRANSMITTAL
TO TENDER FOR EXCHANGE
14 1/2% SENIOR NOTES DUE 2008
OF
ONEPOINT COMMUNICATIONS CORP.
PURSUANT TO THE PROSPECTUS DATED , 1998
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
, 1998, UNLESS EXTENDED.
TO: HARRIS TRUST AND SAVINGS BANK
HARRIS TRUST AND SAVINGS BANK, DEPOSITARY
C/O HARRIS TRUST COMPANY OF NEW YORK
By Mail: Overnight Courier:
Wall Street Station 77 Water Street, 4th Floor
P.O. Box 1023 New York, NY 10005
New York, NY 10268-1023 Attention: Reorganization Dept.
Attention: Reorganization Dept.
Facsimile Transmission:
By Hand: (for Eligible Institutions Only)
Receive Window (212) 701-7636 or 7637
77 Water Street, 5th Floor
New York, NY 10005
Attention: Reorganization Dept.
Confirm by Telephone:
(212) 701-7649
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE OR TRANSMISSION OF THIS LETTER OF TRANSMITTAL VIA A FACSIMILE NUMBER
OTHER THAN THE ONE LISTED ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
The undersigned acknowledges receipt of the Prospectus, dated ,
1998 (as it may be supplemented and amended from time to time, the
"Prospectus") of OnePoint Communications Corp., a Delaware corporation (the
"Company") and this Letter of Transmittal (the "Letter of Transmittal"), that
together describe the Company's offer (the "Exchange Offer") to exchange
$1,000 principal amount of its 14 1/2% Senior Notes due 2008, Series B (the
"Exchange Notes"), which have been registered under the Securities Act of
1933, as amended (the "Securities Act"), pursuant to a Registration Statement,
for each $1,000 principal amount of its outstanding 14 1/2% Senior Notes due
2008, Series A (the "Notes"), of which $175,000,000 principal amount is
outstanding. The term "Expiration Date" shall mean 5:00 p.m., New York City
time, on , 1998, unless the Company, in its sole discretion,
extends the Exchange Offer, in which case the term shall mean the latest date
and time to which the Exchange Offer is extended. The term "Holder" with
respect to the Exchange Offer means any person in whose name Notes are
registered on the books of the Company or any other person who has obtained a
properly completed bond power from the registered holder. Capitalized terms
used but not defined herein have the respective meanings set forth in the
Prospectus.
This Letter of Transmittal is to be used by holders of Notes if (i)
certificates representing the Notes are to be physically delivered to the
Exchange Agent herewith, (ii) tender of the Notes is to be made by book-entry
transfer to the Exchange Agent's account at The Depository Trust Company (the
"Book-Entry Transfer Facility") pursuant to the procedures set forth in the
Prospectus under the caption "The Exchange Offer--Procedures for Tendering" by
any financial institution that is a participant in the Book-Entry Transfer
Facility and whose name appears on a security position listing as the owner of
Notes
<PAGE>
to the extent provided herein or (iii) tender of the Notes is to be made
according to the guaranteed delivery procedures described in the Prospectus
under the caption "The Exchange Offer--Guaranteed Delivery Procedures." See
Instruction 2. Delivery of documents to the Book-Entry Transfer Facility does
not constitute delivery to the Exchange Agent.
Notwithstanding the foregoing, valid acceptance of the terms of the Exchange
Offer may be effected by a participant in the Book-Entry Transfer Facility
tendering Notes through the Book-Entry Transfer Facility's Automated Tender
Offer Program ("ATOP") where the Exchange Agent receives an Agent's Message
prior to the Expiration Date. Accordingly, such participant must electronically
transmit its acceptance to the Book-Entry Transfer Facility through ATOP, and
then the Book-Entry Transfer Facility will edit and verify the acceptance,
execute a book-entry delivery to the Exchange Agent's account at the Book-Entry
Transfer Facility and send an Agent's Message to the Exchange Agent for its
acceptance. By tendering through ATOP, participants in the Book-Entry Transfer
Facility will expressly acknowledge receipt of this Letter of Transmittal and
agree to be bound by its terms and the Company will be able to enforce such
agreement against such Book-Entry Transfer Facility participants.
The undersigned has completed, executed and delivered this Letter of
Transmittal to indicate the action the undersigned desires to take with respect
to the Exchange Offer. Holders who wish to tender their Notes must complete
this letter in its entirety.
[_]CHECK HERE IF TENDERED NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER MADE
TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE BOOK-ENTRY TRANSFER
FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution: _____________________________________________
Account Number: ____________________________________________________________
Transaction Code Number: ___________________________________________________
Principal Amount of Tendered Notes: ________________________________________
If Holders desire to tender Notes pursuant to the Exchange Offer and (i) time
will not permit this Letter of Transmittal, certificates representing Notes, an
Agent's Message or other required documents to reach the Exchange Agent prior
to the Expiration Date, or (ii) the procedures for book-entry transfer cannot
be completed prior to the Expiration Date, such Holders may effect a tender of
such Notes in accordance with the guaranteed delivery procedures set forth in
the Prospectus under the caption "The Exchange Offer--Guaranteed Delivery
Procedures." See Instruction 2 below.
[_]CHECK HERE IF TENDERED NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY DELIVERED TO THE EXCHANGE AGENT AND COMPLETE THE
FOLLOWING (SEE INSTRUCTION 2):
Name of Registered or Acting Holder(s): ____________________________________
Window Ticket No. (if any): ________________________________________________
Date of Execution of Notice of Guaranteed Delivery: ________________________
Name of Eligible Institution
that Guaranteed Delivery: __________________________________________________
If Delivered by Book-Entry Transfer,
the Account Number: ________________________________________________________
Transaction Code Number: ___________________________________________________
[_]CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO.
2
<PAGE>
PLEASE NOTE: THE COMPANY HAS AGREED THAT, FOR A PERIOD OF 180 DAYS AFTER
THE EXPIRATION DATE, IT WILL MAKE COPIES OF THE PROSPECTUS AVAILABLE TO ANY
PARTICIPATING BROKER-DEALER FOR USE IN CONNECTION WITH RESALES OF THE
EXCHANGE NOTES.
Name: ______________________________________________________________________
Address: ___________________________________________________________________
----------------------------------------------------------------------------
Attention: _________________________________________________________________
List below the Notes to which this Letter of Transmittal relates. If the
space provided below is inadequate, the certificate numbers and principal
amount of Notes should be listed on a separate signed schedule affixed hereto.
PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL CAREFULLY BEFORE COMPLETING
BOX 1
DESCRIPTION OF NOTES
<TABLE>
- ------------------------------------------------------------------------------------
<CAPTION>
PRINCIPAL AMOUNT
NAME(S) AND ADDRESS(ES) OF AGGREGATE PRINCIPAL TENDERED (MUST BE
REGISTERED HOLDER(S) CERTIFICATE AMOUNT REPRESENTED AN INTEGRAL MULTIPLE
(PLEASE FILL IN, IF BLANK) NUMBER(S)* BY CERTIFICATE(S) OF $1,000)**
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------
TOTAL
- ------------------------------------------------------------------------------------
</TABLE>
* Need not be completed by Holders tendering by book-entry transfer.
** Unless indicated in the column labeled "Principal Amount Tendered," any
tendering Holder of Notes will be deemed to have tendered the entire
aggregate principal amount represented by the column labeled "Aggregate
Principal Amount Represented by Certificate(s)." If the space provided
above is inadequate, list the certificate numbers and principal amounts on
a separate signed schedule and affix the list to this Letter of
Transmittal.
The minimum permitted tender is $1,000 in principal amount of Notes. All
other tenders must be in integral multiples of $1,000.
3
<PAGE>
BOX 2 BOX 3
SPECIAL REGISTRATION SPECIAL DELIVERY
INSTRUCTIONS INSTRUCTIONS
(See Instructions 4, 5 and 6)
(See Instructions 4, 5 and 6)
To be completed ONLY if To be completed ONLY if
certificates for Notes in a certificates for Notes in a
principal amount not tendered, or principal amount not tendered, or
Exchange Notes issued in exchange Exchange Notes issued in exchange
for Notes accepted for exchange, are for Notes accepted for exchange, are
to be issued in a name other than to be sent to an address other than
the name appearing in Box 1 above. the address appearing in Box 1
above, or if Box 2 is filled in, to
an address other than the address
appearing in Box 2.
Issue certificate(s) to:
Name ________________________________
(Please Print)
Deliver certificate(s) to:
Address _____________________________
------------------------------------- Name ________________________________
(Include Zip Code) (Please Print)
------------------------------------- Address _____________________________
(Tax Identification or Social Security -------------------------------------
Number) (Include Zip Code)
-------------------------------------
(Tax Identification or Social
Security Number)
BOX 4
BROKER-DEALER STATUS
[_] Check this box if the Beneficial Owner of the Notes is a Participating
Broker-Dealer and such Participating Broker-Dealer acquired the Notes for
its own account as a result of market-making activities or other trading
activities. IF THIS BOX IS CHECKED, A COPY OF THIS LETTER OF TRANSMITTAL
MUST BE RECEIVED WITHIN FIVE BUSINESS DAYS AFTER THE EXPIRATION DATE BY
ONEPOINT COMMUNICATIONS CORP., ATTENTION JOHN D. STAVIG, VIA FACSIMILE
(847) 374-1070.
4
<PAGE>
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
Subject to the terms and conditions of the Exchange Offer, the undersigned
hereby tenders to the Company the principal amount of Notes indicated above.
Subject to and effective upon the acceptance for exchange of the principal
amount of Notes tendered in accordance with this Letter of Transmittal, the
undersigned sells, assigns and transfers to, or upon the order of, the Company
all right, title and interest in and to the Notes tendered hereby. The
undersigned hereby irrevocably constitutes and appoints the Exchange Agent its
agent and attorney-in-fact (with full knowledge that the Exchange Agent also
acts as the agent of the Company) with respect to the tendered Notes with the
full power of substitution to (i) present such Notes and all evidences of
transfer and authenticity to, or transfer ownership of, such Notes on the
account books maintained by the Book-Entry Transfer Facility to, or upon, the
order of, the Company, (ii) deliver certificates for such Notes to the Company
and deliver all accompanying evidences of transfer and authenticity to, or
upon the order of, the Company and (iii) present such Notes for transfer on
the books of the Company and receive all benefits and otherwise exercise all
rights of beneficial ownership of such Notes, all in accordance with the terms
of the Exchange Offer.
The undersigned hereby represents and warrants that the undersigned has full
power and authority to tender, sell, assign and transfer the Notes tendered
hereby and that the Company will acquire good, valid and unencumbered title
thereto, free and clear of all liens, restrictions, charges and encumbrances
and not subject to any adverse claims, when the same are acquired by the
Company. The undersigned hereby further represents that any Exchange Notes
acquired in exchange for Notes tendered hereby will have been acquired in the
ordinary course of business of the person receiving such Exchange Notes,
whether or not such person is the undersigned, that neither the undersigned
nor any other such person has any arrangement or understanding with any person
to participate in the distribution of such Exchange Notes and that neither the
undersigned nor any such other person is an "affiliate," as defined in Rule
405 under the Securities Act, of the Company or any of the Subsidiary
Guarantors. In addition, the undersigned and any such person acknowledge that
(a) any person participating in the Exchange Offer for the purpose of
distributing the Exchange Notes must, in the absence of an exemption
therefrom, comply with the registration and prospectus delivery requirements
of the Securities Act in connection with a secondary resale of the Exchange
Notes and cannot rely on the position of the staff of the Securities and
Exchange Commission enunciated in no-action letters and (b) failure to comply
with such requirements in such instance could result in the undersigned or
such person incurring liability under the Securities Act for which the
undersigned or such person is not indemnified by the Company. The undersigned
will, upon request, execute and deliver any additional documents deemed by the
Exchange Agent or the Company to be necessary or desirable to complete the
assignment, transfer and purchase of the Notes tendered hereby. If the
undersigned is not a broker-dealer, the undersigned represents that it is not
engaged in and does not intend to engage in, a distribution of Exchange Notes.
If the undersigned is a broker-dealer that will receive Exchange Notes for its
own account in exchange for Notes that were acquired as a result of market-
making activities or other trading activities, it acknowledges that it will
deliver a Prospectus in connection with any resale of such Exchange Notes,
however, by so acknowledging and by delivering a Prospectus, the undersigned
will not be deemed to admit that it is an "underwriter" within the meaning of
the Securities Act. Unless otherwise notified in accordance with the
instructions set forth herein in Box 4 under "Broker-Dealer Status," the
Company will assume that the undersigned is not a Participating Broker-Dealer.
For purposes of the Exchange Offer, the Company shall be deemed to have
accepted validly tendered Notes when, as and if the Company has given notice
thereof to the Exchange Agent.
If any Notes tendered herewith are not accepted for exchange pursuant to the
Exchange Offer for any reason, certificates for any such unaccepted Notes will
be returned, without expense, to the undersigned at the address shown below or
to a different address as may be indicated herein in Box 3 under "Special
Delivery Instructions" as promptly as practicable after the Expiration Date.
All authority conferred or agreed to be conferred by this Letter of
Transmittal shall survive the death, incapacity or dissolution of the
undersigned, and every obligation of the undersigned under this Letter of
Transmittal shall be binding upon the undersigned's heirs, personal
representative, successors and assigns.
5
<PAGE>
The undersigned understands that tenders of Notes pursuant to the procedures
described under the caption "The Exchange Offer--Procedures for Tendering" in
the Prospectus and in the instructions hereto will constitute a binding
agreement between the undersigned and the Company upon the terms and subject
to the conditions of the Exchange Offer, subject only to withdrawal of such
tenders on the terms set forth in the Prospectus under the caption "The
Exchange Offer--Withdrawal of Tenders."
Unless otherwise indicated in Box 2 under "Special Registration
Instructions," please issue the certificates representing the Exchange Notes
issued in exchange for the Notes accepted for exchange and any certificates
for Notes not tendered or not exchanged, in the name(s) of the registered
holder of the Notes appearing in Box 1 above. Similarly, unless otherwise
indicated in Box 3 under "Special Delivery Instructions," please send the
certificates, if any, representing the Exchange Notes issued in exchange for
the Notes accepted for exchange and any certificates for Notes not tendered or
not exchanged (and accompanying documents, as appropriate) to the undersigned
at the address shown below in the undersigned's signature(s). In the event
that the box entitled "Special Registration Instructions" and the box entitled
"Special Delivery Instructions" both are completed, please issue the
certificates representing the Exchange Notes issued in exchange for the Notes
accepted for exchange in the name(s) of, and return any certificates for Notes
not tendered or not exchanged to, the person(s) so indicated. The undersigned
understands that the Company has no obligation pursuant to the "Special
Registration Instructions" and "Special Delivery Instructions" to transfer any
Notes from the name of the registered Holder(s) thereof if the Company does
not accept for exchange any of the Notes so tendered.
Holders who wish to tender their Notes and (i) whose Notes are not
immediately available or (ii) who cannot deliver the Notes, an Agent's
Message, this Letter of Transmittal or any other documents required hereby to
the Exchange Agent prior to the Expiration Date, may tender their Notes
according to the guaranteed delivery procedures set forth in the Prospectus
under the caption "The Exchange Offer--Guaranteed Delivery Procedures." See
Instruction 2.
The lines below must be signed by the registered holder(s) exactly as their
name(s) appear(s) on the Notes or by person(s) authorized to become registered
holder(s) by a properly completed bond power from the registered holder(s), a
copy of which must be transmitted with this Letter of Transmittal. If Notes to
which this Letter of Transmittal relate are held of record by two or more
joint holders, then all such holders must sign this Letter of Transmittal.
SIGNATURES
x
------------------------------------------------------- -------------------
Date
x
------------------------------------------------------- -------------------
Date
Area Code and Telephone Number: _______________________
If signature is by a trustee, executor, administrator, guardian, attorney-
in-fact, officer of a corporation or other person acting in a fiduciary or
representative capacity, then such person must (i) set forth his or her full
title below and (ii) submit evidence satisfactory to the Company of such
person's authority so to act. See Instruction 5.
Name(s): _____________________________________________________________________
(Please Print)
Capacity: ____________________________________________________________________
Address: _____________________________________________________________________
(Include Zip Code)
6
<PAGE>
MEDALLION SIGNATURE GUARANTEE
(If required by Instruction 5)
Certain Signatures must be Guaranteed by an Eligible Institution
Signature(s) Guaranteed by an Eligible Institution: _________________________
(Authorized Signature)
------------------------------------------------------------------------------
(Title)
------------------------------------------------------------------------------
(Name of Firm)
------------------------------------------------------------------------------
(Address, Include Zip Code)
------------------------------------------------------------------------------
(Area Code and Telephone Number)
Dated ________________________________________________________________________
7
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS
OF THE EXCHANGE OFFER
1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND CERTIFICATES FOR NOTES OR
BOOK-ENTRY CONFIRMATIONS. Certificates representing the tendered Notes (or a
confirmation of book-entry transfer of such Notes into the Exchange Agent's
account with the Book-Entry Transfer Facility), as well as a properly
completed and duly executed copy of this Letter of Transmittal (or, in the
case of a book-entry transfer, an Agent's Message), a Substitute Form W-9 and
any other documents required by this Letter of Transmittal must be received by
the Exchange Agent at its address set forth herein prior to the Expiration
Date. The method of delivery of certificates for Notes and all other required
documents is at the election and sole risk of the tendering holder and
delivery will be deemed made only when actually received by the Exchange
Agent. If delivery is by mail, registered mail with return receipt requested,
properly insured, is recommended. As an alternative to delivery by mail, the
holder may wish to use an overnight or hand delivery service. In all cases,
sufficient time should be allowed to assure timely delivery. Neither the
Company nor the Exchange Agent is under an obligation to notify any tendering
holder of the Company's acceptance of tendered Notes prior to the completion
of the Exchange Offer.
2. GUARANTEED DELIVERY PROCEDURES. Holders who wish to tender their Notes
but whose Notes are not immediately available and who cannot deliver their
certificates for Notes (or comply with the procedures for book-entry transfer
prior to the Expiration Date), the Letter of Transmittal and any other
documents required by the Letter of Transmittal to the Exchange Agent prior to
the Expiration Date must tender their Notes according to the guaranteed
delivery procedures set forth below. Pursuant to such procedures:
(i) such tender must be made by or through a firm which is a member of a
registered national securities exchange or of the National Association of
Securities Dealers, Inc., or a commercial bank or trust company having an
office or correspondent in the United States (an "Eligible Institution");
(ii) prior to the Expiration Date, the Exchange Agent must have received
from the holder and the Eligible Institution a properly completed and duly
executed Notice of Guaranteed Delivery (by facsimile transmission, mail, or
hand delivery) setting forth the name and address of the holder, the
certificate number or numbers of the tendered Notes, and the principal
amount of tendered Notes and stating that the tender is being made thereby
and guaranteeing that, within five New York Stock Exchange trading days
after the Expiration Date, the Letter of Transmittal (or facsimile thereof)
(or, in the case of a book-entry transfer, an Agent's Message), together
with the tendered Notes (or a confirmation of book-entry transfer of such
Notes into the Exchange Agent's account with the Book-Entry Transfer
Facility) and any other required documents will be deposited by the
Eligible Institution with the Exchange Agent; and
(iii) the certificates representing the tendered Notes in proper form for
transfer (or a confirmation of book-entry transfer of such Notes into the
Exchange Agent's account with the Book-Entry Transfer Facility), together
with this Letter of Transmittal (or facsimile thereof), properly completed
and duly executed, with any required signature guarantees (or, in the case
of a book-entry transfer, an Agent's Message) and all other documents
required by the Letter of Transmittal must be received by the Exchange
Agent within five New York Stock Exchange trading days after the Expiration
Date.
Failure to complete the guaranteed delivery procedures outlined above will
not, of itself, affect the validity or effect a revocation of any Letter of
Transmittal form properly completed and executed by a Holder who attempted to
use the guaranteed delivery procedure.
3. TENDER BY HOLDER. Only a registered holder of Notes may tender such Notes
in the Exchange Offer. Any beneficial owner of Notes who is not the registered
holder and who wishes to tender should arrange with such Holder to execute and
deliver this Letter of Transmittal on such owner's behalf or must, prior to
completing and executing this Letter of Transmittal and delivering such Notes,
either make appropriate arrangements to register ownership of the Notes in
such owner's name or obtain a properly completed bond power from the
registered holder.
4. PARTIAL TENDERS. Tenders of Notes will be accepted only in integral
multiples of $1,000 in principal amount. If less than the entire principal
amount of Notes is tendered, the tendering holder should fill in the principal
amount tendered in the column labeled "Principal Amount Tendered" of the box
entitled "Description of Notes" (Box 1) above. The entire
8
<PAGE>
principal amount of Notes delivered to the Exchange Agent will be deemed to
have been tendered unless otherwise indicated. If the entire principal amount
of Notes is not tendered, Notes for the principal amount of Notes not tendered
and Exchange Notes exchanged for any Notes tendered will be sent to the holder
at his or her registered address, unless a different address is provided in
the appropriate box on this Letter of Transmittal, as soon as practicable
following the Expiration Date.
5. SIGNATURES ON THE LETTER OF TRANSMITTAL; BOND POWERS AND ENDORSEMENTS;
MEDALLION GUARANTEE OF SIGNATURE. If this Letter of Transmittal is signed by
the registered holder(s) of the Notes tendered herewith, the signatures must
correspond with the name(s) as written on the face of the tendered Notes
without alteration, enlargement, or any change whatsoever.
If any of the tendered Notes are owned of record by two or more joint
owners, all such owners must sign this Letter of Transmittal. If any tendered
Notes are held in different names on several Notes, it will be necessary to
complete, sign, and submit as many separate copies of the Letter of
Transmittal documents as there are names in which tendered Notes are held.
If this Letter of Transmittal is signed by the registered holder, and
Exchange Notes are to be issued and any untendered or unaccepted principal
amount of Notes are to be reissued or returned to the registered holder, then,
the registered holder need not and should not endorse any tendered Notes nor
provide a separate bond power. In any other case, the registered holder must
either properly endorse the Notes tendered or transmit a properly completed
separate bond power with this Letter of Transmittal (executed exactly as the
name(s) of the registered holder(s) appear(s) on such Notes), with the
signature(s) on the endorsement or bond power guaranteed by an Eligible
Institution unless such certificates or bond powers are signed by an Eligible
Institution.
If this Letter of Transmittal or any Notes or bond powers are signed by
trustees, executors, administrators, guardians, attorneys-in-fact, officers of
corporations, or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing and evidence satisfactory to the
Company of their authority to so act must be submitted with this Letter of
Transmittal.
No medallion signature guarantee is required if this Letter of Transmittal
is signed by the registered holder(s) of the Notes tendered herewith and the
Exchange Notes (and any Notes not tendered or not accepted) are to be issued
directly to such registered holder(s) and neither the "Special Registration
Instructions" (Box 2) nor the "Special Delivery Instructions" (Box 3) has been
completed. In all other cases, all signatures on this Letter of Transmittal
must be guaranteed by an Eligible Institution.
6. SPECIAL REGISTRATION AND DELIVERY INSTRUCTIONS. Tendering holders should
indicate, in the applicable box, the name and address in which the Exchange
Notes and/or substitute Notes for principal amounts not tendered or not
accepted for exchange are to be sent, if different from the name and address
or account of the person signing this Letter of Transmittal. In the case of
issuance in a different name, the employer identification number or social
security number of the person named must also be indicated and the tendering
holders should complete the applicable box.
If no such instructions are given, the Exchange Notes (and any Notes not
tendered or not accepted) will be issued in the name of and sent to the
registered holder of the Notes.
7. TRANSFER TAXES. The Company will pay all transfer taxes, if any,
applicable to the sale and transfer of Notes to it or its order pursuant to
the Exchange Offer. If, however, a transfer tax is imposed for any reason
other than the transfer and sale of Notes to the Company or its order pursuant
to the Exchange Offer, then the amount of any such transfer taxes (whether
imposed on the registered holder or on any other person) will be payable by
the tendering holder. If satisfactory evidence of payment of such taxes or
exemption from taxes therefrom is not submitted with this Letter of
Transmittal, the amount of transfer taxes will be billed directly to such
tendering holder.
Except as provided in this Instruction 7, it will not be necessary for
transfer tax stamps to be affixed to the Notes listed in this Letter of
Transmittal.
9
<PAGE>
8. TAX IDENTIFICATION NUMBER. Federal income tax law requires that a holder
of any Notes which are accepted for exchange must provide the Company (as
payor) with its correct taxpayer identification number ("TIN"), which, in the
case of a holder who is an individual, is his or her social security number.
If the Company is not provided with the correct TIN, the Holder may be subject
to a $50 penalty imposed by Internal Revenue Service. (If withholding results
in an over-payment of taxes, a refund may be obtained.) Certain holders
(including, among other, all corporations and certain foreign individuals) are
not subject to these backup withholding and reporting requirements. See the
enclosed "Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9" for additional instructions.
To prevent backup withholding, each tendering holder must provide such
holder's correct TIN by completing the Substitute Form W-9 set forth herein,
certifying that the TIN provided is correct (or that such holder is awaiting a
TIN), and that (i) the holder has not been notified by the Internal Revenue
Service that such holder is subject to backup withholding as a result of
failure to report interest or dividends or (ii) the Internal Revenue Service
has notified the holder that such holder is no longer subject to backup
withholding. If the Notes are registered in more than one name or are not in
the name of the actual owner, see the enclosed "Guidelines for Certification
of Taxpayer Identification Number on Substitute Form W-9" for information on
which TIN to report.
The Company reserves the right in its sole discretion to take whatever steps
are necessary to comply with the Company's obligation regarding backup
withholding.
9. VALIDITY OF TENDERS. All questions as to the validity, form, eligibility
(including time of receipt), and acceptance of tendered Notes will be
determined by the Company, in its sole discretion, which determination will be
final and binding. The Company reserves the right to reject any and all Notes
not validly tendered or any Notes, the Company's acceptance of which would, in
the opinion of the Company or its counsel, be unlawful. The Company also
reserves the right to waive any conditions of the Exchange Offer or defects or
irregularities in tenders of Notes as to any ineligibility of any holder who
seeks to tender Notes in the Exchange Offer. The interpretation of the terms
and conditions of the Exchange Offer (including this Letter of Transmittal and
the instructions hereto) by the Company shall be final and binding on all
parties. Unless waived, any defects or irregularities in connection with
tenders of Notes must be cured within such time as the Company shall
determine. The Company will use reasonable efforts to give notification of
defects or irregularities with respect to tenders of Notes, but shall not
incur any liability for failure to give such notification.
10. WAIVER OF CONDITIONS. The Company reserves the absolute right to amend,
waive, or modify specified conditions in the Exchange Offer in the case of any
tendered Notes.
11. NO CONDITIONAL TENDER. No alternative, conditional, irregular, or
contingent tender of Notes will be accepted.
12. MUTILATED, LOST, STOLEN, OR DESTROYED NOTES. Any tendering holder whose
Notes have been mutilated, lost, stolen, or destroyed should contact the
Exchange Agent at the address indicated above for further instruction.
13. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Requests for information
and for additional copies of the Prospectus may be directed to the Exchange
Agent at the address set forth on the first page of this Letter of
Transmittal. Holders may also contact their broker, dealer, commercial bank,
trust company, or other nominee for assistance concerning the Exchange Offer.
14. ACCEPTANCE OF TENDERED NOTES AND ISSUANCE OF EXCHANGE NOTES; RETURN OF
NOTES. Subject to the terms and conditions of the Exchange Offer, the Company
will accept for exchange all validly tendered Notes as soon as practicable
after the Expiration Date and will issue Exchange Notes therefor as soon as
practicable thereafter. For purposes of the Exchange Offer, the Company shall
be deemed to have accepted tendered Notes when, as and if the Company has
given notice thereof to the Exchange Agent. If any tendered Notes are not
exchanged pursuant to the Exchange Offer for any reason, such unexchanged
Notes will be returned, without expense, to the undersigned at the address
shown above or at a different address as may be indicated under "Special
Delivery Instructions."
10
<PAGE>
15. WITHDRAWAL. Tenders may be withdrawn only pursuant to the limited
withdrawal rights set forth in the Prospectus under the caption "The Exchange
Offer--Withdrawal of Tenders."
PAYOR'S NAME: ONEPOINT COMMUNICATIONS CORP.
- -------------------------------------------------------------------------------
SUBSTITUTE PART 1--PLEASE PRO- Social Security
VIDE YOUR TAXPAYER Number
IDENTIFICATION NUMBER or TIN
("TIN") IN THE BOX AT / /
RIGHT AND CERTIFY BY
SIGNING AND DATING
BELOW.
FORM W-9
DEPARTMENT OF THE
TREASURY
---------------------------------------------------------
INTERNAL REVENUE
SERVICE PART 2--Check the box if you are NOT subject
to backup withholding under the provisions of
section 3408(a)(1)(C) of the Internal Revenue
Code because (1) you have not been notified
that you are subject to backup withholding as
a result of failure to report all interest or
dividends or (2) the Internal Revenue Service
has notified you that you are no longer
subject to backup withholding. [_]
PAYER'S REQUEST FOR
TAXPAYER
IDENTIFICATION
NUMBER (TIN)
---------------------------------------------------------
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP
WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE EXCHANGE
OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
CERTIFICATION--UNDER THE PENAL-
TIES OF PERJURY, I CERTIFY THAT
THE INFORMATION PROVIDED ON
THIS FORM IS TRUE, CORRECT AND PART 3--
COMPLETE.
Awaiting
Signature __________ Date ______ TIN g [_]
---------------------------------------------------------
Name (if joint names, list first and circle
the name of the person or entity whose number
you enter in Part I below. See instructions if
your name has changed.)
---------------------------------------------------------
Address
---------------------------------------------------------
City, State and ZIP Code
---------------------------------------------------------
List account number(s) here (optional)
11
<PAGE>
EXHIBIT 99.2
NOTICE OF GUARANTEED DELIVERY
WITH RESPECT TO
ONEPOINT COMMUNICATIONS CORP.
14 1/2% SENIOR NOTES DUE 2008
This form must be used by a holder of 14 1/2% Senior Notes due 2008 (the
"Notes") of OnePoint Communications Corp. (the "Company"), who wishes to
tender Notes to the Exchange Agent pursuant to the guaranteed delivery
procedures described in the section of the Prospectus entitled "The Exchange
Offer--Guaranteed Delivery Procedures," and in Instruction 2 to the related
Letter of Transmittal. Any holder who wishes to tender Notes pursuant to such
guaranteed delivery procedures must ensure that the Exchange Agent receives
this Notice of Guaranteed Delivery prior to the Expiration Date of the
Exchange Offer. Capitalized terms not defined herein have the meanings
ascribed to them in the Letter of Transmittal.
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
1998, UNLESS EXTENDED (THE "EXPIRATION DATE").
TO: HARRIS TRUST AND SAVINGS BANK
(THE "EXCHANGE AGENT")
HARRIS TRUST AND SAVINGS BANK, DEPOSITARY
C/O HARRIS TRUST COMPANY OF NEW YORK
By Mail: Overnight Courier:
Wall Street Station 77 Water Street, 4th Floor
P.O. Box 1023 New York, NY 10005
New York, NY 10268-1023 Attention: Reorganization Dept.
Attention: Reorganization Dept.
Facsimile Transmission:
By Hand: (for Eligible Institutions Only)
Receive Window (212) 701-7636 or 7637
77 Water Street, 5th Floor
New York, NY 10005
Attention: Reorganization Dept.
Confirm by Telephone:
(212) 701-7649
DELIVERY OF THIS FORM TO AN ADDRESS, OR TRANSMISSION VIA FACSIMILE, OTHER
THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE VALID DELIVERY.
This form is not to be used to guarantee signatures. If a signature on the
Letter of Transmittal is required to be guaranteed by an "Eligible
Institution" under the instructions thereto, such signature guarantee must
appear in the applicable space provided in the signature box on the Letter of
Transmittal.
<PAGE>
LADIES AND GENTLEMEN:
The undersigned hereby tenders to the Company, upon the terms and subject to
the conditions set forth in the Prospectus and the related Letter of
Transmittal, receipt of which is hereby acknowledged, the principal amount of
Notes set forth below pursuant to the guaranteed delivery procedures set forth
in the Prospectus and in Instruction 2 of the Letter of Transmittal.
The undersigned hereby tenders the Notes listed below:
<TABLE>
<CAPTION>
CERTIFICATE NUMBER(S) (IF KNOWN) OF NOTES
OR ACCOUNT AGGREGATE PRINCIPAL AGGREGATE PRINCIPAL
NUMBER AT THE BOOK-ENTRY FACILITY AMOUNT REPRESENTED AMOUNT TENDERED
<S> <C>
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
</TABLE>
PLEASE SIGN AND COMPLETE
- -------------------------------------------------------------------------------
Signatures of Registered Holder(s) Date: ________________________, 1998
or
Address: ___________________________
Authorized Signatory: ______________ ------------------------------------
------------------------------------ Area Code and Telephone No.: _______
------------------------------------
Name of Registered Holder(s): ______
------------------------------------
------------------------------------
This Notice of Guaranteed Delivery must be signed by the Holder(s) exactly
as their name(s) appear on certificates for Notes or on a security position
listing as the owner of Notes, or by person(s) authorized to become
Holder(s) by endorsements and documents transmitted with this Notice of
Guaranteed Delivery. If signature is by a trustee, executor, administrator,
guardian, attorney-in-fact, officer or other person acting in a fiduciary or
representative capacity, such person must provide the following information:
Please print name(s) and address(es)
Name(s): ____________________________________________________________________
-----------------------------------------------------------------------------
Capacity: ___________________________________________________________________
Address(es): ________________________________________________________________
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
2
<PAGE>
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a firm which is a member of a registered national
securities exchange or of the National Association of Securities Dealers,
Inc., or is a commercial bank or trust company having an office or
correspondent in the United States, or is otherwise an "eligible guarantor
institution" within the meaning of Rule 17Ad-15 under the Securities
Exchange Act of 1934, as amended, guarantees that either the Notes tendered
hereby in proper form for transfer (or confirmation of the book-entry
transfer of such Notes into the Exchange Agent's account at Book-Entry
Transfer Facility as described in the Prospectus under the caption "The
Exchange Offer--Guaranteed Delivery Procedures"), together with a properly
completed Letter of Transmittal (or facsimile thereof) (or, in the case of a
book-entry transfer, an Agent's Message) and any other required documents
will be received by the Exchange Agent by 5:00 p.m., New York City time, on
the third New York Stock Exchange trading day following the Expiration Date.
Name of Firm: ______________________ ------------------------------------
Address: ___________________________ Authorized Signature
------------------------------------ Name: ______________________________
Area Code and Telephone No.: _______ Title: _____________________________
Date: _______________________ , 1998
- --------------------------------------------------------------------------------
DO NOT SEND NOTES WITH THIS FORM. ACTUAL SURRENDER OF NOTES MUST BE MADE
PURSUANT TO, AND BE ACCOMPANIED BY, AN EXECUTED LETTER OF TRANSMITTAL.
3
<PAGE>
INSTRUCTIONS FOR NOTICE OF GUARANTEED DELIVERY
1. Delivery of this Notice of Guaranteed Delivery. A properly completed and
duly executed copy of this Notice of Guaranteed Delivery and any other
documents required by this Notice of Guaranteed Delivery must be received by
the Exchange Agent at its address set forth herein prior to the Expiration
Date. The method of delivery of this Notice of Guaranteed Delivery and any
other required documents to the Exchange Agent is at the election and sole
risk of the holder, and the delivery will be deemed made only when actually
received by the Exchange Agent. If delivery is by mail, registered mail with
return receipt requested, properly insured, is recommended. As an alternative
to delivery by mail, the holders may wish to consider using an overnight or
hand delivery service. In all cases, sufficient time should be allowed to
assure timely delivery. For a description of the guaranteed delivery
procedures, see Instruction 2 of the Letter of Transmittal.
2. Signatures on this Notice of Guaranteed Delivery. If this Notice of
Guaranteed Delivery is signed by the registered holder(s) of the Notes
referred to herein, the signature must correspond with the name(s) written on
the face of the Notes without alteration, enlargement, or any change
whatsoever. If this Notice of Guaranteed Delivery is signed by a participant
of the Book-Entry Transfer Facility whose name appears on a security position
listing as the owner of Notes, the signature must correspond with the name
shown on the security position listing as the owner of the Notes.
If this Notice of Guaranteed Delivery is signed by a person other than the
registered holder(s) of any Notes listed or a participant of the Book-Entry
Transfer Facility, this Notice of Guaranteed Delivery must be accompanied by
appropriate bond powers, signed as the name of the registered holder(s)
appears on the Notes or signed as the name of the participant shown on the
Book-Entry Transfer Facility's security position listing.
If this Notice of Guaranteed Delivery is signed by a trustee, executor,
administrator, guardian, attorney-in-fact, officer of a corporation, or other
person acting in a fiduciary or representative capacity, such person should so
indicate when signing and submit with the Letter of Transmittal evidence
satisfactory to the Company of such person's authority to so act.
3. Requests for Assistance or Additional Copies. Requests for information
and additional copies of the Prospectus may be directed to the Exchange Agent
at the address set forth on the first page of this Notice of Guaranteed
Delivery. Holders may also contact their broker, dealer, commercial bank,
trust company, or other nominee for assistance concerning the Exchange Offer.
4
<PAGE>
EXHIBIT 99.3
INSTRUCTIONS TO REGISTERED HOLDER AND/OR
BOOK-ENTRY TRANSFER FACILITY PARTICIPANT FROM BENEFICIAL OWNER
OF
ONEPOINT COMMUNICATIONS CORP.
14 1/2% SENIOR NOTES DUE 2008
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
1998, UNLESS EXTENDED (THE "EXPIRATION DATE").
To Registered Holder and/or Participant of the Book-Entry Transfer Facility:
The undersigned hereby acknowledges receipt of the Prospectus, dated
,1998 (as amended or supplemented from time to time, the "Prospectus"), of
OnePoint Communications Corp. (the "Company"), and the accompanying Letter of
Transmittal (the "Letter of Transmittal"), that together constitute the
Company's offer (the "Exchange Offer") to exchange $1,000 principal amount of
its 14 1/2% Senior Notes due 2008, Series B (the "Exchange Notes"), for each
$1,000 principal amount of its outstanding 14 1/2% Senior Notes due 2008,
Series A (the "Notes"). Capitalized terms used but not defined herein have the
meanings ascribed to them in the Prospectus.
This will instruct you, the registered holder and/or book-entry transfer
facility participant, as to the action to be taken by you relating to the
Exchange Offer with respect to the Notes held by you for the account of the
undersigned.
The aggregate face amount of the Notes held by you for the account of the
undersigned is (FILL IN AMOUNT):
$ of the 14 1/2% Senior Notes due 2008.
With respect to the Exchange Offer, the undersigned hereby instructs you
(CHECK APPROPRIATE BOX):
[_]TO TENDER the following Notes held by you for the account of the
undersigned (INSERT PRINCIPAL AMOUNT OF NOTES TO BE TENDERED):
$
[_]NOT TO TENDER any Notes held by you for the account of the undersigned.
If the undersigned instructs you to tender the Notes held by you for the
account of the undersigned, it is understood that you are authorized (a) to
make, on behalf of the undersigned (and the undersigned, by its signature
below, hereby makes to you), the representations and warranties contained in
the Letter of Transmittal that are to be made with respect to the undersigned
as a beneficial owner, including but not limited to the representations that
(i) the undersigned's principal residence is in the state of (fill in state)
, (ii) the undersigned is acquiring the Exchange Notes in
the ordinary course of business of the undersigned, (iii) the undersigned is
not participating, does not intend to participate, and has no arrangement or
understanding with any person to participate in the distribution of the
Exchange Notes, (iv) the undersigned acknowledges that any person
participating in the Exchange Offer for the purpose of distributing the
Exchange Notes must comply with the registration and prospectus delivery
requirements of the Securities Act of 1933, as amended (the "Act"), in
connection with a secondary resale transaction of the Exchange Notes acquired
by such person and cannot rely on the position of the staff of the Securities
and Exchange Commission set forth in no-action letters that are discussed in
the section of the Prospectus entitled "The Exchange Offer--Resale of the
Exchange Notes," and (v) the undersigned is not an "affiliate," as defined in
Rule 405 under the Act, of the Company or any of the Subsidiary Guarantors;
(b) to agree, on behalf of the undersigned, as set forth in the Letter of
Transmittal; and (c) to take such other action as necessary under the
Prospectus or the Letter of Transmittal to effect the valid tender of such
Notes.
(CONTINUED ON BACK)
<PAGE>
PLEASE NOTE: THE COMPANY HAS AGREED THAT, FOR A PERIOD OF 180 DAYS AFTER THE
EXPIRATION DATE, IT WILL MAKE COPIES OF THE PROSPECTUS AVAILABLE TO ANY
PARTICIPATING BROKER-DEALER FOR USE IN CONNECTION WITH RESALES OF THE EXCHANGE
NOTES.
[_]Check this box if the Beneficial Owner of the Notes is a Participating
Broker-Dealer and such Participating Broker-Dealer acquired the Notes for
its own account as a result of market-making activities or other trading
activities. IF THIS BOX IS CHECKED, A COPY OF THESE INSTRUCTIONS MUST BE
RECEIVED WITHIN FIVE BUSINESS DAYS AFTER THE EXPIRATION DATE BY ONEPOINT
COMMUNICATIONS CORP., ATTENTION: JOHN D. STAVIG, VIA FACSIMILE (847) 374-
1070.
SIGN HERE
Name of beneficial owner(s): ________________________________________________
Signature(s): _______________________________________________________________
Name (please print): ________________________________________________________
Address: ____________________________________________________________________
-----------------------------------------------------------------------
-----------------------------------------------------------------------
Telephone number: ___________________________________________________________
Taxpayer Identification or Social Security Number: __________________________
Date: _______________________________________________________________________
2
