U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-SB/A
AMENDMENT NO. 1
TO
GENERAL FORM FOR REGISTRATION OF SECURITIES
OF SMALL BUSINESS ISSUERS UNDER SECTION
12(B) OR (G) OF THE SECURITIES EXCHANGE ACT OF 1934
GTC TELECOM CORP.
(Name of small business issuer in its charter)
NEVADA 88-0318246
(State or Other Jurisdiction of (IRS Employer
Incorporation or Organization) Identification Number)
3151 AIRWAY AVE., SUITE P-3
COSTA MESA, CALIFORNIA 92626
(Address of Principal Executive Offices) (Zip Code)
(714) 549-7700
(Registrant's Telephone Number, Including Area Code)
SECURITIES TO BE REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
(None)
SECURITIES TO BE REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
Common Stock, par value $0.001
Title of Class
<PAGE>
TABLE OF CONTENTS
PART I
Item 1 Description of Business.
Item 2 Management's Discussion and Analysis or Plan of
Operation.
Item 3 Description of Property.
Item 4 Security Ownership of Certain Beneficial Owners
and Management.
Item 5 Directors, Executive Officers, Promoters and
Control Persons.
Item 6 Executive Compensation.
Item 7 Certain Relationships and Related Transactions.
Item 8 Description of Securities.
PART II
Item 1 Market Price of and Dividends on the
Registrant's Common Equity and Other Shareholder
Matters.
Item 2 Legal Proceedings.
Item 3 Changes In and Disagreements With Accountants.
Item 4 Recent Sales of Unregistered Securities.
Item 5 Indemnification of Directors and Officers.
PART F/S
Financial Statements.
PART III
Item 1 Index to Exhibits.
Item 2 Description of Exhibits.
<PAGE>
PART I
ITEM 1 - DESCRIPTION OF BUSINESS
GTC Telecom Corp. (the "Company" or "GTC") is a single source
provider of various Telecommunication services, including long
distance telephone and calling card services, as well as various
Internet related services including Internet Service Provider access
and Web Page Hosting. GTC Telecom Corp. was organized as a Nevada
Corporation on May 17, 1994 and is currently based in Costa Mesa,
California.
On August 31, 1998, GTC Telecom Corp. (which at the time was
designated Bobernco, Inc., a Nevada corporation ("Bobernco")
acquired all of the outstanding common stock of GenTel
Communications, Inc., a Colorado corporation ("GenTel") in a
business combination described as a "reverse acquisition." For
accounting purposes, the acquisition has been treated as the
acquisition of Bobernco (the Registrant) by GenTel.
GenTel Communications, was formerly known as GenX, LLC ("GenX").
GenX, a Delaware limited liability company, was formed on May 29,
1997. GenTel Communications, Inc., a Colorado corporation was formed on
December 9, 1997 and was inactive until its reorganization with
GenX. Effective February 3, 1998, pursuant to a plan of
reorganization, the members of GenX converted their members'
interest into 8,786,950 shares of the Common Stock of GenTel.
Subsequently, GenX was dissolved. At the time of its acquisition by
Bobernco, GenTel operated as provider of long distance telephone
services.
Immediately prior to the acquisition, Bobernco had 1,800,000 shares
of Common Stock outstanding. As part of Bobernco's reorganization
with GenTel, Bobernco issued 8,986,950 shares of its Common Stock
to the shareholders of GenTel in exchange for 8,986,950 shares of
GenTel Common Stock. Immediately following the merger, Bobernco
changed its name to GTC. Bobernco had no significant operations
prior to the merger. Subsequent to the acquisition, the former
shareholders of GenTel constituted 83.31% of the total outstanding
shares of the Common Stock of the Company and the original
shareholders of Bobernco constituted 16.69% of the total outstanding
shares of the Common Stock of the Company. The Company's common
stock currently trades on the NASD OTC Bulletin Board under the
symbol "GTCC."
BUSINESS OF THE ISSUER
The Company currently offers a variety of services designed to meet
its customers' telecommunications and Internet related needs. The
Company's services consists of the following:
TELECOMMUNICATIONS RELATED SERVICES
The Company is currently licensed in 38 states and the District of
Columbia to provide long distance telecommunications services. The
Company primarily services small and medium sized businesses and
residential customers throughout the United States. The Company has
positioned itself to be a low-cost provider in the marketplace. By
offering low rates, the Company expects to add customers at an
accelerated pace. To date, the Company has operated as a
switchless(1), nonfacilities-based reseller of long distance
services. By committing to purchase large usage volumes from
carriers such as MCI/WorldCom, Inc. pursuant to contract tariffs(2),
the Company has been able to procure substantial discounts and offer
low-cost, high-quality long distance services to its customers at
rates below the current standard industry levels.
____________________
1 Switchless resellers of long distance services do not
utilize any of their own lines, or switching equipment.
2 Contract tariffs are services and rates based on contracts
negotiated with individual customers, but also available to all customers.
<PAGE>
The Company provides long distance telephone service under a variety
of plans. These include outbound service, inbound toll-free 800
service and dedicated private line services(3) for data. The
Company does not currently provide local telephone service. The
Company's long distance services are billed on a monthly basis
either directly by the Company or by the Local Exchange Carrier(4)
("LEC") through the services of Billing Concepts, Inc. dba U.S.
Billing ("USBI"). If these services are billed directly by the
Company, the customer has a choice of paying by credit card or
sending payment to the Company. If these services are billed by the
LEC, the LEC is responsible for collecting the amount billed and
remitting the proceeds to the Company. The Company is also in the
process of developing a voice-over-IP ("VoIP")(5) technology network
to complement its long distance telecommunications services. Please
refer to the Management's Discussion and Analysis section of this
Document. In addition, the Company is also exploring the
possibility of providing local telephone service. Whether the
Company will be able to provide local telephone services is
dependent on its ability to negotiate contracts with third-party
providers of local telephone service on favorable terms. The
Company has initiated negotiations with certain local telephone
providers but has not reached any agreements. Therefore, there can
be no assurances that the Company will be able to offer local
telephone service.
____________________
3 Private Line uses circuits dedicated to a specific customer
to connect that customer's equipment to both ends of the line.
4 A company providing local telephone service.
5 Voice calls carried over a private (packet-switched) network
of equipment using Internet protocol (codes) to route the messages.
<PAGE>
INTERNET RELATED SERVICES
The Company also recently began providing a variety of Internet
related services. These services, available to both consumer and
business users, include prepaid calling cards at the Company's
ecallingcards.com web site; Internet Services Provider access
through dial-up(6), Digital Subscriber Line ("DSL")(7), and Wireless
T-1 methods(8); and Internet Web Page development and hosting
services(9). The Company's Internet related services are billed
using the same methods as those used for billing its
Telecommunication services. The Company's Internet related
services, with the exception of its prepaid calling cards, are
provided pursuant to contracts with third-party providers, who
remain competitors with the Company. By contracting with
third-party providers to purchase large quantities of usage volumes,
the Company is able to secure significant discounts which then
allows the Company to offer these services to its end-users at rates
at or lower than its competitors.
____________________
6 Modem access via traditional telephone lines.
7 Digital Subscriber Line ("DSL") utilizes advanced technology
to transmit data over copper lines at speeds up to 1,000 faster than
Dial-Up service.
8 Wireless T-1 services are Internet connections using
microwave or radio frequencies, without the use of a cable
connection, that can transfer data at speeds up to 1.5 million
bits-per-second.
9 Web Page Hosting services permits customers to market
themselves on the Internet without having to invest significantly in
technology infrastructure and operations staff.
<PAGE>
The Company's Internet Service Provider Access service is currently
provided on a nationwide basis. Dial-up service provides unlimited
Internet access and several related services using conventional
modems at access speeds up to 56 kbps for a $14.95 monthly fee. DSL
service provides a faster, more efficient method for communicating
digital data over telephone lines. DSL speeds are significantly
faster than conventional modem speeds (up to 1.1 Mbps versus 56 kbps
for Dial-up service). The monthly DSL service charge ranges from
$100 to $260 depending on speed and service options. A one-time
set-up fee of $500 is also charged.
Currently, the Company's Wireless T-1 services are only available in
the Southern California region. Wireless T-1 allows businesses to
utilize connections at 1.5 Mbps without contracting for T-1 service
from local telephone companies. Wireless T-1 Service fees range
from $299 to $899 per month with a one-time set-up fee of $2,500.
The Company plans on expanding this service to include other
regions. Whether the Company is able to provide its Wireless T-1
services to other regions depends on whether the Company will be
able to secure contracts with third-party suppliers on favorable
terms. There can be no assurances that the Company will be able to
obtain such contracts and therefore be able to expand its Wireless
T-1 service to other regions.
The Company's Internet Web Page Hosting services are currently
available on a nationwide basis. Internet Web Page Hosting services
provides space on the Company's Web Server computers for customers
to publish their own Web Pages. Internet Web Page Hosting fees are
$29.95 per month, with a one-time set-up fee of $29.95.
TELECOMMUNICATIONS INDUSTRY BACKGROUND
The $88.6 billion U.S. long distance industry is dominated by the
nation's three largest long distance providers, AT&T, MCI/WorldCom
and Sprint, which together generated approximately 80.3% of the
aggregate revenue of all U.S long distance interexchange carriers in
1997. Other long distance companies, some with national
capabilities, accounted for the remainder of the market.
Based on published FCC estimates(10), toll service revenues of U.S.
long distance interexchange carriers have grown from $38.8 billion
in 1984 to $88.6 billion in 1997. While industry revenues have
grown at a compounded annual rate of 6.6% since 1984, the revenues
of carriers other than AT&T, MCI/WorldCom and Sprint have grown at a
compounded rate of 124.6% during the same period. As a result, the
aggregate market share of all interexchange carriers other than
AT&T, MCI/WorldCom and Sprint has grown from 2.6% in 1984 to 19.8%
in 1997. During the same period, the market share of AT&T declined
from 90.1% to 44.5%.
____________________
10 As published on the FCC's Website located at www.fcc.gov/Bureaus/
Common_Carrier/Reports/FCC-State_Link/socc/97socc.pdf.
<PAGE>
Prior to the Telecommunications Act, signed by President Clinton on
February 8, 1996, the long distance telecommunications industry had
been principally shaped by a court decree between AT&T and the
United States Department of Justice, known as the Modification of
Final Judgment (the "Consent Decree") that in 1984 required the
divestiture by AT&T of its 22 Bell operating companies and divided
the country into some 200 Local Access and Transport Areas, or
"LATAs." The 22 operating companies, which were combined into seven
Regional Bell Operating Companies, or "RBOCs", were given the right
to provide local telephone service, local access service to long
distance carriers and intraLATA toll service (service within LATAs),
but were prohibited from providing interLATA service (service
between LATAs). The right to provide interLATA service was
maintained by AT&T and the other carriers.
To encourage the development of competition in the long distance
market, the Consent Decree and the FCC require most LECs to provide
all carriers with access to local exchange services that is equal in
type, quality and price to that provided to AT&T and with the
opportunity to be selected by customers as their preferred long
distance carrier. These so-called equal access and related
provisions are intended to prevent preferential treatment of AT&T.
On February 8, 1996, the President signed the Telecommunications Act
(the "Act"), which is intended to introduce more competition to U.S.
telecommunications markets. The Act opens the local services market
by requiring LECs to permit interconnection to their networks and
establishing among other things, LEC obligations with respect to
access, resale, number portability, dialing party, access to
rights-of-way, and mutual compensation. The legislation also
codifies the LECs' equal access and nondiscrimination obligations
and pre-empts most inconsistent state regulation.
Regulatory, judicial and technological factors have helped to create
the foundation for smaller companies to emerge as competitive
alternatives to AT&T, MCI/WorldCom and Sprint for long distance
telecommunications services. The FCC requires that AT&T not
restrict the resale of its services, and the Consent Decree and
regulatory proceedings have ensured that access to LEC networks is,
in most cases, available to all long distance carriers.
DEVELOPMENT AND STRATEGY OF THE COMPANY
The Company's telecommunication services are currently licensed in
the states of Alabama, Arizona, Arkansas, California, Colorado,
Delaware, Florida, Georgia, Idaho, Indiana, Iowa, Kansas, Kentucky,
Maine, Massachusetts, Michigan, Minnesota, Missouri, Montana,
Nevada, New Hampshire, New Jersey, New York, North Carolina, North
Dakota, Ohio, Oregon, Pennsylvania, Rhode Island, South Dakota,
Tennessee, Texas, Utah, Vermont, Virginia, Washington, Washington
D.C., Wisconsin, and Wyoming. The Company is in the process of
obtaining licences to provide its services in the remaining states,
except Alaska. However, there can be no assurances that the Company
will be successful in obtaining such licences.
The Company plans to market its products and services using four
methods. The first of those methods is to do an aggressive
concentrated media campaign that utilizes a professional advertising
agency. The Company launched its first media campaign on March 1,
<PAGE>
1999 utilizing television and radio advertisement and print media
targeting Southern California as well as nationwide audiences using
cable television advertisement. The Company intends to continue to
utilize both broadcasting and print media campaigns in the future.
The Company presently has allocated sufficient funds to continue its
media campaign through the end of its fiscal year 1999 (June 30,
1999). The Company's ability to continue such media campaigns in
the future is dependant upon the Company's ability to secure
financing for such media campaigns. Therefore, there can be no
assurances that it will be able to continue to utilize such media
campaigns in the future.
The second method of marketing the Company's products and services
is through outside telemarketing agencies. These firms are
paid on a commission only basis. The Company estimates that it
will cost an average of thirty-five dollars ($35.00) to obtain each
customer, while the average customer generates two hundred and forty
dollars ($240.00) in revenue per year. The Company currently
utilizes the services of two telemarketing companies. These
companies operate on a nationwide basis. As of March 31, 1999,
these companies have generated 964 customers for the Company's
telecommunications services.
The third method of marketing the Company's products and services
utilizes its own sales force and independent sales agents working on
its behalf. The sales force will consist of properly trained
professionals within the industry that are currently looking for an
opportunity to sell at rates that are lower than the industry
standard. Many of these professionals will come from companies such
as MCI/WorldCom, LCI International, TelCo and Frontier
Communications where the average calling rate is 10-12 cents per
minute. The Company has recently hired a V.P. of Sales from
MCI/WorldCom and a National Accounts Manager from Cable & Wireless
Communications PLC, both with extensive sales and marketing
backgrounds in the telecommunications industry. In addition, the
Company has already engaged in discussions with many potential
representatives to work for the Company based on commission-only (8%
to 10% of collected billings) compensation packages. However, there
can be no assurances that the Company will be successful in
retaining its in-house sales force or in acquiring independent sales
agents to work on its behalf at the commission-only compensation
packages described.
The fourth method of marketing the Company's products and services
utilizes the Internet. The Company currently markets and
distributes its Telecommunications and Internet related services
through the Internet utilizing its gtctelecom.com and
ecallingcards.com web pages. The Company also plans to market
international calling plans as well as co-brand calling cards and
advertise domestic long distance rates on the Internet through joint
agreements such as its agreement with Community Connect Inc.'s
online community for Asian Americans, AsianAvenue.com. There can be
no assurances that such joint agreements will continue or that the
Company will be able to develop such joint agreements in the future.
The Company believes these four marketing methods will be adequate
to sustain the Company now and for the foreseeable future.
COMPETITION
Telecommunication Services
The long distance telecommunications industry is highly competitive
and affected by the introduction of new services by, and the market
activities of, major industry participants. Competition in the long
distance business is based upon pricing, customer service, billing
services and perceived quality. The Company competes against
various national and regional long distance carriers that are
composed of both facilities-based providers and switchless resellers
offering essentially the same services as the Company. Several of
the Company's competitors are substantially larger and have greater
financial, technical and marketing resources. The Company believes
that it is able to compete with these competitors by providing high
quality service at the lowest price possible.
The Company believes that the pricing strategies and cost structures
of the major long distance carriers have resulted historically in
their charging higher rates to the small to medium sized business
customer. Small to medium-sized business customers typically are
not able to make the volume commitments necessary to negotiate
reduced rates under individualized contracts. By committing to
large volumes of traffic, the Company is guaranteeing traffic to the
major long distance carrier while relieving the major long distance
carrier of the administrative burden of qualifying and servicing
large numbers of small to medium-sized accounts. To be successful,
the Company believes that it must have lower overhead costs and be
<PAGE>
able to efficiently market the long distance product, process
orders, verify credit and provide customer service to a large number
of accounts. Although the Company believes it has human and
technical resources to pursue its strategy and compete effectively
in this competitive environment, its success will depend upon its
continued ability to profitably provide high quality, high value
services at prices generally competitive with, or lower than, those
charged by its competitors. There can be no assurances that the
Company will be able to compete successfully in these markets.
The Company currently links its switching equipment with
transmission facilities and services purchased or leased from
MCI/WorldCom and will continue to resell services obtained from
MCI/WorldCom, which will remain a competitor of the Company for the
provision of telecommunications services. However, there can be no
assurances that the Company will be able to continue to provide its
Telecommunication Services through MCI/WorldCom.
In a continual effort to lower the costs of its services, the
Company has entered into a contract with the Williams Company to
secure the acquisition of its own nationwide long distance and
Internet Network based on VoIP technology. Please refer to the
Management's Discussion and Analysis of Operations section of this
document for further details. The Company believes that by
developing its own network, the Company will be able to
substantially lower the transmission costs of its telecommunication
service.
The Telecommunications Act is intended to introduce more competition
to U.S. telecommunications markets. The legislation opens the local
services market by requiring LECs to permit interconnection to their
networks and establishing, among other things, LEC obligations with
respect to access, resale, number portability, dialing parity,
access to rights-of-way and mutual compensation. The legislation
also codifies the LECs' equal access and nondiscrimination
obligations and preempts most inconsistent state regulation. The
legislation also contains special provisions that eliminate
restrictions on the RBOCs providing long distance services, which
means that the Company will face competition for providing long
distance services from well capitalized, well known companies that
prior to this time could not compete in long distance service.
The RBOCs have been prohibited from providing interLATA
interexchange telecommunications services under the terms of the
AT&T decree. The Telecommunications Act authorizes the RBOCs to
provide certain interLATA interexchange telecommunications services
immediately and others upon the satisfaction of certain conditions.
Such legislation includes certain safeguards against anticompetitive
conduct by the RBOCs in the provision of interLATA service.
Anticompetitive conduct could result from, among other things, a
RBOC's access to all subscribers on its existing network as well as
its potentially lower costs related to the termination and
origination of calls within its territory. It is impossible to
predict whether such safeguards will be adequate to protect against
anticompetitive conduct by the RBOCs and the impact that any
anticompetitive conduct would have on the Company's business and
prospects. Because of the name recognition that the RBOCs have in
their existing markets and the established relationships that they
have with their existing local service customers, and their ability
to take advantage of those relationships, as well as the possibility
of favorable interpretations of the Telecommunications Act by the
RBOCs, it may be more difficult for other providers of long distance
services, such as the Company, to compete to provide long distance
services to RBOC customers. At the same time, as a result of the
Telecommunications Act, RBOCs have become potential customers for
the Company's long distance services.
Internet Related Services
The market for Internet-based online services is relatively new,
intensely competitive and rapidly changing. Since the advent of
commercial services on the Internet, the number of Internet Service
Providers and online services competing for users' attention and
spending has proliferated because of, among other reasons, the
absence of substantial barriers to entry, and the Company expects
that competition will continue to intensify. Many of the Company's
current and potential competitors such as Earthlink, PsiNet, AOL,
UUNET, Microsoft Network, and Prodigy have longer operating
histories, larger customer bases, greater brand recognition and
significantly greater financial, marketing and other resources.
These competitors may be able to respond more quickly to new or
emerging technologies and changes in customer requirements and to
devote greater resources to the development, promotion and sale of
their products and services than the Company. The Company believes
that its Internet related services are marketed at competitive rates
and provide quality and services comparable to its competitors.
However, there can be no assurance that the Company will be able to
compete successfully against its current or future competitors.
<PAGE>
In a continual effort to lower the costs of its services, the
Company has entered into an agreement with the Williams Company to
secure the acquisition of its own nationwide long distance and
Internet Network based on VoIP technology. Please refer to
Management's Discussion and Analysis of Operations section of this
document for further details. The Company believes that by
developing its own network, the Company will be able to
substantially lower the acquisition costs of its Internet services.
CUSTOMER ATTRITION
The Company believes that a high level of customer attrition is a
characteristic of the domestic residential long distance and
Internet related industries. Attrition is attributable to a variety
of factors, including the termination of customers by the Company
for non-payment and the initiatives of existing and new competitors
as they engage in, among other things, national advertising
campaigns, telemarketing programs and the issuance of cash or other
forms of incentives. Such attrition could have a material adverse
effect upon the Company's future results of operations and financial
conditions.
DEPENDENCE ON KEY CUSTOMERS
The Company is not dependent on any single customer for a
significant portion of its annual sales. The Company's customer
base changes on a continuous basis as new customers are added or
removed.
MAJOR SUPPLIERS
The Company does not own its own long distance network, and pursuant
to the Company's contract with MCI/WorldCom, the Company currently
depends primarily upon MCI/WorldCom to provide for the transmission
of phone calls by its customers and to provide the call detail
records upon which the Company bases its customers billings. Under
the terms of the three-year contract entered into with MCI/WorldCom
on August 10, 1998 the Company is obligated to a minimum monthly
revenue commitment of $10,000 commencing March 1999. The contract
expires on September 30, 2001. Pursuant to the terms of the
contract with MCI/WorldCom, the Company must pay liquidated damages
in an amount equal to the aggregate minimum revenue requirement for
the remaining term of the contract if the Company terminates the
contract prior to the expiration date. Although the Company
believes that its relations with MCI/WorldCom are strong and should
remain so with continued contract compliance, the termination of the
Company's contract with MCI/WorldCom, the loss of telecommunications
services provided by MCI/WorldCom, or a reduction in the quality of
service the Company receives from MCI/WorldCom could have a material
adverse effect on the Company's results of operations. In addition,
the accurate and prompt billing of the Company's customers is
dependent upon the timeliness and accuracy of call detail records
provided to the Company by MCI/WorldCom.
In the event that MCI/WorldCom were to discontinue its service to
the Company, the Company believes, based upon discussions that the
Company has had with other long distance providers and based on such
providers' published contract tariffs, that it could negotiate and
obtain contracts with other long distance providers to resell long
distance services at rates at or below its current contract tariffs
with MCI/WorldCom. If the Company were to enter into contracts with
another provider, however, the Company believes it would take
approximately thirty (30) days to switch end users to that provider.
Although the Company believes it may have the right to switch the
end users without their consent to such other providers, the end
users have the right to discontinue such service at any time.
Accordingly, the termination or non-renewal of the Company's
contract tariffs with MCI/WorldCom or the loss of telecommunications
services from MCI/WorldCom would likely have a material adverse
effect on the Company's results of operations and financial
condition. In an effort to minimize the Company's dependence on
MCI/WorldCom, the Company has entered into a contract with the
Williams Company to secure the acquisition of its own nationwide
long distance and Internet Network based on VoIP technology. Please
refer to the Management's Discussion and Analysis of Operations
section of this document for further details.
The Company does not currently have its own Internet Network.
Currently, the Company provides its Internet Service Provider Access
services pursuant to a contract with Epoch Networks, Inc. dba Epoch
Internet ("Epoch"). Under the terms of the three year contract with
Epoch dated February 3, 1999, the Company is obligated to an initial
monthly minimum revenue commitment of $0.00 increasing to $25,000
per month over a seven month ramp up period. The loss of Internet
Service Provider access, or a reduction of service quality by Epoch,
<PAGE>
could have a material adverse effect on the Company's results of
operations. Pursuant to the terms of the contract with Epoch, the
Company must pay liquidated damages in an amount equal to the
aggregate minimum revenue commitment for the remaining term of the
contract if the Company terminates the contract prior to the
expiration date. In a continual effort to lower costs, the Company
is currently in the process of locating alternative or additional
Internet Services Providers to supplement or replace its current
provider.
As a result of this effort, on April 6, 1999, the Company entered
into a one-year agreement with Level 3 Communications, LLC ("Level
3") to provide its Internet Service Provider Access. The agreement,
which begins in July 1999, provides for the Company to initially pay
$36,000 per month with an initial set-up fee of $8,000. As Level 3
is able to provide service throughout the nation, the Company's
monthly minimum commitment will increase from $36,000 per month to a
maximum $60,750 per month. In addition, the Company is committed to
pay an additional set-up fee of up to $5,500. The Company is
currently in the process of negotiating the termination of its
agreement with Epoch. Unless the Company is able to negotiate the
termination of its agreement with Epoch on more favorable terms, the
Company will be committed to pay Epoch a monthly minimum of $25,000
beginning in September, 1999.
The Company's Wireless T-1 services are currently provided pursuant
to a contract with Global Pacific Internet ("Global"). Currently,
the Company's T-1 services are available only in the Southern
California region. Under the terms of its contract with Global, the
Company is not subject to a monthly minimum revenue commitment.
Although the Company believes that its relations with Global are
strong and should remain so with continued contract compliance, the
loss of Wireless T-1 services provided by Global, or a reduction in
the quality of service the Company receives from Global could have a
material adverse effect on the Company' s results of operations.
The Company anticipates that it would take between thirty (30) to
sixty (60) days to locate a replacement supplier in the event that
the Company's agreement with Global is terminated. The Company
currently plans to expand its Wireless T-1 services to other
regions. However, there can be no assurances that the Company will
or will be able to expand this service to other regions.
Previously, the Company's Internet Web Development service was
provided pursuant to contracts with Service One Communications, Inc.
("Service One") and OhGolly.com, Inc. ("OhGolly"). Web Pages
developed by Service One and OhGolly.com are housed within the
Company's own computer servers. On May 21, 1999, the Company
terminated its contracts with Service One and OhGolly.com for
non-performance. The Company anticipates that it will require
between thirty (30) to sixty (60) days to locate a replacement
supplier. Until the Company is able to locate an replacement
supplier, it will not able to develop additional Web Pages. Current
Web Page Hosting users, however, are unaffected by the termination
of the Company's agreements with Service One and OhGolly.com.
REGULATION
The Company's provision of communications services is subject to
government regulation. Federal law regulates interstate and
international telecommunications, while states have jurisdiction
over telecommunications that originate and terminate within the same
state. Changes in existing policies or regulations in any state or
by the FCC could materially adversely affect the Company's financial
condition or results of operations, particularly if those policies
make it more difficult for the Company to obtain service from
MCI/WorldCom or other long distance companies at competitive rates,
or otherwise increase the cost and regulatory burdens of marketing
and providing service. There can be no assurance that the
regulatory authorities in one or more states or the FCC will not
take action having an adverse effect on the business or financial
condition or results of operations of the Company.
Federal
The Company is classified by the FCC as a nondominant carrier.
After the recent reclassification of AT&T as nondominant, only the
LECs are classified as dominant carriers among domestic carriers.
Because AT&T is no longer classified as a dominant carrier, certain
pricing restrictions that formerly applied to AT&T have been
eliminated, which could make it easier for AT&T to compete with the
Company for low volume long distance subscribers. The FCC generally
does not exercise direct oversight over charges for service of
nondominant carriers, although it has the statutory power to do so.
Nondominant carriers are required by statute to offer interstate
services under rates, terms, and conditions that are just,
reasonable and not unreasonably discriminatory. The FCC has the
jurisdiction to act upon complaints filed by third parties, or
<PAGE>
brought on the FCC's own motion, against any common carrier,
including nondominant carriers, for failure to comply with its
statutory obligations. Nondominant carriers are required to file
tariffs listing the rates, terms and conditions of service, which
are filed pursuant to streamlined tariffing procedures. The FCC
also has the authority to impose more stringent regulatory
requirements on the Company and change its regulatory classification
from nondominant to dominant. In the current regulatory atmosphere,
the Company believes, however, that the FCC is unlikely to do so.
The FCC imposes only minimal reporting requirements on nondominant
resellers, although the Company is subject to certain reporting,
accounting and record-keeping obligations. Both domestic and
international nondominant carriers, including the Company, must
maintain tariffs on file with the FCC.
At present, the FCC exercises its regulatory authority to set rates
primarily with respect to the rates of dominant carriers, and it has
increasingly relaxed its control in this area. Even when AT&T was
classified as a dominant carrier, the FCC most recently employed a
"price cap" system, which essentially exempted most of AT&T's
services, including virtually all of its commercial and 800
services, from traditional rate of return regulation because the FCC
believes that these services were subject to adequate competition.
State
The Company is subject to varying levels of regulation in the states
in which it currently anticipates providing intrastate
telecommunications services. The vast majority of the states
require the Company to apply for certification to provide intrastate
telecommunications services, or at least to register or to be found
exempt from regulation, before commencing intrastate service. The
vast majority of states also require the Company to file and
maintain detailed tariffs listing its rates for intrastate service.
Many states also impose various reporting requirements and/or
require prior approval for transfers of control of certified
carriers, corporate reorganizations, acquisitions of
telecommunications operations, assignments of carrier assets,
including subscriber bases, carrier stock offerings and incurrence
by carriers of significant debt obligations. Certificates of
authority can generally be conditioned, modified, canceled,
terminated or revoked by state regulatory authorities for failure to
comply with state law and the rules, regulations and policies of the
state regulatory authorities. Fines and other penalties, including
the return of all monies received for intrastate traffic from
residents of a state, may be imposed for such violations. In
certain states, prior regulatory approval may be required for
acquisitions of telecommunications operations.
As the Company expands its efforts to resell long distance services,
the Company will have to remain attentive to relevant federal and
state regulations. FCC rules prohibit switching a customer from one
long distance carrier to another without the customer's consent and
specify how that consent can be obtained. Most states have consumer
protection laws that further define the framework within which the
Company's marketing activities must be conducted. The Company
intends to comply fully with all laws and regulations, and the
constraints of federal and state restrictions could impact the
success of direct marketing efforts.
The Company is not currently subject to any State or Federal
regulation with respect to its Internet related services. However,
there can be no assurances that the Company will not be subject to
such regulations in the future. Additionally, the Company is not
aware of any pending legislation that would have a material adverse
effect on the Company's operations.
PATENTS, TRADEMARKS, LICENSES
The Company does not depend upon any patents or trademarks to
conduct its business; nor does the Company hold any such patents or
trademarks. The Company is required to hold licenses with the
Federal Communication Commission for the operation of its
telecommunication services. The Company is also required to hold
licenses in the states in which it provides intrastate long distance
services. Currently, the Company is licensed in 38 states and the
District of Columbia to provide intrastate services. The Company's
federal and state telecommunication licenses are of indefinite
length and will remain effective so long as the Company complies
with all Federal and State regulations.
The Company is currently in the process of securing licenses for
operation of its telecommunication services in the remainder of the
United States, except Alaska. The Company's ability to obtain
licenses in the remaining states is dependent on the Company's
<PAGE>
ability to meet each state's specific guidelines. Although the
Company anticipates that it will able to secure licenses in these
states, there can be no assurances that the Company will be
successful in obtaining such licenses.
COST OF COMPLIANCE WITH ENVIRONMENTAL REGULATIONS
The Company currently has no costs associated with compliance with
environmental regulations. However, there can be no assurances that
the Company will not incur such costs in the future.
NUMBER OF EMPLOYEES
As of March 31, 1999, the Company employed approximately 20 people
on a full time basis.
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion contains certain forward-looking statements
that are subject to business and economic risks and uncertainties,
and the Company's actual results could differ materially from those
forward-looking statements. The following discussion regarding the
financial statements of the Company should be read in conjunction
with the financial statements and notes thereto.
GENERAL OVERVIEW
The company's principal line of business is to provide long distance
and value-added services for small and medium-sized businesses and
residential customers throughout the United States. The Company's
strategy has been to do build a subscriber base without committing
capital or management resources to construct its own network and
transmission facilities. This strategy has allowed the Company to
add customers without being limited by capacity, geographic
coverage, or configuration of any particular network that the
Company might have developed. In order to remain competitive, the
Company believes that it must continue to offer its services at the
lowest rates possible. The Company believes that in order to
continue to offer lower than industry average rates, as well as
reduce its dependency on major suppliers, the Company will need to
either purchase or construct its own network. In furtherance of
this, the Company has entered into a contract with Williams
Communications to construct, equip and manage a voice-over-IP
network for the Company. Management believes that the creation of
such a network will allow it to continue to offer its
telecommunication and Internet services below the industry average.
Recently, the Company has begun providing a number of Internet
related services such as the sale of electronic calling cards on its
ecallingcards.com web site; Internet access via Dial-Up, Wireless
T-1, and DSL; and Internet Web Page Hosting services.
The Company's services are marketed nationwide, through broadcasting
and print media, telemarketing, independent sales agents and its
own sales force.
The Company's revenues consist of sales revenues from
telecommunication and Internet related services. These revenues are
generated when customers make long distance telephone calls from
their business or residential telephones or by using the Company's
telephone calling cards. Proceeds from prepaid telephone calling
cards are recorded as deferred revenues when the cash is received
and recognized as revenue as the telephone service is utilized. The
reserve for deferred revenues is carried on the balance sheet as an
accrued liability. Internet related services are typically billed
at a flat rate and are billed in advance. Revenues are recognized
in the period earned.
Cost of Sales include telecommunications service costs and
commissions paid for customer acquisition. Telecommunications
service costs paid by the Company are based on the Company's
customers' long distance usage. The Company pays its carriers based
on the type of call, time of call, duration of call, the terminating
telephone number, and terms of the Company's contract in effect at
the time of the call. General and administrative expenses consist
of the cost of customer service, billing, cost of information
systems and personnel required to support the Company's operations
and growth.
<PAGE>
The Company, depending on the extent of its future growth, may
experience significant strain on its management, personnel, and
information systems. The Company will need to implement and improve
operational, financial, and management information systems. In
addition, the Company is implementing new information systems that
will provide better record-keeping, customer service and billing.
However, there can be no assurance that the Company's management
resources or information systems will be sufficient to manage any
future growth in the Company's business, and the failure to do so
could have a material adverse effect on the Company's business,
results of operations and financial condition.
In 1998, the Company determined to change its fiscal year to June
30. As previously discussed, the Company acquired all of the
outstanding common stock of GenTel on August 31, 1998. Following
the acquisition, the Company adopted the business plan of GenTel and
changed its name to GTC.
RESULTS OF OPERATIONS OF THE COMPANY
The following discussion assumes that the acquisition of GenTel by
the Company occurred as of June 30, 1997.
Prior to the acquisition of GenTel by the Company, the Company had
no revenues or expenses for the fiscal year ended December 31, 1996
or the six-month period ended June 30, 1997.
Revenues
Revenues for the three- and nine-month periods ended March 31, 1999
were $204,573 and $222,535, respectively, compared with $497,312 for
both the three- and nine-month periods ended March 31, 1998.
Revenues for the nine-months ended March 31, 1999 were comprised
primarily of $180,600 from Web development and hosting services and
$41, 935 from telecommunication services. Revenues for the three-
and nine-month periods ended March 31, 1998 was from the bulk sale
of long distance calling cards. Pursuant to the Company's newly
adopted business plan for its telecommunication services, the
Company began to acquire telecommunication customers, primarily
through the use of telemarketing. For the nine months ended March
31, 1999, the Company had approximately 1,060 telecommunication
customers, with usage of long distance services of approximately
430,000 minutes.
Cost of Sales
Cost of sales for the three- and nine-month periods ended March 31,
1999 were $77,334 and $85,665, respectively, compared with $447,312
for both the three- and nine-month periods ended March 31, 1998.
Cost of sales for the nine-months ended March 31, 1999 were
comprised primarily of carrier costs of $35,670, associated with the
cost of long distance service provided by MCI/WorldCom, $25,653 for
commissions paid for customer acquisition and $24,342 for the cost
of third party verification on its newly acquired customers. Cost
of sales for the three- and nine-month periods ended March 31, 1998
was comprised of the cost of acquiring the long distance calling
cards. As a percentage of revenue, cost of sales was 38.5% for the
nine months ended March 31, 1999 resulting in a gross margin of 61.5%.
Selling, General and Administrative Expenses
Selling, general and administrative ("S,G&A") expenses for the
three- and nine-month periods ended March 31, 1999 were $1,150,108
and $1,837,988, respectively, compared with $117,413 and $228,575
for the three- and nine-month periods ended March 31, 1998. S,G&A
expenses for the nine-months ended March 31, 1999 were comprised
primarily of advertising expenses of $258,000; options valued at
$150,000 issued to a marketing company in exchange for services;
shares valued at approximately $371,000 issued to vendors in
exchange for services and rent; provision for bad debts of
approximately $249,500; options valued at approximately $48,150
issued to supplement compensation to certain key employees;
approximately $271,000 in salaries paid to employees; and $490,338
of other operating expenses, primarily rent, legal services, and
investor relations. S,G&A expenses of $228,575 for the nine months
ended March 31, 1998 were comprised primarily of options valued at
approximately $71,250 issued to supplement compensation to certain
key employees; approximately $57,900 in salaries paid to employees;
and $99,425 of other operating expenses, primarily legal services.
Net loss was $1,697,266 and $178,575 for the nine months ended March
31,1999 and 1998, respectively.
<PAGE>
Assets and Liabilities
Assets were $519,293 for the period ended March 31, 1999. Assets
consisted primarily of accounts receivables of $67,915, cash of
$128,430, other current assets of $58,020, equipment with a net book
value of $145,566 and other long term assets of $119,632.
Liabilities were $226,696 for the period ended March 31, 1999.
Liabilities consisted primarily of accounts payable of $148,641,
payroll and payroll related liabilities of $45,794, and other
liabilities of $32,261.
Stockholder's Equity
Stockholder's equity was $292,597 for the period ended March 31,
1999. Stockholder's equity consisted primarily of $1,599,731 raised
in the GenX and the Company's recent private offering of its Common
Stock, offset primarily by the accumulated deficit at March 31, 1999
of $2,148,730.
RESULTS OF OPERATIONS FOR GENTEL FROM MAY 29, 1997 (INCEPTION) TO
JUNE 30, 1998.
Revenues
For the period from inception to June 30, 1998, revenues for GenTel
totaled $497,312. This amount was from the bulk sale of long
distance calling cards.
Cost of Sales
Cost of Sales for the period from inception to June 30, 1998 of
$447,312 was comprised of the cost of acquiring the long distance
calling cards.
Selling, General & Administrative Expenses (S,G & A)
For the period from inception to June 30, 1998, S,G & A totaled
$500,665 comprised of salaries of approximately $200,000; shares
valued at approximately $95,000 issued to the CEO and Vice-President
of GenTel, options valued at approximately $71,000 issued to certain
key employees to supplement compensation, professional fees of
approximately $57,000 and rent of approximately $22,000. Net loss
for the period of inception to June 30, 1998 was $451,465.
Assets and Liabilities
GenTel's assets as of June 30, 1998 were $162,085. Assets consisted
primarily of subscriptions receivable of $142,500, computer
equipment of $17,394 and cash of $3,892. Liabilities as of June 30,
1998 were $178,075. Liabilities consisted primarily of notes
payable to shareholder of $80,000; deferred salaries of $70,000;
accrued offering costs of $20,525; and accounts payable of $7,550.
Stockholders' Deficit
Stockholders' deficit as of June 30, 1998 was ($15,990). Stockholders'
deficit consisted primarily of $269,225 raised in the sale of GenX
member interests through a private placement, options valued at
$71,250 issued to key employees to supplement compensation and stock
valued at $95,000 issued to GenTel's CEO and Vice-President to
supplement compensation, offset primarily by a net loss of $451,465
for the period ended June 30, 1998.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Prior the acquisition of GenTel by the Company, GenTel achieved
positive cash flows of $3,892 resulting from $227,250 of cash
provided from the Company's financing activities, offset by $205,964
of cash used in operating activities and $17,394 of cash used in
investing activities.
Net cash used in operating activities of $205,964 was primarily due
to a net loss of $451,465 offset partially by increases in operating
liabilities, principally accounts payable ($7,550) and accrued
expenses ($70,000).
Net cash used in investing activities of $17,394 funded purchases of
computer equipment. Net cash provided by financing activities of
$227,250 was due to the proceeds from sales of equity interests of
GenTel's predecessor, GenX, of $147,250 and borrowings on notes
payable to a shareholder of $80,000.
Short-Term Financing
On February 12, 1999, the Company completed a private placement
offering of 1,535,000 shares of the Company's restricted (as that
term is defined by Rule 144 of the Securities Act of 1933) Common
Stock at a price of $1.00 per share, resulting in $1,330,000 raised,
net of issuance costs paid for brokers and finder's fees from the
offering.
In connection with the Company's private placement, the Company
entered into an Investment Banking Agreement with Transglobal
Capital Corporation ("TCC"), a licensed NASD broker on November 19,
1998. As part of this Agreement, TCC agreed to provide the Company
with consulting services and to assist the Company in raising
capital. In return, the Company agreed to compensate TCC with an
initial fee of 50,000 shares of the Company's restricted Common
Stock and to pay TCC a 13% commission on gross proceeds on financing
received by the Company as a result of TCC's efforts. In addition,
the Company agreed to issue TCC options to purchase 100,000 shares
of the Company's Common Stock at an exercise price of $0.01 upon
receipt of the first tranche of $100,000 in financing; an option to
purchase an additional 100,000 shares of the Company's Common Stock
at an exercise price of $0.01 upon receipt of $250,000 in financing;
an option to purchase an additional 100,000 shares of the Company's
Common Stock at an exercise price of $0.01 upon receipt of $500,000
in financing; and options to purchase an additional 300,000 shares
of the Company's Common Stock at an exercise price of $0.01 upon the
receipt of $1,000,000 in financing. As of March 31, 1999, all
600,000 options have vested. The difference between the exercise
price ($6,000 at $.01 per share) and the fair market value of the
underlying restricted stock ($600,000 at $1.00 per share) has been
charged against additional paid in capital.
In late March 1999, the Company initiated a private placement
offering of 1,000,000 shares of the Company's restricted (as that
term is defined by Rule 144 of the Securities Act of 1933) Common
Stock at a price of $5.00. As of April 15, 1999, the Company had
not received any offers for subscriptions to this private offering.
The Company believes that no offers were received primarily due to
the fact that the Company's "free trading" common stock has been
trading at a price close to the $5.00 price of the private offering.
On April 21, 1999, the Company replaced its $5.00 offering with a
private placement offering (the "Private Offering") of 2,000,000
shares of the Company's restricted (as that term is defined by Rule
144 of the Securities Act of 1933) Common Stock at a price of $3.00.
The Company anticipates that this Private Offering will raise
approximately $5,220,000, net of issuance costs paid for brokers and
finder's fees, should the total offering be sold.
In addition, the Company is currently negotiating with an
institutional investor for the purchase of 2,000,000 shares of the
Company's restricted (as that term is defined by Rule 144 of the
Securities Act of 1933) Common Stock at a price of $5.00 per share
pursuant to Rule 506 promulgated under Regulation D of the
Securities Act of 1933 (the "Institutional Offering"). In
conjunction with the investment, the Company has agreed to register
these shares under the Securities Act of 1933 within 120 days of the
sale.
The funds from the Private Offering and the Institutional Offering
will be used principally to complete the acquisition of the
Company's VoIP network (Please refer to the General Overview,
Long-Term Financing, and Capital Expenditure section of this
document for further information) and fund its on-going operations.
No assurances can be given, however, that the Company will be able
to complete either the Private Offering or the Institutional
Offering. The failure to complete either offering may have a
material adverse effect on the Company's operations.
<PAGE>
Long-Term Financing
On April 30, 1999, the Company entered into a financing agreement
(the "Financing Agreement") for $26 million in equipment financing,
specifically for the Company' s VoIP network. The terms of the
financing include thirty-three (33) monthly payments of $942,760
beginning February 1, 2000. In addition, the Financing Agreement
will include a five-year warrant agreement to purchase 315,151
shares of the Company's restricted (as that term is defined by Rule
144 of the Securities Act of 1933) Common Stock at an exercise price
of $8.25 per share. The warrants include provisions for
anti-dilution protection, net exercise and registration rights. An
additional amount of capital, above and beyond the Financing
Agreement, will be needed to complete the purchase of the VoIP network.
The Private Offering and the Institutional Offering are designed to
complete the acquisition of the Company's VoIP network, meet the
Company's working capital and other cash requirements, and other
equipment purchases in connection with the expansion of its business.
The Company believes that its anticipated funds from operations,
funds from the prior sale of equity interests of GenTel's
predecessor, GenX, and funds from the sale of its recent and ongoing
Private Offering and Institutional Offering of the Company's common
stock, will be sufficient to fund its capital expenditures, working
capital, and other cash requirements for the next 12 months.
CAPITAL EXPENDITURES
On April 30, 1999, the Company entered into an agreement with
Williams Communications, a unit of Williams of Tulsa, Oklahoma, in
which Williams Communications will design, install, maintain and
fully manage the Company's previously discussed high speed,
nationwide VoIP network. The total contract value is approximately
$110,000,000 over a five-year term. The Company also expects to
continue purchasing additional equipment in connection with the
expansion of its business. Because the Company presently does not
have the capital for such expenditures, it will have to raise these
funds. (See Long-Term Financing in this section).
GOING CONCERN
The Company's independent certified public accountants have stated
in their report included in this Form 10SB, that the Company has no
current source of revenue and, without realization of additional
capital, it would be unlikely for the Company to continue as a going
concern. As stated in Short-Term Financing and Long-Term Financing
in this section, the Company believes that if it is successful in
raising these funds, that its certified public accountants would not
issue a going concern qualification regarding the Company's
financial condition in its upcoming Fiscal Year 1999 report.
However, there can be no assurances that the Company will be able to
raise sufficient capital to meet its needs. If the Company is not
successful in raising the necessary capital, then the Company
believes that its independent certified public accountants would
issue an opinion with a similar going concern modification regarding
the Company's financial condition.
INFLATION
Management believes that inflation has not had a material effect on
the Company's results of operations.
YEAR 2000 DISCLOSURE
The Company has completed a comprehensive review of its computer
systems to identify all software applications that could be affected
by the inability of many existing computer systems to process
time-sensitive data accurately beyond the year 1999, referred to as
the Year 2000 or Y2K issue. The Company is dependent on third-party
computer systems and applications, particularly with respect to such
critical tasks as accounting, billing and the underlying carrier
(MCI/WorldCom) of its long distance telephone service. The Company
also relies on its own computer systems. As a result of its review,
the Company has discovered no problems with its computer systems
relating to the Y2K issue. Although the Company believes that its
computer systems are Y2K compliant, the Company is continuing to
monitor its computer systems in a continual effort to insure that
its systems are Y2K compliant. Additionally, the Company has
obtained written assurances from its major suppliers indicating that
they have completed a review of their respective computer systems
and that such systems are Y2K compliant. Costs associated with the
Company's review were not material to its results of operations.
<PAGE>
While the Company believes that its procedures have been designed to
be successful, because of the complexity of the Year 2000 issue and
the interdependence of organizations using computer systems, there
can be no assurances that the Company's efforts, or those of third
parties with whom the Company interacts, have fully resolved all
possible Year 2000 issues. Failure to satisfactorily address the
Year 2000 issue could have a material adverse effect on the Company.
The most likely worst case Y2K scenario which management has
identified to date is that, due to unanticipated Y2K compliance
problems, the Company may be unable to bill its customers, in full
or in part, for services used. Should this occur, it would result
in a material loss of some or all gross revenue to the Company for
an indeterminable amount of time, which could cause the Company to
cease operations. The Company has not yet developed a contingency
plan to address this worst case Y2K scenario, and does not intend to
develop such a plan in the future.
ITEM 3 - DESCRIPTION OF PROPERTY
Effective June 1, 1998, the Company began leasing approximately
2,712 square feet of administrative office space in Costa Mesa,
California at a monthly rental rate of $5,017 per month. This
facility serves as the Company's headquarters and primary place of
business. The monthly rental rate is scheduled to increase to
$5,560 on June 1, 1999, through the end of the lease. The lease
expires on May 31, 2001.
In addition, on February 8, 1999, the Company entered into a
month-to-month lease for approximately 1,987 square feet of office
space for its customer service operation, at a monthly rental rate
of $3,676 per month, at its headquarters building in Costa Mesa.
The lease obligates the Company to pay the first three months of
rent and will automatically expire on February 7, 2000, unless
previously terminated either by the Company or by Lessor given
thirty (30) days written notice.
Due to anticipated growth, the Company is in the process of looking
for new space for its headquarters and customer service operations.
The Company believes that it will be able to locate such space on
reasonable rates and terms.
<PAGE>
ITEM 4 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of March 31, 1999, certain
information with respect to the Company's equity securities owned of
record or beneficially by (i) each Officer and Director of the
Company; (ii) each person who owns beneficially more than 5% of each
class of the Company's outstanding equity securities; and (iii) all
Directors and Executive Officers as a group.
Common
Title Stock Percent of
of Class Name and Address of Beneficial Owner Outstanding Outstanding
<TABLE>
<S> <C> <C> <C>
Common Stock Paul Sandhu1 5,069,088 33.99%
3151 Airway Avenue, Suite P-3
Costa Mesa, CA 92626.
Common Stock Eric Clemons2 1,819,522 12.20%
3151 Airway Avenue, Suite P-3
Costa Mesa, CA 92626.
Common Stock Mark Fleming3 10,000 0.07%
3151 Airway Avenue, Suite P-3
Costa Mesa, CA 92626.
Common Stock Gerald A. DeCiccio4 25,000 0.17%
3151 Airway Avenue, Suite P-3
Costa Mesa, CA 92626.
Common Stock Frank Naccarelli5 0 0.00%
3151 Airway Avenue, Suite P-3
Costa Mesa, CA 92626.
Common Stock Clay T. Whitehead 526,316 3.53%
3151 Airway Avenue, Suite P-3
Costa Mesa, CA 92626.
Common Stock Reet Trust6 2,000,000 13.41%
21520 Yorba Linda
Suite 6227
Yorba Linda, CA 92887
Common Stock Michelson Group7 1,416,042 9.90%
5000 Birch Street
Suite 9600
Newport Beach, CA 92660
All Directors and 7,449,926 52.04%
Officers as a Group (6)
</TABLE>
(1) Includes an aggregate of 200,000 options to acquire shares of
Company common stock in accordance with Mr. Sandhu's
employment agreement.
(2) Includes an aggregate of 100,000 options to acquire shares of
Company common stock in accordance with Mr. Clemons'
employment agreement.
(3) Does not include an aggregate of an additional 90,000 options
to acquire shares of Company common stock which vest in 1/3
increments each year beginning October 14, 1999 in accordance
with Mr. Fleming's employment agreement.
(4) Does not include an aggregate of an additional 125,000
options to acquire shares of Company common stock which vest
in 1/3 increments each year beginning December 1, 1999 in
accordance with Mr. DeCiccio's employment agreement.
(5) Does not include an aggregate of an additional 45,000 options
to acquire shares of Company common stock which vest 1/3
increments each year beginning March 15, 2000 in accordance
with Mr. Naccarelli's employment agreement.
(6) The trustee of the Reet Trust is Teg Sandhu, father of Paul
Sandhu. However, Paul Sandhu disclaims any beneficial
ownership to the shares held by the Reet Trust.
<PAGE>
(7) Consists of options to acquire 9.9% of the issued and
outstanding Company common stock calculated after completion
of the Company's initial private placement of securities.
The options vested according to the following schedule: (I)
one-fourth vested upon execution of the Company's agreement
with the Michelson Group, (ii) one-fourth when the Company
broke escrow on its private placement, (iii) one-fourth when
the Company's market capitalization reached $40 million, and
(iv) one-fourth when the Company breaks escrow on a round of
debt or equity financing of $3 million or more. Pursuant to
an amendment to the agreement in November 3, 1998, the
Company agreed to waive the requirements for the vesting of
the fourth tranche of options provided under this Agreement.
As of March 31, 1999, 1,135,000 out of a total of 1,416,042
vested options have been exercised, resulting in $11,350
charged to the Company for consulting fees rendered.
The Company believes that the beneficial owners of securities listed
above, based on information furnished by such owners, have sole
investment and voting power with respect to such shares, subject to
community property laws where applicable. Beneficial ownership is
determined in accordance with the rules of the Commission and
generally includes voting or investment power with respect to
securities. Shares of stock subject to options or warrants
currently exercisable, or exercisable within 60 days, are deemed
outstanding for purposes of computing the percentage of the person
holding such options or warrants, but are not deemed outstanding for
purposes of computing the percentage of any other person.
<PAGE>
ITEM 5 - DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
The following table sets forth the names and ages of the current
directors and executive officers of the Company, the principal
offices and positions with the Company held by each person and the
date such person became a director or executive officer of the
Company. The executive officers of the Company are elected annually
by the Board of Directors. The directors serve one year terms until
their successors are elected. The executive officers serve terms of
one year or until their death, resignation or removal by the Board
of Directors. There are no family relationships between any of the
directors and executive officers. In addition, there was no
arrangement or understanding between any executive officer and any
other person pursuant to which any person was selected as an
executive officer.
The directors and executive officers of the Company are as follows:
Name Age Positions
Paul Sandhu 37 Chief Executive Officer, President,
and Chairman of
the Board
Eric Clemons 27 Director, Chief Operating Officer,
Secretary and Treasurer
Gerald A. DeCiccio 41 Chief Financial Officer
Mark Fleming 40 Executive Vice President
Frank Naccarelli 44 Vice President of Sales
Clay T. Whitehead 57 Director
PAUL SANDHU is currently the Company's President and Chief
Executive Officer. Mr. Sandhu has been with GenTel since its
inception. Mr. Sandhu has over ten (10) years experience with
start-up and emerging growth companies. Mr. Sandhu was Co-Founder,
President and Co-Owner of Maximum Security ("Maximum"), a Security
and surveillance company he started in 1992. While at Maximum, Mr.
Sandhu actively managed a staff of over 200 employees. In 1997 Mr.
Sandhu sold the business to his partner. Mr. Sandhu graduated from
the University of Punjab in India with a degree in Engineering.
ERIC CLEMONS is currently the Company's Chief Operating
Officer. Mr. Clemons has been with GTC since its inception. Mr.
Clemons has over eight (8) years experience with sales and marketing
organizations. Mr. Clemons most recently was Vice President of
Marketing for Intelligent Electronic Communications managing a staff
of 50 employees. Mr. Clemons has attended The Wharton School of
Business executive management programs.
GERALD A. DECICCIO joined the Company in January, 1999 as
Chief Financial Officer. Mr. DeCiccio has over eighteen years
experience in the financial and accounting field. Prior to joining
GTC, Mr. DeCiccio was the Vice President of Finance and
Administration for National Telephone & Communications, Inc.,
("NT&C") a $150 million inter-exchange carrier and provider of
communications products and services. While at NT&C, Mr. DeCiccio
managed NT&C's finance, accounting, human resources and legal
departments. Between 1995 and 1997, Mr. DeCiccio was the Corporate
Controller for Newport Corporation, a $140 million multi-national
manufacturer / distributor of laser and optics products. Prior to
that, Mr. DeCiccio was the Director of Audit and Quality Systems for
Sunrise Medical, Inc., a $750 million multi-national manufacturer /
distributor of health care products. From 1980 to 1984, Mr.
DeCiccio was a Supervising Senior Accountant for Ernst and Young.
Mr. DeCiccio received his Bachelor of Science in Accounting from
Loma Linda University, and his Masters of Science in Finance and
Systems Technology from the University of Southern California. Mr.
DeCiccio is a Certified Public Accountant in the State of California.
MARK FLEMING joined the Company in October 1998 as
Executive Vice President. Mr. Fleming has sixteen years of business
strategy, planning, and analysis experience within the competitive
consumer products / services industries. For the past seven years,
<PAGE>
Mr. Fleming worked in the telecommunications industry, holding
several finance and marketing management positions at MCI. Some of
the key business / operational issues that Mr. Fleming managed while
at MCI included pricing strategy, market positioning, new product
development, sales channel and customer service performance reviews,
capital investment decisions and overall business planning /
analysis for Residential Markets and Local Services divisions. Mr.
Fleming received his Bachelor of Arts degree in Business
Administration from Principia College in 1980, and attained his
Masters in Business Administration, with honors from the University
of Southern California in 1986.
FRANK NACCARELLI joined GTC in March 1999 as its Vice
President of Sales. In this role, he will be responsible for
leading the Company's national sales efforts with large corporate
accounts as well as the Company's Commercial Sales Agent Programs.
Prior to joining the Company, Mr. Naccarelli worked with
MCI/WorldCom. During his 20 year term with MCI/WorldCom, Mr.
Naccarelli's duties involved responsibility for P & L management,
and regional and national sales. Mr. Naccarelli received his
Associates of Arts degree in Business Administration from the
University of Pittsburgh in 1978.
CLAY T. WHITEHEAD is currently president of Clay Whitehead
Associates, a strategic consulting and business development company
which concentrates on the telecommunications and media industries.
Clay Whitehead Associates primarily works with large companies to
develop business projects in the areas of telecommunications and
television. Mr. Whitehead has participated in the formation,
strategy development, regulatory posture, and financing of a number
of telecommunications businesses in the United States and
internationally. Mr. Whitehead has also served as a special
assistant to President Nixon, with policy responsibility for NASA,
the Atomic Energy Commission, and the National Science Foundation.
From 1971 to 1974, he was director of the U.S. Office of
Telecommunications Policy. From 1979 to 1983, Mr Whitehead founded
and was president of Hughes Communications, Inc., a subsidiary of
Hughes Aircraft Company. Mr. Whitehead also currently serves on the
board of directors for Prudential Funds.
<PAGE>
ITEM 6 - EXECUTIVE COMPENSATION
On December 1, 1998, the Company entered into an Employment
Agreement with Paul Sandhu, the Company's President and CEO, whereby
the Company will pay Mr. Sandhu an annual salary of $84,000.
Pursuant to the Agreement, Mr. Sandhu's salary shall increase to
$168,000 should the Company either maintain a positive cash flow for
two consecutive months, or the Company successfully completes a Form
SB-2 registered offering of its securities. In addition to his
annual salary, the Agreement confirmed the prior issuance of options
to purchase 200,000 shares of the Company's Common Stock at an
exercise price of $0.2375 previously granted to Mr. Sandhu pursuant
to an employment agreement between Mr. Sandhu and GenTel dated
January 5, 1998. These options vested upon execution of the
Agreement. The Agreement may be canceled at any time by either the
Company or Mr. Sandhu. However, if the Company terminates the
Agreement without cause, as defined in the Agreement, the Company
shall be obligated to pay Mr. Sandhu 25% of his annual salary as
severance.
On December 1, 1998, the Company entered into an Employment
Agreement with Eric Clemons, the Company's Chief Operating Officer
("COO"), whereby the Company will pay Mr. Clemons an annual salary
of $76,000. Pursuant to the Agreement, Mr. Clemons' salary shall
increase to $152,000 should the Company either maintain a positive
cash flow for two consecutive months, or the Company successfully
completes a Form SB-2 registered offering of its securities. In
addition to his annual salary, the Agreement confirmed the prior
issuance of options to purchase 100,000 shares of the Company's
Common Stock at an exercise price of $0.2375 previously granted to
Mr. Clemons pursuant to an employment agreement between Mr. Clemons
and GenTel dated January 5, 1998. These options vested upon
execution of the Agreement. The Agreement may be canceled at any
time by either the Company or Mr. Clemons. However, if the Company
terminates the Agreement without cause, as defined in the Agreement,
the Company shall be obligated to pay Mr. Clemons 25% of his annual
salary as severance.
On December 1, 1998, the Company entered into an Employment
Agreement with Gerald DeCiccio, the Company's Chief Financial
Officer, whereby the Company will pay Mr. DeCiccio an annual salary
of $105,000. Pursuant to the Agreement, Mr. DeCiccio's salary shall
increase to $144,000 should the Company either maintain a positive
cash flow for two consecutive months, or the Company successfully
completes a Form SB-2 registered offering of its securities. In
addition to his annual salary, the Agreement grants Mr. DeCiccio
options to purchase 150,000 shares of the Company's Common Stock.
Twenty-five thousand (25,000) of the options are set to vest six (6)
months from the execution of the Agreement at an exercise price of
$.01, expiring three years from the date of vesting if not
exercised. The remaining 125,000 options are scheduled to vest in
1/3 increments each following year provided that Mr. DeCiccio is
employed with the Company. The Agreement may be canceled at any
time by either the Company or Mr. DeCiccio. However, if the Company
terminates the Agreement without cause, as defined in the Agreement,
the Company shall be obligated to pay Mr. DeCiccio 25% of his annual
salary as severance.
On October 14, 1998, the Company entered into an Employment
Agreement with Mark Fleming, the Company's Executive Vice-President,
whereby the Company will pay Mr. Fleming an annual salary of
$70,000. Pursuant to the Agreement, Mr. Fleming's salary shall
increase to $107,000 should the Company either maintain a positive
cash flow for two consecutive months, or the Company successfully
completes a Form SB-2 registered offering of its securities. In
addition to his annual salary, the Agreement grants Mr. Fleming
options to purchase 100,000 shares of the Company's Common Stock.
Ten thousand (10,000) of the options are set to vest six (6) months
from the execution of the Agreement at an exercise price of $.01,
expiring three years from the date of vesting if not exercised. The
remaining 90,000 options are scheduled to vest in 1/3 increments
each following year provided that Mr. Fleming is employed with the
Company. The Agreement may be canceled at any time by either the
Company or Mr. Fleming. However, if the Company terminates the
Agreement without cause, as defined in the Agreement, the Company
shall be obligated to pay Mr. Fleming 25% of his annual salary as
severance.
On March 3, 1999, the Company entered into an Employment Agreement
with Frank Naccarelli, the Company's Vice-President of Sales,
whereby the Company will pay Mr. Naccarelli an annual salary of
$85,000. In addition to his annual salary, the Agreement grants Mr.
Naccarelli options to purchase 45,000 shares of the Company's Common
Stock at $5.50 per share. Fifteen Thousand (15,000) options are
scheduled to vest in 1/3 increments each following year provided
that Mr. Naccarelli is employed with the Company. The Agreement may
be canceled at any time by either the Company or Mr. Naccarelli.
However, if the Company terminates the Agreement without cause, as
defined in the Agreement, the Company shall be obligated to pay Mr.
Naccarelli 25% of his annual salary as severance.
<PAGE>
SUMMARY COMPENSATION TABLE
The Summary Compensation Table shows certain compensation
information for services rendered in all capacities for the six
months ending December 31, 1998, the period ended June 30, 1998, and
the fiscal year ended December 31, 1997. Other than as set forth
herein, no executive officer's salary and bonus exceeded $100,000 in
any of the applicable years. The following information includes the
dollar value of base salaries, bonus awards, the number of stock
options granted and certain other compensation, if any, whether paid
or deferred.
SUMMARY COMPENSATION TABLE
Annual Compensation Long Term Compensation
Awards Payouts
------- ---------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Restricted Securities LTIP All Other
Other Annual Stock Underlying PAYOUTS Compensation
Name and Salary Bonus Compensation Awards Options SARs ($) ($)
Principal Position Year ($) ($) ($) ($) SARs (#)
Paul Sandhu 1998 0 -0- -0- -0- -0- -0- -0-
(President, CEO) (12/31)
1998 40,000 -0- -0- 76,000 200,000 -0- -0-
(6/30)
1997 n/a -0- -0- -0- -0- -0- -0-
Eric Clemons 1998 11,500 -0- -0- -0- -0- -0- -0-
(COO) (12/31)
1998 40,500 -0- -0- 19,000 100,000 -0- -0-
(6/30)
1997 n/a -0- -0- -0- -0- -0- -0-
</TABLE>
<PAGE>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<S> <C> <C> <C> <C>
NUMBER OF SECURITIES PERCENT OF TOTAL Excercise
UNDERLYING OPTIONS/SAR'S OPTIONS/SAR'S GRANTED TO of Base Price
GRANTED (#) EMPLOYEES IN FISCAL YEAR ($/SH) EXPIRATION DATE
Paul Sandhu 200,000 67% 0.2375 January, 2003
Eric Clemons 100,000 33% 0.2375 January, 2003
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
(Individual Grants)
Value of
Number of Unexercised Unexercised In-
Securities Underlying The-Money
Options/SARs At Options/SARs
FY-End At FY-End ($)
Shares Acquired On Exercisable/ Exercisable/
Name Exercise (#) Value Realized ($) Unexercisable Unexercisable
Paul Sandhu -0- -0- 200,000 / 0 47,500 / 0
Eric Clemons -0- -0- 100,000 / 0 23,750 / 0
</TABLE>
COMPENSATION OF DIRECTORS
For the fiscal years ended 1996, 1997 and 1998, and the six months
ended December 31, 1998, Directors of the Company received no
compensation. Beginning with the third quarter of fiscal year 1999,
Directors will receive $1,500 and 2,500 shares of the Company's
restricted (as that term is defined by Rule 144 of the Securities
Act of 1933) Common Stock per quarter.
ITEM 7 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On June 17, 1998, the Company entered into a Corporate Development
Agreement with the Michelson Group. As part of the Agreement,
Michelson has agreed to provide consultation and corporate
development services on behalf of the Company. In return, the
Company has agreed to compensate the Michelson Group in the amount
of $6,500 per month in addition to warrants to purchase up to 9.9%
of the outstanding shares of the Common Stock of the Company (as
calculated following the completion of the July 21, 1998 private
placement) at an exercise price of $0.01. Pursuant to the
Agreement, the Michelson Group has agreed that the exercise of the
warrants adhere to the following schedule: one fourth of the
warrants can be exercised upon execution of the Agreement; an
additional one fourth when the Company breaks escrow on its initial
private placement of securities; an additional one fourth once the
Company's market capitalization reaches $40,000,000; and the
remaining one fourth upon the Company breaking escrow on a debt or
equity financing of $3,000,000 or more. Pursuant to an amendment to
the agreement in November 3, 1998, the Company agreed to waive the
requirements for the vesting of the fourth tranche of options
provided under this Agreement. As of March 31, 1999, 1,135,000 out
of a total of 1,416,042 vested options have been exercised,
resulting in $11,350 charged to the Company for consulting fees
rendered.
On August 31, 1998, the Company (which at the time was designated
Bobernco, Inc., a Nevada corporation) acquired all of the
outstanding common stock of GenTel Communications, Inc., a Colorado
corporation in a business combination described as a "reverse
acquisition." As part of the reorganization, the Company issued
8,986,950 shares of its Common Stock to the shareholders of GenTel
in exchange for all of the outstanding shares of Common Stock of
GenTel. Such shares include the shares owned by officers and
directors of the Company as set forth in the Section "Security
Ownership of Certain Beneficial Owners and Management" hereunder.
<PAGE>
Between 1989 and 1994, Mr. Clemons was a licensed NASD broker. As a
broker, Mr. Clemons was subject to three claims related to such
engagement and subsequently an administrative action by the NASD
related to his work as a licensed broker. Mr. Clemons was found
liable for an award of $4,000 on one of the actions and subsequently
was fined $65,000 and suspended for a period of two years by the NASD.
ITEM 8 - DESCRIPTION OF SECURITIES
COMMON STOCK
The Company's Articles of Incorporation authorize the issuance of
50,000,000 shares of Common Stock, $0.001 par value per share, of
which 14,914,472 were outstanding as of May 31, 1999. Pursuant to
the Agreement and Plan of Reorganization dated August 31, 1998, the
Company approved a 2-for-1 reverse stock split of its Common Stock.
All references to the numbers of shares of the Company's Common
Stock are adjusted to reflect the 2-for-1 reverse split of the
Company's Common Stock. Holders of shares of Common Stock are
entitled to one vote for each share on all matters to be voted on by
the stockholders. Holders of Common Stock have no cumulative voting
rights. Holders of shares of Common Stock are entitled to share
ratably in dividends, if any, as may be declared, from time to time
by the Board of Directors in its discretion, from funds legally
available therefor. In the event of a liquidation, dissolution or
winding up of the Company, the holders of shares of Common Stock are
entitled to share pro rata all assets remaining after payment in
full of all liabilities. Holders of Common Stock have no preemptive
rights to purchase the Company's common stock. There are no
conversion rights or redemption or sinking fund provisions with
respect to the common stock. All of the outstanding shares of
Common Stock are fully paid and non-assessable.
TRANSFER AGENT
The transfer agent for the Common Stock is Alpha Tech Stock
Transfer, 4505 South Wasatch Blvd., Suite 205, Salt Lake City, UT
84124.
<PAGE>
PART II
ITEM 1 - MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON
EQUITY AND OTHER SHAREHOLDER MATTERS
MARKET INFORMATION
The following table sets forth the high and low bid prices for
shares of the Company Common Stock for the periods noted, as
reported by the National Daily Quotation Service and the NASDAQ
Bulletin Board. Quotations reflect inter-dealer prices, without
retail mark-up, mark-down or commission and may not represent actual
transactions. The Company's Common Stock was not listed on the
NASDAQ Bulletin Board during 1997. On April 21, 1998, the Company's
Common Stock began listing on the NASDAQ exchange under the trading
symbol BBRI. However, the Company's Common Stock did not begin
trading until after the Company merged with GenTel on August 31,
1998 wherein the trading symbol for the Company's Common Stock
changed to GTCC.
BID PRICES
YEAR PERIOD HIGH LOW
1998 First Quarter. . . . . n/a n/a
Second Quarter . . . . n/a n/a
Third Quarter. . . . . n/a n/a
Fourth Quarter . . . . 4.41 3.33
1999 First Quarter. . . . . 11.125 3.25
NUMBER OF SHAREHOLDERS
The number of beneficial holders of record of the Common Stock of
the Company as of the close of business on March 31, 1999 was
approximately 153. Many of the shares of the Company's Common Stock
are held in a "street name" and consequently reflect numerous
additional beneficial owners.
DIVIDEND POLICY
To date, the Company has declared no cash dividends on its Common
Stock, and does not expect to pay cash dividends in the next term.
The Company intends to retain future earnings, if any, to provide
funds for operation of its business.
ITEM 2 - LEGAL PROCEEDINGS
The Company may from time to time be involved in various claims,
lawsuits, disputes with third parties, actions involving allegations
of discrimination, or breach of contract actions incidental to the
operation of its business. The Company is not currently involved in
any such litigation which it believes could have a materially
adverse effect on its financial condition or results of operations.
ITEM 3 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
Prior to the acquisition of GenTel by Bobernco as previously
described, the Company engaged Barry L. Friedman, P.C., Certified
Public Accountants ("Mr. Friedman"), to audit the Company' s
financial statements for the fiscal years ended December 31, 1996,
December 31, 1997, and June 30, 1998. Mr. Friedman's opinions on
the financial statements for these periods included modifications
relating to going concern. GenTel's Certified Public Accountants
were Corbin & Wertz.
Subsequent to the acquisition of GenTel by Bobernco, Corbin & Wertz,
was retained by the Company as their principal accountant to audit
the Company's financial statements effective March 23, 1999. There
have been no disagreements between Barry L. Friedman and Management
of the type required to be reported under this Item 3 since the date
of Mr. Friedman's engagement.
<PAGE>
ITEM 4 - RECENT SALES OF UNREGISTERED SECURITIES
On August 31, 1998, the Company (which at the time was designated
Bobernco, Inc., a Nevada corporation ("Bobernco") acquired all of
the outstanding common stock of GenTel Communications, Inc., a
Colorado corporation ("GenTel") in a business combination described
as a "reverse acquisition". As part of the reorganization, the
Company issued 8,986,950 shares of its Common Stock to the
shareholders of GenTel in exchange for all of the outstanding shares
of Common Stock of GenTel. Such shares include the shares owned by
officers and directors of the Company as set forth in the Section
"Security Ownership of Certain Beneficial Owners and Management"
hereunder. This issuance was conducted under an exemption under
Section 4(2) of the Securities Act of 1933.
In August, 1998, the Company issued an aggregate of 11,000 shares of
"restricted" (as that term is defined under Rule 144 of the
Securities Act of 1933) Common Stock to Elizabeth Hurtado and Azad
Rob, two (2) employees of the Company, in lieu of salary and as a
retention bonus valued at $5,225. This issuance was conducted under
an exemption under Section 4(2) of the Securities Act of 1933.
In September and November, 1998, the Company issued 1,135,000 shares
of "restricted" (as that term is defined under Rule 144 of the
Securities Act of 1933) Common Stock to the Michelson Group,
pursuant to a Corporate Development Agreement entered into between
the Company and the Michelson Group. This issuance was conducted
under an exemption under Section 4(2) of the Securities Act of 1933.
In November, 1998, the Company issued 7,300 shares of its Common
Stock to MRC Legal Services Corp., the Company's securities counsel,
under Rule 504 of Regulation D promulgated under the Securities Act
of 1933, in consideration for legal services rendered.
In November, 1998, the Company issued 50,000 shares of "restricted"
(as that term is defined under Rule 144 of the Securities Act of
1933) Common Stock to Dan W. Baer in consideration for deferment of
$27,769.60 in rent owed by the Company for its headquarters in Costa
Mesa, CA. This issuance was conducted under an exemption under
Section 4(2) of the Securities Act of 1933.
In November, 1998, the Company issued 40,000 shares of "restricted"
(as that term is defined under Rule 144 of the Securities Act of
1933) Common Stock to Benjamin Abelson pursuant to a convertible
note entered into between the Company and Mr. Abelson in the amount
of $80,000. This issuance was conducted under an exemption under
Section 4(2) of the Securities Act of 1933.
In December, 1998, the Company issued 30,000 shares of "restricted"
(as that term is defined under Rule 144 of the Securities Act of
1933) Common Stock to Lance Steinhart, Esq., the Company's Federal
Communication Commission regulatory counsel, an accredited investor,
in consideration for legal services rendered. The issuance was
exempt under Section 4(2) of the Securities Act of 1933.
In January, 1999, the Company issued 8,750 shares of its Common
Stock to MRC Legal Services Corp., the Company's securities counsel,
under Rule 504 of Regulation D promulgated under the Securities Act
of 1933, in consideration for legal services rendered.
In February, 1999, the Company issued 7,000 shares of "restricted"
(as that term is defined under Rule 144 of the Securities Act of
1933) Common Stock to MRC Legal Services Corp., the Company's
securities counsel, in consideration for legal services rendered.
The issuance was exempt under Rule 506 of Section 4(2) of the
Securities Act of 1933.
In February, 1999, the Company completed a private placement
offering of 1,535,000 "restricted" (as that term is defined under
Rule 144 of the Securities Act of 1933) shares of the Company's
Common Stock under Rule 506 of Regulation D and Section 4(2) of the
Securities Act of 1933 to "accredited" investors at a price of $1.00
per share, resulting in net proceeds to the Company of approximately
$1,330,000.
In February, 1999, the Company issued 46,000 shares of "restricted"
(as that term is defined under Rule 144 of the Securities Act of
1933) Common Stock to Elwood Sprenger in accordance with a
consulting Agreement entered into between the Company and Mr.
Sprenger whereby the Company agreed to grant Mr. Sprenger 150,000
options to purchase the Company's Common Stock at an exercise price
of $1.00. The issuance was exempt under Section 4(2) of the
Securities Act of 1933.
<PAGE>
In March, 1999, the Company issued 25,000 shares of "restricted" (as
that term is defined under Rule 144 of the Securities Act of 1933)
Common Stock to the Zomaya Group in exchange for advertising
services. The issuance was exempt under Section 4(2) of the
Securities Act of 1933.
In March, 1999, the Company issued 50,000 shares of "restricted" (as
that term is defined under Rule 144 of the Securities Act of 1933)
Common Stock to Transglobal Capital Corporation ("Transglobal"),
pursuant to an Investment Banking Agreement entered into between the
Company and Transglobal. The issuance was exempt under Section 4(2)
of the Securities Act of 1933.
On May 4, 1999, the Company issued 526,316 shares of "restricted"
(as that term is defined under Rule 144 of the Securities Act of
1933) to Clay T. Whitehead, a director of the Company, pursuant to
an option agreement entered into between the Company and Mr.
Whitehead in April, 1999 which granted Mr. Whitehead an option to
purchase up to 526,316 shares of the Company's Common Stock at an
excercise price of $0.475 per share. A total of approximately
$1,328,950 of compensation expense will be recorded at the date of
grant in April, 1999. The issuance was exempt under Section 4(2) of
the Securities Act of 1933.
ITEM 5 - INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Corporation Laws of the State of Nevada and the Company's Bylaws
provide for indemnification of the Company's Directors for
liabilities and expenses that they may incur in such capacities. In
general, Directors and Officers are indemnified with respect to
actions taken in good faith in a manner reasonably believed to be
in, or not opposed to, the best interests of the Company, and with
respect to any criminal action or proceeding, actions that the
indemnitee had no reasonable cause to believe were unlawful.
Furthermore, the personal liability of the Directors is limited as
provided in the Company's Articles of Incorporation.
Beginning in March, 1999, the Company maintains a policy of
Directors and Officers Liability Insurance with an aggregate
coverage limit of $2,000,000.
<PAGE>
PART F/S
INDEX TO FINANCIAL STATEMENTS
The Financial Statements required by this Item are included at the
end of this report beginning on page F-1 as follows:
GenTel Communications, Inc.
Audited Financial Statements
for the Periods
Ended June 30, 1998 and 1999 . . . . . . . . . F-1
GTC Telecom Corp. Pro Forma
Combined Financial Statements
(Unaudited) . . . . . . . . . . . . . . . . . . F-14
Bobernco, Inc. Audited Financial
Statements for the Fiscal
Periods Ended June 30, 1998,
December 31, 1997 and December 31, 1996 . . . . F-21
Interim Financial Statements of
GTC Telecom Corp. for Period
Ending March 31, 1999 (Unaudited) . . . . . . . F-30
The above financial statements are presented pursuant to
an Agreement and Plan of Reorganization dated August 31,
1998 which GenTel Telecommunication, Inc. (the "Company")
merged with and into Bobernco, Inc. For financial
reporting purposes, the Company is considered the acquiror
and therefore the predecessor, and Bobernco, Inc. is
considered the acquiree, and therefore, its financial
statements are included pursuant to Item 310 (c) of
Regulation S-B.
PART III
ITEM 1 - INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION
*(2) Agreement and Plan of Reorganization dated
August 1998 between
Bobernco, Inc. and GenTel Communications, Inc.
*(3.1) Articles of Incorporation
*(3.2) Certificate of Amendment of Articles of
Incorporation, filed with the
Nevada Secretary of State on March 30, 1998
*(3.3) Certificate of Amendment of Articles of
Incorporation filed with the
Nevada Secretary of State on September 3, 1998
*(3.4) Bylaws of Bobernco, Inc. (The "Corporation")
*(10.1) Michelson Group Corporate Development
Agreement, dated June 17,
1998, including amendment
*(10.2) One Plus Billing and Information
Management, Service Agreement,
dated September 8, 1998, including
addendum
*(10.3) MCI/WorldCom Telecommunication Resale Contracts
*(10.3.1) Program Enrollment
*(10.3.2) Rate and Discount Schedule
*(10.3.3) Service Schedule
*(10.3.4) Telecommunications Service
Agreement
*(10.4) Investment Banking Agreement, dated November 19, 1998
*(10.5) Employment Agreement by and between GTC Telecom, Inc.,
a Nevada corporation and Mark Fleming, dated October
14, 1998
*(10.6) Employment Agreement by and between GTC
Telecom, Inc., a Nevada corporation and Eric Clemons,
dated December 1, 1998
*(10.7) Employment Agreement by and between GTC
Telecom, Inc., a Nevada
corporation and Jerry DeCiccio, dated
December 1, 1998
*(10.8) Employment Agreement by and between GTC
Telecom, Inc., a Nevada corporation and
Paul Sandhu, dated December 1, 1998
*(10.9) Employment Agreement by and between GTC
Telecom, Inc., a Nevada
corporation and Frank Naccarelli, dated
March 3, 1999
*(10.10) Lease dated February 5, 1999 between
Southern California Sunbelt
Developers, Inc., and GTC Telecom, a Nevada
corporation; Eric Clemons; and Paul Sandhu Jointly and
Severally as Tenant ("Tenant")
relating to premises at Suite K-104 The
John Wayne Executive Guild Center, 3151 Airway Avenue,
Costa Mesa, California 92626
*(10.11) Global Pacific Internet Reseller
Agreement between Global Pacific
Internet and GTC Telecom, dated
January 25, 1999
*(10.12) Telecommunications Service
Agreement by and between
International Telephone and
Electronics, LLC and GTC Telecom
*(10.13) Sales Representative Agreement
between GTC Telecom, Inc. and
OhGolly.com, Inc., dated March 9, 1999
*(10.14) Purchase and Services Agreement
between GTC Telecom, Inc. and
Service One Communications, Inc.,
dated March 9, 1999
*(10.15) Branded Services Agreement between
Epoch Networks, Inc. dba Epoch
Internet and GTC Telecom, Inc.,
dated February, 1999
*(10.16) Lease dated May 22, 1998 between
Southern California Sunbelt
Developers, Inc., and GenTel
Communications, Inc., a Colorado
Corporation; Eric Clemons; and Paul
Sandhu Jointly and Severally as
Tenant ("Tenant") relating to
premises at Suite P-3 The John
Wayne Executive Guild Center, 3151
Airway Avenue, Costa Mesa, CA 92626
(10.17) Agreement for Purchase and Sale of
Equipment dated April 28, 1999
between GTC Telecom and Williams
Communications, Inc.
(10.18) Ascend Financing Agreement
(10.19) Purchase Order and Terms and Conditions
Agreement between Level 3
Communications and GTC Telecom
____________________
* Previously Filed
<PAGE>
ITEM 2 - DESCRIPTION OF EXHIBITS
Not applicable
SIGNATURES
In accordance with Section 12 of the Securities Exchange
Act of 1934, the registrant caused this registration
statement to be signed on its behalf by the undersigned,
thereunto duly authorized.
GTC TELECOM CORP.
Date: June 10, 1999
By: /s/ Paul Sandhu
____________________
Paul Sandhu
President & Chief Executive Officer
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors
GenTel Communications
We have audited the accompanying balance sheet of GenTel
Communications, formerly known as GenX, LLC, (a development stage
company) (the "Company") as of June 30, 1998, and the related
statements of operations, stockholders' equity (deficit) and cash flows for
the periods ended June 30, 1998 and 1997 and for the period from
May 29, 1997 (date of inception) through June 30, 1998. These
financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of the Company as of June 30, 1998, and the results of its
operations and its cash flows for the periods ended June 30, 1998
and 1997 and for the period from May 29, 1997 (date of inception)
through June 30, 1998 in conformity with generally accepted
accounting principles.
As discussed in Note 1, the Company has been in the development
stage since its inception on May 29, 1997. Realization of a
major portion of the assets is dependent upon the Company's
ability to raise funds through debt or equity offerings, and the
success of future operations. These factors raise substantial
doubt about the Company's ability to continue as a going concern.
The financial statements do not include any adjustments that
might result from the outcome of this uncertainty.
/s/ Corbin & Wertz
CORBIN & WERTZ
Irvine, California
March 4, 1999
F-1
<PAGE>
GENTEL COMMUNICATIONS
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
JUNE 30, 1998
ASSETS
Current assets:
Cash $ 3,892
Stock subscription receivable 142,500
Total current assets 146,392
Computer equipment, net of accumulated
dereciation of $1,701 15,693
$ 162,085
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable $ 7,550
Accrued expenses 90,525
Total current liabilities 98,075
Convertible note payable to stockholder 80,000
Total liabilities 178,075
Commitments and contingencies
Stockholders' deficit:
Common stock, $0.0001 par value;
100,000,000 shares authorized;
8,986,950 shares issued and
outstanding (including 313,010
shares subscribed) 899
Additional paid-in capital 434,576
Deficit accumulated during the development stage (451,465)
Total stockholders' deficit (15,990)
$ 162,085
F-2
<PAGE>
GENTEL COMMUNICATIONS
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
<TABLE>
<S> <C> <C> <C>
MAY 29, 1997 MAY 29, 1997
(DATE OF (DATE OF
YEAR ENDED JUNE 30, INCEPTION) INCEPTION)
JUNE 30, THROUGH THROUGH
1998 JUNE 30, 1997 JUNE 30,
Net revenues $ 497,312 $ - $ 497,312
Cost of sales 447,312 - 447,312
Gross profit 50,000 - 50,000
Selling, general
and administrative
expenses 500,665 - 550,665
Loss before
provision
for taxes (450,665) - (450,665)
Provision for taxes 800 - 800
Net loss $(451,465) $ - (451,465)
Basic and diluted net
loss per common share $ (0.05) $ - (0.05)
Basic and diluted weighted
average common shares
outstanding 8,511,610 8,089,488 8,479,139
</TABLE>
F-3
<PAGE>
GENTEL COMMUNICATIONS
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE YEAR ENDED JUNE 30, 1998 AND
THE PERIOD FROM MAY 29, 1997 (DATE OF INCEPTION)
THROUGH JUNE 30, 1997
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
DEFICIT
ACCUMULATED
ADDITIONAL DURING THE TOTAL
MEMBERS' INTEREST COMMON STOCK PAID-IN DEVELOPMENT STOCKHOLDERS'
SHARES AMOUNT SHARES AMOUNT CAPITAL STAGE EQUITY
Balance, May 29, 1997
(date of inception) - $ - - $ - $ - $ - $ -
Founders' capital
contribution 736.5 750 - - - - 750
Balance, June 30, 1997 736.5 750 - - - - 750
Members' cash
contributions:
August 1997 4 20,000 - - - - 20,000
September 1997 4 20,000 - - - - 20,000
October 1997 5 25,000 - - - - 25,000
November 1997 7 35,000 - - - - 35,000
December 1997 6 30,000 - - - - 30,000
January 1998 2 10,000 - - - - 10,000
Subscribed 35.5 177,500 - - - - 177,500
Offering costs - (49,025) - - - - (49,025)
Balance, February 3, 1998 800 269,225 - - - - 269,225
Conversion of GenX, LLC
to GenTel Communications
(conversion rate of
10,983.69 to 1) on
February 3, 1998 (800) (269,225) 8,786,950 879 268,346 - -
Estimated fair market
value of options
granted to employees
for compensation
on January 5, 1998 - - - - 71,250 - 71,250
Estimated fair market
value of restricted
common stock issued
to CEO and Vice
President for
compensation on
June 30, 1998 - - 200,000 20 94,980 - 95,000
Net loss - - - - - (451,465) (451,465)
Balance, June 30, 1998 - $ - 8,986,950 $ 899 $434,576 $(451,465) $(15,990)
F-4
<PAGE>
GENTEL COMMUNICATIONS
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
</TABLE>
<TABLE>
<S> <C> <C> <C>
MAY 29, 1997 MAY 29, 1997
(DATE OF INCEPTION) (DATE OF INCEPTION)
YEAR ENDED THROUGH THROUGH
JUNE 30, 1998 JUNE 30, 1997 JUNE 30, 1998
Cash flows from operating activities:
Net loss $(451,465) $ - $ (451,465)
Estimated fair market value of options
granted to employee for compensation 71,250 - 71,250
Estimated fair market value of stock issued
to CEO and Vice President for compensation 95,000 - 95,000
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation 1,701 - 1,701
Changes in operating assets and
liabilities:
Accounts payable 7,550 - 7,550
Accrued expenses 70,000 - 70,000
Net cash used in operating activities (205,964) - (205,964)
Cash flows used in investing activities:
Purchases of computer equipment (17,394) - (17,394)
Cash flows from financing activities:
Founders' capital contribution - 750 750
Proceeds from sale of GenX units, net of
offering costs of $28,500 146,500 - 146,500
Notes payable to stockholder 80,000 - 80,000
Net cash provided by financing activities 226,500 750 227,250
Net increase in cash 3,142 750 3,892
Cash at beginning of period 750 - -
Cash at end of period $ 3,892 $ 750 $ 3,892
Supplemental disclosure of cash flow information -
Cash paid during period for:
Interest $ - $ - $ -
Income and franchise taxes $ - $ - $ -
</TABLE>
Supplemental disclosure on non-cash investing and
financing activities:
During the year ended June 30, 1998, the Company issued
313,010 shares of common stock in exchange for
a $142,500 stock subscription receivable, net of accrued offering costs
of $20,525. All amounts were collected and paid subsequent to
June 30, 1998.
F-5
<PAGE>
GENTEL COMMUNICATIONS
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
FOR THE PERIODS ENDED JUNE 30, 1998 AND 1997 AND
FOR THE PERIOD FROM MAY 29, 1997 (DATE OF INCEPTION)
THROUGH JUNE 30, 1998
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
PRINCIPLES
Organization and Operations
GenTel Communications ("GenTel") (a development stage company)
(the "Company"), was formerly known as GenX, LLC, ("GenX").
GenX, a Delaware limited liability company was formed on
May 29, 1997. GenTel Communications, a Colorado corporation,
was formed December 9, 1997 and was inactive until the
reorganization. Effective February
3, 1998 and pursuant to a plan of reorganization, the members of
GenX converted their members' interest into common stock of
GenTel and GenX was dissolved. These financial statements
include the activity of GenX from the date of GenX's inception,
with operations commencing in August 1997. The Company has been
in the development stage since its formation. During the
development stage, the Company is primarily engaged
in raising capital, obtaining financing, advertising and
promoting the Company, and administrative functions. The
Company intends to provide long distance service primarily to
small and medium-sized businesses and residential customers
throughout the United States. The Company's long distance
service offerings include outbound
service, inbound toll-free 800 service, dedicated private line
services for data, wireless T1 service and website development
and hosting.
Going Concern
The accompanying financial statements have been prepared assuming
the Company will continue as a going concern, which contemplates,
among other things, the realization of assets and satisfaction of
liabilities in the normal course of business. The Company's losses
from operations through June 30, 1998 and lack of operational
history, among other matters, raise substantial doubt about its
ability to continue as a going concern. The Company intends to fund
operations through debt and equity financing arrangements (see Note
7) which management believes will be sufficient to fund its capital
expenditures, working capital requirements and other cash
requirements for the fiscal year ending June 30, 1999.
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 disclosures of contingent
assets and liabilities at the date of the financial statements,
as well as the reported
amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Fair Value of Financial Instruments
Financial Accounting Standards Board ("FASB") issued Statement of
Financial Accounting Standards No. 107 ("SFAS 107"), "Disclosures
About Fair Value of Financial Instruments." SFAS 107 requires
disclosure of fair value information about financial instruments
when it is practicable to estimate that value. The carrying
amount of the Company's cash, receivables, trade payables, accrued
expenses and note payable to stockholder approximates their
estimated fair values due to the short-term maturities
of those financial instruments.
F-6
<PAGE>
GENTEL COMMUNICATIONS
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
FOR THE PERIODS ENDED JUNE 30, 1998 AND 1997 AND
FOR THE PERIOD FROM MAY 29, 1997 (DATE OF INCEPTION)
THROUGH JUNE 30, 1998
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
PRINCIPLES, CONTINUED
Risks and Uncertainties
The Company is a start up company subject to the substantial
business risks and uncertainties inherent to such an entity,
including the potential risk of business failure.
Year 2000
The Year 2000 issue relates to limitations in computer systems
and applications that may prevent proper recognition of the Year
2000. The potential effect of the Year 2000 issue on the Company
and its business partners will not be fully determinable until
the Year 2000 and thereafter. If Year 2000 modifications are
not properly completed either by the Company or entities with which
the Company conducts business, the Company's revenues and financial
condition could be adversely impacted.
Dependent on Key Customers
The Company is not dependent on any single customer for a
significant portion of its annual sales. The Company's customer
base changes on a continuous basis as new customers are added or
removed.
Major Suppliers
The Company does not own its own long distance network, and
pursuant to the Company's contract with MCI/WorldCom, the Company
currently depends primarily upon MCI/WorldCom to provide for the
transmission of phone calls by its customers and to provide the
call detail records upon which the Company bases its customers
billings. Under the terms of the three-year contract entered
into with MCI/WorldCom on August 10, 1998, the Company is
obligated to a minimum monthly revenue commitment of $10,000
commencing March 1999. The contract expires on September 30, 2001.
Pursuant to the terms of the contract with MCI/WorldCom, the
Company must pay liquidated damages in an amount equal to the
aggregate minimum revenue requirement for the
remaining term of the contract if the Company terminates the
contract prior to the expiration date. Although the Company
believes that its relationship with MCI/WorldCom are strong and
should remain so with continued contract compliance, the
termination of the Company's contract with MCI/WorldCom, the loss of
telecommunications services provided by MCI/WorldCom, or a
reduction in the quality of service the Company receives from
MCI/WorldCom could have a material adverse effect on the Company's
results of operations. In addition, the accurate and prompt billing
of the Company's customers is dependent upon the timeliness
and accuracy of call detail records provided to the Company
by MCI/WorldCom.
Computer Equipment
Computer equipment is stated at cost. Depreciation is computed
using the straight-line method over the useful life of 3 years.
F-7
<PAGE>
GENTEL COMMUNICATIONS
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
FOR THE PERIODS ENDED JUNE 30, 1998 AND 1997 AND
FOR THE PERIOD FROM MAY 29, 1997 (DATE OF INCEPTION)
THROUGH JUNE 30, 1998
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
PRINCIPLES, CONTINUED
Betterments, renewals, and extraordinary repairs that extend the
lives of the assets are capitalized; other repairs and
maintenance charges are expensed as incurred. The cost and related
accumulated depreciation applicable to assets retired are removed from
the accounts, and the gain or loss on disposition is recognized in
current operations.
During 1995, the FASB issued Statement of Financial Accounting
Standards No. 121 ("SFAS 121"), "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets To Be Disposed Of,"
which requires that long-lived assets and certain identifiable
intangibles to be held and used by an entity be reviewed for
impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. In
accordance with the provisions of SFAS 121, the Company regularly
reviews long-lived assets and intangible assets for impairment
whenever events or changes in circumstances indicate that the
carrying amount of the assets may not be recoverable. Based on
its analysis, the Company believes that no impairment of the carrying
value of its long-lived assets existed at June 30, 1998.
Stock-Based Compensation
During 1995, the FASB issued Statement of Financial Accounting
Standards No. 123 ("SFAS 123"), "Accounting for Stock-Based
Compensation," which defines a fair value based method of
accounting for stock-based compensation. However, SFAS 123 allows
an entity to continue to measure compensation cost related
to stock and stock options issued to employees using the intrinsic
method of accounting prescribed by Accounting Principles Board Opinion
No. 25 ("APB 25"), "Accounting for Stock Issued to Employees." Entities
electing to remain with the accounting method of APB 25 must make pro
forma disclosures of net income (loss), as if the fair value method of
accounting defined in SFAS 123 had been applied. The Company has
elected to account for its stock-based compensation to employees
under APB 25.
Revenue Recognition
The Company recognizes revenue during the month in which services
or products are delivered, as follows:
The Company's long distance telecommunications service revenues
are generated when customers make long distance telephone calls from
their business or residential telephones or by using any of the
Company's telephone calling cards. Proceeds from prepaid
telephone calling cards are recorded as deferred revenues when the
cash is received, and recognized as revenue as the telephone service is
utilized. The reserve for deferred revenues, if any, is carried
on the balance sheet as an accrued liability.
F-8
<PAGE>
GENTEL COMMUNICATIONS
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
FOR THE PERIODS ENDED JUNE 30, 1998 AND 1997 AND
FOR THE PERIOD FROM MAY 29, 1997 (DATE OF INCEPTION)
THROUGH JUNE 30, 1998
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
PRINCIPLES, CONTINUED
Earnings Per Share
The Company has adopted Statement of Financial Accounting
Standards No. 128 ("SFAS 128"), "Earnings Per Share."
Under SFAS 128, basic earnings per share is computed by
dividing income available to common shareholders by the
weighted-average number of common shares
assumed to be outstanding during the period of computation.
Diluted earnings per share is computed similar to basic earnings per
share except that the denominator is increased to include the
number of additional common shares that would have been outstanding
if the potential common shares had been issued and if the additional
common shares were dilutive. Pro forma per share data has been computed
using the weighted average number of common shares outstanding
during the period assuming the Company was a C corporation since
inception. Because the Company has incurred net losses, basic
and diluted loss per share are the same as additional potential
common shares would be anti-dilutive.
Income Taxes
The Company accounts for income taxes under Statement of
Financial Accounting Standards No. 109 ("SFAS 109"), "Accounting
for Income Taxes." Under SFAS 109, deferred tax assets and liabilities
are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases.
Deferred tax assets and liabilities are measured using enacted
tax rates expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered or
settled. A valuation allowance is provided for significant deferred tax
assets when it is more likely than not that such assets will not
be recovered.
New Accounting Pronouncements
In June 1997, the FASB issued Statement of Financial Accounting
Standards No. 130 ("SFAS 130"), "Reporting Comprehensive Income."
SFAS 130 establishes standards for reporting and display of
comprehensive income and its components in a full set of
general-purpose financial statements as is effective for fiscal
years beginning after December 15, 1997. The Company does not
expect that SFAS 130 will have a material effect on its financial
statements.
In June 1997, FASB issued Statement of Financial Accounting
Standards No. 131 ("SFAS 131"), "Disclosures about Segments of an
Enterprise and Related Information" was issued. SFAS 131 will
change the way public companies report information about segments
of their business in their annual financial statements and requires
them to report selected segment information in their quarterly
reports issued to shareholders. It also requires entity-wide
disclosures about the products and services an entity provides,
the material countries in which it holds assets and reports revenues
and its major customers. SFAS 131 is effective for fiscal years
beginning after December 15, 1997. As the Company is currently
in the development stage, the Company does not expect that SFAS 131
will have a near-term material effect on its financial
statements.
F-9
<PAGE>
GENTEL COMMUNICATIONS
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
FOR THE PERIODS ENDED JUNE 30, 1998 AND 1997 AND
FOR THE PERIOD FROM MAY 29, 1997 (DATE OF INCEPTION)
THROUGH JUNE 30, 1998
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
PRINCIPLES, CONTINUED
In June 1998, the FASB issued Statement of Financial Accounting
Standards No. 133 ("SFAS 133"), "Accounting for Derivative
Instruments and Hedging Activities." SFAS 133 establishes
accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other
contracts, and for hedging activities. It requires that an
entity recognize all derivatives as either assets or liabilities
on the balance sheet at their fair value. This statement is
effective for financial statements for all fiscal quarters
of all fiscal years beginning after June 15, 1999. The
Company does not expect the adoption of this standard to
have a material impact on its results
of operations, financial position or cash flows as it currently
does not engage in any derivative or hedging activities.
In April 1998, the American Institute of Certified Public
Accountants issued Statement of Position No. 98-5 ("SOP 98-5"),
"Reporting the Costs of Start-Up Activities." SOP 98-5 requires
that all non-governmental entities expense the costs of start-up
activities, including organization costs as those costs are
incurred. SOP 98-5 is effective for financial statements for
fiscal years beginning after December 15, 1998. The Company does not
expect the adoption of this standard to have a material effect on
its results of operations, financial position or cash flows.
NOTE 2 - CONVERTIBLE NOTE PAYABLE TO STOCKHOLDER
Convertible note payable to stockholder represents monies
borrowed from a stockholder for working capital purposes.
The note payable accrues interest at 12.50% and is payable
in two installments of $40,000 plus interest due on November 15, 1998
and May 15, 1999. The note is convertible into 40,000 shares of
restricted common stock at $2.00 per share. Subsequent to the
Merger (see Note 7), the stockholder exercised the conversion feature.
NOTE 3 - STOCKHOLDERS' EQUITY
Stock Options
Under the terms of employment agreements with its CEO and Vice
President, the Company issued options to purchase 300,000 shares
of the Company's common stock at an exercise price of 50% of the
fair market value at the date the option was granted (estimated by the
Company to be $0.475 at January 5, 1998). The options vested
100% on the date of grant and are exercisable through January 5, 2003
(remaining contractual life at June 30, 1998 is 4 1/2 years).
F-10
<PAGE>
GENTEL COMMUNICATIONS
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
FOR THE PERIODS ENDED JUNE 30, 1998 AND 1997 AND
FOR THE PERIOD FROM MAY 29, 1997 (DATE OF INCEPTION)
THROUGH JUNE 30, 1998
NOTE 3 - STOCKHOLDERS' EQUITY, CONTINUED
A summary of all employee stock option activity for the periods
ended June 30, 1998 and 1997 follows:
<TABLE>
<S> <C> <C>
OPTIONS WEIGHTED
AVERAGE EXERCISE
PRICE
_______ _________
Balance, May 29, 1997 - $ -
Granted - -
Balance, June 30, 1997 - -
Granted 300,000 0.2375
Balance, June 30, 1998 300,000 $ 0.2375
Exercisable, June 30, 1998 300,000 $ 0.2375
Weighted average fair value of options granted in 1998 $ 0.32
</TABLE>
SFAS 123 Pro Forma Information
Pro forma information regarding net income (loss) is required by
SFAS 123, and has been determined as if the Company had accounted
for its employee stock options under the fair value method of
SFAS 123. The fair value for these options was estimated at the date
of grant using the Black Scholes option pricing model with the
following assumptions for the period ended June 30, 1998: risk
free interest rate of 5.52%; dividend yield of 0%; expected life of
the options of 1 year; and volatility factor of the expected market
price of the Company's common stock of 135%.
For purposes of pro forma disclosures, the estimated fair value
of the options is amortized to expense over the option vesting
period. Adjustments are made for options forfeited prior to vesting.
The effect on compensation expense and net loss had compensation cost
for the Company's stock option issuances been determined based on
fair value on the date of grant consistent with the provisions of
SFAS 123 is as follows:
<TABLE>
<S> <C> <C>
Periods Ended June 30,
1998 1997
____ ____
Net loss, as reported $(451,465) $ -
Adjustment to compensation expense
under SFAS 123 (24,750) -
Pro forma net loss $(476,215) $ -
</TABLE>
F-11
<PAGE>
GENTEL COMMUNICATIONS
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
FOR THE PERIODS ENDED JUNE 30, 1998 AND 1997 AND
FOR THE PERIOD FROM MAY 29, 1997 (DATE OF INCEPTION)
THROUGH JUNE 30, 1998
NOTE 3 - STOCKHOLDERS' EQUITY, CONTINUED
<TABLE>
<S> <C> <C>
Periods Ended June 30,
1998 1997
_____ _____
Loss per common share:
As reported $ (.10) $ -
Pro forma $ (.11) $ -
</TABLE>
NOTE 4 - INCOME TAXES
The tax effects of temporary differences that give rise to
deferred taxes at June 30, 1998 are as follows:
<TABLE>
<S> <C>
Deferred tax asset:
Net operating loss carryforward $ 146,000
Other, net 6,000
Total gross deferred tax asset 152,000
Less valuation allowance (152,000)
Net deferred tax asset $ -
</TABLE>
The valuation allowance increased by approximately $152,000
during the year ended June 30, 1998. No current provision
for income taxes for the periods ended June 30, 1998 and 1997
is required, except for minimum state taxes, since the
Company incurred taxable losses during such years.
The provision for income taxes for fiscal 1998 was $800 and
differs from the amount computed by applying the U.S.
Federal income tax rate of 34% to loss before income
taxes as a result of the following:
<TABLE>
<S> <C>
Computed tax benefit at federal statutory rate $(154,000)
State income tax benefit, net of federal effect (27,000)
Increase in valuation allowance 152,000
Non-deductible compensation expenses for
options granted to employees 28,000
Other, net 1,800
$ 800
</TABLE>
As of June 30, 1998, the Company had net operating loss
carryforwards of approximately $379,000 and $190,000 for federal
and state income tax reporting purposes, which expire in 2013 and
2003, respectively.
F-12
<PAGE>
GENTEL COMMUNICATIONS
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
FOR THE PERIODS ENDED JUNE 30, 1998 AND 1997 AND
FOR THE PERIOD FROM MAY 29, 1997 (DATE OF INCEPTION)
THROUGH JUNE 30, 1998
NOTE 5 - COMMITMENTS AND CONTINGENCIES
Lease Agreements
The Company leases certain facilities for its corporate and
operations offices under a non-cancelable operating lease
agreement that expires in 2001.
Future annual minimum commitments under this lease agreement are
as follows:
<TABLE>
<S> <C>
Years Ending
June 30,
----
1999 $ 60,745
2000 66,715
2001 61,156
------
$ 188,616
</TABLE>
Rent expense was $22,115 and $0 for the periods ended June 30,
1998 and 1997, respectively.
Employment Agreements
On January 5, 1998, the Company entered into five-year employment
agreements with its CEO and majority stockholder and its Vice
President. Under the terms of the agreements, the CEO and the
Vice President will receive an annual salary and options to purchase
Company common stock (see Note 3). In addition, the Company
retains an option to extend each employee's employment and renew the
agreement annually for up to ten additional years. Subsequent to
year-end, these agreements were modified to one-year at-will
employment agreements.
Contracts and Agreements
On June 17, 1998, the Company entered into an agreement with The
Michelson Group, Inc. ("Michelson"), whereby Michelson will
perform corporate development services such as, but not limited to,
selecting key employees, attracting capital investors, providing
advice on stock option plans and maintaining an ongoing stock
market support system. Pursuant to the agreement, the Company
will pay Michelson a monthly fee of $6,500. In addition, the Company
agrees to issue Michelson warrants to purchase that number of shares of
common stock of the Company which would, upon exercise, result in
Michelson holding 9.9% of the outstanding shares of the Company
(estimated to be a maximum of 1,416,042 shares) upon the
completion of a proposed bridge financing. The agreement is
effective through June 2000.
Subsequent to the Merger (see Note 7), Michelson exercised
warrants to purchase 1,135,000 shares of GTC stock at an exercise
price of $.01 per share. The exercise price reflected the Company's
estimate of fair market value at the date of grant and therefore no
amount was recognized as expense.
F-13
<PAGE>
GENTEL COMMUNICATIONS
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
FOR THE PERIODS ENDED JUNE 30, 1998 AND 1997 AND
FOR THE PERIOD FROM MAY 29, 1997 (DATE OF INCEPTION)
THROUGH JUNE 30, 1998
NOTE 6 - EARNINGS PER SHARE
The following is a reconciliation of the numerators and
denominators of the basic and diluted earnings per share
computations:
<TABLE>
<S> <C> <C>
Periods Ended June 30,
1998 1997
Numerator for basic and diluted earnings per share:
Net loss charged to common stockholders $(451,465) $ -
Denominator for basic and diluted earnings per share:
Weighted average shares 8,511,610 8,089,488
Basic and diluted earnings per share $ (0.05) $ -
</TABLE>
NOTE 7 - SUBSEQUENT EVENTS
Merger
Pursuant to an Agreement and Plan of Reorganization dated August
31, 1998, the Company completed a merger with and into Bobernco, Inc.
(the "Merger"). Under the terms of the tax-free reorganization
and merger, all of the Company's common stock was converted to
8,986,950 shares of Bobernco common stock and, as a result, the
separate corporate existence of the Company ceased and Bobernco
continued as the surviving corporation. Thus, all additional
subsequent events are disclosed in Bobernco's separate audited
financial statements. The directors and officers of the Company
immediately prior to the merger became the directors and officers
of Bobernco, which subsequently changed its corporate name
to GTC Telecom Corp. ("GTC"). However, if the merger had
occurred at the beginning of the year, the pro forma financial
statements as of June 30, 1998 would be as follows:
Net sales $ 497,312
Cost of sales $ 447,312
Net loss $(452,739)
Basic and dilutive loss per share $ (0.04)
Basic and dilutive weighted average
common shares outstanding 10,311,610
Stock Issuances
On July 21, 1998, the Company issued a confidential private
placement memorandum offering of 500,000 shares of common stock
at $1.00 per share. After the Merger, this offering was amended
to become an offering of GTC. Per an amendment dated January 29,
1999 the maximum offering was increased to 1,500,000 shares.
GTC was able to raise approximately $1,330,000, net of
issuance costs paid for brokers and finder's fees, from
the offering.
F-14
<PAGE>
GTC TELECOM CORP.
PRO FORMA COMBINED FINANCIAL STATEMENTS
(UNAUDITED)
BASIS OF PRESENTATION
Effective August 31, 1998, GenTel Communications ("GenTel")
completed a merger with and into Bobernco, Inc. ("Bobernco").
Under the terms of the tax-free reorganization and merger, all of
the Company's common stock was converted to 8,986,950 shares of
Bobernco common stock and, as a result, the separate corporate
existence of the Company ceased and Bobernco continued as the
surviving corporation. The directors and officers of the Company
immediately prior to the merger became the directors and officers of
Bobernco, which subsequently changed its name to GTC Telecom Corp.
("GTC").
The following unaudited pro forma combined balance sheet has been
prepared as if the merger had occurred at June 30, 1998. The
unaudited pro forma combined statement of operations was prepared as
if the merger were consummated on July 1, 1997. GTC
believes no adjustments are necessary to present fairly the
unaudited pro forma combined financial statements as the transaction
was, in effect, a recapitalization of GenTel with an inactive
corporation to allow GenTel additional access to capital markets in
the future. These financial statements are not necessarily
indicative of what actual results would have been had the
transaction occurred on July 1, 1997, nor do they purport to
indicate the future results of GTC. The unaudited pro forma
combined financial statements should be read in conjunction with
GenTel's audited financial statements and accompanying notes and the
audited financial statements of Bobernco and related notes appearing
elsewhere.
F-15
<PAGE>
GTC TELECOM CORP.
PRO FORMA COMBINED BALANCE SHEET
(UNAUDITED)
JUNE 30, 1998
<TABLE>
GENTEL Pro forma
Communications Bobernco, Inc. Adjustments Pro forma
<S> <C> <C> <C> <C>
CURRENT ASSETS:
CASH $ 3,892 $ - $ - $ 3,892
STOCK SUBSCRIPTIONS
RECEIVABLE 142,500 - - 142,500
_________ ________ ________ _______
TOTAL CURRENT ASSETS 146,392 - - 146,392
COMPUTER EQUIPMENT, NET 15,693 - - 15,693
ORGANIZATION COSTS - 44 - 44
__________ ________ ________ _______
TOTAL $162,085 $ 44 $ - $162,129
CURRENT LIABILITIES:
ACCOUNTS PAYABLE $ 7,550 $ - $ - $ 7,550
ACCRUED EXPENSES 90,525 - - 90,525
OFFICER ADVANCES - 1,250 - 1,250
________ _______ _________ _______
TOTAL CURRENT LIABILITIES 98,075 1,250 - 99,325
CONVERTIBLE NOTE PAYABLE
TO STOCKHOLDER 80,000 - - 80,000
________ _______ _________ _______
TOTAL LIABILITIES 178,075 1,250 - 179,325
STOCKHOLDERS' DEFICIT (15,990) (1,206) - (17,196)
________ _______ _________ _______
TOTAL $ 162,085 $ 44 $ - $162,129
</TABLE>
F-16
<PAGE>
GTC TELECOM CORP.
PRO FORMA COMBINED STATEMENT OF OPERATIONS
(UNAUDITED)
FOR THE YEAR ENDED JUNE 30, 1998
GENTEL
COMMUNICATIONS
BOBERNCO, INC.PRO FORMA ADJUSTMENTS
PRO FORMA
<TABLE>
GENTEL Pro forma
Communications Bobernco, Inc. Adjustments Pro forma
<S> <C> <C> <C> <C>
NET REVENUES $ 497,312 $ - $ - $ 497,312
COST OF SALES 447,312 - - 447,312
__________ __________ _________ __________
GROSS PROFIT 50,000 - - 50,000
SELLING, GENERAL AND ADMIN-
ISTRATIVE EXPENSES 500,665 1,274 - 501,939
__________ __________ _________ __________
LOSS BEFORE PROVISION FOR
INCOME TAXES (450,665) (1,274) - (451,939)
PROVISION FOR INCOME TAXES 800 - - 800
__________ __________ _________ __________
NET LOSS $ (451,465) $ (1,274) $ - (452,739)
BASIC AND DILUTED NET LOSS
PER COMMON SHARE $ (0.05) $ - $ - $ (0.04)
BASIC AND DILUTED WEIGHTED
AVERAGE COMMON SHARES
OUTSTANDING 8,511,610 1,800,000 - 10,311,610
</TABLE>
F-17
<PAGE>
BOBERNCO, INC.
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
June 30, 1998
December 31, 1997
December 31, 1996
F-18
<PAGE>
TABLE OF CONTENTS
INDEPENDENT AUDITORS' REPORT 1
ASSETS 2
LIABILITIES AND STOCKHOLDERS' EQUITY 3
STATEMENT OF OPERATIONS 4
STATEMENT OF STOCKHOLDERS' EQUITY 5
STATEMENT OF CASH FLOWS 6
NOTES TO FINANCIAL STATEMENTS 7-10
F-19
<PAGE>
BARRY L. FRIEDMAN, PC.
CERTIFIED PUBLIC ACCOUNTANT
1582 TULITA DRIVE
OFFICE (702) 361-8414
LAS VEGAS, NEVADA 89123 FAX NO. (702) 896-0278
INDEPENDENT AUDITORS' REPORT
Board of Directors March 22, 1999
Bobernco, Inc.
Costa Mesa, California
I have audited the accompanying Balance Sheets of Bobernco, Inc.,(A
Development Stage Company), as of June 30, 1998, December 31, 1997, and
December 31, 1996, and the related statements of operations, stockholders'
equity and cash flows for period January 1, 1998, to June 30, 1998, and the
two years ended December 31, 1997, and December 31, 1996. These financial
statements are the responsibility of the Company's management. My
responsibility is to express an opinion on these financial statements based
on my audit.
I conducted my 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. I believe that my audit provides a
reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Bobernco, Inc., (A
Development Stage Company), as of June 30, 1998, December 31, 1997, and
December 31, 1996, and the results of its operations and cash flows for the
period January 1, 1998, to June 30, 1998, and the two years ended December
31, 1997, and December 31, 1996, in conformity with generally accepted
accounting principles.
The accompanying financial statements have been prepared assuming the
Company will continue as a going concern. As discussed in Note #3 to the
financial statements, the Company has suffered recurring losses from
operations and has no established source of revenue. This raises substantial
doubt about its ability to continue as a going concern. Management's plan
in regard to these matters are also described in Note #3. The financial
statements do not include any adjustments that might result from the outcome
of this uncertainty.
/s/ Barry L. Friedman
Barry L Friedman
Certified Public Accountant
F-20
<PAGE>
BOBERNCO, INC.
(A Development Stage Company)
BALANCE SHEET
ASSETS
<TABLE>
June December December
30, 1998 31, 1997 31, 1996
<S> <C> <C> <C>
CURRENT ASSETS: $ 0 $ 0 $ 0
TOTAL CURRENT ASSETS $ 0 $ 0 $ 0
OTHER ASSETS:
Organization Costs (Net) $ 44 $ 68 $ 116
TOTAL OTHER ASSETS $ 44 $ 68 $ 116
TOTAL ASSETS $ 44 $ 68 $ 116
</TABLE>
See accompanying notes to financial statements & audit report
F-21
<PAGE>
BOBERNCO, INC.
(A Development Stage Company)
BALANCE SHEET
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
June December December
30, 1998 31, 1997 31, 1996
<S> <C> <C> <C>
CURRENT LIABILITIES:
Officers Advances (Note#6) $ 1,250 $ 0 $ 0
TOTAL CURRENT LIABILITIES $ 1,250 $ 0 $ 0
STOCKHOLDERS' EQUITY: (Note 1)
Common stock par value, $.001
authorized 50,000,000 shares
issued and outstanding at
December 31, 1996-3,000,000 shs $ 3,000
December 31, 1997-3,000,000 shs $ 3,000
June 30, 1998-6,000,000 shares $ 6,000
Additional paid in Capital -3,000 0 0
Accumulated loss -4,206 -2,932 - 2,884
TOTAL STOCKHOLDERS' EQUITY $ -1,206 $ 68 $ 116
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 44 $ 68 $ 116
</TABLE>
See accompanying notes to financial statements & audit report
F-22
<PAGE>
BOBERNCO, INC.
(A Development Stage Company)
STATEMENT OF OPERATIONS
<TABLE>
Jan. 1, Year Year May 17, 1994
1998 to Ended Ended (inception)
Jun. 30, Dec. 31, Dec. 31, to Jun. 30,
1998 1997 1996 1998
<S> <C> <C> <C> <C>
INCOME:
Revenue $ 0 $ 0 $ 0 $ 0
EXPENSES:
General, Selling
and Administrative $ 450 $ 0 $ 0 $ 3,210
Accounting 800 0 0 800
Amortization 24 48 48 196
Total Expenses $ 1,274 $ 48 $ 48 $ 4,206
Net Profit/Loss(-) $-1,274 $ - 48 $ - 48 $- 4,206
Net Profit/Loss(-)
per weighted
share (Note 1) $ -.0002 $ NIL $ NIL $ -.0007
Weighted average
number of common
shares outstanding 6,000,00 6,000,000 6,000,000 6,000,000
</TABLE>
See accompanying notes to financial statements & audit report
F-23
<PAGE>
BOBERNCO, INC.
(A Development Stage Company)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
Additional Accumu-
Common Stock paid-in lated
Shares Amount capital Deficit
<S> <C> <C> <C> <C>
Balance,
December 31, 1995 3,000,000 $ 3,000 $ 0 $- 2,836
Net loss year ended
December 31, 1996 - 48
Balance,
December 31, 1996 3,000,000 $ 3,000 $ 0 $- 2,884
Net loss year ended
December 31, 1997 - 48
Balance,
December 31, 1997 3,000,000 $ 3,000 $ 0 $- 2,932
March 30, 1998
Forward stock
split 2:1 3,000,000 +3,000 - 3,000
Net loss,
January 1, 1998
to June 30, 1998 - 1,274
Balance,
June 30, 1998 6,000,000 $ 6,000 $- 3,000 $- 4,206
</TABLE>
See accompanying notes to financial statements & audit report
F-24
<PAGE>
BOBERNCO, INC.
(A Development Stage Company)
STATEMENT OF CASH FLOWS
<TABLE>
Jan. 1, Year Year May 17, 1995
1998, to Ended Ended (inception)
Jun. 30, Dec. 31, Dec. 31, to Jun. 30,
1998 1997 1996 1998
<S> <C> <C> <C> <C>
Cash Flows from
Operating Activities:
Net Loss $ - 1,274 $ - 48 $ - 48 $- 4,206
Adjustment to
reconcile net loss
to net cash
provided by operating
activities
Amortization +24 +48 +48 +196
Changes in assets and
liabilities:
Organization Costs -240
Increase in current
liabilities: +1,250 0 0 +1,250
Net cash used in
operating activities $ 0 $ 0 $ 0 - 3,000
Cash Flows from
investing activities 0 0 0 0
Cash Flows from
Financing Activities:
Issuance of common
Stock for cash 0 0 0 +3,000
Net increase (decrease)
in cash $ 0 $ 0 $ 0 $ 0
Cash,
beginning of period 0 0 0 0
Cash,
end of period $ 0 $ 0 $ 0 $ 0
</TABLE>
See accompanying notes to financial statements & audit report
F-25
<PAGE>
BOBERNCO, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
June 30, 1998, December 31, 1997, and December 31, 1996
NOTE 1 - HISTORY AND ORGANIZATION OF THE COMPANY
The Company was organized May 17, 1994, under the laws of the State of
Nevada, as Bobernco, Inc. The Company currently has no operations and, in
accordance with SFAS #7, is considered a development stage company.
On May 24, 1994, the company issued 3,000,000 shares of $.001 par value
common stock for $ 3,000. in cash.
NOTE 2 - ACCOUNTING POLICIES AND PROCEDURES
Accounting policies and procedures have not been determined except as follows:
1. The Company uses the accrual method of accounting.
2. Earnings per share is computed using the weighted average number of
common shares outstanding.
3. The Company has not yet adopted any policy regarding payment of
dividends. No dividends have been paid since inception.
4. Organization costs of $ 240.00 are being amortized over a 60 month period
commencing may 17, 1994, to May 16, 1999.
NOTE 3 - GOING CONCERN
The Company's financial statements are prepared using the generally accepted
accounting principles applicable to a going concern, which contemplates the
realization of assets and liquidation of liabilities in the normal course of
business. However, the Company has no current source of revenue. Without
realization of additional capital, it would be unlikely for the Company to
continue as a going concern. It is management's plan to seek additional
capital through a merger with an existing operating company.
NOTE 4 - WARRANTS AND OPTIONS
There are no warrants or options outstanding to acquire any additional
shares of common stock.
F-26
<PAGE>
BOBERNCO, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS CONTINUED
June 30, 1998, December 31, 1997, and December 31, 1996
NOTE 5 - RELATED PARTY TRANSACTION
The Company neither owns or leases any real or personal property. Office
services are provided without charge by a director. Such costs are
immaterial to the financial statements and, accordingly, have not been
reflected therein. The officers and directors of the Company are involved in
other business activities and may, in the future, in other business
opportunities. If a specific business opportunity becomes available, such
persons may face a conflict in selecting between the Company and their other
business interests. The Company has not formulated a policy for the
resolution of such conflicts.
NOTE 6 - OFFICERS ADVANCES
While the Company is seeking additional capital through a merger with an
existing operating company, an officer of the Company has advanced funds on
behalf of the Company to pay for any costs incurred by it. These funds are
interest free.
NOTE 7 - SUBSEQUENT EVENTS (UNAUDITED)
MERGER
Pursuant to an Agreement and Plan of Reorganization dated August 31, 1998,
the Company completed a merger with Gentel Communications ("Gentel"). Under
the terms of the tax-free reorganization and merger, the Company issued
8,986,950 of its shares to the shareholders of Gentel. As a result, the
separate corporate existence of Gentel ceased and the Company continued as
the surviving corporation. The directors and officers of Gentel immediately
prior to the merger became the directors and officers of the Company, which
subsequently changed its corporate name to GTC Telecom Corp.
STOCK ISSUANCES
On July 21, 1998, Gentel issued a confidential private placement memorandum
offering of 500,000 shares of common stock at $1.00 per share. After the
merger (described above), this offering was amended to become an offering of
the Company. Per an amendment dated January 29, 1999, the maximum offering
was increased to 1,500,000 shares.The Company was able to raise
approximately $1,397,000, net of issuance costs paid for brokers and
finder's fees, from the offering.
F-27
<PAGE>
BOBERNCO, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS CONTINUED
June 30, 1998, December 31, 1997, and December 31, 1996
STOCK FOR SERVICES
In August 1998, the Company issued 11,000 restricted shares of common stock,
with a fair market value of $0.475 per share, to two employees of the
Company in lieu of salary.
Pursuant to various agreements subsequent to June 30, 1998, the Company
agreed to issue a total of 12,300 shares of common stock and 7,000 shares of
restricted common stock at $1.00 per share and 3,750 restricted shares of
common stock at one-third of the issue date's bid price per share for legal
services rendered.
On November 19, 1998, the Company entered into an Investment Banking
Agreement with Transglobal Capital Corporation ("TCC"), a licensed NASD
broker. Pursuant to the agreement, TCC will provide consulting services and
assist the Company with raising capital. The agreement, provides for the
Company to compensate TCC with an initial fee of 50,000 shares of the
Company's restricted common stock and a 13% commission on gross proceeds
received. In addition, the Company agreed to issue TCC options to purchase a
total of 600,000 shares of the Company's restricted common stock, at an
exercise price of $0.01 per share, when certain financing benchmarks are
obtained, as defined , with each option having a five-year life. As of the
date of our report, all 600,000 options have been granted pursuant to the
agreement. The difference between the exercise price and the fair market
value of the restricted common stock will be charged against additional
paid-in capital.
Pursuant to an agreement dated November 30, 1998, the Company issued 50,000
restricted shares of common stock, with a fair market value of $1.00 per
share, for deferment of rent.
Pursuant to an agreement dated January 13, 1999, the Company issued 30,000
restricted shares of common stock, with a fair market value of $1.00 per
share, for legal services rendered.
In March 1999, the Company issued options to purchase 25,000 shares of
restricted stock, at a price of $1.00 per share, for advertising.
STOCK OPTIONS AND WARRANTS
Subsequent to June 30, 1998, the Company entered into various employment
agreements wherein the Company has agreed to supplement compensation to
certain key employees in the form of stock options. Pursuant to the
agreements, the Company issued options to purchase 91,000 shares of
restricted common stock at a price of $.01 per share and vesting over a
period of one year from the date of grant. A total of approximately $63,600
of compensation expense will be recorded over the vesting period. In addition,
the Company issued options to purchase 254,000 shares of restricted common
stock at a price ranging from $1.00 to $5.00 per share and vesting over a
period of six months to three years from date of grant. A total of
approximately $81,700 of compensation expense will be recorded over the
vesting period.
F-28
<PAGE>
BOBERNCO, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS CONTINUED
June 30, 1998, December 31, 1997, and December 31, 1996
OPERATING AGREEMENTS
On June 17, 1998, Gentel entered into an agreement with The Michelson Group,
Inc., ("Michelson"), whereby Michelson will perform corporate development
services such as, but not limited to, selecting key employees, attracting
capital investors, providing advice on stock option plans and maintaining an
ongoing stock market support system. Pursuant to the agreement, the Company
will pay Michelson a monthly fee in of $ 6,500. In addition, the company
agrees to issue Michelson warrants to purchase that number of shares of
common stock of the Company which would, upon exercise, result in Michelson
holding 9.9% of the outstanding shares of the Company upon the completion of
a proposed bridge financing. The agreement is effective through June 2000.
Subsequent to June 30, 1998, in accordance with the tax-free reorganization
and merger, all of the warrants were exercised into 1,135,000 restricted
shares of common stock.
In August 1998, the Company entered into a three-year carrier contract with
WorldCom, Inc. covering a potential volume purchase of $300,000 of long
distance telephone time. The contract provides for a minimum monthly revenue
commitment of $10,000 commencing March 1999.
On September 8, 1998, the Company entered into a agreement with a billing
company who will provide processing services for customer billing and
collections. In addition the billing company will provide financing
opportunities through a third-party lender for amounts up to 70% of eligible
accounts receivable, as defined.
On October 26, 1998, the Company entered into a agreement to become a
licensed user of a telecommunications management and accounting software
program. The agreement, which expires in October 2003, unless terminated by
the Company, has a five-year renewal feature and provides for the Company to
pay $1,425 per month.
On February 3, 1999, the Company entered into an agreement with an Internet
Access Provider ("IAP") whereby the IAP will provide internet services for
the Company. The agreement provides for a minimum monthly revenue commitment
of $25,000 beginning September 1999. The Agreement shall continue for a
period of three years and is automatically renewed for additional,
successive one-year periods unless terminated by the Company.
F-29
<PAGE>
GTC TELECOM CORP.
BALANCE SHEET (UNAUDITED)
<TABLE>
March 31,
1999
ASSETS
<S> <C>
Current assets:
Cash $128,430
Accounts receivable, less allowance for doubtful accounts of
$249,524 67,915
Other current assets 58,020
--------------------
Total current assets 254,365
Property and equipment, net of accumulated depreciation of $14,358 145,566
Other assets 119,362
--------------------
Total assets $519,293
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $148,641
Deferred income and other liabilities 78,055
--------------------
Total current liabilities 226,696
--------------------
Commitments and contingencies
Stockholders' equity:
Common stock, $0.001 par value; 50,000,000 shares
authorized; 14,388,156 shares issued and outstanding 14,388
Additional paid-in-capital 2,426,939
Accumulated deficit (2,148,730)
--------------------
Total stockholders' equity 292,597
--------------------
Total liabilities and stockholders' equity $519,293
==========
F-30
<PAGE>
GTC TELECOM CORP.
STATEMENTS OF OPERATIONS (UNAUDITED)
</TABLE>
<TABLE>
Three Months Ended Nine Months Ended
March 31, March 31,
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Net revenues $204,573 $497,312 $222,535 $497,312
Cost of sales 77,334 447,312 85,665 447,312
--------- --------- --------- ---------
Gross profit 127,239 50,000 136,870 50,000
Selling, general and
administrative expenses (1,150,108) (117,413) (1,837,988) (228,575)
Other income 4,402 -- 4,452 --
--------- --------- --------- ---------
Loss before provision for
income taxes (1,018,467) (67,413) (1,696,666) (178,575)
Provision for income taxes 200 -- 600 --
--------- --------- --------- ---------
Net loss $(1,018,667) $(67,413)$(1,697,266) $(178,575)
============ ========= ========== ==========
Basic and diluted net loss
per common share ($0.08) ($0.01) ($0.14) ($0.02)
============ ========= ========== ==========
Basic and diluted weighted
average common shares
outstanding 13,137,393 8,786,400 12,324,296 8,419,080
</TABLE>
F-31
<PAGE>
GTC TELECOM CORP.
STATEMENT OF CASH FLOWS (UNAUDITED)
<TABLE>
Nine Months Ended
March 31,
1999 1998
<S> <C> <C>
Cash flows from operating activities:
Net loss $(1,697,266) $(178,575)
Fair market value of options granted for compensation 198,150 71,250
Fair market value of stock issued for compensation 480,728 --
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 12,657 --
Provision for losses on accounts receivable 249,524 --
Changes in operating assets and liabilities:
Accounts receivable (317,437) --
Other current assets (58,020) --
Accounts payable 141,091 --
Accrued expenses 8,055 --
---------- ----------
Net cash used in operating activities (982,518) (107,325)
---------- ----------
Cash flows from investing activities:
Purchases of equipment (139,499) (6,600)
PUC certifications and web site development (122,395) --
---------- ----------
(261,894) (6,600)
---------- ----------
Cash flows from financing activities:
Proceeds from sale of GTC common shares, net of
offering costs of $232,027 1,200,975 --
Collection of stock subscription receivable, net of
offering costs of $20,525 121,975 --
Proceeds from exercise of stock options 46,000 --
Proceeds from sale of GenX units and related
conversion into Gentel common shares, net
of offering costs of $28,500 -- 117,500
---------- ----------
Net cash provided by financing activities 1,368,950 117,500
---------- ----------
Net increase in cash 124,538 3,575
Cash at beginning of period 3,892 --
---------- ----------
Cash at end of period $ 128,430 $ 3,575
============ ==========
Supplemental disclosure of cash flow information:
Cash paid during period for:
Interest -- --
Income and franchise taxes -- --
</TABLE>
Supplemental disclosure on non-cash investing and financing activities:
During the period ended March 31, 1999, the holder of a $80,000
convertible notes payable elected to convert such note into
40,000 shares of the Company's common stock in accordance
with the conversion option.
F-32
<PAGE>
GTC TELECOM CORP.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
MARCH 31, 1999
1. MANAGEMENT'S REPRESENTATION:
The management of GTC Telecom Corp. (the "Company" or "GTC")
without audit has prepared the financial statements included
herein. Certain information and note disclosures normally
included in the financial statements prepared in accordance with
generally accepted accounting principles have been omitted. In
the opinion of the management of the Company, all adjustments
considered necessary for fair presentation of the financial
statements have been included and were of a normal recurring
nature, and the accompanying financial statements present fairly
the financial position as of March 31, 1999, the results of
operations for the three months and nine months ended March 31,
1999, and cash flows for the nine months ended March 31, 1999.
The results of operations for the three months and nine months
ended March 31, 1998 and cash flows for the nine months ended
March 31, 1998 are for GenTel Communications ("GenTel"),
the predecessor to GTC (see Note 4).
It is suggested that these financial statements be read in
conjunction with the GenTel audited financial statements and
notes for the period from May 29, 1997 (date of inception)
through June 30, 1998, and the Bobernco, Inc. ("Bobernco")
audited financial statements and notes for the period ended June
30, 1998, included in this Form 10-SB. The interim results are
not necessarily indicative of the results for a full year.
2. DEVELOPMENT STAGE:
Prior to June 30, 1998, in accordance with Statement of
Financial Accounting Standards No. 7 ("SFAS 7"), "Accounting and
Reporting by Development Stage Enterprises," the Company was
considered a development stage enterprise. Subsequent to June
30, 1998, the Company began deriving revenue from its planned
principal operations. Therefore, all references to SFAS 7 have
been removed.
3. OTHER ASSETS:
The Company capitalizes the costs associated with the development of
its website and carrier certification. Other assets are amortized
using the straight-line method over the assets' estimated useful lives
ranging from 2 to 3 years.
4. PROFORMA:
Pursuant to an Agreement and plan of Reorganization dated August 31, 1998,
GenTel completed a merger with and into Bobernco, Inc. (the "Merger").
Under the terms of the tax-free reorganization and merger, all of the
Company's common stock was converted to 8,986,950 shares of Bobernco
common stock and, as a result, the separate corporate existence of GenTel
ceased and Bobernco continued as the surviving corporation. Thus, all
additional subsequent events are disclosed in Bobernco's separate audited
financial statements. Bobernco subsequently changed its name to GTC.
However, if the merger had occurred at the beginning of the year July 1,
1997, the pro forma financial statements for the Nine months ended
March 31, 1999 and March 31, 1998 are as follows:
<TABLE>
March 31, March 31,
1999 1998
<S> <C> <C>
Net sales $ 222,535 $ 497,312
Cost of sales $ 85,665 $ 447,312
Net loss $(1,697,266) $ (179,037)
Basic and dilutive loss per share $ (0.14) $ (0.02)
Basic and dilutive weighted average
common shares outstanding 12,234,296 10,219,080
</TABLE>
5. SUBSEQUENT EVENTS:
On April 21, 1999, the Company initiated a private placement offering of
2,000,000 shares of the Company's restricted (as that term is defined
by Rule 144 of the Securities Act of 1933) Common Stock at a price of $3.00
per share. Issuance costs paid for broker and finder's fees will offset
against capital raised.
F-33
<PAGE>
On April 28, 1999, the Company entered into an agreement with Williams
Communications, a unit of Williams of Tulsa, Oklahoma, in which Williams
Communications will design, install, maintain and fully manage the
Company's high speed, nationwide VoIP network. The contract value
approximates $110 million over a five-year term. In conjunction with
the acquisition of the network, on April 30, 1999, the Company entered into
a financing agreement for $26 million in equipment financing specifically
for the Company's VoIP network. Terms of the financing include thirty-three
33) monthly payments of $942,760 beginning February 1, 2000. In addition,
the financing will include a five-year warrant to purchase 315, 151 shares
of the Company's common stock at an exercise price of $8.25 per share. The
warrant will include provisions for anti-dilution protections, net exercise
and registration rights.
In conjunction with the development of its web portal site, the Company has
entered into the following agreements:
1. On May 12, 1999, the Company entered into a financing
agreement for approximately $205,000 for equipment. Terms of
the financing include thirty-six (36) monthly payments of
$6,737.60 beginning June 1, 1999. This lease will be
accounted for as a capital lease.
2. On April 6, 1999, the Company entered into a one-year
agreement with a company who will provide the dial up
Internet infrastructure. The agreement, beginning July 1999,
provides for the Company to initially pay $36,000 per month
and an initial set-up fee of $8,000. As the supplier is able
to provide service throughout the nation, The Company's
monthly minimum commitment will increase from $36,000 per
month to a maximum $60,750 per month. In addition, the
Company is committed to pay a set-up fee of up to $5,500.
3. On March 31, 1999, the Company entered into a one-year
agreement with a company who will provide Internet data
services. The agreement, beginning May 1999, provides for
the Company to pay $8,220 per month and an initial set-up fee
of $3,790.
4. On April 21, 1999, the Company entered into a two-year
agreement with a company who will provide technical support
services. The agreement, beginning June 1999, obligates the
Company to an initial monthly minimum revenue commitment of
$4,000 in month 1, $5,000 in months 2 and 3 and increasing to
$9,300 per month beginning in month 4 over the remainder of
the agreement.
5. On March 29, 1999, the Company entered into a one-year
agreement with a company who will provide access to certain
Internet content. The agreement, beginning June 1999,
provides for the Company to pay $5,000 per month and an
initial set-up fee of $5,000.
On April 15, 1999 (date of grant), the Company issued options to
a director to purchase 526,316 shares of the Company's restricted
common stock at an exercise price of $0.475 per share. The options
vest 100% on the date of grant and are exercisable for three years.
On April 16, 1999, the director exercised these options for $250,000.
A total of approximately $1,328,950 of compensation expense was recorded
in April 1999 in connection with the granting of this option.
F-34
<PAGE>
AGREEMENT FOR PURCHASE AND SALE
OF SERVICES AND EQUIPMENT
This AGREEMENT FOR PURCHASE AND SALE OF SERVICES AND EQUIPMENT
(this "Agreement") is made this __28th_ day of _April____,
1999, by and between Williams Communications Inc., a Delaware
corporation, ("WCI"), Williams Communications Solutions, LLC, a
Delaware limited liability company, ("WCS"), and GTC Telecom, a
Nevada corporation ("GTC").
WHEREAS, WCI, WCS and GTC intend for WCI and WCS to design,
install and maintain a network for GTC based on capacity with
Williams Network, a division of WCI, and Ascend technology
("Designed Network");
WHEREAS, GTC has agreed to purchase from WCI, and WCI has
agreed to sell to GTC, certain Services (as defined below), and
GTC has agreed to purchase from WCS, and WCS has agreed to sell
to GTC Equipment(as defined below) pursuant to the terms and
conditions of this Agreement.
NOW, THEREFORE, for and in consideration of the mutual
promises set forth herein, the sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Certain Definitions.
"Agreement" shall mean this agreement and the agreements set
forth in Attachments A, B, and C.
"Affiliate" shall mean any entity which (a) is at least 50%
owned by WCI or WCS, or (b) owns at least
50% of WCI or WCS.
"Dispute" shall mean any controversy, dispute or claim
arising out of or related to the Agreements or the breach,
termination, enforceability or validity thereof.
"Equipment" shall mean the telecommunications equipment, and
installation, maintenance and other incidental services
relating thereto, set forth in Attachment C attached hereto
and incorporated herein by this reference.
"Services" shall mean the telecommunications transmission
services and other services set forth in Attachment A attached
hereto and incorporated herein by this reference, and
consulting services set forth in Attachment C
attached hereto and incorporated herein by this reference.
2. Purchase and Sale of Carrier Services. GTC shall
purchase carrier services from WCI, and WCI shall, subject to
availability, sell carrier services to GTC, pursuant and
subject to the terms and conditions of (a) this Agreement,
and (b) the Carrier Services Agreement (Attachment A) attached
hereto and incorporated herein by this reference. In the event
of any conflict, the order of precedence shall be Attachment A
and then this Agreement.
<PAGE>
3. Purchase and Sale of Consulting Services. GTC shall
purchase consulting services from WCI, and WCI shall sell
consulting services to GTC, pursuant and subject to the terms
and conditions of (a) this Agreement, and (b) the Master
Agreement for Consultant Services attached hereto and
incorporated herein by reference (Attachment B). In the
event of any conflict, the order of precedence shall be
Attachment B and then this Agreement.
4. Purchase and Sale of Equipment. GTC shall purchase
Equipment from WCS and WCS shall sell Equipment to GTC,
pursuant and subject to the terms and conditions of (a) this
Agreement, and (b) the Data-Master Purchase Agreement
(Attachment C) attached hereto and incorporated herein by
this reference. In the event of any conflict, the order of
precedence shall be Attachment C and then this Agreement.
5. Buy Back. The parties agree that WCI shall have the
opportunity to purchase up to the lesser of fifty million
(50,000,000) minutes or ten percent (10%) of GTC's capacity at
any given time, on the Designed Network, the terms and
conditions of such purchase to be commercially reasonable, and
if the parties cannot agree, such
terms and conditions may be submitted by either party to
binding arbitration pursuant to the rules then in effect for
commercial arbitration by the American Arbitration
Association. The arbitrator shall be a mutually
acceptable industry consultant.
6. Confidential Information. The parties agree that the
exchange of proprietary or confidential information shall be
governed by the Confidentiality and Nondisclosure Agreement
between WCI, WCS and GTC dated April 28, 1999.
7. Resolution of Disagreements Among Parties. No
party to this Agreement shall be entitled to take legal action with
respect to any Dispute relating to this Agreement until it has
complied in good faith with the following alternative dispute
resolution procedures. If a Dispute, claim or controversy
arises with respect to or relates to any Section of this Agreement,
then the following Dispute resolution procedures shall govern
the parties' conduct:
(a) The parties shall attempt promptly and in good faith to
resolve any Dispute arising out of or relating to the
Agreements through negotiations between representatives who
have authority to settle the controversy. Any party may give the
other party written notice of any such dispute not resolved
in the normal course of business. Negotiations extending
ten (10) days after the disputing party's notice shall be deemed
at an impasse, unless otherwise agreed by the parties. If a
negotiator intends to be accompanied at a meeting by an
attorney, the other negotiator(s) shall be given at least two (2)
working days notice of such intention and may also be
accompanied by an attorney. All negotiations pursuant
to this clause are confidential and shall be treated as
compromise and settlement negotiations for purposes of the
Federal and state Rules of Evidence.
<PAGE>
(b) If a Dispute is at an impasse (i.e., it has not been resolved
within ten (10) days of the disputing party's notice), the
parties may then pursue any other means of redress, including
without limitation, litigation.
(c) The obligation herein to negotiate to settle a Dispute shall not be
binding upon any party with respect to requests for preliminary
injunctions, temporary restraining orders, specific performance
or other procedures in a court of competent jurisdiction to obtain
interim relief when deemed necessary to preserve the status
quo or prevent irreparable injury pending resolution by
negotiation of the Dispute.
(d) Notice of any Dispute shall be sent to:
GTC:
GTC Telecom
3151 Airway Drive, Suite P-3
Costa Mesa, California 92626
WCI:
The Williams Companies
One Williams Center, Suite 4100
Tulsa, Oklahoma 74172
Mail Drop 41-3
Attn: General Counsel, Williams Communications, Inc.
WCS:
The Williams Companies
One Williams Center, Suite 4100
Tulsa, Oklahoma 74172
Mail Drop 41-3
Attn: General Counsel, Williams Communications
Solutions, LLC
8. As Documented Warranty. The parties recognize and
acknowledge that GTC has entered into the Agreement in
reliance upon the representations made by WCI and WCS
regarding the services and products recommended by WCI and
WCS with respect to the subject matter of the Agreement
WCI's and WCS's representations include the attachments,
exhibits and addenda to the Agreement, the written requests for
proposals and written quotations and written responses thereto,
and written correspondence between the parties (the Documents).
In light of the foregoing, Williams further represents warrants and
covenants to GTC (a) that the products and services which are
the subject of this Agreement shall operate in all material
respects in accordance with the Documents, and (b) that
WCI and WCS shall use best commercial efforts so that all
equipment, carrier services, consulting services and other
services provided for in the Agreement shall work together to
provide the functionalities represented by Williams in the
Documents.
<PAGE>
9. Duties upon Termination. Upon termination of any of
the Agreements not resulting from GTC's default, WCI
and WCS and each of their affiliates shall cooperate with the
transfer of all goods owned by GTC to GTC and to entities
designated by GTC, and reasonably assist with the change
of provision of services and activities covered by the
Agreement from WCI and WCS to GTC and to entities
designated by GTC. Without limiting WCI's and WCS's
obligations, as necessary for transfer of goods or services,
WCI and WCS shall grant access to GTC and its designees to
all equipment used by or for GTC operated by or at facilities
owned, leased, operated or otherwise used by WCI or WCS;
disassemble, package and prepare for delivery all equipment in
WCI's or WCS's possession (or that of its affiliates, designees,
bailees or agents) which is owned or leased by GTC;
transfer any and all software licenses, permits and rights
allowed by law which are necessary or convenient for the
fulfillment of the objectives of the Agreement which are
not held in GTC's name to GTC; transfer any and all
records required or reasonably requested by GTC to GTC
in such form, whether paper, electronic or otherwise, as may be
reasonably requested by GTC; and take all other actions as
may be necessary, appropriate or reasonably requested by
GTC to effect an orderly transition of business from WCI and
WCS to any designee of GTC, to minimize any potential
disruption of services provided by GTC, to protect the trade
secrets and confidential information of GTC, and to minimize
the cost incurred by GTC in the course of any transition
to a new or substitute provider of goods or services. The
provisions of this section shall survive the termination of the
Agreement or any part thereof.
10. Limitation of Liability. IN NO EVENT SHALL WCI, WCS,
OR THEIR SUPPLIERS OR SUBCONTRACTORS, BE LIABLE
FOR (I) ANY SPECIAL, INCIDENTAL, EXEMPLARY, OR
CONSEQUENTIAL DAMAGES (INCLUDING LOSS OF
BUSINESS OR PROFITS), OR (II) ANY DAMAGES OF ANY
KIND RESULTING FROM UNAUTHORIZED USE OF THE
SYSTEM OR LOSS OF DATA. THIS PROVISION
APPLIES TO ALL CLAIMS WHETHER BASED UPON BREACH
OF WARRANTY, BREACH OF CONTRACT, NEGLIGENCE,
STRICT LIABILITY IN TORT OR ANY OTHER LEGAL
THEORY, EVEN IF WCI, WCS OR THEIR SUPPLIERS HAVE BEEN
ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
.
11. Default. A default under one of the agreements set forth
in Attachments A, B, or C shall not constitute a default,
nor will it permit either party to declare a default, under this
agreement or either of the other agreements set forth in the
Attachments.
12. Miscellaneous.
(a) Neither party may assign or otherwise transfer (other than a transfer
due to a Change of Control which results in an Acceptable
Transfer) its rights or obligations under the Agreements or any
portion of them without the express
<PAGE>
written consent of the other, which consent shall not be
unreasonably withheld; provided, however, WCI
and WCS may assign, without obtaining the consent of
GTC, any or all of its rights or obligations hereunder
to any parent, affiliate or subsidiary of WCI or
WCS; provided, that no such assignment shall
in any way reduce or impact the primary liability of the
assignor, which shall, at GTC's request, execute an
affirmation, guarantee or other evidence acceptable to GTC
that the assignor remains liable under the applicable Agreement.
A Change in Control shall be deemed to be an assignment, merger,
sale of a controlling interest or other transfer of a
controlling ownership interest. An Acceptable Transfer
shall be when the entity that remains after a Change of
Control is at least as creditworthy as GTC was prior to the
Change in Control. WCS reserves the right to subcontract any and
all of the work to be performed by it under Attachment C and WCI
reserves the right to subcontract any and all of the work to be
performed by it under Attachment B without receiving prior
consent of GTC; provided, that such action shall not reduce or
impact the primary liability of the WCS and WCI, as
the case may be, and that WCS and WCI shall, at GTC's
request, execute an affirmation, guarantee or other evidence
acceptable to GTC that the assignor remains primarily liable
under the applicable Agreement.
(b) The waiver by either party of any breach, default or
remedy hereunder will not operate as a waiver of any
subsequent breach, default or remedy.
(c) The Agreements supersede all prior or contemporaneous
proposals, communications and negotiations, both
oral and written, and constitute the entire agreement between
WCI, WCS, and GTC with respect to (but only with respect
to) the subject matter hereof.
(d) Except as otherwise provided herein, any amendments
or modifications to this Agreement must be in writing and
executed by an authorized representative of each party.
(e) This Agreement is deemed made and GOVERNED BY
THE LAWS OF THE STATE OF NEW YORK except for
its rules regarding the conflict of laws.
(f) Nothing contained in this Agreement will be
interpreted or construed as to characterize the
relationship between GTC and WCI and WCS as
a joint venture, partnership or franchise for any
purpose. Neither party has the authority to, and
neither party shall, make any representation,
prepare documents or statements on behalf
of, or in the name of the other party, give
any warranties, accept any orders, enter into
a contract on behalf of the other party, or
obligate the other party in any manner,
unless expressly authorized to do so by
this Agreement or in writing by the other
party.
(g) All notices to be sent to a party pursuant to this
Agreement shall be in writing and deemed to
be effective upon (i) personal delivery,
(ii) three days after mailing
<PAGE>
certified mail return receipt requested, (iii) on
the day when the notice has been sent by facsimile if during
business hours and followed by express mail priority next-day
delivery, or (iv) in the case of invoices, upon the Due Date. In
each case, the notice shall be sent to the person identified in
this Section at the Full Business Addresses of the parties as
they appear herein. The effective date for any notice
under this Agreement shall be the date of delivery of such
notice, not the date of mailing.
The Full Business Address for purposes of notice under this
Section as well as telephone voice and facsimile numbers
shall be:
(i) To GTC:
GTC Telecom
3151 Airway Ave., Suite P-3
Costa Mesa, CA 92626
Attn:
(ii) To WCI:
Williams Communications, Inc.
One Williams Center, 26th Floor
Tulsa, OK 74172
Telephone: (918) 573-6000
Fax: (918) 573-6578
Attn: Contract Administration
(iii) To WCS:
Williams Communications Solutions, LLC
2800 Post Oak Boulevard
Houston, Texas 77056
Telephone: (713) 307-4000
Fax: (713) 307-6700
or to such place or places as any of the
parties shall designate by written notice to the others.
(h) No rule of construction requiring interpretation against
the draftsman hereof shall apply in the interpretation of this
Agreement
(i) The provisions of the Agreements are for the
benefit only of the parties hereto, and no third party may seek
to enforce or benefit from these provisions
(j) If a proceeding is brought for the enforcement of
this Agreement or because of any alleged or actual Dispute,
breach, default or misrepresentation in connection with
<PAGE>
any of the provisions of this Agreement, the
prevailing party shall be entitled to recover
reasonable attorneys' fees and other
reasonable costs and expenses incurred in
such action or proceeding in addition
to any other relief to which such party may
be entitled.
(k) In the event any provision of this Agreement conflicts with
any statute, rule or order of any governmental unit or regulatory
body, or tariff then, if required by law, such statute, rule,
order or tariff shall control. If any term or provision of this
Agreement shall, to any extent, be determined to be
invalid or unenforceable by a court or body of
competent jurisdiction, the remainder of this
Agreement shall not be affected thereby, and
each term and provision of this Agreement shall be
valid and enforceable to the fullest extent permitted by law.
THIS AGREEMENT is executed by the parties as of the
date first set forth above, but is effective for all purposes
only as set forth herein.
GTC TELECOM WILLIAMS COMMUNICATIONS, INC.
By: /s/Paul Sandhu By: /s/Howard Janzen
Name: Paul Sandhu Name: Howard Janzen
Title: __________________ Title: ______________________________
WILLIAMS COMMUNICATIONS SOLUTIONS, LLC
By: /s/Howard Janzen
Name: Howard Janzen
Title:________________________
<PAGE>
Attachment A
CARRIER SERVICES AGREEMENT
Agreement No. ______________
This Attachment shall amend and shall constitute a part, together
with any quotations, schedules, exhibits or annexes attached hereto,
of that Agreement for Purchase and Sale of Services and Equipment
made as of April 28, 1999, between GTC Telecom and Williams
Communications, Inc. Except for provisions pertaining to exchange
of confidential or proprietary information between the parties, in
the event of any conflict between the terms of this Attachment and
the terms of the Agreement for Purchase and Sale of Services and
Equipment, the terms of this Attachment shall govern.
This Carrier Services Agreement (this "Carrier Agreement") is made
this 28th day of April, 1999, by and between Williams
Network, a division of Williams Communications, Inc., a Delaware
corporation ("Seller"), with its principal place of business at One
Williams Center, 26th Floor, Tulsa, Oklahoma 74172, and GTC
Telecom, a Nevada corporation ("Customer"), with its principal place
of business at 3151 Airway Avenue, Costa Mesa, CA 92626, for the
provision of telecommunications services, subject to this Carrier
Agreement and as set forth in this Carrier Agreement.
1.0 Exhibits
Exhibit I - Williams Network Pricing Schedule
Exhibit II - Williams Network Technical Specifications
Exhibit III - Williams Network Collocation Service Terms and
Conditions
2.0 Description of Services and Pricing
Customer may order from Seller telecommunications transmission
services ("Services"), the terms and conditions of which are set
forth in this Carrier Agreement. The current Williams Network
Pricing Schedule is attached to this Carrier Agreement and
incorporated herein by reference. All Network Services, Local
Access Services and Ancillary Services, as defined in Section 6.0,
are subject to availability. "Network Services" are provided on the
Williams Network, unless otherwise specifically agreed. References
to "Network Services" are to such on-net services unless expressly
provided otherwise.
2.1 Description of Private Line Service: Williams Network
Private Line Service (the "Private Line Service") provides
domestic DS-1, DS-3 and optical SONET (OC-N) circuits which are
specifically dedicated to Customer's use between two (2) points
specified by the parties in a Service Order and meeting the
technical requirements as defined in the "Williams Network
Technical Specifications for Private Line Service" attached
hereto as Exhibit II.
<PAGE>
2.2 Description of ATM Service: Williams Network Asynchronous
Transfer Mode Service (the "ATM Service") is technology that
provides integration of disparate networks onto a single
communications infrastructure. ATM technology takes voice,
data and video packets and divides them into equally sized,
53-byte cells and transmits them over Seller's ATM network.
Seller's ATM Service is designed for two (2) primary
applications. These applications include ATM transport and
backbone connectivity. ATM transport provides multimedia and
video transmission. Multimedia transmission is suited for
transporting voice, data and video while video transmission is
best designed for point-to-point video services. Backbone
connectivity provides for the interconnection of local area
networks ("LAN(s)") as well as interconnection of existing
network access points ("NAP(s)") or private peering backbones.
2.3 Description of Frame Relay Service: Williams Frame Relay
Service is a technology that allows commercial end-users to use
a network of shared private lines to send and receive data from
geographically distant locations. Frame Relay can be defined
as packet-switched, multiplexed data networking technology
supporting connectivity between user equipment, such as
routers, and a carrier's frame relay network equipment.
2.4 Description of Collocate Service: In the event the
Customer should desire to place Customer owned equipment in a
facility owned (or leased) and operated by Seller for the
purpose of interconnecting the Customer owned equipment with
Seller's network ("Collocation Service"), the Customer shall
complete a Collocate Request Form. Upon agreement between
Customer and Seller of the Collocation Services to be provided,
the parties shall complete a Collocation Service Order. The
terms and conditions relating to Collocation Service and the
forms required from Customer are attached hereto as Exhibit III
and are a part of this Carrier Agreement and incorporated
herein by reference.
3.0 Effective Date and Term
This Carrier Agreement shall become effective on the date on which
Seller signs the Carrier Agreement ("Effective Date") and shall
continue for a term of five (5) years (the "Term"). Each Service
Order placed under this Carrier Agreement shall have its own term,
as indicated on such Service Order. This Carrier Agreement shall
automatically renew for successive one-year periods (the "Renewal
Term(s)") unless canceled by either party by giving written notice
of such cancellation not less than sixty (60) days before the end of
the current Term, or any Renewal Term. Unless Customer is in
default, any Service being provided at the time of termination shall
continue until the natural end of such Service as specified in the
applicable Service Order upon the terms and conditions of this
Carrier Agreement; provided, however, that Customer may not order
any new Service until Customer and Seller have entered into a new
agreement or mutually agreed in writing to extend this Carrier
Agreement. The charges for any Network Services, Local Access
Services or Ancillary Services during any such extension shall be
the then current Seller charges.
4.0 Service Orders and Provisioning of Circuits
<PAGE>
4.1 Services requested by Customer hereunder shall be
requested on Seller's Service Order forms in effect from time
to time or on Customer's forms accepted in writing by Seller
("Service Order(s)"). Each Service Order shall reference this
Carrier Agreement and its respective Carrier Agreement number.
Seller reserves the right not to accept a Service Order under
this Carrier Agreement at any time.
4.2 When a Service Order is placed, the Customer will
indicate a requested start date (the "Requested Start Date")
for the Service, the desired term of the Service, the specific
city pairs, the applicable bandwidth and any other information
necessary for Seller to provide the Service. Seller will make
reasonable efforts to meet Customer's Requested Start Date. In
the event that a Requested Start Date is altered, Customer's
Requested Start Date will be changed to reflect the number of
days of delay or advance, as appropriate (the "Actual Start
Date").
4.3 This Carrier Agreement shall apply to all Network
Services, Local Access Services and Ancillary Services provided
by Seller to the Customer whether pursuant to a Service Order
or otherwise.
4.4 Seller's standard service implementation interval for
Network Services provided on Seller's owned and operated
network is forty-five (45) days from acceptance of a Service
Order by Seller's Customer Care department. Such acceptance
shall be indicated by the signature of a representative of such
department on the Service Order. The standard service
implementation interval for Network Services provided by a
third party and either partially or wholly off of Seller's
owned and operated network shall be determined on an individual
case basis. Seller shall make reasonable efforts to provide
Network Services within its standard service implementation
interval or on Customer's Requested Start Date. Failure of
Seller to deliver by such date shall not constitute a default
under this Carrier Agreement and Seller shall not be liable to
pay to Customer any penalties or damages for Seller's failure
to meet such standard service implementation intervals.
4.5 Network Services shall begin on the date Seller
issues notice that Service is available (the "Start of Service
Notice" or "SOSN"), indicating that the Service has been tested
by Seller in accordance with the Technical Specifications set
forth in Exhibit II attached hereto and that the Service meets
or exceeds those Technical Specifications (the "Actual Start
Date"). If Customer fails to give written notice that the
Service is in material non-compliance with the applicable
Technical Specifications within three (3) business days after
Seller issues the SOSN, Customer shall be deemed to have
accepted such Service and Seller shall begin billing for the
Service as of the Actual Start Date.
4.6 Customer may request a delay in the Actual Start Date
of an Order provided that (i) it provides the Seller a written
delay request no later than five (5) business days prior to the
Requested Start Date or the delayed Requested Start Date, as
the case may be, and (ii) the aggregate number of the days
requested by such delay request or requests do not exceed
thirty (30) calendar days from the Service Order's original
Requested Start Date. At the expiration of such thirty (30)
day period the Customer may no longer delay the Actual Start
Date of such Order and Seller may begin billing as of such date.
<PAGE>
4.7 Any conflicting, different or additional terms and
conditions contained in Customer's acknowledgement or Service
Order or elsewhere are objected to by Seller and shall not
constitute part of this Carrier Agreement. No action by Seller
(including, without limitation, provision of Network Services,
Local Access Services or Ancillary Services to Customer
pursuant to such Service Order) shall be construed as binding
or estopping Seller with respect to such term or condition.
4.8 Once the Actual Start Date has passed and Customer
has accepted the Network Services, Local Access Services or
Ancillary Services, Customer must pay for the Network Services,
Local Access Services or Ancillary Services as indicated on the
Service Order, regardless of whether Customer is actually using
the Network Services, through the Term indicated on the Service
Order.
5.0 Local Access Services
5.1 Unless the parties otherwise agree pursuant to
Section 5.3 below, Seller shall obtain "Local Access Services"
for Customer, which are defined as the telecommunications
facilities connecting a Customer-designated termination point
to a Seller Point of Presence ("POP"). Customer shall execute
a Letter of Agency, on such form as provided by Seller,
authorizing Seller to interact directly with the Local Access
provider(s) to obtain the Local Access Services. Customer
shall request all Local Access Services in writing to Seller.
Customer shall be responsible for all charges, including
without limitation, monthly charges, usage charges,
installation charges, non-recurring charges, or applicable
termination/cancellation liabilities, of the Local Access
provider(s).
5.2 In obtaining Local Access Services, Seller shall be
responsible for provisioning and the initial testing of an
interconnection between the interexchange Service set forth in
a Service Order and the Local Access Services. Seller will
coordinate the installation of the Local Access Services with
the interexchange Service being provided by Seller. Charges to
Customer for Local Access Service administered by Seller on
behalf of Customer shall be billed to Customer at the tariff
rate of the Local Access service provider. If the tariff rate
for Local Access Services is changed by the Local Access
service provider, such changes will be passed through to Customer.
5.3 Customer may, upon Seller's prior written approval,
order its own Local Access Services. In such event, Customer
shall be billed directly by the provider of such services and
Seller shall not be responsible for billing any such charges.
If Customer orders its own Local Access Services, Customer
shall be responsible for ensuring that such services are turned
up at the same time as the Network Services being provided by
Seller. In the event the Customer-ordered Local Access
Services are not ready at such time as the Network Services
being provided by Seller, Seller shall nevertheless have the
right to begin billing for such Network Services as of the
Actual Start Date and Customer shall be liable for payment for
such Network Services as of such date.
6.0 Ancillary Services and Charges
<PAGE>
6.1 Seller may provide extraordinary service to Customer
for reasons including but not limited to: (a) Customer's
request to expedite Service availability to a date earlier than
Seller's published installation interval or a previously
accepted start date; (b) Service redesign or other activity
occasioned by receipt of inaccurate information from Customer;
(c) reinstallation charges following any suspension of the
Service for cause by Seller; (d) Customer's request for use of
routes or facilities other than those selected by Seller for
provision of the Service; and (e) other circumstances in which
extraordinary costs and expenses are generated by Customer and
reasonably incurred by Seller (services under this subsection
are collectively referred to herein as "Ancillary Services").
Customer shall be liable for all charges for any Ancillary
Services provided by Seller.
6.2 If Customer desires to change the date on which
Customer has requested that Service be available, other than a
request to expedite Service as set forth above, Customer may be
charged a Change of Service Date Charge. Such charge will not
apply to Customer's first change request, as long as such
request is made more than fifteen (15) business days prior to
the original Requested Start Date. If Customer makes a second
change, or such change is requested less than fifteen (15) days
prior to the original Requested Service Date, Customer will be
charged Seller's then applicable Change of Service Date Charge.
Customer will also be charged for any charges incurred by
Seller from third party providers as a result of Customer's
request for Change of Service Date.
6.3 If Customer requests a modification to the
information contained in a Service Order (other than a Change
of Service Date) prior to completion of installation of the
Service, Customer may incur a Change of Service Order Charge.
No charge will be incurred if the change is administrative in
nature (i.e. billing address, contact information, etc.). A
charge will be incurred if the administrative change relates to
Local Access for which Seller is acting as agent.
6.4 If Customer requests a change to Network Services after
such Network Services have been installed, Customer may incur a
Change of Service Charge. If such Change of Service is
administrative in nature, Customer will not incur a charge,
unless such administrative change applies to Local Access
Services which have been ordered by Seller as agent for
Customer. In addition to the Change of Service Charge,
Customer will be responsible for any charges due to
re-engineering which is required as a result of Customer's
request for Change of Service.
6.5 If Customer desires to cancel a Service Order prior
to installation and acceptance of the Service, Customer will
incur a Cancellation Charge.
6.6 All charges referred to in this Section 6.0 shall be
established as of Seller's acceptance of the Service Order to
which they apply unless they are otherwise specifically set
forth in the Williams Network Pricing Schedule as non-recurring
charges. Such non-recurring charges will be set forth for each
type of Service available under this Carrier Agreement.
<PAGE>
7.0 Payment Terms
7.1 Due Date and Invoice. All amounts stated on each monthly
invoice are due and payable upon Customer's receipt of the
invoice ("Due Date"). Customer agrees to remit payment to
Seller at the remittance address. In the event Customer fails
to make full payment to the proper address within thirty (30)
days of the date of the invoice, Customer shall also pay a late
fee in the amount of the lesser of one and one-half percent (1
1/2%) of the unpaid balance per month or the maximum lawful
rate under applicable state law which shall accrue from the Due
Date. Customer acknowledges and understands that all charges
are computed exclusive of any applicable federal, state or
local use, excise, valued added, gross receipts, sales and
privilege taxes, duties, fees or similar liabilities (other
than general income or property taxes imposed on Seller),
whether charged to or against Seller, its suppliers or
affiliates or Customer associated with the Service, Local
Access Service or Ancillary Service provided to Customer
("Additional Charges"). Such Additional Charges shall be paid
by Customer in addition to all other charges provided for
herein.
7.2 All prorated monthly recurring charges (charges for
monthly Service or Ancillary Service provided for less than a
calendar month), installation and other non-recurring charges
shall be billed following the receipt of any such Service,
Local Access Service or Ancillary Service. Payment for all
monthly recurring charges for full months during which Service,
Local Access Service or Ancillary Service are to be provided
shall be due in advance.
7.3 If Customer in good faith disputes any portion of an
invoice it must pay the undisputed amount of the invoice and
provide written notice to Seller of the billing dispute within
thirty (30) days of the Due Date. Such notice must include
documentation substantiating the dispute. Customer's failure
to notify Seller of a dispute shall be deemed to be Customer's
acceptance of such charges. The parties will make a good faith
effort to resolve billing disputes as expeditiously as
possible. If a dispute is resolved in favor of Customer,
Customer shall receive an adjustment on its next bill.
7.4 Suspension of Service.
(a) In the event payment of undisputed amounts is not received
from Customer on or before sixty (60) days following the date
of the invoice, Seller shall have the right to suspend all or
any portion of the Network Services, Local Access Services or
Ancillary Services to Customer. Seller shall exercise this
suspension right by providing Customer with a minimum of ten
(10) days' written notice specifying the past due amount and
the Network Services and/or Ancillary Services to be suspended.
If Seller receives the entire specified past due amount within
the ten (10) day notice period, then Customer's Service shall
not be suspended.
(b) If only a portion of the Network Services, Local Access
Services or Ancillary Services is initially suspended pursuant
to Seller's written notice, and Customer fails to pay the
specified past due amount within an additional ten (10) days
after the partial suspension of
<PAGE>
Service, then after the
additional ten (10) day period, Seller may suspend all or any
additional portion of the Network Services, Local Access
Services or Ancillary Services to Customer with no additional
written notice. Further, after the additional ten (10) day
period, Seller may continue suspension until such time as
Customer has paid in full all charges then due, including any
late fees as specified herein. Following such payment, Seller
shall reinstate Customer's Network Services, Local Access
Services or Ancillary Services, subject to Seller's Right to
Assurance as provided in Paragraph 7.5 below.
(c) Suspension of Network Services, Local Access Services or
Ancillary Services as set forth in this Paragraph shall not
affect Customer's obligation to pay for the Network Services,
Local Access Services or Ancillary Services.
7.5 Seller's Right to Assurance.
(a) If at any time there is a material adverse change in
Customer's creditworthiness or a material change in Customer's
financial position, then in addition to any other remedies
available to Seller, Seller may elect, in its sole discretion,
to demand reasonable assurance of payment from Customer. An
adverse material change in Customer's creditworthiness shall
include, but not be limited to: (a) Customer's default of its
obligations to Seller under this or any other agreement with
Seller; (b) failure of Customer to make full payment of charges
due hereunder on or before the Due Date on three (3) or more
occasions during any period of twelve (12) or fewer months or
Customer's failure to make such payment on or before the Due
Date in any two (2) consecutive months; (c) acquisition of
Customer (whether in whole or by majority or controlling
interest) by an entity which is insolvent, which is subject to
bankruptcy or insolvency proceedings, which owes past due
amounts to Seller or any entity affiliated with Seller or which
is a materially greater credit risk than Customer; or (d)
Customer's being subject to or having filed for bankruptcy or
insolvency proceedings or the legal insolvency of Customer. An
adverse material change in Customer's financial position shall
include, but not be limited to, negative net worth or working
capital. If Customer's financial statements are not public
information, upon Seller's demand for reasonable assurance of
payment, Customer shall be required to provide financial
statements. After receipt of Customer's financial information,
Seller may require a deposit or other similar means to
establish reasonable assurance of payment.
(b) If Customer has not provided Seller with its financial
information and with reassurance satisfactory to Seller within
thirty (30) days of Seller's notice of demand for reassurance,
then, in addition to any other remedies available to Seller,
Seller shall have the option, in its sole discretion, to
exercise one or more of the following remedies: (i) cause the
start of the Service, Local Access Service or Ancillary Service
described in a previously executed Service Order to be delayed
pending satisfactory reassurance; or (ii) decline to accept a
Service Order or other requests from Customer to provide
Service, Local Access Service or Ancillary Service.
7.6 Taxes. If any sales taxes, valued added taxes or similar
charges or impositions are asserted against Seller after, or as
a result of, Customer's use of Network Services, Local Access
Services or Ancillary Service by any local, state, national,
international, public or
<PAGE>
quasi-public governmental entity or
foreign government or its political subdivision, including
without limitation, any tax or charge levied to support the
federal Universal Service Fund contemplated by the
Telecommunications Act of 1996, or any state equivalent,
Customer shall be solely responsible for such taxes, charges or
impositions. Customer agrees to pay any such taxes, charges or
impositions and hold Seller harmless from any liability or
expense associated with such taxes, charges or impositions.
7.7 Adjustments. Seller may make billing adjustments for a
period of two (2) years after the Due Date of an invoice, or
two (2) years after the date a service is rendered, whichever
is later.
8.0 General Agreement
8.1 Outage Credits. (a) Customer acknowledges the
possibility of an unscheduled, continuous and/or interrupted
period of time when a Network Service or Network Services are
"unavailable" (as defined in the Technical Specifications
attached hereto as Exhibit II) for a continuous period of two
(2) hours (hereafter an "Outage"). An Outage shall begin upon
the earlier of Seller's actual knowledge of the Outage or
Seller's receipt of notice from the Customer of the Outage. In
the event of an Outage, Customer shall be entitled to a credit
(the "Outage Credit") upon Seller's receipt of Customer's
written request for such Outage Credit, (i) for ATM or Frame
Relay Service in the amount of ten percent (10%) of the monthly
Port, PVC and/or usage charges (as stated on the applicable
Service Order) regardless of the length of such Outage, or (ii)
for Private Line Service in the amount of 1/720 of the monthly
recurring charge for the interexchange portion of the Service
for each hour in excess of the first two (2) consecutive hours
that the affected Service fails to conform to the Technical
Specifications.
(b) In the event that Customer experiences one or more Outages
on the same circuit or Service each month for a period of three
consecutive months or three outages on the same circuit or
Service in a given month (the "Excessive Outage"), Customer
shall be entitled, in addition to the applicable Outage Credit,
if any, to terminate such circuits as are affected by the
Excessive Outage without liability for early termination
charges stated in Section 6.1.
(c) Customer shall not receive an Outage Credit if the
interruptions are (i) of a duration of less than two (2)
consecutive hours, (ii) caused by Customer or others authorized
by Customer to use the Network Services under this Carrier
Agreement, (iii) due to the failure of power, facilities,
equipment, systems or connections not provided by Seller, (iv)
caused by the failure of Local Access to Seller's fiber optic
network, (v) the result of scheduled maintenance where Customer
has been notified of scheduled maintenance in advance, (vi) due
to a Force Majeure event as defined in Section 8.7 of this
Carrier Agreement.
(d) All Outage Credits shall be credited on Customer's next
monthly invoice for the affected Service.
<PAGE>
(e) Under no circumstances shall an Outage or an Excessive
Outage be deemed a default under this Carrier Agreement.
8.2 Warranty and Disclaimer of Warranty. Seller warrants that
Network Services or Ancillary Services shall be provided to
Customer in accordance with the applicable Technical
Specifications set forth in Exhibit II. Seller shall use
commercially reasonable efforts under the circumstances to
remedy any delays, interruptions, omissions, mistakes,
accidents or errors in the Network Services or Ancillary
Services and restore such Network Services or Ancillary
Services to comply with the terms hereof. THE FOREGOING
WARRANTY IS THE SOLE AND EXCLUSIVE WARRANTY AND IS PROVIDED IN
LIEU OF ALL OTHER WARRANTIES WHETHER EXPRESS OR IMPLIED
INCLUDING WITHOUT LIMITATION THE IMPLIED WARRANTY OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
8.3 Limitation of Liability. Seller shall indemnify and
defend Customer from and against any loss incurred by Customer
with respect to any deficiency in any of the Services or
Ancillary Services provided by Seller hereunder and any breach
by Seller of its obligations under this Carrier Agreement;
provided, that Seller's liability for any defect or deficiency
in any services provided hereunder shall not exceed the sum of
all amounts paid to Seller or any of its affiliates by Customer
pursuant to this Carrier Agreement during the preceding three
(3) months for the circuit or Service which was defective or
deficient. IN THE EVENT OF ANY BREACH OF THIS CARRIER AGREEMENT
OR ANY FAILURE OF THE NETWORK SERVICES OR THE ANCILLARY
SERVICES, WHATSOEVER, NO PROVIDER (AS DEFINED IN SECTION 8.5)
SHALL BE LIABLE FOR ANY (i) ANY SPECIAL, INCIDENTAL, EXEMPLARY,
OR CONSEQUENTIAL DAMAGES (INCLUDING LOSS OF BUSINESS OR
PROFITS), OR (ii) ANY DAMAGES OF ANY KIND RESULTING FROM
UNAUTHORIZED USE OF THE SYSTEM OR LOSS OF DATA. THIS PROVISION
APPLIES TO ALL CLAIMS WHETHER BASED UPON BREACH OF WARRANTY,
BREACH OF CONTRACT, NEGLIGENCE, STRICT LIABILITY IN TORT OR ANY
OTHER LEGAL THEORY, EVEN IF THE PROVIDER BEEN ADVISED OF THE
POSSIBILITY OF SUCH DAMAGES.
8.4 Year 2000 Compliance Readiness Disclosure. Seller has
initiated an enterprise-wide project to address the year 2000
compliance issue for all technology hardware and software,
external interfaces with customers and suppliers, operations
process control, automation and instrumentation systems and
facilities items. Seller's goal is to have all business
critical processes tested and certified as year 2000 compliant.
"Year 2000 Compliant" means that any function of such hardware
and software containing or calling on a calendar function,
including, without limitation, any function indexed to the CPU
clock, and any function providing specific days, or calculating
spans of dates or days, shall record, store, process, provide
and where appropriate, insert, true and accurate dates and
calculations for dates and spans prior to, including and
following January 1, 2000, and shall correctly recognize and
process the date of February 29, and any related data, during
leap years. Any occurrence of error or interruption of Service
caused by non-compliance with this paragraph shall entitle
<PAGE>
Customer to the Outage Credits remedy stated in Section 3.0 of
Schedule A of this Carrier Agreement. This shall be Customer's
sole remedy in the event of any such error or interruption of
Service caused by non-compliance with this paragraph.
8.5 Customer Content and Indemnity. Customer shall make
all arrangements with copyright holders, music licensing
organizations, performers' representatives or other parties for
necessary authorizations, clearances or consents with respect
to transmission contents ("Contents"). Customer shall
indemnify and hold harmless Providers (as defined below)
against and from any court, administrative or agency action,
suit or similar proceeding, whether civil or criminal, private
or public, brought against Providers arising out of or related
to the contents transmitted hereunder (over Seller's network or
otherwise) including, but not limited to, claims, actual or
alleged, relating to any violation of copyright law, export
control laws, failure to procure Consents, failure to meet
governmental or other technical broadcast standards, or that
such transmission contents are libelous, slanderous, an
invasion of privacy, pornographic, or otherwise unauthorized or
illegal. Providers shall be defined to include Seller, any
third party or affiliated provider, operator or
maintenance/repair contractor of facilities employed in
connection with the provision of Network Services, Local Access
Services or Ancillary Services under this Carrier Agreement.
Seller may terminate or restrict any transmissions over the
network if, in its judgment, (a) such actions are reasonably
appropriate to avoid violation of applicable law; or (b) there
is a reasonable risk that criminal, civil or administrative
proceedings or investigations based upon the transmission
contents shall be instituted against Providers. Customer
agrees not to use Network Services, Local Access Services or
Ancillary Services for any unlawful purpose, including without
limitation any use which constitutes or may constitute a
violation of any local, state or federal obscenity law.
8.6 General Indemnity.
a) Customer and Seller shall defend, indemnify and hold
harmless the other against and from any and all claims for
physical property damage, physical personal injury or wrongful
death to the extent that such arises out of the negligence or
willful misconduct of the respective indemnifying party, its
employees, agents, or contractors in connection with the
provision or use of Network Services, Local Access Services,
Ancillary Services or other performance.
b) With respect to third parties that use Network Services,
Local Access Services or Ancillary Services through Customer,
Customer shall defend, indemnify and hold harmless Providers
against any claims by such third parties for damages arising or
resulting from any defect in or failure to provide Network
Services, Local Access Services or Ancillary Services.
c) The indemnifying party agrees to defend the other against
the claims as set forth above and to pay all reasonable
litigation costs, attorneys' fees, court costs, settlement
payments, and any damages awarded or resulting from any such
claims. The indemnified party shall promptly notify the
indemnifying party in writing of any such claims.
<PAGE>
8.7 Force Majeure. If either party's performance of this
Carrier Agreement or any obligation (other than the obligation
to make payments) hereunder is prevented, restricted or
interfered with by causes beyond its reasonable control
including, but not limited to, acts of God, fire, explosion,
vandalism, cable cut, power outage, storm or other similar
occurrence including rain fade or other atmospheric conditions,
any law, order, regulation, direction, action or request of the
United States Government or national, state or local
governments, or of any department, agency, commission, court,
bureau, corporation or other instrumentality of any one or more
of said governments, or of any civil or military authority, or
by national emergencies, insurrections, riots, wars, acts of
terrorism, strikes, lockouts or work stoppages or other labor
difficulties, supplier failures, shortages, breaches or delays,
then the affected party shall be excused from such performance
on a day-to-day basis to the extent of such prevention,
restriction or interference. The affected party shall use
commercially reasonable efforts under the circumstances to
avoid and remove such causes of non-performance and shall
proceed to perform with reasonable dispatch whenever such
causes cease.
8.8 Events of Default. Either party may terminate this
Carrier Agreement if the other is in default of any material
obligation contained herein, which default has not been cured
within thirty (30) days following the receipt of notice of such
default setting forth the specifics of such default.
Termination and receipt of any applicable refund are Customer's
sole remedies in the event of any such Seller's default.
Notwithstanding the foregoing, the failure of any particular
Network Service or Network Services to comply with the
Technical Specifications (as set forth in Exhibit II) shall not
be deemed a default by Seller, but may obligate Seller to
provide Customer with Outage Credits, as provided in Section
8.1 hereof.
8.9 Use of Services. Seller's obligation to provide Network
Services, Local Access Services or Ancillary Services to
Customer is subject to the following conditions: (a) Network
Services, Local Access Services or Ancillary Services shall not
be used for any unlawful purpose, (b) at least ten percent
(10%) of the transmissions shall be interstate transmissions.
Customer represents that this Carrier Agreement, to the extent
it is subject to FCC regulation, is an inter-carrier agreement
not subject to the filing requirements of Section 211(a) of the
Communications Act of 1934, as amended. The parties hereto
acknowledge that from time to time a portion or portions of the
Customer's use of Network Services may be intended for
transmission upon a portion of the Seller's network with
respect to which Seller is contractually limited to use for
multimedia transmissions (i.e. internet traffic, video and
radio transmission services and/or related applications,
including, graphic, visual, imaging, interactive and multimedia
transmissions)(the "Restricted Fiber"). Upon request from the
Seller, Customer agrees within one (1) business day to identify
the nature of its proposed use of the Service so as to permit
Seller to determine whether the Service may be carried over the
Restricted Fiber. The fact that Seller may not utilize the
Restricted Fiber for such transmissions shall not affect
Seller's obligation to provide Network Services or Ancillary
Services, unless otherwise specifically set forth in this
Carrier Agreement.
8.10 Proprietary Information. Customer understands and agrees
that the terms and conditions of this Carrier Agreement and all
documents referenced herein (including invoices to Customer for
Network Services, Local Access Services or Ancillary Services
provided hereunder) are confidential as between Customer,
Seller and its affiliates and shall
<PAGE>
not be disclosed by
Customer to any party other than the directors, officers, and
employees or agents of Customer who have specifically agreed to
nondisclosure of the terms and conditions hereof. Violation by
Customer or its agents of the foregoing provision shall entitle
Seller, at its option, to discontinue Network Services, Local
Access Services or Ancillary Services to Customer without
further obligation or liability to Customer. Customer further
agrees that any Customer generated press release, advertisement
or publication regarding this Carrier Agreement, Network
Services, Local Access Services or Ancillary Services provided
hereunder or in which Seller, or its affiliates are to be
mentioned, will be submitted to Seller for its written approval
prior to publication. Customer understands and agrees that
Seller may disclose such information as may be required under
applicable law including, without limitation, filing of
tariffs.
8.11 Intrastate Interexchange Services. Customer may use any
interexchange Service provided under this Carrier Agreement
only if such interexchange Service is used for carrying
interstate telecommunications (i.e., telecommunications subject
to the jurisdiction of the Federal Communications Commission).
Seller and its affiliates shall not be obligated to make
available interexchange Service on a circuit with end points
within a single state or service on a circuit which
originates/terminates at points both of which are situated
within a single state unless Customer represents in writing
that such interexchange Service or circuits shall be used to
carry at least 10% interstate telecommunications. If it is
determined at any time that such interexchange Service or
circuit is subject to state regulation, the interexchange
Service or circuit may be provided by Seller or its affiliates
pursuant to applicable state laws, regulations and applicable
tariffs, or Seller and its affiliates may discontinue provision
of the affected interexchange Service or circuit.
8.12 Tariff. Based on Customer's representation to Seller
that Customer is a telecommunications carrier, to the best of
Seller's knowledge, this Carrier Agreement is not subject to
and does not require the filling of a tariff with the Federal
Communications Commission (the "FCC"), because this Carrier
Agreement is subject to the inter-carrier exemption provided in
47 U.S.C. Sec. 211(a), or is otherwise provided on a private
carriage basis. In the event that due to a court or agency
ruling, or change in applicable law or regulation, this Carrier
Agreement becomes subject to a requirement of an FCC tariff,
then Seller will file a contract tariff with the FCC
incorporating all of the material terms and conditions of this
Carrier Agreement, including pricing, and the parties agree to
abide by that contract tariff.
8.13 Customer Responsibilities. Customer has sole
responsibility for installation, testing and operation of
facilities, services and equipment ("Customer Facilities")
other than those specifically provided by Seller as part of the
Network Services, Local Access Services or Ancillary Services
as described in a Service Order. In no event will the untimely
installation or non-operation of Customer Facilities relieve
Customer of its obligation to pay charges for the Network
Services, Local Access Services or Ancillary Services after the
Actual Start Date.
9.0. Miscellaneous Provisions
<PAGE>
9.1 Title to Equipment. This Carrier Agreement shall not, and
shall not be deemed to, convey to Customer title of any kind to
any of the transmission facilities, digital encoder/decoders,
telephone lines, microwave facilities or other facilities
utilized in connection with the Network Services or Ancillary
Services. Any equipment provided by Customer must be itemized
on a schedule listing all such Customer-provided equipment and
appended to the Service Order to which use of that equipment
relates ("Customer Equipment Inventory"). Seller shall not be
obligated to provide any Network Services, Local Access
Services or Ancillary Services for Customer if Customer will be
providing any of its own equipment unless and until such
equipment is itemized on the applicable Customer Equipment
Inventory.
9.2 Conflict of Law. In addition to the nonpayment of any sum
due hereunder, Seller may immediately suspend Network Services,
Local Access Services or Ancillary Services in whole or part if
Seller determines that such Network Services, Local Access
Services or Ancillary Services violate the Communications Act
of 1934, as amended (including the Telecommunications Act of
1996), or that the imposition of any state or federal statute,
or promulgation of any rule, regulation, or order of the
Federal Communications Commission ("FCC") or other governing
body makes Seller's performance commercially impracticable.
9.3 Effect of Change in Law. Upon thirty (30) day's prior
written notice to the other party, either Customer or Seller
shall have the right, without disconnection charge or other
liability to the other party, to cancel the affected portion of
any Service, Local Access Service or Ancillary Service, if
Seller is prohibited by governmental authority from furnishing
or Customer is prohibited from using such portion, or if any
material rate or term contained herein and relevant to the
affected portion of any Service, Local Access Service or
Ancillary Service is substantially changed by order of the
highest court of competent jurisdiction to adjudicate the
matter, the Federal Communications Commission, or other local,
state or federal government authority.
CUSTOMER WILLIAMS NETWORK, A DIVISION OF
WILLIAMS COMMUNICATIONS, INC.
By: /s/Paul Sandhu By: /s/Frank Femple
Name: Paul Sandhu Name: Frank Femple
Title: Title:
Date: Date:
<PAGE>
Exhibit I
Williams Network Pricing Schedule
This Pricing Schedule is made as of this _____ day of
________________, 1999, and is subject to that Carrier Services
Agreement No. __________________ (the "CSA") by and between Williams
Network, a division of Williams Communications, Inc., a Delaware
corporation ("Seller"), and GTC Telecom, a Nevada corporation
("Customer").
A. ATM SERVICES
1. Recurring Rates & Charges: Williams Network ATM service has
three basic rate elements; Local Access, Port Connections, and
Bandwidth.
a. Local Access. Pricing for Local Access is determined in
accordance with the Terms and Conditions set forth in Section 5.0 of
this Carrier Agreement.
b. UNI Port Connections. Pricing for User Network Interface (UNI)
Port Connections is determined on the port speed connections
selected by Customer. UNI is Port Connections are currently
available at DS3, OC3 and OC12 speeds. Monthly recurring charges
for Port Connections are set forth in Table A.1 below.
Table A.1 Monthly Recurring Port Charges
Monthly Recurring Port ChargesPort Speed Monthly Recurring Port
Charge CoS
DS3 $4,500 VBRnrt or CBR
OC3 $11,000 VBRnrt or CBR
OC12 $37,000 VBRnrt or CBR
c. Bandwidth.
(i) There are two types of Bandwidth which can be selected,
the Virtual Channel Connection (VCC) or the Virtual Path Connection
(VPC). The type of bandwidth selected by the Customer does not
determine the price.
(ii) Pricing for Bandwidth is determined based on the Class of
Service (CoS). Two Classes of Service are offered by Williams
Network: Constant Bit Rate (CBR) and Variable Bit Ratenon real time
(VBRnrt). CoS charges are stated in Committed Information Rates
(CIR) which are stated in Megabit per second (Mbps) increments for
one-way (Simplex) VCCs or VPCs. CIR increments are available in
1Mbps increments up to 40Mbps for DS3 ports, 5 Mbps increments up to
150 Mpbs for OC3 ports and 25 Mbps
<PAGE>
increments up to 600 Mbps for
OC12 ports. Monthly recurring charges for Bandwidth are set forth
in Table A.2 below.
Table A.2 Monthly Recurring Bandwidth Charges
Monthly Recurring Bandwidth Charges
Port Speed CoS CIR (Mbps) Price Per Mbps
DS3 VBRnrt 1-9 $151
VBRnrt 10-19 $147
VBRnrt 20-29 $144
VBRnrt 30-40 $140
OC3 VBRnrt 5-20 $147
VBRnrt 25-35 $144
VBRnrt 40-55 $140
VBRnrt 60-75 $137
VBRnrt 80-95 $133
VBRnrt 100-120 $130
VBRnrt 125-150 $126
OC12 VBRnrt 25-75 $133
VBRnrt 100-175 $130
VBRnrt 200-275 $126
VBRnrt 300-350 $123
VBRnrt 375-475 $119
VBRnrt 500-600 $116
DS3 CBR 1-9 $323
CBR 10-19 $315
CBR 20-29 $308
CBR 30-40 $300
OC3 CBR 5-20 $315
CBR 25-35 $308
CBR 40-55 $300
CBR 60-75 $293
CBR 80-95 $285
CBR 100-120 $278
CBR 125-150 $270
OC12 CBR 25-75 $285
CBR 100-175 $278
CBR 200-275 $270
CBR 300-350 $263
CBR 375-475 $255
CBR 500-600 $248
2. Non-Recurring Charges:
Non-recurring charges include installation, configuration changes,
order cancellations and order changes that may be incurred for the
Port, VCC or VPC. Such non-recurring charges are set forth in Table
A.3 below.
<PAGE>
Table A.3
Non Recurring Charges
Description of Charge Charges
Installation:
DS3 Port $1,500
OC3 Port $4,000
OC12 Port $15,000
per PVC or VP $40
Expedite Charge $300
Change of Service Order Charges:
Configuration Change Charge $50
Order Cancellation Charge $250
Port Order Change Charge $100
Change of Service Charge:
Configuration Change Charge $50
Port Order Change Charge $100
Configuration change charges are applied when the bandwidth size of
a VCC or VPC are changed.
Order Cancellation Charges apply when a PVC, VP or Port has been
ordered and needs to be canceled prior to the Service having been
installed and accepted.
Port Order Change Charges apply when Customer requests to
change the port size ordered. If the Port has been installed and
accepted, Customer will be charged for a new port installation.
3. ATM Discount Structure
Williams Network offers the following discounts on ATM Service
charges. Discounts are based on the monthly recurring Port
Connection and Bandwidth (CIR) charges only for ATM Services, as
well as the applicable monthly revenue as defined for Private Line
Service, Frame Relay Service and Collocate Service. Any credits to
which Customer may be entitled, late payment penalties, taxes or
other government surcharges, any one-time non-recurring fees and
charges or any charges related to Local Access Services are not
considered when determining the monthly revenue for purposes of the
ATM discount. The discount structure is based on the monthly
revenue achieved by Customer and the stated length of the Service
Order. The discount Customer will receive on any Service Order will
be determined by the level of revenue achieved by Customer at the
time the Service Order is placed and will include the anticipated
revenue for the Service Order being placed. The discount is
determined at the time the Service Order is placed and Customer
shall receive the determined discount for the remainder of the term
of the Service Order. Customer will receive the stated discount off
of Seller's standard rates as such rates may exist from time to
time.
<PAGE>
Table A.4
Discount StructureMonthly Revenue 1 Year 2 Year 3 Year 4
Year 5 Year
Less than $25,000 0% 0% 0% 0% 0%
$25,000 12% 14% 18% 22% 27%
$50,000 14% 16% 20% 24% 29%
$100,000 16% 18% 22% 26% 31%
$150,000 18% 20% 24% 28% 33%
$200,000 (+) 20% 22% 26% 30% 35%
B. Private Line Services
1. Williams Network Private Line Service has three basic rate
elements; Interexchange charges, Local Access Charges and
non-recurring charges.
a. Interexchange rates are determined in accordance with Table B.3
below. Pricing for any Service not listed in such Table is
determined on an individual case basis and will be set forth on
Customer's Service Order.
The minimum monthly charge for any Interexchange circuit ordered by
Customer shall be as follows:
Table B.1
Minimum Monthly ChargesDS-3 $2,000
OC-3 $5,000
OC-12 $20,000
OC-48 $80,000
b. Non-Recurring Charges:
Table B.2
Non-Recurring Charges DS-1 DS-3 OC-3 OC-12 OC-48
New Order Installation $400 $2,000 $6,000 $12,000 $24,000
Order Change (1st change free) $25 $50 $2,000 $3,000 $4,000
Order Cancellation
Pre-Engineering $150 $250 $500 $750 $1,000
Post-Engineering $300 $500 $2,000 $3,000 $4,000
ASR (new or disconnect) Special Access $250 $250 $250 $250 $250
ASR Supplement $150 $150 $150 $150 $150
Order Expedite $300 $300 $300 $300 $300
Reconfiguration $200 $1,000 $3,000 $6,000 $12,000
Additional Installation/Maintenance/Engineering $100.00/hr
$100.00/hr $100.00/hr $100.00/hr $100.00/hr
<PAGE>
Additional Installation/Maintenance/Engineering (After Hours)
$125.00/hr $125.00/hr $125.00/hr $125.00/hr $125.00/hr
Cross-Connect Charge Monthly Recurring
Non-Recurring
DS-1 $150 $300
DS-3 $250 $500
OC-3 $600 $1,000
OC-12 $1,200 $10,000
OC-48 $3,500 $25,000
Installation charges shall apply to the normal installation of
equipment necessary to provide the requested service to the point of
demarcation at the Customer's premises. Additional installation
charges shall apply when Seller is required to install equipment
other than that normally required to provide the service or when
Customer requests special equipment.
Non-recurring charges not described above will be considered special
requests and will be handled on an individual case basis. All of
the charges stated above are subject to change with thirty (30) days
notice.
c. Private Line Discount Structure
Williams Network offers the following discounts on Private Line
Service charges. Discounts are based on the monthly recurring
interexchange charges only for Private Line Services, as well as the
applicable monthly revenue as defined for ATM Service, Frame Relay
Service and Collocate Service. Any credits to which Customer may be
entitled, late payment penalties, taxes or other government
surcharges, any one-time non-recurring fees and charges or any
charges related to Local Access Services are not considered when
determining the monthly revenue for purposes of the Private Line
discount. The discount structure is based on the monthly revenue
achieved by Customer and the stated length of the Service Order.
The discount Customer will receive on any Service Order will be
determined by the level of revenue achieved by Customer at the time
the Service Order is placed and will include the anticipated revenue
for the Service Order being placed. The discount is determined at
the time the Service Order is placed and Customer shall receive the
determined discount for the remainder of the term of the Service
Order. Customer will receive the stated discount off of Seller's
standard rates as such rates may exist from time to time. The rates
stated in the discount tables below are per VGE V&H mile per month.
Table B.3
Month to
Month Rate
$ 0.04
DS3 RATE TABLE 1 year Circuit 2 year Circuit 3 year Circuit 4 year
Circuit 5 year Circuit$ Volume Rate Disc. Rate Disc.
Rate Disc. Rate Disc. Rate Disc.
Less than $50,000 .0348 13% .0344 14% .0340 15%
.0336 16% .0332 17%
<PAGE>
$ 50,000 .0344 14% .0340 15% .0336
16% .0332 17% .0328 18%
$ 100,000 .0340 15% .0336 16% .0332 17%
.0328 18% .0324 19%
$ 250,000 .0336 16% .0332 17% .0328 18%
.0324 19% .0320 20%
$ 500,000 .0332 17% .0328 18% .0324 19%
.0320 20% .0316 21%
$ 750,000 .0328 18% .0324 19% .0320 20%
.0316 21% .0312 22%
$ 1,000,000 .0324 19% .0320 20% .0316 21%
.0312 22% .0308 23%
$ 1,500,000 .0320 20% .0316 21% .0312 22%
.0308 23% .0304 24%
$ 2,000,000 .0316 21% .0312 22% .0308 23%
.0304 24% .0300 25%
Month to
Month Rate
$ 0.0375 OC-3 / OC-3(c) RATE TABLE 1 year Circuit 2
year Circuit 3 year Circuit 4 year Circuit 5 year Circuit$ Volume
Rate Disc. Rate Disc. Rate Disc. Rate Disc.
Rate Disc.
Less than $50,000 .0326 13% .0323 14% .0319 15%
.0315 16% .0311 17%
$ 50,000 .0323 14% .0319 15% .0315 16%
.0311 17% .0308 18%
$ 100,000 .0319 15% .0315 16% .0311 17%
.0308 18% .0304 19%
$ 250,000 .0315 16% .0311 17% .0308 18%
.0304 19% .0300 20%
$ 500,000 .0311 17% .0308 18% .0304 19%
.0300 20% .0296 21%
$ 750,000 .0308 18% .0304 19% .0300 20%
.0296 21% .0293 22%
$ 1,000,000 .0304 19% .0300 20% .0296 21%
.0293 22% .0289 23%
$ 1,500,000 .0300 20% .0296 21% .0293 22%
.0289 23% .0285 24%
$ 2,000,000 .0296 21% .0293 22% .0289 23%
.0285 24% .0281 25%
Month to
Month Rate
$ 0.0335 OC-12 / OC-12(c) RATE TABLE 1 year Circuit 2
year Circuit 3 year Circuit 4 year Circuit 5 year Circuit$ Volume
Rate Disc. Rate Disc. Rate Disc. Rate Disc.
Rate Disc.
Less than $250,000 .0291 13% .0288 14% .0285 15%
.0281 16% .0278 17%
$ 250,000 .0288 14% .0285 15% .0281 16%
.0278 17% .0275 18%
$ 500,000 .0285 15% .0281 16% .0278 17%
.0275 18% .0271 19%
$ 750,000 .0281 16% .0278 17% .0275 18%
.0271 19% .0268 20%
$ 1,000,000 .0278 17% .0275 18% .0271 19%
.0268 20% .0265 21%
$ 1,500,000 .0275 18% .0271 19% .0268 20%
.0265 21% .0261 22%
$ 2,000,000 .0271 19% .0268 20% .0265 21%
.0261 22% .0258 23%
$ 3,000,000 .0268 20% .0265 21% .0261 22%
.0258 23% .0255 24%
$ 4,000,000 .0265 21% .0261 22% .0258 23%
.0255 24% .0251 25%
Month to
Month Rate
$ 0.0320 OC-48 RATE TABLE 1 year Circuit 2 year
Circuit 3 year Circuit 4 year Circuit 5 year Circuit$ Volume
Rate Disc. Rate Disc. Rate Disc. Rate Disc. Rate Disc.
Less than $250,000 .0278 13% .0275 14% .0272 15%
.0269 16% .0266 17%
$ 250,000 .0275 14% .0272 15% .0269 16%
.0266 17% .0262 18%
$ 500,000 .0272 15% .0269 16% .0266 17%
.0262 18% .0259 19%
$ 1,000,000 .0269 16% .0266 17% .0262 18%
.0259 19% .0256 20%
$ 2,000,000 .0266 17% .0262 18% .0259 19%
.0256 20% .0253 21%
$ 3,000,000 .0262 18% .0259 19% .0256 20%
.0253 21% .0250 22%
$ 4,000,000 .0259 19% .0256 20% .0253 21%
.0250 22% .0246 23%
$ 5,000,000 .0256 20% .0253 21% .0250 22%
.0246 23% .0243 24%
$ 6,000,000 .0253 21% .0250 22% .0246 23%
.0243 24% .0240 25%
<PAGE>
C. Frame Relay Services
1. Rates & Charges: Williams Network Frame Relay Service has four
principal rate elements: Local Access, Port Connections, Permanent
Virtual Circuits (PVCs), and Trunking charges.
Port Connections and PVCs can be categorized as being either a
User-to-Network Interface (UNI) type or Network-to-Network Interface
(NNI) type. An NNI port is defined as one end of a connection
between Seller's frame relay network and another carrier's network.
The connecting carrier could be either a customer or off-net service
provider. Similarly, an NNI PVC is defined as one which has each
end of the PVC residing in two different carrier's frame relay
networks, rather than the originating and terminating points being
in the same carrier's network.
2. Conventional Frame Relay Services:
a. Local Access: Pricing for Local Access is determined in
accordance with the Terms and Conditions set forth in Section 5.0 of
this Carrier Agreement.
b. Port Connections: Both UNI and NNI port charges are based
solely on the speed of the port selected by the Customer. Available
port speeds range from 64 Kilobits per second (Kbps) to 1.536
Megabits per second (Mbps). Available speeds are set forth in Table
C.1 below. Monthly recurring charges and installation charges for
frame relay ports are set forth in Table C.1 below. Other
non-recurring charges are set forth in Table C.3 below.
c. Permanent Virtual Circuit (PVC) bandwidth charges: UNI and NNI
PVC charges are both based solely on the bandwidth selected by
Customer. Bandwidth charges are stated in Committed Information
Rates (CIR) which are stated in Kbps increments for one-way
(Simplex) PVCs. Available PVC-CIR speeds range from 4 Kbps to 1.024
Mbps. Available speeds are set forth in Table C.1 below. Monthly
recurring charges and installation charges for Frame Relay PVCs are
set forth in Table C.1 below. Other non-recurring charges are set
forth in Table C.3 below.
d. Trunking Charges: The trunking charge is for the communication
line between the Williams Network switch and Customer's switch. The
trunking charge is added to the rates set forth in Table C.1 below.
Table C.1 Monthly Recurring Charges (MRC) and Installation Charges
Frame Relay Service
Components Speed/CIR
(Kbps) MRC Install
NNI Port (Private NNI) 64 $ 201 $ 250
128 $ 376 $ 250
(Add: 'NNI Trunking Charge') 192 $ 410 $ 250
256 $ 443 $ 250
320 $ 549 $ 250
384 $ 655 $ 250
448 $ 741 $ 250
512 $ 828 $ 250
576 $ 886 $ 250
640 $ 944 $ 250
<PAGE>
704 $ 1,002 $ 250
768 $ 1,061 $ 250
1024 $ 1,324 $ 250
1536 $ 1,670 $ 250
NNI PVC 4 $ 7 $ 25
(Simplex Pricing) 8 $ 9 $ 25
16 $ 11 $ 25
32 $ 18 $ 25
48 $ 27 $ 25
64 $ 36 $ 25
128 $ 72 $ 25
192 $ 107 $ 25
256 $ 143 $ 25
320 $ 179 $ 25
384 $ 215 $ 25
448 $ 250 $ 25
512 $ 286 $ 25
576 $ 322 $ 25
640 $ 358 $ 25
704 $ 394 $ 25
768 $ 429 $ 25
832 $ 465 $ 25
896 $ 501 $ 25
960 $ 537 $ 25
1024 $ 572 $ 25
UNI Ports 64 $ 201 $ 250
128 $ 376 $ 250
192 $ 410 $ 250
256 $ 443 $ 250
320 $ 549 $ 250
384 $ 655 $ 250
448 $ 741 $ 250
512 $ 828 $ 250
576 $ 886 $ 250
640 $ 944 $ 250
704 $ 1,002 $ 250
768 $ 1,061 $ 250
1024 $ 1,324 $ 250
1536 $ 1,670 $ 250
UNI PVCs 4 $ 7 $ 25
(Simplex Pricing) 8 $ 9 $ 25
16 $ 11 $ 25
32 $ 18 $ 25
48 $ 27 $ 25
64 $ 36 $ 25
128 $ 72 $ 25
192 $ 107 $ 25
<PAGE>
256 $ 143 $ 25
320 $ 179 $ 25
384 $ 215 $ 25
448 $ 250 $ 25
512 $ 286 $ 25
576 $ 322 $ 25
640 $ 358 $ 25
704 $ 394 $ 25
768 $ 429 $ 25
832 $ 465 $ 25
896 $ 501 $ 25
960 $ 537 $ 25
1024 $ 572 $ 25
Local Access DS-0/DDS
ICB
ICB
ICB
FT-1 ICB
ICB
ICB
DS-1 ICB
ICB
NNI Trunking Charge DS-0/DDS
ICB
ICB
ICB
FT-1 ICB
ICB
ICB
DS-1 ICB
ICB
3. Enhanced Frame Relay Services:
a. Frame Relay/ATM Service Interworking:
Frame Relay/ATM Service Interworking gives Customer the ability to
communicate seamlessly between ATM and Frame Relay locations. There
is no additional charge for locations requiring ATM beyond the
standard ATM charges set forth in Section A of this Pricing
Schedule.
b. Flex-CIR Services: Seller's Flex-CIR Service is designed
to help end-users in two ways:
1. Customer can reserve the exact amount of bandwidth needed by the
end-user during the hours it is most critical.
2. Customer can minimize network costs by 'turning off' excess
bandwidth during the hours when it is least required.
Specifically, Customer will be able to plan adjustments to PVC
speeds (or CIR) at quarter-hour increments (e.g. 8:00, 8:15, 8:30,
8:45, etc.). Once Customer has made a speed change, Customer will
not be able to make another change for at least two (2) hours.
Customer shall have the option of establishing different speed
schedules for the same PVC depending on the day of the week (e.g.
turning a Flex-CIR PVC down from its 'weekday speed' of 256 Kbps CIR
to 64 Kbps CIR on the weekend). The configuration charges for this
enhanced service are provided in Table C.2 below.
<PAGE>
Table C.2
Time-of-Day/Day-of-Week Flex-CIR
PVC ChargesDescription NRC (Per PVC) MRC (Per PVC)
Basic PVC Charge
(Based on weighted average of CIRs) (Standard NRC charge for
average CIR level) (Standard MRC charge for average CIR level)
TOD Configuration Charge (2 CIR adjustments per day) $40 $60
DOW Configuration Charge (2 CIR adjustments per wk.) $40
$60
Each additional CIR adjustment per period (Per day or per week) $20
$30
Example:
Pricing Step 1: Customer establishes the necessary CIR and times
for the TOD Flex-CIR Service as follows:
8 a.m. to 5 p.m.:1.024Mbps
5 p.m. to 8 a.m.: 64 Kbps
Once the times and CIR are known, Seller and Customer may then
prorate the charges, based on the percent of time each CIR speed is
scheduled for use. In this example, assuming the standard Monthly
Recurring Charges are $600 for a 1.024Mbps CIR and $40 for a 64Kbps
CIR, the prorated charge would be calculated as follows:
Business Hours: 9/24 hours * $600 (1.024Mbps CIR) = $225
Nonbusiness Hours: 15/24 hours * $40 (64Kbps CIR) = $25
Total Prorated Flex-CIR Charge: = $250.00
per month
Pricing Step 2: Next, Seller adds the speed change
configuration charges. There is a $30 fee every time the CIR is
changed during a Time-of-Day (TOD) schedule. In this example, the
CIR speed changes two times each day (i.e. 8 a.m. to 5 p.m. and 5
p.m. to 8 a.m.). The TOD configuration charges would be calculated
as follows:
TOD Configuration Charge = $30/daily speed change * 2
Changes = $60 per month
Pricing Step 3: In order to determine the total monthly
Flex-CIR cost for this PVC, the Seller adds the "Prorated Charge"
calculated in Step 1 with the "TOD Configuration Charge" calculated
in Step 2.
Monthly Recurring Flex-CIR PVC Cost: $250 + $60 = $310
per month
Pricing Step 4: In order to determine the non-recurring
charges for this example, you first determine the installation
charges. The Installation charges for PVC's are $25 (you would add
to this the installation charge for the ports chosen by Customer as
well. Since ports were not part of
<PAGE>
this example, the Port
installation charges and MRC have not been included). Since there
are 2 PVC's (64 & 1.024 Mbps) the total installation charge for the
PVC's is $50. In addition, Customer would pay a one time
non-recurring charge of $40 for the TOD configuration. Therefore,
in this example, Customer's non-recurring charges for the PVC's only
would be $90.
4. Additional Non-recurring Charges: In addition to the
non-recurring installation charges set forth in Tables C.1 & C.2
above, Customer may incur additional non-recurring charges as set
forth in Table C.3 below.
Table C.3
Additional Non-Recurring ChargesDescription of Charge Charge
Configuration Changes $50
Order Cancellation Charge $250
PVC Order Change Charge $50
Port Order Change Charge $100
Configuration charges are applied when the CIR of PVCs for Basic
Frame Relay Service are changed or when Customer desires a change to
the CIR of PVCs in an already established Flex CIR Schedule (i.e.
Customer will not be charged the $50 fee for changes to the CIR when
establishing its initial Flex-CIR schedule).
Order Cancellation Charges apply when a Customer cancels an order
prior to its installation.
PVC Order Change Charges apply when Customer makes a change to the
PVC size ordered. If the PVC has been installed and accepted,
Customer will be charged for a new PVC installation.
Port Order Change Charges apply when Customer requests to change the
port size ordered. If the Port has been installed and accepted,
Customer will be charged for a new port installation.
5. Frame Relay Discount Schedule
Williams Network offers the following discounts on Frame Relay
Service charges. Discounts are based on monthly recurring charges
only for Frame Relay Services, as well as the applicable monthly
revenue as defined for Private Line Service, ATM Service and
Collocate Service. Any credits to which Customer may be entitled,
late payment penalties, taxes or other government surcharges, any
one-time non-recurring fees and charges or any charges related to
Local Access Services are not considered when determining the
monthly revenue for purposes of the Frame Relay discount. The
discount structure is based on the monthly revenue achieved by
Customer and the stated length of the Service Order. The discount
Customer will receive on any Service Order will be determined by the
level of revenue achieved by Customer at the time the Service Order
is placed and will include the anticipated revenue for the Service
Order being placed. The discount is determined at the time the
Service Order is placed and Customer shall receive the determined
discount for the remainder of the term of the Service Order.
Customer will receive the stated discount off of Seller's standard
rates as such rates may exist from time to time.
Table C.4
Monthly Revenue Commitment 1 Year 2 Year 3 Year 4 Year
5 Year
$0 0% 0% 0% 0% 0%
$20,000 37.0% 39.0% 41.0% 43.0% 45.0%
<PAGE>
$30,000 38.0% 40.0% 42.0% 44.0% 46.0%
$40,000 39.0% 41.0% 43.0% 45.0% 47.0%
$50,000 40.0% 42.0% 44.0% 46.0% 48.0%
$75,000 41.0% 43.0% 45.0% 47.0% 49.0%
$100,000 42.0% 44.0% 46.0% 48.0% 50.0%
$150,000 43.0% 45.0% 47.0% 49.0% 51.0%
$250,000 43.5% 45.5% 47.5% 49.5% 51.5%
$350,000 44.0% 46.0% 48.0% 50.0% 52.0%
$500,000 44.5% 46.5% 48.5% 50.5% 52.5%
$750,000 45.0% 47.0% 49.0% 51.0% 53.0%
$1,000,000 45.5% 47.5% 49.5% 51.5% 53.5%
IV. Pricing General Conditions
1. All pricing set forth in Sections I, II and III above is
Seller's current pricing. Such pricing is subject to change upon
thirty (30) days written notice by Seller to Customer. Price
changes shall only be effective on a going-forward basis and shall
not apply to Service Orders previously placed by Customer and
accepted by Seller.
IN WITNESS WHEREOF, the parties hereto have executed this Williams
Network Pricing Schedule as of the day and year first above written.
CUSTOMER: WILLIAMS NETWORK, A DIVISION OF
WILLIAMS COMMUNICATIONS, INC.
/s/Paul Sandhu /s/Frank Femple
Signature of Authorized Representative Signature of Authorized Representative
Paul Sandhu
Printed Name Printed Name
Title Title
<PAGE>
Exhibit II
Williams Network Technical Specifications
I. TECHNICAL SPECIFICATIONS FOR ATM AND FRAME RELAY SERVICES
A. Williams Network
Technical Specifications are
stated as an objective that the
ATM and Frame Relay Services will
perform in accordance with
prevailing telecommunications
industry standards. All Service
provided under Williams ATM and
Frame Relay Services are measured
using two variables: Network
Availability and
Mean-time-to-restore.
Mean-time-to-restore is discussed
in the General Provisions of this
Schedule.
B. Availability.
1. Availability on Williams Network. Availability is a
measurement of the percent of total time that service is
operative when measured over a 365 consecutive day (8760
hour) period. For ATM and Frame Relay Services on the
Williams network, availability shall be 99.95% from
point-of-presence ("POP") to POP measured over a one year
period.
2. Availability for Services not on Williams Network. For
Services not on the Williams network, the off-net provider
will establish availability. The Local Access availability
standards for ATM and Frame Relay Services are established
by the Local Access Provider.
3. See General Provisions for other factors affecting
availability.
II. TECHNICAL SPECIFICATIONS FOR PRIVATE LINE SERVICE
A. Interconnection Specifications
1. DS-3. DS-3 service is provided in accordance with
ANSI Standard T1.102 (formerly AT&T Compatibility Bulletin
119) and Technical Reference 54014 '4. DS-3 Service
operates at 44.736 Mbps.
2. Optical SONET Services (OC-N). Optical SONET Services
are provided in accordance with ANSI Standard T1.105. OC-3
Service operates at 155.520 Mbps and is configured with 3
separate STS-1 signaling paths. OC-3C Service operates at
155.520 Mbps and is configured with 1 STS-3C signaling path
(or 3 concatenated STS-1 signaling paths). OC-12 Service
operates at 622.080 Mbps with 12 separate STS-1 signaling
paths. OC-12C Service operates at 622.080 Mbps with 1
STS-12C signaling path (or 4 separate STS-3C signaling
paths). OC-48 Service operates at 2488.320 Mbps and is
configured with 48 separate STS-1 signaling paths.
B. Availability.
1. Availability on Williams Network. Availability is a
measurement of the percent of total time that service is
operative when measured over a 365 consecutive day (8760
hour) period. DS-3 and Optical SONET Service is considered
inoperative when there has been a loss of signal or when
two consecutive 15 second loop-back tests confirm the
observation of a bit error rate equal to or worse than 1 x
10-6. For Services on the Williams network, availability
shall be 99.95% from POP to POP measured over a one year
period.
2. Availability for Services not on Williams Network.
For Services not on the Williams network, the off-net
provider will establish availability. The Local Access
availability standards for DS-3 and Optical SONET Services
are established by the Local Access Provider.
3. See General Provisions for other factors affecting
availability.
<PAGE>
C. Performance (% Error Free Seconds, while Available).
1. Error Free Seconds on Williams Network. Performance
is noted in Error Free Seconds which are a measure of the
percentage of total seconds that do not contain bit errors
when measured over a consecutive 24 hour period.
Performance shall be measured on a one-way basis using a
Pseudo Random Bit Sequence test pattern as defined in
CCITT Recommendation 0.151. For Services on the Williams
network, Error Free Seconds shall be 99.5% from POP to POP
measured over a monthly period.
2. Error Free Seconds for Services Not on Williams
Network. The Error Free Seconds standards for the Local
Access for DS-3 and Optical SONET Service is established
by the Local Access Provider. For Services not on the
Williams network, the off-net provider will establish
Error Free Seconds. For multi-media services, Error Free
Seconds will be as defined by WorldCom, Inc.
III. GENERAL PROVISIONS RELATING TO TECHNICAL SPECIFICATIONS
A. Quality Standards.
1. Standards apply on a one-way basis between Williams
Point(s) of Presence (POP) only.
2. All standards exclude nonperformance due to force
majeure or planned interruptions for necessary maintenance
purposes.
3. All standards exclude nonperformance due to acts or
omissions of Customer or due to any failure of
Customer-provided equipment.
B. Maintenance
1. Williams will undertake repair efforts on equipment
or fiber when Williams first becomes aware of it, or when
notified by Customer and Customer has released all or part
of the Service for testing. The maintenance standards in
this Section III B only apply for Network Equipment or
Fiber on Williams' owned and operated network and from
Williams' POP to Williams' POP.
2. Mean Time to Restore (MTTR) is the average time
required to restore service and resume availability and is
stated in terms of equipment and cable outages. The time
is measured from the moment the outage is reported until
the service is available.
3. MTTR Objective: 2 Hours (Network Equipment)
6 Hours (First Fibers on Cable)
C. Calculation. Williams Network calculates network
availability upon written request from customers. Customer
must notify the Williams Network Customer Care department and
initiate an action request to determine if the standards stated
above were met.
<PAGE>
Exhibit III
Williams Network Collocation Services
SERVICES & TERMS
This Collocation Service Schedule ("Schedule") is made as of this
______day of ___________, 199_, and is subject to that Carrier
Services Agreement No. _________________ the ("CSA") by and between
Williams Network, a division of Williams Communications, Inc., a
Delaware corporation ("Seller"), and GTC Telecom, a Nevada
corporation ("Customer").
1. COLLOCATION SERVICE:
1.1 COLLOCATION SERVICE DESCRIPTION ("COLLOCATION
SERVICE").
Seller grants the Customer a license to occupy, access and
locate therein certain telecommunications transmission
equipment and cabling ("Equipment") for the purpose of
interconnecting the Equipment with Seller's
telecommunications transmission network within a portion of
certain premises ("Premises") which are currently owned or
leased by Seller. Customer shall initiate request for
Collocation Service by completion of the form included as
Attachment I to this Schedule. Collocation Service is
granted only by mutual execution of relevant Collocation
Service Order(s), identified as Attachment II to this
Schedule. The portion of collocation space ("Space")
allocated is accepted "as-is" by Customer and Seller makes
no representation as to the fitness of the space for the
Customer's intended purpose. Customer shall abide by the
standard specifications as set forth in the Technical
Specifications as attached hereto. No work related to
Collocation Service shall commence until the CSA,
Collocation Schedule, the Collocation Service Request, and
the relevant Collocation Service Order(s) are mutually
executed.
Only upon the express written consent of Seller may Customer
interconnect the Equipment with transmission service
provided to Customer by third parties. If Customer should
interconnect the Equipment with equipment or services of any
entity other than Seller without obtaining the written
consent of Seller, Customer shall be in breach of the
Carrier Agreement and Seller may pursue any legal or
equitable remedy, including but not limited to the immediate
termination of the license granted in this Schedule.
All cross-connections relevant to interconnecting the
Equipment with Seller or any other party for which Seller
gives explicit written permission shall be established under
the control and direction of Seller.
1.2 MINIMUM SERVICE COMMITMENT.
Collocation Service shall be granted with a minimum network
service commitment as further described herein. Customer
will be required to purchase a minimum of $25,000 of ATM,
Private Line or Frame Relay Service per month per collocate
rack. ATM, Private Line and Frame Relay Service charges
applied to this commitment level include monthly recurring
fees only. The Customer's monthly transmission billing will
be reviewed against the quantity of Collocation Service and
the Customer shall be liable for any deficiency. Charges
for deficiency will be assessed one month in arrears.
<PAGE>
2. EFFECTIVE DATE: The Effective Date is defined as the date
identified on the relevant Collocation Service Order as the
date of Collocation Service delivery, or the date upon which
Seller delivers Collocation Service, whichever is later.
3. TERM: The Collocation Service Term shall commence upon the
Effective Date and shall continue for the duration specified
within the relevant Collocation Service Order. Once the
Effective Date has passed, Customer must pay for the
Collocation Services through the end of the Collocation Service
Term specified on the Collocation Service Order, regardless of
whether Customer is actually using the Services.
4. RATES & CHARGES: Customer shall pay Seller for the
Collocation Services rendered pursuant to this Schedule the
charges set forth in each Collocation Service Order. Charges
shall be payable in advance commencing on the Effective Date of
the Collocation Service Term and on the first day of each
calendar month thereafter during the Collocation Service Term.
Charges for partial months shall be prorated.
4.1 SERVICE FEE.
The Service Fee is the amount to be invoiced Customer on a
monthly basis for Collocation Service rendered including,
but not limited to, space and power use. Service Fees are
identified on the relevant Collocation Service Order.
4.2 INSTALLATION FEE.
The Installation Fee is the amount to be invoiced Customer
as a one time fee for Collocation Service consisting of
charges associated with the initial installation of the
Collocation Service. Installation Fees are identified on
the relevant Collocation Service Order.
4.3 BUILD-OUT FEE.
Build-Out Fees are those one-time charges applicable to
Collocation Services rendered that are outside the standard
Collocation offering. Build-Out fees are individually
quoted based on Service Order. Build-out fees are payable
in full to Seller upon execution of a Collocation Service
Order and no work will be performed by Seller or Customer to
Build-Out space prior to Seller's receipt of said payment.
4.4 ANCILLARY.
Ancillary charges related to changes of Collocation Service
delivery are set ofth below. These Ancillary Services are
more fully described in Section 9 of this Collocation
Schedule.
Charge Per Occurrence
Change of Effective Date (pre-install) $100.00
Change of Collocation Service Order (pre-Effective Date) $100.00
Change of Collocation Service (post-Effective Date) $250.00
Order Cancellation (>/=30 days from Effective Date) $250.00
Order Cancellation (<30 days from Effective Date) $500.00
AC power addition (post Effective Date) $750.00
<PAGE>
4.5 DISPATCH LABOR CHARGES.
Dispatch labor charges are assessed for Customer requested
site labor. Dispatch requires a minimum 10 days advance
written notice to Seller.
Charge Per Hour
M-F Business Hours $100.00
M-F Off Business Hours $125.00
Saturday & Sunday $150.00
Holidays $150.00
5. COLLOCATION SERVICE DELIVERY: Upon mutual acceptance of a
Collocation Service Order, Seller shall confirm Effective Date,
or inform Customer of the estimated date for the delivery of
such Collocation Service. Seller shall use reasonable efforts
to install each Collocation Service on or before the Effective
Date, but the inability of Seller to deliver Collocation
Services by such date shall not be a default under this Schedule.
In the event Seller fails to tender possession of the Space to
Customer by the Effective Date, Customer shall not be obligated
to pay the Service Fee or Installation Fee until such time as
Seller tenders possession of the Space to the Customer.
If Seller fails to make Collocation Services available within
ninety (90) days after the Effective Date (due to any reason
other than the acts or omissions of Customer), Customer's sole
remedy shall be to cancel the Collocation Service Order which
pertains to such Collocation Service by written notice to
Seller. Seller shall not be liable to Customer in any way as a
result of such delay or failure to tender possession.
6. CONTRACT EXPIRATION: Following the expiration of the
Collocation Service Term or failure of the parties to enter
into any renewal periods, Customer's license shall continue in
effect on a month-to month basis upon the same terms and
conditions specified within this Schedule and relevant
Collocation Service Order, unless terminated by either Customer
or Seller upon thirty (30) days' prior written notice.
Customer's option to renew its license to occupy the Space
shall be contingent on the election by Seller to continue to
own or lease the premises in which the Space is located for the
duration of the renewal period(s), such election to be
exercised at the sole discretion of Seller.
7. INSURANCE: The Customer will carry or cause to be
carried and maintained in force throughout the entire Term of
this Collocation Service Order insurance coverages as described
in paragraphs (A) through (C) below with insurance companies
reasonably acceptable to Seller. The limits set forth below
are minimum limits and will not be construed to limit
Customer's liability. All costs and deductible amounts will be
for the sole account of the Customer.
(A) Worker's Compensation insurance complying with the laws of
the State or States having jurisdiction over each employee,
whether or not Customer is required by such laws to maintain
such insurance, and Employer's Liability with limits of
$500,000 each accident, $500,000 disease each employee, and
$500,000 disease policy limit. If work is to be performed in
Nevada, North Dakota, Ohio, Washington, Wyoming or West
Virginia, Customer will participate in the appropriate state
fund(s) to cover all eligible employees and provide a stop gap
endorsement.
<PAGE>
(B) Commercial or Comprehensive General Liability insurance on
an occurrence form with a combined single limit of $1,000,000
each occurrence, and annual aggregates of $1,000,000, for
bodily injury and property damage, including coverage for
blanket contractual liability, broad form property damage,
personal injury liability, independent contractors,
products/completed operations, and when applicable the
explosion, collapse and underground exclusion will be deleted.
(C) Automobile Liability insurance with a combined single
limit of $1,000,000 each occurrence for bodily injury and
property damage to include coverage for all owned, non-owned,
and hired vehicles.
In each of the above described policies, Customer agrees to
waive and will require its insurers to waive any rights of
subrogation or recovery they may have against Seller its
parent, subsidiary, or affiliated companies.
Under the policies described in (B) and (C) above, Seller its
parent, subsidiary and affiliated companies will be named as
additional insureds as respects Customer's operations and as
respects this contract. Any costs associated with naming these
additional insureds will be the responsibility of Customer.
The policies described in (B) and (C) above will include the
following "other insurance" amendment: "This insurance is
primary insurance with respect to Williams Communications,
Inc., its parent, subsidiary and affiliated companies, and any
other insurance maintained by Williams Communications, Inc.,
its parent, subsidiary or affiliated companies is excess and
not contributory with this insurance."
Non-renewal or cancellation of policies described above will be
effective only after written notice is received by Seller from
the insurance company thirty (30) days in advance of any such
non-renewal or cancellation. Prior to the commencement of the
Collocation Service hereunder, Customer will deliver to Seller
certificates of insurance on an ACORD 25 or 25S form evidencing
the existence of the insurance coverages required above. In
the event of a loss or claim arising out of or in connection
with the work performed under this contract, Customer agrees,
upon request of Seller, to submit the original or a certified
copy of its insurance policies for inspection by Seller.
Seller will not insure nor be responsible for any loss or
damage, regardless of cause, to property of any kind, including
loss of use thereof, owned, leased or borrowed by the Customer,
or its employees, servants or agents.
If Customer utilizes contractor(s) per this Schedule, then
Customer shall require such contractor(s) to comply with these
insurance requirements and supply certificates of insurance
before any work commences.
It is hereby agreed that the insurance requirements of this
Paragraph 8 shall be the insurance requirements under this
Schedule unless more stringent requirements are made by the
Landlord pursuant to the lease relevant to the premises in
question, in which event Customer hereby agrees to comply with
the Landlord's requirements under the lease, as the lease may
be modified from time to time.
<PAGE>
8. CHANGE OF COLLOCATION SERVICES:
8.1 CHANGE OF EFFECTIVE DATE (PRE-INSTALL). Customer will
be assessed a Change of Effective Date Charge by Seller for
any changes of Effective Date requested within thirty (30)
days prior to original Effective Date. Customer will also
be charged for any charges incurred by Seller from third
party providers as a result of a request by Customer for a
Change of Effective Date, regardless of date of Customer
notification.
8.2 CHANGE OF COLLOCATION SERVICE ORDER (PRE-EFFECTIVE
DATE). All modifications to the information contained in an
executed Collocation Service Order will be reviewed on an
individual case basis and the Collocation Service Order
shall be amended accordingly upon Seller's acceptance of the
Collocation Service modifications. Any modifications will
permit Seller to likewise amend Rates and Charges and
Effective Date from original Collocation Service Order.
Customer will be assessed a one time fee for changes to a
Collocation Service Order. Customer will also be charged
for any charges incurred by Seller from third party
providers as a result of a request by Customer for a Change
of Collocation Service Order, regardless of date of Customer
notification.
8.3 CHANGE OF COLLOCATION SERVICE (POST-EFFECTIVE DATE).
If Customer requests a change to Collocation Services after
such Collocation Services have been installed, the request
will be reviewed by Seller on an individual case basis with
no guarantees granted by Seller as to the ability to provide
such changed Collocation Service. All Change of Collocation
Service requests shall be authorized by Seller via a change
Collocation Service Order. Customer may incur an additional
Collocation Service and/or Installation Fee(s) for the
changed Collocation Service. Customer will be assessed a
one time fee for Collocation Service changes. Customer will
also be charged for any charges incurred by Seller from
third party providers as a result of a request by Customer
for a Change of Collocation Service, regardless of date of
Customer notification.
8.4 ORDER CANCELLATION (>/=30 DAYS FROM EFFECTIVE DATE).
Customer may cancel a Collocation Service Order by written
notice to Seller. Customer will incur a one time
cancellation fee for Collocation Services cancelled where
notice is received at least 30 days prior to Effective Date.
8.5 ORDER CANCELLATION (<30 DAYS FROM EFFECTIVE DATE).
Customer may cancel a Collocation Service Order by written
notice to Seller. Customer will incur a one time
cancellation fee for Collocation Services cancelled where
notice is received less than 30 days prior to Effective Date.
9. IMPROVEMENTS TO SPACE: In the event Customer desires to
make improvements to the Space which improvements are deemed
material and substantial as reasonably determined by Seller
("Material Improvements"), Customer shall submit all plans and
specifications for such work to be performed in the Space to
Seller for Seller's prior written approval, which approval
shall not be unreasonably withheld or delayed. No construction
may commence until Seller has given its written approval.
Customer agrees that its use or construction of the Space shall
not interfere with Seller's use of its Premises or other
tenants' use of their premises in the building in which the
Premises are located.
Customer shall not employ any contractor to perform Material
Improvements unless previously approved in writing by Seller
which approval shall not be unreasonably withheld (and approved
in writing by the Landlord if required by the lease). Customer
and each contractor and subcontractor participating in
performing Material Improvements shall warrant that such work
shall be free from
<PAGE>
all mechanic's and/or materialman's liens
and free from any and all defects in workmanship and materials
for the period of time which customarily applies in good
contracting practice, but in no event for less than one (1)
year after the acceptance of the work by Customer and Seller.
The aforesaid warranties of each such contractor and
subcontractor and Customer shall include the obligation to
repair or replace in a thoroughly first-class and workmanlike
manner all defects in workmanship and materials without any
additional charge. All the Material Improvements shall be
contained in the contracts and subcontracts for performance of
Customer's work and shall be written so that they shall inure
to the benefit of Seller and Customer as their respective
interests may appear. Such warranties shall be so written that
they can be directly enforced by either Customer or Seller, and
Customer shall give to Seller any assignment or other assurance
to effectuate the same.
It shall be the Customer's responsibility to cause each of
Customer's contractors and subcontractors to maintain
continuous protection of the premises adjacent to the Space in
such manner as to prevent any damage to such adjacent property
by reason of the performance of Customer's work.
All of Customer's work shall be coordinated with all work being
performed or to be performed by Seller and other tenants of the
building in which the Premises are located. The contractor or
subcontractor shall not at any time damage, injure, interfere
with or delay the completion of any other construction within
the building; and they and each of them shall comply with all
procedures and regulations prescribed by Seller and the
Landlord of the Premises for integration of Customer's work
with the work to be performed in connection with the
construction of the building, and all other construction
within the building which comprises or contains the Premises.
All fixtures, alterations, additions, repairs, improvements
and/or appurtenances attached to or built into, on or about the
Space prior to or during the Term of the license relevant
thereto, whether by Seller at its expense or at the expense of
Customer, or by Customer at its expense or by previous
occupants of the Space, shall be and remain part of the Space
and shall not be removed by Customer at the end of the
Collocation Service Term. Upon termination or expiration of
the Collocation Service Term, Seller shall allow Customer
thirty (30) days from the date of such termination or
expiration, at Customer's sole cost and expense, to remove all
trade fixtures (including, but not limited to,
rectifiers/chargers, batteries, AC power conditioning
equipment, telecommunication switching equipment, channel
banks, etc.) installed by Customer provided that the Space is
restored by Customer to its condition before the installation
of such items and that all such work (including restoration) is
performed in accordance with the other provisions of this
Schedule. If Customer shall fail to complete such removal and
restoration within the aforesaid thirty (30) day time period,
all such trade fixtures remaining within the Space or at the
Premises may, at Seller's option, become the sole property of
Seller, and Seller may dispose of such trade fixtures as it
deems appropriate. Customer shall continue to pay the Service
Fee specified in the relevant Collocation Service Order until
the earlier of: (i) Customer's removal of such trade fixtures
and completion of such restoral or (ii) Seller's taking
possession of such trade fixtures as set forth above.
All work affecting the Space shall be in compliance with all
laws, ordinances, rules, regulations, orders and directives of
governmental and quasi-governmental bodies and authorities
having jurisdiction over the Premises and the Space from time
to time and Customer shall obtain and keep in effect all
licenses, permits and other authorizations required with
respect to the business conducted by Customer within the Space.
10. SOLE USE OF SPACE BY CUSTOMER: Customer acknowledges that
it has been granted only a license to occupy the Space and
that it has not been granted any real property interests in
the Space. Customer further agrees that neither this Schedule
nor any interest created herein shall be assigned, mortgaged,
subleased, encumbered or otherwise transferred, and that
neither the Space nor any part thereof shal
<PAGE>
be encumbered in
any manner by reason of any act or omission on the part of
Customer. Customer further agrees that the Space or any part
thereof shall not be used or occupied, nor permitted to be used
or occupied, by anyone other than Customer. Any attempt to
allow the use or occupation of the Space by anyone other than
Customer, or to assign, mortgage, sublease or encumber any
rights under this Schedule by Customer shall, unless otherwise
agreed to in writing by Seller, be void. In such event, Seller
shall have the right to terminate this Schedule as to any or
all Space occupied by Customer. Seller's agreement to any of
these arrangements shall be in the sole discretion of Seller.
11. EMINENT DOMAIN: In the event of a taking by eminent
domain (or a conveyance by any Landlord of all or any portion
of the Premises to an entity having the power of eminent domain
after receipt of actual notice of the threat of such taking) of
all or any portion of the Premises so as to prevent, in
Seller's sole discretion, the utilization by Customer of the
Space in the Premises, relevant Collocation Service Order(s)
shall terminate as of the date of such taking or conveyance
with respect to the Space which is affected by such taking or
conveyance and the Service Fee paid or to be paid by Customer
shall be reduced accordingly. Except as set forth below,
Customer shall have no claim against Seller for the value of
the unexpired Term of the license affected thereby (or any
portion thereof) or any claim or right to any portion of the
amount that might be awarded to the Landlord of the Premises or
Seller as a result of any such payment for condemnation or
damages. Nothing contained in this Schedule should prohibit
Customer from seeking any relief or remedy against the
condemning authority in the event of an Eminent Domain
proceeding or condemnation which affects the Space.
12. DAMAGE TO PREMISES: If the building in which the Premises
are located is damaged by fire or other casualty, Seller shall
give notice to Customer of such damage as quickly as
practicable under the circumstances. If a Landlord or Seller
exercises an option to terminate a particular Lease due to
damage or destruction of the Premises subject to such Lease, or
if Seller decides not to rebuild such building or portion
thereof in which the Space is located, relevant Collocation
Service Order(s) shall terminate as of the date of such
exercise or decision as to the affected Space and the Service
Fee paid by Customer shall be modified accordingly. If
neither the Landlord of the affected Premises nor Seller
exercises the right to terminate, Seller shall repair the
particular Space to substantially the same condition it was in
prior to the damage, completing the same with reasonable speed.
In the event that Seller shall fail to complete the repair
within a reasonable time period, Customer shall thereupon have
the option to terminate relevant Collocation Service Order(s)
with respect to the affected Space, which option shall be the
sole remedy available to Customer against Seller under this
Schedule relating to such failure. If the Space or any
portion thereof shall be rendered unusable by reason of such
damage, the Service Fee for such Space shall proportionately
abate, based on the amount of square footage which is rendered
unusable, for the period from the date of such damage to the
date when such damage shall have been repaired for the portion
of the Space rendered unusable.
13. CONDUCT IN SPACE & PREMISES: Customer shall abide by
Seller's and applicable Landlord's rules with regard to conduct
in the Premises. Such rules include, but are not limited to,
a prohibition against smoking in the Space or the Premises by
Customer's employees, agents, representatives,
contractors, subcontractors, invitees or licensees. Further,
Customer shall maintain the Space in a safe condition,
including but not limited to the preclusion of storing
combustible materials in the Space.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Collocation Service Schedule as of the day and year first above
written.
CUSTOMER: WILLIAMS COMMUNICATIONS, INC:
Signature of Authorized Signature of Authorized
Representative Representative
Printed Name Printed Name
Title Title
<PAGE>
TECHNICAL SPECIFICATION FOR COLLOCATION SERVICE
WILLIAMS NETWORK STANDARDS, DESCRIPTIONS & TASKS
1.0 DC POWER
1.1 Backup electrical power, including batteries and
shared use of an emergency generator to the extent such
generator exists and is maintained to support the Premises.
1.2 DC power adequate for Customer's consumption equated
to power specified in applicable Collocation Service
Order. A low-voltage and high-voltage battery alarm will
be monitored by Seller.
1.3 Nominal 50 +/- 6V DC battery and charger supply with
a minimum four (4) hour reserve will be provided by Seller.
1.4 Redundant chargers of adequate size will be provided
by Seller, so that in the event of a charger failure the
full load will be supplied to Customer's equipment. A
charger failure alarm will be monitored by Seller.
2.0 AC POWER
2.1 A 20-amp four-plex AC receptacle will be available
within reach of the Customer's Equipment. AC power and
outlets for use with test equipment only and is not
provided to operate the Equipment. This AC power is not
provided over an Uninterruptable Power Source (UPS).
2.2 AC power supply to Customer equipment is backed by
generator where available, but is not UPS. This excludes
utility outlets described in the immediately preceding
subsection 2.1.
3.0 ENVIRONMENTALS
3.1 Pre-reaction sprinkler protection, where available.
Smoke and fire alarms monitored by Seller.
3.2 Lighting.
3.3 Ground Bus and cable interconnect.
3.4 Grounding conductor will be supplied by Seller
between the bus bar and the Customer's Equipment.
3.5 Overhead cable ladder
3.6 Interconnect signal and power cabling between Seller
and Customer.
3.7 Concrete floors will be covered with vinyl tile.
3.8 Ambient temperature will be maintained by Seller
between 60-90 F with an objective of 20-65% humidity.
<PAGE>
3.9 General and administrative services directly relating
to the provision of the above listed Collocation Services.
CUSTOMER STANDARDS, DESCRIPTIONS & TASKS
1.0 EQUIPMENT SPECIFICATIONS
1.1 The Equipment should be designed to operate
satisfactorily between 60-90 F with 20-65%
(non-condensing) humidity. Low 60 and high 90
temperature alarms will be monitored by Seller.
1.2 Customer will ensure that the Equipment and
surrounding area do not pose safety hazards to personnel.
This includes exposed AC electrical hazards, trip and slip
hazards, hazardous material storage deficiencies,
improperly secured or overloaded equipment racks or
ladders, inadequate ingress and egress space. OSHA and
local codes will apply.
1.3 Customer will notify Seller of any significant
Equipment additions or deletions (i.e. shelf or rack).
Installation and removals will be coordinated with local
Seller management.
2.0 SPACE SPECIFICATIONS
2.1 Customer will not jeopardize Collocation Service or
damage property of other collocated customers, Seller, or
Landlord in any manner.
2.2 Customer will take precautions to protect Seller's
and Landlord's common facility and nearby equipment
belonging to other customers. This includes floor, wall,
and telecommunication equipment protection while moving
Equipment and notifying Seller of any major rearrangements
of Equipment, drilling, power work, and similar
potentially disruptive work.
2.3 Customer will follow good cleanliness practices. All
trash must be disposed of daily at Customer's expense.
Any trash or empty boxes not disposed of by Customer is
subject to removal by Seller with any associated charges
borne by Customer.
2.4 Nothing may be stored outside of the assigned rack
space. A minimum of 2.5' of aisle space must be
maintained at front and rear of Equipment.
2.5 No metal ladders, stools, or chairs may be used.
2.6 Combustible or hazardous material may not be stored
in the area.
2.7 All Equipment must be installed within the assigned
rack footprint (i.e. UPS units, spare equipment).
2.8 All cabling will be terminated on DSX panels in the
Seller common area. Fiber will be terminated on an
appropriate Fiber Distribution Panel ("FDP"). Any panels
for Customer end will be supplied at Customer's expense.
2.9 Customer is responsible for the termination of the A
& B DC power and signal cabling in its Equipment.
<PAGE>
2.10 Maximum DC power provided to Customer as A & B power
shall be rated for the rating of a single feed. Customer
is liable for an outage caused by the DC power exceeding
the single feed rating. Customer will be responsible for
payment of consumed power exceeding the single feed rating
specified in the Collocation Service Order.
2.11 Customer will follow normal telecommunications
industry standards with regards to equipment installation
and removal in a central office environment. Seller
standards are to be followed for connection of cables that
interface with Seller. All installations are subject to
approval by Seller.
2.12 Permanent use of extension cords is not allowed.
2.13 Customer will not jeopardize Seller's ability to
conduct business in any manner.
2.14 All local, state, and federal laws will be obeyed.
Local requirements for union labor, especially for AC
electrical work, will be observed. Building management
guidelines will be followed.
2.15 Customer will follow Seller sign-in procedures at all
times. Subject to the requirements of this Schedule,
Customer shall have access to its Equipment 24 hours a
day, 265 days a year. Customer must coordinate its first
visit to a particular Williams' site with Williams'
operations department, giving at least five (5) days
notice of such visit. For all subsequent entries,
Customer will follow the procedure outlined below:
(a) At locations where Customer's Equipment is located in
caged space which is separate from Seller's equipment,
before entry Customer will notify Seller's Network Control
Center at (800) 582-9069 and follow Seller's sign-in
procedures.
(b) At locations where Customer's Equipment is not
located in caged space which is separate from Seller's
equipment, Customer must be escorted by a Williams
technician. Customer may gain such escort by notifying
Seller's Network Control Center at (800) 582-9069 at least
forty-eight hours prior to Customer's desired entry. In
the case of an emergency, Customer shall give as much
notice as is reasonably possible by contacting Seller's
Network Control Center at the number listed above.
Seller's Network Control Center shall work with Customer
to allow Customer to gain access as soon as reasonably
possible.
2.16 If Seller notifies Customer in writing of a violation
of the above rules, or any other unsafe or unacceptable
situation or practice, the Customer must correct the
problem within seven days or provide a written plan for
correction to Seller's satisfaction and proposed
completion date. If the problem is not resolved in seven
days or within a longer time frame agreed upon by Seller,
Seller will have the option of either (i) correcting the
problem at Customer's expense, or (ii) terminating the
Collocation Service Order and disconnecting power and
signal connections from Customer's Equipment.
Extreme safety violations are subject to immediate
correction by Seller without prior notice to Customer.
Corrections made by Seller are at the Customer's expense
and will be billed to the Customer on a time and material
basis.
<PAGE>
Exhibit III Attachment I
Reference Number _____________________________________
new disc
sup cancel
change
WILLIAMS COLLOCATION SERVICE REQUEST
Customer Information
Customer Name
Customer Address street
city state zip
Customer Technical Contact
Phone:
Premises Information
Premises requested
Requested Effective Date
Term 1 Yr 3 Yr 5 Yr
Floor Space Requirements
Cabinets or Racks Quantity Rack Size Wx Dx H
Williams provided Racks Y N
Special Rack Spacing (std @ 5")
Caged Space Y N
Power Requirements
DC Amp Total (per Rack Y N) AC Amp Total (per Rack Y
N)
# feeds (A&B=1)
Equipment Listing
Circuit Requirements
Type of Connection: ABAM/ Coax/ Fiber Quantity
Future Quantity
Coax qty pr. (# DS3 connects from collocate into network)
ABAM/Coax/Fiber Termination Location(s) (DSX or similar port
assignments)
Williams Network Revenue $ Term
(Commitment per Month)
Preferred Local Access Vendor Bandwidth
Comments
Sales Authorizing Signature Customer Authorizing
Signature
Print Name Print Name
Title Title
Company Company
Date Date
Network Services comments
<PAGE>
Exhibit III Attachment II
WILLIAMS COLLOCATION SERVICE ORDER
order number
new add
change cancel
Customer
Collocation
Premises
Effective Date
Term 1Yr 3Yr 5 Yr
# Racks Rack Size W x D x H
Williams provided Racks Y N
DC Amp Total (per Rack Y__ N__) AC Amp Total (per Rack
Y__ N__)
# feeds (A&B=1)
Coax qty pr. (# DS3 connects from collocate into network)
Coax/Fiber Termination Location(s) (DSX or similar port assignments)
Preferred Local Access Vendor Bandwidth
Comments
Sales Representative
24 Hour Technical Assistance 1-800-582-9069
POP Technician (name)
POP Technician (phone)
Customer Contact (name)
Customer Contact (phone)
PRICING
Service Fee (MRC) $
Installation (NRC) $
Build Out (NRC) $
Ancillary $
TERMS AND CONDITIONS OF THIS ORDER
PRICING IS VALID FOR 30 DAYS FROM ISSUE DATE.
THIS ORDER WILL NOT BE FULLY EXECUTED UNTIL THE CUSTOMER'S CREDIT
HAS BEEN APPROVED.
ALL SERVICE IS PROVIDED IN ACCORDANCE WITH CUSTOMER'S CARRIER
SERVICES AGREEMENT, OR IF NO AGREEMENT EXISTS
BETWEEN WILLIAMS AND CUSTOMER, THEN WILLIAMS' STANDARD TERMS AND
CONDITIONS, AND ANY APPLICABLE WILLIAMS TARIFF.
SERVICES PROVIDED CONTINGENT UPON NETWORK MINIMUMS STATED IN
CUSTOMER'S CARRIER SERVICES AGREEMENT.
Engineering Authorizing Signature Marketing Authorizing
Signature Customer Authorizing Signature
Print Name Print Name Print Name
Title Title Title
Date Date Date
<PAGE>
ATTACHMENT B
MASTER AGREEMENT FOR CONSULTANT SERVICES
No. _____
This Attachment shall amend and shall constitute a part, together with any
quotations, schedules, exhibits or annexes attached hereto, of that
Agreement for Purchase and Sale of Services and Equipment made as of
April 28, 1999, between GTC Telecom and Williams Communications, Inc.
Except for provisions pertaining to exchange of confidential or proprietary
information between the parties, in the event of any conflict between the
terms of this Attachment and the terms of the Agreement for Purchase and
Sale of Services and Equipment, the terms of this Attachment shall govern.
This Consulting Agreement is entered into this ___28th__ day of __April,
1999 (the "Effective Date"), by and between GTC Telecom, a Nevada
corporation, (hereinafter referred to as "Company") and Williams Technology
Solutions, a Division of Williams Communications, Inc., a Delaware
corporation (hereinafter referred to as "Consultant").
WHEREAS, Consultant is especially skilled in providing the type of support
that Company desires:
WHEREAS, Company desires to engage the professional services (the
"Consulting Services" as hereinafter defined) of Consultant in certain matters.
NOW, THEREFORE, Company and Consultant agree as follows:
1. TERM OF CONSULTING AGREEMENT.
The term of this Master Agreement for Consultant Services shall commence on
the date set forth above and shall continue in effect for a period of five
(5) years unless earlier terminated by either party upon six (6) months
prior written notice.
2. CONSULTANT SERVICES. Consultant will prepare a separate summary
of Services To Be Performed ("Exhibit "A") for each Customer order for
Consulting Services. Each Exhibit A shall be signed by both parties
and a part of this Consulting Agreement and incorporated herein. All
Exhibit A's shall be sequentially numbered for ease of identification,
e.g., Exhibit A.1, A.2, A.3 and so forth and shall be executed by
authorized individuals of both parties.
Consultant shall provide consulting services (the "Consulting Services")
as described in Exhibit "A" attached hereto. Each Exhibit "A" shall have a
term associated with a start and end date for the Consulting Services
described. From time to time, changes may be made in the Consulting
Services in the nature of additions, deletions or modifications, which
changes will be reflected in an Amendment to Exhibit "A." Consultant shall
provide Consulting Services as stated in Exhibit A.
3. COMPENSATION AND EXPENSES.
a. For the Term of this Consulting Agreement, Consultant shall receive
from Company a sum for the performance of the Consulting Services to be
rendered to Company pursuant to the terms of
<PAGE>
this Consulting Agreement at
the rate(s) specified in Exhibit "A," plus actual and reasonable expenses
including, but not limited to, travel time, travel expenses, office
supplies, postage, telephone, and expenses directly related to Consulting
Services requested by Company and performed by Consultant.
b. Any reimbursable expenses not specifically allowed in subparagraph a
above shall be limited to those expenses which are approved by an authorized
representative of Company.
c. Payment for Consulting Services shall be made within thirty (30) days
of Company's receipt of Consultant's invoice. Consultant shall invoice
Company on a monthly basis in arrears. Each invoice will reflect the rates
agreed upon in each Schedule. Late payment of any amounts still owing shall
result in the assessment of one and a half ( 1.5%) percent charge , 18%
annually, or such percentage allowable by law, if the percentage allowed by
law is lower.
4. WORK PRODUCT. Any invention, work of authorship, trade secret,
processes, know-how, technologies or ideas, including patents, copyrights
and other intellectual property (collectively, Property), shall remain the
property of the originating Party. In the event that Consultant or any
employee, agent, or subcontractor of Consultant develops or creates any
Property, that Property shall be and remain the exclusive property of
Consultant and shall not be considered a work for hire and Consultant shall
grant Company a non-exclusive license to the Property at no charge for
Company's internal use. Company shall have
no right to sell, lease, license or otherwise transfer, with or without
consideration, any Property to any third party or permit any third party to
reproduce or copy or otherwise use or see the Property
in any form and shall use all reasonable efforts to ensure that no improper
or unauthorized use of the Property is made. In addition, Company agrees
that it will not reverse engineer or de-compile any Property. Company will
promptly, upon termination of this Consulting Agreement or upon the request
of Consultant, deliver to Consultant all such Property without retaining any
copy or duplicate thereof unless Company has requested a license.
5. INDEPENDENT CONTRACTOR. The relationship between Company and
Consultant shall be only that of an "Independent Contractor." The detailed
manner and method of performing the work are under the sole control of
Consultant. Nothing in this Consulting Agreement shall constitute
Consultant as an employee, licensee, partner or agent of Company, and
Consultant shall not hold himself/herself out as such. Consultant
specifically agrees and understands that Consultant shall not be entitled to
any of the benefits which are available to Company employees.
6. COMPLIANCE WITH EMPLOYMENT LAWS. Consultant shall comply, at its
expense, with all applicable statutes with respect to Worker's Compensation,
Employer's Liability, Social Security, Unemployment Compensation and/or
Retirement Benefits and other applicable laws relating to or affecting the
employment of labor.
7. INDEMNIFICATION. Each party ("Indemnitor") shall protect, defend,
indemnify, and hold the other party ("Indemnitee") harmless from and against
any and all suits, actions, legal or administrative proceedings, claims
demands, damages, punitive damages, liabilities, fines, penalties, losses,
costs, and expenses, including without limitation, costs of a reasonable
defense and reasonable attorneys' fees (each, a "Claim" and, collectively,
the "Claims") arising out of or resulting from the negligence or willful
misconduct of the Indemnitor in any way related to its performance under
this Consulting Agreement, including without limitation acts or omissions
resulting in personal injury, death,
<PAGE>
or damage or loss to tangible property.
8. TAXES. The Consultant shall pay or otherwise discharge all Federal,
State and local taxes assessed against Consultant arising out of, occurring
in, or in connection with, Consulting Services performed or things furnished
by Consultant. All amounts paid by Company to Consultant pursuant to
Section 3 of this Consulting Agreement will be reported as non-employee
compensation by Company to the I.R.S. at the end of each calendar year.
Consultant agrees to complete and execute any and all I.R.S. documentation
necessary upon the execution of this Consulting Agreement.
9. COMPANY POLICY. In the event services are to be performed on Company's
premises, Consultant agrees to comply with all Company policies, including
but not limited to the alcohol and drug abuse policy, the no-smoking policy,
and the workplace violence risk reduction and response policy which written
policies shall be provided to Consultant prior to Consultant's entry upon
the premises.
10. DELIVERY AND INSTALLATION. For non-Williams Communications,
Inc. sites, Customer agrees to permit and arrange full access to the sites
necessary for the delivery and installation of equipment during the normal
working hours of 8:00 a.m.-5:00 p.m., Monday through Friday, excluding
Consultant holidays. Any delay or downtime resulting from Customer act or
omission shall be the responsibility of Customer and technician time shall
be billed at Consultant's prevailing rate. Customer represents and warrants
that conditions to be encountered by Consultant at non-Williams
Communications, Inc. sites in areas where work is to be performed shall:
(i) be in compliance with all applicable federal, state and local laws,
rules and regulations: (ii) be safe and non-hazardous: and (iii) not
contain, present, or expose Consultant representatives to hazardous
materials or hazardous substances. In the event of breach of the foregoing,
in addition to all other remedies, Consultant may immediately suspend work
until Customer has promptly corrected such condition(s) at Customer's
expense. In the event Customer cannot or does not correct such condition,
it will be at Consultant's option as to whether to recommence performance or
terminate this Consulting Agreement or the applicable Service to be
Performed. Any termination by Consultant because of its opinion that an
unsafe environmental condition exists will not be deemed a breach of this
Consulting Agreement or a default under it and no liability for such
decision will attach.
11. LETTER OF AGENCY. If required, upon the execution of this
Consulting Agreement, Company shall give Consultant the limited authority to
directly notify the appropriate vendor for the purpose as specifically
identified in a letter substantially in the form of Exhibit B hereto.
Company may terminate this authorization at any time upon notice to
Consultant. As soon as commercially practicable, Company shall also provide
its vendors with a letter (with a copy to Consultant) acknowledging
Consultant's role as Company's agent solely as it relates to the purpose as
specifically identified in a letter substantially in the form of Exhibit B
hereto. As soon as commercially practicable, Company agrees to provide
Consultant with a copy of any contractual commitments which Consultant must
know or comply with in order to dispatch such vendor accordingly.
12. SURVIVAL OF PROVISIONS. The terms and conditions contained in sections
7, 14, 15, 18 and 23 of this Consulting Agreement, respectively,
Confidentiality, Indemnification, Warranty, Limitation of Liability, and
Copyright Warranty, are intended to survive the completion of performance,
cancellation or termination of this Consulting Agreement.
13. WARRANTY. Consultant represents and warrants that all goods,
services and products
<PAGE>
provided pursuant to this Consulting Agreement shall
be of professional quality, conform to industry standards and practices, and
fulfill all of Consultant's obligations under each Exhibit A and the Scope
of Work attached hereto. Customer understands that Consultant will perform
best efforts in meeting mutually agreeable timeframes but many factors
outside of the control of Consultant exist. These factors are the
availability of Local Access Facilities, Collocation facilities completions
as planned, equipment delivery issues and other unforeseen obstacles unknown
to Consultant. These timeframes will be established and updated as the
project unfolds. Timeframes provided in Schedule 2 to Exhibit A.1 are
estimates only.
CONSULTANT MAKES NO OTHER WARRANTIES ABOUT THE SERVICES PROVIDED
HEREUNDER, EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED TO, ANY WARRANTY OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE. CONSULTANT
DISCLAIMS ANY WARRANTY TO PREVENT UNAUTHORIZED USE OF THE SYSTEM.
14. LIMITATION OF LIABILITY. Consultant shall indemnify and
defend Customer from and against any loss incurred by Customer with respect
to any deficiency in any of the services, including assembling, testing and
implementation of Ascend equipment, goods or products provided by Consultant
hereunder and any breach by Consultant of its obligations under this
Consulting Agreement; provided, that Consultant's liability for any defect
or deficiency in any services, goods or products provided hereunder shall
not exceed the sum of all amounts paid to Consultant or any of its
affiliates by Customer pursuant to this Consulting Agreement during the
preceding three (3) months. IN NO EVENT SHALL WCI, WCS, OR THEIR SUPPLIERS
OR SUBCONTRACTORS, BE LIABLE FOR (I) ANY SPECIAL, INCIDENTAL, EXEMPLARY, OR
CONSEQUENTIAL DAMAGES (INCLUDING LOSS OF BUSINESS OR PROFITS), OR (II) ANY
DAMAGES OF ANY KIND RESULTING FROM UNAUTHORIZED USE OF THE SYSTEM, OR LOSS
OF DATA. THIS PROVISION APPLIES TO ALL CLAIMS WHETHER BASED UPON BREACH OF
WARRANTY, BREACH OF CONTRACT, NEGLIGENCE, STRICT LIABILITY IN TORT OR ANY
OTHER LEGAL THEORY, EVEN IF WCI,WCS OR THEIR SUPPLIERS HAVE BEEN ADVISED OF
THE POSSIBILITY OF SUCH DAMAGES.
15. FORCE MAJEURE. If Consultant's performance of this Consulting
Agreement or any obligation hereunder is prevented, restricted or interfered
with by causes beyond its reasonable control including, but not limited to,
acts of God, fire, explosion, vandalism, storm or other similar occurrence,
any law, order, regulation, direction, action or request of the United
States Government or state or local governments, or of any department,
agency, commission, court, bureau, corporation or other instrumentality of
any one or more said governments, or of any civil or military authority, or
by national emergencies, insurrections, riots, wars, strikes, lock-outs or
work stoppages, or other labor difficulties, supplier failures, shortages,
breaches or delays, then Consultant shall be excused from such performance
on a day to day basis to the extent of such prevention, restriction or
interference. Consultant shall use reasonable efforts under the
circumstances to avoid and remove such causes of non-performance and shall
proceed to perform with reasonable dispatch whenever such causes cease.
Company's obligations to pay for Consulting Services already provided
hereunder shall not be subject to Force Majeure.
16. PUBLICITY. Both parties agree to cooperate in joint publicity efforts.
Neither party will use in any advertising or sales promotion, press release
or other publicity matters any endorsements, direct or indirect quotes,
pictures, name and/or marks of the other party without prior written
consent, which consent shall not be unreasonably withheld.
<PAGE>
17. IMPROPER PAYMENTS. Consultant will not use any funds received under
this Consulting Agreement for illegal or otherwise improper purposes related
to the Agreement. Consultant will not pay any commissions, fees, or rebates
to any employee of Company nor favor any employee of Company with gifts or
entertainment of significant cost or value.
18. COPYRIGHT WARRANTY. Company hereby warrants that any products,
Information or services provided to Consultant for use under this Consulting
Agreement shall not violate any applicable copyrights, patents, trademarks,
trade secrets, software licenses, or federal or state laws. Company hereby
agrees to defend, indemnify and hold harmless Consultant and pay all
damages, expenses, and fees (including reasonable attorney's fees) should
such claims arise.
19. DEFAULT. If Company (i) fails to pay the amounts due under the
Consulting Agreement or any other agreement with Consultant, or (ii)
breaches this Consulting Agreement, Consultant may, in addition to all other
remedies available to it at law or in equity, suspend its Consulting
Services obligations, terminate this Consulting Agreement, and/or furnish
service on a time and materials basis, C.O.D. In the event of Consultant's
material non-performance of this Consulting Agreement, Company may cancel
this Consulting Agreement and receive a refund for the unused portion of the
Service Fee, which shall be Company's exclusive remedy for Consultant's
non-performance.
<PAGE>
20. RECORDS AND AUDITS. Both parties shall maintain detailed,
complete and accurate records of all expenses related to the Consulting
Services performed hereunder for a period of at least two (2) years
following the completion of the relevant Consulting Services.
IN WITNESS WHEREOF, the parties have executed this Consulting Agreement as
of the date first above written:
GTC TELECOM WILLIAMS TECHNOLOGY SOLUTIONS,
A DIVISION OF WILLIAMS
COMMUNICATIONS, INC.
By: /s/Paul Sandhu By: /s/Frank Femple
Title:________________________ Title: _____________________
<PAGE>
EXHIBIT A.
SERVICES TO BE PERFORMED
BY
CONSULTANT
(Sample format)
I. INTRODUCTION
II. SCOPE OF WORK
III. TRAINING
IV. WORK HOURS
V. TERM OF CONSULTING SERVICES (COMMENCEMENT DATE AND
COMPLETION DATE)
VI. PRICING
(COMPANY) WILLIAMS TECHNOLOGY
SOLUTIONS,A DIVISION OF
WILLIAMS COMMUNICATIONS, INC.
BY: SAMPLE BY: SAMPLE
TITLE: ____________ TITLE:
DATE: ______________ DATE: ___________________
<PAGE>
EXHIBIT B.
SAMPLE LETTERS OF AGENCY
(Consultant (Williams Technology Solutions)is granted Company's
permission to act as Company's agent for certain purposes)
Date__________
Williams Technology Solutions a Division of
Williams Communications, Inc.
944 Anglum Road
Hazelwood, Missouri 63042
RE: Agency appointment
Gentlemen:
By this letter, _________ authorizes you to act as its agent for the purpose(s)
of _____________ as required by the __________ Agreement dated ___________.
The attached letter addressed to the [vendor/lec] expressly sets forth our
appointment of you as an agent and should be delivered by you to the
appropriate [vendor/lec].
The billing for the ___________ services should be directed to:
_______________________
_______________________
_______________________
If you have any questions or comments with respect to this authorization, please
do not hesitate to call.
Sincerely,
<PAGE>
(Company to complete for Consultant to send/give to Company's
vendors/LEC's)
Date: _______________
Attention: _______________
We have on this date entered into a contractual agreement with Williams
Technology Solutions a Division of Williams Communications, Inc.
(Williams Technology Solutions) to act as our agent and
representative through April 28th, 2004.
Under the terms of this letter, we do hereby authorize
Williams Technology Solutions to act as our agent for the
purpose of handling all negotiations and executing any
resulting agreement(s) for service thereby binding us to
any such agreement(s). This includes the issuance of orders
for data services at:
Customer Name:
Street and No.:
City and State:
Telephone Number:
By exercising its authority, Williams Technology Solutions is creating a
contractual obligation between our company and you, the service
provider, only. Williams Technology Solutions is not responsible for the
obligations of our company to you. Your company shall bill us
for the services at the address listed above.
The authorization granted by this letter does not, however
prevent our company from acting on its own behalf when it is
necessary.
Your contact at Williams Technology Solutions will be: Michael Fallon
(314) 506-4206
Customer Signature:
Title:
Date:
__________________ acknowledges on this ___ day of _______ 199__, the
appointment of Williams Technology Solutions as ___________'s agent for the
purpose stated above and agrees not to hold Williams Technology Solutions liable
or responsible for any breach by _________ of its contractual obligations.
Williams Technology Solutions's point of contact shall be: _______________.
<PAGE>
EXHIBIT A.1
SERVICES TO BE PERFORMED
BY
CONSULTANT
I. INTRODUCTION
See "Overview" section in Scope of Work document which is
attached hereto as Schedule 1 and incorporated herein by
reference.
II. SCOPE OF WORK
See "Scope of Work, Project Management, Network Design and
Analysis, Implementation Services, Staging, Installation
Documentation, Continuing Engineering Services, Network
Administration, Network Operations and Network Reporting"
sections in Scope of Work document which is attached hereto
as Schedule 1 and incorporated herein by reference.
III. TRAINING
Any training necessary is set forth in the Scope of Work
document which is attached hereto as Schedule 1 and
incorporated herein by reference.
IV. WORK HOURS
Work hours are set forth in the Scope of Work document
which is attached hereto as Schedule 1 and incorporated
herein by reference.
V. TERM OF CONSULTING SERVICES (COMMENCEMENT DATE AND
COMPLETION DATE)
The Term of the Consulting Services covered by the Scope of
Work attached hereto shall commence upon the signature of
this document by both parties and shall be completed five
(5) years thereafter, with the exception of the POP
installation/implementation which is expected to be
completed within twelve (12) months from the date of
signature by both parties. Termination by either party
will require six (6) months written notice.
VI. PRICING
Pricing for the Consulting Services is set forth in the
"Pricing and Assumptions, Network Engineering Installation
Team Pricing, Network Engineering Team, Network Operations
Pricing, Network Operations Personnel (Systems), and
Engineering Budget" sections of the Scope of Work document
which is attached hereto and incorporated herein by reference.
SIGNATURE PAGE TO FOLLOW
<PAGE>
GTC TELECOM WILLIAMS TECHNOLOGY SOLUTIONS A
DIVISION OF WILLIAMS
COMMUNICATIONS, INC.
BY:/s/Paul Sandhu BY: /s/Frank Femple
TITLE:_________________ TITLE:_________________
Date: ____________________ Date: _________________
<PAGE>
EXHIBIT A.1 - SCHEDULE 1
SCOPE OF WORK
<PAGE>
Overview
Williams Technology Solutions (Williams) is providing this scope
of work to assist in identifying our abilities to provide GTC
Telecom a fully managed network including network
administration, network operations, installation services,
staging services, and circuit provisioning. Williams will
assist GTC in installing and implementing ninety (90) POP sites.
Once such POP sites are installed, Williams will provide staff
to GTC in order to perform engineering services, network control
center services and software support services which are detailed
herein. Williams will subcontract portions of the managed
network services to third parties and other Williams
subsidiaries in order to provide a single point of service to
its customer. In support of this strategy, Williams will
provide GTC TELECOM with the following services:
O PROJECT MANAGEMENT
O IMPLEMENTATION SERVICES
O SUSTAINED ENGINEERING SERVICES
O NETWORK ADMINISTRATION
O NETWORK OPERATIONS
This scope of work provides an overview of those services and
related pricing.
Scope of Work
Williams Technology Solutions will provide GTC Telecom Managed
Network Services consisting of Project Management,
Implementation Services, Sustained Engineering Services, Network
Administration and Network Operations. This scope provides the
detailed Williams Technology Solutions approach to this project,
discussion of the responsibilities to be taken on by Williams,
and pricing. Williams offers GTC Telecom the knowledge and
experience of the entire Williams Communications Group, as we
will use other organizations in the Williams suite of service
providers in the execution of our duties. GTC TELECOM should
view its interface with Williams Technology Solutions as its
Single Point of Contact (SPOC) for all services contracted from
Williams within this Scope of Work.
The Consulting Services to be provided by Williams are detailed
separately within this Scope of Work but are generally as follows:
O PROJECT MANAGEMENT
- Installation coordination
- Circuit Provisioning
- Certification coordination
- Post project review
O IMPLEMENTATION SERVICES
- Staging and configuration
- Installation
<PAGE>
O SUSTAINED ENGINEERING SERVICES
O NETWORK ADMINISTRATION
- Configuration management
- Process administration
O NETWORK OPERATIONS
- 24x7x365 network monitoring
- Problem resolution
- Dispatch
- Escalation
- Reporting
Project Management
The Network Project Manager will serve to bring all
components of the project together, starting with a
proper, forward-thinking network design. The Network
Project Manager will procure the network hardware and
software, ensure timely delivery, develop an
implementation plan, coordinate installations in a
timely and efficient manner, and develop and execute a
test plan. The key components of the project management
function are as follows:
O NETWORK DESIGN: The project manager will work with GTC
and Ascend Communications Engineer to ensure a functional
network design to support the proposed network.
O PROCUREMENT: The project manager will confirm timely
provisioning of the network equipment. This individual
will assure that the facilities have the physical capacity
( e.g., space, power, etc.), to handle the new equipment;
including site survey coordination, and verification of
equipment shipments and delivery.
O INSTALLATION COORDINATION: The installation process
will include the coordination of configuration and staging
of the network equipment, developing a plan for site
installations, resolving and escalating site installation
issues, and the actual coordination of the site installation.
O CERTIFICATION COORDINATION: This involves developing
a test plan and coordinating the execution of this plan to
validate each installation for functional correctness. The
general plan for the staging, certification and acceptance
of the equipment and the network is as follows: WTS will
accept the equipment when it arrives. WTS will uncrate the
equipment and inspect it for obvious damage. If the
equipment is damaged in shipping WTS will report this
occurrence back to Ascend for replacement.
After the uncrating and acceptance of the
equipment, WTS will the stage the equipment in St.
Louis Staging Site. WTS performs several tests to
ensure the equipment is working properly which will
include power up, installing of the
<PAGE>
configuration
and adequate "burn-in" time for the equipment.
During this burn-in time WTS will place simulated
traffic on the equipment to test the configuration
and ensure that everything is working correctly
before actually installing the equipment in the POP's.
After the staging function is completed, WTS will
begin installing the equipment in the POP's. After
WTS installs the equipment, WTS will then issue a
letter of acceptance for the individual site for
GTC's approval. GTC will then inspect the
installation and accept the equipment as installed.
After approval, WTS will hand off the monitoring
and "care and feeding" of the equipment to the
Network Operations Center in St. Louis.
WTS plans to have the sites up and running by
December 15, 1999. After it has been determined
that the network is ready WTS will then burn in the
network and equipment for a couple of weeks. In
this timeframe WTS plans to actually place portions
of the network with "live" customer traffic to
ensure that the equipment and the network is ready
for live customers.
O POST PROJECT REVIEW: After a POP is completed, GTC
and the project team will review the work efforts,
scorecard the project and perform this Post Project Review
as the certification and acceptance step of a POP by GTC.
After GTC approves and accepts the POP site, the site will
be placed in service and managed by the Network Operations
Center.
Network Design and Analysis
The keys to a successful network deployment are a well
designed network, thorough implementation plan, and
consistent network operations. Williams is highly skilled
and well qualified to deliver on all of these services. It
is important that Williams technical personnel are
thoroughly versed on the network design and objectives in
order to best meet the needs of GTC TELECOM. Understanding
the hardware requirements, applications interfaces, and
transport protocols will improve Williams' ability to
deliver on Project Management, Provisioning and Network
Administration.
Implementation Services
Williams will provide GTC TELECOM with network engineering
services including the following:
o Documentation of site surveys
o Hardware staging
o Site documentation (creation, storage, and
maintenance), to include installation procedures
o Hardware installation
o Site test and certification coordination with the
Network Operations Center
o Hardware maintenance calls
<PAGE>
STAGING
Williams will:
o Accept delivery of equipment.
o Track the incoming and outgoing status of equipment
shipped from Williams and delivered to the locations.
o Provide inventory information to GTC TELECOM as required.
o Provide the resources to install equipment in GTC
TELECOM regions as directed.
Installation Documentation
Installation documentation will consist of:
o Installation Tracking Sheet
o Site Installation Procedures
o Site Survey Form
o Site Floor Plan
o Site Design Diagram.
Continuing Engineering Services
The service-driven nature of Williams Technology Solutions
allows us to offer GTC TELECOM a wide range of
implementation services. Using our own in-house expertise
and appropriate skills from the Williams team, Williams
will provide the following services to GTC TELECOM:
o Circuit provisioning -- designing and ordering
circuits from inter-exchange and local exchange carriers.
o Hardware and software acquisition.
o Staging, configuring, and installation of network
hardware.
o Maintenance -- repair and replenishment; test and
certification of new software releases.
o Capacity planning -- determining and planning areas of
change on the network in terms of capacity, performance,
and utilization.
o Design engineering -- integrating new sites, circuits,
and technology onto the network.
Williams has considerable experience in managing the
implementation process. Williams will put that experience to
work for GTC TELECOM as it expands its customer base and
provides new customers with value-added service offerings.
Network Administration
Williams will provide a network engineer to perform the tasks of
network administration. This engineer will be responsible for:
o Security administration -- password change support;
monthly and quarterly changes; management security reports;
notification processes.
o Configuration management -- archival of change dates;
twelve month archival of router configurations;
configuration notification procedures.
o Report review -- reviewing trouble tickets, network
performance, and utilization reports for trends and problems.
<PAGE>
o Management of service providers -- distributing
information to all necessary parties; monitoring activities
of service providers and taking corrective actions;
supporting GTC TELECOM for network additions/changes/deletes.
o Process management -- providing liaison support to the
customer and GTC TELECOM; ensuring escalation processes and
procedures are adhered to.
Network Operations
Williams will provide GTC TELECOM with Network
Operations solution from a dedicated network operations
center (NOC) in St. Louis. All sites will receive the
following basic services:
o Remote fault (alarm) SNMP monitoring of designated
routers and hubs. Monitoring covers the WAN as well as the
site LANs up to and including the SNMP-manageable hubs,
where present. Monitoring occurs on a 24x7x365 basis and
includes identification of fault domain.
o Trouble ticket initiation within the NOC trouble
ticket system.
o Customer notification (using GTC TELECOM escalation
list and procedures) of critical faults for monitored
equipment and circuits.
o Second-level problem resolution.
o Dispatch of on-site service technician.
o Archiving of equipment inventory information.
o Delivery of trouble ticket reports on a monthly basis.
Reports are available daily via Web-based access.
In summary, all customers will receive support services with
resolution procedures defined by GTC TELECOM. The NOC provides
activities such as soft router boots and interface manipulation,
but will follow whatever reasonable procedures GTC TELECOM
wishes to implement. This flexibility is the key to the group's
success.
Network Reporting
Reporting functionality is addressed in the chart below. The
customer has access to daily, monthly, and historical reports
via the web. Specific reports can be customized to meet the
customer's requirements
The key to successfully implementing and managing a network is
the non-interruption of the service. The following table
details services that Williams will provide.
SERVICE PROVIDED
Create customer profile in problem management system X
Monitor network for problems: 24 x7x365 basis X
Equipment management X
Isolate problems X
Create and manage trouble tickets for problems X
Notify client of problems and actions taken to resolve X
Dispatch Ascend's on site support resources X
Coordinate resources to resolve problems X
<PAGE>
Capacity planning X
Second level help desk X
System downtime reports (incl. trouble ticket information) X
Creating and maintaining configuration database X
Physical and logical network maps X
Configuration change reports Quarterly
Meetings to discuss problems worked and trouble tickets X
Collection of network statistics X
Reporting of network statistics X
Network statistics trend analysis X
Technical, functional, financial analysis of the network
Quarterly
Performance statistics database X
Meetings to discuss performance statistics and findings
Quarterly
Password management X
Out-of-band equipment testing X
Web-based report access X
Circuit provisioning X
Work with Ascend on Testing and certifications of new software
releases X
Dedicated network administrator X
Pricing and Assumptions
Williams has based this Scope of Work and all pricing herein
upon a number of key assumptions about the project and the
relationship between Williams and GTC TELECOM that would result
from this Scope of Work. These assumptions are as follows:
q GTC TELECOM will provide all first level support to its
end-users for non-network problems.
q Monthly recurring and non-recurring circuit costs for
connecting Williams to the GTC TELECOM network will be borne
by GTC TELECOM.
q GTC TELECOM staff will be reasonably accessible to Williams
staff to answer questions and provide information. Williams
will make its best effort to avoid impacting operational
efficiency when gathering information.
q The network deployment for the POP sites will be
accomplished in twelve months from acceptance of agreement.
q Actual equipment configurations and costs may change based
on a final design review and analysis.
<PAGE>
q Williams will provide an Installation Team, Sustained
Engineering Team, Network Systems, and Network Operations
Team in parallel to meet the established timeframe.
q GTC TELECOM and Williams Technology Solutions will mutually
agree to additional staff as the needs of the business
dictates throughout the five-year agreement.
q All direct travel and administrative expenses will be
billed to GTC TELECOM at cost plus 10%.
q GTC TELECOM will purchase a third-party billing package
requiring no development effort for the Network Systems and
Network Engineering Teams.
q Williams Technology Solutions personnel will support a
third party billing system selected by GTC Telecom by
initially providing three resources to maintain the billing
software. Williams Technology Solutions will receive factory
certification from the manufacturer of the billing system.
As GTC Telecom's business expands and a need arises for
additional resources for the maintenance of this billing
system additional resources will be provided to GTC Telecom
at the agreed upon billing rate for the additional resources.
q Williams will require a 45 60 days lead time to secure
the personnel required to implement and maintain the proposed
network.
q GTC TELECOM will pay for night differential of 10% for
second and third shift technicians in the NCC.
q GTC TELECOM will pay time and one half for any overtime
required. GTC TELECOM will pay an additional 5% increase
each year on engineering rates representing salary increases.
NETWORK ENGINEERING INSTALLATION TEAM PRICING:
This section describes a forecasted initial engineering team
to provide the contracted services required to install 90
POPs for GTC Telecom consisting of Ascend TNTs and CBX 500s.
The Network Engineers will act as Network Project Managers to
ensure the smooth implementation of the sites for GTC
Telecom. The estimated timeframe to install these POPs is
twelve months (12) months.
PER HOUR
PRICING
(1) Network Project Manager = $ 80
(1) Network Administration = $ 40
(2) Staging Engineers, each = $ 60
(2) Circuit Provisioners, each
= $ 50
(2) Installation Engineers, each = $ 60
(2) Contracted Ascend Engineer, six months
= $175
NETWORK ENGINEERING TEAM:
Williams will provide the personnel to sustain the network after
installation. The following engineering team will support GTC
TELECOM with customer installs, upgrades, and all the necessary
day-to-day activities required to sustain the network.
PER HOUR
<PAGE>
PRICING
(2) Network Engineers, each = $ 80
(1) Network Administrator = $ 40
(1) Documentation Specialist = $ 45
(2) Circuit Provisioners, each
= $ 50
NETWORK OPERATIONS PRICING:
The following represents the forecasted initial project teams to
provide the contracted services defined in the agreement. It is
expected that the core team of 9 analysts will be expanded, as
the needs of the business require additional resources. The
following represents the initial resources required for the
Network Operations Center:
PER HOUR
PRICING
Network Operations - Personnel (Operations):
(1) Manager - Network Operations * = $ 80
(1) Supervisor, Network Operations = $ 65
(4) Network Analyst, (first shift, each)
= $ 50
(4) Network Analyst (second shift, each)
= $ 55
(4) Network Analyst (third shift, each)
= $ 55
(2) Network Engineers (third level, each) = $ 80
(2) Network Administrators = $ 40
(2) Documentation Specialist, each = $ 45
* Manager Operations is projected at 30% of yearly time will
be charged to GTC Telecom.
Network Operations - Personnel (Systems):
PER HOUR
PRICING
(1) Manager - Systems = $ 70
(2) System Administration Managers, each = $ 50
(1) Data Base Administrator = $ 65
GTC will pay to Williams, in addition to the hourly fees set
forth in above, a start up fees in the amount of $270,000 which
will include (1) Remedy Ticketing Software Package, Ascend NMS
NavisCore Software, and (2) Sunsparc 250s for both the main and
redundant Network Control Centers.
<PAGE>
Engineering Budget
The following represents the costs GTC can expect to incur
during the first year of operations. Williams has prepared this
budget as a guideline and it is an estimate only.
Budget
Function (first year)
Network Engineering Installation $
1,597,533
Network Engineering (Sustaining) $ 477,133
Network Operations $ 2,178,360
Network Systems
$ 436,800
Total $ 4,689,827
(see attached spreadsheet for details)
<PAGE>
EXHIBIT A.2
SERVICES TO BE PERFORMED
BY
CONSULTANT
I. INTRODUCTION
Williams Technology Solutions ("WTS") is providing to GTC
Telecom Project Management, Network Design and Analysis,
Implementation Services, Staging, Installation Documentation,
Continuing Engineering Services, Network Administration, Network
Operations and Network Reporting under the Scope of Work
identified in Exhibit A.1. In addition to the services
identified in such Exhibit A.1, GTC Telecom desires that WTS
provide maintenance services on specific equipment located at
the points of presence ("POP(s)") being installed and
implemented by Williams under Exhibit A.1.
II. SCOPE OF WORK
WTS will provide to GTC Telecom maintenance services which shall
include coordination of on-call trouble resolution, software
upgrades, spare parts and an assigned network services engineer
from Ascend for Ascend CBX500 & MAX TNT equipment in 90
locations. These locations will be the locations in the
domestic United States which are determined, installed and
implemented under Exhibit A.1 of this Consulting Agreement. WTS
is under contract with Ascend for Ascend to provide Advantage
Plus Services to WTS. WTS will use this contract to provide
maintenance services to GTC.
III. TRAINING
N/A
IV. WORK HOURS
Williams will provide maintenance services on a 7x24x365 basis
with a two hour response time on the 106 pieces of equipment (8
CBX 500's and 98 MAX TNT's) which are located in the 90
locations established under Exhibit A.1 to this Consulting
Agreement.
V. TERM OF CONSULTING SERVICES (COMMENCEMENT DATE AND
COMPLETION DATE)
The Term of the Consulting Services covered by this Exhibit
shall commence on December 15, 1999 and shall be completed five
(5) years thereafter. Termination by either party will require
six (6) months written notice.
VI. PRICING
GTC will make five annual payments to Williams in the amount
below. Payments will be made in advance each year beginning
December 15, 1999 and will be due every December 15 thereafter.
The pricing set forth in this section includes the 106 pieces of
equipment identified above for the 90 sites. In the event all
106 pieces of equipment at the 90 sites are not ready for
maintenance by December 15, 1999, WTS will work with GTC to
determine if the maintenance can be pro-rated. If additional
equipment or sites are added to the network, additional charges
may apply. In such event, this Exhibit will be modified in a
writing signed by both parties in order to cover such additional
charges. The annual maintenance pricing will be as follows:
<PAGE>
ITEM
ORDERING MODEL
NUMBERS
PROPOSED HARDWARE SUPPORT OPTION
NETWORK NODES/UNITS COVERED
ANNUAL
CHARGE
1 CS-ADVP-GRD On Guard Annual Program 106 $1,039,450
2 CS-ADVP-OPT4 2 Hour On-site Option 106 $1,559,175
Annual Amount
$2,598,625
Total Maintenance
For 5 years
$13,008,105
GTC TELECOM WILLIAMS TECHNOLOGY SOLUTIONS, A
DIVISION OF WILLIAMS
COMMUNICATIONS, INC.
BY:/s/Paul Sandhu BY:/s/Frank Femple
TITLE:___________________ TITLE: ________________
DATE: __________________ DATE:___________________
<PAGE>
ATTACHMENT C
DATA - MASTER PURCHASE AGREEMENT
This Attachment shall amend and shall constitute a part, together
with any quotations, schedules, exhibits or annexes attached hereto,
of that Agreement for Purchase and Sale of Services and Equipment
made as of __April 28, 1999, between GTC Telecom and Williams
Communications, Inc. Except for provisions pertaining to exchange
of confidential or proprietary information between the parties, in
the event of any conflict between the terms of this Attachment and
the terms of the Agreement for Purchase and Sale of Services and
Equipment, the terms of this Attachment shall govern.
This Master Purchase Agreement ("Purchase Agreement") is made as of
_____April 28,__ 1999, between WILLIAMS COMMUNICATIONS SOLUTIONS,
LLC, 2800 Post Oak Boulevard, Houston, Texas 77056, a Delaware
limited liability company, ("WCS") and GTC Telcom, a corporation
formed in the State of Nevada ("Customer") as a master agreement
whereby Customer may place multiple orders for the purchase of data
communications and internetworking equipment manufactured by Ascend
Communications, Inc. and whereby WCS may accept such orders and
deliver the equipment:
1. AGREEMENT. As ordered by Customer, WCS will sell and
deliver the data communications and internetworking equipment
("Equipment") manufactured by Ascend Communications, Inc. and
sublicense the associated software (together, the "System") as
listed on individual quotations generated by WCS and executed
by Customer (the "Quotation"). Customer will purchase the
Equipment and pay the applicable software license fees. Each
properly executed Quotation and its attachment shall reference
this Purchase Agreement and become a part of this Purchase
Agreement and incorporated herein as if attached hereto.
2. AGREEMENT TERM. The term of this Purchase Agreement (the
"Purchase Agreement Term") shall be three (3) years from the
date first written above. With respect to the sale and
installation of any System described on a Quotation, for which
WCS' obligations will exceed the term of this Purchase
Agreement, both WCS' and Customer's obligations and rights
regarding such System shall continue and survive the expiration
of this Purchase Agreement, provided that the general terms and
conditions of this Purchase Agreement shall continue to define
the rights and obligations of the parties with respect to such
System.
3. PRICE AND PAYMENT TERMS. The price of the System
including price of Equipment, and software licensing fee but
excluding any applicable installation fees, maintenance or
taxes, (the "Cash Price") shall be set forth on the applicable
Quotation. Unless stated otherwise on the Quotation, Customer
will be invoiced and will pay the amount due in accordance with
the following schedule: 25% of the Cash Price upon execution
of the applicable Quotation, 75% of the Cash Price upon the
Delivery Date as those terms are defined in Section 8 of this
Purchase Agreement. All invoices shall be due upon receipt.
All payments will be subject to a late payment service charge
of one and one half percent (1 1/2 %) per month (or as limited
by applicable law) on payments in arrears for more than thirty
(30) days after invoice date. CUSTOMER WILL PROVIDE EVIDENCE OF
ITS TAX-EXEMPT STATUS IF IT CLAIMS SUCH STATUS.
<PAGE>
4. ORDERING PROCEDURES. The parties acknowledge that this
Purchase Agreement is for the purchase of products manufactured
by Ascend Communications only. The purchase and sale of any
System shall be subject to the following ordering procedures:
(A) Whenever Customer desires to purchase a System from WCS,
Customer shall notify WCS specifying the following: (i) the
delivery sites; (ii) specific items of Equipment and quantity,
(iii) the software features and services, (iv) any ancillary
hardware and services; and (v) the desired date that the System
will be delivered. (B) Upon receipt of the information
described above, WCS shall submit to Customer the price and
completed Quotation for the desired System as confirmation of
the order placed. (C) Within thirty (30) days of Customer's
receipt of the Quotation, Customer shall notify WCS that
Customer accepts WCS' offer to sell Customer the applicable
System by signing the Quotation and returning it to WCS. If
not signed and returned within thirty (30) days of its receipt
by Customer, WCS' offer automatically expires. (D) If, for
reasons of convenience, Customer uses its own purchase order or
similar document to place an order under this Purchase
Agreement, WCS may, at its option, accept the order on the
nonconforming form provided the purchase order references this
Purchase Agreement and\or the applicable Quotation. IT IS
EXPRESSLY AGREED, HOWEVER, THAT ANY TERMS AND CONDITIONS ON
SUCH A FORM WHICH ARE CONTRARY TO THE TERMS OF THIS PURCHASE
AGREEMENT, OR WHICH ADD TERMS OR CONDITIONS BEYOND THOSE
CONTEMPLATED IN THIS PURCHASE AGREEMENT OR ITS ATTACHMENTS,
WILL BE NULL, VOID, AND OF NO EFFECT. THE RIGHTS AND
OBLIGATIONS OF THE PARTIES AS SET FORTH HEREIN MAY ONLY BE
ALTERED BY WRITTEN AMENDMENT OR MODIFICATION EXECUTED BY BOTH
PARTIES.
5. LIMITATION OF LIABILITY. Each party shall indemnify the
other only with respect to any third party claim alleging
bodily injury, including death, or damage to tangible property
to the extent such injury or damage is caused by the negligence
of the indemnifying party, provided that such claim is reported
promptly in writing to the indemnifying party. IN NO EVENT
SHALL WCS AND ITS SUPPLIERS OR SUBCONTRACTORS, BE LIABLE FOR
(I) ANY SPECIAL, INCIDENTAL, EXEMPLARY, OR CONSEQUENTIAL
DAMAGES, (II) COMMERCIAL LOSS OF ANY KIND (INCLUDING LOSS OF
BUSINESS OR PROFITS), OR (III) ANY DAMAGES OF ANY KIND
RESULTING FROM UNAUTHORIZED USE OF THE SYSTEM, INTERRUPTION OF
SERVICE OR LOSS OF DATA. THIS PROVISION APPLIES TO ALL CLAIMS
WHETHER BASED UPON BREACH OF WARRANTY, BREACH OF CONTRACT,
NEGLIGENCE, STRICT LIABILITY IN TORT OR ANY OTHER LEGAL THEORY,
AND WHETHER WCS OR ITS SUPPLIERS OR ITS SUBCONTRACTORS HAVE
BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGE OR LOSS.
6. SOFTWARE LICENSE. WCS shall cause all licenses, including
software licenses, necessary for the operation and use of the
Equipment as contemplated by this Purchase Agreement and the
agreements related hereto to be entered into directly between
the licensor or owner of such software or other rights and
Customer. In conjunction with the execution of this Purchase
Agreement, Customer agrees to execute the licensor's End User
License and to abide by the terms and conditions of said
license. WCS represents and warrants that the licenses being
granted to Customer are sufficient to operate and use the
<PAGE>
Equipment as contemplated by Customer and shall use its best
efforts to maintain the functionality of the software in the
event of any failure of a licensor of the software to maintain
the software.
7. RISK OF LOSS, TITLE AND SECURITY INTEREST. Customer assumes
the risk of loss to the System from the date of its delivery to
Customer and Customer shall assume all risks of loss and
responsibility for obtaining and paying for insurance in the
event of loss or damage. Title in the System will pass on full
payment of the Cash Price plus all taxes. WCS reserves and
Customer grants WCS a security interest in the System in the
amount of the purchase price. At WCS' option, Customer will
execute appropriate financing statements to fully protect WCS'
interest hereunder in accordance with the Uniform Commercial Code.
8. DELIVERY AND ACCESS
(A) Delivery Date occurs when WCS delivers the networking
Equipment to the delivery site designated on the
Quotation. Customer shall, at its own expense, provide and
be responsible for installation of the System by
manufacturer certified technicians. Customer acknowledges
that failure to use manufacturer certified technicians
may, at the manufacturer's option, result in denial of
software and technical support services.
(B) For sites not owned by WCS or Williams
Communications, Inc. ("Non-Williams Premises"), Customer
agrees to permit and arrange full access to the Premises
necessary for the delivery of the System during the normal
working hours of 8:00 a.m.-5:00 p.m., Monday through
Friday, excluding WCS holidays. Any delay or downtime
resulting from Customer act or omission shall be the
responsibility of Customer and technician time shall be
billed at WCS' then prevailing rate. Customer represents
and warrants that conditions to be encountered by WCS at
Non-Williams Premises in areas where work is to be
performed shall: (i) be in compliance with all applicable
federal, state and local laws, rules and regulations: (ii)
be safe and non-hazardous: and (iii) not contain, present,
or expose WCS representatives to hazardous materials or
hazardous substances. In the event of breach of the
foregoing, in addition to all other remedies, WCS may
immediately suspend work until Customer has promptly
corrected such condition(s) at Customer's expense. In the
event Customer cannot or does not correct such condition,
it will be at WCS' option as to whether to recommence
performance or terminate due to Customer's breach this
Purchase Agreement or the applicable Quotation for
delivery at that site. Any termination by WCS because of
its opinion that an unsafe environmental condition exists
will not be deemed a breach of this Purchase Agreement by
WCS or a default under it and no liability to WCS for such
decision will attach.
(C) Any addition\deletion or change to the System shall
be made by mutual agreement through a written change order
or quotation which is executed by an authorized
representative of Customer and the terms of this Purchase
Agreement will apply to the Equipment purchased
thereunder. The Cash Price of the System, Delivery Date
and Installation Date shall be subject to adjustment for
any mutually agreeable change order.
(D) No claims with regard to shortages, discrepancies, or
damage to components of the System will be accepted by WCS
unless Customer notifies WCS in writing within ten (10)
working days of the Delivery Date. WCS shall have no
liability in respect of damage or shortages caused by the
acts or omissions of the Customer or of others. If a
claim is validly made under this Section which may entitle
the Customer to
<PAGE>
return a System component, WCS shall not
be bound to accept such return or exchange component
unless the Customer complies strictly with the following
return procedures, which may be modified by WCS from time
to time on written notice: (i) a Return Merchandise
Authorization number must first be obtained from WCS and
must appear on all shipping labels of components to be
returned and (ii) components must be returned in the same
condition as originally delivered, ordinary wear and tear
excepted, and in original box/carton.
9. LIMITED WARRANTY.
(a) FOR THE PERIOD COMMENCING ON INSTALLATION DATE AND
EXPIRING ON DECEMBER 15, 1999 (THE "WARRANTY PERIOD"), WCS
WARRANTS THAT THE SYSTEM WILL BE FREE FROM DEFECTS IN
MATERIALS AND WORKMANSHIP AND WILL OPERATE IN ACCORDANCE
WITH MANUFACTURER'S SPECIFICATIONS AND CUSTOMER'S WRITTEN
SPECIFICATIONS WHICH HAVE BEEN PROVIDED TO WCS. During the
Warranty Period, if warranty work is necessary on the
System, WCS will, at its option: (i) repair the System in
place or (ii) accept return of components for repair or
replacement. Such repair or repair or replacement,
including both parts and labor, will be at WCS' expense.
Repair and replacement parts may be refurbished or contain
refurbished materials. Customer's SOLE AND EXCLUSIVE
REMEDY for breach of warranty is limited to WCS'
performance as set forth herein and performance of
warranty service during the Warranty Period will not
extend or restart the Warranty Period.
(b) In addition to the warranty set forth above, for the
period beginning on the Installation Date and ending on
March 31, 2000 (the "Year 2000 Warranty Period"), WCS will
provide the following warranty for CBX 500, MAXTNT ("TNT")
and NavisCore software (collectively, the "Product")
which the manufacturer has determined the Year 2000
Compliant status and has affirmatively designated that the
Product, as indicated on the manufacturer's Year 2000 web
site, is Year 2000 Compliant. Year 2000 Compliant shall
be defined pursuant to the manufacturer's criteria set
forth on the relevant web site. If, during the Year 2000
Warranty Period the Product fails to perform in the manner
set forth in the manufacturer's web site, CUSTOMER'S SOLE
REMEDY AND WCS' SOLE OBLIGATION under this warranty is for
WCS to correct such failure through, at WCS' expense and
in its sole discretion, repair, replacement or
modification of the Product using commercially reasonable
efforts.
(c) Warranty service provided herein excludes: (i) the
failure of the System due to the reliability of compliance
of other software interfaces residing in the computer
system or Customer's hardware and date interfaces; (ii)
repair of damage resulting from accident, transportation,
neglect or misuse, operation of the System outside the
manufacturer's environmental specifications, failure of
electrical power, air conditioning or humidity control;
(iii) service required because of system operation failure
due to other manufacturer's equipment not provided and
installed by WCS and/or other vendor malfunctions; (iv)
damage caused or required by or resulting from the fault,
misuse, or negligence of the Customer.
(D) THE ABOVE WARRANTIES ARE IN LIEU OF ALL OTHER EXPRESS
WARRANTIES. THIS AGREEMENT EXCLUDES ALL IMPLIED
WARRANTIES, INCLUDING, BUT NOT LIMITED TO, THE WARRANTIES
OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
WCS DISCLAIMS ANY WARRANTY TO PREVENT UNAUTHORIZED USE OF
THE SYSTEM.
(e) The limitations on warranties provided in this
Section 9 do not limit warranties provided under the
Carrier Services Agreement or the Master Agreement for
Consultant Services.
<PAGE>
10. DEFAULT. If, prior to Delivery, Customer cancels an
Equipment order placed pursuant to this Purchase Agreement or
rejects, without cause, Equipment already delivered, WCS, in
addition to the remedies set forth below, shall be entitled to
retain all monies paid by Customer and recover additional
monies, if necessary, to cover actual and verifiable costs
incurred by WCS in preparation for and any actual performance
under this Purchase Agreement; in the event the amount exceeds
WCS' actual costs, WCS shall promptly refund the difference to
Customer. If any material breach of this Purchase Agreement,
or any other agreement between the parties, continues
uncorrected for more than twenty (20) days after written notice
from the aggrieved party describing the breach, the aggrieved
party shall be entitled to declare a default under this
Purchase Agreement and pursue any and all remedies available at
law or equity except as specifically limited elsewhere in this
Purchase Agreement. In addition, if Customer is the aggrieved
party, Customer may suspend its payment obligation relating to
the breach until WCS' breach is corrected, and if WCS is the
aggrieved party, WCS may suspend performance of its obligations
until Customer's breach is corrected.
11. FORCE MAJEURE. WCS' performance shall be adjusted or
suspended by WCS to the extent performance is beyond WCS'
reasonable control for reasons including, without limitation,
the following: strikes, work stoppages, fire, water,
governmental action, acts of God (including, without
limitation, earthquakes, rains, floods or lightning), or public
enemy, delays of suppliers, subcontractors, power company,
local exchange company, or other carrier.
12. MISCELLANEOUS. (A) If WCS delivers additional Equipment
or Software, or provides time and materials maintenance or
other incidental services relating to the System the terms of
this Purchase Agreement will govern, subject to WCS' price
quotes, unless there is a separate written agreement between
the parties covering those items. (B) WCS' obligation is
contingent upon a credit report satisfactory to WCS. (C) Except
for indemnification and payment obligations, no action,
regardless of form, arising out of this Purchase Agreement may
be brought by either party more than one (1) year after the
cause of action has accrued. (D) Customer's signature on a
facsimile transmission of an Quotation or any amendment or
attachment thereto, when sent from Customer's office to WCS,
may be relied upon by WCS in lieu of an inked signature and
shall be binding on Customer and satisfy any applicable Statute
of Frauds. WCS' copy of such facsimile transmission shall
serve as the original of any such document. (E) This Purchase
Agreement may be executed contemporaneously in one or more
counterparts, each of which shall be deemed an original but all
of which together shall constitute one and the same instrument.
(F) Customer agrees that neither it nor any of its affiliates
will solicit any of the WCS employees providing services
pursuant to this Purchase Agreement with offers of employment
during the term of this Purchase Agreement.
SIGNATURE PAGE TO FOLLOW
<PAGE>
WILLIAMS COMMUNICATIONS SOLUTIONS , LLC
BY: /s/Dan M. Miller
CUSTOMER: /s/Paul Sandhu
<PAGE>
MASTER LEASE AGREEMENT
No.A
This Master Lease Agreement (the "MLA") is entered into by and between
Ascend Credit Corporation ("Lessor"), having its principal place of
business at 1701 Harbor Bay Parkway, Alameda, CA 94502 and GTC
Telecom Corp. ("Lessee"), having its principal place of business at 3151
AIRWAY AVE., SUITE P-3, COSTA MESA, CA 92626.
1. LEASE AGREEMENT. Lessor agrees to lease to Lessee, and Lessee agrees to
lease from Lessor, the equipment (the "Equipment") referenced in each of the
Schedules (the "Schedule" or "Schedules") which incorporate this MLA therein
(the "Lease").
2. TERM. Each Lease shall be effective upon the execution of the MLA and
the related Schedule by the Lessor and the Lessee. The lease term (the
"Lease Term") of the Equipment referenced in each of the Schedules shall
commence on the rent commencement date specified in each Schedule (the
"Rent Commencement Date"). The Rent Commencement Date shall be the date
30 days from the date that the Equipment is shipped by the supplier (the "Ship
Date") as evidenced by a shipping document provided by the supplier related
to the Equipment (the "Shipping Document"). Lessor will provide Lessee with
a copy of the Shipping Document evidencing the Ship Date.
3. RENT. The rent (the "Rent") for the Equipment referenced in any
Schedule shall be as stated in such Schedule and shall be payable according
to the provisions of such Schedule. If any amount payable under a Schedule
is not received by Lessor within 10 days of the due date, Lessee agrees
to pay an Overdue Charge, as defined herein, with respect to such amount.
4. SELECTION AND ASSIGNMENT. Lessee will select the type, quantity and
Supplier of each item of Equipment designated in a Schedule, and Lessee
hereby assigns to Lessor all of its right, title and interest in and to the
related equipment purchase agreement, a copy of which has been provided to
Lessor by Lessee (the "Agreement"). The Agreement may be amended with the
consent of Lessor. Any such assignment with respect to Equipment shall
become binding upon Lessor when Lessor and Lessee have entered into a Lease
with respect to such Equipment and as of the Rent Commencement Date
referenced in such Lease. Upon such an assignment becoming effective,
Lessor shall be obligated to purchase the Equipment from the Supplier in
accordance with the provisions of the Agreement. It is expressly agreed
that Lessee shall at all times remain liable to Supplier under the Agreement
to perform all duties and obligations of Lessee thereunder, except for the
obligation to purchase the Equipment to the extent expressly assumed by the
Lessor hereunder, and that the Lessee shall be entitled to the same rights
of the purchaser of the Equipment under the Agreement, except such right,
title and interest in the Equipment retained exclusively by the Lessor as
owner of the Equipment. Lessor shall have no liability for a Supplier's
failure to meet the terms and conditions of the Agreement.
5. DELIVERY AND INSTALLATION. Lessee shall be responsible for payment of
all transportation, packing, installation, testing and other charges
associated with the delivery, installation or use of any Equipment which are
not included in the Agreement with respect to such Equipment.
6. WARRANTIES. LESSOR MAKES NO REPRESENTATION OR WARRANTY OF ANY KIND,
EXPRESS OR IMPLIED, WITH RESPECT TO ANY OF THE EQUIPMENT, ITS
MERCHANTABILITY, OR ITS FITNESS FOR A PARTICULAR PURPOSE. LESSOR SHALL NOT
BE LIABLE TO LESSEE OR ANY OTHER PERSON FOR DIRECT, INDIRECT, SPECIAL,
INCIDENTAL OR CONSEQUENTIAL DAMAGES ARISING FROM LESSEE'S USE OF THE
EQUIPMENT, OR FOR DAMAGES BASED ON STRICT OR ABSOLUTE TORT LIABILITY OR
LESSOR'S PASSIVE NEGLIGENCE. LESSEE HEREBY ACKNOWLEDGES THAT ANY
MANUFACTURER'S OR SUPPLIER'S WARRANTIES WITH RESPECT TO THE EQUIPMENT ARE
FOR THE BENEFIT OF BOTH LESSOR AND LESSEE. NOTWITHSTANDING THE FOREGOING,
LESSEE'S OBLIGATIONS TO PAY EACH RENT PAYMENT DUE, OR OTHERWISE PERFORM ITS
OBLIGATIONS, UNDER THIS LEASE ARE ABSOLUTE AND UNCONDITIONAL.
7. TITLE TO AND LOCATION OF EQUIPMENT. Lessor shall retain title to each
item of Equipment. Lessee, at its expense, shall protect Lessor's title and
keep the Equipment free from all claims, liens, encumbrances and legal
processes. The Equipment is personal property and is not to be regarded as
part of the real estate on which it may be situated. If requested by
Lessor, Lessee will, at Lessee's expense, furnish a landlord or mortgagee
waiver with respect to the Equipment. The Equipment shall not be removed
from the location specified in the Schedule without the written consent of
Lessor. Lessee shall, upon Lessor's request, affix and maintain plates,
tags or other identifying labels, showing Lessor's ownership of the
Equipment in a prominent position on the Equipment.
8. USE OF EQUIPMENT, INSPECTION AND REPORTS. The use of the Equipment by
Lessee shall conform with all applicable laws, insurance policies, and
warranties of the manufacturer or Supplier of the Equipment. Lessor shall
have the right to inspect the Equipment at the premises where the Equipment
is located. Lessee shall notify Lessor promptly of any claims, liens,
encumbrances or legal processes with respect to the Equipment.
9. FURTHER ASSURANCES. Lessee shall execute and deliver to Lessor such
instruments as Lessor deems necessary for the confirmation of this Lease and
Lessor's rights hereunder. Lessor is authorized to file financing
statements signed only by the Lessor in accordance with the Uniform
Commercial Code, or financing statements signed by Lessor as Lessee's
attorney-in-fact. Any such filing with respect to the Equipment leased
pursuant to a true lease shall not be deemed evidence of any intent to
create a security interest under the Uniform Commercial Code.
10. MAINTENANCE AND REPAIRS. Lessee shall, at its expense, maintain each
item of Equipment in good condition, normal wear and tear excepted. Lessee
shall not make any addition, alteration, or attachment to the Equipment
without Lessor's prior written consent. Lessee shall make no repair,
addition, alteration or attachment to the Equipment which interferes with
the normal operation or maintenance thereof, creates a safety hazard, or
might result in the creation of a mechanic's or materialman's lien.
11. LESSOR'S PERFORMANCE OF LESSEE'S OBLIGATIONS. If Lessee fails to
perform any of its obligations under a Lease, Lessor may perform any act or
make any payment which Lessor deems necessary for the maintenance and
preservation of the Equipment subject thereto and Lessor's title thereto.
All sums so paid by Lessor (together with all related Overdue Charges), and
reasonable attorneys' fees incurred by Lessor in connection therewith, shall
be additional rent payable to Lessor on demand. The performance of any such
act or the making of any such payment by Lessor shall not be deemed a waiver
or release of any obligation or default on the part of Lessee.
12. INDEMNIFICATION. Lessee assumes liability for, and hereby agrees to
indemnify, protect and hold harmless, Lessor, and its agents, employees,
officers, directors, partners and successors and assigns, from and against,
all liabilities, obligations, losses, damages, injuries, claims, demands,
penalties, actions, costs and expenses, including, without limitation,
reasonable attorneys' fees, of whatever kind and nature, in contract or in
tort, arising out of the use, condition, operation, ownership, selection,
delivery, leasing or return of any item of Equipment, regardless of when,
how and by whom operated, or any failure on the part of Lessee to perform or
comply with any of its obligations under a Lease, excluding, however, any of
the foregoing which result from the gross negligence or willful misconduct
of Lessor. Such indemnities and assumptions of liabilities and obligations
shall continue in full force and effect, notwithstanding the expiration or
other termination of such Lease. Nothing contained in any Lease shall
authorize Lessee to operate the Equipment subject thereto so as to incur or
impose any liability on, or obligation for or on behalf of, Lessor.
13. NO OFF-SET. All Rents shall be paid by Lessee irrespective of any
off-set, counterclaim, recoupment, defense or other right which Lessee may
have against Lessor, the manufacturer or Supplier of the Equipment or any
other party.
14. ASSIGNMENT BY LESSEE. Lessee shall not, without Lessor's prior written
consent, (a) sell, assign, transfer, pledge, hypothecate, or otherwise
dispose of, encumber or suffer to exist a lien upon or against, any of the
Equipment or any Lease or any interest therein, by operation of law or
otherwise, or (b) sublease or lend any of the Equipment or permit any of the
Equipment to be used by anyone other than Lessee.
15. ASSIGNMENT BY LESSOR. Lessor may assign, sell or encumber its interest
in any of the Equipment and any Lease. Upon Lessor's written consent,
Lessee shall pay directly to the assignee of any such interest all Rent and
other sums due under an assigned Lease. THE RIGHTS OF ANY SUCH ASSIGNEE
SHALL NOT BE SUBJECT TO ANY ABATEMENT, DEDUCTION, OFF-SET, COUNTERCLAIM,
RECOUPMENT, DEFENSE OR OTHER RIGHT WHICH LESSEE MAY HAVE AGAINST LESSOR OR
ANY OTHER PERSON OR ENTITY. Notwithstanding the foregoing, any such
assignment (a) shall be subject to Lessee's right to possess and use the
Equipment subject to a Lease so long as Lessee is not in default thereunder,
and (b) shall not release any of Lessor's obligations hereunder.
16. RETURN OF EQUIPMENT. Unless Lessee has exercised its option, if any, to
renew a lease or purchase the Equipment subject thereto, upon expiration of
the then current Lease Term of such Lease, Lessee shall, at its expense,
cause such Equipment to be removed, disassembled, and placed in the same
condition as when delivered to Lessee (reasonable wear and tear excepted)
and properly crate such Equipment for shipment and deliver it to a common
carrier designated by Lessor. Lessee will ship such Equipment, F.O.B.
destination, to any address specified in writing by Lessor within the
continental United States. All additions, attachments, alterations and
repairs made or placed upon any of the Equipment shall become part of such
Equipment and shall be the property of Lessor.
<PAGE>
17. EVENTS OF DEFAULT. The occurrence of any of the following shall be
deemed to constitute an Event of Default hereunder: (a) Lessee fails to pay
Rent, any other amount it is obligated to pay under a Lease or any other
amount it is obligated to pay to Lessor and does not cure such failure
within 10 days of such amount becoming due; (b) Lessee fails to perform or
observe any obligation or covenant to be performed or observed by Lessee
hereunder or under any Schedule, including, without limitation, supplying
all requested documentation, and does not cure such failure within 10 days
of receiving written notice thereof from Lessor; (c) any warranty,
representation or statement made or furnished to Lessor by or on behalf of
Lessee is proven to have been false in any material respect when made or
furnished; (d) the attempted sale or encumbrance by Lessee of the Equipment,
or the making of any levy, seizure or attachment thereof or thereon; or (e)
the dissolution, termination of existence, discontinuance of business,
insolvency, or appointment of a receiver of any part of the property of
Lessee, assignment by Lessee for the benefit of creditors, the commencement
of proceedings under any bankruptcy, reorganization or arrangement laws by
or against Lessee, or any other act of bankruptcy on the part of Lessee.
18. REMEDIES OF LESSOR. At any time after the occurrence of any Event of
Default, Lessor may exercise one or more of the following remedies: (a)
Lessor may terminate any or all of the Leases with respect to any or all
items of Equipment subject thereto; (b) Lessor may recover from Lessee all
Rent and other amounts then due and to become due under any or all of the
Leases; (c) Lessor may take possession of any or all items of Equipment,
wherever the same may be located, without demand or notice, without any
court order or other process of law and without liability to Lessee for any
damages occasioned by such taking of possession, and any such taking of
possession shall not constitute a termination of any Lease; (d) Lessor may
demand that Lessee return any or all items of Equipment to Lessor in
accordance with Paragraph 16; and (e) Lessor may pursue any other remedy
available at law or in equity, including, without limitation, seeking
damages, specific performance or an injunction.
Upon repossession or return of any item of the Equipment, Lessor shall
sell, lease or otherwise dispose of such item in a commercially reasonable
manner, with or without notice and on public or private bid, and apply the
net proceeds thereof (after deducting the estimated fair market value of
such item at the expiration of the term of the applicable Lease, in the case
of a sale, or the rents due for any period beyond the scheduled expiration
of such Lease, in the case of any subsequent lease of such item, and all
expenses, including, without limitation, reasonable attorneys' fees,
incurred in connection therewith) towards the Rent and other amounts due
under such Lease, with any excess net proceeds to be retained by Lessor.
Each of the remedies under this Lease shall be cumulative, and not
exclusive, and in addition to any other remedy referred to herein or
otherwise available to Lessor in law or in equity. Any repossession or
subsequent sale or lease by Lessor of any item of Equipment shall not bar an
action for a deficiency as herein provided, and the bringing of an action or
the entry of judgment against Lessee shall not bar Lessor's right to
repossess any or all items of Equipment.
19. CREDIT AND FINANCIAL INFORMATION. Within 90 days of the close of each
of Lessee's fiscal years, Lessee shall deliver to Lessor a copy of Lessee's
annual report, if any, and an audited balance sheet and profit and loss
statement with respect to such year. Within 45 days of the close of each of
Lessee's fiscal quarters, Lessee shall deliver to Lessor a copy of Lessee's
balance sheet and profit and loss statement with respect to such quarter,
certified by an officer of Lessee. At Lessor's request, Lessee shall
deliver to Lessor additonal information reqarding Lessee's operating and/or
projected performance.
20. INSURANCE. As of the date that risk of loss for the Equipment passes
from the Supplier to the Lessee under the terms of the Agreement, Lessee
shall obtain and maintain through the end of the Lease Term of each Lease
(and any renewal or extension thereof), at its own expense, property damage
and personal liability insurance and insurance against loss or damage to the
Equipment, including, without limitation, loss by fire (with extended
coverage), theft and such other risks of loss as are customarily insured
against with respect to the types of Equipment leased hereunder and by the
types of businesses in which such Equipment will be used by Lessee. Such
insurance shall be in such amounts, with such deductibles, in such form and
with such insurers as shall be satisfactory to Lessor; provided, however,
that the amount of the insurance against loss or damage to the Equipment
shall not be less than the greater of the replacement value of the
Equipment, from time to time, or the original purchase price of the
Equipment. Each insurance policy shall name Lessee as an insured and Lessor
as an additional insured or loss payee, and shall contain a clause requiring
the insurer to give Lessor at least 30 days prior written notice of any
alteration in the terms of such policy or of the cancellation thereof.
Lessee shall furnish to Lessor a certificate of insurance or other evidence
satisfactory to Lessor that such insurance coverage is in effect; provided,
however, that Lessor shall be under no duty either to ascertain the
existence of or to examine such insurance policy or to advise Lessee in the
event such insurance coverage shall not comply with the requirements hereof.
Lessee shall give Lessor prompt notice of any damage to, or loss of, any of
the Equipment, or any part thereof, or any personal injury or property
damage occasioned by the use of any of the Equipment.
21. TAXES. Lessee hereby assumes liability for, and shall pay when due,
and, on a net after-tax basis, shall indemnify, protect and hold harmless
Lessor against all fees, taxes and governmental charges (including, without
limitation, interest and penalties) of any nature imposed on or in any way
relating to Lessor, Lessee, any item of Equipment or any Lease, except state
and local taxes on or measured by Lessor's net income (other than any such
tax which is in substitution for or relieves Lessee from the payment of
taxes it would otherwise be obligated to pay or reimburse to Lessor as
herein provided) and federal taxes on Lessor's net income. Lessee shall, at
its expense, file when due with the appropriate authorities any and all tax
and similar returns, and reports required to be filed with respect thereto,
for which it has indemnified Lessor hereunder or, if requested by Lessor,
notify Lessor of all such requirements and furnish Lessor with all
information required for Lessor to effect such filings. Any fees, taxes or
other charges paid by Lessor upon failure of Lessee to make such payments
shall, at Lessor's option, become immediately due from Lessee to Lessor and
shall be subject to the Overdue Charge from the date paid by Lessor until
the date reimbursed by Lessee.
22. SEVERABILITY. If any provision of any Lease is held to be invalid by a
court of competent jurisdiction, such invalidity shall not affect the other
provisions of such Lease or any provision of any other Lease.
23. NOTICES. All notices hereunder shall be in writing and shall be deemed
given when sent by certified mail, postage prepaid, return receipt
requested, addressed to the party to which it is being sent at its address
set forth herein or to such other address as such party may designate in
writing to the other party.
24. AMENDMENTS, WAIVERS AND EXTENSIONS. This MLA and each Schedule
constitute the entire agreement between Lessor and Lessee with respect to
the lease of the Equipment subject to such Schedule, and supersede all
previous communications, understandings, and agreements, whether oral or
written, between the parties with respect to such subject matter. No
provision of any Lease may be changed, waived, amended or terminated except
by a written agreement, specifying such change, waiver, amendment or
termination, signed by both Lessee and Lessor, except that Lessor may
insert, on the appropriate schedule, the serial number of Equipment, after
delivery of such Equipment, and the Rent Commencement Date for the
Equipment. No waiver by Lessor of any Event of Default shall be construed
as a waiver of any future Event of Default or any other Event of Default.
At the expiration of the Lease Term with respect to a Lease, upon notice
given by Lessee at least ninety (90) days prior thereto, (a) such Lease
shall be renewed or the Equipment subject thereto shall be purchased under
the terms and conditions set forth herein for a term and rent amount or
purchase price, as the case may be, to be agreed upon, or (b) if no such
agreement is reached prior to the expiration of such Lease Term or such
notice specifies that Lessee intends to return the Equipment, then Lessee
shall return the Equipment to Lessor in the manner prescribed in Paragraph
16 of this MLA. In the absence of Lessor's timely receipt of the notice
contemplated by the preceding sentence, the Lease shall be automatically
extended, on a month-to-month basis, until terminated (upon notice by either
party given at least ninety (90) days prior to the end of the month on which
the termination is to be effective) or until renewed or the Equipment
subject thereto is purchased by agreement of the parties. Unless otherwise
agreed, Lessee shall continue to pay Rent for each month following such
Lease Term until the Equipment subject to such Lease is returned pursuant to
Paragraph 16 of this MLA.
25. CONSTRUCTION. This MLA shall be governed by and construed in accordance
with the internal laws, but not the choice of laws provisions, of the State
of California. The titles of the sections of this MLA are for convenience
only and shall not define or limit any of the terms or provisions hereof.
Time is of the essence in each of the provisions hereof.
26. PARTIES. This MLA shall be binding upon, and inure to the benefit of,
the permitted assigns, representatives and successors of the Lessor and
Lessee. If there is more than one Lessee named in this MLA, the liability
of each shall be joint and several.
27. COUNTERPARTS. Each Lease may be executed in two or more counterparts,
each of which shall be deemed an original and all of which together shall
constitute but one and the same instrument.
28. OVERDUE CHARGE. Overdue Charge shall mean an amount equal to 2% per
month of any payment under a Lease which is past due, including, without
limitation, any amounts not included in any payment of Rent hereunder, or
the highest charge permitted by law, whichever is lower.
The person executing this MLA on behalf of Lessee hereby certifies that he
or she has read, and is duly authorized to execute, this MLA.
Accepted by:
Ascend Credit Corporation LESSEE: GTC Telecom Corp.
BY:/s/Mark E. Alman_______ BY:__/s/ Paul Sandhu__________
NAME:_Mark E. Alman_______ NAME:___Paul Sandhu___________
Print
TITLE:_Director of Corporate Finance TITLE:___Paul Sandhu__________
DATE:_6/10/99_____________ DATE:___4/29/99_______________
<PAGE>
LEVEL 3
COMMUNICATIONS - Customer Order Form
GTC order
Phase 2
Section 1: Contracting Customer Information
Customer: GTC - Gen-Tel Communications
Address 1: 3151 Airway Ave., Suite P-3
City/Town: Costa Mesa
State/Prov.: CA
Postal/ZIP: 92626
Country: USA
Contact: Paul Sandhu
Title: CEO
Telephone: 714-549-7700
Facsimile: 714-549-7707
e-mail: [email protected]
Section 2: Services Requested
IP & Related Services
Managed Modem: Transit
Section 3: Charges Related to Order
MRC: 24,750 - Fixed
NRC: 5,500
Revenue Commitment: 1 yr.
Ramp Period: 3 months
Section 4: Order Type & Customer Service Date Request
New
Request: Aug/Sept 1999
Section 5: Billing Address & Details
Address Same as Contracting Customer Information, Above
<PAGE>
LEVEL 3
COMMUNICATIONS (TM)
TERMS AND CONDITIONS
FOR DELIVERY OF SERVICE
These Terms and Conditions for Delivery of Service (the "Terms and
Conditions") shall be applicable to Customer Orders executed by
Customer for Services delivered by Level 3 Communications, LLC
("Level 3"), and shall be incorporated into each Customer Order.
These Terms and Conditions are applicable to sales of Services
originating or terminating in the United States.
DEFINITIONS
CONFIDENTIAL INFORMATION: Licensed Software, and all source code,
source documentation, inventions, know-how, and ideas, updates and
any documentation and information related to the Licensed Software,
and any non-public information regarding the business of a party
provided to either party by the other party where such information
is marked or otherwise communicated as being "proprietary" or
"confidential" or the like, or where such information is, by its
nature, confidential.
CUSTOMER: The person, firm or corporation so named on the Customer
Order.
CUSTOMER ORDER: A request for Level 3 Service submitted by the
Customer in the format devised by Level 3 and accepted by Level 3.
FIRM ORDER COMMITMENT: A written communication from Level 3 to
Customer within which Level 3 commits to deliver some or all of the
Services requested in a Customer Order.
LICENSED SOFTWARE: Computer software, in object code format only,
the use of which is required for use of Service ordered by Customer
hereunder.
PREMISES: The location(s) occupied by Customer or its end users
specified in the Customer Order to (or from) which Service will be
delivered.
REVENUE COMMITMENT: A commitment which, if made by Customer in a
Customer Order or in any other form specified and accepted by Level
3, obligates Customer to order and pay for a minimum volume of
Services during an agreed term.
SERVICE: Any communications (or related) service offered by Level 3
pursuant to a Customer Order.
SECTION 1. CUSTOMER ORDERS
1.1 SUBMISSION OF CUSTOMER ORDERS. Customer may submit to Level 3
Customer Order forms requesting the provision of Service. Each
Customer Order form shall be submitted on a form designated by Level
3. Level 3 shall confirm the accuracy of information on the Customer
Order form and the availability of the Services requested. Level
3's delivery of a Firm Order Commitment respecting such Services
shall constitute Level 3's acceptance of the Customer Order for such
Services. The Customer Order form and attachments shall set forth
the Service, the locations for delivery of same, the prices to be
charged for same and any applicable term and/or Revenue Commitment.
1.2 UNDERTAKING OF LEVEL 3. If Level 3 issues a Firm Order
Commitment respecting Services, Level 3 will furnish such Services
in accordance with these Terms and Conditions and any Customer
Orders executed by Customer. All title to equipment or materials
used to deliver the Services (except as otherwise expressly agreed)
shall be and remain with Level 3.
SECTION 2. BILLING AND PAYMENT
2.1 PAYMENT AND RENDERING OF BILLS. Level 3 shall bill all charges
incurred by and credits due to Customer on a monthly basis (unless
otherwise agreed in writing by Level 3 and Customer). Level 3 shall
bill in advance charges for all Services to be provided during the
ensuing month except for charges which are dependent upon usage of
Service (which charges shall be billed in arrears). Adjustments for
the quantities of Service established or discontinued in any billing
period will be prorated to the number of days based on a 30-day
month. Level 3 will, upon request and if available, furnish such
detailed information as may reasonably be required for verification
of the bill.
2.2 PAYMENT OF BILLS. All bills are due upon receipt thereof by
Customer, and become past due thirty (30) days thereafter. The
unpaid balance of any past due bills shall bear interest at a rate
of 1.5% per month (prorated on a daily basis), or the highest rate
allowed by law, whichever is less. Interest will be applied for the
number of days from the date the bill became past due to and
including the date that payment is received by Level 3.
2.3 TAXES AND FEES. Except for taxes based on Level 3's net income
and except with respect to ad valorem personal and real property
taxes imposed on Level 3's property, Customer shall be responsible
for payment of all sales, use, gross receipts, excise, access,
bypass, franchise or other local, state and federal taxes, fees,
charges, or surcharges, however designated, imposed on or based upon
the provision, sale or use of the Services delivered by Level 3
(including, but not limited to, taxes and fees lawfully assessed by
nations outside of the United States). Any taxes shall be separately
stated on Customer's bill. Any state or
<PAGE>
local tax, fee, charge, or
surcharge shall be payable only for Services that are subject to
such imposition.
2.4 REGULATORY AND LEGAL CHANGES. . In the event of any change in
applicable law or regulation that materially increases the cost of
delivery of Service, Level 3 and Customer shall negotiate regarding
the rates charged to Customer to reflect such increase in cost and,
in the event that the parties are unable to reach agreement
respecting new rates within thirty (30) days after Level 3's
delivery of written notice requesting renegotiation, then (a) Level
3 may pass such increased costs through to Customer, and (b)
Customer may terminate the affected Customer Order upon no less than
sixty (60) days' prior written notice without payment of any
applicable termination charge
2.5 DISPUTED BILLS. In the event that Customer disputes any
portion of the charges contained in a bill, Customer must pay the
undisputed portion of the invoice in full and submit a documented
claim for the disputed amount. All claims must be submitted to Level
3 within sixty (60) days of receipt of billing for those Services.
If Customer does not submit a claim within such period and in the
manner stated above, Customer waives all rights to dispute such
charges.
2.6 CREDIT APPROVAL AND DEPOSITS. Customer shall provide Level 3
with credit information as requested in advance of the commencement
of delivery of Service under any Customer Order. Delivery of
Service is subject to credit approval. Level 3 may require any
Customer to make a deposit as a condition to Level 3's acceptance of
any Customer Order submitted by Customer, or as a condition to Level
3's continuation of Service under any Customer Order (but only when
Customer's consumption of Service materially exceeds Customer's
anticipated use or when, in Level 3's reasonable discretion, such
deposit is required in order to secure Customer's continued payment
obligation), which deposit shall be held by Level 3 as security for
payment of charges. A deposit may not exceed the actual or estimated
rates and charges for the Service for a two (2) month period. At
such time as the provision of Service to Customer is terminated, the
amount of the deposit will be credited to Customer's account and any
credit balance which may remain will be refunded.
2.7 FRAUDULENT USE OF SERVICES. Customer shall be solely
responsible for all charges incurred respecting the Services, even
if such charges were incurred through or as a result of fraudulent
or unauthorized use of the Services, unless Level 3 has actual
knowledge of such fraudulent or unauthorized use and fails to inform
Customer thereof or otherwise limit or preclude such use. Nothing
in this Section 2.7, however, shall be construed to obligate Level 3
to detect or report unauthorized or fraudulent use of Services.
SECTION 3. CANCELLATION OF CUSTOMER ORDERS
3.1 CANCELLATION OF CUSTOMER ORDER BY LEVEL 3.
A. For nonpayment: Level 3 may, upon fourteen (14) days' written
notice, discontinue Service without incurring any liability when
there is an unpaid balance for Service that is past due.
B. For any violation of law or of any of the provisions governing
the furnishing of Service: Any Customer Order shall be subject to
cancellation, without notice, for any violation of any law, rule,
regulation or policy of any government authority having jurisdiction
over Service or by reason of any order or decision of a court or
other government authority having jurisdiction which prohibits Level
3 from furnishing such Service.
C. For other causes: Any Customer Order shall be subject to
cancellation, upon fourteen (14) days' prior written notice, in the
event of a breach of a Customer Order, fraudulent use of the
Service, or fraud or misrepresentation in any submission of
information required in a Customer Order or any other information
submitted to Level 3.
D. For any Customer filing of bankruptcy or reorganization or
failing to discharge an involuntary petition therefor within sixty
(60) days after filing: Level 3 may immediately discontinue or
suspend delivery of Service without incurring any liability.
E. For consumption of Services that materially exceeds Customer's
credit limit: Level 3 may, upon fourteen (14) days prior written
notice and provided Customer has not provided additional security
for payment which is sufficient in Level 3's reasonable discretion,
discontinue or suspend delivery of Service without incurring any
liability.
3.2 EFFECT OF CANCELLATION. Upon Level 3's discontinuance of
Service to Customer under any of the foregoing subparagraphs, Level
3 may, in addition to all other remedies that may be available to
Level 3 at law or in equity or under any other provision of a
Customer Order, assess and collect from Customer any termination
charge set forth herein (to the extent applicable).
3.3 RESUMPTION OF SERVICE. If Service has been discontinued by
Level 3, and Customer requests that Service be restored, Level 3
shall have the sole and absolute discretion to restore such Service
only after satisfaction of such conditions as Level 3 determines to
be required for its protection. Nonrecurring charges apply to
restoration of Service.
SECTION 4. DELIVERY OF SERVICES
4.1 LEVEL 3 ACCESS TO PREMISES. Customer shall allow Level 3
continuous and reasonable access to the Premises to the extent
reasonably determined by Level 3 to be appropriate to the
installation, inspection and maintenance of equipment, facilities
and systems relating to the Service. Level 3 shall notify Customer
two (2) business days in advance of any regularly scheduled
maintenance that will require access to the Premises.
4.2 LEVEL 3 FACILITIES. Level 3 will use reasonable efforts to
maintain the facilities and equipment required to deliver Service.
Customers shall not and shall not permit others to rearrange,
disconnect, remove, attempt to repair, or otherwise tamper with any
of the facilities or equipment installed by Level 3, except upon the
written consent of Level
<PAGE>
3. Equipment provided or installed at the
Premises by Level 3 for use in connection with the Service shall not
be used for any purpose other than that for which Level 3 provided
it. In the event that Customer or a third party attempts to operate
or maintain any Level 3-owned equipment without first obtaining
Level 3's written approval, in addition to any other remedies of
Level 3 for a breach by Customer of Customer's obligations
hereunder, Customer shall pay Level 3 for any damage to Level
3-owned equipment caused thereby. Customer shall be responsible for
the payment of service charges in the event that maintenance or
inspection of the equipment is required as a result of Customer's
breach of this Section. Level 3 shall, in the event that such
expenses are incurred, deliver to Customer a written invoice
therefor. In no event shall Level 3 be liable to Customer or any
other person for interruption of Service or for any other loss, cost
or damage caused or related to improper use or maintenance of Level
3-owned equipment.
4.3 TITLE AND POWER. Title to all facilities (except as otherwise
agreed), including terminal equipment, shall remain with Level 3.
The electric power consumed by such equipment on the Premises shall
be provided by and maintained at the expense of Customer.
4.4 CUSTOMER-PROVIDED EQUIPMENT. Level 3 shall not be responsible
for the operation or maintenance of any Customer-provided
communications equipment. Level 3 may install certain Customer
provided communications equipment upon installation of Service;
unless otherwise agreed by Level 3 in writing, Level 3 shall not
thereafter be responsible for the operation or maintenance of such
equipment. Level 3 shall not be responsible for the transmission or
reception of signals by Customer-provided equipment or for the
quality of, or defects in, such transmission.
4.5 REMOVAL OF EQUIPMENT. Customer agrees to allow Level 3 to
remove all Level 3-owned equipment from the Premises:
A. after termination, interruption or suspension of the Service in
connection with which the equipment was used; and
B. for repair, replacement or otherwise as Level 3 may determine is
necessary or desirable.
At the time of such removal, such equipment shall be in the same
condition as when delivered to Customer or installed in the
Premises, normal wear and tear only excepted. Customer shall
reimburse Level 3 for the depreciated cost of any equipment which is
not in such condition.
4.6 SERVICE SUBJECT TO AVAILABILITY. The furnishing of Service
under these Terms and Conditions is subject to the availability on a
continuing basis of all the necessary facilities and is limited to
the capacity of Level 3's facilities, as well as facilities Level 3
may obtain from other carriers to furnish Service from time to time
as required at the sole discretion of Level 3. Nothing in these
Terms and Conditions shall be construed to obligate Customer to
submit, or Level 3 to accept, Customer Orders.
4.7 NO LIABILITY FOR FAILURE TO TRANSMIT MESSAGES. Level 3 does
not undertake to transmit messages, but offers the use of its
Service when available, and, as more fully set forth elsewhere in
these Terms and Conditions and any applicable Customer Orders, shall
not be liable for errors in transmission or for failure to establish
connections.
4.8 SERVICE LEVEL AGREEMENTS. All warranties respecting the
Service, and the remedies applicable to a failure of Level 3 to meet
such warranties, shall be set forth in Service Level Agreements
applicable to the particular Service, which Service Level Agreements
(when and if issued by Level 3) shall be deemed attached hereto and
by this reference incorporated herein.
SECTION 5. OBLIGATIONS AND LIABILITY LIMITATION
5.1 OBLIGATIONS OF THE CUSTOMER. Customer shall be responsible for:
A. The payment of all charges applicable to the Service (including
charges incurred as a result of fraud or unauthorized use of the
Service).
B. Damage or loss of Level 3's facilities or equipment installed on
the Premises (unless caused by the negligence or willful misconduct
of the employees or agents of Level 3);
C. Providing the level of power, heating and air conditioning
necessary to maintain the proper environment on the Premises for the
provision of Service;
D. Providing a safe place to work and complying with all laws and
regulations regarding the working conditions on the Premises;
E. Granting Level 3 or its employees access to the Premise for the
purpose of maintaining Level 3's facilities in accordance herewith;
F. Keeping Level 3's equipment and facilities located on Premises
free and clear of any liens or encumbrances.
5.2 LIABILITY. The liability of Level 3 for damages arising out of
the furnishing of Service, including but not limited to mistakes,
omissions, interruptions, delays, tortious conduct or errors, or
other defects, representations, use of Service or arising out of the
failure to furnish Service, whether caused by acts of commission or
omission, shall be limited to the extension of credit allowances due
under any Service Level Agreement. The extension of such credit
allowances or refunds shall be the sole remedy of Customer and the
sole liability of Level 3. Neither party shall be liable for any
indirect, incidental, special, consequential, exemplary or punitive
damages (including but not limited to damages for lost profits or
lost revenues), whether or not caused by the acts or omissions or
negligence of its employees or agents, and regardless of whether
such party has been informed of the possibility or likelihood of
such damages.
5.3 DISCLAIMER OF WARRANTIES. LEVEL 3 MAKES NO WARRANTIES OR
REPRESENTATIONS, EXPRESS OR IMPLIED EITHER IN FACT OR BY OPERATION
OF LAW, STATUTORY OR OTHERWISE, INCLUDING WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR USE, EXCEPT THOSE
EXPRESSLY SET FORTH HEREIN OR IN ANY APPLICABLE SERVICE
<PAGE>
LEVEL AGREEMENT.
SECTION 6. SOFTWARE TERMSal Information disclosed by
either party constitutes the confidential and proprietary
information of the disclosing party and the receiving party shall
retain same in strict confidence and not disclose to any third party
(except as authorized by these Terms and Conditions) without the
disclosing party's express written consent. Each party agrees to
treat all Confidential Information of the other in the same manner
as it treats its own proprietary information, but in no case will
the degree of care be less than reasonable care.
7.2 RESTRICTED USE. Each party agrees:
A. to use Confidential Information only for the purposes of
performance of any Customer Order or as otherwise expressly
permitted by these Terms and Conditions;
B. not to make copies of Confidential Information or any part
thereof except for purposes consistent with these Terms and
Conditions; and
C. to reproduce and maintain on any copies of any Confidential
Information such proprietary legends or notices (whether of
disclosing party or a third party) as are contained in or on the
original or as the disclosing party may otherwise reasonably request.
7.3 EXCEPTIONS. Notwithstanding the foregoing, each party's
confidentiality obligations hereunder shall not apply to information
which:
A. is already known to the receiving party;
B. becomes publicly available without fault of the receiving party;
C. is rightfully obtained by the receiving party from a third party
without restriction as to disclosure, or is approved for release by
written authorization of the disclosing party;
D. is developed independently by the receiving party without use of
the disclosing party's Confidential Information;
E. is required to be disclosed by law.
7.4 REMEDIES. Notwithstanding any other section of these Terms and
Conditions, the non-breaching party shall be entitled to seek
equitable relief to protect its interests, including but not limited
to preliminary and permanent injunctive relief. Nothing stated
herein shall be construed to limit any other remedies available to
the parties.
7.5 SURVIVAL. The obligations of confidentiality and limitation of
use shall survive the termination of any applicable Customer Order.
SECTION 8. GENERAL TERMS
8.1 FORCE MAJEURE. Except with respect to payment obligations,
neither party shall be liable, nor shall any credit allowance or
other remedy be extended, for any failure of performance or
equipment due to causes beyond such party's reasonable control,
including but not limited to: acts of God, fire, flood or other
catastrophes; any law, order, regulation, direction, action, or
request of any governmental entity or agency, or any civil or
military authority; national emergencies, insurrections, riots,
wars; unavailability of rights-of-way or materials; or strikes,
lock-outs, work stoppages, or other labor difficulties.
8.2 ASSIGNMENT OR TRANSFER. Customer may not transfer or assign
the use of Service without the express prior written consent of
Level 3, and then only when such transfer or assignment can be
accomplished without interruption of the use or location of Service.
These Terms and Conditions shall apply to all such permitted
transferees or assignees. Customer shall, unless otherwise expressly
agreed by Level 3 in writing, remain liable for the payment of all
charges due under each Customer Order.
8.3 NOTICES. Any notice Level 3 may give to Customer or Customer
shall give to Level 3 shall be deemed properly given when delivered,
if delivered in person, or when sent via facsimile, overnight
courier, electronic mail or when deposited with the U.S. Postal
Service, (a) with respect to Customer, the address listed on each
Customer Order, or (b) with respect to Level 3, to: Contracts
Administration, Level 3 Communications, LLC, 1450 Infinite Drive,
Louisville, CO 80027. Customer shall notify Level 3 of any changes
to its addresses listed on any Customer Order.
8.4 INDEMNIFICATION BY CUSTOMER. Customer shall indemnify, defend
and hold Level 3 harmless from claims, loss, damage, expense
(including attorney's fees and court costs), or liability (including
liability for patent infringement) arising from (1) any claims made
against Level 3 by any end user in connection with the delivery or
consumption of Service, (2) use of facilities furnished by Level 3
in a manner inconsistent with the terms hereof or in a manner that
Level
<PAGE>
3 did not contemplate and over which Level 3 exercises no
control and (3) all other claims, loss, damage, expense (including
attorneys fees and court costs), or liability arising out of any
commission or omission by Customer in connection with the Service.
8.5 INDEMNIFICATION BY LEVEL 3. Level 3 shall indemnify, defend and
hold Customer harmless from claims, loss, damage, expense (including
attorney's fees and court costs), or liability (including liability
for patent infringement) arising from all claims, loss, damage,
expense (including attorneys fees and court costs), or liability for
property damage or personal injury to the extent that such claims
arise out of or are caused by Level 3's negligence or willful
misconduct.
8.6 APPLICATION OF TARIFFS. Level 3 may elect or be required by
law to file with the appropriate regulatory agency tariffs
respecting the delivery of certain Service. In the event and to the
extent that such tariffs have been or are filed respecting Service
ordered by Customer, then (to the extent such provisions are not
inconsistent with the terms of a Customer Order) the terms set forth
in the applicable tariff shall govern Level 3's delivery of, and
Customer's consumption or use of, such Service.
8.7 CONTENTS OF COMMUNICATIONS Level 3 shall have no liability or
responsibility for the content of any communications transmitted via
the Service by Customer or any other party, and Customer shall hold
Level 3 harmless from any and all claims (including claims by
governmental entities seeking to impose penal sanctions) related to
such content.
8.8 ENTIRE UNDERSTANDING These Terms and Conditions, including any
Customer Orders executed hereunder (and any tariff applicable to the
delivery of Service), constitutes the entire understanding of the
parties related to the subject matter hereof. These Terms and
Conditions may be amended by Level 3 at any time, and Customer
agrees to be bound by the amended Terms and Conditions from and
after the effective date of such amendment. In the event of a
conflict between these Terms and Conditions and any Customer Order
executed hereunder, the Customer Order shall control. These Terms
and Conditions shall be governed and construed in accordance with
the laws of the state of Colorado.
8.9 NO WAIVER. No failure by either party to enforce any rights
hereunder shall constitute a waiver of such right.
<PAGE>
TERMS AND CONDITIONS
PRIVATE LINE SERVICE
The following Terms and Conditions shall be applicable to
metropolitan (local), city to city (within the United States) and
international (from the United States to another country) private
line, non-switchable circuits (the "Private Line Services") ordered
by Customer under any Customer Order.
1. Any state or federal tariffs applicable to the Private Line
Services to be delivered under any Customer Order are incorporated
into the terms thereof.
2. The nonrecurring charges and monthly recurring rates for the
Private Line Services provided by Level 3 to Customer shall be set
forth in each Customer Order.
3. Customer hereby agrees to pay for the Private Line Services for
the period of time specified in each Customer Order, which period
shall commence with the initiation of delivery of such Services.
The rates and other charges set forth in each Customer Order are
established in reliance on the term commitment made therein. In the
event that Customer terminates Services ordered in any Customer
Order or in the event that the delivery of Services terminated due
to a failure of Customer to satisfy the requirements set forth
herein or in the Terms and Conditions prior to the end of the agreed
term, Customer shall (unless Customer has made a Revenue Commitment)
pay a termination charge equal to the termination or other charges
paid or to be paid by Level 3 for services purchased from other
sources used to deliver the Private Line Services to Customer, plus
the percentage of the monthly recurring charges for the terminated
Private Line Services calculated as follows:
A. 100% of the monthly recurring charge that would have been
incurred for the Private Line Service for months 1-12 of the agreed
term; plus
B. 75% of the monthly recurring charge that would have been
incurred for the Private Line Service for months 13-24 of the agreed
term; plus
C. 50% of the monthly recurring charge that would have been
incurred for the Private Line Service for months 25 through the end
of the agreed term.
Customer may, in the event that a Revenue Commitment is made and is
then being satisfied by Customer, terminate, rearrange or
reconfigure the Private Line Services ordered under a Customer Order
without payment of the termination charge specified above; PROVIDED,
HOWEVER, that Customer shall be responsible for payment of Level 3's
then-current standard nonrecurring charges for such termination,
rearrangement or reconfiguration.
<PAGE>
Standard Service Level Agreement (SLA) days 30 working days
30
working days ICB ICB
OFF-NET WITHIN SSA
(either end) 20 working days 20 working days 45 working days 60
working days ICB ICB
OUTSIDE SSA (BUT <50 MILES (KM IN EUROPE))
(either end) 30 working days 60 working days ICB ICB ICB ICB
Single toll-free number to reach Level 3 Customer Service for
all customer issues, including technical, billing, and product
inquiries.
Mean Time to Respond - Within 30 minutes
2 hour calendar month Average Time To Repair (MTTR)
If Level 3 fails to meet any of the guarantees above, Level 3 will
review all reported failures at the end of the month, and calculate
the applicable credits:
Any customer inquiry to the Level 3 Customer Service Center that
results in a Time to Respond of >30 minutes will result in a one
day service credit when the customer notifies Level 3 of the failure.
MTTR is calculated as a monthly average. All reported customer
trouble tickets will be totaled over the month, then the average
time to close each ticket will be calculated. If the MTTR is
greater than 2 hours, the customer will receive a one day service
credit.
Credits will only be applied to events where the Customer
reports a failure to the Level 3 Customer Care organization.
Customers must report any Service Delivery failures within five
business days of the event.
<PAGE>
NETWORK PERFORMANCE SLA
99.99 % Service Availability
Target Bit Error Rate(1)
____________________
1Bit Error Rate figure excludes periods of more than 10
seconds having error rates equal to, or worse than 1x10-3
End-to-end link (Level 3 on-net) > 5
x 10-8 at T1 Rate (equivalent rate for
DS0 1x10-6)
End-to-end link (Non-Level 3 access)
> 1 x 10-7 (Dependent on local supplier)
Target Severely Errored Seconds(2)
____________________
22Severely Errored Seconds have bit error rates equal to, or
worse than 1x10-3
End-to-end link (Level 3 fiber access) < 0.008%
End-to-end link (Non-Level 3 access) < 0.013% (Dependent on local
supplier)
Availability refers to customer's access point to the
Level 3 Backbone Network, including their Level 3 provided
local access circuit.
Availability does not include regularly scheduled or
emergency maintenance events, or customer caused outages or
disruptions.
Customers may report service unavailability events of
longer than 15 consecutive minutes to Level 3 customer service
within 48 hours of the event. If the event is confirmed by
Level 3 customer service, the customer will receive a pro-rated
service credit that equals the time of the unavailability.
NOTES:
All measurements are based on monthly averages.
These guarantees only apply to the Level 3 Network (including
the Local Access to the customer). They do not apply to off-net
city circuits which do not transit the Level 3 Backbone Network
(or the portion the circuit which does not transit the Level 3
Backbone)
This SLA does not apply to periods of regularly scheduled or
emergency maintenance that Level 3 performs on its network or
associated hardware and software.
Credits will only be applied to events where the Customer
reports a network performance failure to the Level 3 Customer Care
organization.
Customers must report any Network Performance failures
(unavailability or delay) within 48 hours (two business days) of
the service affecting event in order to receive a credit.
Customers must report any Service Delivery failures within five
business days of the event.
<PAGE>
TERMS AND CONDITIONS
TELEPHONY COLOCATION
The following Terms and Conditions shall be applicable to Customer's
use of space within Level 3 facilities used for the purpose of
colocating telecommunications equipment (the "Space") ordered by
Customer under any Customer Order.
1. Upon execution and performance of Customer's obligations under a
Customer Order for use of Space, Customer shall be granted the right
to occupy the Space identified therein. Customer may submit multiple
Customer Orders requesting use of different Space, each of which
shall be governed by the terms hereof.
2. Customer shall be permitted to use the Space only for placement
and maintenance of communications equipment which shall be
interconnected to the network services offered by Level 3. Customer
may use the Space to cross connect to the facilities of other
communications carriers if and only if Level 3 cannot or will not
provide such services to Customer on commercially reasonable terms.
The nonrecurring and monthly recurring charges for the Space and any
Services ordered by Customer shall be set forth in each Customer Order.
3. During the term for use of the Space set forth in each Customer
Order, Customer shall commit to use, order and pay for Level 3
network communications services (not including monthly recurring
fees charged for the use of the Space) with monthly recurring
charges of at least $4,000.00 for each cabinet ($2,000.00 for each
half cabinet) of Space ordered by Customer. Customer shall achieve
the minimum service level no later than six (6) months after
submission and acceptance of each Customer Order. Level 3 may
terminate use of the Space in the event that Customer does not
satisfy this minimum service commitment.
4. Level 3 shall perform such janitorial services, environmental
systems maintenance, power plant maintenance and other actions as
are reasonably required to maintain the facility in which the Space
is located in good condition which is suitable for the placement of
communications equipment. Customer shall maintain the Space in
orderly and safe condition, and shall return the Space to Level 3 at
the conclusion of the term set forth in the Customer Order in the
same condition (reasonable wear and tear excepted) as when such
Space was delivered to Customer. EXCEPT AS EXPRESSLY STATED HEREIN
OR IN ANY CUSTOMER ORDER, THE SPACE SHALL BE DELIVERED AND ACCEPTED
"AS IS" BY CUSTOMER, AND NO REPRESENTATION HAS BEEN MADE BY LEVEL 3
AS TO THE FITNESS OF THE SPACE FOR CUSTOMER'S INTENDED PURPOSE.
5. The term of use of the Space shall begin on the later to occur
of the date requested by Customer or the date that Level 3 completes
the build-out of the Space. Customer's use of the Space beyond the
initial term shall be on a month-to-month basis, unless Customer and
Level 3 have agreed in writing to a renewal of the right to use such
Space.
6. Level 3 shall use reasonable efforts to complete the build-out
and make the Space available to Customer on or before the date
requested by Customer. In the event that Level 3 fails to complete
the build-out within sixty (60) days of the date requested by
Customer, then Customer may terminate its rights to use such Space
and receive a refund of any fees paid for the use or build-out of
such Space.
7. Customer shall abide by any posted or otherwise communicated
rules relating to use of, access to, or security measures respecting
the Space. In the event that unauthorized parties gain access to
the Space through access cards, keys or other access devices
provided to Customer, Customer shall be responsible for any damages
incurred as a result thereof. Customer shall be responsible for the
cost of replacing any security devices lost or stolen after delivery
thereof to Customer. In addition, Level 3 shall have the right to
terminate Customer's use of the Space in the event that: (a) Level
3's rights to use the facility within which the Space is located
terminates or expires for any reason; (b) Customer has violated the
terms hereof or any Customer Order submitted hereunder; (c) Customer
makes any material alterations to the Space without first obtaining
the written consent of Level 3; (d) Customer allows personnel or
contractors to enter the Space who have not been approved by Level 3
in advance; or (e) Customer violates any posted or otherwise
communicated rules relating to use of or access to the Space. Level
3 shall use reasonable efforts to notify Customer of any events that
may result in termination of the use of the Space.
8. Customer shall pay all monthly recurring fees, cross-connect
fees, power charges and nonrecurring fees specified in each Customer
Order for the agreed term thereof. In the event that Customer
terminates a Customer Order for Space or in the event that the
Customer Order is terminated due to a failure of Customer to satisfy
the requirements set forth herein or in the Customer Order prior to
the end of the agreed term, Customer shall pay a termination charge
equal to the costs incurred by Level 3 in returning the Space to a
condition suitable for use by other parties, plus the percentage of
the monthly recurring fees for the terminated Space calculated as
follows:
A. 100% of the monthly recurring fees that would
<PAGE>
have been charged for the Space for months 1-12 of the agreed term; plus
B. 75% of the monthly recurring fees that would have been charged
for the Space for months 13-24 of the agreed term; plus
C. 50% of the monthly recurring fees that would have been charged
for the Space for months 25 through the end of the agreed term.
9. Level 3 reserves the right to change the location or
configuration of the Space, provided, however, that Level 3 shall
not arbitrarily or discriminatorily require such changes. Level 3
and Customer shall work in good faith to minimize any disruption in
Customer's services that may be caused by such changes in location
or configuration of the Space.
10. Prior to occupancy and during the term of use of any Space,
Customer shall procure and maintain the following minimum insurance
coverage: (a) Workers' Compensation in compliance with all
applicable statutes of appropriate jurisdiction. Employer's
Liability with limits of $500,000 each accident; (b) Commercial
General Liability with combined single limits of $1,000,000 each
occurrence; and (c) "All Risk" Property insurance covering all of
Customers personal property located in the Space. Customer's
Commercial General Liability policy shall be endorsed to show Level
3 (and any underlying property owner, as requested by Level 3) as an
additional insured. All policies shall provide that Customer's
insurers waive all rights of subrogation against Level 3. Customer
shall furnish Level 3 with certificates of insurance demonstrating
that Customer has obtained the required insurance coverages prior to
occupancy of the Space. Such certificates shall contain a statement
that the insurance coverage shall not be materially changed or
cancelled without at least thirty (30) days' prior written notice to
Level 3. Customer shall require any contractor entering the Space
on its behalf to procure and maintain the same types, amounts and
coverage extensions as required of Customer above.
11. The liability of Level 3 for damages arising out of the
furnishing of Space, including but not limited to mistakes,
omissions, interruptions, delays, tortious conduct or errors, or
other defects arising out of the failure to furnish Space, whether
caused by acts of commission or omission, shall be limited to a
prorated refund of the charges paid by Customer for the use of the
Space hereunder. The extension of such refunds shall be the sole
remedy of Customer and the sole liability of Level 3.
<PAGE>
TERMS AND CONDITIONS
IP COLOCATION
The following Terms and Conditions shall be applicable to Customer's
use of space within Level 3 facilities used for the purpose of
colocating equipment used for connection to the internet (the
"Space") ordered by Customer under any Customer Order.
1. Upon execution and performance of Customer's obligations under a
Customer Order for use of Space, Customer shall be granted the right
to occupy the Space identified therein. Customer further agrees to
purchase certain communications services ("Services") identified in
Customer Orders for such Services submitted by Customer hereunder.
Customer may submit multiple Customer Orders requesting use of
different Space, each of which shall be governed by the terms
hereof. Services ordered by Customer shall at all times be used by
Customer in compliance with Level 3's then-current Acceptable Use
Policy and Privacy Policy, as amended by Level 3 from time to time
and which are available through Level 3's web site.
2. Customer shall be permitted to use the Space only for placement
and maintenance of computer and/or communications equipment which
shall be interconnected to the Services provided by Level 3.
Customer may use the Space to cross connect to the facilities of
other communications carriers if and only if Level 3 cannot or will
not provide such services to Customer on commercially reasonable
terms. The nonrecurring and monthly recurring charges for the
Space and the Services shall be set forth in each Customer Order.
3. During the term for use of the Space set forth in each Customer
Order, Customer shall commit to use, order and pay for the following
amounts of bandwidth provided by Level 3: (a) for Customers using
cabinets, at least 1 Mbps of bandwidth for each partial cabinet and
at least 2 Mbps of bandwidth for each full cabinet of Space ordered
by Customer; and (b) for Customers using private rooms, at least 1
Mbps of bandwidth for each 10 square feet of Space ordered by
Customer. Customer shall achieve the minimum service level
immediately after submission and acceptance of each Customer Order.
Level 3 may terminate use of the Space in the event that Customer
does not satisfy this minimum service commitment.
4. Level 3 shall perform such janitorial services, environmental
systems maintenance, power plant maintenance and other actions as
are reasonably required to maintain the facility in which the Space
is located in good condition which is suitable for the placement of
communications equipment. In addition, Customer may order and pay
for Level 3 to perform certain limited ("remote hands") maintenance
services on Customer's equipment within the space, which shall be
performed in accordance with Customer's directions. "Remote hands"
maintenance services includes power cycling equipment. Level 3
shall in no event be responsible for the repair, configuration or
tuning of equipment, or for installation of Customer's equipment
(although Level 3 will provide reasonable assistance to Customer in
such installation). Customer shall maintain the Space in orderly
and safe condition, and shall return the Space to Level 3 at the
conclusion of the term set forth in the Customer Order in the same
condition (reasonable wear and tear excepted) as when such Space was
delivered to Customer. EXCEPT AS EXPRESSLY STATED HEREIN OR IN ANY
CUSTOMER ORDER, THE SPACE SHALL BE DELIVERED AND ACCEPTED "AS IS" BY
CUSTOMER, AND NO REPRESENTATION HAS BEEN MADE BY LEVEL 3 AS TO THE
FITNESS OF THE SPACE FOR CUSTOMER'S INTENDED PURPOSE.
5. The term of use of the Space shall begin on the later to occur
of the date requested by Customer or the date that Level 3 completes
the build-out of the Space. Customer's use of the Space beyond the
initial term shall be on a month-to-month basis, unless Customer and
Level 3 have agreed in writing to a renewal of the right to use such
Space. Customer hereby agrees to pay for the Space and Services for
the period of time specified in each Customer Order, which period
shall commence when both completion of the build-out of the Space
and initiation of delivery of such Services has occurred. The rates
and other charges set forth in each Customer Order are established
in reliance on the term commitment made therein. In the event that
Customer terminates a Customer Order for Space or in the event that
the Customer Order is terminated due to a failure of Customer to
satisfy the requirements set forth herein or in the Customer Order
prior to the end of the agreed term, Customer shall pay a
termination charge equal to the costs incurred by Level 3 in
returning the Space to a condition suitable for use by other
parties, plus the percentage of the monthly recurring fees for the
terminated Space calculated as follows:
a. 100% of the monthly recurring fees that would have been charged
for the Space for months 1-12 of the agreed term; plus
b. 75% of the monthly recurring fees that would have been charged
for the Space for months 13-24 of the agreed term; plus
c. 50% of the monthly recurring fees that would have been charged
for the Space for months 25 through the end of the agreed term.
6. Level 3 shall use reasonable efforts to complete the build-out
and make the Space available to Customer on or before the date
requested by Customer. In the event that Level 3 fails to complete
the build-out within sixty (60) days
<PAGE>
of the date requested by Customer, then Customer may terminate its
rights to use such Space and receive a refund of any fees paid for the use
or build-out of such Space.
7. Customer shall abide by any posted or otherwise communicated
rules relating to use of, access to, or security measures respecting
the Space. In the event that unauthorized parties gain access to
the Space through access cards, keys or other access devices
provided to Customer, Customer shall be responsible for any damages
incurred as a result thereof. Customer shall be responsible for the
cost of replacing any security devices lost or stolen after delivery
thereof to Customer. In addition, Level 3 shall have the right to
terminate Customer's use of the Space or the Services in the event
that: (a) Level 3's rights to use the facility within which the
Space is located terminates or expires for any reason; (b) Customer
has violated the terms hereof or of any Customer Order submitted
hereunder; (c) Customer makes any material alterations to the Space
without first obtaining the written consent of Level 3; (d) Customer
allows personnel or contractors to enter the Space who have not been
approved by Level 3 in advance; or (e) Customer violates any posted
or otherwise communicated rules relating to use of or access to the
Space. Level 3 shall use reasonable efforts to notify Customer of
any events that may result in termination of the use of the Space or
delivery of Services.
8. Level 3 reserves the right to change the location or
configuration of the Space, provided, however, that Level 3 shall
not arbitrarily or discriminatorily require such changes. Level 3
and Customer shall work in good faith to minimize any disruption in
Customer's services that may be caused by such changes in location
or configuration of the Space.
9. Level 3 provides only access to the Internet; Level 3 does not
operate or control the information, services, opinions or other
content of the Internet. Customer agrees that it shall make no
claim whatsoever against Level 3 relating to the content of the
Internet or respecting any information, product, service or software
ordered through or provided by virtue of the Internet.
10. Prior to occupancy and during the term of use of any Space,
Customer shall procure and maintain the following minimum insurance
coverage: (a) Workers' Compensation in compliance with all
applicable statutes of appropriate jurisdiction. Employer's
Liability with limits of $500,000 each accident; (b) Commercial
General Liability with combined single limits of $1,000,000 each
occurrence; and (c) "All Risk" Property insurance covering all of
Customers personal property located in the Space. Customer's
Commercial General Liability policy shall be endorsed to show Level
3 (and any underlying property owner, as requested by Level 3) as an
additional insured. All policies shall provide that Customer's
insurers waive all rights of subrogation against Level 3. Customer
shall furnish Level 3 with certificates of insurance demonstrating
that Customer has obtained the required insurance coverages prior to
occupancy of the Space. Such certificates shall contain a statement
that the insurance coverage shall not be materially changed or
cancelled without at least thirty (30) days prior written notice to
Level 3. Customer shall require any contractor entering the Space
on its behalf to procure and maintain the same types, amounts and
coverage extensions as required of Customer above.
11. The liability of Level 3 for damages arising out of the
furnishing of Services or the Space, including but not limited to
mistakes, omissions, interruptions, delays, tortious conduct or
errors, or other defects arising out of the failure to furnish
Services or Space, whether caused by acts of commission or omission,
shall be limited to a prorated refund of the charges paid by
Customer for the use of the Space hereunder. The extension of such
refunds shall be the sole remedy of Customer and the sole liability
of Level 3.
<PAGE>
TERMS AND CONDITIONS
INTERNET ACCESS DEDICATED AND DIAL UP
The following Terms and Conditions shall be applicable to dedicated
and dial-up Internet Access Service (the "Internet Access Services")
ordered by Customer under any Customer Order.
1. Any state or federal tariffs applicable to the Internet Access
Services to be delivered under any Customer Order are incorporated
into the terms thereof. The Internet Access Services shall at all
times be used in compliance with Level 3's then-current Acceptable
Use Policy and Privacy Policy, as amended by Level 3 from time to
time and which are available through Level 3's web site.
2. The nonrecurring charges and monthly recurring rates for the
Internet Access Services provided by Level 3 to Customer shall be
set forth in each Customer Order.
3. Customer hereby agrees to pay for the Internet Access Services
for the period of time specified in each Customer Order, which
period shall commence with the initiation of delivery of such
Internet Access Services. The rates and other charges set forth in
each Customer Order are established in reliance on the term and/or
volume commitment made therein. In the event that Customer
terminates Internet Access Services ordered in any Customer Order or
in the event that the delivery of Internet Access Services is
terminated due to a failure of Customer to satisfy the requirements
set forth herein or in the Customer Order prior to the end of the
agreed term, Customer shall (unless Customer has made a Revenue
Commitment) pay a termination charge equal to the termination or
other charges paid or to be paid by Level 3 for services purchased
from other sources used to deliver the Internet Access Services to
Customer, plus the percentage of the monthly recurring charges for
the terminated Internet Access Services calculated as follows:
a. 100% of the monthly recurring charge that would have been
incurred for the Internet Access Service for months 1-12 of the
agreed term; plus
b. 75% of the monthly recurring charge that would have been
incurred for the Internet Access Service for months 13-24 of the
agreed term; plus
c. 50% of the monthly recurring charge that would have been
incurred for the Internet Access Service for months 25 through the
end of the agreed term.
Customer may, in the event that a Revenue Commitment is made and is
then being satisfied by Customer, terminate, rearrange or
reconfigure the Internet Access Services ordered under a Customer
Order without payment of the termination charge specified above;
PROVIDED, HOWEVER, that Customer shall be responsible for payment of
Level 3's then-current standard nonrecurring charges for such
termination, rearrangement or reconfiguration.
4. Level 3 provides only access to the Internet; Level 3 does not
operate or control the information, services, opinions or other
content of the Internet. Customer agrees that it shall make no
claim whatsoever against Level 3 relating to the content of the
Internet or respecting any information, product, service or software
ordered through or provided by virtue of the Internet.
5. This Section 5 shall apply only to Customers who order Dial-Up
Internet Access Services. The Dial-Up Internet Access Services
shall be used only by an officer, director, employee or agent
("Employee") of Customer. Customer shall assure that each Employee
accessing the Dial-Up Internet Access Service abides by these Terms
and Conditions. Prior to any Employee accessing Dial-Up Internet
Access Services, such Employee will be required to accurately
complete an on-line registration process. During this registration
process, each Employee will be required to identify himself/herself
through some means satisfactory to Level 3. Pursuant to the
registration process, by clicking an "ACCEPT" icon, each Employee
will (i) agree to accurately complete the registration; (ii) agree
to abide by all of the provisions, terms, limitations, conditions
and restrictions of these Terms and Conditions; and (iii) agree to
use the Dial-Up Internet Access Services in accordance with any
requirements set forth in the online registration process and for
the legitimate business purposes of Customer only. Each Employee
will also receive a password which such Employee will agree to keep
in strict confidence and which will be required whenever accessing
the Dial-Up Internet Access Services.
<PAGE>
Standard Service Level Agreement (SLA) IVERY SLA
30 Calendar Day Installation Guarantee for Customers buying
Dedicated Internet Access in speeds from 64 Kbps 1.544 Kbps
within the Standard Service Area..
45 Calendar Day Installation Guarantee for Customers buying
Dedicated Internet Access in speeds from 3 Mbps 45 Mbps within
the Standard Service Area.
Single toll-free number to reach Level 3 Customer Service for
all customer issues, including technical, billing, and product
inquiries.
Time to Respond - Within 30 minutes
2 hour calendar month Average Time To Repair (ATTR)
If Level 3 fails to meet any of the guarantees above, Level 3 will
review all reported failures at the end of the month, and calculate
the applicable credits:
Any customer inquiry to the Level 3 Customer Service Center that
results in a Time to Respond of >30 minutes will result in a one
day service credit when the customer notifies Level 3 of the failure.
ATTR is calculated as a monthly average. All reported customer
trouble tickets will be totaled over the month, then the average
time to close each ticket will be calculated. If the ATTR is
greater than 2 hours, the customer will receive a one day service
credit.
Credits will only be applied to events where the Customer
reports a failure to the Level 3 Customer Care organization.
Customers must report any Service Delivery failures within five
business days of the event.
NETWORK PERFORMANCE SLA
SERVICE AVAILABILITY
Availability refers to customer's access point to the
Level 3 Internet network, including their Level 3 provided
local access circuit, and the customer's port.
Unavailability Events are defined as any outage of the
Level 3 provided local access circuit and the customer's port
of longer than 15 consecutive minutes.
The Availability Guarantee does not extend to the
performance of Internet networks controlled
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by other companies,
or traffic exchange points (including NAPs and MAEs) which are
controlled by other companies.
Availability does not include regularly scheduled or
emergency maintenance events, or customer caused outages or
disruptions.
Customers may report service unavailability events of
longer than 15 consecutive minutes to Level 3 customer service
within 48 hours of the event. If the event is confirmed by
Level 3 customer service, the customer will receive a pro-rated
service credit that equals the time of the unavailability.
40 MS ONE-WAY DELAY GUARANTEE
The Delay guarantee refers to the average delay parameters
among the Level 3 Gateway sites in the United States. It does
not extend to the customer's local access circuit, transit or
peering connections, or to circuits to the traffic exchange
points, including NAPs and MAEs.
Delay is measured as the average delay, over a calendar
month, of traffic between all major Gateways on the Level 3
U.S. Internet network.
Level 3 will publicly report the Average Monthly Delay
measurement for the Level 3 U.S. Internet Network at the end of
every month.
If the customer reports that Level 3 has failed to meet
the Delay guarantee, and this is confirmed by Level 3 customer
service, the customer will be issued one day service credit.
NOTES:
All measurements are based on monthly averages.
These guarantees only apply to the Level 3 Internet Network.
They do not apply to NAP or transit connections, or to any traffic
once it leaves the Level 3 network.
This SLA does not apply to periods of regularly scheduled or
emergency maintenance that Level 3 performs on its network or
associated hardware and software.
Credits will only be applied to events where the Customer
reports a network performance failure to the Level 3 Customer Care
organization.
Customers must report any Network Performance failures
(unavailability or delay) within 48 hours (two business days) of
the service affecting event in order to receive a credit.
Customers must report any Service Delivery failures within five
business days of the event.
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TERMS AND CONDITIONS
MANAGED MODEM -- DEDICATED, QUICKSTART AND TRANSIT SERVICES
The following Terms and Conditions shall be applicable to services
required to allow access to "Dedicated Services," "Dedicated Service
with QuickStart" and "Transit Services" as offered by Level 3 (the
"Managed Modem Services") ordered by Customer under any Customer
Order.
1. Any state or federal tariffs applicable to the Managed Modem
Services to be delivered under any Customer Order are incorporated
into the terms thereof. The Managed Modem Services shall at all
times be used in compliance with Level 3's then-current Acceptable
Use Policy and Privacy Policy, as amended by Level 3 from time to
time and which are available through Level 3's web site.
2. In the event Customer orders "Dedicated Service," end user
traffic will be routed through and aggregated in Level 3's facility,
sent to the Customer's Premises via a dedicated circuit, and then
routed to its final destination by Customer. In the event that
Customer orders "Transit Services," End User traffic will be routed
to Level 3's facility and then routed to its final destination by
Level 3 via the Internet. Dedicated Service with "QuickStart" will
initially be provisioned to the Customer in the same fashion as
Transit Services, until such time as Level 3 has provisioned the
dedicated circuit to send end user traffic from Level 3's facility
to the Customer's Premises. QuickStart will then be migrated to
standard Dedicated Service. Customers ordering Dedicated Services
will be required to make a portion of the Premises available to
Level 3 for the placement of equipment necessary to provide such
Dedicated Services. For Dedicated Service, all Customer CPE as well
as the private line necessary to support this service will be
ordered, installed and managed by Level 3. Any telephone numbers
assigned to Customer for the purpose of providing Managed Modem
Services hereunder shall be property of Customer; PROVIDED, however,
that Level 3 shall be obligated to release such numbers to Customer
upon expiration or termination hereof if and only if Customer is
then in compliance with all of the terms contained herein or in the
Standard Terms and Conditions.
3. The nonrecurring charges and monthly recurring rates for the
Managed Modem Services provided by Level 3 to Customer shall be set
forth in each Customer Order. Level 3 will dedicate the specified
number of ports to Customer in the Level 3 facilities as identified
in each Customer Order. Customer may be responsible for additional
monthly charges if Customer's use of the Managed Modem Services
requires and utilizes more ports than the number committed to and
ordered by Customer.
4. Customer hereby agrees to pay for the Services for the period of
time specified in each Customer Order, which period shall commence
with the initiation of delivery of such Managed Modem Services. The
rates and other charges set forth in each Customer Order are
established in reliance on the term commitment made therein. In the
event that Customer terminates Managed Modem Services ordered in any
Customer Order or in the event that the delivery of Managed Modem
Services is terminated due to a failure of Customer to satisfy the
requirements set forth herein or in the Customer Order prior to the
end of the agreed term, Customer shall (unless Customer has made a
Revenue Commitment) pay a termination charge equal to the
termination or other charges paid or to be paid by Level 3 for
services purchased from other sources used to deliver the Managed
Modem Services to Customer, plus the percentage of the monthly
recurring charges for the terminated Managed Modem Services
calculated as follows:
a. 100% of the monthly recurring charge that would have been
incurred for the Managed Modem Service for months 1-12 of the agreed
term; plus
b. 75% of the monthly recurring charge that would have been
incurred for the Managed Modem Service for months 13-24 of the
agreed term; plus
c. 50% of the monthly recurring charge that would have been
incurred for the Managed Modem Service for months 25 through the end
of the agreed term.
Customer may, in the event that a Revenue Commitment is made and is
then being satisfied by Customer, terminate, rearrange or
reconfigure the Managed Modem Services ordered under a Customer
Order without payment of the termination charge specified above;
PROVIDED, HOWEVER, that Customer shall be responsible for payment of
Level 3's then-current standard nonrecurring charges for such
termination, rearrangement or reconfiguration.
5. Level 3 provides only access to the Internet; Level 3 does not
operate or control the information, services, opinions or other
content of the Internet. Customer agrees that it shall make no
claim whatsoever against Level 3 relating to the content of the
Internet or respecting any information, product, service or software
ordered through or provided by virtue of the Internet.
<PAGE>
Standard Service Level Agreement (SLA) tomer Service for
all customer issues, including technical, billing, and product
inquiries.
Time to Respond - Within 30 minutes
2 hour calendar month Average Time To Repair (ATTR)
If Level 3 fails to meet any of the guarantees above, Level 3 will
review all reported failures at the end of the month, and calculate
the applicable credits:
Any customer inquiry to the Level 3 Customer Service Center that
results in a Time to Respond of >30 minutes will result in a one
day service credit when the customer notifies Level 3 of the failure.
ATTR is calculated as a monthly average. All reported customer
trouble tickets will be totaled over the month, then the average
time to close each ticket will be calculated. If the ATTR is
greater than 2 hours, the customer will receive a one day service
credit.
Credits will only be applied to events where the Customer
reports a failure to the Level 3 Customer Care organization.
Customers must report any Service Delivery failures within five
business days of the event.
