<PAGE> 1
As Filed with the Securities and Exchange Commission on December 21, 1999
Registration No. 333-____
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------------
FORM S-1
REGISTRATION STATEMENT
under
THE SECURITIES ACT OF 1933
---------------------------
UNITED STATES TELECOMMUNICATIONS, INC.
(Exact Name of Registrant as Specified in Its Charter)
<TABLE>
<CAPTION>
Florida 4813 59-3470483
<S> <C> <C>
(State or Other Jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Incorporation or Organization) Classification Code Number) Identification Number)
</TABLE>
Suite 118
5251 110th Avenue North
Clearwater, FL 33760
(727) 572-7832
(Address, Including Zip Code, and Telephone Number, including Area Code, of
Registrant's Principal Executive Offices)
Richard Pollara
President
United States Telecommunications, Inc.
Suite 118
5251 110th Avenue North
Clearwater, FL 33760
(727) 572-7832
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
of Agent for Service)
---------------------------
COPIES TO:
Walter E. Jospin, Esq.
Elizabeth Hardy Noe, Esq.
Paul, Hastings, Janofsky & Walker LLP
600 Peachtree Street, N.E., Suite 2400
Atlanta, Georgia 30308
(404) 815-2400
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement.
---------------------------
If any of the securities being registered on this Form are being offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]
If this form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this is a post-effective amendment filed pursuant to Rule 462(d) under the
Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same
offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
<PAGE> 2
-----------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
TITLE OF EACH CLASS OF SECURITIES TO AMOUNT TO BE PROPOSED MAXIMUM
BE REGISTERED REGISTERED(1) OFFERING PRICE(2) AMOUNT OF REGISTRATION FEES(3)
<S> <C> <C> <C>
Common Stock, no par value per
share.............................. 4,169,644 N/A N/A
Class A Preferred Stock, $0.10 par
value per share.................... 16,519,349 N/A N/A
Total 20,688,993 $29,677,218 $7,835
</TABLE>
(1) The amount to be registered includes all issued and outstanding shares
of common stock and Class A preferred stock, except shares held by
persons who were or are executive officers, directors or control
persons of the Company or, to the best of our knowledge, shares held by
persons who actively participated in the offer and sale of the
securities which are the subject of the rescission offer.
(2) Aggregate estimated purchase price, excluding interest, estimated to be
payable if the rescission offer is accepted in full.
(3) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(j) under the Securities Act of 1933.
---------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
<PAGE> 3
PROSPECTUS
RESCISSION OFFER TO CERTAIN SHAREHOLDERS OF
UNITED STATES TELECOMMUNICATIONS, INC.
We are offering certain holders of our common stock and Class A
preferred stock the right to rescind their purchase of securities of one or more
of our predecessor entities. We are making this rescission offer as a result of
the following two transactions which did not satisfy the requirements of federal
and state securities laws:
- Sale of Securities of Predecessor Entities: Our predecessor
entities, Tel Com East, Tel Com West and Tel Com Jacksonville,
offered to sell and sold their securities in a manner that did
not satisfy the requirements of federal and state securities
laws.
- Exchange Offer: As of September 30, 1998, Tel Com East, Tel
Com West and Tel Com Jacksonville transferred their respective
assets and liabilities to us. In connection with this
transfer, unit holders of each of these entities exchanged
their limited liability company units for shares of our common
stock and Class A preferred stock. This exchange transaction
was performed in a manner that did not satisfy the
requirements of federal and state securities laws.
We offer to rescind the purchase of the securities of our predecessor
entities by repurchasing shares of our common stock and Class A preferred stock
for an amount equal to the consideration you paid for securities of our
predecessor entities plus interest from the date of purchase. If you have
already disposed of your shares of common stock or Class A preferred stock at a
loss, we offer to pay you an amount equal to the difference between the
consideration you paid for the securities of our predecessor entity or entities
and the consideration you received upon the sale of our stock plus interest.
EITHER REJECTION OR ACCEPTANCE OF THIS RESCISSION OFFER IS SPECULATIVE
AND INVOLVES A HIGH DEGREE OF RISK. RETAINING AN INVESTMENT IN UNITED STATES
TELECOMMUNICATIONS, INC. IS SUITABLE ONLY FOR PERSONS OF SUBSTANTIAL FINANCIAL
MEANS WHO ARE ABLE TO BEAR THE RISK OF LOSS OF THEIR ENTIRE INVESTMENT. IF OUR
LIABILITY UNDER THIS RESCISSION OFFER EXCEEDS $100,000, WE EXPECT THAT PAYMENT
WILL BE MADE OVER A LONG PERIOD OF TIME. PAYMENT OF OUR LIABILITY UNDER THIS
RESCISSION OFFER, IF ANY, WILL BE SUBJECT TO A NUMBER OF RISKS. SEE "RISK
FACTORS" BEGINNING ON PAGE 5 FOR A DISCUSSION OF FACTORS WHICH SHOULD BE
CONSIDERED BY EACH RECIPIENT OF THIS RESCISSION OFFER. IF YOU DO NOT COMPLETE
AND RETURN A FORM OF ACCEPTANCE OR A FORM OF REJECTION PRIOR TO THE EXPIRATION
OF THE RESCISSION OFFER, YOU WILL BE DEEMED TO HAVE REJECTED THE RESCISSION
OFFER.
THIS RESCISSION OFFER WILL EXPIRE AT THE EARLIER OF 5:00 P.M., EASTERN
STANDARD TIME, ON ___________ __, 2000 OR UPON OUR RECEIPT OF A PROPERLY
COMPLETED FORM OF REJECTION OR FORM OF ACCEPTANCE FROM EACH RECIPIENT OF THE
RESCISSION OFFER.
We urge you to read this prospectus thoroughly before acting on this
rescission offer. You may call one of our representatives at (813) 258-4651 if
you have any questions concerning the terms and conditions of this rescission
offer.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this prospectus is ____________ ___, ____.
<PAGE> 4
PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in this
prospectus. It does not contain all of the information that you should consider
before acting on our rescission offer. We encourage you to read the entire
prospectus carefully, including the section entitled "Risk Factors" and the
financial statements and notes to those financial statements.
THE COMPANY
We provide residential local telephone service to people with bad
credit. Typically, our customers have been disconnected by their local exchange
carrier because of nonpayment. Most local telephone exchange carriers require
disconnected customers to pay their past due balance in addition to a security
deposit before the carrier will reconnect their service. We focus on those
consumers who have been disconnected by their local telephone exchange carrier
and cannot afford to reconnect service with the carrier. We offer these
consumers local telephone service for a fixed monthly price without requiring a
security deposit.
We are authorized as a reseller or competitive local telephone exchange
carrier in 26 states. As a competitive local exchange carrier, we are able to
purchase telephone service from major local exchange carriers at a wholesale
rate under resale agreements entered into between us and each local exchange
carrier from whom we purchase telephone service. We then resell the local
telephone service to our customers. As of December 1, 1999, we had 17,953
customers and were conducting business in 20 states. Our principal executive
offices are located at Suite 118, 5251 110th Avenue North, Clearwater, Florida
33760.
BUSINESS STRATEGY
Our mission is to become a leading reseller of local telephone services
to consumers with bad credit. To achieve this goal, we have developed and have
begun implementing a business strategy to position us as a leader in the
reseller segment of the telecommunication services industry. Our business
strategy can be categorized into the following five main objectives:
- Expand our market area;
- Increase product availability for our customers;
- Automate and upgrade our operational systems;
- Advertise on a national basis; and
- Develop and introduce new ancillary products, such as Internet
services.
RISK FACTORS
Either rejection or acceptance of this rescission offer is speculative
and involves a high degree of risk. Retaining on investment in United States
Telecommunications, Inc. is suitable only for persons of substantial financial
means who are able to bear the risk of loss of their entire investment.
Recipients of this rescission offer should carefully consider all information
set forth in this prospectus, including the information set forth in "Risk
Factors" beginning on page 5, prior to acting on our rescission offer.
THE RESCISSION OFFER
We are offering certain holders of our common stock and Class A
preferred stock the right to rescind their purchase of securities of one or more
of our predecessor entities. These securities were offered and sold and were
subsequently exchanged for shares of our common stock and Class A preferred
stock in a manner that did not satisfy the requirements of federal and state
securities laws. In a Stipulation and Consent Agreement with Final Order dated
May 12, 1999 between the State of Florida, Department of Banking and Finance, us
and other parties, we, as legal successor to Tel Com East, Tel Com West and Tel
Com Jacksonville, admitted that our predecessors' securities were sold in
violation of the securities laws of the State of Florida. Accordingly, we offer
to shareholders
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<PAGE> 5
the right to rescind the purchase of these securities. We are not making the
rescission offer to shareholders who were or are executive officers, directors
or control persons of the Company or to shareholders who, to the best of our
knowledge, actively participated in the offer and sale of the securities which
are the subject of this rescission
offer.
If a recipient of this rescission offer accepts this rescission offer,
we will pay, upon provision of adequate proof of payment by the recipient, an
amount equal to the consideration paid for the securities of our predecessor
entity or entities, plus interest at the applicable statutory interest rate,
from the date of purchase of the securities to the expiration of the rescission
offer. If a recipient of this rescission offer resold shares of our stock in a
bona fide transaction to a third party at a loss prior to the date of this
rescission offer, we will pay an amount equal to the difference between the
purchase price paid for the securities of our predecessor entity or entities and
the proceeds from the sale of shares of our stock, plus interest at the
applicable state statutory rate from the date of purchase to the expiration of
the rescission offer.
We have limited resources from which to pay the amounts due to
shareholders under this rescission offer. Our sole source of funds for the
rescission offer may be our operating revenues. For the nine months ended
September 30, 1999, our operating revenues were $12,232,122 and our operating
loss was $5,830,367. If all recipients accept our rescission offer, we estimate
our maximum liability under the rescission offer to be approximately $30,000,000
plus interest. Our actual liability under the rescission offer will depend on
the number of shareholders who accept the rescission offer and on the price each
shareholder paid for the securities. If the amount of our aggregate liability is
in excess of $100,000, we will pay the amount due, including interest, over a
period of time in annual installments. As of the date of this prospectus, we
cannot estimate the length of time over which payments may be made because we do
not know the number of recipients who will accept this offer or the purchase
price the accepting recipients paid for our securities. The amount due to each
recipient of this rescission offer who accepts will bear interest at the
interest rate set by the state in which each recipient resides at the date of
this rescission offer. THE TIME PERIOD DURING WHICH PAYMENTS WILL BE MADE TO
RECIPIENTS WHO ACCEPT THIS RESCISSION OFFER WILL BE DETERMINED BY MANAGEMENT IN
THEIR SOLE DISCRETION.
To accept the rescission offer, you must complete, sign and return to
us the Form of Acceptance of Rescission Offer attached to this prospectus as
Appendix A prior to the expiration of the rescission offer. To reject the
rescission offer, you must complete, sign and return to us the Form of Rejection
of Rescission Offer attached to this prospectus as Appendix B prior to the
expiration of the rescission offer.
IF YOU DO NOT COMPLETE AND RETURN A FORM OF ACCEPTANCE OR A FORM OF
REJECTION PRIOR TO THE EXPIRATION OF THE RESCISSION OFFER, YOU WILL BE DEEMED TO
HAVE REJECTED THE RESCISSION OFFER.
SUMMARY FINANCIAL DATA
The following table summarizes our statements of operations for the
period from our inception (November 17, 1997) to December 31, 1997, for the year
ended December 31, 1998 and for the nine months ended September 30, 1998 and
1999. In addition, the following table summarizes our balance sheet data for the
nine months ended September 30, 1999. See "Selected Financial Data,"
"Managements' Discussion and Analysis of Financial Condition and Results of
Operations," and the historical financial statements and the notes thereto,
appearing elsewhere in this prospectus.
2
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SUMMARY FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Nine Months Ended Periods Ended
September 30 December 31
------------ -----------
1999 1998 1998 1997
----------- ---------- ------------- ------------
<S> <C> <C> <C> <C>
Sales ............................... $ 12,232,122 $ 1,245,813 $ 5,347,642 $
Cost of sales ....................... 5,579,939 574,897 2,317,945 --
------------ ------------ ------------ ------------
GROSS PROFIT ........................ 6,652,183 670,916 3,029697 --
Advertising expenses ................ 1,144,515 117 430,703 --
General and administrative expenses . 9,203,713 1,030,799 5,017,832 250
Impairment loss ..................... -- -- 31,674,670 --
Loss on promoter receivable write off 2,134,322 -- 748,459 --
------------ ------------ ------------ ------------
OPERATING (LOSS) .................... (5,830,367) (360,000) (34,841,967) (250)
------------ ------------ ------------ ------------
Other income (expenses):
Interest Expense .................... (43,598) (333) (13,860) --
Gain from easy phone settlement ..... 1,315,742
------------ ------------ ------------ ------------
TOTAL OTHER INCOME (EXPENSES) ....... 1,272,144 -- (13,860) --
NET LOSS ............................ $ (4,558,223) $ (360,333) $(34,855,827) $ (250)
============ ============ ============ ============
Basic loss per share ................ $ (0.45) $ (0.07) $ 5.68
============ ============ ============
Diluted loss per share .............. $ (0.45) $ (0.07) $ 5.68
============ ============ ============
Weighted average number of common
shares
Basic common shares ................. 10,236,796 5,115,114 6,140,532
============ ============ ============
Diluted common shares ............... 10,236,796 5,115,114 6,140,532
============ ============ ============
Balance Sheet Data:
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER
30, 1999
<S> <C>
Working capital deficit ...... $ 4,008,126
============
Total assets ................. $ 6,290,977
============
Rescission obligation ........ $ 29,677,218
============
Rescission obligation interest $ 4,469,417
============
Total stockholders' deficit .. $(33,627,853)
============
</TABLE>
3
<PAGE> 7
FORWARD-LOOKING STATEMENTS
Certain of the statements made in this prospectus, including matters discussed
under the caption "Management's Discussion and Analysis of Financial Condition
and Results of Operations," as well as oral statements made by us or our
officers, directors or employees, may constitute forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933 and Section 21E
of the Securities Exchange Act of 1934. These forward-looking statements are
based on management's beliefs, current expectations, estimates and projections
about the telecommunications industry, the economy and about us and
telecommunications providers in general. The words "expect," "anticipate,"
"intend," "plan," "believe," "seek," "estimate" and similar expressions are
intended to identify forward-looking statements; however, this prospectus also
contains other forward-looking statements in addition to historical information.
Such forward-looking statements are not guarantees of future performance and are
subject to risks, uncertainties and other factors that may cause our actual
results, performance or achievements to differ materially from our historical
results or from any results expressed or implied by such forward-looking
statements. Such factors include, without limitation:
- lack of sustained growth in the economy;
- increased competition within the telecommunications industry;
- changes in the regulatory environment;
- our ability to fund the rescission offer and the impact of the
rescission offer on our financial condition;
- our ability to obtain the necessary capital to operate and
grow our business; and
- the additional risk factors set forth on page 5.
Many of these factors are beyond our ability to control or predict, and
readers are cautioned not to put undue reliance on such forward-looking
statements. We disclaim any obligation to update or revise any forward-looking
statements contained in this prospectus, whether as a result of new
information, future events or otherwise.
4
<PAGE> 8
RISK FACTORS
YOU SHOULD CAREFULLY CONSIDER THE FOLLOWING RISKS FACTORS AND OTHER
INFORMATION IN THIS PROSPECTUS BEFORE ACTING ON OUR RESCISSION OFFER.
LIMITED OPERATING HISTORY
We were incorporated in November 1997 and therefore have a limited
operating history with which you can evaluate our business and prospects. Our
predecessor entities were formed in early to mid-1997 and therefore they also
have a limited operating history. Our business prospects must be considered in
light of the uncertainties encountered by companies in the early stages of
development. Some of the uncertainties we face include our ability to:
- increase the efficiency and function of our services;
- continue to develop, upgrade and protect our technology;
- respond effectively to the increasingly competitive
environment;
- continue to closely monitor and comply with federal and state
industry regulations;
- respond effectively to our increasing portfolio of customers;
- develop appropriate strategic alliances with our agents; and
- plan and effectively implement our business strategy.
EFFECT OF RESCISSION LIABILITY ON FINANCIAL POSITION ; TIMING OF PAYMENT WILL BE
WITHIN THE SOLE DISCRETION OF MANAGEMENT
Our actual aggregate liability under the rescission offer will depend
on the number of recipients who accept this offer. We will have no liability
under this rescission offer if all of the recipients reject this rescission
offer. On the other hand, if all of the recipients accept this rescission offer,
we estimate our aggregate liability under this rescission offer will equal
approximately $30,000,000 plus interest. Any actual liability we incur under
this rescission offer in excess of $100,000 will have an adverse effect on our
financial condition, including without limitation, impairing our ability to
raise capital and grow our business. The extent and materiality of such adverse
effect, if any, depends upon the actual aggregate amount of liability imposed on
us as a result of this rescission offer.
Our sole source of funds for payment of our actual aggregate liability,
if any, under this rescission offer, may be our operating revenues which were
$12,232,122 for the nine month period ended September 30, 1999 and our operating
loss was $5,830,367. If our actual liability is in excess of $100,000, we will
pay the aggregate amount of liability, including accrued interest, over a period
of time in annual installments. The amount to be paid over time will bear
interest at the statutory interest rate set by the state in which the accepting
recipient resides as of the date of the rescission offer. Because we do not know
the number of recipients who will accept this recission offer, we cannot
estimate the length of time over which payments will be made. No assurances can
be given that we will ever be able to pay in full the amount due to accepting
recipients under this rescission offer, even if such payments are made in annual
installments over a period of time. The time period during which payments will
be made to recipients who accept this rescission offer will be determined by
management in their sole discretion.
If we continue to incur losses in the future due to our growth strategy
or for other reasons, there can be no assurance that we will be able to raise
funds with which to make payments to those shareholders accepting the rescission
offer.
The chart set forth below illustrates the potential interest expense we
may incur as a result of this rescission offer. For purposes of this
illustration, we have assumed payment of various aggregate amounts of liability
in equal annual installments for a period of 30 years, plus interest to be paid
annually at a rate of 10% per annum. The chart shows the total interest expense
we may have to pay over a 30 year period based on various amounts of the
aggregate liability under the rescission offer.
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INTEREST EXPENSE OF RESCISSION OFFER
AGGREGATE LIABILITY AMOUNT
(in millions)
<TABLE>
<CAPTION>
$5 $10 $15 $20 $25 $30
<S> <C> <C> <C> <C> <C> <C>
TOTAL INTEREST EXPENSE $10.9M $21.8M $32.7M $43.7M $54.6M $65.5M
(in millions)
</TABLE>
REGULATORY RISKS
Compliance with State and Federal Regulations. We and our competitors
are subject to state and federal statutes and rules regulating the
telecommunications industry. These regulations vary from state to state and
consist of items such as:
- approval procedures for resale agreements;
- certification or licensing procedures and requirements;
- tariff requirements;
- reporting requirements; and
- requirements in connection with customer billing, suspension
and disconnection.
We believe we are in substantial compliance with all of these laws and
regulations and that these laws and regulations have not had any material
adverse effect on our ability to operate our business. Changes in existing laws
or regulations, or in their interpretation, or the adoption of any additional
laws or regulations, could have a material adverse effect on our business.
Impact of Change in State Law. As a reseller of residential local
telephone service to persons with bad credit, we, together with most other
resellers, generally do not provide long-distance services. Although most states
have regulations requiring resellers to provide access to long distance,
operator or information services, these states typically waive these regulations
and thus permit resellers to limit their exposure to the nonpayment risks of our
customers. However, the public utility commissioners in Ohio and Minnesota have
been unwilling to waive these regulations concerning long-distance and operator
or information services. Therefore, we are effectively prohibited from
conducting business in those states. There can be no assurance that other state
public utility commissioners will continue to waive these regulations and thus
permit us to conduct business in their state.
6
<PAGE> 10
A substantial portion of the market for our services are consumers who
have been disconnected by their local exchange carrier for nonpayment of
long-distance service. Several states are examining the billing policies of
these carriers which permit them to disconnect their customers for nonpayment of
long-distance services. A change in this policy may have an adverse impact on
our earnings and our ability to attract customers.
RISK OF NONPAYMENT FROM CUSTOMERS
Because most of our customers have bad credit, there is a significant
risk of nonpayment. We disconnect service to nonpaying customers as soon as we
are legally permitted to do so under the applicable state laws and regulations.
Each state has enacted certain notice requirements that a carrier must comply
with prior to disconnecting a customer's telephone service. These notice
requirements vary from state to state and range from approximately 30 to 60
days' notice. In states which are consumer oriented, such as Massachusetts, we
face a significant risk that we may be forced by state law to continue to
provide telephone service to a nonpaying customer for an extended period of
time. As a result, our financial position and results of operations may be
materially adversely effected. No assurance can be given that additional states
will not increase the requisite notice period in connection with the
disconnection of nonpaying customers and therefore make conducting business in
these states cost prohibitive.
COMPETITION
We operate in a very competitive business environment. Competition may
affect our ability to increase our customer base and generate revenues. The
barriers to entry in our business are relatively low in that the initial capital
investment required to enter our business is minimal. Therefore, there are a
large number of small, local businesses who resell local telephone service to
credit challenged consumers. These types of small businesses typically focus on
a single city or relatively compact area. Although the geographic range of these
types of competitors is limited, many of these companies are fiercely
competitive with us in their fees for services and some of these companies have
greater financial resources than we. In addition, we face increasing competition
from local exchange carriers such as Southwestern Bell, who have begun offering
local telephone service to their own customers who have been disconnected for
nonpayment. These local exchange carriers have far more resources than we do,
and will generally have lower marketing and operational costs, thus allowing
them to price their local telephone services at rates that are lower than the
rates we charge our customers.
FAILURE TO IMPLEMENT BUSINESS STRATEGY
Failure to implement our business strategy could adversely affect our
operations, our financial position and our results of operations and possibly
our ability to generate sufficient cash to pay the amounts owed under this
rescission offer. Our ability to execute our business strategy depends on our
ability to:
- raise sufficient capital to pursue our business plan;
- expand our market share;
- identify and target the untapped markets;
- increase our product availability;
- automate our operations;
- advertise in an effective yet cost efficient manner;
- retain our key employees; and
- manage growth successfully.
If our actual liability under this rescission offer is in excess of
$100,000, our ability to implement our business strategy will be materially
adversely affected.
ABILITY TO RETAIN KEY PERSONNEL
Our success is largely dependent upon our ability to retain our key
personnel including our President, Richard Pollara, Vice President/General
Manager, Bill Van Aken, Vice President, Terrence Battle, Treasurer, Maurice
Franklin, Marketing Director/Secretary, Julie Graton, Banking Administrator,
Robin Caldwell and MIS Director, Bruce Walker. The loss of the service of one or
more of our key personnel could have a material adverse effect on our business.
We have not entered into employment agreements or non-compete agreements with
any of
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<PAGE> 11
our key personnel. Such employees may terminate their employment with us at any
time. If one or more of our key employees resign to join a competitor or to form
a competing company, the loss of such personnel and any resulting loss of
existing or potential customers to any such competitor could have a material
adverse effect on our business, financial condition and results of operations.
In the event of the loss of any such personnel, there can be no assurance that
we would be able to prevent the unauthorized disclosure or use of our technical
knowledge, practices or procedures by such personnel.
SEC LITIGATION RISKS
Our business and financial prospects may be materially adversely
affected by the outcome of an action brought by the Securities and Exchange
Commission against our predecessor entities. Tel Com East and Tel Com West have
been named as defendants in a lawsuit brought in federal court in Tampa, Florida
in which the SEC alleges, among other things, violation of Rule 10b-5 of the
Securities Exchange Act of 1934. The complaint further alleges that Tel Com East
and Tel Com West committed fraud in the sale of their securities. As of the date
of this prospectus, we have not been named as a defendant in the action.
However, no assurance can be given that the SEC will not bring an action against
us as a successor in interest to Tel Com East and Tel Com West. The outcome of
this litigation cannot be predicted. If we are named as a party and the court
rules against us, we may be subject to severe civil penalties and other remedies
which will have a material adverse effect on our business and financial
condition.
LACK OF PROFITABILITY
We may not achieve profitability in the near term, if at all. During
the nine months ended September 30, 1999, we incurred an operating loss of
$5,830,367. Although we believe that our revenues should increase as we expand
our customer base and automate our operational systems, no assurance can be
given that our revenues will increase to the level necessary to cover our
expenses. In addition, our financial condition may be materially adversely
affected as a result of this rescission offer if our aggregate liability is in
excess of $100,000. Our sole source of funds for any liability under this
rescission offer may be our operating revenues.
LIQUIDITY AND FINANCING REQUIREMENTS
In order to pursue our business strategy and growth plans, we will
require significant amounts of capital. However, as of the date of this
prospectus we do not have any written arrangements with respect to financing for
future growth and expansion. There can be no assurance that financing will be
available at all or on terms acceptable to us. In addition, because we are
financing this rescission offer with our operating revenues, our liquidity and
financial condition may be adversely affected by this rescission offer if our
aggregate liability is in excess of $100,000. Our inability to raise capital and
meet our financing requirements would have a material adverse effect on our
business, financial condition and future prospects or on our ability to pay
those accepting the rescission offer.
NO PUBLIC MARKET FOR OUR SECURITIES
There presently exist no public or other market for our stock and it is
not anticipated that any such market will develop. Consequently, investors may
be required to maintain their ownership interest for an indefinite period of
time. Because of the illiquidity of our stock and the high degree of risk, you
should reject this offer and thus retain an investment in us only if you have no
need for liquidity with respect to this investment and understand the nature of
the risks involved in this investment.
ABSENCE OF DIVIDENDS
We have never declared or paid cash dividends on our common stock or
Class A preferred stock and we do not anticipate paying any cash dividends in
the foreseeable future.
SURVIVAL OF MATERIAL CONTINGENT LIABILITIES
It is not certain that this rescission offer will have the effect of
barring claims relating to our (or our predecessor entities) non-compliance with
the applicable federal and state securities laws. The rights remaining to the
recipients of a rescission offer are not clearly delineated under the federal or
most state securities laws. The staff of the SEC has taken the position that a
person's federal right of rescission, which may survive for one year
8
<PAGE> 12
following the date of the sale, may survive a rescission offer. If a person
accepts the rescission offer, we take the position that our potential liability
to that person based upon initial sales of units of our predecessor entities and
the exchange offer occurring as of September 30, 1998 will be eliminated. Should
the rescission offer be rejected by any or all recipients, we may continue to be
contingently liable for rescission or damages in an indeterminate amount, which
liability could be material. We cannot presently quantify the number or the
magnitude of the possible claims related to the rescission offer. Thus, we
cannot quantify the potential continuing exposure upon completion of the
rescission offer.
Recipients who do not accept this rescission offer may be able to
assert claims against us relating to possible non-compliance with federal and
state securities laws. Should any or all of such claims prevail, our business,
financial condition and results of operations could all be materially adversely
affected. Even if we are successful in defending any claims under applicable
securities laws, their mere assertion could result in costly litigation and
significant diversion of effort by us.
SURVIVAL OF MATERIAL CONTINGENT LIABILITY FROM TEL COM JACKSONVILLE RESCISSION
OFFER
Tel Com Plus Jacksonville, LLC, one of our predecessor entities, made
an offer in early to mid-1998 to each of its investors to repurchase the
respective holder's units. The State of Florida, Department of Banking and
Finance, acknowledged this rescission offer in the Consent Agreement with the
Company. The Tel Com Jacksonville rescission offer was not registered with the
SEC or with any state securities commission. No assurance can be given that the
Tel Com Jacksonville rescission offer complied with applicable federal and state
securities laws. Therefore, previous holders of units in Tel Com Jacksonville
may have a valid claim against Tel Com Jacksonville and us, its successor
entity, for failure to comply with the applicable federal and state securities
laws in connection with the rescission offer. In addition, it is not certain
that the rescission offer had the effect of barring claims relating to Tel Com
Jacksonville's alleged non-compliance with the applicable federal and state
securities laws. The rights remaining to holders of units in Tel Com
Jacksonville are not delineated under the federal and state securities laws. We
cannot quantify the number or the magnitude of the possible claims related to
the Tel Com Jacksonville rescission offer; however, these claims, if brought,
may have a material adverse effect on our business and financial condition.
LACK OF DOCUMENTATION OF PAST CORPORATE ACTIONS
We and our predecessor entities have not properly documented our past
corporate actions, including without limitation, shareholder meetings and board
of director meetings. In addition, our purchase of the assets and liabilities of
Tel Com East, Tel Com West and Tel Com Jacksonville was not supported by the
proper transfer documentation. Although our board of directors has ratified
significant past corporate actions, there may remain corporate actions which
were not properly approved or documented and which may not be properly described
in this prospectus. As a result of this lack of documentation of corporate
actions, we may be unaware of corporate acts which may have a material adverse
effect on our business, financial condition or results of operations.
9
<PAGE> 13
THE RESCISSION OFFER
BACKGROUND AND REASONS FOR THE RESCISSION OFFER
We are the legal successor to Tel Com East, Tel Com West and Tel Com
Jacksonville, each a limited liability company engaged in the business of
reselling residential local telephone service to consumers with bad credit who
have typically been disconnected from residential telephone service by their
local exchange carrier. As of September 30, 1998, Tel Com East, Tel Com West and
Tel Com Jacksonville transferred their respective assets and liabilities to us.
Prior to this business combination, securities of Tel Com East, Tel Com West and
Tel Com Jacksonville were offered and sold to persons in violation of the
securities laws of the State of Florida, other applicable state securities laws
and federal securities laws. In connection with the asset transfer, holders of
units in each of Tel Com East, Tel Com West and Tel Com Jacksonville exchanged
their units for securities of the Company. This exchange transaction was not
registered with the SEC or any state securities commission. We have been advised
that the offer and sale of such securities and their exchange for our securities
did not comply with federal securities laws and other state securities laws.
We, as successor in interest to Tel Com East, Tel Com West and Tel Com
Jacksonville, entered into a Stipulation and Consent Agreement with Final Order
with the State of Florida, Department of Banking and Finance, on May 12, 1999
whereby we admitted that the sale of securities of our predecessor entities was
in violation of Florida law. In order to resolve this matter expeditiously and
without the need for litigation, we agreed to complete an offer of rescission
with respect to the securities of Tel Com East, Tel Com West and Tel Com
Jacksonville sold in violation of Florida law. Pursuant to the Consent
Agreement, as amended, we agreed to complete the rescission offer by November
30, 1999. However, we were unable to do so. On December 7, 1999, the State of
Florida, Department of Banking and Finance, notified us that we were in
violation of the Consent Agreement and that it intended to bring an action
against us to enforce the provisions of the Consent Agreement. As of the date of
this prospectus, the Department has not brought an action against us to enforce
compliance with the Consent Agreement. We believe that by filing and
distributing this prospectus in accordance with federal and state securities
laws, and subsequently mailing this prospectus to our shareholders and complying
with the terms of the rescission offer, we will be in compliance with the
provisions of the Consent Agreement.
TERMS OF THE RESCISSION OFFER
Pursuant to the terms hereof, we hereby offer:
- to repurchase, from each recipient of this rescission offer,
all shares of our stock received pursuant to the combination
of Tel Com East, Tel Com West and Tel Com Jacksonville into
United States Telecommunications, Inc. (the "Rescission
Stock") at the price paid by such recipient for the securities
of Tel Com East, Tel Com West and/or Tel Com Jacksonville
subsequently exchanged for Rescission Stock, plus interest at
the applicable state statutory rate, upon receipt by the
Company of
- a properly completed and executed Acceptance of
Rescission Offer in the form of Appendix A to this
prospectus, together with a properly completed and
executed stock power in the form of Appendix A,
- proof reasonably satisfactory to the Company
evidencing the price paid by the shareholder for the
securities of Tel Com East, Tel Com West and/or Tel
Com Jacksonville, and
- certificates representing such shares of Rescission
Stock.
- to pay to each recipient of the rescission offer who sold
shares of the Rescission Stock at a loss prior to the date
hereof an amount equal to the price paid by such recipient for
the securities of Tel Com East, Tel Com West and/or Tel Com
Jacksonville, less the proceeds from the sale of the
Rescission Stock, upon receipt by the Company of
- a properly executed Acceptance of Rescission Offer,
and
- proof reasonably satisfactory to the Company
evidencing the bona fide sale of such shares to a
third party at a loss.
Satisfactory proof of the price paid by a shareholder for the
securities of Tel Com East, Tel Com West and/or Tel Com Jacksonville may take
the form of a canceled check or a receipt from the broker, dealer or other
10
<PAGE> 14
person conducting such sale. The purchase price may have been paid in either
cash or property. If the purchase price was paid in property, the price will be
deemed to be the fair market value of such property at the time of the sale. If
the proof of the purchase price is not reasonably satisfactory to us, we may
require additional proof.
Satisfactory proof of sale at a loss may take the form of appropriate
confirmation of sale from brokers or dealers. If the proof of sale at a loss is
not reasonably satisfactory to us, we may require additional proof. In
addition, we will require evidence that any sale of the shares of Rescission
Stock was a bona fide transfer to a third party of such shares. Finally, we may
require that an improperly completed Acceptance of Rescission Offer form be
properly completed.
HOW TO ACCEPT THE RESCISSION OFFER
A HOLDER OF SHARES OF RESCISSION STOCK IS NOT REQUIRED TO ACCEPT THIS
RESCISSION OFFER. Acceptance of the rescission offer is optional for each
recipient of this rescission offer. You are urged to consider this prospectus
carefully before reaching a decision.
The form of Acceptance of Rescission Offer for persons desiring to
accept the rescission offer is attached hereto as Appendix A. If you wish to
accept the rescission offer made to you, you should complete and execute the
appropriate sections of the Acceptance of Rescission Offer form enclosed with
this prospectus and return it (along with your stock certificate(s) representing
shares to be surrendered in acceptance of the offer to rescind and other
required documents) to us, in care of the Company, Suite 118, 5251 110th
Avenue North, Clearwater, Florida 33760, as soon as practicable after the date
of receipt this prospectus, but in no event being received by us, after the
expiration date of this rescission offer which is ____________ __, 2000.
Recipients of this rescission offer are encouraged to promptly return their
acceptance materials by certified mail or overnight courier.
IF YOU DO NOT COMPLETE AND RETURN A FORM OF ACCEPTANCE OR A FORM OF
REJECTION PRIOR TO THE EXPIRATION OF THE RESCISSION OFFER, YOU WILL BE DEEMED TO
HAVE REJECTED THE RESCISSION OFFER.
HOW TO REJECT THE RESCISSION OFFER
REJECTION OF THIS RESCISSION OFFER, AND RETENTION OF YOUR INVESTMENT IN
THE RESCISSION STOCK, IS SPECULATIVE, INVOLVES A HIGH DEGREE OF RISK, AND IS
SUITABLE ONLY FOR PERSONS WHO HAVE SUBSTANTIAL FINANCIAL RESOURCES IN RELATION
TO THIS INVESTMENT, HAVE NO NEED FOR LIQUIDITY IN THIS INVESTMENT, AND
UNDERSTAND THE RISK FACTORS AND ALL OTHER ASPECTS OF THE INVESTMENT.
The form of Rejection of Rescission Offer for recipients desiring to
reject the rescission offer are attached hereto as Appendix B. If you wish to
reject the rescission offer made to you, you should complete and execute the
Rejection of Rescission Offer form enclosed with this prospectus and return it
to us, in care of the Company, Suite 118, 5251 110th Avenue North, Clearwater,
Florida 33760, as soon as practicable after the date of receipt of this
prospectus.
IF YOU DO NOT COMPLETE AND RETURN A FORM OF ACCEPTANCE OR A FORM OF
REJECTION PRIOR TO THE EXPIRATION OF THE RESCISSION OFFER, YOU WILL BE DEEMED TO
HAVE REJECTED THE RESCISSION OFFER.
QUESTIONS ABOUT THE RESCISSION OFFER
Persons entitled to participate in the rescission offer may call our
representatives at (813) 258-4651 between 9:00 a.m. and 6:00 p.m., Eastern
Standard Time.
USE OF RESCISSION STOCK REPURCHASED BY THE COMPANY IN THE RESCISSION OFFER
The shares of common stock and Class A preferred stock purchased by us
pursuant to the rescission offer, if any, will become unauthorized and unissued
shares and available for general corporate purposes.
11
<PAGE> 15
FEDERAL INCOME TAX CONSEQUENCES OF THE RESCISSION OFFER
The following is a general summary of the likely U.S. federal income
tax consequences to the persons entitled to this rescission offer who elect to
accept this rescission offer and who have held their shares of stock as a
capital asset. This summary is not a complete analysis of the potential tax
considerations and does not discuss all aspects of the U.S. federal income
taxation that may be relevant to a particular recipient of this rescission
offer. Moreover, no information is provided with respect to the consequences of
any applicable state, local or foreign tax laws. The accuracy of this summary is
not free from doubt, and there can be no assurance that the U.S. Internal
Revenue Service will agree with the conclusions stated. Accordingly, and because
the tax treatment applicable to each recipient of this rescission offer may vary
due to the facts and circumstances applicable to that individual, each recipient
of this rescission offer should consult his or her own tax advisor to determine
his or her actual tax consequences attributable to the rescission offer.
If the amount received by the recipient of this rescission offer upon
his or her acceptance of the rescission offer is deemed to constitute a
distribution in redemption of stock covered under Section 302 of the Internal
Revenue Code of 1986, as amended (the "Code"), the amounts received by such
recipient of this rescission offer who accepts the rescission offer and tenders
his or her shares to the Company will constitute a tax-free return of basis up
to the amount of cash such person paid for the securities of Tel Com East, Tel
Com West and/or Tel Com Jacksonville. Amounts received by a recipient of the
rescission offer who accepts the rescission offer and who resold his or her
shares of Rescission Stock at a loss prior to the date hereof (the "Sold Stock")
will constitute taxable income. The taxable income will be characterized as
capital gain up to an amount equal to the difference between the amount of cash
such person paid for the stock and the amount realized upon the prior sale of
such stock. The characterization of such capital gain as long-term or short-term
is dependent upon the length of time such person held the Sold Stock.
However, if the amount received by the recipient of the rescission
offer upon his or her acceptance of the rescission offer is deemed to constitute
a distribution of property covered under Section 301 of the Code, with respect
to amounts received by such person who accepts the rescission offer and tenders
his or her shares to the Company (i) that portion of the amounts received
constituting a dividend (as defined in Section 316 of the Code) will constitute
ordinary taxable income, and (ii) that portion of the amount received which is
not a dividend, will be applied against and reduce such person's basis in such
shares.
12
<PAGE> 16
CAPITALIZATION
The following table sets forth our capitalization as of September 30,
1999. Our capitalization is presented on an actual basis. You should read this
information together with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and our financial statements and notes to
those statements included elsewhere in this prospectus.
<TABLE>
<CAPTION>
At September 30, 1999
<S> <C>
Long-term obligations
Rescission obligation................................................ $29,677,218
Rescission obligation interest....................................... $4,469,417
Total Long-term obligations................................................. $34,146,635
Stockholders' Equity:
Preferred Stock, $0.10 par value, 200,000,000 shares authorized
Class A Preferred Stock, $0.10 par value per share, $1,572,951
40,000,000 shares authorized; 36,461,749 shares issued......
Common Stock, no par value, 100,000,000 shares
authorized; 10,819,674 shares issued........................... --
Additional Paid-In Capital........................................... $4,213,496
Accumulated Deficit.................................................. ($39,414,300)
Total Stockholders' Deficit................................................. ($33,627,853)
Total Capitalization........................................................ $518,782
</TABLE>
SELECTED FINANCIAL DATA
The following selected financial data for the year ended December 31, 1998 and
for the period from inception (November 17, 1997) to December 31, 1997 are
derived from our financial statements which have been audited by Pender Newkirk
& Company, our independent public accountants, and are included elsewhere in
this prospectus. The following selected financial data for the nine months ended
September 30, 1999 and 1998 are derived from unaudited financial statements
included elsewhere in this prospectus. The unaudited combined pro forma
financial data for the years ended December 31, 1997 and 1998 are also derived
from unaudited financial statements included elsewhere in this prospectus. In
the opinion of our management, the unaudited financial data include all
adjustments, consisting only of normal recurring adjustments, necessary to
present fairly the data for such period. The unaudited pro forma combined
financial data presents our financial condition as if we had acquired the assets
and liabilities of Tel Com East, Tel Com West and Tel Com Jacksonville on
January 1, 1997. The unaudited combined pro forma financial information is not
necessarily indicative of the results of operation that would have been reported
had the acquisition of the assets and liabilities of Tel Com East, Tel Com West
and Tel Com Jacksonville actually been accounted for on the date it occurred,
September 30, 1998, nor is it necessarily indicative of our future results. The
unaudited combined pro forma financial statement should be read in
13
<PAGE> 17
conjunction with our historical financial statements. The data set forth below
should be read in conjunction with "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and our consolidated financial
statements and related notes appearing elsewhere in this prospectus.
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
Nine Months Ended Periods Ended
September 30 December 31
---------------------------------------------------------------- --------------
1999 1999 1998 1998 1998 1998
Pro forma Actual(1) Pro forma Actual(1) Pro forma Actual(1)
as adjusted(2) as adjusted(2) as adjusted(3)
-------------- ------------- --------------- ------------ -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Sales ................. $ 12,232,122 $ 12,232,122 $ 12,516,060 $ 1,245,813 $ 16,617,889 $ 5,347,642
Cost of sales ......... 5,579,939 5,579,939 4,011,350 574,897 5,754,897 2,317,945
------------ ------------ ------------ ------------ ------------ ------------
GROSS PROFIT .......... 6,652,183 6,652,183 8,504,710 670,916 10,863,491 3,029,697
Advertising expenses .. 1,144,515 1,144,515 1,662,821 117 2,093,407 430,703
General and administra-
tive expenses 8,823,549 9,203,713 9,628,225 1,030,799 13,488,537 5,017,832
Impairment loss ....... -- -- 126,721 -- 126,721 31,674,670
Loss on promoter
receivable writeoff . 2,134,322 2,134,322 18,830,888 -- 19,579,347 748,459
------------ ------------ ------------ ------------ ------------ ------------
OPERATING (LOSS) ...... (5,450,203) (5,830,367) (21,743,945) (360,000) (24,424,521) (34,841,967)
------------ ------------ ------------ ------------ ------------ ------------
Other income
(expenses:
Interest expense .... (43,598) (43,598) (43,662) (333) (57,189) (13,860)
Gain from Easy Phone
settlement .......... 1,315,742 1,315,742 -- -- -- --
------------ ------------ ------------ ------------ ------------ ------------
TOTAL OTHER INCOME .... 1,272,144 1,272,144 (43,662) -- (57,189) (13,860)
(EXPENSES)
NET LOSS .............. $ 4,178,059 $ (4,558,223) $(21,787,607) $ (360,333) $(24,481,710) $(34,855,827)
============ ============ ============ ============ ============ ============
Per Share data:
Basic loss per share .. $ (0.41) $ (0.45) $ (2.39) $ (0.07) $ (2.68) $ (5.68)
Diluted loss per share $ (0.41) $ (0.45) $ (2.39) $ (0.07) $ (2.68) $ (5.68)
Weighted average number
of common shares
Basic common shares ... 10,236,769 10,236,796 9,121,708 5,115,114 9,138,928 6,140,532
Diluted common shares . 10,236,059 10,236,796 9,121,708 5,115,114 9,138,928 6,140,532
</TABLE>
- ------------------------
*(1) Reflects the operations of United States Telecommunications, Inc. for the
period presented.
(2) Reflects a reduction of goodwill and customer base amortization expenses
of $380,162.
(3) Reflects a reduction of goodwill and customer base amortization expenses of
$136,721 and a reduction of impairment loss of $31,674,670 and the
operations of TelCom East, Tel Com West And Tel Com Jacksonville for the
nine months ending September 30, 1998.
(4) Reflects the operations of Tel Com East, Tel Com West and Tel Com
Jacksonville for the nine months ending September 30, 1999.
(5) Reflects the operations of Tel Com East, Tel Com West and Tel Com
Jacksonville for the period from inception to December 31, 1997.
<TABLE>
<CAPTION>
Period Ended
December 31
------------------------------
1997 1997
Pro forma Actual(1)
as adjusted(4)
--------------- ---------
<S> <C> <C>
Sales ................. $ 3,558,018 $ --
Cost of sales ......... 2,098,000 --
------------ ------------
GROSS PROFIT .......... 1,460,018 --
Advertising expenses .. 1,455,009 --
General and administra-
tive expenses 3,925,562 250
Impairment loss ....... 200,356 --
Loss on promoter
receivable writeoff . 6,453,979 --
------------ ------------
OPERATING (LOSS) ...... (10,574,888) (250)
------------ ------------
Other income
(expenses:
Interest expense .... (57,047) --
Gain from Easy Phone
settlement .......... -- --
------------ ------------
TOTAL OTHER INCOME .... (57,047) --
(EXPENSES)
NET LOSS .............. $(10,631,935) $ (250)
============ ============
Basic loss per share .. -- --
Diluted loss per share -- --
Weighted average number
of common shares
Basic common shares ...
Diluted common shares .
</TABLE>
- ------------------------
(1) Reflects a reduction of goodwill and customer base of $2,996,230 resulting
from the pro forma adjustments to offset the acquisition of TelCom East,
TelCom West and TelCom Jacksonville, as if the October 1, 1998 acquisition
occurred on January 1, 1997.
<TABLE>
<CAPTION>
Balance Sheet Data: SEPTEMBER
30, 1999 SEPTEMBER
AS ADJUSTED(1) 30, 1999 December 31
-------------- -------------------- --------------------------------------------
1998(1) 1997(1)
-------------------- -------------------- ---------------------
<S> <C> <C> <C>
Working capital deficit $ 4,008,124 $ 4,008,126 $ 3,388,674 $ (250)
Total assets $ 3,294,747 $ 6,290,977 $ 6,628,989 $ -
Rescission obligation $ 29,677,218 $ 29,677,218 $ 30,032,642 $ -
Rescission obligation interest $ 4,469,417 $ 4,469,417 $ 2,335,095 $ (250)
Total stockholders' deficit $ 30,631,603 $ (33,627,853) $ (30,904,445) $ (250)
</TABLE>
14
<PAGE> 18
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion of our financial condition and
results of operations together with the financial statements and the notes to
financial statements included elsewhere in this prospectus. The following
Management's Discussion and Analysis of Financial Condition and Results of
Operations contains forward-looking statements based upon current expectations
that involve risks and uncertainties. when used in this prospectus, the words
"intend," "anticipate," "believe," "estimate," "plan" and "expect" and similar
expressions as they relate to us are included to identify forward-looking
statements. Our actual results and the timing of certain events could differ
materially from those anticipated in these forward-looking statements as a
result of certain factors, including those set forth under "Risk Factors" and
elsewhere in this prospectus.
BACKGROUND AND OVERVIEW
We were incorporated in the State of Florida on November 19, 1997. In
February 1998 we began obtaining licenses from various state public utility
commissions to resale local telephone service, which we permitted Tel Com East,
Tel Com West and Tel com Jacksonville to use. As of September 30, 1998, we
purchased the assets and liabilities of Tel Com East, Tel Com West and Tel Com
Jacksonville (the "Acquisition"), to obtain a greater degree of operational
efficiency by combining the administrative, management, marketing and finance
functions of the various companies.
We provide residential local telephone service to people with bad
credit. Typically, our customers have been disconnected by their local exchange
carrier because of nonpayment. Most local telephone exchange carriers require
disconnected customers to pay their past due balance in addition to a security
deposit before the carrier will reconnect their service. We focus on those
consumers who have been disconnected by their local telephone exchange carrier
and cannot afford to reconnect service with the carrier. We offer these
consumers local telephone service for a fixed monthly price without requiring a
security deposit. We do, however, charge a connection fee for new service to our
customers.
We are authorized as a reseller or competitive local telephone exchange
carrier in 26 states. As a competitive local exchange carrier, we are able to
purchase telephone service from major local exchange carriers at a wholesale
rate under resale agreements entered into between us and each local exchange
carrier from whom we purchase telephone service. We then resell the local
telephone service to our customers. As of December 1, 1999, we had 17,953
customers and were conducting business in 20 states.
For accounting purposes, our purchase of the assets and liabilities of
Tel Com East, Tel Com West and Tel Com Jacksonville is accounted for using the
purchase method of accounting. Our financial statements for periods prior to the
Acquisition are considered to be the historical financial statements.
The following discussion of the results of operation and liquidity and
capital resources are based on the combined results of operation and liquidity
and capital resources since the inception of all entities. We believe that the
combined results presents a more beneficial presentation of historical
operations since Tel Com West, Tel Com East and Tel Com Jacksonville effectively
operated jointly during 1997 and 1998 prior to the Acquisition.
15
<PAGE> 19
The following table sets forth, for the periods indicated, the pro
forma results of operation as if the acquisition of Tel com East, Tel Com
Jacksonville and Tel Com West had occurred on January 1, 1997.
<TABLE>
<CAPTION>
Nine Months Ended Periods Ended
September 30 December 31
-------------------------------------------- ---------------------------------------
1999 1998 1998 1997
(unaudited) (unaudited) (unaudited) (unaudited)
(as adjusted) (as adjusted)
-------------------- ------------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Sales $ 12,232,122 $ 12,516,060 $ 16,617,889 $ 3,558,018
Cost of sales 5,579,939 4,011,350 5,754,398 2,098,000
-------------------- ------------------- ----------------- -----------------
GROSS PROFIT 6,652,183 8,504,710 10,863,491 1,460,018
Advertising expenses 1,144,515 1,662,821 2,093,407 1,455,009
General and administrative expenses 8,823,554 9,628,225 13,488,537 3,925,562
Impairment loss - 126,721 126,721 200,356
Loss on promoter receivable
write off 2,134,322 18,830,888 19,579,347 6,453,979
-------------------- ------------------- ----------------- -----------------
OPERATING (LOSS) (5,450,203) (21,743,945) (24,424,521) (10,574,888)
Other income (expenses):
Interest expense (43,598) . (43,662) (57,189) (57,047)
Gain from easy phone settlement 1,315,742 - - -
-------------------- ------------------- ----------------- -----------------
TOTAL OTHER INCOME (EXPENSES) 1,272,144 (43,662) (57,189) (57,047)
==================== =================== ================= =================
NET LOSS $ (4,178,059) $ (21,787,607) $ (24,481,710) $ (10,631,935)
==================== =================== ================= =================
</TABLE>
Source of revenue and revenue recognition policy
We generate revenues from activating a consumer and through monthly
billing for the telephone services provided. Activation revenue, which is
typically $89.00, is recognized when telephone services are applied for and
payment is received. Telephone service revenue is recognized monthly at the time
of billing. We charge our customers a fixed monthly rate of $49.95. We record
unearned revenue for services, which are billed, but not yet earned.
Source of Costs of Revenues
Our costs of revenues result from the purchases of traditional local
telephone service from various local exchange carriers. The provisions of
telephone service is provided to us pursuant to a resale agreement entered into
with each local exchange carrier operating in the areas in which we desire to
operate. In addition, the purchase and resale of the telephone service is
subject to tariff agreements set forth by each state.
16
<PAGE> 20
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, certain pro
forma results of operations data as a percentage of revenues as if the
acquisition of Tel Com East, Tel Com Jacksonville and Tel Com West had occurred
on January 1, 1997. Our results of operations are reported as a single business
segment.
<TABLE>
<CAPTION>
Nine Months Ended Periods Ended
September 30 December 31
--------------------------------------------- ---------------------------------------
1999 1998 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Sales 100.0% 100.0% 100.0% 100.0%
Cost of sales (45.6) (32.0) (34.6) (59.0)
-------------------- ------------------- ----------------- ------------------
GROSS PROFIT 54.4 68.0 65.4 41.0
Advertising expenses (9.4) (13.3) (12.6) (40.9)
General and administrative expenses (72.2) (76.9) (81.2) (110.3)
Impairment loss - (1.0) (.8) (5.6)
Loss on promoter receivable
write off (17.4) (150.5) (117.8) (181.4)
-------------------- ------------------- ----------------- ------------------
OPERATING (LOSS) (44.6) (173.7) (147.0) (297.2)
Other income (expenses):
Interest expense (0.4) . (0.3) (0.3) (1.6)
Gain from easy phone settlement 10.8 - - -
-------------------- ------------------- ----------------- ------------------
TOTAL OTHER INCOME (EXPENSES) 10.4 (0.3) (0.3) (1.6)
==================== =================== ================= ==================
NET LOSS (34.2)% (174.0)% (147.3)% (298.8)%
==================== =================== ================= ==================
</TABLE>
COMPARISON OF NINE MONTHS ENDED SEPTEMBER 30, 1999 AND SEPTEMBER 30, 1998
Revenues
<TABLE>
<CAPTION>
Nine Months Ended
September 30
---------------------------------------------
1999 1998
---- ----
<S> <C> <C>
Sales $ 12,232,122 $ 12,516,060
Less provision for
doubtful accounts (1,798,769) (3,963,542)
------------------- -------------------
Net Sales $ 10,433,353 $ 8,552,518
=================== ===================
</TABLE>
Our net revenues increased 22% from $8,552,518 for the nine months
ended September 30, 1998 to $10,433,353 for the nine months ended September 30,
1999. The difference was primarily attributable to significantly higher
receivables in 1998 that were written off as uncollectible. In 1998, we were
billing a larger number of customers than in 1999. During 1999, we focused on
improving our collections which resulted in disconnecting customers with problem
accounts resulting in a reduction in our subscriber base but our collections on
remaining account were substantially higher.
Cost of Revenues
Our cost of revenues increased 39% from $4,011,350 for the nine months
ended September 30, 1998 to $5,579,939 for the nine months ended September 30,
1999. The increase in costs is primarily due to a flaw in the billing system
which allowed customers to receive services without a bill being generated, as
well as our inability to decipher the carriers' encrypted bills to audit
discrepancies. We believe we have solved the problem in the billing system. As
of the date hereof, we believe all services provided are billed. In June of
1999, we developed a software program to read the information provided by the
carrier and create an audit format to reconcile bill discrepancies. The increase
in revenue per customer is a strong indication that this problem has been
addressed.
17
<PAGE> 21
Additionally, we will indirectly benefit from the merger of SBC
Communications Inc. and Ameritech Corporation. The FCC has mandated that
SBC/Ameritech extend a promotional resale discount of 32% to all eligible
resellers. We currently buy at a discount of between 10% and 21%. Based on
current carrier billings this may result in an annual decrease in costs of
revenues of over $900,000.
Our cost of revenues will also be effected by the implementation of an
electronic data interface (EDI) with the carriers. When fully operational it
will eliminate the manual processing charges we now incur. Manual processing
charges are approximately $25,000 per month. We will also be able to process
activations and disconnections on a timely basis. We estimate savings for this
function at $20,000 per month.
Advertising
Our advertising cost decreased $518,306 from $1,662,821 for the nine
months ended September 30, 1998 to $1,144,515 for the nine months ended
September 30, 1999. Our advertising costs have decreased because we have focused
our promotional efforts in less expensive markets. In 1999 we shifted a
significant portion of our advertising budget out of expensive markets such as
Boston, Los Angeles and Miami, where we were competing with multiple
competitors, to less expensive markets such as Detroit, Flint and Indianapolis
where there is less competition and advertising rates are cheaper. As a result,
we have been able to generate a similar amount of business with less costs.
General and Administrative Expenses
Our general and administrative expenses decreased $804,677 from
$9,628,226 for the nine months ended September 30, 1998 to $8,823,549 for the
nine months ended September 30, 1999. The change in general and administrative
expenses primarily resulted from the following: (i) an increase of $193,390 in
depreciation and amortization expenses resulting mainly from software and
equipment purchases; (ii) an increase of $767,360 in wages from an increase in
the work force; (iii) an increase of $210,623 in taxes from increased cash
collection; (iv) a decrease of $185,244 in tax penalties and interest; (v) an
increase in agent commissions expenses of $21,529; and (vi) an increase in
accounting and legal fees of $311,037 to comply with regulatory requirements. In
addition, other general and administrative expenses increased $277,089 from
additional overhead, which was offset by a reduction of bad debt of $2,164,674
from improvements made in tracking customers and obtaining payments.
Included in other general and administrative expenses for the nine
months ended September 30, 1999 are non-recurring expenses related to legal fees
of $273,982 and accounting fees of $147,186 to comply with the Consent Agreement
and related matters. We are anticipating these fees to decrease substantially
after our compliance with the Consent Agreement.
Impairment Loss
During the nine months ended September 30, 1998 we recognized a
$126,720 write off of impaired operating licenses obtained from the joint
venture agreements between Easy Cellular, Inc. and Tel Com East, Tel Com West
and Tel Com Jacksonville. These operating licenses were impaired by the
acquisition of the assets and liabilities of Tel Com East, Tel Com West and Tel
Com Jacksonville by us resulting in the operating licenses no longer having use.
Loss on Promoter Receivable Write Off
The loss on promoter receivable write off decreased by $16,696,566 for
the nine months ended September 30, 1999 compared to the same period in 1998.
The receivable was established when the rescission obligation was established
and was determined to be uncollectible from the promoter of the Tel Com East,
Tel Com Jacksonville and Tel Com West units sold. The receivable and subsequent
loss decreased as a result of all the units being sold in 1997 and 1998. The
only increases to the promoter receivable in 1999 were related to increases to
the promoter receivable for increases in rescission obligation interest.
18
<PAGE> 22
Other Income (Expense)
For the nine months ended September 30, 1999, other income (expenses)
were $1,272,144 as compared to ($43,662) for the nine months ended September 30,
1998. The balance is comprised of interest expense of $43,598 for 1999 and
$43,662 for 1998 offset by a $1,315,742 gain in 1999 on the settlement with Easy
Phone, Inc. In August 1999 we reached a settlement with Easy Phone, Inc. whereby
Easy Phone, Inc. agreed to assume their carrier liabilities that we had been
paying on their behalf. The liabilities of Easy Phone, Inc. had been assumed by
us as part of the Acquisition. Prior to the Acquisition, Tel Com East, Tel Com
West and Tel Com Jacksonville had operated under the Easy Phone, Inc. operating
licenses.
Net Loss
Our net loss for the nine months ended September 30, 1999 was
$4,178,059 as compared to a net loss of $21,787,607 for the nine months ended
September 30, 1998.
The $17,609,548 reduction in our net loss was primarily due to a
reduction in the write off of the promoter receivable. In addition, the
reduction in our net loss was due to improving recurring operating profits
as a result of better tracking and billing of customers and increased efforts in
monitoring of carrier costs.
COMPARISON OF FISCAL YEARS 1998 AND 1997
Revenues
Our revenues increased 367% from $3,558,018 for the period ended
December 31, 1997 to $16,617,889 for the year ended December 31, 1998. The
$13,059,871 increase was primarily attributable to our rapid expansion from
operations in Florida and California from 1997 to 1998. Also in 1997 we entered
the California market late in the year and had a full year of operations in
1998. The underlying subscriber base increased from 8,007 in 1997 to 24,718 in
1998.
Cost of Revenues
Our cost of revenues increased 174% from $2,098,000 for the period
ended December 31, 1997 to $5,754,398 for the year ended December 31, 1998,
primarily due to entering new states and increasing the number of customers in
the existing states. This increase was mainly attributable to Tel Com
Jacksonville starting operations in January 1997, Tel Com East starting
operations in April 1997 and Tel Com West starting Operations in July 1997
resulting in a partial year of operations in 1997 compared to twelve months in
1998.
Advertising
Our advertising cost increased $638,398 from $1,455,009 for the period
ended December 31, 1997 to $2,093,407 for the year ended December 31, 1998,
primarily due to entering new markets. Also, Tel Com Jacksonville began
operations in January 1997, Tel Com East began operations in April 1997 and Tel
Com West began operations in July 1997 resulting in a partial year of operations
in 1997 compared to twelve months in 1998.
General and Administrative Expenses
Our general and administrative expenses increased $9,562,975 from
$3,925,562 for period ended December 31, 1997 to $13,488,537 for the year ending
December 31, 1998. The increased general and administrative expenses was
primarily attributable to an increase of $61,365 of depreciation and
amortization expenses resulting mainly from the additional depreciation and
amortization from purchase of software and property and equipment. Further, we
had an increase of $1,667,803 in wages from an increase in the work force and a
$460,884 increase in taxes. We also had the following increases in expenses: (i)
a $4,965,090 increase in bad debt expenses; (ii) a $429,093 increase in agent
commissions; (iii) a $161,754 increase in office supplies; (iv) a $147,707
increase in postage; and (v) a $97,091 increase in travel from increased sales
activity. In addition, we had increases in accounting and legal fees of $168,114
from retaining an accounting firm to provide record keeping services and
retaining counsel. We incurred an increase in rent of $107,416 due to opening
two new centers of operations, an increase in management fees of $70,146 due to
increases in
19
<PAGE> 23
the cost of complying with state utility compliance requirements and an increase
in consulting fees of $742,053 as a result of additional outside services
utilized in 1998 to obtain licences in various states as well as the use of
contract labor. We had an increase in tax penalties and interest of $477,214 due
to our software system's failure to recognize and collect taxes.
Impairment Loss
Our impairment losses decreased $73,635 from $200,356 in 1997 to
$126,721 in 1998. This impairment loss was attributable to an impairment in 1997
of the goodwill related to the Tel Com Jacksonville acquisition of Montebello
Finance and the impairment in 1998 of the operating licenses resulting from the
Easy Cellular, Inc. joint venture.
Loss on Promoter Receivable Write Off
The loss on promoter receivable increased $13,125,369 from 1997 to 1998
because of the write off of the promoter receivable. The receivable was
established when the rescission obligation was established and was determined to
be uncollectible from the promoter of the Tel Com East, Tel Com Jacksonville and
Tel Com West units sold. The receivable and subsequent loss increased as a
result of a higher number of units sold in 1998 and the increase in the
rescission obligation interest.
Other Income (Expense)
For the year ended December 31, 1998, other income (expenses) were $57,189 as
compared to $57,047 for the period ended December 31, 1997. The balance is
comprised of interest expense from related party notes payable and a line of
credit with Bank of America.
Net Loss
Our net loss for the year ended December 31, 1998 was $24,481,710, as
compared to a net loss of $10,631,935 for the period ended December 31, 1997.
The $13,849,775 increase in our loss was primarily due to additional
costs incurred from expansion, mainly in advertising and general and
administrative expenses along with non-recurring loss on the promoter receivable
write off.
LIQUIDITY AND CAPITAL RESOURCES
Since our inception, we have primarily financed our operations through
operations and from the sale of common stock and units of Tel Com East, Tel Com
Jacksonville and Tel Com West. We have raised $1,985,000 through the sale of our
common stock and approximately $5,845,000 through the sale of units of Tel Com
East, Tel Com Jacksonville and Tel Com West which was used to finance our
growth. Additionally, we have borrowed $150,000 from a shareholder and
periodically drawn upon a $50,000 bank line of credit to fund our growth and
working capital requirements.
As of September 30, 1999, we had negative cash and cash equivalents
totaling $34,826 with a negative working capital was $4,008,126.
Cash provided by or used in operations is primarily derived from
changes in working capital. Cash used in operations was $1,821,341, $2,961,962
and $1,682,148 for the nine months ended September 30, 1999, the year ended
December 31, 1998 and period ended December 31, 1997.
Our September 30, 1999, net cash used by operating activities included
a $1,315,742 non-cash gain on a write off of accrued carrier costs payable to
Easy Cellular, Inc. and was partially offset by non-cash items aggregating
$4,227,728, such as depreciation and amortization, provision for bad debts and
loss on promoter receivable write off and was further offset by increases in
accounts payable and other accrued liabilities of $1,821,485 and unearned
revenue of $107,100, and a decrease in receivables and other assets of
$2,483,860.
20
<PAGE> 24
Our December 31, 1998, net cash used by operating activities was
partially offset by non-cash items aggregating $6,174,942, such as depreciation
and amortization, provision for bad debts and loss on promoter receivable write
off, $162,609 offering cost write off and was further offset by increases in
accounts payable and other accrued liabilities of $2,609,468 and unearned
revenue of $136,105, and a decrease in receivables and other assets of
$6,393,994.
Our December 31, 1997, net cash used by operating activities was
partially offset by non-cash items aggregating $6,808,440, such as depreciation
and amortization, provision for bad debts and loss on promoter receivable write
off, $1,036,619 of intangible impairment and offering cost write off and was
further offset by increases in accounts payable and other accrued liabilities of
$1,760,721, and decreases on receivables and other assets of $681,293.
Cash used in investing activities was $279,558 for the nine months
ended September 30, 1999 and $734,524 and $315,762 for the years ended December
31, 1998 and 1997, respectively. Investing activities consist primarily of
purchases of property and equipment of $170,711, $333,849 and $255,711 for the
nine months ended September 30, 1999 and the period ended December 31, 1998 and
1997, respectively and purchase and development of customer tracking and billing
software of $108,847, $400,673 and $10,051 for the nine months ended September
30, 1999 and the period ended December 31, 1998 and 1997, respectively.
Cash provided by financing activities for the nine months ended
September 30, 1999 was $1,473,045 which was derived from the proceeds from sales
of common stock totaling $600,000 and a private placement of the common stock
totaling $1,234,815. The cash provided by these financing activities was
partially offset by repayments on borrowings totaling $6,346 and rescission
payments of $355,425. Cash provided by financing activities for the year ended
December 31, 1998 was $4,252,136 which primarily consisted of proceeds of from
sales of common stock totaling $150,000, proceeds from the sale of Tel Com East
and Tel Com West units of $4,359,223 and $50,151 from borrowings offset by
rescission payments of $98,000, distributions of $169,084 and note payable
payments to a related party of $190,154. Cash provided by financing activities
for the year ended December 31, 1997 was $2,069,844 which was primarily derived
from the proceeds from the sales of Tel Com East, Tel Com Jacksonville and Tel
Com West units of $2,091,718. The cash provided by these financing activities
was offset by distributions of $12,029 and note payable payments to a related
party of $9,845.
We believe that our funds from operations will be sufficient to satisfy
our cash requirements for at least the next twelve months. If this rescission
offering has a large acceptance rate, we believe that our existing resources
would not be sufficient to fund our operations for the next twelve months. The
estimates for the periods for which we expect funds from operations, rescission
payments and our available cash balances to be sufficient to meet our capital
requirements are forward-looking statements that involve risks and uncertainties
as set forth under the caption "Risk Factors" in this prospectus. Our capital
requirements will depend on numerous factors and include possible expansion,
acquisitions of complementary businesses or technologies and the resources we
dedicate to new technologies and new markets.
We have no other material commitments other than the contingent
liability to Easy Cellular, Inc. related to sales taxes, excise taxes and
related interest and penalties.
We may need to raise additional capital to fund rescission payments. If
additional funds are raised through the issuance of equity, the percentage
ownership of our stockholders will be reduced; our stockholders may experience
dilution. There can be no assurance that additional financing will be available
or on terms favorable to us. If adequate funds are not available or are not
available on acceptable terms, our ability to fund the rescission obligation,
fund the expansion of our markets and take advantage of unanticipated
opportunities or otherwise respond to competitive pressures could be
significantly limited. Our business may be harmed by such limitations.
Recent Accounting Pronouncements
In June 1998, FASB issued SFAS No. 133 "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133 establishes accounting and
reporting standards for derivative instruments and hedging activities. SFAS No.
133 requires the recognition of all derivative instruments as either assets or
liabilities in the statement of financial position and measurement of those
derivative instruments at fair value.
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<PAGE> 25
SFAS No. 133, as amended, is effective for all fiscal quarters of fiscal years
beginning after June 15, 2000. Currently, we do not hold derivative instruments
or engage~in hedging activities. The adoption of this standard is not expected
to have a material effect on our combined financial statements taken as a whole.
In March 1998, the Accounting Standards Executive Committee of the
American Institute of Public Accountants issued Statement of Position 98-1,
"Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use." In April 1998, the same committee issued Statement of Position
98-5, "Reporting on the Costs of Start-Up Activities." These standards are
effective for the first quarter of the year ending December 31, 1999. The
adoption of these standards did not have a material effect on our combined
financial statements taken as a whole.
22
<PAGE> 26
BUSINESS
THE COMPANY
We provide residential local telephone service to people with bad
credit. Typically, our customers have been disconnected by their local
telephone exchange carrier because of nonpayment. Most local exchange carriers
require disconnected customers to pay their past due balance in addition to a
security deposit before the carrier will reconnect their service. We focus on
those consumers who have been disconnected by their local telephone exchange
carrier and cannot afford to reconnect service with the carrier. We offer these
consumers local telephone service for a fixed monthly price without requiring a
security deposit.
We are authorized as a reseller or competitive local exchange carrier
in 26 states. As a competitive local telephone exchange carrier, we are able to
purchase telephone service from major local exchange carriers at a wholesale
rate under the resale agreements entered into between us and each local
exchange carrier from whom we purchase telephone service. We then resell the
local telephone service to our customers. As of December 1, 1999, we had 17,953
customers and were conducting business in 20 states. Our principal executive
offices are located at Suite 118, 5251 110th Avenue North, Clearwater, Florida
33760.
OUR HISTORY
We were incorporated in the State of Florida on November 19, 1997. In
February 1998, we began obtaining licenses from various state public
commissions to resale local telephone service, which we permitted Tel Com East,
Tel Com West and Tel Com Jacksonville to use. As of September 30, 1998, we
purchased the assets and assumed liabilities of Tel Com East, Tel Com West and
Tel Com Jacksonville.
Tel Com Jacksonville was formed in February 1997. Its initial sole
managing member was Tel Com Plus, Inc., a Nevada corporation. Charles Polley was
the president of Tel Com Plus, Inc. On December 3, 1996, prior to the filing of
the Certificate of Formation of Tel Com Jacksonville with the Florida Secretary
of State, Tel Com Jacksonville entered into a purchase agreement with D&B
Holdings International, Inc. whereby D&B agreed to purchase a 62.5% interest in
Tel Com Jacksonville for $750,000. The purchase price was evidenced by a
non-recourse promissory note issued to Tel Com Jacksonville which has been paid
in full. In addition, management believes that Tel Com Plus sold a 25% interest
in Tel Com Jacksonville to Easy Cellular, Inc. in exchange for Easy Cellular's
agreement to grant the venture exclusive use of its telecommunications reseller
licenses. Richard Pollara, our current President, was a substantial shareholder
and President and Chief Executive Officer of Easy Cellular, Inc. Management
believes that after the purchase by Easy Cellular, Inc. of its interest in Tel
Com Jacksonville, Easy Cellular, Inc. became a co-managing member of Tel Com
Jacksonville, together with Tel Com Plus, and assumed responsibility for the
operations of Tel Com Jacksonville. Thereafter, intermediaries purchased units
of Tel Com Jacksonville from D&B Holdings International, Inc. and then sold
these securities at significantly higher prices to investors in an unregistered
offering, without the assistance of the Company's present management.
On April 25, 1997, Tel Com Plus, Inc. formed another limited liability
company, Tel Com Miami, which was subsequently renamed Tel Com East. On
February 28, 1997, prior to filing the Certificate of Formation of Tel Com East
with the Florida Secretary of State, Tel Com East entered into a joint venture
agreement with Easy Cellular, Inc. Under this joint venture agreement, Easy
Cellular agreed to grant the venture exclusive use of its telecommunications
reseller license in Florida and Tel Com East agreed to contribute funds to the
venture of approximately $3,000,000. In return for the contribution of its
licenses, Easy Cellular received a 35.4% interest in Tel Com East, plus the
right to receive $400,000 from the proceeds of the venture, which amount has
not been paid as of the date of this prospectus. Mr. Pollara was the President
and a substantial shareholder of Easy Cellular. After the contribution by Easy
Cellular, it became the co-managing member of Tel Com East together with Tel
Com Plus. On July 21, 1997, Tel Com East entered into a purchase agreement with
Prime Equities Group, Inc. whereby Prime Equities purchased 50% of the total
ownership of Tel Com East. Intermediaries purchased units of Tel Com East from
Prime Equities and then sold these securities at significantly higher prices to
investors in an unregistered offering, without the assistance of the Company's
present management.
On July 28, 1997, Tel Com Plus, Inc. formed Tel Com California, which
was subsequently renamed Tel Com West. Tel Com West entered into a joint venture
agreement with Easy Cellular, Inc. on July 24, 1997 whereby Easy Cellular agreed
to grant the venture exclusive use of its resellers agreement for the state of
California and Tel Com West agreed to contribute funds of approximately
$16,500,000 to the venture. Tel Com West actually contributed only approximately
$3 million in exchange for its
23
<PAGE> 27
contribution, Easy Cellular received approximately 40% of the units of Tel Com
West plus the right to receive $60,000 from the proceeds of the venture, which
amount has not been paid as of the date of this prospectus. Intermediaries
purchased units of Tel Com West and then sold these securities at significantly
higher prices to investors in an unregistered offering, without the assistance
of the Company's present management. Promotional materials for Tel Com West,
prepared without the assistance of the Company's present management, indicate
that Prime Equities Group, Inc. purchased approximately 50% of the units of Tel
Com West.
On December 31, 1997, Richard Pollara purchased Easy Cellular, Inc.'s
interest in Tel Com East, Tel Com West and Tel Com Jacksonville in exchange for
a substantial portion of his holdings in Easy Cellular, Inc. Mr. Pollara and
Easy Cellular, Inc. valued this exchange transaction in excess of $170,000.
As of September 30, 1998, we purchased the assets and assumed
liabilities of Tel Com East, Tel Com West and Tel Com Jacksonville. The purpose
of this transaction was to obtain a greater degree of operational efficiency by
combining administrative, management, marketing and finance functions of the
various companies. In connection with this consolidation, the holders of Tel Com
Jacksonville, Tel Com East and Tel Com West received shares of our common stock
and Class A preferred stock. No formal documents of transfer were executed by
the parties to this consolidation. Mr. Pollara elected not to have his units
converted into shares of our capital stock.
In early to mid-1998, Tel Com Jacksonville made an offer to purchase to
all of its outstanding units held by the holders of Tel Com Jacksonville. The
amount of Tel Com Jacksonville's aggregate liability to its holders is presently
$995,000. As of the date of this prospectus, approximately $578,250 has been
paid by us, as successor in interest to Tel Com Jacksonville, to the former unit
holders of Tel Com Jacksonville.
Investors in units of Tel Com East, Tel Com West and Tel Com
Jacksonville purchased units in these companies from various intermediaries for
an aggregate purchase price of approximately $30,000,000. However, we only
received approximately $6,600,000 of these proceeds. The current management of
the Company is uncertain of the location or use of the remaining balance;
however, they believe that a substantial portion of these funds were maintained
as commissions by the intermediaries. Our attorneys are evaluating possible
legal action against certain of these intermediaries. No assurance can be given
that any legal action will be brought and, if brought, that it will be
successful.
OUR STRATEGY
Our mission is to become a leading reseller of local telephone services
to consumers with bad credit. To achieve this goal, we have developed and have
begun implementing a business strategy to position us as a leader in the
reseller segment of the telecommunication services industry. Our business
strategy can be categorized into the following five main objectives:
- Expanding our market area;
- Increasing product availability for our customers;
- Automating our operational systems;
- Advertising on a national basis; and
- Developing and introducing new products.
Expansion of Market Area. We are currently licensed in 26 states and
doing business in 20 states. We intend to obtain licenses in all states where
the regulatory environment makes it financially viable to enter the market. At
this time, only two states, Ohio and Minnesota, have regulations which make it
difficult for companies such as ours to operate. We expect to obtain licenses
in the 22 additional states, the District of Columbia and Puerto Rico.
Expand Product Availability. One component of our business strategy is
to increase product availability for our customers. We believe that our product,
local telephone service, is made available to our customer by providing
convenient, easy and reliable means by which they may pay the installation and
monthly fees. Because our typical customer does not have a checking account or a
credit card, we rely on direct payment agents for approximately half of our
customer payment activity, which are typically check cashing stores, pawn shops
and convenience stores which have entered into agreements with us whereby they
agree to process installation and monthly payments from our customers in
exchange for receiving a percentage based commission. As of the date of this
prospectus, we have approximately 425 direct payment agents. We plan to
substantially increase the number of agents over the next 12 months. We also
offer several methods for bypassing payment agents, including payment by check
draft, Federal Express, Western Union, US Mail and credit card, which methods
currently account for approximately 50% of payment activity. We are currently
experimenting with E-commerce whereby the customer can access his account, make
a customer service request
24
<PAGE> 28
and make a payment on-line. As the internet continues to penetrate our
demographic customer base we believe that E-Commerce will account for a growing
percentage of all customer transactions.
Automation. We have invested a substantial amount of money in a
proprietary software system (TMS), which is an integrated and automated order
processing and collections systems. Once it is fully functioning, it will enable
us to handle higher volumes of business without incremental increases in labor
costs.
Additionally, we are seeking to automate our interactions with the
local telephone exchange carriers. On October 1, 1999, the Company signed an
agreement with Wisor Telecom to provide an electronic data interface with
Ameritech Corporation, a major local exchange carrier in the Midwest of the
United States. The electronic data system will allow the Company to communicate
directly and electronically with the carriers. This will greatly speed up order
processing, suspensions and disconnections. Additionally it will lower the
processing fees that some carriers charge, which can be as high as $19.00 per
manual order. The contract with Wisor Telecom also anticipates implementing an
electronic data interface with Bell Atlantic, a major local exchange carrier, by
mid to late December 1999, and all additional local exchange carriers by
mid-2000.
National Advertising. We plan to begin a national advertising campaign
if we become licensed in enough states to justify the additional expense of
national advertising. Currently, we advertise on a local or regional basis in
areas of dominant influence. The current population base we serve is not large
enough to justify the expense of a national advertising campaign. However, we
intend to become licensed in most states and thus expand our potential customer
base. Once we have expanded our potential customer base to a specified level, we
believe that national advertising will achieve greater cost efficiency and
customer awareness than local or regional advertising.
At present, advertising in each of the areas of dominant influence is
one of our largest variable expenses. Once we have expanded into additional
markets and have begun our national advertising campaign, we believe that
further expansion into new markets will be extremely cost efficient because we
will not need to incur significant additional advertising expense.
New Products. We intend to offer new products to incrementally increase
the revenues we receive from each customer. Currently we are exploring a
relationship with several wholesale Internet service providers to become an
Internet service provider directly to our customer base, as well as other
consumers that cannot obtain Internet service due to their lack of a credit
card. We believe that the demographic base we service will have the largest
percentage increase of new Internet users over the next several years and we
want to be positioned to be their main provider.
In summary, we believe we can increase our revenue by expanding the
service area, adding new products and advertising nationally. We further believe
that the investment we are making in automation and the cost efficiency of
national advertisements will allow our costs to remain relatively stable. The
combination of increasing revenues and controlled costs should result in
significant increases in profitability over the next 24 months.
SERVICE AND SERVICE AREAS
We provide local telephone services to those consumers that are unable
to establish traditional local service with their local exchange carrier. As a
reseller of local telephone services, we purchase service from the local
exchange carrier and simply provide a dial tone to our customers. We also offer
additional features such as caller ID, call waiting and call forwarding for an
additional charge. We do not have any specific telecommunications equipment
requirements relating to maintaining a customer's dial tone. Existing local
exchange carrier equipment and operation support systems are used to provide our
customers with local phone service. However, the local exchange carrier does not
have any contact with our customers. From the local exchange carrier's
perspective we are their customer, not the consumers to whom we resell their
services.
As of December 1, 1999, we were licensed as a telephone service
provider in each of the states listed on the following chart. The chart
indicates the carriers within each state with whom we have a resale agreement
and the approximate number of customers we have within each state.
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<PAGE> 29
<TABLE>
<CAPTION>
STATE NUMBER OF CARRIER AGREEMENTS
CUSTOMERS
<S> <C> <C>
Alabama 238 Bell South, GTE
Arizona 65 US West, GTE
California 3,923 Pacific Bell, GTE
Connecticut 254 SNET
Delaware 10 Bell Atlantic
Florida 3,838 Bell South, GTE, Sprint
Illinois 1,104 Ameritech, GTE
Indiana 723 Ameritech, GTE
Kansas 0 Southwestern Bell, Sprint
Massachusetts 884 Bell Atlantic
Michigan 5,995 Ameritech
Missouri 2 South Western Bell
Nevada 43 Nevada Bell, Sprint, GTE
New Jersey 613 Bell Atlantic
New York 82 Bell Atlantic, Frontier
Pennsylvania 7 Bell Atlantic, GTE, Sprint
Rhode Island 55 Bell Atlantic
South Carolina 17 Bell South , Sprint
Washington 0 US West, GTE, Sprint
Wisconsin 100 Ameritech, GTE
TOTAL 17,953
</TABLE>
OPERATIONS
Initial Customer Contact/Installation Payment. In order to apply for
service, a customer must first pay the installation fee. Typically, a customer
sees one of our print or television advertisements and calls the 1-800 number
displayed in the advertisement. This 1-800 number automatically connects the
caller to an integrated voice response system which, based upon the caller's
responses, provides him or her with service information for the state in which
he or she lives, the current price of the services, the various acceptable
methods of payments and the nearest agent payment location. If the caller needs
more information, he or she is directed to one of our sales representatives.
A customer must pay the installation fee, which is typically $89.00,
before an application is completed and a service order is processed with the
local exchange carrier. The installation fee may be paid by any one of the
following methods: (1) credit card; (2) check draft; (3) home pick-up by Federal
Express; or (4) direct payment to one of our agents. If the customer desires to
pay by credit card, check draft or Federal Express, the integrated voice
response system directs the customer to our accounting department which
processes the payment. If the customer desires to pay at one of our agent
locations, then the integrated voice response system directs the customer to an
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<PAGE> 30
agent located within his or her zip code area. After paying the installation
fee, either over the phone or in person at an agent location, the customer will
receive an application number. The customer is then asked to call our sales
department or is transferred by our accounting department to one of our sales
representatives. The sales representative will verify payment of the
installation fee by confirming the customer's application number. Once payment
has been verified, the sales representative will process the application.
We have written agreements with over 425 agents located in 16 states.
Our agents are typically check cashing stores, pawn shops, rent-to-own stores or
convenience stores. Under written agreements with our agents, they are required
to use an electronic system to accept and process the payment activity in their
stores. This electronic system records their daily activity and communicates
with a server in our operations center. We are able to access their activity via
our server and apply the payment activity directly to our customers' accounts.
The agent is able to review a report from the electronic system with the gross
amount they have collected. They deduct their commission prior to making their
daily deposit. The amount of the commission is based upon the amount of the
installation fee and is typically $25.00 per installation. In addition, agents
receive $2.00 for each monthly bill collected from each customer.
Activation/Line Service Request. Once we have verified payment of the
installation fee, one of our sales representatives will complete the customer's
application over the phone. Generally, during this call we are able to provide
the customer with a phone number and an approximate date when service will be
activated. From the information received from the customer, we generate a local
service request with the local exchange carrier with whom we have a resale
agreement. This information is then transmitted electronically to the carrier
who processes the service request. Once the carrier has received and processed
the service request, it will send us a firm order confirmation with the
installation due date and phone number. The customer's application is then moved
from pending applications to subscriber accounts. We generate and send a bill
for the monthly service charge to each subscriber at the earliest possible date
as permitted by the applicable state laws and regulations. The monthly service
charge is a fixed amount of $49.95.
Disconnects. A key factor in our operations is closely monitoring
incoming payments so that we may disconnect a non-paying customer as soon as we
are legally permitted to do so. We have software which monitors non-paying
customers. This software automatically activates an automated phone message
service which calls customers whose bills are due within 24 hours and also calls
customers whose bills are delinquent. If the customer is delinquent in paying
for a designated period of time, we may first suspend the service. If the
customer still fails to pay after a designated period of time, we will
permanently disconnect service. The periods of time which must pass before we
either suspend or disconnect service depend on each state's laws and
regulations.
REGULATORY ENVIRONMENT
The Telecommunications Act of 1996 ("1996 Act"), which became effective
in February 1996, introduced widespread changes in the regulation of the
telecommunications industry with its adoption of a pro-competitive, deregulatory
national policy framework. The following summary of regulatory developments and
legislation offers an overview of the current regulatory environment. We have
not attempted to describe all present and proposed federal, state and local
regulations and legislation affecting the telecommunications industry. Other
existing federal and state regulations are currently the subject of judicial
proceedings, legislative hearings and administrative proposals which could
change, in varying degrees, the manner in which this industry operates. Neither
the outcome of these proceedings, nor their impact upon us or the
telecommunications industry, can be predicted at this time.
The 1996 Act eliminates many of the pre-existing legal barriers to
entry in the local exchange telephone market in which we operate. Remaining
legal barriers to entry imposed by state or local law, rule, or regulations are
subject to preemption by the Federal Communications Commission ("FCC"). As
discussed below, however, the 1996 Act maintains the authority of individual
state utility commissions to regulate local exchange services and to impose, on
a competitively-neutral basis, requirements that are necessary to (1) preserve
and advance universal service; (2) protect the public safety and welfare; (3)
ensure the continued quality of telecommunications service; and (4) safeguard
the rights of consumers. This overview does not purport to identify all
state-level obligations owed by us.
The 1996 Act attempts to eliminate or minimize economic and technical
barriers to entry in the local exchange telephone market. Section 251 and 252
set standards that govern the relationship between local exchange carriers and
resellers or competitive local exchange carriers. Under Section 251, for
example, local exchange
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<PAGE> 31
carriers must provide to potential competitors nondiscriminatory access and
interconnection as well as retail telecommunications services priced at
wholesale rates. The wholesale rates which the resellers are charged by the
local exchange carriers generally are discounted 10% to 24% from the retail
rate. The level of the discount varies depending on the local exchange carrier
and the state in which the telecommunications service is provided. Section 252
establishes competitive local exchange carrier status as "co-carriers," rather
than local exchange carrier customers, by requiring that state-approved
negotiated or arbitrated contracts govern the parties' agreements. Under the
1996 Act, state commission decisions regarding implementation and enforcement of
these interconnection or resale agreements are appealable to the federal
district court in that state. Pursuant to Sections 251 and 252 of the 1996 Act,
the FCC promulgated regulations (1) requiring the local exchange carrier to open
their telephone networks to competition and (2) addressing various issues
associated with interconnection or resale agreements. On January 25, 1999, the
United States Supreme Court affirmed the authority of the FCC to establish rules
governing interconnection, but remanded to the FCC issues regarding which
individual components of the local exchange carriers' telephone network they
must make available to resellers. On September 15, 1999, the FCC adopted rules
that specify the portions of the nation's local telephone networks that local
exchange carriers must make available to competitors seeking to provide
competitive local telephone service. It cannot be determined at this time which,
if any, parties will appeal these regulations or the impact that such appeals or
the new rules may have on us or the telecommunications industry, as a whole.
The 1996 Act establishes in Section 254 a national policy to provide
affordable "universal service" to all telecommunications consumers and to
provide advanced telecommunications services to schools, libraries, and rural
health care providers. To achieve these objectives, the 1996 Act mandates the
adoption of explicit universal service support mechanisms funded by equitable
and nondiscriminatory assessments on telecommunications carriers providing
interstate services. We do not provide interstate service and are, therefore,
not subject to interstate universal funding requirements. States may adopt
universal service mechanisms that are not inconsistent with the federal model
and fund these mechanisms by assessments on telecommunications carriers
providing intrastate services. In May, 1997 the FCC adopted its universal
service rules implementing Section 254. The FCC's regulations provide for the
collection of universal service assessments based on end-user, or retail,
revenues derived from the provision of interstate telecommunications services.
Numerous parties appealed various aspects of these regulations, including the
revenue basis on which the contributions are determined. The appeals were
consolidated in the United States Court of Appeals for the Fifth Circuit ("Fifth
Circuit"), which, on July 30, 1999, remanded three portions of the FCC rules. In
response, on October 8, 1999, the FCC changed it rules to eliminate intrastate
revenues from the calculations for universal service contributions. Under the
FCC's regulations, universal service fund ("USF") assessments are revised on a
quarterly basis. During the first half of 1999, an interstate carrier's federal
USF obligations totaled approximately four (4) percent of the carrier's end user
revenues derived from telecommunications services. State USF programs are
expected to generate approximately 75% of the support mandated under the 1996
Act. Thus the USF obligations are likely to increase as the states implement
intrastate USF programs consistent with the federal model.
The 1996 Act specifically provides for "number portability." The FCC
has construed this term to refer to "service provider number portability," which
allow residential and business customers to retain their telephone numbers when
switching telecommunications carriers. Implementation of local number
portability ("LNP"), which has been occurring in phases, is estimated to cost
billions of dollars. Pursuant to the 1996 Act, costs must be recovered in a
competitively-neutral matter. In May, 1998, the FCC determined that
telecommunications carriers will share the costs of the regional databases
necessary to implement LNP based on carriers' intrastate, interstate, and
international end-user telecommunications revenues for each region.
Carrier-specific costs are to be borne by each carrier. Beginning February 1,
1999 local exchange carriers have been permitted to recover their carrier-
specific costs through direct end-user charges (limited to five years' duration)
and/or a federally-tariffed intercarrier charge for long-term number portability
query services they perform for other carriers. Interstate carriers are also
required to contribute to the cost associated with numbering administration.
State regulatory commissions exercise jurisdiction over intrastate
communications, defined as those that originate and terminate within a specific
state. Each state maintains its own regulatory regime. State regulation, in most
cases, includes requirements for the reseller to receive from the state
commission, prior to offering service, a certificate of public convenience and
necessity authorizing it to provide service. The requirements for such
certificates vary by state, but generally include a demonstration by the
reseller that it has the financial, managerial and technical qualifications to
provide the services it proposes. The certification process may take up to six
months. There can be no assurances that we will receive all of the certificates
we need to provide service in additional markets or that such certificates will
be obtained in a timely manner.
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<PAGE> 32
In addition, resellers are required to file tariffs with each state
commission detailing the rates, terms and conditions for its services. These
tariffs must be modified before the reseller may change prices, offer new
services or change material terms and conditions. Tariff changes are generally
approved within 30 days of filing. After the reseller is certified, it may also
be required to file periodic reports with the state commissions and pay fees to
maintain its certificates. Failure to make such filings or pay such fees could
result in fines or loss of the reseller's certificates.
On October 6, 1999, the FCC approved the merger of two major local
exchange carriers, namely SBC Communications Inc. and Ameritech Corporation. SBC
Communications Inc. owns and/or controls Pacific Bell, SNET and Nevada Bell. In
order to receive regulatory approval, the two carriers agreed to numerous
conditions designed to promote competition in the local telecommunications
market within its region. One of the provisions provides that the surviving
entity must provide each reseller with whom it has a resale agreement, a written
offer to amend each agreement to incorporate a significant resale discount
promotion of 32%. This promotional rate will remain in effect for a minimum
period of two years.
As of the date of this prospectus, we have entered into resale
agreements to purchase telecommunication services from Ameritech Corporation and
entities controlled by SBC Communications Inc. The resale discount rates under
these resale agreements range from approximately 10% to 21%. As a result of the
mandated increase in the resale discount rate as a condition to the merger, we
believe that we will experience significant costs savings, estimated to be
approximately $900,000 per year.
Finally, new or renegotiated resale agreements negotiated between us
and local exchange carriers must be filed with and approved by the relevant
state public service commission where the services will be provided. If the
state commission does not act upon a filed agreement within 90 days of filing,
the agreement is deemed to go into effect. There can be no assurance that such
agreements will be approved or that they will be approved in a timely manner.
RELATIONSHIP WITH LOCAL EXCHANGE CARRIERS
Presently, all of our local phone services in each market are provided
through a single underlying carrier, the local exchange carrier. Although the
relationship between us and each local exchange carrier is governed by a
negotiated resale agreement, we face risks in that the scope and availability of
some of the telephone services are primarily controlled by the local exchange
carrier. For example, in several major cities, such as Chicago and New York
City, flat rate (or unlimited) local calling plans are not available, making it
difficult to provide our local services in these markets for a fixed monthly
charge. The discontinuation of flat rate calling plans in markets in which we
operate may have an adverse impact on our ability to offer service. Further,
some local exchange carriers refuse to block directory assistance or other
usage-based charges. Such blocking mechanisms are crucial to the local services
we provide. Because customers purchasing our local service expect to pay a rate
that does not change each month, it is difficult, if not impossible, to collect
payments for calls for which charges are assessed on a per minute or per call
basis. Our inability to block all usage-based calls may impede future expansion
in such markets. Finally, some state commissions have held that voice mail is
not a "telecommunications service" and, therefore, local exchange carriers are
not required to resell this service pursuant to Section 251(c)(4) of the Act.
The issue of whether local exchange carriers must resell voice mail service is
currently the subject of a proceeding before the FCC. Without voice mail, we
cannot offer potential customers the same package of services local exchange
carriers offer.
Our ability to compete in the local services market is further
influenced by the local exchange carriers' efficient, accurate and fair
provision of the service to us and our customers. Currently, local exchange
carriers take anywhere from five days to two weeks to initiate service for a new
reseller customer. In many instances, additional delays are caused by the local
exchange carrier's improper processing of reseller orders. Further, several
local exchange carriers have disparate disconnection and suspension charges,
resulting in the reseller incurring a more costly charge to suspend service to
its end user customer than that of a similarly-situated local exchange carrier
customer. Recently, some local exchange carriers have begun imposing significant
deposit requirements on resellers, which if imposed on us, could restrict the
capital available to us for other uses. In addition, local exchange carriers in
some states are attempting to impose significant costs on resellers for
blocking, testing, and access to the local exchange carrier's operational
support systems, through which customer orders are placed. Such costs, delays
and varying treatment by the local exchange carrier could have a significant
impact on our earnings.
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SALES AND MARKETING
We primarily market and sell our product through mass media
advertising, including television, radio and print. We believe that our
marketing strategy has been effective in generating demand for our product. Our
call center in Clearwater, Florida generally takes 65,000 to 75,000 calls per
month from potential customers.
The vast majority of our customers are in the lower middle to low
income bracket. We believe that television advertisements are very effective
with our customer base. Therefore, our television advertisements account for
more than 90% of our advertising budget. Most of the television advertisements
appear between the hours of 9:00 a.m. and 5:00 p.m. and appear on local network
or independent stations. We attempt to advertise on television during daytime
talk shows, soap operas and sitcom reruns because of the high concentration of
persons within our targeted demographic base who watch these television shows.
A significant portion of our potential customer base is Hispanic.
Therefore, all advertisements are done in English and Spanish. Additionally, we
use different Hispanic dialects for advertisements appearing in south Florida,
California and the northeastern United States. We have a separate Spanish
speaking department to handle all Spanish sales and customer service questions.
Our television advertisements follow one of three formats;
informational, testimonial or humorous. The informational advertisement provides
the viewer with all of the necessary information about the product. These
advertisements seek to emphasize the following three key points of our product:
(1) we do not require a deposit; (2) we do not perform a credit check; and (3)
we do not require any form of identification. We run the informational
advertisements when we have just entered a market and need to educate potential
customers about our product. The testimonial advertisement is an endorsement by
actual customers. These customers talk about their good experiences with
obtaining telephone service with us. We typically run these advertisements four
to six weeks after we have entered the market. The humorous advertisements are
used four to six months after we have entered a market and are used to cause
potential customers to remember our name and product. In mature markets, all
three types of television advertisements are rotated throughout the day.
EMPLOYEES
As of December 1, 1999, we had 126 employees. None of our employees is
represented by a labor union, and we consider our relationship with our
employees to be good.
COMPETITION
The competition for customers with bad credit who have been
disconnected by their local exchange carrier is rapidly increasing. Competition
may affect our ability to increase our customer base and generate revenues. The
barriers to entry in the business are relatively low because the initial capital
investment required to enter our business is minimal. Therefore, there are a
large number of small, local businesses who resell local telephone service to
consumers with bad credit. These types of small businesses typically focus on a
single city or relatively compact geographic area. Although the geographic range
of these types of competitors is limited, they are fiercely competitive with us
in their fees for services and some of these companies have greater financial
resources than we. In addition, we face increasing competition from local
exchange carriers, such as Southwestern Bell, who have begun offering local
telephone service to their own customers who have been disconnected for
nonpayment. The local exchange carriers have far more resources than we do, and
will generally have lower marketing and operational costs, allowing them to
price their local telephone services at rates that are lower than the rates we
charge our customers.
PROPERTIES
Our principal executive office and operations center are located in the
Pinellas Park Square Shopping Center in Clearwater, Florida. We entered into a
lease agreement with Watch Holdings, LLC for Suites 104, 105, 118 and 119. The
total amount of square footage for all of the suites is approximately 11,300
square feet and the approximate monthly rental amount is $9,510. We also lease a
small office space in Sacramento, California. We have a lease with the Franklin
Business Center Association for an office approximately 1,150 square feet. The
approximate monthly rental amount is $860. These leases for these facilities
will expire at various times in year
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<PAGE> 34
2000. When these leases expire, we believe that suitable replacement space will
be available as required. We believe that our current facilities are adequate
for our expected needs over the next several years.
We have entered into an oral agreement with Nancy Turner Properties,
Inc. effective as of October 1, 1999 to lease building space located in Tampa,
Florida on a month-to-month basis. This facility will be used for additional
office space. The facility is approximately 1,000 square feet and the monthly
rental amount is $1,500.
LEGAL PROCEEDINGS
Consent Agreement with the State of Florida. The rescission offer is
being made pursuant to a Stipulation and Consent Agreement with Final Order
dated May 12, 1999 between the State of Florida, Department of Banking and
Finance, Tel Com Plus, Inc. (a Nevada corporation whose president was Charles
Polley, a promoter of the Company and its predecessor entities), Tel Com East,
Tel Com West, Tel Com Jacksonville and us, as successor in interest to Tel Com
East, Tel Com West and Tel Com Jacksonville. The Department conducted an
investigation into the activities of the parties to the Consent Agreement with
respect to their offering and sale of ownership units for the period beginning
February 1997 and ending as of the date of the Consent Agreement. As a result of
the Department's investigation, it determined, and the parties to the Consent
Agreement agreed, to the following:
- the ownership units of Tel Com East, Tel Com West and Tel Com
Jacksonville were securities as defined by the Florida statutes;
- the ownership units of Tel Com East, Tel Com West and Tel Com
Jacksonville were offered and sold in Florida through unregistered
third persons/entities in violation of Florida law;
- the ownership units of Tel Com East, Tel Com West and Tel Com
Jacksonville offered and sold in Florida were not registered for sale
in Florida in violation of Florida law; and
- none of these entities were registered to sell securities in Florida.
Tel Com East, Tel Com West, Tel Com Jacksonville and Tel Com Plus, Inc.
agreed to cease and desist any and all present and future violations of the
Florida Securities and Investor Protection Act. We agreed to abide by the
provisions of this Act now and in the future. In addition, the parties to the
Consent Agreement agreed to complete an offer of rescission in accordance with
the Florida Securities and Investor Protection Act on or before November 30,
1999 for the securities of Tel Com East, Tel Com West and Tel Com Jacksonville.
However, we were unable to complete the rescission offer by November 30, 1999.
On December 7, 1999, the State of Florida, Department of Banking and Finance,
notified us that we were in violation of the Consent Agreement and that it
intended to commence litigation against us in order to enforce the provisions
of the Consent Agreement. As of the date of this prospectus, the Department has
not commenced litigation against us. We believe that by filing and distributing
this prospectus in accordance with federal and state securities laws, we will
be in compliance with the provisions of the Consent Agreement.
Action for Injunctive Relief. On December 20, 1999, we filed a
complaint for injunctive relief in the circuit court of the thirteenth judicial
circuit in Hillsborough County, Florida. This complaint seeks to enjoin Stephen
Henderson, Ruben P. Ballis and Paul Gregory from improperly purporting to act as
directors of the Company. They were directors of the Company until December 15,
1999. On December 15, 1999, shareholders holding in excess of two-thirds of our
voting securities acted by written consent to remove Henderson, Ballis and
Gregory as directors. Notwithstanding their removal as directors, on December
17, 1999, they gave written notice of a special meeting of the board of
directors to be held on December 23, 1999. It is the Company's position that
they have no legal authority to convene any meeting of the Company's board of
directors and can take no valid legal action on behalf of the Company. No
hearing has been set in this matter and no assurances can be given as to the
outcome of the lawsuit.
Cease and Desist Orders. To the best of our knowledge, there exists the
following cease and desist orders which are either against us or related
parties:
- North Dakota. The Securities Commissioner of the State of
North Dakota issued a cease and desist order on January 29,
1998 against Tel Com Plus Miami, LLC, Tel Com East, Tel Com
Plus, Inc., Easy Cellular, Inc., Prime Equities Group, Inc.,
Capital Funds Administration, Inc., Applied Financial Group,
Wireless Connection, Inc., Lenny Bierstein, Neil Pinkus,
Howard W. Kratz, Richard Pollara, Ted Bender, Bruce Porter and
their officers, directors, agents and employees. In this
order, the Securities Commissioner stated that he had a
reasonable basis to believe that the above named persons had
engaged in, were engaging in, or were about to engage in,
acts, practices or transactions which are prohibited by the
North Dakota Corporation Code. The acts involved offering for
sale and selling unregistered securities to residents of North
Dakota and failing to register as dealers or salesmen under
the laws of North Dakota. Richard Pollara vigorously denies
any participation in the alleged acts and is actively
contesting this cease and desist order entered against him.
- Pennsylvania. The Pennsylvania Securities Commission issued a
summary order to cease and desist on June 23,1998 against Tel
Com West, Tel Com East, Tel Com Plus, Inc. Prime Equities
Group, Inc., Satellite Capital Group and David Allen. In this
order, the Securities Commissioner determined that units of
Tel Com West and Tel Com East were being offered for sale and
sold in violation of the laws of Pennsylvania.
- Florida. In connection with the Consent Agreement entered into
between the State of Florida, Department of Banking and
Finance, us and certain other parties, the Department issued a
cease and desist order. In connection with the Consent
Agreement, Tel Com Plus, Inc., Tel Com East, Tel Com
Jacksonville and Tel Com West agreed to cease and desist any
and all present and future
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violations of the Florida Securities and Investor Protection
Act and, in addition, we agreed to abide by the provision of
this Act.
- Illinois. The Illinois Securities Department issued an order
of prohibition against Tel Com Plus, Inc., Tel Com West and
Tel Com East on September 11, 1998. This order provided that
Tel Com Plus, by and through its officers, directors,
employees, agents, affiliates, successors, and assigns,
offered through a web page advertisement on the internet units
in Tel Com West and Tel Com East to residents of Illinois. Tel
Com Plus, Inc., Tel Com West and Tel Com East did not register
these units with the State of Illinois and therefore violated
certain provisions of the Illinois Securities Law of 1953.
- Wisconsin. The Commissioner of Securities of the State of
Wisconsin issued a summary order of prohibition against
Stephen Henderson, Raymond H. Beam, Lydia Banes, George
Holmes, Christopher Polley, David Morris, Howard Kratz and
Richard Inzer on December 22, 1998. This order provides that
during the period of April through June 1998, agents, on
behalf of the persons and entities named in this order,
offered to at least one person in Wisconsin units of ownership
in Tel Com East, which units were never registered for offer
and sale in Wisconsin and which agents were not licensed as
securities agents under the laws of Wisconsin. These actions
violated the securities laws of the State of Wisconsin. As a
result, the securities commissioner ordered that the named
persons and entities, their agents, servants, employees, and
every entity or person directly or indirectly controlled or
organized by or on his behalf, are prohibited from making or
causing to be made to any person or entity in Wisconsin any
further offers or sales of securities unless and until such
securities are registered under the securities laws of
Wisconsin.
SEC Complaint. The SEC brought an action in the federal district court
in the Middle District of Florida on May 12, 1999 against Tel Com East and Tel
Com West. The complaint alleges violation of Rule 10b-5 of the Securities and
Exchange Act of 1934, as amended, and fraud in the sale of their securities. As
of the date of this prospectus, we have not been named as a defendant in the
action; however, no assurance can be given that the SEC will not bring an action
against us as a successor entity to Tel Com East and Tel Com West. The outcome
of this litigation cannot be predicted. If we are named as a defendant and the
court does rule against us, we may be subject to severe civil penalties and
other remedies which will have a material adverse effect on our business and
financial condition.
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MANAGEMENT
The name, ages and positions of the directors and officers of the Company
at December 16, 1999 are as follows:
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Richard J. Pollara 45 President, Director
Bill D. Van Aken 47 Vice President, General Manager
Terrence G. Battle 39 Vice President
Maurice S. Franklin 39 Treasurer
Julie Graton 35 Secretary, Marketing Director
Sam Dean 66 Director
</TABLE>
Richard Pollara has served as President and as a director of the
Company since the Company's inception in November 1997. From April 1996 until
December 1997, Mr. Pollara was the President and Chief Executive Officer of Easy
Phone, Inc. and its predecessor entity, Easy Cellular, Inc. Easy Phone, Inc. was
a cellular and residential phone service company. From May 1994 until January
1997, Mr. Pollara served as President and Chief Executive Officer of Montebello
Finance, LLC, a limited liability company engaged in the rent-to-own business.
Mr. Pollara attended the University of Mississippi. Mr. Pollara is subject to a
cease and desist order issued by the State of North Dakota Securities Commission
on January 29, 1998. This order arose in connection with alleged offers to sell
and sales of investments contracts to residents of North Dakota which were not
registered with the North Dakota Securities Commission and which were not
offered or sold by registered dealers. Mr. Pollara vigorously denies any
participation in the alleged acts and is actively contesting this cease and
desist order entered against him.
Bill Van Aken has served as Vice President of the Company since October
11, 1999 and has served as the Company's General Manager since its inception in
November 1997. In addition, Mr. Van Aken served as the General Manager of the
one of the Company's predecessor entities since February 1997. From September
1994 until February 1997, Mr. Van Aken served as a Manager of Cellular, Inc.,
one of GTE's Mobilenet largest agents. Mr. Van Aken attended the University
of Iowa.
Terrence G. Battle has service as Vice President of the Company since
October 11, 1999 and has served as Director of Operations since the Company's
inception. He also served as Director of Operations for the Company's
predecessor entities. From July 1996 until June 1997, Mr. Battle was the Manager
of Easy Phone, Inc. From January 1994 until June 1997, Mr. Battle was an owner
of PBF, Inc., a paging service business.
Maurice S. Franklin has served as Treasurer of the Company since
October 11, 1999. Mr. Franklin was employed in sales by one of the Company's
predecessor entities from August 1997 until December 1997. From July 1996 until
July 1997 and from January 1998 to August 1998, Mr. Franklin served as General
Manager of Easy Phone, Inc., a residential and cellular phone service company.
Prior to July 1996, Mr. Franklin was an owner of PBF, Inc., a paging service
business.
Julie Graton has served as Secretary of the Company since October 11,
1999 and has served as Marketing Director of the Company since its inception.
Ms. Graton also served as Marketing Director of one of the Company's predecessor
entities. Ms. Graton was employed from November 1994 until July 1, 1996 by GTE
MobileNet where she serviced all their government accounts in Pinellas County,
Florida. From May 1994 until November 1994, Ms. Graton was the campaign manager
for a candidate for the state legislature of Florida. Prior to managing this
campaign, Ms. Graton worked for the Florida legislature as a legislative aide
for two state representatives. Ms. Graton and her former husband, Robert Richey,
filed for personal bankruptcy under Chapter 13 of the United States Bankruptcy
Code in July 1998. They were discharged in March 1999.
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Sam Dean has served as a director of the Company since October 11, 1999.
Mr. Dean is the owner and president of Dean Plumbing & Heating which he founded
in April 1965.
COMPENSATION OF EXECUTIVE OFFICERS
SUMMARY COMPENSATION TABLE
The following table contains information regarding all compensation paid
or accrued for each of the last two fiscal years for Richard J. Pollara, the
Company's President, Joseph Cillo, the Company's former Vice President and Bill
D. Van Aken, the Company's Vice President. No bonuses or other compensation were
paid to the persons listed below for the fiscal years 1997 and 1998.
<TABLE>
<CAPTION>
Annual Compensation
--------------------------------
Name and Principal Position Fiscal Year Salary
----------------------------------------------------------------
<S> <C> <C>
Richard J. Pollara.... 1998 $273,000
President 1997 $178,000
Joseph Cillo.......... 1998 $166,963
former Vice President 1997 ---
November 1997 to
October 1999
Bill D. Van Aken...... 1998 $146,084
Vice President 1997 $142,912
</TABLE>
CERTAIN TRANSACTIONS
In January 1997, Tel Com Plus Jacksonville, LLC purchased the assets of
Montebello Finance, LLC, a rent-to-own business, for $250,000. Montebello
Finance was owned in trust by the children of Richard Pollara and Robin
Caldwell. Richard Pollara had served as President and Chief Executive Officer of
Montebello Finance from May 1994 until January 1997.
In December 1997, Easy Phone, Inc. redeemed a substantial portion of the
shares of stock held by Richard Pollara in exchange for Easy Phone's interest in
Tel Com East, Tel Com West and Tel Com Jacksonville. Mr. Pollara was the
President and Chief Executive Officer of Easy Phone and was a substantial
shareholder of Easy Phone. Prior to this transaction, Easy Phone owned
approximately 38% of the outstanding units of Tel Com East, approximately 32.5%
of the outstanding units of Tel Com West and approximately 25% of the
outstanding units of Tel Com Jacksonville. Therefore, after the redemption of
Mr. Pollara's stock, Mr. Pollara was a direct shareholder of Tel Com East, Tel
Com West and Tel Com Jacksonville in the above percentages. The parties to this
transaction valued the transaction in excess of $170,000.
In September 1999, a settlement agreement was reached between Tel Com
East, Tel Com West, Richard Pollara, Joseph Cillo, Charles Polley, Easy Phone,
Inc. and us in connection with the proceeding styled Tel Com Plus West, LLC and
Tel Com Plus East, LLC, Plaintiffs v. Easy Phone, Inc. Defendant which was
pending in the United Stated District Court, Middle District of Florida. The
parties to this litigation settled this litigation on the following terms:
- The litigation was dismissed with prejudice;
- Each party to the litigation released the other party from any and
all claims which were or could have been asserted in the litigation;
34
<PAGE> 38
- The Company delivered to Easy Phone, Inc. its Easy Phone, Inc. stock
certificates;
- The lawsuit brought by Mr. Pollara, Robin Caldwell and Maurice
Franklin against Easy Phone, Inc., Lorrinda Bucchieri and others
pending in the State of California was dismissed with prejudice; and
- The Company agreed to indemnify Easy Phone, Inc. from any tax
liability of any kind to the States of Florida and California
incurred in connection with the use by Tel Com East, Tel Com West or
us of Easy Phone, Inc.'s public utility commission licenses in those
states.
The Company issued two promissory notes to Mr. Pollara dated November 22,
1999. These promissory notes memorialize the obligations of the Company arising
from joint venture agreements entered into between two predecessor entities of
the Company and Easy Cellular, Inc. Mr. Pollara succeeded to the rights of Easy
Cellular, Inc. under these joint venture agreements. One joint venture agreement
was entered into by Tel Com East and Easy Cellular, Inc. on February 28, 1997
whereby Tel Com East agreed to pay Easy Cellular, Inc. $400,000 from the
proceeds of the venture. This amount has not been paid to Mr. Pollara, as
successor in interest to Easy Cellular, Inc. Therefore, the Company, as a
successor in interest to Tel Com East, issued a promissory note dated as of
November 22, 1999 payable upon demand to Mr. Pollara in the principal amount of
$400,000 which shall bear interest at the rate of 8.5% per annum. The second
joint venture agreement was entered into by Tel Com West and Easy Cellular on
July 24, 1997 whereby Tel Com West agreed to pay Easy Cellular approximately
$60,000. This amount has not been paid to Mr. Pollara, as successor in interest
to Easy Cellular, Inc. Therefore, the Company, as a successor in interest to Tel
Com West, issued a promissory note dated as of November 22, 1999 payable upon
demand to Mr. Pollara in the principal amount of approximately $60,000 which
shall bear interest at the rate of 8.5% per annum. As of the date of this
prospectus, Mr. Pollara has not received any interest payment on the promissory
notes and does not have any present intent to demand payment of these two
promissory notes.
The Company is in arbitration proceedings with MCI Telecommunications
Corp. ("MCI") for nonpayment of phone service provided by MCI. We are disputing
the amount of the MCI's phone usage charge for the period during 1998. If the
arbitration proceeding concludes in a manner favorable to MCI, we may be
required to pay MCI approximately $264,000. As of the date of this prospectus,
we have reserved $25,000 for the possibility of an adverse outcome.
In 1999, Travelers Express Company, Inc. brought an action against us in
the Circuit Court of the County of Hillsborough, Florida alleging breach of a
buy-pay utility agreement. Travelers Express alleges that it is due
approximately $65,000. We have counterclaimed for unspecified and, as of the
date of this prospectus, undetermined damages arising out of the breach of this
agreement. Management intends to vigorously litigate this matter. It is not yet
possible to evaluate the likelihood of an unfavorable outcome, or provide an
estimate of the potential loss.
Charles Polley was a promoter of the Company and its predecessor entities.
He was the president of Tel Com Plus, Inc., which initially formed Tel Com
Jacksonville. Tel Com Plus, Inc. also formed Tel Com East and Tel Com West.
After the initial formation of these entities, Easy Cellular, Inc. became a
equity holder by contributing licenses to sell pre-paid telephone service to
these entities. Units of Tel Com Jacksonville, Tel Com East and Tel Com West
were sold to intermediaries, which in turn, sold the securities to investors in
unregistered offerings, without the knowledge or assistance of the Company's
present management. Neither Mr. Pollara nor any of the current officers or
directors of the Company were aware of the extent of the promotional efforts.
Mr. Polley, Tel Com East and Tel Com West have been named as defendants,
together with Physicians Guardian, Inc., in an action brought by the SEC on May
12, 1999 in the federal district court of the Middle District of Florida
alleging, among other things, the sale of unregistered securities in violation
of Section 5 of the Securities Act of 1933, as amended, and fraud in violation
of Section 17(a) and Section 10(b) of the Securities and Exchange Act. According
to the complaint filed in the district court, Mr. Polley is the alleged chief
executive officer of Physicians Guardian, Inc. and was instrumental in the
unlawful sale of the unregistered securities. The SEC has placed Physicians
Guardian, Inc. into receivership.
35
<PAGE> 39
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following tables set forth certain information as to the common stock
and Class A preferred stock beneficially owned as of December 16, 1999 by
- each of the Company's directors and executive officers;
- all directors and executive officers as a group; and
- each person known to us to be the beneficial owner of more than five
percent of the outstanding shares of capital stock of the Company.
Under the rules of the SEC, a person is deemed to be a beneficial owner of
a security if he or she has or shares the power to vote or to direct the voting
of such security, or the power to dispose or to direct the disposition of such
security. A person is also deemed to be a beneficial owner of any securities
which that person has the right to acquire within 60 days, as well as any
securities owned by such person's spouse, children or relatives living in the
same house. Unless otherwise indicated in a footnote, each person listed below
possesses sole voting and investment power with respect to the shares indicated
as beneficially owned by him or her.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
Name of Beneficial Owner Number of Shares Percentage
Ownership
- --------------------------------------------------------------------------------------------------
Common Class A Total
Stock Preferred Stock
- --------------------------------------------------------------------------------------------------
DIRECTORS & EXECUTIVE
OFFICERS
==================================================================================================
<S> <C> <C> <C> <C>
Richard J. Pollara (1) 1,641,600 6,566,400 8,208,000 17.35%
- --------------------------------------------------------------------------------------------------
Bill Van Aken (2) 176,000 704,000 880,000 1.86%
- --------------------------------------------------------------------------------------------------
Terrence Battle 88,000 352,000 440,000 *
- --------------------------------------------------------------------------------------------------
Julie Graton 88,000 352,000 440,000 *
- --------------------------------------------------------------------------------------------------
Maurice Franklin 88,000 352,000 440,000 *
- --------------------------------------------------------------------------------------------------
Sam Dean 24,000 96,000 120,000 *
- --------------------------------------------------------------------------------------------------
ALL DIRECTORS AND EXECUTIVE
OFFICE AS A GROUP 2,105,600 8,422,400 10,528,000 22.3%
(6 PERSONS)
==================================================================================================
</TABLE>
36
<PAGE> 40
<TABLE>
<CAPTION>
==================================================================================================
BENEFICIAL OWNERS OF MORE THAN 5%
==================================================================================================
<S> <C> <C> <C> <C>
Richard J. Pollara (1) 1,641,600 6,566,400 8,208,000 17.4%
- --------------------------------------------------------------------------------------------------
GIRI Holdings 840,000 3,360,000 4,200,000 8.88%
- --------------------------------------------------------------------------------------------------
Intercontinental Brokers, Inc. 840,000 3,360,000 4,200,000 8.88%
- --------------------------------------------------------------------------------------------------
Prime Equities Group, Inc. 600,000 2,400,000 3,000,000 6.34%
- --------------------------------------------------------------------------------------------------
</TABLE>
* Less than 1% ownership.
(1) These shares are held by Quantum Law, Inc., a corporation which is
wholly-owned in trust by the two minor children of Richard Pollara. Mr. Pollara
is the trustee of this trust.
(2) 156,000 of these shares are held by Titan Capital Corporation, which is a
corporation owned and controlled by Bill Van Aken.
37
<PAGE> 41
DESCRIPTION OF CAPITAL STOCK
GENERAL
Our authorized capital stock consists of 300,000,000 shares of capital
stock, including 100,000,000 shares of common stock, no par value per share, and
200,000,000 shares of preferred stock, $0.10 par value per share. 40,000,000
shares of the preferred stock has been designated Class A preferred stock. As
of September 30, 1999, 10,819,674 shares of common stock were outstanding and
36,461,749 shares of Class A preferred stock were outstanding. Our Amended and
Restated Articles of Incorporation and Bylaws are included as exhibits to the
registration statement of which this prospectus is a part. Each of these
documents contains more specific information regarding shareholder rights. The
following discussion sets forth the material features of our capital stock.
COMMON STOCK
The holders of common stock are entitled to one vote for each share held
of record on all matters submitted to a vote of shareholders. The holders of
common stock are entitled to receive ratably such dividends, if any, as may be
declared from time to time by the board of directors out of funds legally
available therefor. This entitlement to dividends is subject to preferences of
the Class A preferred stock and of any outstanding shares of any other class of
preferred stock that may be issued with dividend preferences. In the event of
our liquidation, dissolution or winding up, the holders of common stock are
entitled to share ratably in all assets remaining after payment of liabilities
and liquidation preferences on the shares of Class A preferred stock and on any
outstanding shares of any other class of preferred stock that may be issued that
have liquidation preferences. Holders of common stock have no preemptive rights
or rights to convert their common stock into any other securities. There are no
redemption or sinking fund provisions applicable to the common stock. All
outstanding shares of common stock are fully paid and non-assessable.
PREFERRED STOCK
Our board of directors has the authority, without action by the
shareholders, to designate and issue up to l60,000,000 shares of preferred stock
in one or more classes. Our board also has the authority to designate the
dividend rate, voting rights and other rights, preferences and restrictions of
each class, any or all of which may exceed those of the common stock.
One of the effects of undesignated preferred stock may be to enable the
board of directors to discourage an attempt to obtain control of us via a tender
offer, proxy contest, merger or other means. Another effect is to protect the
continuity of management. The issuance of shares of preferred stock may
adversely affect the rights of holders of common stock. For example, preferred
stock we issue may rank prior to the common stock as to dividend rights,
liquidation preferences or both. The preferred stock also may have full or
limited voting rights and may be convertible into shares of common stock.
Accordingly, the issuance of shares of preferred stock may discourage bids for
common stock.
CLASS A PREFERRED STOCK
The holders of Class A preferred stock have voting rights identical to the
holders of shares of Common Stock and are entitled to vote with the holders of
shares of Common Stock as one voting class. The holders of Class A preferred
stock are entitled to receive ratably dividends, if any, as may be declared from
time to time by the board of directors out of funds legally available therefor
in preference of any dividends paid on shares of the common stock. In the event
of our liquidation, dissolution or winding up, the holders of Class A preferred
stock are entitled to share ratably in all assets remaining after the payment of
liabilities. The right of the holders of Class A preferred stock upon our
liquidation, dissolution or winding up is in preference to the rights of the
holders of the common stock. Holders of Class A preferred stock have no
preemptive rights or rights to convert their Class A preferred stock into any
other securities. There are no redemption or sinking fund provisions applicable
to the Class A preferred stock. All outstanding shares of Class A preferred
stock are fully paid and non-assessable.
38
<PAGE> 42
EXPERTS
Our financial statements in this prospectus and elsewhere in this
registration statement, to the extent and for the periods indicated in their
reports, have been audited by Pender Newkirk & Company, CPAs and are included
herein in reliance upon its authority as an expert in accounting and auditing in
giving said reports.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
We have filed with the SEC a registration statement on Form S-1 under the
Securities Act with respect to this rescission offer. While the prospectus,
which forms a part of the registration statement, contains the information that
we believe is material relative to the rescission offer, it does not contain all
of the information set forth in the registration statement. Statements contained
in this prospectus as to the contents of any document are not necessarily
complete, and, in each instance, reference is made to the copy of the contract
or document filed as an exhibit to the registration statement. Copies of the
registration statement may be examined without charge at the Public Reference
Section of the SEC, 450 Fifth Street, N.W. Room 1024, Washington, D.C. 20549.
Copies of all or any portion of the registration statement can be obtained from
the Public Reference Section of the SEC, 450 Fifth Street, N.W., Washington,
D.C. 20549, upon payment of the fees prescribed by the SEC. The SEC maintains a
World Wide Web site that contains registration statements, reports, proxy and
information statements and other information regarding registrants (including
us) that file electronically with the SEC. The address of such site is
http://www.sec.gov.
39
<PAGE> 43
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Basis of Presentation .........................................................................................F-2
PRO FORMA FINANCIAL STATEMENTS:
Statement of Operations for the nine months ended September 30, 1998 (unaudited)...........................F-3
Statement of Operations for the year ended December 31, 1998 (unaudited)...................................F-4
Statement of Operations for the year ended December 31, 1997 (unaudited)...................................F-5
UNITED STATES TELECOMMUNICATIONS, INC:
Independent Auditors' Report...............................................................................F-6
Balance Sheets as of September 30, 1999 (unaudited), December 31, 1998
and December 31, 1997..................................................................................F-7
Statements of Operations for the for the nine months ended September 30, 1999 (unaudited)
and the year ended December 31, 1998 and the period from inception (November 17, 1997)
to December 31, 1997...................................................................................F-9
Statements of Changes in Stockholders Deficit for the nine months ended September 30, 1999
(unaudited) and the year ended December 31, 1998 and the period from inception
(November 17, 1997) to December 31, 1997...............................................................F-10
Statements of Cash Flows for the nine months ended September 30, 1999 (unaudited)
and the year ended December 31, 1998 and the period from inception (November 17, 1997)
to December 31, 1997...................................................................................F-11
Notes to Financial Statements..............................................................................F-13
COMBINED FINANCIAL STATEMENTS OF TEL COM PLUS EAST, L.L.C., TEL COM PLUS WEST,
L.L.C., AND TEL COM PLUS JACKSONVILLE, L.L.C.:
Independent Auditors' Report...............................................................................F-24
Balance Sheet as of September 30, 1998 and December 31, 1997...............................................F-25
Statements of Operations for the period ending September 30, 1998 and the period
from inception to December 31, 1997....................................................................F-26
Statements of Changes in Members Capital for the period ending September 30, 1998
and the period from inception to December 31, 1997.....................................................F-27
Statements of Cash Flows for the period ending September 30, 1998 and the period from
inception to December 31, 1997.........................................................................F-29
Notes to Financial Statements..............................................................................F-31
</TABLE>
F-1
<PAGE> 44
UNITED STATES TELECOMMUNICATIONS, INC.
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
BASIS OF PRESENTATION
Effective October 1, 1998, United States Telecommunications, Inc. ("UST")
completed an asset acquisition of Tel Com Plus East L.L.C. ("Tel Com East"), Tel
Com Plus West, L.L.C. ("Tel Com West") and Tel Com Plus Jacksonville,
L.L.C.("Tel Com Jacksonville"). The historical financial statements prior to the
acquisition transactions are those of UST.
For accounting purposes, the purchase by UST of the assets and liabilities of
Tel Com East, Tel Com West and Tel Com Jacksonville (the "Acquisition") is
regarded as an acquisition of all of the assets and liabilities of Tel Com East,
Tel Com West and Tel Com Jacksonville and is accounted for using the purchase
method of accounting. See Note D to the financial statements which includes a
more complete discussion of the acquisitions.
The unaudited pro forma statement of operations of UST for the years ended
December 31, 1997 and December 31, 1998 and for the nine months ended September
30, 1998 presents the financial condition of UST as if the Acquisition had
occurred on January 1, 1997.
The unaudited pro forma financial information is not necessarily indicative of
the results of operations that would have been reported had the Acquisition
actually been accounted for on the date it occurred, September 30,1998, nor is
it necessarily indicative of the future results of the consolidated entities.
The unaudited consolidated pro forma financial statements should be read in
conjunction with the historical financial statements of the Company.
F-2
<PAGE> 45
UNITED STATES TELECOMMUNICATIONS, INC.
PRO FORMA STATEMENT OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
ACQUISITION
HISTORICAL(1) ENTITIES(2) ADJUSTMENTS TOTAL
------------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
Sales $1,245,813 $11,270,247 $ -- $ 12,516,060
Cost of sales 574,897 3,436,453 -- 4,011,350
---------- ------------ -- ------------
Gross profit 670,916 7,833,794 -- 8,504,710
Advertising expenses 117 1,662,704 -- 1,662,821
General and administrative expenses 1,030,799 8,597,426 -- 9,628,225
Impairment loss -- 126,721 -- 126,721
Loss on promoter receivable write off -- 18,830,888 -- 18,830,888
---------- ------------ -------- ------------
Operating (loss) (360,000) (21,383,945) -- (21,743,945)
Interest expense (333) (43,329) -- (43,662)
---------- ------------ -- ------------
Net loss (360,333) $(21,427,274) $ -- $(21,787,607)
========== ============ ========== ============
Per share date:
Basic loss per share $ (2.39)
============
Diluted loss per share $ (2.39)
============
Weighted average number of common shares:
Basic common shares 9,121,708
Diluted common shares 9,121,708
============
</TABLE>
(1) Reflects the operations of United States Telecommunications, Inc. for the
nine months ended September 30, 1998.
(2) Reflects the operations of Tel Com East, Tel Com West and Tel Com
Jacksonville for the nine months ended September 30, 1998.
F-3
<PAGE> 46
UNITED STATES TELECOMMUNICATIONS, INC.
PRO FORMA STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
Acquisition
Historical(1) Entities (2) Adjustments (3) Total
--------------- -------------- ----------------- -------
<S> <C> <C> <C> <C>
Sales $ 5,347,642 $ 11,270,247 $ $ 16,617,889
Cost of sales 2,317,945 3,436,453 5,754,398
------------ ------------ -------------- ------------
Gross profit 3,029,697 7,833,794 10,863,491
Advertising expenses 430,703 1,662,704 2,093,407
General and administrative expenses 5,017,832 8,597,426 (126,721) 13,488,537
Impairment loss 31,674,670 126,721 (31,674,670) 126,721
Loss on promoter receivable write off 748,459 18,830,888 19,579,347
------------ ------------ -------------- ------------
Operating (loss) (34,841,967) (21,383,945) 31,801,391 (24,424,521)
Interest expense (13,860) (43,329) (57,189)
------------ ------------ -------------- ------------
Net loss $(34,855,827) $(21,427,274) $ 31,801,391 $(24,481,710)
============ ============ ============== ============
Per share data:
Basic loss per share $ (2.68)
============
Diluted loss per share $ (2.68)
============
Weighted average number of
common shares:
Basic common shares 9,138,928
============
Diluted common shares 9,138,928
============
</TABLE>
(1) Reflects the operations of United States Telecommunications, Inc. for the
year ended December 31, 1998.
(2) Reflects the operations of Tel Com East, Tel Com West and Tel Com
Jacksonville for the nine months ended September 30, 1998.
(3) Reflects the reduction of the acquired goodwill and customer base impairment
write off and the amortization of goodwill and customer base resulting from
the acquisition.
F-4
<PAGE> 47
UNITED STATES TELECOMMUNICATIONS, INC.
PRO FORMA STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
Acquisition
Historical(1) Entities (2) Total
------------- ------------ ------------
<S> <C> <C> <C>
Sales $ 3,558,018 $ 3,558,018
Cost of sales $ 2,098,000 2,098,000
------------ ------------ ------------
Gross profit 1,460,018 1,460,018
Advertising expenses 1,455,009 1,455,009
General and administrative expenses $ 250 3,925,312 3,925,562
Impairment loss 200,356 200,356
Loss on promoter receivable write off 6,453,979 6,453,979
------------ ------------ ------------
Operating (loss) (250) (10,574,638) (10,574,888)
Interest expense (57,047) (57,047)
------------ ------------ ------------
Net loss $ (250) $(10,631,685) $(10,631,935)
============ ============ ============
</TABLE>
(1) Reflects the operations of United States Telecommunications, Inc. for the
period from inception (November 17, 1997) to December 31, 1997.
(2) Reflects the operations of Tel Com East, Tel Com West and Tel Com
Jacksonville for the period from inception to December 31, 1997.
F-5
<PAGE> 48
(PNCCPAs LOGO)
Independent Auditors' Report
Board of Directors
United States Telecommunications, Inc.
Clearwater, Florida
We have audited the accompanying balance sheets of United States
Telecommunications, Inc. as of December 31, 1998 and 1997 and the related
statements of operations, changes in stockholders' deficit, and cash flows for
the year and period then ended. These financial statements are the
responsibility of the management of United States Telecommunications, Inc. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. These standards require that we plan and perform the audits 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 United States
Telecommunications, Inc. as of December 31, 1998 and 1997 and the results of its
operations and its cash flows for the year and period then ended in conformity
with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As further discussed in Note B to the
financial statements, the Company incurred an operating loss of approximately
$34,900,000 during the year ended December 31, 1998. In addition, the Company
had negative working capital of approximately $3,400,000 at December 31, 1998.
These conditions combined with the rescission obligation discussed in Note J,
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.
Certified Public Accountants
Tampa, Florida
December 7, 1999
F-6
<PAGE> 49
UNITED STATES TELECOMMUNICATIONS, INC.
BALANCE SHEET
<TABLE>
<CAPTION>
September 30,
(unaudited) December 31,
------------- ------------------------------
1999 1998 1997
------------- ---------- ----------
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash -- $ 627,854 --
Accounts receivable, net allowance for doubtful
accounts of $1,114,170, $2,638,331, and $0
at 1999, 1998, and 1997, respectively $1,586,405 1,015,235 --
Agent receivables 173,081 132,534 --
Prepaid expenses and other 4,583 1,400 --
---------- ---------- ----------
TOTAL CURRENT ASSETS 1,764,069 1,777,023 --
---------- ---------- ----------
Property and equipment, net of accumulated depreciation of
$222,575, $47,732, and $0 449,398 453,530 --
OTHER ASSETS
Licenses, net of accumulated amortization of $12,985,
$5,108, and $0 at 1999, 1998, and 1997, respectively 164,004 137,633 --
Software, net of amortization of $162,163, $57,353, and
$0 at 1999, 1998, and 1997, respectively 350,272 353,351 --
Goodwill, net of amortization of $190,082, $47,520, and
$0 at 1999, 1998, and 1997, respectively 2,661,142 2,803,703 --
Customer base, net of amortization of $316,803, $79,201,
and $0 at 1999, 1998, and 1997, respectively 633,605 871,208 --
Deposits 226,754 204,541 --
Other assets 41,733 28,000 --
---------- ---------- ----------
TOTAL OTHER ASSETS 4,077,510 4,398,436 --
---------- ---------- ----------
TOTAL ASSETS $6,290,977 $6,628,989 --
========== ========== ==========
</TABLE>
Read the accompanying Independent Certified Public Accountants Report.
The accompanying notes are an integral part of these financial statements.
F-7
<PAGE> 50
UNITED STATES TELECOMMUNICATIONS, INC.
BALANCE SHEET
<TABLE>
<CAPTION>
September 30,
(unaudited) December 31,
------------ --------------------------------
1999 1998 1997
------------ ------------ -------------
<S> <C> <C> <C>
LIABILITIES AND SHAREHOLDERS' DEFICIT
CURRENT LIABILITIES
Accounts payable $ 250,107 $ 90,800 --
Accrued liabilities 466,894 305,819 $ 250
Accrued carrier costs 1,712,418 2,112,027 --
Accrued sales tax 2,446,763 1,861,792 --
Unearned revenue 243,205 136,105 --
Notes payable and obligations - related party 609,003 609,003 --
Line of credit 43,805 50,151 --
------------ ------------ -------------
TOTAL CURRENT LIABILITIES 5,772,195 5,165,697 250
------------ ------------ -------------
LONG TERM LIABILITIES
Unit recission obligation 29,677,218 30,032,642 --
Rescission accrued interest 4,469,417 2,335,095 --
------------ ------------ -------------
TOTAL LONG TERM LIABILITIES 34,146,635 32,367,737
------------ ------------ -------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' DEFICIT
Preferred stock; $0.10 par value; 200,000,000 shares authorized;
36,461,749; 36,461,749; 0 shares issued and outstanding at
1999, 1998, and 1997, respectively; outstanding shares
subject to the recission 16,519,349 1,572,951 1,572,951 --
Common stock; no par value; 100,000,000 shares authorized;
10,819,674; 9,555,244; 0 shares issued and outstanding at
1999, 1998, and 1997, respectively; outstanding shares
subject to the recission 4,169,644 -- -- --
Additional paid in capital 4,213,496 2,378,681 --
Accumulated Deficit (39,414,300) (34,856,077) (250)
------------ ------------ -------------
TOTAL STOCKHOLDERS' DEFICIT (33,627,853) (30,904,445) (250)
------------ ------------ -------------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 6,290,977 $ 6,628,989 $ --
============ ============ =============
</TABLE>
Read the accompanying Independent Certified Public Accountants Report.
The accompanying notes are an integral part of these financial statements.
F-8
<PAGE> 51
UNITED STATES TELECOMMUNICATIONS, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Nine Months Ended Periods Ended
September 30, December 31,
---------------------------------- -----------------------------------
1999 1998 1998 1997
(unaudited) (unaudited)
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Sales $ 12,232,122 $ 1,245,813 $ 5,347,642 $ --
Cost of sales 5,579,939 574,897 2,317,945 --
------------ ------------ ------------ ------------
GROSS PROFIT 6,652,183 670,916 3,029,697 --
Advertising expenses 1,144,515 117 430,703 --
General and administrative expenses 9,203,713 1,030,799 5,017,832 (250)
Impairment loss -- -- 31,674,670 --
Loss on promoter receivable write off 2,134,322 -- 748,459 --
------------ ------------ ------------ ------------
OPERATING (LOSS) (5,830,367) (360,000) (34,841,967) (250)
------------ ------------ ------------ ------------
Other income (expenses):
Interest expense
(43,598) (333) (13,860) --
Gain from easy phone settlement 1,315,742 -- -- --
------------ ------------ ------------ ------------
TOTAL OTHER INCOME (EXPENSES) 1,272,144 -- (13,860) --
NET LOSS $ (4,558,223) $ (360,333) $(34,855,827) $ (250)
============ ============ ============ ============
Per share data:
Basic loss per share $ (0.45) $ (0.07) $ (5.68) $ --
============ ============ ============ ============
Diluted loss per share $ (0.45) $ (0.07) $ (5.68) $ --
============ ============ ============ ============
Weighted average number of common shares:
Basic common shares 10,236,796 5,115,114 6,140,532 --
============ ============ ============ ============
Diluted common shares 10,236,796 5,115,114 6,140,532 --
============ ============ ============ ============
</TABLE>
Read the accompanying Independent Certified Public Accountants Report.
The accompanying notes are an integral part of these financial statements.
F-9
<PAGE> 52
UNITED STATES TELECOMMUNICATIONS, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS DEFICIT
NINE MONTHS ENDED SEPTEMBER 30, 1999 (UNAUDITED)
AND YEAR ENDED DECEMBER 31, 1998 AND
PERIOD FROM INCEPTION (NOVEMBER 17, 1997) TO DECEMBER 31, 1997
<TABLE>
<CAPTION>
Preferred Common Additional
------------------------ ---------------------- Paid In Accumulated
Shares Stock Shares Stock Capital Deficit Total
---------- ----------- ---------- --------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Inception, November 17, 1997 $ $ $ $ $
Net loss (250) (250)
---------- ----------- ---------- --------- ---------- ------------ ------------
Balance at December 31, 1997 (250) (250)
Shares issued to founders 18,102,400 4,525,600
Shares issued to employees
for services 1,840,000 460,000
Shares issued for cash 400,000 150,000 150,000
Acquisitions Transactions of
Tel Com West 9,543,810 954,381 2,375,267 2,228,681 3,183,062
Acquisitions Transactions of
Tel Com East 5,726,057 536,957 1,482,005 536,957
Acquisitions Transactions of
Tel Com Jacksonville 1,249,482 81,613 312,372 81,613
Net loss (34,855,827) (34,855,827)
---------- ----------- ----------- --------- ---------- ------------ ------------
Balance at December 31, 1998 36,461,749 1,572,951 9,555,244 2,378,681 (34,856,077) (30,904,445)
Shares issued for cash
(unaudited) 850,000 600,000 600,000
Private placement memorandum
net of offering costs of
approximately $10,000
(unaudited) 414,430 1,234,815 1,234,815
Net loss (unaudited) (4,558,223) (4,558,223)
---------- ----------- ---------- --------- ---------- ------------ ------------
Balance at September 30,
1999 (unaudited) 36,461,749 $ 1,572,951 10,819,674 $4,213,496 $(39,414,300) $(33,627,853)
========== =========== ========== ========= ========== ============ ============
</TABLE>
Read the accompanying Independent Certified Public Accountants Report.
The accompanying notes are an integral part of these financial statements.
F-10
<PAGE> 53
UNITED STATES TELECOMMUNICATIONS, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Nine Months Ended Periods Ended
September 30 December 31
---------------------------- -----------------------------
1999 1998
(unaudited) (unaudited) 1998 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss $ (4,558,223) $ (360,333) $(34,855,827) $ (250)
Adjustments to reconcile net loss to net cash (used)
by operating activities
Depreciation and amortization 674,811 20,000 229,797 --
Loss on promoter receivable 2,134,322 -- 748,459 --
Impairment loss -- -- 31,674,670 --
Provision for doubtful accounts receivable 1,798,769 671,397 1,953,860 --
Gain from Easy Cellular settlement (1,315,742) -- -- --
Changes in operating assets and liabilities:
(Increases) decreases in:
Accounts receivables and agent receivables (2,410,486) (867,206) (2,411,164) --
Deposits and other assets (39,129) (20,000) (201,500) --
Licenses (34,248) (107,921) (142,741) --
Increases (decreases) in:
Accounts payable 159,307 750 58,355 250
Accrued liabilities 160,825 15,967 9,969 --
Accrued carrier costs 916,382 262,362 796,035 --
Accrued taxes 584,971 17,615 504,632 --
Unearned revenues 107,100 -- 136,105 --
------------ ------------ ------------ ------------
Total adjustments to reconcile net loss to net
cash used by operating activities 2,736,882 (7,036) 33,356,477 250
------------ ------------ ------------ ------------
NET CASH (USED) BY OPERATING ACTIVITIES (1,821,341) (367,369) (1,499,350) --
------------ ------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Cash resulting from the acquisition -- -- 296,326 --
Payable to Tel Com East, Tel Com West and Tel Com
Jacksonville -- 1,406,738 1,406,738 --
Purchase of software (108,847) (175,771) (365,647) --
Purchases of property and equipment (170,711) (58,383) (125,237) --
------------ ------------ ------------ ------------
NET CASH PROVIDED (USED) BY INVESTING
ACTIVITIES (279,558) 1,172,584 1,212,180 --
------------ ------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net cash provided (payments) under line of credit (6,345) -- 50,151 --
Principal payments on note payable - related -- -- (41,355) --
Cash received from the issuance of a note payable -- 150,000 150,000 --
Payments related to the Jacksonville recission (355,425) -- -- --
Payments on note receivable -- -- 606,228
Cash received from issuance of common stock for cash 600,000 -- 150,000 --
Cash received from issuance of common stock for cash
from the private placement memorandum 1,234,815 -- -- --
------------ ------------ ------------ ------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 1,473,045 150,000 915,024 --
------------ ------------ ------------ ------------
NET INCREASE (DECREASE) IN CASH $ (627,854) $ 955,215 $ 627,854 $ --
------------ ------------ ------------ ------------
CASH AT BEGINNING OF PERIOD $ 627,854 -- -- --
============
CASH AT END OF PERIOD $ -- $ 955,215 $ 627,854 $ --
============ ============ ============ ============
</TABLE>
Read the accompanying Independent Certified Public Accountants Report.
The accompanying notes are an integral part of these financial statements.
F-11
<PAGE> 54
UNITED STATES TELECOMMUNICATIONS, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Nine Months Ended Periods Ended
September 30 December 31
------------------------ -------------------------
1999 1998
(unaudited) (unaudited) 1998 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
SUPPLEMENTAL DISCLOSURES OF NON-CASH
INVESTING ACTIVITIES
On September 30, 1998 the Company acquired the
asset of Tel Com East, Tel Com Jacksonville and Tel
Com West (See Note D)
Fair value of assets acquired $ -- $ -- $ 3,446,164 $ --
----------- ----------- ----------- -----------
Net liabilities assumed $ -- $ -- $35,120,834 $ --
----------- ----------- ----------- -----------
Fair value of common stock issued $ -- $ -- $ 3,801,632 $ --
----------- ----------- ----------- -----------
SUPPLEMENTAL DISCLOSURES OF NON-CASH
FINANCING ACTIVITIES
Issuance of stock for acquisitions of Tel Com East,
Tel Com Jacksonville and Tel Com West $ -- $ -- $ 3,801,632 $ --
----------- ----------- ----------- -----------
Recession obligation interest $ 2,134,322 $ -- $ 748,459 $ --
----------- ----------- ----------- -----------
SUPPLEMENTAL CASH FLOW INFORMATION
Interest paid $ 3,089 $ -- $ 315 $ --
----------- ----------- ----------- -----------
</TABLE>
Read the accompanying Independent Certified Public Accountants Report.
The accompanying notes are an integral part of these financial statements.
F-12
<PAGE> 55
UNITED STATES TELECOMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE A - NATURE OF OPERATIONS
United States Telecommunications, Inc. ("UST" or the "Company"), was
incorporated on November 19, 1997 under the laws of the State of Florida and
began operations during February 1998. The Company is a reseller of local
telephone services to consumers with bad credit throughout the United States.
The Company's business could be significantly affected by regulatory and
legislative developments. Such effects could include increased competition and,
as a result, decreased revenues.
On September 30, 1998 (effective as of October 1, 1998) UST purchased the assets
and assumed liabilities of Tel Com Plus Jacksonville, L.L.C. ("Tel Com
Jacksonville") Tel Com Plus East, L.L.C. ("Tel Com East") and Tel Com Plus West,
L.L.C. ("Tel Com West") In connection with the acquisition, unit holders of Tel
Com Jacksonville, Tel Com East and Tel Com West received shares of common stock
and Class A preferred stock of UST. (See Note D).
Tel Com Florida, L.L.C. which changed its name to Tel Com Plus Jacksonville,
L.L.C. on February 28, 1997 was formed on February 6, 1997. Tel Com Plus Miami
L.L.C. ("TCM"), which changed its name to Tel Com East on April 9,1998, was
formed on April 25,1997. Tel Com Plus California, L.L.C. ("TCC"), which changed
its name to Tel Com Plus West (" Tel Com West") on April 9,1998, was formed on
July 28,1997.
NOTE B - GOING CONCERN UNCERTAINTY
As indicated in the accompanying financial statements, the Company incurred a
net loss of $34,855,827 during the year ended December 31, 1998. At December 31,
1998 the Company had negative working capital of $3,388,674 and negative equity
of $30,904,445. Additionally the Company has entered into a Stipulation and
Consent Agreement with Final Order dated May 12, 1999 with the State of Florida,
Department of Banking and Finance whereby the Company agreed to complete an
offer of rescission with respect to securities at Tel Com East, Tel Com West,
and Tel Com Jacksonville sold in violation of federal and state securities laws.
The Department of Banking and Finance for the State of Florida notified the
Company on December 7, 1999, that the Company was in violation of the Consent
Agreement. Further, the Department of Banking and Finance indicated that action
will be taken against the Company to enforce compliance with the Consent. The
Company has recorded an approximate contingent liability of $30,000,000 plus
interest thereon in anticipation of a payments related to the recission
offering. These factors, among others, raise substantial doubt as to the
Company's ability to continue as a going concern.
Management believes three major steps are important for the Company's future.
- - Final settlement of the alleged federal and state violations of the
securities laws, which have drained the Company of time and resources;
- - Securing new operating licenses and territories; and
- - Securing additional capital to fund future expansion.
Management believes, based on the three major steps outlined above, the
Company's operating losses could be reduced, and to the extent the Company's
business strategy is realized, the Company's operating losses could be
eliminated.
An appropriate liquidity of the Company is also based on the three major steps
outlined above. The potential liability of the Company under the rescission
offer is approximately $30,000,000 plus interest. If the actual amount of
liability of this recission offer exceeds $100,000, then the amount due plus
interest will be paid over time. Management believes making payments over a
period of time in annual installments will ease the financial burden imposed by
the recission offer. However, if a significant number of participants accept
this recission offer, the likelihood of repayment decreases.
Read the accompanying Independent Certified Public Accountants Report.
F-13
<PAGE> 56
UNITED STATES TELECOMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE B - GOING CONCERN UNCERTAINTY - continued
During 1999, the Company offered a private placement of common stock and has
received net proceeds of approximately $1,234,815. (See Note M). The Company
plans to obtain additional funding through borrowings and sale of securities.
However, no assurance can be given that the Company will be able to obtain
additional funding.
The financial statements do not include any adjustments to reflect the possible
future effects on the recoverability and classification of assets or the amounts
or classification of liabilities which may result from the possible inability of
the Company to continue as a going concern.
NOTE C - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Unaudited Condensed Interim Financial Statements
The condensed consolidated financial statements as of September 30, 1999 and for
the nine months ended September 30, 1999 and 1998 are unaudited. In the opinion
of management, the unaudited financial statements have been prepared on the same
basis as the audited financial statements and include all adjustments,
consisting of normal recurring adjustments, necessary for a fair presentation of
the financial position and the results of operations as of such date and for
such periods. Results of interim periods are not necessarily indicative of the
results to be expected for the entire fiscal year.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Cash and Cash Equivalent
For purposes of the statement of cash flows, cash equivalents include time
deposits, certificates of deposits, and all highly liquid debt instruments with
original maturities of three months or less when purchased.
Accounts Receivables
Accounts receivable occur solely from sales of telephone services. Management
reserves for all receivable balances that have not been collected within 60
days. Accounts over 90 days are written off. Management determines the reserve
based upon reviews of individual accounts, recent loss experience, current
economic conditions and other pertinent factors. Allowances for uncollectible
billed services are adjusted monthly.
Agent Receivables
The Company has entered into agreements with various agents to receive payments
for phone services. The agents are typically check cashing stores, pawnshops,
rent-to-own stores and convenience stores. At the time of customer payment to
the agent, the Company transfers the receivables from accounts receivable to
agent receivable. At the time of agent collection, a commission obligation to
the agent is recorded.
Read the accompanying Independent Certified Public Accountants Report.
F-14
<PAGE> 57
UNITED STATES TELECOMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE C - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued
Asset Impairment
When the Company has long-lived assets, which have a possible impairment
indicator, the Company estimates the future cash flows from the operation of
these assets. If the estimated cash flows recoup the recorded value of the
assets, they remain on the books at that value. If the net recorded value cannot
be recovered, the assets are written down to their market value if lower than
the recorded value.
Property and Equipment
Property and equipment are stated at cost. The Company provides for depreciation
on the straight-line method over the estimated useful lives of the related
assets. Assets held under leasehold improvements are amortized using the
straight-line method over the life of the lease or life of the improvement,
whichever is less. Major classes of property and equipment and their related
lives are as follows:
<TABLE>
<CAPTION>
Life in
Major Class Years
- ---------------- -------
<S> <C>
Leasehold improvements 3-5
Furniture, fixtures and equipment 5
Computer equipment 3
Equipment 5
</TABLE>
Maintenance and repairs are expensed as incurred. Replacements and betterments
are capitalized.
Capitalized License Costs
The Company must obtain a license from each state's public utility commission in
which it intends to operate. The requirements for these certificates vary by
state, but generally include a demonstration by the Company that it has adequate
managerial and technical qualifications to provide the services it proposes. In
addition, the Company is required to file a tariff with each state's public
utility commission in which it intends to operate. The Company must also file
with each state's public utility commission the new or negotiated resale
agreement negotiated with the incumbent local exchange carrier.
The direct cost of acquiring the certificates of authority, the tariffs, and the
approval of the resale agreements are capitalized and amortized on a
straight-line basis over 15 years.
Goodwill and Customer Base
Goodwill is the difference between the purchase price paid and liabilities
assumed over the estimated fair value of assets acquired from Tel Com East, Tel
Com Jacksonville and Tel Com West. Goodwill recorded in connection with the
acquisition of Tel Com East, Tel Com Jacksonville and Tel Com West amounted to
$26,607,226 and is being amortized using the straight-line method over 15 years.
Additional goodwill resulted from the acquisition of the customer base amounted
to $8,869,075 and is being amortized over three years. On an on-going basis,
management reviews recoverability, the valuation and amortization of goodwill.
As part of this review, management considers the un-discounted value of the
projected future net earnings in evaluating the value of goodwill. If the
un-discounted value of the projected future net earnings is less than the stated
value, the goodwill would be written down to its fair value.
In October 1998 the Company determined that the goodwill and customer base was
impaired and recognized a loss of $31,674,670 for the impairment of these
intangible assets.
Read the accompanying Independent Certified Public Accountants Report.
F-15
<PAGE> 58
UNITED STATES TELECOMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE C - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued
Software Capitalization
The Company has adopted Statement of Position (SOP) 98-1, "Accounting for the
Costs of Computer Software Developed or Obtained for Internal Use." This
standard requires certain direct development costs associated with internal-use
software to be capitalized, including external direct costs of material and
services and payroll costs for employees devoting time to the software projects.
These costs are amortized over a period of three years beginning when the asset
is substantially ready for USE. On October 1, 1998 the Company completed the
application development stage and upon placing the software in use, began
amortizing the capitalized software. The Company capitalized external direct
material and service costs of $108,847, $365,647 and $0 for software costs
during the nine months ended September 30, 1999 and the periods ended December
31, 1998 and 1997 respectively. The Company recorded amortization of $10,485,
$0, $2,500 $0 and $0 for the nine months ending September 30, 1999 and September
30, 1998 and the periods ending December 31, 1998 and 1997, respectively.
Revenue Recognition
Telephone service revenue is recognized monthly at the time of billing. The
customers are billed for the prior months services. The Company records unearned
revenue for services billed, but not earned.
Activation revenue is recognized when telephone services are applied for and
payment is received.
Advertising
Advertising costs, other than direct response advertising, is expense as
incurred. During the periods presented, the Company had no direct response
advertising costs.
Income Taxes
The Company accounts for income taxes in accordance with the asset and liability
approach. Deferred income tax assets and liabilities are computed annually for
differences between the financial statement and tax base of assets and
liabilities that will result in taxable or deductible amounts in the future,
based on enacted tax laws and rates applicable to the periods in which the
differences are expected to affect taxable income. Valuation allowances are
established when necessary to reduce deferred tax assets to the amount expected
to be realized. Income tax expense is the tax payable or refunded for the period
plus or minus the change during the period in deferred tax assets and
liabilities.
Earnings Per Share
Effective December 15, 1997, the Financial Accounting Standards Board issued
Statement No. 128, "Earnings Per Share." Statement 128 replaced the previously
reported primary and fully diluted earnings per share with basic and diluted
earnings per share. Under the new requirements for calculating earnings per
share, the dilutive effect of stock options and other dilutive instruments will
be excluded from the basic earnings per share but included in the computation of
diluted earnings per share.
Read the accompanying Independent Certified Public Accountants Report.
F-16
<PAGE> 59
UNITED STATES TELECOMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE C - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued
Carrier Contracts
The Company purchases traditional local telephone service from various incumbent
local exchange carriers. The provision of telephone service is provided to the
Company pursuant to a resale agreement entered into between the Company and each
incumbent local exchange carrier. As of September 30, 1999 the Company was
authorized to provide residential local telephone service to consumers in 26
states. The Company is presently doing business in 20 states.
Fair Value
The Company believes that the carrying amounts of its current assets and current
liabilities approximate the fair value of such items due to their short-term
nature. The carrying amount of cash, accounts receivable, accounts payable and
other liabilities are carried at amounts that reasonably approximate their fair
values.
Credit Risk
Cash is at risk to the extent that it exceeds Federal Deposit Insurance
Corporation ("FDIC") insured amounts (approximately $436,000 at December 31,
1998). To minimize risk, the Company places its cash with high credit quality
institutions.
NOTE D - ACQUISITION
On October 1, 1998, UST purchased the assets and assumed liabilities of Tel Com
East, Tel Com West and Tel Com Jacksonville. The consideration paid by UST in
connection with the Acquisition consisted of 4,169,644 shares of common stock of
UST and 16,519,349 shares of Class A preferred stock of UST which were given to
certain holders of units in Tel Com East, Tel Com West and Tel Com Jacksonville.
The total purchase price for the Acquisition was approximately $35,476,000,
which included the assumption of net liabilities of approximately $31,675,000.
Approximately $35,500,000 of the purchase price, has been accounted for as
goodwill and customer base.
The following unaudited pro forma consolidated amounts give effect to the
Acquisition as if it had occurred on January 1, 1997, by consolidating the
results of operations of Tel Com East, Tel Com Jacksonville and Tel Com West
with the results of UST for the years ended December 31, 1998 and 1997.
<TABLE>
<CAPTION>
1998 1997
------------ ------------
<S> <C> <C>
Revenues $ 16,617,889 $ 3,558,018
Net loss (24,481,710) (10,631,935)
------------ ------------
Net loss per common share $ (2.68)
============
Weighted average shares used in net loss per common share calculation 9,138,928
============
</TABLE>
The unaudited pro forma consolidated statements of operations are not
necessarily indicative of the operating results that would have been achieved
had the Acquisition accounted for as of the date it actually occurred and should
not be construed as being representative of future operating results.
Read the accompanying Independent Certified Public Accountants Report.
F-17
<PAGE> 60
UNITED STATES TELECOMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE E - PROPERTY AND EQUIPMENT
<TABLE>
<CAPTION>
September 30 December 31
------------ -------------------------------
1999
(unaudited) 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Furniture and equipment $ 62,209 $ 61,631 $ --
Leasehold Improvements 17,719 17,567 --
Equipment 360,970 253,560 --
Computer equipment 231,075 168,504 --
-------- -------- --------
671,973 501,262
-------- -------- --------
Less accumulated depreciation 222,575 47,732 --
-------- -------- --------
$449,398 $453,530 $ --
======== ======== ========
</TABLE>
Depreciation expenses was $174,843, $47,732, $2,870 and $0, for period ending
September 30, 1999, December 31, 1998, September 30, 1998 and December 31, 1997,
respectively.
NOTE F - REVOLVING LINE OF CREDIT
The Company has established a line of credit with Bank of America, which
provides for draws up to a maximum of $50,000. Amounts advanced under terms of
the line of credit bear interest at 8% and interest payments are due monthly.
The line of credit with the bank is secured by a $50,000 certificate of deposit.
The amount outstanding on the line was $50,151 at December 31, 1998 and $43,805
at September 30, 1999.
Interest expense on the line of credit was $3,089, $2, $0 and $0, for period
ending September 30, 1999, December 31, 1998, September 30, 1998 and December
31, 1997, respectively.
NOTE G - NOTES PAYABLE AND OBLIGATIONS TO RELATED PARTY
The Company holds an obligation with Richard Pollara, president of the
Company and a significant shareholder of the Company. The obligation is
non-interest bearing, however the Company has imputed interest at 8.5% per
annum. The obligation outstanding was $400,000 at September 30, 1999 and
December 31, 1998, respectively. Interest expense was $25,500, $8,500, $0 and
$0, for period ending September 30, 1999, December 31, 1998, September 30, 1998
and December 31, 1997, respectively. On November 22, 1999 the obligation was
converted to a note payable. (See Note M).
The Company holds an obligation with Richard Pollara, president of the
Company and a significant shareholder of the Company. The obligation is
non-interest bearing, however the Company has imputed interest at 8.5% per
annum. The obligation outstanding was $59,003 at September 30, 1999 and December
31, 1998, respectively. Imputed interest expense was $3,825, $1,275, $0 and $0,
for period ending September 30, 1999, December 31, 1998, September 30, 1998 and
December 31, 1997, respectively. On November 22, 1999 the obligation was
converted to a note payable. (See Note M).
On September 22, 1998 the Company entered into an unsecured note payable with a
shareholder for $150,000. The note payable bears interest at 10% and due no
later then September 28, 2000. Interest expense on the note payable was $11,250,
$4,083, $333 and $0, for period ending September 30, 1999, December 31, 1998,
September 30, 1998 and December 31, 1997, respectively.
Read the accompanying Independent Certified Public Accountants Report.
F-18
<PAGE> 61
UNITED STATES TELECOMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE H - STOCKHOLDERS' DEFICIT
On November 2, 1999 the Company increased the par value of its preferred stock
from no par to $0.10. The par value has been restated for all periods presented.
Class A Preferred Stock
The holders of Class A preferred stock have voting rights identical to the
holders of shares of Common Stock and are entitled to vote with the holders of
shares of Common Stock as one voting class. The holders of Class A preferred
stock are entitled to receive ratably dividends, if any, as may be declared from
time to time by the board of directors out of funds legally available therefor
in preference of any dividends paid on shares of the common stock. In the event
of our liquidation, dissolution or winding up, the holders of Class A preferred
stock are entitled to share ratably in all assets remaining after the payment of
liabilities. The right of the holders of Class A preferred stock upon our
liquidation, dissolution or winding up is in preference to the rights of the
holders of the common stock. Holders of Class A preferred stock have no
preemptive rights or rights to convert their Class A preferred stock into any
other securities. There are no redemption or sinking fund provisions applicable
to the Class A preferred stock.
Common Stock
The holders of common stock are entitled to one vote for each share held of
record on all matters submitted to a vote of shareholders. The holders of common
stock are entitled to receive ratably such dividends, if any, as may be declared
from time to time by the board of directors out of funds legally available
therefor. This entitlement to dividends is subject to preferences of the Class A
preferred stock and of any outstanding shares of any other class of preferred
stock that may be issued with dividend preferences. In the event of our
liquidation, dissolution or winding up, the holders of common stock are entitled
to share ratably in all assets remaining after payment of liabilities and
liquidation preferences on the shares of Class A preferred stock and on any
outstanding shares of any other class of preferred stock that may be issued that
have liquidation preferences. Holders of common stock have no preemptive rights
or rights to convert their common stock into any other securities.
During 1998, UST issued an aggregate of 4,525,600 shares of Common Stock and
18,102,400 shares of Class A preferred stock to the founders. These shares were
valued at $0 since the Company was a start up organization.
During 1998, UST issued an aggregate of 460,000 shares of Common Stock and
1,840,000 shares of Class A preferred stock to employees. These shares were
valued at $0 since the Company was a start up organization.
Later in 1998, UST issued an aggregate of 400,000 shares of Common Stock, at a
purchase price of $150,000.
The Company issued 4,169,644 shares of Common Stock and 16,519,349 shares of
Class A preferred stock In connection with the acquisition of Tel Com East, Tel
Com West and Tel Com Jacksonville.
On February 12, 1999, the Company offered a private placement of a minimum of
500 and a maximum of 1,600,000 shares of common stock at a offering price of $3
per share for aggregate consideration of between $1,500 and $4,800,000. As of
September 30, 1998, the Company has sold 414,430 shares resulting in net
proceeds of approximately $1,234,815.
During 1999 the Company issued 850,000 shares of it common stock for cash of
$600,000 to four individuals.
Read the accompanying Independent Certified Public Accountants Report.
F-19
<PAGE> 62
UNITED STATES TELECOMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE I - INCOME TAXES
Deferred income tax assets and liabilities at December 31, 1998 consist of the
following:
<TABLE>
<CAPTION>
1998
------------
<S> <C>
Current deferred tax asset $ 1,008,000
Non-current deferred tax asset 12,221,000
Valuation allowance (13,229,000)
------------
Net deferred tax asset $ --
============
</TABLE>
The current deferred tax asset results from the provision for doubtful accounts,
which is not currently deductible for income tax purposes and depreciation and
amortization expensed for financial reporting purposes in excess of the
deduction for income tax purposes. The non-current deferred tax asset results
from the intangible asset impairment deductible for financial reporting purposes
not deductible for tax purposes. The net deferred tax asset has a 100% valuation
allowance recorded against it due to the uncertainty of generating future
taxable income.
The Company's income tax benefit for the year ended December 31, 1998 differed
from the statutory Federal rate of 34% applied to net income before income taxes
as follows:
<TABLE>
<S> <C>
Statutory rate of 34% applied to the Company's net loss $ 11,851,000
Decreased (increase) in income taxes resulting from:
Permanent differences (2,000)
State income taxes, net of federal tax effect 1,380,000
Change in valuation allowance (13,229,000)
------------
Total income tax benefit $ --
============
</TABLE>
At December 31, 1998, the Company has a net operating loss carryforward of
approximately $1,224,000 which expires in 2018.
NOTE J - RESCISSION OBLIGATION
The State of Florida, Department of Banking and Finance entered into a
Stipulation and Consent Agreement (the Agreement") with Final Order dated May
12, 1999 with the Company, Tel Com East, Tel Com West, Tel Com Jacksonville. The
Agreement relates to the sale of securities of Tel Com East, Tel Com West, Tel
Com Jacksonville in violation of federal and state securities laws. On December
7, 1999, the State of Florida, Department of Banking and Finance notified the
Company that it was in violation of the Agreement. The Department stated that it
intended to bring an action to enforce compliance with the Agreement
Pursuant to the agreement, the Company has agreed to offer a rescission in
accordance with the Florida Securities and Investor Protection Act for the
securities of Tel Com East, Tel Com West and Tel Com Jacksonville.
As a part of the recission, the Company is offering holders of our common stock
and Class A preferred stock the right to rescind their purchase of securities of
one or more of our predecessor entities. These securities were offered and sold
and were subsequently exchanged for shares of the Company's common stock and
Class A preferred stock in violation of federal and state securities laws. In
the Agreement, the Company, as legal successor to Tel Com East, Tel Com West and
Tel Com Jacksonville, admitted that the predecessors' securities were sold in
violation of the securities laws of the State of Florida. Accordingly, The
Company offers to certain shareholders the right to rescind the purchase of
these securities. The Company is not making the rescission offer to shareholders
who were or are executive officers of the Company or who actively participated
in the offer and sale of the securities which are the subject of this
rescission.
Read the accompanying Independent Certified Public Accountants Report.
F-20
<PAGE> 63
UNITED STATES TELECOMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE J - RESCISSION OBLIGATION - continued
In early to mid-1998, an offer to purchase was made by Tel Com Jacksonville to
all the unit holders of Tel Com Jacksonville. The recission was accepted by 80
unit holders resulting in the recission of approximately $995,000. The
obligation is being paid out over a period of time by UST, as successor in
interest to Tel Com Jacksonville. Tel Com Jacksonville established a receivable
from the promoter for the total amount of the recission. In 1998, Tel Com
Jacksonville wrote off the receivable of $995,000.
NOTE K - COMMITMENTS AND CONTINGENCIES
As of December 31, 1998, the Company is obligated under non-cancelable operating
leases for future minimum rent payments for office space and furniture and
equipment as follows:
<TABLE>
<CAPTION>
12 months ending
December 31,
----------------
<S> <C>
1999 $ 196,921
2000 134,538
2001 39,266
2002 34,287
2003 7,265
---------
$ 412,277
=========
</TABLE>
Rent expense was $115,116, $48,602, $0 and $0, for period ending September 30,
1999, December 31, 1998, September 30, 1998 and December 31, 1997, respectively.
Legal and Securities and Exchange Commission Proceedings
The Company is in arbitration proceedings with MCI Telecommunications Corp.
("MCI") for nonpayment of phone service provided by MCI. The Company is
disputing the phone usage charge. If there is a negative outcome related to the
arbitration the Company may be required to pay approximately $264,000. The
Company has reserved $25,000 for the possibility of an adverse outcome.
In September 1999, a settlement agreement was reached between Tel Com East, Tel
Com West, Richard Pollara, Joseph Cillo, Charles Polley, Easy Phone, Inc. and
the Company in connection with the proceeding styled Tel Com Plus West, LLC and
Tel Com Plus East, LLC, Plaintiffs v. Easy Phone, Inc. Defendants which was
pending in the United States District Court, Middle District of Florida.
The parties to this litigation settled on the following terms:
- The litigation was dismissed with prejudice.
- Each party to the litigation released the other parties from
any and all claims which were or could have been asserted in
this litigation.
- The Company delivered to Easy Phone, Inc. its Easy Phone, Inc
stock certificates.
- The lawsuit brought by Mr. Pollara, Robin Caldwell and Maurice
Franklin against Easy Phone and Lorrinda Bucchieri and others
pending on the state of California was dismissed with
prejudice.
- The Company agreed to indemnify Easy Phone, Inc. from any tax
liability of any kind to the States of Florida and California
incurred in connection with the use by Tel Com East, Tel Com
West or the Company of Easy Phone, Inc.'s public utility
commission licenses in those states.
Read the accompanying Independent Certified Public Accountants Report.
F-21
<PAGE> 64
UNITED STATES TELECOMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE K - COMMITMENTS AND CONTINGENCIES - continued
Securities and Exchange Commission Litigation
The Securities and Exchange Commission ("SEC") brought an action against Tel Com
East and Tel Com West. The SEC alleges among other things, violation of Rule
10b-5 of the Securities Exchange Act of 1934, as amended, and fraud in the sale
of their securities. As of December 7, 1999, the Company has not been named as a
defendant in the action. However, no assurance can be given that the SEC will
not bring an action against the Company as a successor in interest to TelCom
East and TelCom West. The outcome of this litigation cannot be predicted. If the
Company is named as a party and the court does rule against the Company, the
Company may be subject to severe civil penalties and other remedies which will
have a material adverse effect on our business and financial condition.
In 1999, Travelers Express Company, Inc. brought an action against the Company,
alleging breach of a buy-pay utility agreement. Travelers Express alleges that
it is due approximately $65,000. The Company has a counterclaim for unspecified
and undetermined damages arising out of the breach of this agreement. Management
intends to vigorously litigate this matter. It is not yet possible to evaluate
the likelihood of an unfavorable outcome, or provide an estimate of the
potential loss.
In the normal course of its business, the Company is subject to litigation.
Management, based on discussions with its legal counsel, does not believe any
claims, individually or in the aggregate, will have a material adverse impact on
the Company's financial position other than disclosed above.
NOTE L - OTHER RELATED PARTY TRANSACTIONS
In December 1997, Easy Phone, Inc. (formerly Easy Cellular, Inc.) redeemed a
substantial portion of the shares of stock held by Richard Pollara, president
and a shareholder of UST, in exchange for Easy Phone's interest in Tel Com East,
Tel Com West and Tel Com Jacksonville.
On December 30, 1997, Tel Com East, Tel Com Jacksonville and Tel Com West
operated under a license agreement with Easy Phone. The agreement allowed Tel
Com East, Tel Com Jacksonville and Tel Com West to use the Easy Phone licenses
to resell telecommunication services for monthly payments of $20,000.
In January 1997, Tel Com Jacksonville purchased the assets of Montebello
Finance, LLC, a Florida Limited Liability Company, for cash of $50,000 and a
note payable of $200,000 from Richard Pollara, president of UST. The note
payable was paid off during 1998.
The Company has two obligations arising from joint venture agreements entered
into between two predecessor entities of the Company and Easy Cellular, Inc. Mr.
Pollara succeeded to the rights of Easy Cellular, Inc. under these joint venture
agreements. One joint venture agreement was entered into by Tel Com East and
Easy Cellular, Inc. on February 28, 1997 whereby Tel Com East agreed to pay Easy
Cellular, Inc. $400,000 from the proceeds of the venture. This amount has not
been paid to Mr. Pollara, as successor in interest to Easy Cellular, Inc. The
second joint venture agreement was entered into by Tel Com West and Easy
Cellular on July 24, 1997 whereby Tel Com West agreed to pay Easy Cellular
approximately $60,000. This amount has not been paid to Mr. Pollara, as
successor in interest to Easy Cellular, Inc. Mr. Pollara has not received any
payment of principal or interest on these notes. Mr. Pollara has no present
interest to demand payment of these notes.
On November 22, 1999 the Company issued two promissory notes to Mr. Pollara to
satisfy these obligations. (See Note M).
Read the accompanying Independent Certified Public Accountants Report.
F-22
<PAGE> 65
UNITED STATES TELECOMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE M - SUBSEQUENT EVENTS
On February 12, 1999, the Company offered a private placement of a minimum of
500 and a maximum of 1,600,000 shares of common stock at a offering price of $3
per share for aggregate consideration of between $1,500 and $4,800,000. As of
September 30, 1999, the Company had sold 414,430 shares resulting in net
proceeds of approximately $1,234,815. The offering was open through October
1999. On November 2, 1999, the Board extended the offering for six additional
months. The Company has been advised that this offering is exempt from the
registration requirements of the federal securities law's pursuant to Regulation
D.
During 1999, the Company issued 850,000 shares of its common stock to four
individuals for cash of $600,000 pursuant to an exemption under section 4(2) of
the Securities Act of 1933.
On November 2, 1999 the Company increased the par value of its preferred stock
from no par to $0.10. The par value has been restated for all periods presented.
On November 22, 1999 the Company converted a $400,000 obligation of the Company
with Richard Pollara in to a note payable. The note payable bears interest at
8.5% per annum, with the principal due on demand. The note is unsecured. (See
Note L).
On November 22, 1999 the Company converted a $59,002 obligation of the Company
with Richard Pollara in to a note payable. The note payable bears interest at
8.5% per annum, with the principal due on demand. The note is unsecured. (See
Note L).
Read the accompanying Independent Certified Public Accountants Report.
F-23
<PAGE> 66
(PNC CPAs Letterhead)
Independent Auditors' Report
Board of Directors
Tel Com Plus East, L.L.C., Tel Com Plus West, L.L.C.,
and Tel Com Plus Jacksonville, L.L.C.
Clearwater, Florida
We have audited the accompanying combined balance sheets of Tel Com Plus East,
L.L.C., Tel Com Plus West, L.L.C., and Tel Com Plus Jacksonville, L.L.C. as of
September 30, 1998 and December 31, 1997 and the related combined statements of
operations, members' capital, and cash flows for the year and period then
ended. These combined financial statements are the responsibility of the
management of Tel Com Plus East, L.L.C., Tel Com Plus West, L.L.C., and Tel Com
Plus Jacksonville, L.L.C. Our responsibility is to express an opinion on these
combined financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. These standards require that we plan and perform the audits to
obtain reasonable assurance about whether the combined financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the combined financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
combined financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the financial position of Tel Com Plus East,
L.L.C., Tel Com Plus West, L.L.C., and Tel Com Plus Jacksonville, L.L.C. as of
September 30, 1998 and December 31, 1997 and the results of their operations
and cash flows for the year and period then ended in conformity with generally
accepted accounting principles.
Effective October 1, 1998, all of the assets and liabilities of Tel Com Plus
East, L.L.C., Tel Com Plus West, L.L.C., and Tel Com Plus Jacksonville, L.L.C.
were acquired by United States Telecommunications, Inc. in a transaction
accounted for as a purchase. We have audited the financial statements of United
States Telecommunications, Inc. for the year ended December 31, 1998 and have
emphasized in our report dated December 7, 1999 the conditions which raise
substantial doubt about its ability to continue as a going concern.
Certified Public Accountants
Tampa, Florida
December 7, 1999
F-24
<PAGE> 67
TEL COM PLUS EAST, L.L.C., TEL COM PLUS WEST, L.L.C.,
AND TEL COM PLUS JACKSONVILLE, L.L.C.
COMBINED BALANCE SHEET
<TABLE>
<CAPTION>
ASSETS
September 30, December 31,
1998 1997
------------- ------------
<S> <C> <C>
CURRENT ASSETS
Cash $ 296,328 $ 71,934
Accounts receivable, net of allowance for doubtful
accounts of $2,006,732 and $280,916, respectively 656,680 323,272
Agent receivable 33,786 33,102
Prepaid expenses and Other 4,400 3,979
------------ ------------
Total current assets 991,194 432,287
------------ ------------
PRE BILLED ACCOUNTS RECEIVABLE 147,672
------------ ------------
PROPERTY AND EQUIPMENT, NET 376,021 237,000
OTHER ASSETS
Deposits 13,041 24,971
Operating license net of amortization of $0 and $4,167
at 1998 and 1997, respectively 95,833
Software net of amortization of $7,136 and $2,299 at
1998 and 1997, respectively 37,943 7,753
Receivable from United States Telecommunications, Inc. 1,406,734
Other 15,000 15,000
------------ ------------
Total other assets 1,472,718 143,557
------------ ------------
TOTAL ASSETS $ 2,839,933 $ 960,516
============ ============
LIABILITIES AND MEMBERS' CAPITAL
CURRENT LIABILITIES
Accounts payable $ 32,445 $ 85,915
Accrued liabilities 220,850 117,513
Accrued sale tax 1,357,160 443,833
Accrued carrier charges 1,390,742 1,113,460
Notes Payable and obligations - related parties 500,357 613,270
------------ ------------
Total current liabilities 3,501,554 2,373,991
------------ ------------
DEFERRED PRE BILLED ACCOUNTS RECEIVABLE 147,672
------------ ------------
LONG TERM LIABILITIES
Unit recission obligation 30,032,642 6,900,774
Unit recission obligation accrued interest 1,586,636 366,183
------------ ------------
Total long term liabilities 31,619,278 7,266,957
------------ ------------
COMMITMENTS AND CONTINGENCIES
MEMBERS' CAPITAL (32,280,899) (8,828,104)
------------ ------------
TOTAL LIABILITIES AND MEMBERS' CAPITAL $ 2,839,933 $ 960,516
============ ============
</TABLE>
Read the accompanying Independent Certified Public Accountants Report.
The accompanying notes are an integral part of these financial statements.
F-25
<PAGE> 68
TEL COM PLUS EAST, L.L.C., TEL COM PLUS WEST, L.L.C.,
AND TEL COM PLUS JACKSONVILLE, L.L.C.
COMBINED STATEMENTS OF OPERATIONS
PERIOD ENDED SEPTEMBER 30, 1998 AND THE PERIOD FROM INCEPTION TO
DECEMBER 31, 1997
<TABLE>
<CAPTION>
1998 1997
------------ ------------
<S> <C> <C>
Revenues $ 11,270,247 $ 3,558,018
Cost of revenues 3,436,453 2,098,000
------------ ------------
Gross profit 7,833,794 1,460,018
Advertising expenses 1,662,704 1,455,009
General and administrative expenses 8,597,426 3,925,312
Impairment loss 126,721 200,356
Loss on promoter receivable 18,830,888 6,453,979
------------ ------------
Loss from operations (21,383,945) (10,574,638)
Interest expense (43,329) (57,047)
------------ ------------
Net loss $(21,427,274) $(10,631,685)
============ ============
</TABLE>
Read the accompanying Independent Certified Public Accountants Report.
The accompanying notes are an integral part of these financial statements.
F-26
<PAGE> 69
TEL COM PLUS EAST, L.L.C., TEL COM PLUS WEST, L.L.C.
AND TEL COM PLUS JACKSONVILLE, L.L.C.
COMBINED STATEMENTS OF CHANGES IN MEMBERS CAPITAL
PERIOD ENDED SEPTEMBER 30, 1998 AND THE PERIOD FROM INCEPTION
TO DECEMBER 31, 1997
<TABLE>
<CAPTION>
Tel Com Tel Com Tel Com Unit Holder
East West Jacksonville Members' Promissory Members'
Units Units Units Capital Note Capital
-------- -------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Tel Com East units issued
to founders 310 $ 12,499 $ 12,499
Tel Com East units issued
to founders for license 1,240 50,000 50,000
Tel Com East unit offering 1,805 2,777,910 $(2,621,226) 156,684
Tel Com West units issued
to founders 2,200 12,496 12,496
Tel Com West units issued
to founders for license 8,800 50,000 50,000
Tel Com West unit offering 2,856 4,167,809 (3,911,345) 256,464
Tel Com Jacksonville units
issued to founders 96
Tel Com Jacksonville unit
offering 160 750,000 750,000
Payments on Tel Com East
unit holders promissory
note 571,218 571,218
Payments on Tel Com West
unit holders promissory
note 770,500 770,500
Write off Tel Com East
uncollectible promissory
note 374,286 374,286
Write off Tel Com West
uncollectible promissory
note 457,340 457,340
Rescission offering to Tel Com
East (356) (548,086) (548,086)
Rescission offering to Tel Com
West (238) (347,791) (347,791)
Rescission offering to Tel Com
Jacksonville (160) (750,000) (750,000)
Distributions (12,029) (12,029)
Net loss (10,631,685) (10,631,685)
-------- -------- -------- ------------ ------------ ------------
Balance at December 31, 1997 2,999 13,618 96 $ (4,468,877) $ (4,359,227) $ (8,828,104)
======== ======== ======== ============ ============ ============
</TABLE>
Read the accompanying Independent Certified Public Accountants Report.
The accompanying notes are an integral part of these financial statements.
F-27
<PAGE> 70
TEL COM PLUS EAST, L.L.C., TEL COM PLUS WEST, L.L.C.,
AND TEL COM PLUS JACKSONVILLE, L.L.C.
COMBINED STATEMENTS OF CHANGES IN
MEMBERS CAPITAL
PERIOD ENDED SEPTEMBER 30, 1998 AND
THE PERIOD FROM INCEPTION TO DECEMBER 31, 1997
<TABLE>
<CAPTION>
Tel Com Tel Com Tel Com Unit Holder
East West Jacksonville Members' Promissory Members'
Units Units Units Capital Note Capital
-------- -------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1997 2,999 13,618 96 (4,468,877) (4,359,227) (8,828,104)
Payments on Tel Com East
unit holders promissory note 1,675,721 1,675,721
Payments on Tel Com West
unit holders promissory note 2,077,274 2,077,274
Rescission offering to Tel Com
East (1,449) (2,229,826) (2,229,826)
Rescission offering to Tel Com
West (2,323) (3,379,606) (3,379,606)
Distributions (169,084) (169,084)
Net loss (21,427,274) (21,427,274)
-------- -------- -------- ------------ ------------ ------------
Balance at September 30, 1998 1,550 11,295 96 $(31,674,667) $ (606,232) $(32,280,899)
======== ======== ======== ============ ============ ============
</TABLE>
Read the accompanying Independent Certified Public Accountants Report.
The accompanying notes are an integral part of these financial statements.
F-28
<PAGE> 71
TEL COM PLUS EAST, L.L.C., TEL COM PLUS WEST, L.L.C.,
AND TEL COM PLUS JACKSONVILLE, L.L.C.
COMBINED STATEMENTS OF CASH FLOWS
PERIOD ENDED SEPTEMBER 30, 1998 AND THE PERIOD FROM INCEPTION
TO DECEMBER 31, 1997
<TABLE>
<CAPTION>
1998 1997
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss from operations $(21,427,274) $(10,631,685)
------------ ------------
Adjustments to reconcile net loss to net cash used
by operating activities:
Depreciation and amortization 77,402 73,546
Provision for bad debt 3,292,145 280,916
Impairment loss 126,721 200,356
Issuance of units for services 24,995
Write off of offering costs and imputed interest 35,888 836,263
Loss on promoter receivable write off 18,830,888 6,453,979
Changes in operating assets and liabilities:
(Increases) decreases in:
Accounts receivable and agent receivables (3,626,238) (637,289)
Prepaid expenses and other assets (12,351) (43,950)
Receivable from United States Telecommunications, Inc. (1,406,738)
Increase (decreases) in:
Accounts payable (53,470) 85,915
Accrued liabilities 103,338 117,513
Accrued taxes 913,327 443,833
Accrued carrier charges 277,282 1,113,460
------------ ------------
Total adjustments to reconcile net loss to net cash used
by operating activities 18,558,194 8,949,537
------------ ------------
Net cash used by operating activities (2,869,080) (1,682,148)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of Montebello finance, LLC (50,000)
Purchase of software (35,026) (10,051)
Purchases of property and equipment (208,612) (255,711)
------------ ------------
Net cash used by investing activities (243,638) (315,762)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Payments on note payable - related party (148,799) (9,845)
Cash received from repayment of non-recourse
Promissory notes 3,752,995 1,341,718
Cash received from the issuance of units 750,000
Payments on recission obligation (98,000)
Distributions to unit holders (169,084) (12,029)
------------ ------------
Net cash provided by financing activities 3,337,112 2,069,844
------------ ------------
NET INCREASE IN CASH 224,394 71,934
Cash at beginning of period 71,934
------------ ------------
Cash at end of period $ 296,328 $ 71,934
============ ============
</TABLE>
Read the accompanying Independent Certified Public Accountants Report.
The accompanying notes are an integral part of these financial statements.
F-29
<PAGE> 72
TEL COM PLUS EAST, L.L.C., TEL COM PLUS WEST, L.L.C.,
AND TEL COM PLUS JACKSONVILLE, L.L.C.
COMBINED STATEMENTS OF CASH FLOWS
PERIOD ENDED SEPTEMBER 30, 1998 AND THE PERIOD FROM INCEPTION
TO DECEMBER 31, 1997
<TABLE>
<CAPTION>
1998 1997
------------ ------------
<S> <C> <C>
SUPPLEMENTAL NON-CASH INVESTING ACTIVITIES:
Promoter receivable for recission $ 18,830,888 $ 6,453,979
============ ============
SUPPLEMENTAL NON-CASH FINANCING ACTIVITIES:
Issuance of a note payable for the purchase of
Montebello Finance $ $ 200,000
============ ============
Issuance of obligations for offering costs $ 35,888 $ 423,115
============ ============
Issuance of a non recourse promissory note
in exchange for units $ $ 6,945,719
============ ============
Issuance of a operating license in exchange for units $ $ 100,000
============ ============
Issuance of units to founders $ $ 24,995
============ ============
SUPPLEMENTAL CASH FLOW INFORMATION
Interest paid $ 14,001 $ 23,755
============ ============
</TABLE>
Read the accompanying Independent Certified Public Accountants Report.
The accompanying notes are an integral part of these financial statements.
F-30
<PAGE> 73
TEL COM PLUS EAST, L.L.C., TEL COM PLUS WEST, L.L.C.,
AND TEL COM PLUS JACKSONVILLE, L.L.C.
NOTES TO FINANCIAL STATEMENTS
NOTE A - NATURE OF OPERATIONS
Tel Com Plus Florida, L.L.C. ("Tel Com Florida") which changed its name to Tel
Com Plus Jacksonville, L.L.C. ("Tel Com Jacksonville") was formed on February
28, 1997, Tel Com Plus Miami L.L.C. ("TCM") was formed on April 25, 1997, and
on March 9, 1998 TCM changed its name to Tel Com Plus East, L.L.C. ("Tel Com
East") and Tel Com Plus California, L.L.C. ("TCC") was formed on July 28, 1997
and on March 9, 1998 TCC changed its name to Tel Com Plus West, L.L.C. ("Tel
Com West") collectively referred to as the "Company".
The Company is a reseller of local telephone services to credit challenged
consumers throughout the United States. The Company's business could be
significantly affected by regulatory and legislative developments. Such effects
could include increased competition and, as a result, decreased revenues.
As of September 30, 1998 (effective as of October 1, 1998), Tel Com East, Tel
Com West and Tel Com Jacksonville, entered into an agreement (the "Agreement")
with United States Telecommunications, Inc. ("UST"). The Agreement provided for
the transfer and assignment to UST of all the assets and liabilities of Tel Com
East, Tel Com West and Tel Com Jacksonville in exchange for shares of common
stock and Class A preferred stock of UST. For accounting purposes the
acquisition was accounted for under the purchase method.
NOTE B - GOING CONCERN UNCERTAINTY
As indicated in the accompanying financial statements, the Company incurred an
operating loss of $21,427,274 during the period ended September 30, 1998. At
September 30, 1998 the Company had negative working capital of $2,510,360 and
negative equity of $32,280,899. Additionally the Company has entered into a
stipulation and consent agreement with final order dated May 12, 1999 with the
state of Florida whereby the Company agreed to complete an offer of rescission
with respect to securities at Tel Com East, Tel Com West, and Tel Com
Jacksonville sold in violation of federal and state securities laws. The
Company has recorded an approximate contingent liability of $30,000,000 plus
interest thereon in anticipation of a payments related to the recission
offering. These factors, among others, raise substantial doubt as to the
Company's ability to continue as a going concern.
As indicated above, on September 30, 1998 the Company entered into an agreement
with UST.
Management of UST believes three major steps are important for it's future.
- - Final settlement of the alleged federal and state violations of the
securities laws, which have drained the Company of time and resources;
- - Securing new operating licenses and territories; and
- - Securing additional capital to fund future expansion.
Management of UST believes, based on the three major steps outlined above, its
operating losses could be reduced, and to the extent the Company's business
strategy is realized, the UST's operating losses could be eliminated.
An appropriate liquidity of UST is also based on the three major steps outlined
above. The potential liability of UST under the rescission offer is
approximately $30,000,000 plus interest. If the actual amount of liability of
this recission offer exceeds $100,000, then the amount due plus interest will
be paid over time. Management of UST believes making payments over a period of
time in annual installments will ease the financial burden imposed by the
recission offer. However if a significant number of participants accept this
recission offer the likelihood of repayment decreases.
The financial statements do not include any adjustments to reflect the possible
future effects on the recoverability and classification of assets or the
amounts or classification of liabilities which may result from the possible
inability of the Company to continue as a going concern.
Read the accompanying Independent Certified Public Accountants Report.
F-31
<PAGE> 74
TEL COM PLUS EAST, L.L.C., TEL COM PLUS WEST, L.L.C.,
AND TEL COM PLUS JACKSONVILLE, L.L.C.
NOTES TO FINANCIAL STATEMENTS
NOTE C - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Cash and cash equivalents
The Company considers all cash on hand and in banks, certificates of deposits
and other highly liquid investments with maturities of three months or less,
when purchased, to be cash and cash equivalents.
Accounts Receivables
Accounts receivable occur solely from sales of telephone services. Management
reserves for all receivable balances that have not been collected within 60
days. Accounts over 90 days are written off. Management determines the reserve
based upon reviews of individual accounts, recent loss experience, current
economic conditions and other pertinent factors. Allowances for uncollectible
billed services are adjusted monthly.
Agent Receivable
The Company has entered into agreements with various agents to receive payments
for phone services. The agents are typically check cashing stores, pawnshops,
rent-to-own stores and convenience stores. At the time of customer payment to
the agent, the Company transfers the receivables from accounts receivable to
agent receivable. At the time of agent collection, a commission obligation to
the agent is recorded.
Property and Equipment
Property and equipment are stated at cost. The Company provides for
depreciation on the straight-line method over the estimated useful lives of the
related assets. Assets held under leasehold improvements are amortized using
the straight-line method over the life of the lease or life of improvement,
whichever is less. Major classes of property and equipment and their related
lives are as follows:
<TABLE>
<CAPTION>
Life in
Major Class Years
----------- -----
<S> <C>
Leasehold improvements 3-5
Furniture, fixtures and equipment 5
Computer equipment 3
Equipment 5
</TABLE>
Maintenance and repairs are expensed as incurred. Replacements and betterments
are capitalized.
Revenue Recognition
Revenues are recognized monthly at the time of billing. The customers are
billed mid month for the current months services. Billings were performed under
the carrier license name of Easy Cellular.
Cell phone services were provided on a prepaid basis and recorded as deferred
revenue. Revenue was recognized when services were performed. Operations ceased
during November 1997.
Read the accompanying Independent Certified Public Accountants Report.
F-32
<PAGE> 75
TEL COM PLUS EAST, L.L.C., TEL COM PLUS WEST, L.L.C.,
AND TEL COM PLUS JACKSONVILLE, L.L.C.
NOTES TO FINANCIAL STATEMENTS
NOTE C - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued
Advertising Costs
Advertising costs other than direct response advertising is expense as
incurred. During the period presented the Company had no direct response
advertising costs.
Goodwill
Goodwill relates to the original purchase in 1997 of Montebello Finance, LLC by
Tel Com Jacksonville and represents the excess of cost over fair value of net
assets acquired and was amortized using the straight line method over 15 years.
On an on-going basis, management reviews recoverability, the valuation and
amortization of goodwill. As part of this review, management considers the
undiscounted value of the projected future net earnings in evaluating the value
of goodwill. If the undiscounted value of the projected future net earnings is
less than the stated value, the goodwill would be written down to its fair
value.
During 1997 Tel Com Jacksonville determined that the goodwill was impaired and
recognized a loss on the write off of this goodwill of $200,356.
Software Capitalization
The Company has adopted Statement of Position (SOP) 98-1, "Accounting for the
Costs of Computer Software Developed or Obtained for Internal Use." This
standard requires certain direct development costs associated with internal-use
software to be capitalized including external direct costs of material and
services and payroll costs for employees devoting time to the software
projects. These costs are amortized over a period of three years beginning when
the asset is substantially ready for USE. On October 1, 1998 the Company
completed the application development stage and upon placing the software in
use, began amortizing the capitalized software. The Company capitalized
external direct material and service costs of $35,026 and $10,051 for software
costs during fiscal 1998 and 1997 respectively. During 1998 and 1997 the
company recorded amortization of $7,136 and $2,299, respectively.
Income Taxes
Taxable income or loss of the Company are allocated to the unit holders in
accordance with the provisions of the operating agreement. The Company
qualifies as a S-Corporation and as such, Federal income taxes accrue to the
unitholders rather than to the Company. Accordingly, the statements of
operations of the Company include no provision for Federal income taxes.
Credit Risk
Cash is at risk to the extent that it exceeds Federal Deposit Insurance
Corporation ("FDIC") insured amounts (approximately $78,000 at September 30,
1998). To minimize risk, the Company places its cash with high credit quality
institutions.
Carrier Contracts
The Company purchases traditional local telephone service from various
incumbent local exchange carriers pursuant to a resale agreement. During 1998
and 1997 the Company had entered into resale agreements with four major
carriers to provide residential local telephone service to consumers.
Read the accompanying Independent Certified Public Accountants Report.
F-33
<PAGE> 76
TEL COM PLUS EAST, L.L.C., TEL COM PLUS WEST, L.L.C.,
AND TEL COM PLUS JACKSONVILLE, L.L.C.
NOTES TO FINANCIAL STATEMENTS
NOTE C - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued
Asset Impairment
When the Company has long-lived assets, which have a possible impairment
indicator, the Company estimates the future cash flows from the operation of
these assets. If the estimated cash flows recoup the recorded value of the
assets, they remain on the books at that value. If the net recorded value
cannot be recovered, the assets are written down to their market value if lower
than the recorded value.
NOTE D - OPERATING LICENSE
The Company operated under licenses, tariffs and carrier contract to resell
local telecommunications services provided from a joint venture with Easy
Cellular, Inc. from inception through December 1997. On December 30, 1997, Tel
Com East and Tel Com West entered into an Agency Agreement with Easy Phone, Inc.
(formerly Easy Cellular, Inc.)(See Note K). The agreement allows the Company to
continue to operate under operated under licenses and tariffs held by Easy Phone
for a monthly rental fee of $20,000. Rental expense was $289,222 in 1998 and
$31,458 in 1997, respectively.
NOTE E - ACQUISITIONS
During January 1997 (at the time of inception), Tel Com Jacksonville acquired
the inventory and a carrier contract of Montebello Finance, LLC, in exchange
for cash of $50,000 and a note payable of $200,000. The acquisition was
accounted for using the purchase method. The purchase price of $250,000, has
been recorded as an intangible asset and is being amortized over a period of
three years. During 1997 the intangible asset became impaired and a loss on
impairment was recognized. (See Note C).
NOTE F - PROPERTY AND EQUIPMENT
<TABLE>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
Furniture and equipment $ 64,691 $ 38,398
Equipment 180,295 95,883
Leasehold Improvements 34,934 34,184
Computer equipment 183,128 85,971
---------- ----------
463,048 254,436
Less accumulated depreciation 87,027 17,436
---------- ----------
$ 376,021 $ 237,000
========== ==========
</TABLE>
Depreciation expense for 1998 and 1997 was $69,591 and $ 17,436, respectively.
NOTE G - NOTE PAYABLE-RELATED PARTY
The Company issued a note payable to Richard Pollara, president of the Company
and significant unit holder bearing interest at 12% per annum, principal due on
demand. Certain assets of the Company secure the note. The balance outstanding
was $41,355 and $190,155 at September 30, 1998 and December 31, 1997
respectively. Interest expense was $14,004 and $23,755 for 1998 and 1997,
respectively.
The Company has an obligation with Richard Pollara, president of the Company and
a significant shareholder of the Company. The obligation is non-interest
bearing, however the Company has imputed interest at 8.5% per annum. The
obligation outstanding was $400,000 at September 30, 1998 and December 31, 1997
respectively. Interest expense was $25,500 and $31,167 for 1998 and 1997,
respectively. (See Note L).
Read the accompanying Independent Certified Public Accountants Report.
F-34
<PAGE> 77
TEL COM PLUS EAST, L.L.C., TEL COM PLUS WEST, L.L.C.,
AND TEL COM PLUS JACKSONVILLE, L.L.C.
NOTES TO FINANCIAL STATEMENTS
NOTE G - NOTE PAYABLE-RELATED PARTY - continued
The Company has an obligation with Richard Pollara, president of the Company and
a significant shareholder of the Company. The obligation is non-interest
bearing, however the Company has imputed interest at 8.5% per annum. The
obligation outstanding was $59,002 and $23,115 at September 30, 1998 and
December 31, 1997, respectively. Interest expense was $3,825 and $2,125 for 1998
and 1997, respectively. (See Note L).
NOTE H - RECESSION OBLIGATION
The State of Florida, Department of Banking and Finance entered into a
Stipulation and Consent Agreement (the Agreement") with Final Order dated May
12, 1999 with UST, Tel Com East, Tel Com West, Tel Com Jacksonville. The
Agreement relates to the sale of securities of Tel Com East, Tel Com West, Tel
Com Jacksonville in violation of federal and state securities laws.
Pursuant to the Agreement, UST agreed to offer a rescission in accordance with
the Florida Securities and Investor Protection Act on or before November 30,
1999 for the securities of Tel Com East, Tel Com West and Tel Com Jacksonville.
On December 7, 1999, the State of Florida, Department of Banking and Finance
notified Tel Com East Tel Com West, Tel Com Jacksonville and UST that they were
in violation of the Agreement and action to enforce the Agreement would be
commenced.
As a part of the recission UST is offering certain holders of our common stock
and Class A preferred stock the right to rescind their purchase of securities
of one or more of the predecessor entities. These securities were offered and
sold and were subsequently exchanged for shares of UST common stock and Class A
preferred stock in possible violation of federal and state securities laws. In
a Stipulation and Consent Agreement with Final Order dated May 12, 1999 between
the State of Florida, Department of Banking and Finance, UST and other parties,
UST as legal successor to Tel Com East, Tel Com West and Tel Com Jacksonville,
admitted that the predecessors' securities were sold in violation of the
securities laws of the State of Florida. Accordingly, UST offers to certain
shareholders the right to rescind the purchase of these securities. UST is not
making the rescission offer to shareholders who were nor are executive officers
of the UST or who actively participated in the offer and sale of the
securities, which are the subject of this rescission.
UST has offered a recission to all the unit holders of Tel Com East, Tel Com
Jacksonville and Tel Com West. The Company has calculated interest at 10% on
the outstanding recission obligation. The Company has established a recission
obligation of $30,032,642 and $6,900,774, recission obligation interest of
$1,586,636 and $366,183 and a receivable from the promoter for $18,830,888 and
$6,453,979 during 1998 and 1997 respectively. The Company wrote off the
promoter receivable of $18,830,888 and $6,453,979 during 1998 and 1997,
respectively.
In early to mid 1998 an offer to purchase was made to all the unit holders of
Tel Com Jacksonville. The recission was accepted by 80 unit holders resulting
in the recission obligation of $995,000. This obligation is included in the
above recission obligation. The obligation is being paid out over a period of
time. Tel Com Jacksonville established a receivable from the promoter for the
total amount of the recission. In 1998 Tel Com Jacksonville wrote off the
receivable of $995,000.
Read the accompanying Independent Certified Public Accountants Report.
F-35
<PAGE> 78
TEL COM PLUS EAST, L.L.C., TEL COM PLUS WEST, L.L.C.,
AND TEL COM PLUS JACKSONVILLE, L.L.C.
NOTES TO FINANCIAL STATEMENTS
NOTE I - COMMITMENTS AND CONTINGENCIES
As of September 30, 1998, the Company is obligated under non-cancelable
operating leases for future minimum rent payments for office space and
furniture and equipment as follows:
<TABLE>
<S> <C>
1998 $ 57,009
1999 207,056
2000 141,935
2001 39,266
2002 34,287
2003 7,265
------------
$ 486,818
============
</TABLE>
Rent expense for the periods ended September 30, 1998 and December 31, 1997 was
$138,169 and $79,355, respectively.
These leases were assumed by UST (See Note A).
The Securities and Exchange Commission ("SEC") brought an action against Tel
Com East and Tel Com West. The SEC alleges among other things, violation of
Rule 10b-5 of the Securities and Exchange Act of 1943, as amended, and fraud in
the sale of their securities. The outcome of this litigation cannot be
predicted. If the court does rule against the Company, the Company may be
subject to severe civil penalties and other remedies which will have a material
adverse effect on our business and financial condition.
In the normal course of its business, the Company is subject to litigation.
Management, based on discussions with its legal counsel, does not believe any
claims, individually or in the aggregate, will have a material adverse impact
on the Company's financial position.
NOTE J - OTHER RELATED PARTY TRANSACTIONS
In January 1997, Tel Com Plus Jacksonville purchased the assets of Montebello
Finance, LLC for cash of $50,000 and a note payable of $200,000. Montebello
Finance was owned in trust by the children of the Founders of Tel Com
Jacksonville.
In January 1997 Tel Com East entered into a joint venture agreement with Easy
Cellular, Inc. (owned by a related party) to obtain the use of operating
licenses. (See Note K).
In July 1997 Tel Com West entered into a joint venture agreement with Easy
Cellular, Inc. (owned by a related party) to obtain the use of operating
licenses. (See Note K).
In December 1997, Easy Phone, Inc. redeemed all of the shares of stock held by
Founder of UST in exchange for Easy Phone's interest in Tel Com East, Tel Com
West and Tel Com Jacksonville.
Read the accompanying Independent Certified Public Accountants Report.
F-36
<PAGE> 79
TEL COM PLUS EAST, L.L.C., TEL COM PLUS WEST, L.L.C.,
AND TEL COM PLUS JACKSONVILLE, L.L.C.
NOTES TO FINANCIAL STATEMENTS
NOTE J - OTHER RELATED PARTY TRANSACTIONS - continued
The Company has two obligations arising from the joint venture agreements
entered into between the Company and Easy Cellular, Inc. Mr. Pollara succeeded
to the rights of Easy Cellular, Inc. under these joint venture agreements. One
joint venture agreement was entered into by Tel Com East and Easy Cellular,
Inc. on February 28, 1997 whereby Tel Com East agreed to pay Easy Cellular,
Inc. $400,000 from the proceeds of the venture. This amount has not been paid
to Mr. Pollara, as successor in interest to Easy Cellular, Inc. The second
joint venture agreement was entered into by Tel Com West and Easy Cellular on
July 24, 1997 whereby Tel Com West agreed to pay Easy Cellular approximately
$60,000. This amount has not been paid to Mr. Pollara, as successor in interest
to Easy Cellular, Inc.
NOTE K - MEMBERS' CAPITAL
Joint Venture Agreements
On February 28, 1997 Tel Com East issued 1,240 units payable to obtain the use
of operating licenses valued at $50,000 and a $400,000, 8.5% note payable to
provide capitalization of Tel Com East pursuant to a Joint Venture Agreement
with Easy Cellular (See Note G).
On July 24, 1997 Tel Com West issued 8,800 units to obtain the use operating
licenses valued at $50,000 and a 8.5% note payable for 3% of the capitalization
of Tel Com West pursuant to the Joint Venture Agreement with Easy Cellular (See
Note G).
Purchase Agreements
On December 3, 1996, Tel Com Jacksonville entered into a purchase agreement
pursuant to which D&B Holdings International, Inc. agreed to purchase 160 units
(representing 62.5% of the Tel Com East outstanding membership units) in a
private placement. As part of the agreement a $750,000, 8% annum, non-recourse
promissory note was delivered for the units. The net proceeds from the Unit
Offering were $0 and $750,000 for the nine months ended September 30, 1998 and
the period from inception to December 31, 1997, receptively.
During January 1997, Tel Com Jacksonville issued 96 units to the founding
members. These units were valued at $0 since the Company was a start up
organization.
On May 1, 1997, Tel Com Miami (presently Tel Com East) entered into a purchase
agreement pursuant to which Prime Equities Group, Inc. agreed to purchase 1,950
units (representing 50% of the Tel Com East outstanding membership units) in a
private placement for $1,539 per unit. As part of the agreement a $3,001,050
non-interest bearing, non-recourse promissory note was delivered for the units.
The Company reduced the note to $2,771,910 for units returned to the Company
and $156,684 for imputed interest. The net proceeds from the Unit Offering were
$1,675,721 and $571,218 for the nine months ended September 30, 1998 and the
period from inception to December 31, 1997, respectively. Tel Com East imputed
interest at a rate of 8%. During 1997 Tel Com East wrote off the uncollected
portion of the promoter non-recourse promissory note of $374,286.
During January 1997, Tel Com Miami (presently Tel Com East) issued 310 units to
the founding members. The units were valued at $12,496 based on the value
placed on the units issued for the operating license.
Read the accompanying Independent Certified Public Accountants Report.
F-37
<PAGE> 80
TEL COM PLUS EAST, L.L.C., TEL COM PLUS WEST, L.L.C.,
AND TEL COM PLUS JACKSONVILLE, L.L.C.
NOTES TO FINANCIAL STATEMENTS
NOTE K - MEMBERS' CAPITAL - continued
On July 21, 1997, Tel Com West entered into a purchase agreement pursuant to
which Prime Equities Group, Inc. agreed to purchase 11,000 units (representing
50% of the Tel Com West outstanding membership units) in a private placement
for $1,539 per unit. As part of the agreement a $16,455,000 non-interest
bearing; non-recourse promissory note was delivered for the units. The Company
reduced the note to $4,167,809 for units returned to the Company and imputed
interest of $256,464. The net proceeds from the Unit Offering were $2,077,274
and $770,500 for the nine months ended September 30, 1998 and the period from
inception to December 31, 1997, receptively. Tel Com East imputed interest at a
rate of 8%. During 1997 Tel Com West wrote off the uncollected portion of the
promoter non-recourse promissory note of $457,340.
During July 1997, Tel Com West issued 2,200 units to the founding members. The
units were valued at $12,496 based on the value placed on the units issued for
the operating license.
NOTE L - OPERATING AGREEMENTS
Under an operating agreement dated April 9, 1997 the members of Tel Com East and
Tel Com West agreed that net income, net loss, or capital gains of Tel Com East
and Tel Com West for each fiscal year is allocated and apportioned among the
members pro rata in accordance with their respective ownership interests. The
agreement provides that no member is liable under judgement, decree, or order of
the court, or in any other manner, for debt, obligations or liability of the
Company, except as provided by law. The duration of the Company and the
operating agreement is until December 31, 2025, unless the Company is dissolved
earlier.
Read the accompanying Independent Certified Public Accountants Report.
F-38
<PAGE> 81
================================================================================
You may rely only on the information contained in this prospectus. We have not
authorized anyone to provide information different from that contained in this
prospectus. Neither the delivery of this prospectus nor the sale of common
shares means that information contained in this prospectus is correct after the
date of this prospectus. This prospectus is not an offer to sell or solicitation
of an offer to buy these common shares in any circumstances under which the
offer or solicitation is unlawful.
Until __________, 2000, all dealers that buy, sell or trade our securities
may be required to deliver a prospectus.
- ---------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary................................................. 1
Forward-looking Statements......................................... 4
Risk Factors....................................................... 5
The Rescission Offer............................................... 10
Capitalization..................................................... 13
Selected Financial Data............................................ 13
Management's Discussion and Analysis of Financial Condition and
Results of Operations............................................ 15
Business........................................................... 23
Management......................................................... 33
Compensation of Executive Officers................................. 34
Certain Transactions............................................... 34
Security Ownership of Certain Beneficial Owners and Management..... 36
Description of Capital Stock....................................... 38
Experts............................................................ 39
Additional Information............................................. 39
Index to Financial Statements...................................... 39
Form of Acceptance................................................. A-1
Form of Rejection.................................................. B-1
</TABLE>
================================================================================
================================================================================
RESCISSION OFFER TO THE
SHAREHOLDERS OF
UNITED STATES
TELECOMMUNICATIONS,
INC.
--------------------
PROSPECTUS
--------------------
[ ],
================================================================================
<PAGE> 82
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution.
<TABLE>
<S> <C>
SEC Registration Fee $ 7,835
Legal fees $110,000
Accounting fees $160,000
Printing expenses $ 20,000
Miscellaneous expenses $ 2,000
--------
TOTAL $299,835
</TABLE>
Item 14. Indemnification of Directors and Officers.
In accordance with the Florida Business Corporation Act, Article VII of
United States Telecommunications, Inc.'s (the "Corporation") Articles of
Incorporation provide as follows:
Article VII
The Corporation shall, to the fullest extent permitted by the provisions
of the Florida Business Corporation Act, as the same may be amended and
supplemented, indemnify directors from and against any and all of the expenses,
liabilities, or other matters referred to in or covered by said provisions, and
the indemnification provided for herein shall not be deemed exclusive of any
other rights to which directors may be entitled under any provision of the
Bylaws, vote of shareholders or disinterested directors, or otherwise, both as
to action in his official capacity as director and as to action in another
capacity, including without limitation, as an officer or employee of the
Corporation, while serving as a director and shall continue as to a person who
has ceased to be a director and shall inure to the benefit of the heirs,
executors and administrators of such a person.
The Corporation may, to the fullest extent permitted by the provisions of
the Florida Business Corporation Act, as the same may be amended and
supplemented, indemnify any and all person whom it shall have the power to
indemnify under said provisions from and against any and all of the expenses,
liabilities, or other matters referred to in or covered by such provisions, and
the indemnification provided for herein shall not be deemed exclusive of any
other rights to which those indemnified by may be entitled under any provisions
of the bylaws, vote of shareholders or disinterested directors, or otherwise,
both as to action in his official capacity as to action in another capacity
whiled holding such office and shall continue as to a person who has ceased to
be an officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such person.
Article Eight of the Corporation's Bylaws provides as follows:
Article VIII
8.1. Definitions: As used in this Article, the following terms shall have
the following meanings:
(a) "Corporation" includes, in addition to the resulting corporation, any
constituent corporation (including any constituent of a constituent) absorbed in
a consolidation or merger, so that any person who is or was a director, officer,
employee, or agent of a constituent corporation, or is or was serving at the
request of a constituent corporation as a director, officer, employee, or agent
of another corporation, partnership, joint venture, trust, or other enterprise,
is in the same position under this section with respect to the resulting or
surviving corporation as he would have with respect to such constituent
corporation if its separate existence had continued;
(b) "Other enterprises" includes employee benefit plans;
(c) "Expenses" includes counsel fees, including those for appeal;
II-1
<PAGE> 83
(d) "Liability" includes obligations to pay a judgment, settlement,
penalty, fine (including an excise tax assessed with respect to any employee
benefit plan), and expenses actually and reasonably incurred with respect to a
proceeding;
(e) "Proceeding" includes any threatened pending, or completed action,
suit, or other type of proceeding, whether civil, criminal, administrative, or
investigative and whether formal or informal;
(f) "Agent" includes a volunteer;
(g) "Serving at the request of the corporation" includes any service as a
director, officer, employee, or agent of the corporation that imposes duties on
such persons, including duties relating to an employee benefit plan and its
participants or beneficiaries; and
(h) "Not opposed to the best interest of the corporation" describes the
actions of a person who acts in good faith and in a manner he reasonably
believes to be in the best interests of the participants and beneficiaries of an
employee benefit plan.
8.2 Authority to Indemnify.
(a) Except as otherwise provided in this Section, the Corporation (i)
shall indemnify any person who was or is a director of the Corporation and was
or is a party to any proceeding (other than an action by, or in the right of,
the Corporation), by reason of the fact that he is or was a director, officer,
employee, or agent of the Corporation or is or was serving at the request of the
Corporation as a director, officer, employee, or agent of another corporation,
partnership, joint venture, trust, or other enterprise and (ii) may indemnify
any other person who was or is a party to any proceeding (other than an action
by, or in the right of, the Corporation), by reason of the fact that he is or
was an officer, employee or agent of the Corporation or is or was serving at the
request of the Corporation as a director, officer, employee, or agent of another
corporation, partnership, joint venture, trust, or other enterprise, against
liability incurred in connection with such proceeding, including any appeal
thereof, if he acted in good faith and in a manner he reasonably believed to be
in, or not opposed to, the best interests of the Corporation and, with respect
to any criminal action or proceeding, had no reasonable cause to believe his
conduct was unlawful. The termination of any proceeding by judgment, order,
settlement, or conviction or upon a plea of nolo contendere or its equivalent
shall not, of itself, create a presumption that the person did not act in good
faith and in a manner which he reasonably believed to be in, or not opposed to,
the best interests of the Corporation or, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
(b) The Corporation (i) shall indemnify any person who was or is a
director of the Corporation and who was or is a party to any proceeding by or in
the right of the Corporation to procure a judgment in its favor by reason of the
fact that he is or was a director, officer, employee, or agent of the
Corporation or is or was serving at the request of the Corporation as director,
officer, employee, or agent of another corporation, partnership, joint venture,
trust, or other enterprise, and (ii) may indemnify any other person who was or
is a party to any proceeding by or in the right of the Corporation to procure a
judgment in its favor by reason of the fact that he is or was an officer,
employee, or agent of the Corporation or is or was serving at the request of the
Corporation as director, officer, employee, or agent of another corporation,
partnership, joint venture, trust, or other enterprise, against expenses and
amounts paid in settlement not exceeding, in the judgment of the Board of
Directors, the estimated expense of litigating the proceeding to conclusion,
actually and reasonably incurred in connection with the defense or settlement of
such proceeding, including any appeal thereof. Such indemnification shall be
authorized if such person acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the Corporation,
except that no indemnification shall be made under this subsection in respect of
any claim, issue, or matter as to which such person shall have been adjudged to
be liable unless, and only to the extent that, the court in which such
proceeding was brought, or any other court of competent jurisdiction, shall
determine upon application that, despite the adjudication of liability but in
view of all circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which such court shall deem proper.
(c) To the extent that a director of the Corporation has been successful
on the merits or otherwise in defense of any proceeding referred to in
subsection (a) or subsection (b), or in defense of any claim, issue, or matter
therein, he shall be indemnified against expenses actually and reasonably
incurred by him in connection therewith. To the extent that an officer,
employee, or agent of the Corporation has been successful on the merits or
otherwise in defense of any proceeding referred to in subsection (a) or
subsection (b), or in defense of any claim, issue, or matter therein, he may be
indemnified against expenses actually and reasonably incurred by him in
connection therewith.
8.3 Advances for Expenses.
II-2
<PAGE> 84
(a) Expenses incurred by a director in defending a civil or criminal
proceeding shall be paid by the Corporation in advance of the final disposition
of such proceeding upon receipt of an undertaking by or on behalf of such
director to repay such amount if he is ultimately found not to be entitled to
indemnification by the Corporation pursuant to this section. Expenses incurred
by an officer in defending a civil or criminal proceeding may be paid by the
Corporation in advance of the final disposition of such proceeding upon receipt
of an undertaking by or on behalf of such officer to repay such amount if he is
ultimately found not to be entitled to indemnification by the Corporation
pursuant to this section. Expenses incurred by other employees and agents may be
paid in advance upon such terms or conditions that the Board of Directors deems
appropriate.
(b) The indemnification and advancement of expenses provided pursuant to
this Article are not exclusive, and a Corporation may make any other or further
indemnification or advancement of expenses of any of its directors, officers,
employees, or agents, under any bylaw, agreement, vote of shareholders or
disinterested directors, or otherwise, both as to action in his official
capacity and as to action in another capacity while holding such office.
However, indemnification or advancement of expenses shall not be made to or on
behalf of any director, officer, employee, or agent if a judgment or other final
adjudication establishes that his actions, or omissions to act, were material to
the cause of action so adjudicated and constitute:
(i) A violation of the criminal law, unless the director, officer,
employee, or agent had reasonable cause to believe his conduct was
lawful or had no reasonable cause to believe his conduct was
unlawful;
(ii) A transaction from which the director, officer, employee, or
agent derived an improper personal benefit;
(iii) In the case of a director, a circumstance under which the
liability provisions for unlawful distributions are applicable; or
(iv) Willful misconduct or a conscious disregard for the best
interests of the Corporation in a proceeding by or in the right of
the Corporation to procure a judgment in its favor or in a
proceeding by or in the right of a shareholder.
(c) Indemnification and advancement of expenses as provided in this
Article shall continue as, unless otherwise provided when authorized or
ratified, to a person who has ceased to be a director, officer, employee, or
agent and shall inure to the benefit of the heirs, executors, and administrators
of such a person, unless otherwise provided when authorized or ratified.
8.4 Determination and authorization of indemnification.
(a) Any indemnification under subsection 8.2 (a) or subsection 8.2(b),
unless pursuant to a determination by a court, shall be made by the Corporation
only as authorized in the specific case upon a determination that
indemnification of the director, officer, employee, or agent is proper in the
circumstances because he has net the applicable standard of conduct set forth in
subsection 8.2(a) or subsection 8.2(b). Such determination shall be made:
(i) By the Board of Directors by a majority vote of a quorum
consisting of directors who were not parties to such proceeding;
(ii) If such a quorum is not obtainable or even if obtainable, by
majority vote of a committee duly designated by the Board of
Directors (in which directors who are parties may participate)
consisting solely of two or more directors not at the time parties
to the proceeding;
(iii) By independent legal counsel:
l. Selected by the Board of Directors prescribed in
paragraph (i) or the committee prescribed in paragraph
(ii); or
2. If a quorum of the directors cannot be obtained for
paragraph (i) and the committee cannot be designated
under paragraph (ii), selected by majority vote of the
full Board of Directors (in which directors who are
parties may participate); or
(iv) By the shareholders by a majority vote of a quorum consisting
of shareholders who were not parties to such proceeding or, if no
such quorum is obtainable, by a majority vote of shareholders who
were not parties to such proceeding.
(b) Evaluation of the reasonableness of expenses and authorization of
indemnification shall be made in the same manner as the determination that
indemnification is permissible. However, if the determination of permissibility
is made by independent legal counsel, persons specified by subsection
8.4(a)(iii) shall evaluate the reasonableness of expenses and may authorize
indemnification.
8.5 Application to Court for indemnification or advancement of expenses.
II-3
<PAGE> 85
(a) Unless the Corporation's articles of in Corporation provide otherwise,
notwithstanding the failure of a Corporation to provide indemnification, and
despite any contrary determination of the Board or of the shareholders in the
specific case, a director, officer, employee, or agent of the Corporation who is
or was a party to a proceeding may apply for indemnification or advancement of
expenses, or both, to the court conducting the proceeding, to the circuit court,
or to another court of competent jurisdiction. On receipt of an application, the
court, after giving any notice that it considers necessary, may order
indemnification and advancement of expenses, including expenses incurred in
seeking court-ordered indemnification or advancement of expenses, if it
determines that:
(i) The director, officer, employee, or agent is entitled to
mandatory indemnification under subsection 8.2(c), in which case the
court shall also order the Corporation to pay the director
reasonable expenses incurred in obtaining court-ordered
indemnification or advancement of expenses;
(ii) The director, officer, employee, or agent is entitled to
indemnification or advancement of expenses, or both, by virtue of
the exercise by the Corporation of its power pursuant to subsection
8.3(b); or
(iii) The director, officer, employee, or agent is fairly and
reasonably entitled to indemnification or advancement of expenses,
or both, in view of all the relevant circumstances, regardless of
whether such person met the standard of conduct set forth in
subsection, 8.2(a), subsection 8.2(b), or subsection 8.3(b).
Item 15. Recent Sales of Unregistered Securities.
On February 12, 1999, the Corporation offered a private placement of a
minimum of 500 and a maximum of 1,600,000 shares of common stock to accredited
investors at an offering price of $3 per share for an aggregate consideration of
between $1,500 and $4,800,000. As of September 30, 1999, the Corporation had
sold 414,430 shares of its common stock in this offering resulting in net
proceeds to the Corporation of approximately $1,234,545. The offering was open
until October 1999. On November 7, 1999, the Corporation's board of directors
extended the offering for six additional months. The Corporation has been
advised that this offering is exempt for the registration requirements of the
federal securities laws pursuant to Rule 505 of Regulation D under the
Securities Act of 1933.
On February 17, 1999, the Corporation offered and sold 400,000 shares of
its common stock to Joseph Thacker, an existing shareholder of the Corporation,
for an aggregate purchase price of $150,000. The offer and sale was made in
reliance upon the exemption from the federal securities registration
requirements set forth in Section 4(2) of the Securities Act of 1933.
On September 1, 1999, the Corporation offered and sold (i) 150,000 shares
of its common stock to Larry M. Roberts for an aggregate purchase price of
$150,000, (ii) 150,000 shares of its common stock to Marion T. Wilbanks for an
aggregate purchase price of $150,000 and (iii) 150,000 shares of its common
stock to Khalid Elmanouzi for an aggregate purchase price of $150,000. The offer
and sale was made in reliance upon the exemption from the federal securities
registration requirements set forth in Section 4(2) of the Securities Act of
1933.
Item 16.Exhibits and Financial Statement Schedule
The exhibits filed as part of this registration statement are as follows:
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibit
- ----------------------------------
<S> <C>
3.1 Articles of Incorporation of the Corporation
3.2 Bylaws of the Corporation
4.1 Promissory Notes issued by United States Telecommunications, Inc. to
Richard Pollara dated November 22, 1999 in the principal amount of
$400,000
4.2 Promissory Note issued by United States Telecommunications, Inc. to
Richard Pollara dated November 22, 1999 in the principal amount of
$59,002.54
10.1 Resale Agreement between GTE North Incorporated and Contel of the
South Incorporated d/b/a/ GTE Systems of the South and United States
Telecommunications dated as of December 23, 1998
</TABLE>
II-4
<PAGE> 86
<TABLE>
<S> <C>
10.2 Local Exchange Telecommunications Services Resale Agreement by and
between Ameritech Information Industry Services and United States
Telecommunications, Inc. dated as of August 10, 1998
10.3 Resale Service Agreement by and between New England Telephone and
Telegraph Company d/b/a/ Bell Atlantic - Massachusetts and United
States Telecommunications, Inc. dated as of March 3, 1998.
10.4 Resale Agreement by and between BellSouth Telecommunications, Inc.
and United States Telecommunications, Inc. dated as of
May 28, 1998
10.5 Resale Agreement by and between Southwestern Bell Telephone Company
and United States Telecommunications, Inc. dated as of
October 1, 1998
10.6 Master Resale Agreement for the State of Indiana by and between
United Telephone Company of Indiana and United States
Telecommunications, Inc. (Sprint) dated as of November 1, 1998
11 Statement re: Computation of Per Share Earnings
23.1 Consent of Independent Auditors
27.1 Financial Data Schedule for the nine month period ended September
30, 1999 (for SEC use only)
27.2 Financial Data Schedule for the year ended December 31, 1998 (for
SEC use only)
</TABLE>
Item 17. Undertakings.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the Corporation, or otherwise, the Corporation has been advised that
in the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the Corporation of expenses incurred or paid by a director,
officer or controlling person of the Corporation in the successful defense of
any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Corporation will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
The Corporation will:
(1) For determining any liability under the Act, treat the information
omitted from the form of prospectus filed as part of this registration statement
in reliance upon Rule 430A and contained in a form of prospectus filed by the
Corporation under Rule 424(b)(1), or (4) or 497(h) under the Securities Act as
part of this registration statement as of the time the Commission declared it
effective.
(2) For determining any liability under the Act, treat each post-effective
amendment that contains a form of prospectus as a new registration statement for
the securities offered in the registration statement, and that offering of the
securities at that time as the initial bona fide offering of those securities.
II-5
<PAGE> 87
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto, duly authorized, in the City of Clearwater, State of
Florida, on December 21, 1999.
UNITED STATES TELECOMMUNICATIONS, INC.
By: /s/ RICHARD J. POLLARA
--------------------------------
Richard J. Pollara
President
Duly Authorized Representative
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities indicated as of December 21, 1999.
/s/ RICHARD J. POLLARA
- -------------------------------------
Richard J. Pollara, President and Director Date: December 21, 1999
(Principal Executive and Accounting Officer)
/s/ SAM DEAN
- -----------------------------------
Sam Dean, Director Date: December 21, 1999
II-6
<PAGE> 88
APPENDIX A
ACCEPTANCE OF RESCISSION OFFER
------------
YOU MAY ELECT TO ACCEPT OR REJECT THE RESCISSION OFFER. IF YOU
WISH TO REJECT THE RESCISSION OFFER, YOU SHOULD EXECUTE AND
RETURN TO THE COMPANY THE REJECTION FORM ON APPENDIX B.
IF YOU WISH TO ACCEPT THE RESCISSION OFFER, PLEASE EXECUTE AND
RETURN THIS FORM, IN ACCORDANCE WITH THE INSTRUCTIONS SET
FORTH BELOW.
------------
United States Telecommunications, Inc.
5251 110th Avenue North, Suite 118
Clearwater, Florida 33760
Ladies and Gentlemen:
The undersigned acknowledges receipt of the Prospectus dated __________
___, 2000 of United States Telecommunications, Inc. (the "Company"), together
with the Appendices thereto (the "Prospectus"). The Company is offering, upon
the terms and conditions set forth herein and in the Prospectus, to its holders
of its common stock (the "Common Stock") and Class A preferred stock (the
"Preferred Stock," together with the Common Stock, the "Stock") the right to
rescind their purchase of securities of one or more of the Company's predecessor
entities, Tel Com Plus East, LLC, Tel Com Plus West, LLC and Tel Com Plus
Jacksonville, LLC (the "Rescission Offer"). Accordingly, the undersigned
acknowledges that the Company is offering to purchase the Stock of the
undersigned as set forth below.
I hereby accept the Rescission Offer for the Stock listed below. I
direct that all of the payment be made for shares of Stock surrendered herewith
or all of the payment to be made for the shares resold at a loss in a bona fide
transaction prior to the date hereof be made to the address appearing at the end
of this Rescission Offer Acceptance form. I understand that as a result of
accepting the Rescission Offer, I will no longer hold the shares of Stock
represented by the certificates tendered herewith.
The following certificates representing shares of Stock purchased on
the date set forth below are enclosed herewith:
A-1
<PAGE> 89
Number of Shares Date of Purchase Certificate Numbers
Please include satisfactory proof of the price paid for the
above-listed securities of Tel Com East, Tel Com West and/or Tel Com
Jacksonville. Satisfactory proof may take the form of a canceled check or a
receipt from the broker, dealer or other person conducting such sale. The
purchase price may have been paid in either cash or property. If the purchase
price was paid in property, the price will be deemed to be the fair market value
of such properrty at the time of the sale. If the proof of the purchase price is
not reasonably satisfactory to the Company, we may require additional proof.
If you have resold the shares of Stock to a third party at a loss prior
to the date hereof in a bona fide transaction, please enclose herewith proof
reasonably satisfactory to the Company evidencing the sale of the shares at a
loss in a bona fide transaction. Please list the number of shares purchased and
the amount of consideration you received upon resale.
Number of Shares Consideration Received
Satisfactory proof of sale at a loss may take the form of appropriate
confirmations of sale from brokers or dealers. If the proof of a bona fide sale
at a loss is not reasonably satisfactory to the Company, the Company may require
additional proof. In addition, the Company shall require evidence that any sale
of the Stock was a bona fide transfer of such shares.
*If you require additional space, please complete an additional sheet,
sign it and attach it to this form.
1. Guarantee of Signatures. Except as set forth below, signatures on
the Acceptance of Rescission Offer form need not be guaranteed.
A-2
<PAGE> 90
2. Delivery of Acceptance of Rescission Offer Forms and Certificates.
You, as a Rescission Offeree, must properly complete and duly execute and mail
or deliver this Acceptance of Rescission Offer form, together with the
certificate(s) representing shares of Common Stock and Class A Preferred Stock
to be surrendered in acceptance of the offer to rescind and other required
documents to the Company at the address set forth above. IN ORDER TO ACCEPT THE
RESCISSION OFFER, ALL MATERIALS MUST BE RECEIVED BY THE COMPANY BY _____________
___, 2000.
The Company reserves the absolute right to reject any and all
surrenders of shares of Common Stock or Class A Preferred Stock (i) that are not
in proper form or otherwise not valid or (ii) the acceptance of which would be,
in the opinion of the Company's counsel, unlawful. The Company reserves the
absolute right to waive any defect or irregularity in the surrender of shares of
Common Stock or Class A Preferred Stock.
3. Signatures on the Rescission Offer Acceptance Form. In order to
accept the Rescission Offer, you must complete and execute in full the signature
page and power of attorney on pages A-3 and A-4, respectively. If the shares of
Common Stock or Class A Preferred Stock surrendered hereby are owned of record
by two or more joint owners, all such owners must sign this Acceptance of
Rescission Offer form. If any of the shares of Common Stock or Class A Preferred
Stock are registered in different names on several certificates, it will be
necessary to complete, sign and submit as many separate Acceptance of Rescission
Offer forms as there are different registrations of certificates.
When this Acceptance of Rescission Offer form is signed by the
registered holder(s) of the certificate(s) listed and transmitted hereby, the
Power of Attorney to Transfer Stock on page A-4 must be completed and signed
exactly as the name or names of the registered holder or holders appear on the
certificate(s). Signatures on such power of attorney must be guaranteed.
4. Mutilated, Lost, Destroyed or Stolen Certificates. If any
certificate has been mutilated, lost, destroyed or stolen, the holder should
promptly notify the Company. The holder will then be directed as to the steps
that must be taken in order to replace the certificate. The Acceptance of
Rescission Offer form and related documents cannot be processed until the
procedures for replacing lost, mutilated, destroyed or stolen certificate(s)
have been followed.
5. Questions and Requests for Assistance or Additional Copies.
Questions and requests for assistance may be directed to representatives of the
Company, at the address and telephone number set forth in the Prospectus.
THE METHOD OF DELIVERY OF THIS ACCEPTANCE OF RESCISSION
OFFER FORM, THE CERTIFICATE FOR SHARES OF COMMON STOCK AND CLASS
A-3
<PAGE> 91
A PREFERRED STOCK, AND ALL OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK
OF THE HOLDER AND THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED
BY THE COMPANY. IF DELIVERY IS TO BE MADE BY MAIL, REGISTERED MAIL, WITH RETURN
RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED.
DELIVERY OF THIS ACCEPTANCE OF RESCISSION OFFER FORM TO AN ADDRESS
OTHER THAN TO "UNITED STATES TELECOMMUNICATIONS, INC., 5251 110TH AVENUE NORTH,
SUITE 118, CLEARWATER, FLORIDA 33760," WILL NOT CONSTITUTE A VALID ACCEPTANCE.
THIS ACCEPTANCE OF RESCISSION OFFER IS TO BE COMPLETED AND SIGNED BY EACH
RESCISSION OFFEREE WHO SURRENDERS HEREWITH COMMON STOCK AND/OR CLASS A PREFERRED
STOCK FOR ACCEPTANCE OF THE RESCISSION OFFER.
I hereby accept the Rescission Offer for the above Common Stock and/or
Class A Preferred Stock. I direct that all payments be made to the undersigned
at the address set forth below. I understand and agree that as a result of such
acceptance, I will no longer hold the shares of Common Stock and/or Class A
Preferred Stock in the Company.
<TABLE>
<S> <C>
- ------------------------------------- ------------------------------------------
Name (Please Print) Signature
- -------------------------------------- ------------------------------------------
Street Address Date
- -------------------------------------- ------------------------------------------
City, State and Zip Code of Residence Social Security or Taxpayer Identification
Number
</TABLE>
A-4
<PAGE> 92
POWER OF ATTORNEY TO TRANSFER STOCK
For value received,_____________________________, hereby assigns and
Name(s) of Rescission Offeree
transfers unto United States Telecommunications,Inc.____________________________
Number of Shares subject to the Rescission Offer
shares of the common stock of United States Telecommunications, Inc. standing
in his or her name on the books of said corporation and represented by
Certificate No(s)._______ herewith and hereby assigns and transfers unto
United States Telecommunications, Inc.
__________________________________ shares of the Class A preferred stock
Number of shares subject to the Rescission Offer
of United States Telecommunications, Inc. standing in his or her name on
the books of said corporation and represented by Certificate No(s)._______
herewith and does hereby irrevocably constitute and appoint _________ and
his or her assigns, and each of them, attorney to transfer the said stock on the
books of the within named corporation with full power of substitution in the
premises.
Dated: Signature:
-------------------- -------------------------
Print Name:
------------------------
THIS FORM SHOULD BE MAILED OR SENT TO THE COMPANY AS SOON AS PRACTICABLE, BUT IN
NO EVENT BEING RECEIVED BY THE COMPANY LATER THAN THE EXPIRATION DATE OF THIS
RESCISSION OFFER, WHICH IS ____________ ___, 2000.
A-5
<PAGE> 93
APPENDIX B
REJECTION OF RESCISSION OFFER
------------
YOU MAY ELECT TO ACCEPT OR REJECT THE RESCISSION OFFER.
IF YOU WISH TO ACCEPT THE RESCISSION OFFER, DO NOT EXECUTE AND
RETURN THIS FORM.
IF YOU WISH TO REJECT THE RESCISSION OFFER, PLEASE EXECUTE AND
RETURN THIS FORM, IN ACCORDANCE WITH THE INSTRUCTIONS SET
FORTH BELOW.
------------
United States Telecommunications, Inc.
5251 110th Avenue North
Suite 118
Clearwater, Florida 33760
Ladies and Gentlemen:
The undersigned acknowledges receipt of the Prospectus dated __________
___, 2000 of United States Telecommunications, Inc. (the "Company"), together
with the Appendices thereto (the "Prospectus"). The Company is offering, upon
the terms and conditions set forth herein and in the Prospectus, to its holders
of its common stock (the "Common Stock") and Class A preferred stock (the
"Preferred Stock," together with the Common Stock, the "Stock") the right to
rescind their purchase of securities of one or more of the Company's predecessor
entities, Tel Com Plus East, LLC, Tel Com Plus West, LLC and Tel Com Plus
Jacksonville, LLC (the "Rescission Offer"). Accordingly, the undersigned
acknowledges that the Company is offering to purchase the Stock of the
undersigned as set forth below.
I hereby reject the Rescission Offer. I understand that as a result of
rejecting the Rescission Offer, I continue to hold the shares of Stock. I
further understand that rejection of the Rescission Offer, and retaining an
investment in the Company subject to this Rescission Offer, is speculative,
involves a high degree of risk and is suitable only for persons of substantial
financial means who are able to bear the risk of loss of their entire
investment.
1. In connection with such rejection of the Rescission Offer, the
undersigned hereby represents and warrants as follows:
B-1
<PAGE> 94
(a) The undersigned understands and acknowledges that the
rejection of the Rescission Offer is speculative in nature and involves
significant risks, and the undersigned has taken full cognizance of and
understands all of the risk factors relating to the rejection of the Rescission
Offer, including those set forth under the caption "Risk Factors" in the
Prospectus.
(b) The undersigned represents that he or she has analyzed and
reviewed the Prospectus and this rejection form before making the decision to
reject the Rescission Offer.
(c) The undersigned has been given the opportunity to ask
representatives of the Company, questions relating to the Company, its finances
and its business plans and has had access to all books and records of the
Company and all other documents relating to the business and financial affairs
of the Company as well as such other information concerning the Company as he
has considered necessary to make a decision to reject to Rescission Offer and
has availed himself of that opportunity to the full extent desired, and
understands the financial condition, assets, liabilities, business plans, and
operations of the Company.
(d) The undersigned has sufficient knowledge and experience in
financial matters to evaluate the merits and risks of retaining an investment in
the Company, and the undersigned is financially able to bear the economic risk
of loss of the entire investment should the Stock become worthless.
(e) The undersigned is aware that the Company entered into a
Consent Agreement with the State of Florida, Department of Banking and Finance,
which mandated that the Company make a rescission offer to certain of its
holders of Common Stock and Class A Preferred Stock. The undersigned is further
aware that the Company has a history of losses and deficits and that the
Independent Auditors' Report prepared in connection with the Rescission Offer
indicates substantial doubt about the Company's ability to continue as a going
concern. As a result, an investment in the Shares is a speculative investment
involving a high degree of risk of loss of the entire investment.
(f) The undersigned acknowledges that there has been no market
for the Common Stock and/or the Preferred Stock and there can be no assurance
that such a market will develop. Thus, the Shares are suitable for purchase only
by investors who can afford to have substantial funds committed to a nonliquid,
investment for an indefinite period of time.
(g) The undersigned acknowledges that the Company and others
will rely on the representations, warranties and agreements contained herein and
that, if any of the foregoing representations, warranties and agreements made by
the undersigned are no longer accurate, it shall promptly notify the Company.
B-2
<PAGE> 95
2. Delivery of Rejection of Rescission Offer Forms and Certificates.
You, as a Rescission Offeree, must properly complete and duly execute and mail
or deliver this Rejection of Rescission Offer form. IN ORDER TO REJECT THE
RESCISSION OFFER, ALL MATERIALS MUST BE RECEIVED BY THE COMPANY BY __________
___, 2000
3. Signatures on the Rescission Offer Rejection Form. If the shares of
Common Stock and/or Class A Prferred Stock retained by the undersigned are owned
of record by two or more joint owners, all such owners must sign this Rejection
of RescissionOffer form. If any of the shares of Stock are registered in
different names on several certificates, it will be necessary to complete, sign
and submit as many separate Rejection of Rescission Offer forms as there are
different registrations of certificates.
4. Questions and Requests for Assistance or Additional Copies.
Questions and requests for assistance may be directed to representatives of the
Company, at the address and telephone number set forth in the Prospectus.
THE METHOD OF DELIVERY OF THIS REJECTION OF RESCISSION OFFER FORM IS AT
THE ELECTION AND RISK OF THE HOLDER AND THE DELIVERY WILL BE DEEMED MADE ONLY
WHEN ACTUALLY RECEIVED BY THE COMPANY. IF DELIVERY IS TO BE MADE BY MAIL,
REGISTERED MAIL, WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS
RECOMMENDED.
DELIVERY OF THIS REJECTION OF RESCISSION OFFER FORM TO AN ADDRESS OTHER
THAN TO "THE UNITED STATES TELECOMMUNICATIONS INC., 5251 110TH AVENUE NORTH,
SUITE 118, CLEARWATER, FLORIDA 33760" WILL NOT CONSTITUTE A VALID REJECTION.
THIS REJECTION OF RESCISSION OFFER IS TO BE COMPLETED AND SIGNED BY EACH
RESCISSION OFFEREE WHO SURRENDERS HEREWITH COMMON STOCK OR CLASS A PREFERRED
STOCK FOR REJECTION OF THE RESCISSION OFFER.
B-3
<PAGE> 96
I hereby reject the Rescission Offer for the Shares purchased by me
from the Company. I understand and agree that as a result of such rejection, I
will continue to hold shares of Common Stock and/or Class A Preferred Stock in
the Company.
- -------------------------------------- -----------------------------------
Name (Please Print) Signature
-----------------------------------
Date
THIS FORM SHOULD BE MAILED OR SENT AS SOON AS PRACTICABLE, BUT IN NO EVENT BEING
RECEIVED BY THE COMPANY LATER THAN THE EXPIRATION DATE OF THIS RESCISSION OFFER,
WHICH IS ________ __, 2000.
B-4
<PAGE> 1
EXHIBIT 3.1
ARTICLES OF RESTATEMENT
OF
UNITED STATES TELECOMMUNICATIONS, INC.
United States Telecommunications, Inc., a corporation
organized and existing under the laws of the State of Florida (the
"Corporation"), hereby certifies through its undersigned authorized
representative as follows:
I. The name of the Corporation is United States Telecommunications, Inc.
The Corporation was originally incorporated by virtue of its Articles
of Incorporation filed with the Secretary of State of the State of
Florida on November 19, 1997. Articles of Amendment to the Articles of
Incorporation were filed with the Secretary of State of the State of
Florida on September 2, 1998.
II. Pursuant to Section 607.1006 of the Florida Business Corporation Act,
the Corporation does hereby amend and restate its Articles of
Incorporation by virtue of the Amended and Restated Articles of
Incorporation of the Corporation annexed hereto and made a part hereof.
III. The annexed Amended and Restated Articles of Incorporation contains
amendments to the Articles of Incorporation of the Corporation
requiring shareholder approval pursuant to Section 607.1003 of the
Florida Business Corporation Act.
IV. Pursuant to Section 607.1003 of the Florida Business Corporation Act,
these Articles of Restatement and the annexed Amended and Restated
Articles of Incorporation were adopted by the Board of Directors of the
Corporation by written consent dated October 11, 1999 and by the
shareholders of the Corporation by written consent dated October 11,
1999.
Dated: October 11, 1999
UNITED STATES TELECOMMUNICATIONS,
INC.
/s/ Richard Pollara
----------------------------------------
President
<PAGE> 2
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
UNITED STATES TELECOMMUNICATIONS, INC.
ARTICLE I
The name of the Corporation is "United States Telecommunications, Inc."
ARTICLE II
The street address and mailing address of the principal office of the
Corporation is:
Suite 118
5251 110th Avenue North
Clearwater, Florida 33760
ARTICLE III
PART A. AUTHORIZED SHARES
The total number of shares of stock which the Corporation has authority
to issue is 300,000,000 shares consisting of:
(i) 200,000,000 shares of Preferred Stock, par value
$0.10 per share (the "Preferred Stock"), of which 40,000,000 shares shall be
designated the "Class A Preferred Stock"; and
(ii) 100,000,000 shares of Common Stock, no par value per
share (the "Common Stock).
The Preferred Stock and the Common Stock are herein collectively
referred to as the "Stock." The Class A Preferred Stock shall have the
preferences, limitations and relative rights as set forth in Part B of this
Article III hereof. The Board of Directors of the Corporation shall have the
authority to determine the preferences, limitations and relative rights of the
shares of any other class of Preferred Stock prior to the issuance of any such
shares.
PART B. Class A Preferred Stock
Section 1. Dividends
The holders of the shares of Class A Preferred Stock shall be
entitled to receive, and the Corporation shall be bound to pay thereon,
preferential noncumulative dividends, as and when declared by the Board of
Directors, out of funds legally available therefor as determined
2
<PAGE> 3
pursuant and subject to the provisions of the Florida Business Corporation Act,
at a percentage rate per share per annum in respect of each share of Class A
Preferred Stock as determined by the Board of Directors, payable during each
calendar year on such days and dates as shall be determined by the Board of
Directors of the Corporation, before any dividends shall be declared or paid
upon or set apart for the holders of shares of Common Stock. If no dividends are
declared by the Board of Directors, no dividends shall be due and payable to the
holders of the shares of Class A Preferred Stock.
Section 2. Liquidation
In the event of any liquidation, dissolution or winding up of
the Corporation, whether voluntary or involuntary, the holders of the shares of
Class A Preferred Stock shall be entitled to receive out of the assets of the
Corporation (whether from capital or surplus or both) the par value amount of
their shares of Class A Preferred Stock plus any declared and unpaid dividends
before distribution shall be made to the holders of the shares of Common Stock;
thereafter, the holders of the shares of Common Stock shall be entitled to
participate ratably on a per share basis in the distribution of the remaining
assets. If, upon such liquidation, dissolution or winding up of the Corporation,
the assets of the Corporation shall be insufficient to permit the payment in
full to the holders of the shares of Class A Preferred Stock of the amount
distributable as aforesaid, then the entire assets of the Corporation shall be
distributed ratably among the holders of the shares of Class A Preferred Stock.
The foregoing provisions of this paragraph shall not, however, be deemed to
require the distribution of assets among the holders of the shares of Class A
Preferred Stock and the holders of the shares of Common Stock in the event of a
consolidation, merger, lease or sale, which does not in fact result in the
liquidation or winding up of the enterprise.
Section 3. Voting
The holders of the shares of Class A Preferred Stock shall
have voting power identical to that of the shares of Common Stock and shall vote
with the share of Common Stock as one voting class. The holders of the shares of
Class A Preferred Stock shall have the right to participate in any meeting of
the shareholders and shall be entitled to any notice of any such meeting and
shall be considered shareholders for the purpose of any election, meeting,
consent or waiver of notice, under the provisions of any law now in force or
which may hereafter be enacted.
PART C. COMMON STOCK
Section 1. Dividends
Subject to the provisions of the Class A Preferred Stock set
forth in Section 1 of Part B of this Article III, the holder of Common Stock
shall be entitled to receive dividends ratably on a per share basis out of funds
legally available therefor as determined pursuant and
3
<PAGE> 4
subject to the provisions of the Florida Business Corporation Act at such times
and in such amounts as the Board of Directors may determine in their sole
discretion.
Section 2. Liquidation
Subject to the provisions of the Class A Preferred Stock set
forth in Section 2 of Part B of this Article III, the holders of the Common
Stock shall be entitled to participate ratably on a per share basis in all
distributions to the holders of Common Stock in any liquidation, dissolution or
winding up of the Corporation, whether voluntary or involuntary. The foregoing
provisions of this paragraph shall not, however, be deemed to require the
distribution of assets among the holders of the shares of Common Stock in the
event of a consolidation, merger, lease or sale, which does not in fact result
in the liquidation or winding up of the enterprise.
Section 3. Voting
Except as otherwise required by applicable law, the holders of
the Common Stock shall be entitled to one vote per share on all matters to be
voted on by the shareholders of the Corporation.
ARTICLE IV
The street address of the registered office of the Corporation is:
Suite 118
5251 110th Avenue North
Clearwater, Florida 33760
The registered agent of the Corporation at such address is Richard
Pollara. The written acceptance of the said registered agent, as required by the
provisions of Section 607.0501(3) of the Florida Business Corporation Act, is
set forth following the signature of the undersigned and is made a part of these
Amended and Restated Articles of Incorporation.
ARTICLE V
The number of directors which shall constitute the whole Board of
Directors of the Corporation shall be determined pursuant to the Bylaws of the
Corporation as provided therein.
ARTICLE VI
No director of the Corporation shall be personally liable to the
Corporation or its shareholders for monetary damages for breach of fiduciary
duty by such director as a director; provided however, that this Article VI
shall not eliminate nor limit the liability of a director (i) for any breach of
such director's duty of loyalty to the Corporation or its shareholders, (ii) for
4
<PAGE> 5
acts or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 607.0831 of the Florida Business
Corporation Act or (iv) for any transaction from which such director derived an
improper personal benefit. If the Florida Business Corporation Act is amended to
authorize corporate action further eliminating or limiting the personal
liability of directors, then the liability of a director under the Corporation
shall be eliminated or limited to the full extent permitted by the Florida
Business Corporation Act, as so amended. No amendment to or repeal of this
Article VI shall apply to or have any effect on the liability or alleged
liability of any director of the Corporation for or with respect to any acts or
omissions of such director occurring at the time of or prior to such amendment
or repeal. Any repeal or modification of this Article VI shall not adversely
affect any right or protection of a director of the Corporation existing under
these Amended and Restated Articles of Incorporation.
ARTICLE VII
The Corporation shall, to the fullest extent permitted by the
provisions of the Florida Business Corporation Act, as the same may be amended
and supplemented, indemnify directors from and against any and all of the
expenses, liabilities, or other matters referred to in or covered by said
provisions, and the indemnification provided for herein shall not be deemed
exclusive of any other rights to which directors may be entitled under any
provision of the Bylaws, vote of shareholders or disinterested directors, or
otherwise, both as to action in his official capacity as director and as to
action in another capacity, including without limitation, as an officer or
employee of the Corporation, while serving as a director and shall continue as
to a person who has ceased to be a director and shall inure to the benefit of
the heirs, executors and administrators of such a person.
The Corporation may, to the fullest extent permitted by the provisions
of the Florida Business Corporation Act, as the same may be amended and
supplemented, indemnify any and all person whom it shall have the power to
indemnify under said provisions from and against any and all of the expenses,
liabilities, or other matters referred to in or covered by such provisions, and
the indemnification provided for herein shall not be deemed exclusive of any
other rights to which those indemnified by may be entitled under any provisions
of the bylaws, vote of shareholders or disinterested directors, or otherwise,
both as to action in his official capacity as to action in another capacity
whiled holding such office and shall continue as to a person who has ceased to
be an officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such person.
IN WITNESS WHEREOF, the undersigned has executed these Amended and
Restated Articles of Incorporation on the 11th day of October, 1999.
/s/ Richard Pollara
-------------------------------------
President
5
<PAGE> 1
EXHIBIT 3.2
BYLAWS
OF
UNITED STATES TELECOMMUNICATIONS, INC.
<PAGE> 2
BYLAWS OF
UNITED STATES TELECOMMUNICATIONS, INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE I OFFICES............................................................................-2-
ARTICLE II SHAREHOLDERS' MEETINGS.............................................................-2-
2.1. Annual Meeting.....................................................................-2-
2.2. Special Meetings...................................................................-2-
2.3. Place..............................................................................-2-
2.4. Notice.............................................................................-2-
2.5. Voting; Quorum; Adjournment........................................................-3-
2.6. Action Without Meeting.............................................................-3-
2.7. Proxies............................................................................-3-
ARTICLE III DIRECTORS..........................................................................-3-
3.1. Management.........................................................................-3-
3.2. Number; Election; Quorum; Voting...................................................-4-
3.3. Vacancies..........................................................................-4-
3.4. Removal............................................................................-4-
3.5. Meetings...........................................................................-4-
3.6. Action Without Meeting.............................................................-5-
ARTICLE IV OFFICERS...........................................................................-5-
4.1. General Provisions.................................................................-5-
4.2. President..........................................................................-5-
4.3. Secretary..........................................................................-5-
4.4. Treasurer..........................................................................-6-
4.5. Assistant Officers.................................................................-6-
4.6. Vice Presidents....................................................................-6-
ARTICLE V CAPITAL STOCK......................................................................-6-
5.1. Certificates.......................................................................-6-
5.2. Transfer of Shares.................................................................-7-
ARTICLE VI CORPORATE SEAL.....................................................................-7-
ARTICLE VII AMENDMENT..........................................................................-7-
7.1. Adoption of Bylaws; Amendments Thereof.............................................-7-
7.2. New Bylaws; Amendment..............................................................-7-
ARTICLE VIII INDEMNIFICATION....................................................................-7-
8.1. Definitions........................................................................-7-
8.2. Authority to indemnify.............................................................-8-
8.3. Advance for Expenses...............................................................-9-
8.4. Determination and authorization of indemnification................................-10-
8.5. Application to Court for indemnification or advancement of expenses...............-11-
</TABLE>
<PAGE> 3
BYLAWS OF
UNITED STATES TELECOMMUNICATIONS, INC.
ARTICLE I
OFFICES
The Corporation shall at all times maintain a registered office in the
State of Florida and a registered agent at that address but may have other
offices located within or without the State of Florida.
ARTICLE II
SHAREHOLDERS' MEETINGS
2.1. ANNUAL MEETING. A meeting of shareholders of the Corporation
shall be held annually. The annual meeting shall be held at such time and place
and on such date as the Board of Directors shall determine from time to time and
as shall be specified in the notice of the meeting.
2.2. SPECIAL MEETINGS. Special meetings of the shareholders may be
called at any time by the Board of Directors, the President or any holder or
holders of at least fifty percent (50%) of all votes entitled to be cast on any
issue proposed to be considered at the special meeting. Special meetings shall
be held at such a time and place and on such date as shall be specified in the
notice of the meeting.
2.3. PLACE. Annual or special meetings of shareholders may be held
within or without the State of Florida.
2.4. NOTICE. Notice of annual or special shareholders' meetings
stating the place, day and hour of the meeting shall be given not less than ten
(10) nor more than sixty (60) days before the date of the meeting. Notice may be
communicated in person, by telephone, telegraph, teletype, or other form of wire
or wireless communication, or by mail to the address shown in the Corporation's
current record of shareholders. Notice of a special meeting shall include a
description of the purpose or purposes for which the meeting is called. Unless
otherwise required by law, notice of an annual meeting need not state the
purpose of the meeting. Notice of a meeting may be waived by an instrument in
writing executed before or after the meeting. A shareholder's attendance at a
meeting:
(a) Waives objection to lack of notice or defective
notice of the meeting, unless the shareholder at the beginning of the
meeting objects to holding the meeting or transacting business at the
meeting; and
<PAGE> 4
(b) Waives objection to consideration of a particular
matter at the meeting that is not within the purpose or purposes
described in the meeting notice, unless the shareholder objects to
considering the matter when it is presented.
2.5. VOTING; QUORUM; ADJOURNMENT. Except as otherwise provided by
law or by the Articles of Incorporation, each outstanding share, regardless of
class, is entitled to one vote on each matter voted on at a shareholders'
meeting. Shares entitled to vote as a separate "voting group," as such term is
defined in the Florida Business Corporation Act, may take action on a matter at
a meeting only if a quorum of those shares exists with respect to that matter. A
majority of the votes entitled to be cast on any matter by each voting group
shall constitute a quorum of that voting group for action on that matter at a
meeting of the shareholders. If a quorum is present, action on a matter (other
than election of directors) by a voting group is approved if the votes cast
within the voting group favoring the action exceed the votes cast opposing the
action, unless the vote of a greater number is required by the Articles of
Incorporation, these Bylaws, or applicable law. The holders of a majority of the
voting shares represented at a meeting, whether or not a quorum is present, may
adjourn such meeting from time to time. At such adjourned meeting at which a
quorum shall be present or represented, any business may be transacted which
might have been transacted at the meeting as originally noticed.
2.6. ACTION WITHOUT MEETING. Action required or permitted to be
taken at a shareholders' meeting may be taken without a meeting if the action is
taken by all of the holders of outstanding stock of each voting group entitled
to vote thereon. The action must be evidenced by one or more unanimous written
consents describing the action taken, signed by all of the shareholders entitled
to vote with respect to such matter, delivered to the corporation for inclusion
in the minutes or filing with the corporate records and must otherwise comply
with all requirements of law pertaining to such consents. Such a consent has the
effect of a meeting and may be described as such in any document.
2.7. PROXIES. At every meeting of the shareholders, including
meetings of shareholders for the election of directors, any shareholder having
the right to vote shall be entitled to vote in person or by proxy, but no proxy
shall be voted after eleven (11) months from its date, unless said proxy
provides for a longer period.
ARTICLE III
DIRECTORS
3.1. MANAGEMENT. All corporate powers shall be exercised by or
under the authority of, and the business and affairs of the corporation managed
under the direction of, its Board of Directors, subject to any limitation set
forth in the Articles of Incorporation, these Bylaws, or agreements among the
shareholders which are otherwise lawful.
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<PAGE> 5
3.2. NUMBER; ELECTION; QUORUM; VOTING. The Board of Directors shall
be comprised of five members or such other number as shall be fixed from time to
time by resolution of the Board of Directors. Except with respect to directors
elected to fill a vacancy, directors shall be elected at each annual meeting of
the shareholders and shall serve for a term of one (1) year and until their
successors are elected. Directors shall be elected by a plurality of the votes
cast by the shares entitled to vote in the election at a meeting at which a
quorum is present. A majority of said directors shall constitute a quorum for
the transaction of business. All resolutions adopted and all business transacted
by the Board of Directors shall require the affirmative vote of a majority of
the directors present at the meeting. The Board of Directors may elect from its
membership a Chairman to preside at meetings of the Board of Directors.
3.3. VACANCIES. Unless the Articles of Incorporation provide
otherwise, if a vacancy occurs on the Board of Directors, including a vacancy
resulting from an increase in the number of directors:
(a) The shareholders may fill the vacancy;
(b) The Board of Directors may fill the vacancy; or
(c) If the directors remaining in office constitute fewer
than a quorum of the Board, they may fill the vacancy by the
affirmative vote of a majority of all the directors remaining in
office.
Any such director elected to fill a vacancy shall be elected for the unexpired
term of the director whose place has become vacant.
3.4. REMOVAL. Any director or the entire Board of Directors may be
removed at any time, with or without cause, by the affirmative vote of the
holders of not less than two-thirds of the total number of outstanding shares of
stock of the Company entitled to vote thereon that are present or represented at
a special shareholders' meeting called for that purpose, voting together as a
single class. At the same meeting in which the shareholders remove one or more
directors, a successor or successors may be elected for the unexpired term of
the director or directors removed. Except as provided in this Section 3.4,
directors shall not be subject to removal.
3.5. MEETINGS. The directors shall meet annually, without notice,
following the annual meeting of the shareholders. Special meetings of the
directors may be called at any time by the President or by any director, on five
(5) days' notice to each director, which notice shall specify the date, time,
and place of the meeting. Notice may be communicated in person, by telephone,
telegraph, teletype, or other form of wire or wireless communication, or by mail
or private carrier. Notice of any such meeting may be waived by an instrument in
writing executed before or after the meeting. A director's attendance at or
participation in a meeting waives any required notice to him of the meeting
unless the director at the beginning of the meeting (or promptly upon his
arrival) objects to holding the meeting or transacting business at the meeting
and does not
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<PAGE> 6
thereafter vote for or assent to action taken at the meeting. Unless the
Articles of Incorporation provide otherwise, the Board of Directors may permit
any or all directors to participate in a regular or special meeting by, or
conduct the meeting through the use of, any means of communication by which all
directors participating may simultaneously hear each other during the meeting. A
director participating in a meeting by this means is deemed to be present in
person at the meeting.
3.6. ACTION WITHOUT MEETING. Unless the Articles of Incorporation
provide otherwise, action required or permitted by this chapter to be taken at a
Board of Directors' meeting may be taken without a meeting if the action is
taken by all members of the Board. The action must be evidenced by one or more
written consents describing the action taken, signed by each director, and
delivered to the corporation for inclusion in the minutes or filing with the
corporate records. Such a consent has the effect of a meeting and may be
described as such in any document.
ARTICLE IV
OFFICERS
4.1. GENERAL PROVISIONS. The officers of the Corporation shall
consist of a President, a Secretary and a Treasurer who shall be elected by the
Board of Directors, and such other officers as may be elected by the Board of
Directors or appointed as provided in these Bylaws. Any two or more offices may
be held by the same person. Unless otherwise provided in the resolutions
electing or appointing them, each officer shall serve until the earlier of his
resignation, removal from office, death, or election of his successor.
4.2. PRESIDENT. The President shall be the chief executive officer
of the Corporation and shall have general and active management of the
operations of the Corporation. He shall be responsible for the administration of
the Corporation, including general supervision of the policies of the
Corporation and general and active management of the financial affairs of the
Corporation, and shall execute bonds, mortgages or other contracts in the name
and on behalf of the Corporation. The President of the Corporation may vote,
endorse for transfer, or take any other action necessary with respect to shares
of stock and securities issued by any other corporation and owned by this
Corporation, and may make, execute, and deliver any proxy, waiver, or consent
with respect thereto.
4.3. SECRETARY. The Secretary shall keep minutes of all meetings of
the shareholders and directors; shall have charge of the minute books, stock
books and seal of the Corporation; shall be responsible for authenticating
records of the Corporation; and shall perform such other duties and have other
powers as may from time to time be delegated to him by the President or the
Board of Directors.
4.4. TREASURER. The Treasurer shall be charged with the management
of the financial affairs of the Corporation, shall have the power to recommend
action concerning the Corporation's affairs to the President, and shall perform
such other duties and have
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<PAGE> 7
such other powers as may from time to time be delegated to him by the President
or Board of Directors.
4.5. ASSISTANT OFFICERS. Assistants to the Secretary and Treasurer
may be appointed by the President or by the Board of Directors and shall have
such duties as shall be delegated to them by the President or the Board of
Directors.
4.6. VICE PRESIDENTS. The Corporation may have one or more Vice
Presidents, elected by the Board of Directors, who shall perform such duties as
may be delegated by the President or the Board of Directors.
ARTICLE V
CAPITAL STOCK
5.1. CERTIFICATES. The interest of each shareholder shall be
evidenced by a certificate or certificates representing shares of the
Corporation. Each certificate representing shares shall set forth upon the face
thereof the following:
(a) the name of this Corporation;
(b) that the Corporation is organized under the laws of
the State of Florida;
(c) the name or names of the person or persons to whom
the certificate is issued; and
(d) the number and class of shares, and the designation
of the series, if any, which the certificate represents.
If the Corporation is authorized to issue different classes of shares or
different series within a class, the designations, relative rights, preferences
and limitations applicable to each class and the variations in rights must be
summarized on the front or back of each certificate, or the Certificate must
include a conspicuous statement that the Corporation will furnish upon request a
full statement of this information without charge. Each certificate shall be
signed, either manually or in facsimile, by the President alone or the President
and the Secretary or an Assistant Secretary and may be sealed with the seal of
the Corporation or a facsimile thereof. If the person who signed a share
certificate, either manually or in facsimile, no longer holds office when the
certificate is issued, the certificate is nevertheless valid.
5.2. TRANSFER OF SHARES. Transfers of shares of the Corporation
shall be made in the share records of the Corporation upon surrender of the
certificate for such shares signed by the person in whose name the certificate
is registered or on his behalf by a person legally authorized to so sign (or
accompanied by a separate stock transfer power so signed).
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<PAGE> 8
ARTICLE VI
CORPORATE SEAL
The Corporation may have a seal in such form as the Board of Directors may
from time to time determine. In the event it is inconvenient to use such a seal
at any time, the words "Corporate Seal" or the word "Seal" accompanying the
signature of an officer signing for and on behalf of the Corporation shall be
the seal of the Corporation.
ARTICLE VII
AMENDMENT
7.1. ADOPTION OF BYLAWS; AMENDMENTS THEREOF. Bylaws of the
Corporation may be adopted only by a majority vote of the Board of Directors.
Bylaws may be amended or repealed only by (a) a majority vote of the Board of
Directors, except that any amendment to or repeal of Section 3.4 and Article
VIII of these Bylaws shall require an affirmative vote of at least three-fourths
of the Board of Directors or (b) the affirmative vote of the holders of at least
two-thirds of the total number of outstanding shares of the stock of the Company
entitled to vote thereon, voting together as a single class, that is present in
person or by proxy at any regular or special meeting of the shareholders, the
notice of which expressly states that the proposed amendment or repeal is to be
considered at the meeting.
7.2. NEW BYLAWS; AMENDMENT. Any purported amendment to these Bylaws
which would add hereto a matter not covered herein prior to such purported
amendment shall be deemed to constitute the adoption of a Bylaws provision and
not an amendment to the Bylaws.
ARTICLE VIII
INDEMNIFICATION
8.1. DEFINITIONS. As used in this Article, the following terms
shall have the following meanings:
(a) "Corporation" includes, in addition to the resulting
corporation, any constituent corporation (including any constituent of
a constituent) absorbed in a consolidation or merger, so that any
person who is or was a director, officer, employee, or agent of a
constituent corporation, or is or was serving at the request of a
constituent corporation as a director, officer, employee, or agent of
another corporation, partnership, joint venture, trust, or other
enterprise, is in the same
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<PAGE> 9
position under this section with respect to the resulting or surviving
corporation as he would have with respect to such constituent
corporation if its separate existence had continued;
(b) "Other enterprises" includes employee benefit plans;
(c) "Expenses" includes counsel fees, including those for
appeal;
(d) "Liability" includes obligations to pay a judgment,
settlement, penalty, fine (including an excise tax assessed with
respect to any employee benefit plan), and expenses actually and
reasonably incurred with respect to a proceeding;
(e) "Proceeding" includes any threatened pending, or
completed action, suit, or other type of proceeding, whether civil,
criminal, administrative, or investigative and whether formal or
informal;
(f) "Agent" includes a volunteer;
(g) "Serving at the request of the corporation" includes
any service as a director, officer, employee, or agent of the
corporation that imposes duties on such persons, including duties
relating to an employee benefit plan and its participants or
beneficiaries; and
(h) "Not opposed to the best interest of the corporation"
describes the actions of a person who acts in good faith and in a
manner he reasonably believes to be in the best interests of the
participants and beneficiaries of an employee benefit plan.
8.2. AUTHORITY TO INDEMNIFY.
(a) Except as otherwise provided in this Section, the
Corporation (i) shall indemnify any person who was or is a director of
the Corporation and was or is a party to any proceeding (other than an
action by, or in the right of, the Corporation), by reason of the fact
that he is or was a director, officer, employee, or agent of the
Corporation or is or was serving at the request of the Corporation as a
director, officer, employee, or agent of another corporation,
partnership, joint venture, trust, or other enterprise and (ii) may
indemnify any other person who was or is a party to any proceeding
(other than an action by, or in the right of, the Corporation), by
reason of the fact that he is or was an officer, employee or agent of
the Corporation or is or was serving at the request of the Corporation
as a director, officer, employee, or agent of another corporation,
partnership, joint venture, trust, or other enterprise, against
liability incurred in connection with such proceeding, including any
appeal thereof, if he acted in good faith and in a manner he reasonably
believed to be in, or not opposed to, the best interests of the
Corporation and, with respect to any criminal action or proceeding, had
no
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<PAGE> 10
reasonable cause to believe his conduct was unlawful. The termination
of any proceeding by judgment, order, settlement, or conviction or upon
a plea of nolo contendere or its equivalent shall not, of itself,
create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in, or not opposed to, the
best interests of the Corporation or, with respect to any criminal
action or proceeding, had reasonable cause to believe that his conduct
was unlawful.
(b) The Corporation (i) shall indemnify any person who
was or is a director of the Corporation and who was or is a party to
any proceeding by or in the right of the Corporation to procure a
judgment in its favor by reason of the fact that he is or was a
director, officer, employee, or agent of the Corporation or is or was
serving at the request of the Corporation as director, officer,
employee, or agent of another corporation, partnership, joint venture,
trust, or other enterprise, and (ii) may indemnify any other person who
was or is a party to any proceeding by or in the right of the
Corporation to procure a judgment in its favor by reason of the fact
that he is or was an officer, employee, or agent of the Corporation or
is or was serving at the request of the Corporation as director,
officer, employee, or agent of another corporation, partnership, joint
venture, trust, or other enterprise, against expenses and amounts paid
in settlement not exceeding, in the judgment of the Board of Directors,
the estimated expense of litigating the proceeding to conclusion,
actually and reasonably incurred in connection with the defense or
settlement of such proceeding, including any appeal thereof. Such
indemnification shall be authorized if such person acted in good faith
and in a manner he reasonably believed to be in or not opposed to the
best interests of the Corporation, except that no indemnification shall
be made under this subsection in respect of any claim, issue, or matter
as to which such person shall have been adjudged to be liable unless,
and only to the extent that, the court in which such proceeding was
brought, or any other court of competent jurisdiction, shall determine
upon application that, despite the adjudication of liability but in
view of all circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which such court
shall deem proper.
(c) To the extent that a director of the Corporation has
been successful on the merits or otherwise in defense of any proceeding
referred to in subsection (a) or subsection (b), or in defense of any
claim, issue, or matter therein, he shall be indemnified against
expenses actually and reasonably incurred by him in connection
therewith. To the extent that an officer, employee, or agent of the
Corporation has been successful on the merits or otherwise in defense
of any proceeding referred to in subsection (a) or subsection (b), or
in defense of any claim, issue, or matter therein, he may be
indemnified against expenses actually and reasonably incurred by him in
connection therewith.
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<PAGE> 11
8.3. ADVANCE FOR EXPENSES.
(a) Expenses incurred by a director in defending a civil
or criminal proceeding shall be paid by the Corporation in advance of
the final disposition of such proceeding upon receipt of an undertaking
by or on behalf of such director to repay such amount if he is
ultimately found not to be entitled to indemnification by the
Corporation pursuant to this section. Expenses incurred by an officer
in defending a civil or criminal proceeding may be paid by the
Corporation in advance of the final disposition of such proceeding upon
receipt of an undertaking by or on behalf of such officer to repay such
amount if he is ultimately found not to be entitled to indemnification
by the Corporation pursuant to this section. Expenses incurred by other
employees and agents may be paid in advance upon such terms or
conditions that the Board of Directors deems appropriate.
(b) The indemnification and advancement of expenses
provided pursuant to this Article are not exclusive, and a Corporation
may make any other or further indemnification or advancement of
expenses of any of its directors, officers, employees, or agents, under
any bylaw, agreement, vote of shareholders or disinterested directors,
or otherwise, both as to action in his official capacity and as to
action in another capacity while holding such office. However,
indemnification or advancement of expenses shall not be made to or on
behalf of any director, officer, employee, or agent if a judgment or
other final adjudication establishes that his actions, or omissions to
act, were material to the cause of action so adjudicated and
constitute:
(i) A violation of the criminal law, unless the
director, officer, employee, or agent had reasonable cause to
believe his conduct was lawful or had no reasonable cause to
believe his conduct was unlawful;
(ii) A transaction from which the director,
officer, employee, or agent derived an improper personal
benefit;
(iii) In the case of a director, a circumstance
under which the liability provisions for unlawful
distributions are applicable; or
(iv) Willful misconduct or a conscious disregard
for the best interests of the Corporation in a proceeding by
or in the right of the Corporation to procure a judgment in
its favor or in a proceeding by or in the right of a
shareholder.
(c) Indemnification and advancement of expenses as
provided in this Article shall continue as, unless otherwise provided
when authorized or ratified, to a person who has ceased to be a
director, officer, employee, or agent and shall inure to the benefit of
the heirs, executors, and administrators of such a person, unless
otherwise provided when authorized or ratified.
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<PAGE> 12
8.4. DETERMINATION AND AUTHORIZATION OF INDEMNIFICATION.
(a) Any indemnification under subsection 8.2 (a) or
subsection 8.2(b), unless pursuant to a determination by a court, shall
be made by the Corporation only as authorized in the specific case upon
a determination that indemnification of the director, officer,
employee, or agent is proper in the circumstances because he has net
the applicable standard of conduct set forth in subsection 8.2(a) or
subsection 8.2(b). Such determination shall be made:
(i) By the Board of Directors by a majority vote
of a quorum consisting of directors who were not parties to
such proceeding;
(ii) If such a quorum is not obtainable or even
if obtainable, by majority vote of a committee duly designated
by the Board of Directors (in which directors who are parties
may participate) consisting solely of two or more directors
not at the time parties to the proceeding;
(iii) By independent legal counsel:
l. Selected by the Board of Directors
prescribed in paragraph (i) or the
committee prescribed in paragraph
(ii); or
2. If a quorum of the directors cannot
be obtained for paragraph (i) and
the committee cannot be designated
under paragraph (ii), selected by
majority vote of the full Board of
Directors (in which directors who
are parties may participate); or
(iv) By the shareholders by a majority vote of a
quorum consisting of shareholders who were not parties to such
proceeding or, if no such quorum is obtainable, by a majority
vote of shareholders who were not parties to such proceeding.
(b) Evaluation of the reasonableness of expenses and
authorization of indemnification shall be made in the same manner as
the determination that indemnification is permissible. However, if the
determination of permissibility is made by independent legal counsel,
persons specified by subsection 8.4(a)(iii) shall evaluate the
reasonableness of expenses and may authorize indemnification.
8.5. APPLICATION TO COURT FOR INDEMNIFICATION OR ADVANCEMENT OF
EXPENSES.
(a) Unless the Corporation's articles of in Corporation
provide otherwise, notwithstanding the failure of a Corporation to
provide indemnification, and despite any contrary determination of the
Board or of the shareholders in the specific case, a director, officer,
employee, or agent of the Corporation who is or was a party to a
proceeding may apply for indemnification or advancement of expenses, or
both, to the court conducting the proceeding, to the circuit court, or
to another court of competent jurisdiction. On receipt of an
application, the court, after giving any notice that it considers
necessary, may order indemnification and advancement of expenses,
including expenses incurred
-10-
<PAGE> 13
in seeking court-ordered indemnification or advancement of expenses, if
it determines that:
(i) The director, officer, employee, or agent is
entitled to mandatory indemnification under subsection 8.2(c),
in which case the court shall also order the Corporation to
pay the director reasonable expenses incurred in obtaining
court-ordered indemnification or advancement of expenses;
(ii) The director, officer, employee, or agent is
entitled to indemnification or advancement of expenses, or
both, by virtue of the exercise by the Corporation of its
power pursuant to subsection 8.3(b); or
(iii) The director, officer, employee, or agent is
fairly and reasonably entitled to indemnification or
advancement of expenses, or both, in view of all the relevant
circumstances, regardless of whether such person met the
standard of conduct set forth in subsection, 8.2(a),
subsection 8.2(b), or subsection 8.3(b).
.
-11-
<PAGE> 1
EXHIBIT 4.1
PROMISSORY NOTE
$59,002.54
Tampa, Florida November 22, 1999
FOR VALUE RECEIVED, the undersigned, United States Telecommunications,
Inc. (referred to as the "Maker"), promises to pay to the order of Richard
Pollara (and together with any other holder hereof hereinafter referred to as
"Holder"), the principal sum of Fifty-Nine Thousand Two Dollars and Fifty-four
Cents ($59,002.54), which principal amount plus accrued interest shall be
payable on demand, in legal tender of the United States of America for debts and
dues, public and private. Interest shall accrue on the unpaid principal balance
at a rate equal to 8.5% per annum. Interest shall be calculated on the basis of
a 360 day year for the actual number of days elapsed. Payments due hereunder
shall be made to Holder at: 3320 South San Miguel Street, Tampa, Florida 33629
or at such other place as Holder may from time to time notify Maker of in
writing.
Maker hereby reserves the right to prepay the indebtedness evidenced by
this Promissory Note in whole or in part, at any time without penalty, or
premium. Any partial prepayment shall be attributed to the principal amount
hereof.
Time is of the essence with respect to this Promissory Note.
This Note evidences the obligation of the Maker and its successors in
interest to Easy Cellular, Inc. and its successors in interest pursuant to that
certain Joint Venture Agreement entered into between Tel Com Plus California,
LLC and Easy Cellular, Inc. dated as of July 24, 1997. United States
Telecommunications, Inc. is the successor in interest to Tel Com Plus
California, LLC and Richard Pollara is the successor in interest to Easy
Cellular, Inc.
This Promissory Note shall be governed by and construed in accordance
with the laws of the State of Florida. If this Promissory Note is collected by
or through an attorney-at-law, all costs of collection including reasonable
attorneys' fees and expenses shall be payable by the undersigned.
IN WITNESS WHEREOF, Maker has executed this Promissory Note the day and
year first above written.
MAKER:
UNITED STATES TELECOMMUNICATIONS, INC.
By: /s/ Terrence G. Battle
----------------------------
Terrence G. Battle
Vice President
By: /s/ Bill D. Van Aken
----------------------------
Bill D. Van Aken
Vice President
<PAGE> 1
EXHIBIT 4.2
PROMISSORY NOTE
$400,000
Tampa, Florida November 22, 1999
FOR VALUE RECEIVED, the undersigned, United States Telecommunications,
Inc. (referred to as the "Maker"), promises to pay to the order of Richard
Pollara (and together with any other holder hereof hereinafter referred to as
"Holder"), the principal sum of Four Hundred Thousand Dollars ($400,000), which
principal amount plus accrued interest shall be payable on demand, in legal
tender of the United States of America for debts and dues, public and private.
Interest shall accrue on the unpaid principal balance at a rate equal to 8.5%
per annum. Interest shall be calculated on the basis of a 360 day year for the
actual number of days elapsed. Payments due hereunder shall be made to Holder
at: 3320 South San Miguel Street, Tampa, Florida 33629 or at such other place as
Holder may from time to time notify Maker of in writing.
Maker hereby reserves the right to prepay the indebtedness evidenced by
this Promissory Note in whole or in part, at any time without penalty, or
premium. Any partial prepayment shall be attributed to the principal amount
hereof.
Time is of the essence with respect to this Promissory Note.
This Note evidences the obligation of the Maker and its successors in
interest to Easy Cellular, Inc. and its successors in interest pursuant to that
certain Joint Venture Agreement entered into between Tel Com Plus Miami, LLC and
Easy Cellular, Inc. dated as of February 28, 1997. United States
Telecommunications, Inc. is the successor in interest to Tel Com Plus Miami, LLC
and Richard Pollara is the successor in interest to Easy Cellular, Inc.
This Promissory Note shall be governed by and construed in accordance
with the laws of the State of Florida. If this Promissory Note is collected by
or through an attorney-at-law, all costs of collection including reasonable
attorneys' fees and expenses shall be payable by the undersigned.
IN WITNESS WHEREOF, Maker has executed this Promissory Note the day and
year first above written.
MAKER:
UNITED STATES TELECOMMUNICATIONS, INC.
By: /s/ Terrence G. Battle
------------------------------
Terrence G. Battle
Vice President
By: /s/ Bill D. Van Aken
------------------------------
Bill D. Van Aken
Vice President
<PAGE> 1
EXHIBIT 10.1
RESALE AGREEMENT
BETWEEN
GTE NORTH INCORPORATED
AND CONTEL OF THE SOUTH, INCORPORATED
d/b/a GTE SYSTEMS OF THE SOUTH
AND
UNITED STATES TELECOMMUNICATIONS, INC.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I
SCOPE AND INTENT OF AGREEMENT................................................I-1
ARTICLE II
DEFINITIONS.................................................................II-1
1. General Definitions.........................................................II-1
1.1 ACT..............................................................II-1
1.2 APPLICABLE LAW...................................................II-1
1.3 AS-IS TRANSFER (AIT).............................................II-1
1.4 BASIC LOCAL EXCHANGE SERVICE.....................................II-1
1.5 BUSINESS DAY.....................................................II-1
1.6 CENTRALIZED MESSAGE DISTRIBUTION SYSTEM (CMDS)...................II-1
1.7 COMMISSION.......................................................II-1
1.8 COMPETITIVE LOCAL EXCHANGE CARRIER (CLEC)........................II-1
1.9 CURRENTLY AVAILABLE..............................................II-1
1.10 CUSTOMER.........................................................II-1
1.11 E-911 SERVICE....................................................II-1
1.12 EXCHANGE MESSAGE RECORD (EMR)....................................II-2
1.13 EXCHANGE SERVICE.................................................II-2
1.14 FCC..............................................................II-2
1.15 GTE GUIDE........................................................II-2
1.16 GTOC.............................................................II-2
1.17 INCUMBENT LOCAL EXCHANGE CARRIER (ILEC)..........................II-2
1.18 INTEREXCHANGE CARRIER (IXC)......................................II-2
1.19 LINE INFORMATION DATA BASE (LIDB)................................II-2
1.20 LOCAL EXCHANGE CARRIER (LEC).....................................II-2
1.21 LOCAL NUMBER PORTABILITY (LNP)...................................II-2
1.22 LOCAL TRAFFIC....................................................II-2
1.23 911 SERVICE......................................................II-3
1.24 NUMBERING PLAN AREA (NPA)........................................II-3
1.25 NXX, NXX CODE, CENTRAL OFFICE CODE OR CO CODE....................II-3
1.26 PARTY/PARTIES....................................................II-3
1.27 PROVIDER.........................................................II-3
1.28 SUBSIDIARY.......................................................II-3
1.29 TELECOMMUNICATIONS SERVICES......................................II-3
1.30 UNDEFINED TERMS..................................................II-3
1.31 VERTICAL FEATURES (INCLUDING CLASS FEATURES).....................II-3
ARTICLE III
GENERAL PROVISIONS.........................................................III-1
1. Scope of General Provisions................................................III-1
2. Term and Termination.......................................................III-1
2.1 Term............................................................III-1
2.2 Post-Termination Arrangements...................................III-1
2.3 Termination Upon Default........................................III-1
2.4 Termination Upon Sale...........................................III-1
2.5 Liability upon Termination......................................III-1
3. Amendments.................................................................III-2
</TABLE>
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<PAGE> 3
<TABLE>
<S> <C> <C>
4. Assignment .............................................. III-2
5. Authority .............................................. III-2
6. Responsibility for Payment .............................. III-2
7. Billing and Payment ..................................... III 2
7.1 Dispute .......................................... III-2
7.2 Late Payment Charge .............................. III-2
7.3 Due Date ......................................... III-2
7.4 Audits ........................................... III-2
8. Binding Effect .......................................... III-3
9. Capacity Planning and Forecasting ....................... III-3
10. Compliance with Laws and Regulations .................... III-3
11. Confidential Information ................................ III-3
11.1 Identification .................................. III-3
11.2 Handling ........................................ III-3
11.3 Exceptions ...................................... III-4
11.4 Survival ........................................ III-4
12. Consent ................................................. III-4
13. ......................................................... III-4
14. Reimbursement of Expenses ............................... III-4
15. Dispute Resolution ...................................... III-4
15.1 Alternative to Litigation ....................... III-4
15.2 Negotiations .................................... III-5
15.3 Arbitration ..................................... III-5
15.4 Expedited Arbitration Procedures ................ III-5
15.5 Costs ........................................... III-5
15.6 Continuous Service .............................. III-5
16. Entire Agreement ........................................ III-5
17. Expenses ................................................ III-6
18. Force Majeure ........................................... III-6
19. Good Faith Performance .................................. III-6
20. Governing Law ........................................... III-6
21. Standard Practices ...................................... III-6
22. Headings ................................................ III-6
23. Independent Contractor Relationship ..................... III-6
24. Law Enforcement Interface ............................... III-7
</TABLE>
<PAGE> 4
<TABLE>
<S> <C> <C>
25. Liability and Indemnity................................. III-7
25.1 Indemnification ................................ III-7
25.2 End User and Content-Related Claims............. III-7
25.3 DISCLAIMER...................................... III-8
25.4 Limitation of Liability......................... III-8
25.5 Intellectual Property........................... III-8
26. Multiple Counterparts................................... III-8
27. No Third Party Beneficiaries............................ III-8
28. Notices................................................. III-8
29. Protection.............................................. III-9
29.1 Impairment of Service........................... III-9
29.2 Resolution...................................... III-9
30. Publicity............................................... III-9
31. Regulatory Agency Control............................... III-9
32. Changes in Legal Requirements........................... III-10
33. Effective Date.......................................... III-10
34. Regulatory Matters...................................... III-10
35. Rule of Construction.................................... III-10
36. Section References...................................... III-10
37. Service Standards....................................... III-10
38. Severability............................................ III-10
39. Subcontractors.......................................... III-10
40. Subsequent Law.......................................... III-11
41. Taxes................................................... III-11
41.1 Tax............................................. III-11
41.2 Fees/Regulatory Surcharges...................... III-11
42. Trademarks and Trade Names.............................. III-11
43. Waiver.................................................. III-11
44. TBD Prices.............................................. III-11
ARTICLE IV
GENERAL RULES GOVERNING RESOLD SERVICES................. IV-1
1. General................................................. IV-1
2. Liability of GTE........................................ IV-1
</TABLE>
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<PAGE> 5
<TABLE>
<S> <C>
2.1 Inapplicability of Tariff Liability...........................IV-1
2.2 USTELCOM Tariffs or Contracts.................................IV-1
2.3 No Liability..................................................IV-1
3. Unauthorized Changes......................................................IV-1
3.1 Procedures.....................................................IV-1
4. Impact of Payment of Charges on Service...................................IV-2
5. Unlawful Use of Service...................................................IV-2
6. Timing of Messages........................................................IV-3
7. Procedures For Preordering, Ordering, Provisioning, Etc...................IV-3
8. Letter of Authorization...................................................IV-3
9. Customer Contacts.........................................................IV-3
ARTICLE V
RESALE OF SERVICES..........................................................V-1
1. General....................................................................V-1
2. Terms and Conditions.......................................................V-1
2.1 Restrictions on Resale.........................................V-1
2.2 Interim Universal Service Support Charge for Resale Services...V-1
2.3 Restrictions on Discount of Retail Services....................V-2
2.4 Resale to Other Carriers.......................................V-2
3. Ordering and Billing.......................................................V-2
3.1 Local Service Request..........................................V-2
3.2 Certificate of Operating Authority.............................V-2
3.3 Directory Assistance (DA) Listings.............................V-2
3.4 Nonrecurring Charges...........................................V-2
3.5 Transfers Between USTELCOM
and Another Reseller of GTE Services...........................V-3
3.6 Local Calling Detail...........................................V-3
3.7 Procedures.....................................................V-3
3.8 LIBD...........................................................V-3
3.9 Originating Line Number Screening (OLNS).......................V-3
4. Maintenance................................................................V-3
4.1 Maintenance, Testing and Repair................................V-3
4.2 Specifics and Procedures for Maintenance.......................V-3
5. Services Available for Resale..............................................V-3
5.1 Description of Local Exchange Services Available for Resale....V-3
5.2 Other Services Available for Resale............................V-4
5.3 Rates..........................................................V-4
5.4 Grandfathered Services.........................................V-4
5.5 Access.........................................................V-4
5.6 Operator Services (OS) and Directory Assistance (DA)...........V-4
6. Misdirected Calls..........................................................V-5
7. 911/E911 Arrangements......................................................V-5
</TABLE>
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<PAGE> 6
<TABLE>
<CAPTION>
<S> <C>
7.1 Description of Service ............................... V-5
7.2 Cooperation and Level of Performance ................. V-5
7.3 Updates to Master Street Address Guide (MSAG) ........ V-5
7.4 Updates to Database .................................. V-5
7.5 Compensation ......................................... V-6
7.6 Liability ............................................ V-6
8. Dialing Format Changes ....................................... V-6
APPENDIX A
SERVICES AVAILABLE FOR RESALE ................................ A-1
APPENDIX B
SERVICE ORDERING, PROVISIONING, BILLING AND MAINTENANCE ...... B-1
APPENDIX C
RATES/CHARGES FOR MISCELLANEOUS 911/E911 ITEMS ............... C-1
APPENDIX 45A
GTE/USTELCOM OPT-IN NEGOTIATION ISSUES ..................... 45A-1
APPENDIX 45B
GTE/USTELCOM OPT-IN NEGOTIATION ISSUES
AT&T/GTE TERMS ............................................. 45B-1
</TABLE>
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<PAGE> 7
This Resale Agreement (the "Agreement"), is by and between GTE North
Incorporated, Contel of the South, Inc., d/b/a GTE Systems of the South, with
its address for purposes of this Agreement at 600 Hidden Ridge Drive, Irving,
Texas 75038 ("GTE"), and United States Telecommunications, Inc., in its capacity
as a certified provider of local two-way wireline dial-tone service
("USTELCOM"), with its address for this Agreement at 13902 N. Dalemabry, Suite
212, Tampa, Florida 33618 (GTE and USTELCOM being referred to collectively as
the "Parties" and individually as a "Party"). This Agreement covers services in
the state of Michigan only (the "State").
WHEREAS, Section 251 of the Telecommunications Act of 1996 (the "Act") imposes
specific obligations on LECs with respect to the resale of telecommunications
services; and
WHEREAS, GTE is entering into certain aspects of this Agreement which provide
USTELCOM with the option of replacing certain rates set forth in this Agreement
with the rates from a particular Commission-approved arbitrated agreement
between GTE and AT&T, pursuant to Article III, Section 45 herein. GTE has
entered into such terms, which may cause adverse results from an arbitrated
agreement to be incorporated into this Agreement at a future date, in order to
avoid the expense of arbitration while at the same time preserving its legal
positions, rights and remedies;
NOW, THEREFORE, in consideration of the mutual provisions contained herein and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, GTE and USTELCOM hereby covenant and agree as follows:
<PAGE> 8
ARTICLE I
SCOPE AND INTENT OF AGREEMENT
Pursuant to this Agreement, the Parties will extend certain arrangements to one
another within each area in which they both operate within the State for the
purchase of certain telecommunication services. This Agreement also governs the
purchase by USTELCOM of certain telecommunications services provided by GTE in
its franchise areas for resale by USTELCOM. This Agreement is an integrated
package that reflects a balancing of interests critical to the Parties. This
Agreement will be submitted to the Michigan Public Service Commission (the
"Commission") for approval. The Parties agree that their entrance into this
Agreement is without prejudice to and does not waive any positions they may have
taken previously, or may take in the future, in any legislative, regulatory,
judicial or other public forum addressing any matters, including matters related
to the same types of arrangements and/or matters related to GTE's cost recovery
covered in this Agreement. USTELCOM agrees to negotiate reciprocal terms and
conditions with GTE based on this Agreement. GTE's execution of this Agreement
is not a concession or waiver in any manner concerning its position that certain
of the rates, terms and conditions contained herein are unlawful, illegal and
improper.
The services and facilities to be provided to USTELCOM by GTE in satisfaction
of this Agreement may be provided pursuant to GTE tariffs and then current
practices. Should such services and facilities be modified by tariff or by
Order, including any modifications resulting from other Commission proceedings,
federal court review or other judicial action, and unless otherwise specified
herein, such modifications will be deemed to automatically supersede any rates
and terms and conditions of this Agreement. The Parties shall cooperate with one
another for the purpose of incorporating required modifications into this
Agreement.
I-1
<PAGE> 9
ARTICLE II
DEFINITIONS
1. General Definitions. Except as otherwise specified herein, the
following definitions shall apply to all Articles and Appendices contained in
this Agreement. Additional definitions that are specific to the matters covered
in a particular Article may appear in that Article. To the extent that there may
be any conflict between a definition set forth in this Article II and any
definition in a specific Article or Appendix, the definition set forth in the
specific Article or Appendix shall control with respect to that Article or
Appendix.
1.1 ACT - the Telecommunications Act of 1996, Public Law 104-104
of the 104th United States Congress effective February 8,
1996.
1.2 APPLICABLE LAW - all laws, statutes, common law, regulations,
ordinances, codes, rules, guidelines, orders, permits, and
approvals of any Governmental Authority, which apply or relate
to the subject matter of this Agreement.
1.3 AS-IS TRANSFER (AIT) - the transfer of all telecommunications
services and features available for resale, that are currently
being provided for a specific account, without the
requirements of a specific enumeration of the services and
features on the Local Service Request (LSR).
1.4 BASIC LOCAL EXCHANGE SERVICE - voice grade access to the
network that provides: the ability to place and receive calls;
touch-tone service, access to operator services; access to
directory assistance; access to emergency services (E-911);
access to telephone relay service (TRS); access to
interexchange carriers of the customer's choice; standard
white pages directory listing; and toll blocking for
low-income consumers participating in Lifeline (subject to
technical feasibility).
1.5 BUSINESS DAY - Monday through Friday, except for holidays on
which the U.S. mail is not delivered.
1.6 CENTRALIZED MESSAGE DISTRIBUTION SYSTEM (CMDS) - the billing
record and clearing house transport system that the Regional
Bell Operating Companies (RBOCs) and other incumbent LECs use
to efficiently exchange out collects and in collects as well
as Carrier Access Billing System (CABS) records.
1.7 COMMISSION - the Michigan Public Service Commission.
1.8 COMPETITIVE LOCAL EXCHANGE CARRIER (CLEC) - any company or
person authorized to provide local exchange services in
competition with an ILEC.
1.9 CURRENTLY AVAILABLE - existing as part of GTE's network at the
time of the requested order or service and does not include
any service, feature, function or capability that GTE either
does not provide to itself or to its own end users, or does
not have the capability to provide.
1.10 CUSTOMER - GTE or USTELCOM depending on the context and which
Party is receiving the service from the other Party.
1.11 E-911 SERVICE - a method of routing 911 calls to a Public
Service Answering Point that uses a customer location database
to determine the location to which a call should be routed.
E-9-1-1 service includes the forwarding of the caller's
Automatic Number Identification (ANI) to the PSAP where the
ANI is used to retrieve and display the
II-1
<PAGE> 10
Automatic Location Identification (ALI) on a terminal screen
at the answering Attendant's position. It usually includes
selective routing.
1.12 EXCHANGE MESSAGE RECORD (EMR) - an industry standard record
used to exchange telecommunications message information among
CLECs for billable, non-billable, sample, settlement and study
data. EMR format is defined in BR-010-200-010 CRIS Exchange
Message Record, published by Bellcore.
1.13 EXCHANGE SERVICE - all basic access line services, or any
other services offered to end users which provide end users
with a telephonic connection to, and a unique telephone number
address on, the Public Switched Telecommunications Network
(PSTN), and which enable such end users to place or receive
calls to all other stations on the PSTN.
1.14 FCC - the Federal Communications Commission.
1.15 GTE GUIDE - the GTE Open Market Transition Order/Processing
Guide, LSR Guide, and Products and Services Guide which
contain GTE's operating procedures for ordering, provisioning,
trouble reporting and repair for resold services and unbundled
elements and GTE's CLEC Interconnection Guide which provides
guidelines for obtaining interconnection of GTE's Switched
Network with the networks of all certified CLECs for
reciprocal exchange of traffic. Except as specifically
provided otherwise in this Agreement, service ordering,
provisioning, billing and maintenance shall be governed by the
Guide which may be amended from time to time by GTE as needed.
1.16 GTOC - GTE Telephone Operating Company.
1.17 INCUMBENT LOCAL EXCHANGE CARRIER (ILEC) - any local exchange
carrier that was as of February 8, 1996, deemed to be a member
of the Exchange Carrier Association as set forth in 47 C.F.R.
ss.69.601(b) of the FCC's regulations.
1.18 INTEREXCHANGE CARRIER (IXC) - a telecommunications service
provider authorized by the FCC to provide interstate long
distance communications services between LATAs and are
authorized by the State to provide inter- and/or intraLATA
long distance communications services within the State.
1.19 LINE INFORMATION DATA BASE (LIDB) - one or all, as the context
may require, of the Line Information databases owned
individually by GTE and other entities which provide, among
other things, calling card validation functionality for
telephone line number cards issued by GTE and other entities.
A LIDB also contains validation data for collect and third
number-billed calls; i.e., Billed Number Screening.
1.20 LOCAL EXCHANGE CARRIER (LEC) - any company certified by the
Commission to provide local exchange telecommunications
service. This includes the Parties to this Agreement.
1.21 LOCAL NUMBER PORTABILITY (LNP) - the ability of users of
telecommunications services to retain, at the same location,
existing telecommunications numbers without impairment of
quality, reliability, or convenience when switching from one
telecommunications carrier to another.
1.22 LOCAL TRAFFIC - traffic that is originated by an end user of
one Party and terminates to the end user of the other Party
within GTE's then current local serving area, including
mandatory local calling scope arrangements. A mandatory local
calling scope arrangement is an arrangement that provides end
users a local calling scope, Extended Area Service (EAS),
beyond their basic exchange serving area. Local Traffic does
not include optional local calling scopes (i.e., optional rate
packages that permit the end user to choose a local calling
scope beyond their basic exchange serving area for an
additional
II-2
<PAGE> 11
fee), referred to hereafter as "optional EAS". Local Traffic
excludes Enhanced Service Provider (ESP) traffic (e.g.
Internet, 900-976, etc.) and Internet Protocol based voice or
fax telephony.
1.23 911 SERVICE - a universal telephone number which gives the
public direct access to the PSAP. Basic 911 service collects
911 calls from one or more local exchange switches that serve
a geographic area. The calls are then sent to the correct
authority designated to receive such calls.
1.24 NUMBERING PLAN AREA (NPA) - also sometimes referred to as an
area code, is the three digit indicator which is defined by
the "A", "B", and "C" digits of each 10-digit telephone
number within the NANP. Each NPA contains 800 possible NXX
Codes. There are two general categories of NPA, "Geographic
NPAs" and "Non-Geographic NPAs". A Geographic NPA is
associated with a defined geographic area, and all telephone
numbers bearing such NPA are associated with services provided
within that geographic area. A Non-Geographic NPA, also known
as a "Service Access Code" or "SAC Code" is typically
associated with a specialized telecommunications service which
may be provided across multiple geographic NPA areas. 800,
900, 700, and 888 are examples of Non-Geographic NPAs.
1.25 NXX, NXX CODE, CENTRAL OFFICE CODE OR CO CODE - the three
digit switch entity indicator which is defined by the "D",
"E", and "F" digits of a 10-digit telephone number within the
NANP. Each NXX Code contains 10,000 station numbers.
1.26 PARTY/PARTIES - GTE and/or USTELCOM.
1.27 PROVIDER - GTE or USTELCOM depending on the context and which
Party is providing the service to the other Party.
1.28 SUBSIDIARY - a corporation or other legal entity that is
majority owned by a Party.
1.29 TELECOMMUNICATIONS SERVICES - the offering of
telecommunications for a fee directly to the public, or to
such classes of users as to be effectively available directly
to the public, regardless of the facilities used.
1.30 UNDEFINED TERMS - terms that may appear in this Agreement
which are not defined. Parties acknowledge and agree that any
such terms shall be construed in accordance with customary
usage in the telecommunications industry as of the effective
date of this Agreement.
1.31 VERTICAL FEATURES (INCLUDING CLASS FEATURES) - vertical
services and switch functionalities provided by GTE,
including: Automatic Call Back; Automatic Recall; Call
Forwarding Busy Line/Don't Answer; Call Forwarding Don't
Answer; Call Forwarding Variable; Call Forwarding - Busy Line;
Call Trace; Call Waiting; Call Number Delivery Blocking Per
Call; Calling Number Blocking Per Line; Cancel Call Waiting;
Distinctive Ringing/Call Waiting; Incoming Call Line
Identification Delivery; Selective Call Forward; Selective
Call Rejection; Speed Calling; and Three Way Calling/Call
Transfer.
II-3
<PAGE> 12
ARTICLE III
GENERAL PROVISIONS
1. Scope of General Provisions. Except as may otherwise be set forth in a
particular Article or Appendix of this Agreement, in which case the
provisions of such Article or Appendix shall control, these General
Provisions apply to all Articles and Appendices of this Agreement.
2. Term and Termination.
2.1 Term. Subject to the termination provisions contained in this
Agreement, the term of this Agreement shall be two (2) years
from the effective date referenced in the first paragraph of
this Agreement and shall continue in effect for consecutive
one (1) year terms until either Party gives the other Party at
least ninety (90) calendar days written notice of termination,
which termination shall be effective at the end of the
then-current term. In the event notice is given less than 90
calendar days prior to the end of the current term, this
Agreement shall remain in effect for 90 calendar days after
such notice is received, provided, that in no case shall the
term be extended beyond 90 calendar days after the end of the
current term.
2.2 Post-Termination Arrangements. Except in the case of
termination as a result of either Party's default or a
termination upon sale, for service arrangements made available
under this Agreement and existing at the time of termination,
those arrangements may continue without interruption (a) under
a new agreement voluntarily executed by the Parties; (b)
standard terms and conditions approved and made generally
effective by the Commission, if any; (c) tariff terms and
conditions made generally available to all CLECs; or (d) any
rights under Section 252(i) of the Act.
2.3 Termination Upon Default. Either Party may terminate this
Agreement in whole or in part in the event of a default by the
other Party; provided however, that the non-defaulting Party
notifies the defaulting party in writing of the alleged
default and that the defaulting Party does not cure the
alleged default within sixty (60) calendar days of receipt of
written notice thereof. Default is defined to include:
(a) A Party's insolvency or the initiation of bankruptcy
or receivership proceedings by or against the Party;
or
(b) A Party's refusal or failure in any material respect
properly to perform its obligations under this
Agreement, or the violation any of the material terms
or conditions of this Agreement.
2.4 Termination Upon Sale. Notwithstanding anything to the
contrary contained herein, a Party may terminate this
Agreement as to a specific operating area or portion thereof
if such Party sells or otherwise transfers the area or portion
thereof. The selling or transferring Party shall provide the
other Party with at least ninety (90) calendar days' prior
written notice of such termination, which shall be effective
on the date specified in the notice. Notwithstanding
termination of this Agreement as to a specific operating area,
this Agreement shall remain in full force and effect in the
remaining operating areas.
2.5 Liability upon Termination. Termination of this Agreement, or
any part hereof, for any cause shall not release either Party
from any liability which at the time of termination had
already accrued to the other Party or which thereafter accrues
in any respect to any act or omission occurring prior to the
termination or from an obligation which is expressly stated in
this Agreement to survive termination.
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3. Amendments. Any amendment, modification, or supplement to this
Agreement must be in writing and signed by an authorized representative
of each Party. The term "this Agreement" shall include future
amendments, modifications, and supplements.
4. Assignment. Any assignment by either Party of any right, obligation, or
duty, in whole or in part, or of any interest, without the written
consent of the other Party shall be void, except that either Party may
assign all of its rights, and delegate its obligations, liabilities and
duties under this Agreement, either in whole or in part, to any entity
that is, or that was immediately preceding such assignment, a
Subsidiary or Affiliate of that Party without consent, but with written
notification. The effectiveness of an assignment shall be conditioned
upon the assignee's written assumption of the rights, obligations, and
duties of the assigning Party.
5. Authority. Each person whose signature appears on this Agreement
represents and warrants that he or she has authority to bind the Party
on whose behalf he or she has executed this Agreement. Each Party
represents he or she has had the opportunity to consult with legal
counsel of his or her choosing and has not relied on GTE counsel,
pursuant to this Agreement.
6. Responsibility for Payment. GTE may charge USTELCOM and USTELCOM will
pay GTE a deposit before GTE is required to perform under this
agreement if USTELCOM has not established a good payment history with
GTE. Such deposit will be calculated based on GTE's estimated two-month
charges to USTELCOM using USTELCOM's forecast of resale lines and
unbundled loops and ports. Interest will be paid on the deposit in
accordance with state requirements for end user deposits.
7. Billing and Payment. Except as provided elsewhere in this Agreement and
where applicable, in conformance with Multiple Exchange Carrier Access
Billing (MECAB) guidelines and Multiple Exchange Carriers Ordering and
Design Guidelines for Access Services-Industry Support Interface
(MECOD) guidelines, USTELCOM and GTE agree to exchange all information
to accurately, reliably, and properly order and bill for features,
functions and services rendered under this Agreement.
7.1 Dispute. If one Party disputes a billing statement issued by
the other Party, the billed Party shall notify Provider in
writing regarding the nature and the basis of the dispute
within six (6) months of the statement date or the dispute
shall be waived. The Parties shall diligently work toward
resolution of all billing issues.
7.2 Late Payment Charge. If any undisputed amount due on the
billing statement is not received by Provider on the payment
due date, Provider may charge, and Customer agrees to pay, at
Provider's option, interest on the past due balance at a rate
equal to the lesser of the interest rates set forth in the
applicable GTE/Contel state access tariffs or the GTOC/GSTC
FCC No. 1 tariff, one and one-half percent (1 y2%) per month
or the maximum nonusurious rate of interest under applicable
law. Late payment charges shall be included on the next
statement.
7.3 Due Date. Payment is due thirty (30) calendar days from the
bill date.
7.4 Audits. Either Party may conduct an audit of the other Party's
books and records pertaining to the services provided under
this Agreement, no more frequently than once per twelve (12)
month period, to evaluate the other Party's accuracy of
billing, data and invoicing in accordance with this Agreement.
Any audit shall be performed as follows: (i) following at
least thirty (30) Business Days' prior written notice to the
audited Party; (ii) subject to the reasonable scheduling
requirements and limitations of the audited Party: (iii) at
the auditing Party's sole cost and expense; (iv) of a
reasonable scope and duration; (v) in a manner so as not to
interfere with the audited Party's business operations; and
(vi) in compliance with the audited Party's security rules.
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<PAGE> 14
3. Amendments. Any amendment, modification, or supplement to this
Agreement must be in writing and signed by an authorized representative
of each Party. The term "this Agreement" shall include future
amendments, modifications, and supplements.
4. Assignment. Any assignment by either Party of any right, obligation, or
duty, in whole or in part, or of any interest, without the written
consent of the other Party shall be void, except that either Party may
assign all of its rights, and delegate its obligations, liabilities and
duties under this Agreement, either in whole or in part, to any entity
that is, or that was immediately preceding such assignment, a
Subsidiary or Affiliate of that Party without consent, but with written
notification. The effectiveness of an assignment shall be conditioned
upon the assignee's written assumption of the rights, obligations, and
duties of the assigning Party.
5. Authority. Each person whose signature appears on this Agreement
represents and warrants that he or she has authority to bind the Party
on whose behalf he or she has executed this Agreement. Each Party
represents he or she has had the opportunity to consult with legal
counsel of his or her choosing and has not relied on GTE counsel,
pursuant to this Agreement.
6. Responsibility for Payment. GTE may charge USTELCOM and USTELCOM will
pay GTE a deposit before GTE is required to perform under this
agreement if USTELCOM has not established a good payment history with
GTE. Such deposit will be calculated based on GTE's estimated two-month
charges to USTELCOM using USTELCOM's forecast of resale lines and
unbundled loops and ports. Interest will be paid on the deposit in
accordance with state requirements for end user deposits.
7. Billing and Payment. Except as provided elsewhere in this Agreement and
where applicable, in conformance with Multiple Exchange Carrier Access
Billing (MECAB) guidelines and Multiple Exchange Carriers Ordering and
Design Guidelines for Access Services-Industry Support Interface
(MECOD) guidelines, USTELCOM and GTE agree to exchange all information
to accurately, reliably, and properly order and bill for features,
functions and services rendered under this Agreement.
7.1 Dispute. If one Party disputes a billing statement issued by
the other Party, the billed Party shall notify Provider in
writing regarding the nature and the basis of the dispute
within six (6) months of the statement date or the dispute
shall be waived. The Parties shall diligently work toward
resolution of all billing issues.
7.2 Late Payment Charge. If any undisputed amount due on the
billing statement is not received by Provider on the payment
due date, Provider may charge, and Customer agrees to pay, at
Provider's option, interest on the past due balance at a rate
equal to the lesser of the interest rates set forth in the
applicable GTE/Contel state access tariffs or the GTOC/GSTC
FCC No. 1 tariff, one and one-half percent (1 y2%) per month
or the maximum nonusurious rate of interest under applicable
law. Late payment charges shall be included on the next
statement.
7.3 Due Date. Payment is due thirty (30) calendar days from the
bill date.
7.4 Audits. Either Party may conduct an audit of the other Party's
books and records pertaining to the services provided under
this Agreement, no more frequently than once per twelve (12)
month period, to evaluate the other Party's accuracy of
billing, data and invoicing in accordance with this Agreement.
Any audit shall be performed as follows: (i) following at
least thirty (30) Business Days' prior written notice to the
audited Party; (ii) subject to the reasonable scheduling
requirements and limitations of the audited Party; (iii) at
the auditing Party's sole cost and expense; (iv) of a
reasonable scope and duration; (v) in a manner so as not to
interfere with the audited Party's business operations; and
(vi) in compliance with the audited Party's security rules.
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<PAGE> 15
8. Binding Effect. This Agreement shall be binding on and inure to the
benefit of the respective successors and permitted assigns of the
Parties.
9. Capacity Planning and Forecasting. Within thirty (30) days from the
effective date of this Agreement, the Parties agree to have met and
developed joint planning and forecasting responsibilities which are
applicable to local services. GTE may delay processing USTELCOM service
orders should the Parties not perform obligations as specified in this
Section 9. Such responsibilities shall include but are not limited to
the following:
9.1 USTELCOM will furnish to GTE information that provides for
state-wide annual forecasts of order activity, in-service
quantity forecasts, and facility/demand forecasts.
9.2 USTELCOM shall notify GTE promptly of changes greater than ten
percent (10%) to current forecasts (increase or decrease) that
generate a shift in the demand curve for the following
forecasting period.
10. Compliance with Laws and Regulations. Each Party shall comply with all
federal, state, and local statutes, regulations, rules, ordinances,
judicial decisions, and administrative rulings applicable to its
performance under this Agreement.
11. Confidential Information.
11.1 Identification. Either Party may disclose to the other
proprietary or confidential customer, technical, or business
information in written, graphic, oral or other tangible or
intangible forms ("Confidential Information"). In order for
information to be considered Confidential Information under
this Agreement, it must be marked "Confidential" or
"Proprietary," or bear a marking of similar import. Orally or
visually disclosed information shall be deemed Confidential
Information only if contemporaneously identified as such and
reduced to writing and delivered to the other Party with a
statement or marking of confidentiality within thirty (30)
calendar days after oral or visual disclosure.
Notwithstanding the foregoing, preorders and all orders for
services placed by USTELCOM pursuant to this Agreement, and
information that would constitute customer proprietary network
information of USTELCOM end user customers pursuant to the Act
and the rules and regulations of the FCC, as well as recorded
usage information with respect to USTELCOM end users, whether
disclosed by USTELCOM to GTE or otherwise acquired by GTE in
the course of its performance under this Agreement, and where
GTE is the North American Numbering Plan (NANP) Number Plan
Administrator, USTELCOM information submitted to GTE in
connection with such responsibilities shall be deemed
Confidential Information of USTELCOM for all purposes under
this Agreement whether or not specifically marked or
designated as confidential or proprietary.
11.2 Handling. In order to protect such Confidential Information
from improper disclosure, each Party agrees:
(a) That all Confidential Information shall be and shall
remain the exclusive property of the source;
(b) To limit access to such Confidential Information to
authorized employees who have a need to know the
Confidential Information for performance of this
Agreement;
(c) To keep such Confidential Information confidential
and to use the same level of care to prevent
disclosure or unauthorized use of the received
Confidential Information as it exercises in
protecting its own Confidential Information of a
similar nature;
III-3
<PAGE> 16
(d) Not to copy, publish, or disclose such Confidential
Information to others or authorize anyone else to
copy, publish, or disclose such Confidential
Information to others without the prior written
approval of the source;
(e) To return promptly any copies of such Confidential
Information to the source at its request; and
(f) To use such Confidential Information only for
purposes of fulfilling work or services performed
hereunder and for other purposes only upon such terms
as may be agreed upon between the Parties in writing.
11.3 Exceptions. These obligations shall not apply to any
Confidential Information that was legally in the recipient's
possession prior to receipt from the source, was received in
good faith from a third party not subject to a confidential
obligation to the source, now is or later becomes publicly
known through no breach of confidential obligation by the
recipient, was developed by the recipient without the
developing persons having access to any of the Confidential
Information received in confidence from the source, or that is
required to be disclosed pursuant to subpoena or other process
issued by a court or administrative agency having appropriate
jurisdiction, provided, however, that the recipient shall give
prior notice to the source and shall reasonably cooperate if
the source deems it necessary to seek protective arrangements.
11.4 Survival. The obligation of confidentiality and use with
respect to Confidential Information disclosed by one Party to
the other shall survive any termination of this Agreement for
a period of three (3) years from the date of the initial
disclosure of the Confidential Information.
12. Consent. Where consent, approval, or mutual agreement is required of a
Party, it shall not be conditional, unreasonably withheld, or delayed.
13. Cooperation on Fraud Minimization. USTELCOM assumes responsibility for
all fraud associated with its end user customers and accounts. GTE
shall have no responsibility for, nor is it required to investigate or
make adjustments to USTELCOM's account in cases of fraud. The Parties
agree that they shall cooperate with one another to resolve cases of
fraud. The Parties' fraud minimization procedures are to be cost
effective and implemented so as not to unduly burden or harm one Party
as compared to the other.
14. Reimbursement of Expenses. In performing under this Agreement GTE may
be required to make expenditures or otherwise incur costs that are not
otherwise reimbursed under this Agreement. In such event GTE is
entitled to reimbursement from USTELCOM for all such costs. For all
such costs and expenses GTE shall receive through NRCs the actual costs
and expenses incurred, including labor costs and expenses, overhead and
fixed charges, and may include a reasonable contribution to GTE's
common costs.
15. Dispute Resolution.
15.1 Alternative to Litigation. Except as provided under Section
252 of the Act with respect to the approval of this Agreement
by the Commission, the Parties desire to resolve disputes
arising out of or relating to this Agreement without
litigation. Accordingly, except for action seeking a temporary
restraining order or an injunction related to the purposes of
this Agreement, or suit to compel compliance with this dispute
resolution process, the Parties agree to use the following
alternative dispute resolution procedures as the sole remedy
with respect to any controversy or claim arising out of or
relating to this Agreement or its breach.
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<PAGE> 17
15.2 Negotiations. At the written request of a Party, each Party
will appoint a knowledgeable, responsible representative to
meet and negotiate in good faith to resolve any dispute
arising out of or relating to this Agreement. The Parties
intend that these negotiations be conducted by non-lawyer,
business representatives. The location, format, frequency,
duration, and conclusion of these discussions shall be left to
the discretion of the representatives. Upon agreement, the
representatives may utilize other alternative dispute
resolution procedures such as mediation to assist in the
negotiations. Discussions and correspondence among the
representatives for purposes of these negotiations shall be
treated as confidential information developed for purposes of
settlement, exempt from discovery, and shall not be
admissible in the arbitration described below or in any
lawsuit without the concurrence of all Parties. Documents
identified in or provided with such communications, which are
not prepared for purposes of the negotiations, are not so
exempted and may, if otherwise discoverable, be discovered or
otherwise admissible, be admitted in evidence, in the
arbitration or lawsuit.
15.3 Arbitration. If the negotiations do not resolve the dispute
within sixty (60) Business Days of the initial written
request, the dispute shall be submitted to binding arbitration
by a single arbitrator pursuant to the Commercial Arbitration
Rules of the American Arbitration Association except that the
Parties may select an arbitrator outside American Arbitration
Association rules upon mutual agreement. A Party may demand
such arbitration in accordance with the procedures set out in
those rules. Discovery shall be controlled by the arbitrator
and shall be permitted to the extent set out in this section.
Each Party may submit in writing to a Party, and that Party
shall so respond to, a maximum of any combination of
thirty-five (35) (none of which may have subparts) of the
following: interrogatories, demands to produce documents, or
requests for admission. Each Party is also entitled to take
the oral deposition of one individual of another Party.
Additional discovery may be permitted upon mutual agreement of
the Parties. The arbitration hearing shall be commenced within
sixty (60) Business Days of the demand for arbitration. The
arbitration shall be held in a mutually agreeable city. The
arbitrator shall control the scheduling so as to process the
matter expeditiously. The Parties may submit written briefs.
The arbitrator shall rule on the dispute by issuing a written
opinion within thirty (30) Business Days after the close of
hearings. The times specified in this section may be extended
upon mutual agreement of the Parties or by the arbitrator upon
a showing of good cause. Judgment upon the award rendered by
the arbitrator may be entered in any court having
jurisdiction.
15.4 Expedited Arbitration Procedures. If the issue to be resolved
through the negotiations referenced in Section 15.2 directly
and materially affects service to either Party's end user
customers, then the period of resolution of the dispute
through negotiations before the dispute is to be submitted to
binding arbitration shall be five (5) Business Days. Once such
a service affecting dispute is submitted to arbitration, the
arbitration shall be conducted pursuant to the expedited
procedures rules of the Commercial Arbitration Rules of the
American Arbitration Association (i.e., rules 53 through 57).
15.5 Costs. Each Party shall bear its own costs of these
procedures. A Party seeking discovery shall reimburse the
responding Party the costs of production of documents
(including search time and reproduction costs). The Parties
shall equally split the fees of the arbitration and the
arbitrator.
15.6 Continuous Service. The Parties shall continue providing
services to each other during the pendency of any dispute
resolution procedure, and the Parties shall continue to
perform their obligations (including making payments in
accordance with Article IV, Section 4) in accordance with this
Agreement.
16. Entire Agreement. This Agreement constitutes the entire agreement of
the Parties pertaining to the subject matter of this Agreement and
supersedes all prior agreements, negotiations,
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<PAGE> 18
proposals, and representations, whether written or oral, and all
contemporaneous oral agreements, negotiations, proposals, and
representations concerning such subject matter. No representations,
understandings, agreements, or warranties, expressed or implied, have
been made or relied upon in the making of this Agreement other than
those specifically set forth herein.
17. Expenses. Except as specifically set out in this Agreement, each Party
shall be solely responsible for its own expenses involved in all
activities related to the subject of this Agreement.
18. Force Majeure. In the event performance of this Agreement, or any
obligation hereunder, is either directly or indirectly prevented,
restricted, or interfered with by reason of fire, flood, earthquake or
likes acts of God, wars, revolution, civil commotion, explosion, acts
of public enemy, embargo, acts of the government in its sovereign
capacity, labor difficulties, including without limitation, strikes,
slowdowns, picketing, or boycotts, unavailability of equipment from
vendor, changes requested by Customer, or any other circumstances
beyond the reasonable control and without the fault or negligence of
the Party affected, the Party affected, upon giving prompt notice to
the other Party, shall be excused from such performance on a day-to-day
basis to the extent of such prevention, restriction, or interference
(and the other Party shall likewise be excused from performance of its
obligations on a day-to-day basis until the delay, restriction or
interference has ceased); provided however, that the Party so affected
shall use diligent efforts to avoid or remove such causes of
nonperformance and both Parties shall proceed whenever such causes are
removed or cease.
19. Good Faith Performance. In the performance of their obligation under
this Agreement, the Parties shall act in good faith. In situations in
which notice, consent, approval or similar action by a Party is
permitted or required by any provision of this Agreement, such action
shall not be unreasonably delayed, withheld or conditioned.
20. Governing Law. This Agreement shall be governed by and construed in
accordance with the Telecommunications Act of 1996, applicable federal
and (to the extent not inconsistent therewith) domestic laws of the
state where the services are provided or the facilities reside and
shall be subject to the exclusive jurisdiction of the courts therein.
21. Standard Practices. The Parties acknowledge that GTE shall be adopting
some industry standard practices and/or establishing its own standard
practices to various requirements hereunder applicable to the CLEC
industry which may be added in the Guide. USTELCOM agrees that GTE may
implement such practices to satisfy any GTE obligations under this
Agreement.
22. Headings. The headings in this Agreement are inserted for convenience
and identification only and shall not be considered in the
interpretation of this Agreement.
23. Independent Contractor Relationship. The persons provided by each Party
shall be solely that Party's employees and shall be under the sole and
exclusive direction and control of that Party. They shall not be
considered employees of the other Party for any purpose. Each Party
shall remain an independent contractor with respect to the other and
shall be responsible for compliance with all laws, rules and
regulations involving, but not limited to, employment of labor, hours
of labor, health and safety, working conditions and payment of wages.
Each Party shall also be responsible for payment of taxes, including
federal, state and municipal taxes, chargeable or assessed with respect
to its employees, such as Social Security, unemployment, workers'
compensation, disability insurance, and federal and state withholding.
Each Party shall indemnify the other for any loss, damage, liability,
claim, demand, or penalty that may be sustained by reason of its
failure to comply with this provision.
24. Law Enforcement Interface.
24.1 Except to the extent not available in connection with GTE's
operation of its own business, GTE shall provide seven day a
week/twenty-four hour a day assistance to law
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<PAGE> 19
enforcement persons for emergency traps, assistance involving
emergency traces and emergency information retrieval on
customer invoked CLASS services.
24.2 GTE agrees to work jointly with USTELCOM in security matters
to support law enforcement agency requirements for taps,
traces, court orders, etc. Charges for providing such services
for USTELCOM customers will be billed to USTELCOM.
24.3 GTE will, in non emergency situations, inform the requesting
law enforcement agencies that the end-user to be wire tapped,
traced, etc. is a USTELCOM Customer and shall refer them to
USTELCOM.
24.4 Subsequent to the execution and approval of this Agreement by
the Commission, the parties shall establish a separate
contract or authorization agreement specific to the Nuisance
Call Bureau (NCB) and Security Control Center (SCC) for CLEC
procedures which will be in compliance with applicable state
and federal laws.
25. Liability and Indemnity.
25.1 Indemnification. Subject to the limitations set forth in
Section 25.4 of this Article III, each Party agrees to
release, indemnify, defend, and hold harmless the other Party
from all losses, claims, demands, damages, expenses, suits, or
other actions, or any liability whatsoever, including, but not
limited to, costs and attorney's fees, whether suffered, made,
instituted, or asserted by any other party or person, for
invasion of privacy, personal injury to or death of any person
or persons, or for losses, damages, or destruction of
property, whether or not owned by others, proximately caused
by the indemnifying Party's negligence or willful misconduct,
regardless of form of action. The indemnified Party agrees to
notify the other Party promptly, in writing, of any written
claims, lawsuits, or demands for which it is claimed that the
indemnifying Party is responsible under this Section and to
cooperate in every reasonable way to facilitate defense or
settlement of claims. The indemnifying Party shall have
complete control over defense of the case and over the terms
of any proposed settlement or compromise thereof. The
indemnifying Party shall not be liable under this Section for
settlement by the indemnified Party or any claim, lawsuit, or
demand, if the indemnifying Party has not approved the
settlement in advance, unless the indemnifying Party has had
the defense of the claim, lawsuit, or demand tendered to it in
writing and has failed to assume such defense. In the event of
such failure to assume defense, the indemnifying Party shall
be liable for any reasonable settlement made by the
indemnified Party without approval of the indemnifying Party.
25.2 End User and Content-Related Claims. The Indemnifying Party
agrees to release, indemnify, defend, and hold harmless the
other Party, its affiliates, and any third-party provider or
operator of facilities involved in the provision of services
(collectively, the "Indemnified Party") from all losses,
claims, demands, damages, expenses, suits, or other actions,
or any liability whatsoever, including, but not limited to,
costs and attorney's fees, suffered, made, instituted, or
asserted by the Indemnifying Party's end users against an
Indemnified Party arising from services. The Indemnifying
Party further agrees to release, indemnify, defend, and hold
harmless the Indemnified Party from all losses, claims,
demands, damages, expenses, suits, or other actions, or any
liability whatsoever, including, but not limited to, costs and
attorney's fees, suffered, made, instituted, or asserted by
any third party against an Indemnified Party arising from or
in any way related to actual or alleged defamation, libel,
slander, interference with or misappropriation of proprietary
or creative right, or any other injury to any person or
property arising out of content transmitted by the
Indemnifying Party and the Indemnified Party or such Party's
end users, or any other act or omission of the Indemnified
Party or such Party's end users.
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<PAGE> 20
25.3 DISCLAIMER. EXCEPT AS SPECIFICALLY PROVIDED TO THE CONTRARY IN
THIS AGREEMENT, PROVIDER MAKES NO REPRESENTATIONS OR
WARRANTIES TO CUSTOMER CONCERNING THE SPECIFIC QUALITY OF ANY
SERVICES PROVIDED UNDER THIS AGREEMENT. PROVIDER DISCLAIMS,
WITHOUT LIMITATION, ANY WARRANTY OR GUARANTEE OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, ARISING
FROM COURSE OF PERFORMANCE, COURSE OF DEALING, OR FROM USAGES
OF TRADE.
25.4 Limitation of Liability. Each Party's liability, whether in
contract, tort or otherwise, shall be limited to direct
damages, which shall not exceed the monthly charges, plus any
related costs/expenses GTE may recover, including those under
Section 14 above, for the services for the month during which
the claim of liability arose. Under no circumstance shall
either Party be responsible or liable for indirect,
incidental, or consequential damages, including, but not
limited to, economic loss or lost business or profits, damages
arising from the use or performance of equipment or software,
or the loss of use of software or equipment, or any
accessories attached thereto, delay, error, or loss of data.
Should either Party provide advice, make recommendations, or
supply other analysis related to the services described in
this Agreement, this limitation of liability shall apply to
provision of such advice, recommendations, and analysis.
25.5 Intellectual Property. Neither Party shall have any obligation
to defend, indemnify or hold harmless, or acquire any license
or right for the benefit of, or owe any other obligation or
have any liability to, the other based on or arising from any
claim, demand, or proceeding by any third party alleging or
asserting that the use of any circuit, apparatus, or system,
or the use of any software, or the performance of any service
or method, or the provision or use of any facilities by either
Party under this Agreement constitutes direct or contributory
infringement, or misuse or misappropriation of any patent,
copyright, trademark, trade secret, or any other proprietary
or intellectual property right of any third party.
26. Multiple Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original, but all of
which shall together constitute but one and the same document.
27. No Third Party Beneficiaries. Except as may be specifically set forth
in this Agreement, this Agreement does not provide and shall not be
construed to provide third parties with any remedy, claim, liability,
reimbursement, cause of action, or other right or privilege.
28. Notices. Any notice to a Party required or permitted under this
Agreement shall be in writing and shall be deemed to have been received
on the date of service if served personally, on the date receipt is
acknowledged in writing by the recipient if delivered by regular U.S.
mail, or on the date stated on the receipt if delivered by certified or
registered mail or by a courier service that obtains a written receipt.
Upon prior immediate oral agreement of the parties' designated
recipients identified below, notice may also be provided by facsimile,
Internet or electronic messaging system, which shall be effective if
sent before 5:00 p.m. on that day, or if sent after 5:00 p.m. it will
be effective on the next Business Day following the date sent. Any
notice shall be delivered using one of the alternatives mentioned in
this section and shall be directed to the applicable address or
Internet ID indicated below or such address as the Party to be notified
has designated by giving notice in compliance with this section:
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<PAGE> 21
If to GTE: GTE North Incorporated
Contel of the South, Inc., d/b/a GTE Systems of the
South
Attention: Assistant Vice President/Associate
General Counsel
Business Development & Integration
600 Hidden Ridge - HQEWMNOTICES
Irving, TX 75038
Telephone number: 972/718-6361
Facsimile number: 972/7l8-3403
Internet Address: [email protected]
and
GTE North Incorporated
Contel of the South, Inc., d/b/a GTE Systems of the
South
Attn: Director-Wholesale Contract Compliance
Network Services
600 Hidden Ridge - HQEWMNOTICES
Irving, TX 75038
Telephone Number: 972/718-5988
Facsimile Number: 972/719-1519
Internet Address: [email protected]
If to USTELCOM: United States Telecommunications, Inc.
Attention: Mr. Joseph Cillo, Vice President
13902 N. Dalemabry, Suite 213
Tampa, FL 33618
Telephone Number: 813/963-0004
Facsimile Number: 813/961-1460
29. Protection.
29.1 Impairment of Service. The characteristics and methods of
operation of any circuits, facilities or equipment of either
Party connected with the services, facilities or equipment of
the other Party pursuant to this Agreement shall not interfere
with or impair service over any facilities of the other Party,
its affiliated companies, or its connecting and concurring
carriers involved in its services, cause damage to its plant,
violate any applicable law or regulation regarding the
invasion of privacy of any communications carried over the
Party's facilities or create hazards to the employees of
either Party or to the public (each hereinafter referred to as
an "Impairment of Service").
29.2 Resolution. If either Party causes an Impairment in Service,
the Party whose network or service is being impaired (the
"Impaired Party") shall promptly notify the Party causing the
Impairment of Service (the "Impairing Party") of the nature
and location of the problem and that, unless promptly
rectified, a temporary discontinuance of the use of any
circuit, facility or equipment may be required. The Impairing
Party and the Impaired Party agree to work together to attempt
to promptly resolve the Impairment of Service. If the
Impairing Party is unable to promptly remedy the Impairment of
Service, then the Impaired Party may at its option temporarily
discontinue the use of the affected circuit, facility or
equipment.
30. Publicity. Any news release, public announcement, advertising, or any
form of publicity pertaining to this Agreement, provision of services
pursuant to it, or association of the Parties with respect to provision
of the services described in this Agreement shall be subject to prior
written approval of both GTE and USTELCOM.
31. Regulatory Agency Control. This Agreement shall at all times be subject
to changes, modifications, orders, and rulings by the Federal
Communications Commission and/or the
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applicable state utility regulatory commission to the extent the
substance of this Agreement is or becomes subject to the jurisdiction
of such agency.
32. Changes in Legal Requirements. GTE and USTELCOM further agree that the
terms and conditions of this Agreement were composed in order to
effectuate the legal requirements in effect at the time the Agreement
was produced. Any modifications to those requirements will be deemed to
automatically supersede any terms and conditions of this Agreement.
33. Effective Date. This Agreement will be effective only upon execution by
both Parties and approval by the Commission in accordance with Section
252 of the Act. The "effective date" of this Agreement for such
purposes will be as established by the Commission approval order. The
Parties agree orders for services will not be submitted or accepted
within the first ten (10) business days after the agreement is
effective.
34. Regulatory Matters. Each Party shall be responsible for obtaining and
keeping in effect all FCC, state regulatory commission, franchise
authority and other regulatory approvals that may be required in
connection with the performance of its obligations under this
Agreement.
35. Rule of Construction. No rule of construction requiring interpretation
against the drafting Party hereof shall apply in the interpretation of
this Agreement.
36. Section References. Except as otherwise specified, references within an
Article of this Agreement to a Section refer to Sections within that
same Article.
37. Service Standards.
37.1 The Parties will provide a level of service to each other with
respect to Resale under this Agreement in compliance with the
non-discrimination requirements of the Act. GTE will use
appropriate statistical tests or performance criterion to
include detailed investigation, where required, to verify such
non-discriminatory level of service.
37.2 Each Party may provide input to the various telecommunications
industry forums defining national standards for methods of
quality measurement. Subsequent to adoption of standard
industry measurements the Parties shall work towards
implementing those mutually agreed upon GTE supported
measurements necessary for their quality assurance
relationship of services supplied by GTE. Prior to adoption of
industry guidelines GTE will make available, upon request
through GTE's account management, monthly CLEC standard
reports with comparisons in performance compiled on a rolling
three-month basis.
37.3 The parties will alert each other to any network events that
can result or have resulted in service interruption, blocked
calls, and/or changes in network performance.
38. Severability. If any provision of this Agreement is held by a court or
regulatory agency of competent jurisdiction to be unenforceable, the
rest of the Agreement shall remain in full force and effect and shall
not be affected unless removal of that provision results, in the
opinion of either Party, in a material change to this Agreement. If a
material change as described in this paragraph occurs as a result of
action by a court or regulatory agency, the Parties shall negotiate in
good faith for replacement language. If replacement language cannot be
agreed upon within a reasonable period, either Party may terminate this
Agreement without penalty or liability for such termination upon
written notice to the other Party.
39. Subcontractors. Provider may enter into subcontracts with third parties
or affiliates for the performance of any of Provider's duties or
obligations under this Agreement.
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<PAGE> 23
40. Subsequent Law. The terms and conditions of this Agreement shall be
subject to any and all applicable laws, rules, or regulations that
subsequently may be prescribed by any federal, state or local
governmental authority. To the extent required by any such subsequently
prescribed law, rule, or regulation, the Parties agree to modify, in
writing, the affected term(s) and condition(s) of this Agreement to
bring them into compliance with such law, rule, or regulation.
41. Taxes. Any state or local excise, sales, or use taxes (excluding any
taxes levied on income) resulting from the performance of this
Agreement shall be borne by the Party upon which the obligation for
payment is imposed under applicable law, even if the obligation to
collect and remit such taxes is placed upon the other Party. The
collecting Party shall charge and collect from the obligated Party, and
the obligated Party agrees to pay to the collecting Party, all
applicable taxes, except to the extent that the obligated Party
notifies the collecting Party and provides to the collecting Party
appropriate documentation as GTE requires that qualifies the obligated
Party for a full or partial exemption. Any such taxes shall be shown as
separate items on applicable billing documents between the Parties. The
obligated Party may contest the same in good faith, at its own expense,
and shall be entitled to the benefit of any refund or recovery,
provided that such Party shall not permit any lien to exist on any
asset of the other Party by reason of the contest. The collecting Party
shall cooperate in any such contest by the other Party. The other Party
will indemnify the collecting Party from any sales or use taxes that
may be subsequently levied on payments by the other Party by the
collecting Party.
41.1 Tax - A charge which is statutorily imposed by the state or
local jurisdiction and is either (a) imposed on the seller
with the seller having the right or responsibility to pass the
charge(s) on to the purchaser and the seller is responsible
for remitting the charge(s) to the state or local jurisdiction
or (b) imposed on the purchaser with the seller having an
obligation to collect the charge(s) from the purchaser and
remit the charge(s) to the state or local jurisdiction.
Taxes shall include but not be limited to: federal excise tax,
state/local sales and use tax, state/local utility user tax,
state/local telecommunication excise tax, state/local gross
receipts tax, and local school taxes. Taxes shall not include
income, income-like, gross receipts on the revenue of a
provider, or property taxes. Taxes shall not include payroll
withholding taxes unless specifically required by statute or
ordinance.
41.2 Fees/Regulatory Surcharges - A charge imposed by a regulatory
authority, other agency, or resulting from a contractual
obligation, in which the seller is responsible or required to
collect the fee/surcharge from the purchaser and the seller is
responsible for remitting the charge to the regulatory
authority, other agency, or contracting party.
42. Trademarks and Trade Names. Except as specifically set out in this
Agreement, nothing in this Agreement shall grant, suggest, or imply any
authority for one Party to use the name, trademarks, service marks, or
trade names of the other for any purpose whatsoever.
43. Waiver. The failure of either Party to insist upon the performance of
any provision of this Agreement, or to exercise any right or privilege
granted to it under this Agreement, shall not be construed as a waiver
of such provision or any provisions of this Agreement, and the same
shall continue in full force and effect.
44. TBD Prices. Numerous provisions in this Agreement and its Attachments
refer to pricing principles. If a provision references prices in an
Attachment and there are no corresponding prices in such Attachment,
such price shall be considered "To Be Determined" (TBD). With respect
to all TBD prices, prior to USTELCOM ordering any such TBD item, the
Parties shall meet and confer to establish a price. If the Parties are
unable to reach agreement on a price for such item, an interim price
shall be set for such item that is equal to the price for the nearest
analogous item for which a price has been established (for example, if
there is not an established price for a non recurring charge (NRC) for
a specific service, the Parties would use the NRC for the most
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<PAGE> 24
analogous retail service for which there is an established price). Any
interim prices so set shall be subject to modification by any
subsequent decision of the Commission. If an interim price is different
from the rate subsequently established by the Commission, any
underpayment shall be paid by USTELCOM to GTE, and any overpayment
shall be refunded by GTE to USTELCOM, within 45 Business Days after the
establishment of the price by the Commission.
45. Amendment of Certain Rates, Terms and Conditions. The Parties agree as
follows with respect to modification of the rates, terms and conditions
initially provided for herein:
The rates, terms and conditions that are specified in Appendix 45A (the
"GTE Terms") may be replaced by the rates, terms and conditions from
the GTE/AT&T Interconnection, Resale and Unbundling Agreement (the AT&T
Agreement), respectively, that are specified in Appendix 45B (the "AT&T
Terms") if and when the AT&T Agreement becomes effective after approval
by order of the Commission in Case No. 2180-MA-100. The rates, terms
and conditions that are specified in Appendix 45B (the "AT&T Terms")
shall not take effect for purposes of this Agreement until thirty (30)
days following GTE's receipt of written notice of USTELCOM's election
to replace the specified "GTE Terms" with the specified "AT&T Terms",
which notice may be given no earlier than the date the AT&T Agreement
is approved by the Commission and effective. GTE and USTELCOM agree
that if the "AT&T Terms" are deemed to be unlawful, or are stayed,
enjoined or otherwise modified, in whole or in part, by a court or
commission of competent jurisdiction, then this Agreement shall be
deemed to have been amended accordingly, by modification of the "AT&T
Terms" or, as appropriate, the substitution of "GTE Terms" for all
stayed or enjoined "AT&T Terms", and such amendment shall be effective
retroactive to the Effective Date of the "AT&T Terms."
GTE and USTELCOM further agree that the terms and conditions of this
Agreement reflect certain requirements of the FCC's First Report and
Order in CC Docket No. 96-98. The terms and conditions of this
Agreement shall be subject to any and all actions by any court or other
governmental authority that invalidate, stay, vacate or otherwise
modify the FCC's First Report and Order, in whole or in part
("action"). To the extent warranted by any such action, the parties
agree that this Agreement shall be deemed to have been modified
accordingly as in the first paragraph of this Section 45. The parties
agree to immediately apply any affected terms and conditions, including
any in other sections and articles of this Agreement consistent with
such action, and within a reasonable time incorporate such modified
terms and conditions in writing into the Agreement. If the AT&T Terms
are affected by such action and GTE determines they cannot be
consistently applied therewith, the GTE Terms shall apply. USTELCOM
acknowledges that GTE may seek to enforce such action before a
commission or court of competent jurisdiction. GTE does not waive any
position regarding the illegality or inappropriateness of the FCC's
First Report and Order.
The rates, terms and conditions (including rates which may be
applicable under true-up) specified in both the "GTE Terms" and the
"AT&T Terms" are further subject to amendment, retroactive to the
Effective Date of the Agreement, to provide for charges or rate
adjustments resulting from future Commission or other proceedings,
including but not limited to any generic proceeding to determine GTE's
unrecovered costs (e.g., historic costs, contribution, undepreciated
reserve deficiency, or similar unrecovered GTE costs (including GTE's
end user surcharge)), the establishment of a competitively neutral
universal service system, or any appeal or other litigation.
If the Commission (or any other commission or federal or state court)
in reviewing this Agreement pursuant to applicable state or federal
laws, including Section 252(e) of the Telecommunications Act of 1996,
deletes or modifies in any way this Section 45, USTELCOM agrees that
this entire Agreement is void and will not become effective, and
USTELCOM agrees to withdraw this Agreement from consideration by the
Commission (or any other commission or federal or state court).
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ARTICLE IV
GENERAL RULES GOVERNING RESOLD SERVICES
1. General. General regulations, terms and conditions governing rate
applications, technical parameters, service availability, definitions
and feature interactions, as described in the appropriate GTE
intrastate local, toll and access tariffs, apply to retail services
made available by GTE to USTELCOM for resale provided by GTE to
USTELCOM, when appropriate, unless otherwise specified in this
Agreement. As applied to services under this Agreement, the term
"Customer" contained in the GTE Retail Tariff shall be deemed to mean
"USTELCOM" as defined in this Agreement.
2. Liability of GTE.
2.1 Inapplicability of Tariff Liability. GTE's general liability,
as described in the GTE Retail Tariff, does not extend to
USTELCOM's customers or any other third party. Liability of
GTE to USTELCOM resulting from any and all causes arising out
of services, or any other items relating to this Agreement
shall be governed by the liability provisions contained in
this Agreement and no other liability whatsoever shall attach
to GTE. GTE shall be liable for the individual services,
facilities or elements that it separately provides to USTELCOM
and shall not be liable for the integration of components
combined by USTELCOM.
2.2 USTELCOM Tariffs or Contracts. USTELCOM shall, in its tariffs
or other contracts for services provided to its end users
using services obtained from GTE, provide that in no case
shall GTE be liable to USTELCOM's end users or any third
parties for any indirect, special or consequential damages,
including, but not limited to, economic loss or lost business
or profits, whether foreseeable or not, and regardless of
notification by USTELCOM of the possibility of such damages
and USTELCOM shall indemnify and hold GTE harmless from any
and all claims, demands, causes of action and liabilities
based on any reason whatsoever from its customers as provided
in this Agreement. Nothing in this Agreement shall be deemed
to create a third-party beneficiary relationship with
USTELCOM's end users.
2.3 No Liability for Errors. GTE is not liable for mistakes that
appear in GTE's listings, 911 and other information databases,
or for incorrect referrals of end users to USTELCOM for any
ongoing USTELCOM service, sales or repair inquiries, and with
respect to such mistakes or incorrect referrals, USTELCOM
shall indemnify and hold GTE harmless from any and all claims,
demands, causes of action and liabilities whatsoever,
including costs, expenses and reasonable attorney's fees
incurred on account thereof, by third parties, including
USTELCOM's end users or employees. For purposes of this
Section 2.3, mistakes and incorrect referrals shall not
include matters arising out of the willful misconduct of GTE
or its employees or agents.
3. Unauthorized Changes.
3.1 Procedures. If USTELCOM submits an order for resold services
under this Agreement in order to provide service to an end
user that at the time the order is submitted is obtaining its
local services from GTE or another LEC using GTE resold
services, and the end user notifies GTE that the end user did
not authorize USTELCOM to provide local exchange services to
the end user, USTELCOM must provide GTE with written
documentation of authorization from that end user within
thirty (30) Business Days of notification by GTE. If USTELCOM
cannot provide written documentation of authorization within
such time frame, USTELCOM must within three (3) Business Days
thereafter:
(a) notify GTE to change the end user back to the LEC
providing service to the end user before the change
to USTELCOM was made; and
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<PAGE> 26
(b) provide any end user information and billing records
USTELCOM has obtained relating to the end user to the
LEC previously serving the end user; and
(c) notify the end user and GTE that the change back to
the previous LEC has been made.
Furthermore, GTE will bill USTELCOM fifty dollars ($50.00) per
affected line to compensate GTE for switching the end user
back to the original LEC.
4. Impact of Payment of Charges on Service. USTELCOM is solely responsible
for the payment of all charges for all services, facilities and
elements furnished under this Agreement, including, but not limited to,
calls originated or accepted at its or its end-users' service
locations. If USTELCOM fails to pay when due any and all charges billed
to USTELCOM under this Agreement, including any late payment charges
(collectively, "unpaid charges"), and any or all such charges remain
unpaid more than forty-five (45) calendar days after the bill date of
such unpaid charges excepting previously disputed charges for which
USTELCOM may withhold payment, GTE shall notify USTELCOM in writing
that it must pay all unpaid charges to GTE within seven (7) Business
Days. If USTELCOM disputes the billed charges, it shall, within said
seven (7) day period, inform GTE in writing of which portion of the
unpaid charges it disputes, including the specific details and reasons
for the dispute, unless such reasons have been previously provided, and
shall immediately pay to GTE all undisputed charges. If USTELCOM and
GTE are unable, within thirty (30) Business Days thereafter, to resolve
issues related to the disputed charges, then either USTELCOM or GTE may
file a request for arbitration under Article III of this Agreement to
resolve those issues. Upon resolution of any dispute hereunder, if
USTELCOM owes payment it shall make such payment to GTE with any late
payment charge under Article III, Section 7.2, from the original
payment due date. If USTELCOM owes no payment, but has previously paid
GTE such disputed payment, then GTE shall credit such payment including
any late payment charges. If USTELCOM fails to pay any undisputed
unpaid charges, USTELCOM shall, at its sole expense, within five (5)
Business Days notify its end-users that their service may be
disconnected for USTELCOM's failure to pay unpaid charges, and that its
end-users must select a new provider of local exchange services. GTE
may discontinue service to USTELCOM upon failure to pay undisputed
charges as provided in this Section 4, and shall have no liability to
USTELCOM or USTELCOM's end-users in the event of such disconnection. If
USTELCOM fails to provide such notification or any of USTELCOM's
end-users fail to select a new provider of services within the
applicable time period, GTE may provide local exchange services to
USTELCOM's end-users under GTE's applicable end-user tariff at the then
current charges for the services being provided. In this circumstance,
otherwise applicable service establishment charges will not apply to
USTELCOM's end-user, but will be assessed to USTELCOM.
5. Unlawful Use of Service. Services provided by GTE pursuant to this
Agreement shall not be used by USTELCOM or its end users for any
purpose in violation of law. USTELCOM, and not GTE, shall be
responsible to ensure that USTELCOM and its end users use of services
provided hereunder comply at all times with all applicable laws. GTE
may refuse to furnish service to USTELCOM or disconnect particular
services provided under this Agreement to USTELCOM or, as appropriate,
USTELCOM's end user when (i) an order is issued by a court of competent
jurisdiction finding that probable cause exists to believe that the use
made or to be made of the service is prohibited by law or (ii) GTE is
notified in writing by a law enforcement agency acting within its
jurisdiction that any facility furnished by GTE is being used or will
be used for the purpose of transmitting or receiving gambling
information in interstate or foreign commerce in violation of law.
Termination of service shall take place after reasonable notice is
provided to USTELCOM, or as ordered by the court. If facilities have
been physically disconnected by law enforcement officials at the
premises where located, and if there is not presented to GTE the
written finding of a court, then upon request of USTELCOM and agreement
to pay restoral of service charges and other applicable service
charges, GTE shall promptly restore such service.
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6. Timing of Messages. With respect to GTE resold measured rate local
service(s), chargeable time begins when a connection is established
between the calling station and the called station. Chargeable time
ends when the calling station "hangs up," thereby releasing the network
connection. If the called station "hangs up" but the calling station
does not, chargeable time ends when the network connection is released
by automatic timing equipment in the network.
7. Procedures For Preordering, Ordering, Provisioning, Etc. Certain
procedures for preordering, ordering, provisioning, maintenance and
billing and electronic interfaces for many of these functions are
described in Appendix B. In accordance with Appendix B, GTE will not
process resale or unbundled network element orders until the USTELCOM
Profile has been completed and returned; and, if required, an advanced
deposit paid. All costs and expenses for any new or modified electronic
interfaces USTELCOM requires that GTE determines are Currently
Available and GTE agrees to develop will be paid by USTELCOM pursuant
to Appendix B. The schedule for implementation of any new or modified
electronic interfaces will be developed by GTE according to industry
standards and will be based upon the amount of work needed to design,
test and implement the new or modified interface.
8. Letter of Authorization
8.1 GTE will not release the Customer Service Record (CSR)
containing Customer Priority Network Information (CPNI) to
USTELCOM on GTE end user customer accounts unless USTELCOM
first provides to GTE a written Letter of Authorization (LOA),
signed by the end user customer, authorizing the release of
such information to USTELCOM or if state or federal law
provides otherwise, in accordance with such law.
8.2 An LOA will be required before GTE will process an order for
services provided in cases in which the subscriber currently
receives Exchange Service from GTE or from a local service
provider other than USTELCOM. Such LOA may be a blanket LOA or
such other form as agreed upon between GTE and USTELCOM.
9. Customer Contacts. Except as otherwise provided in this Agreement or as
agreed to in a separate writing by USTELCOM, USTELCOM shall provide the
exclusive interface with USTELCOM's end user customers in connection
with the marketing or offering of USTELCOM services. Except as
otherwise provided in this Agreement, in those instances in which GTE
personnel are required pursuant to this Agreement to interface directly
with USTELCOM's end-users, such personnel shall not identify themselves
as representing GTE. All forms, business cards or other business
materials furnished by GTE to USTELCOM end users shall be generic in
nature. In no event shall GTE personnel acting on behalf of USTELCOM
pursuant to this Agreement provide information to USTELCOM end users
about GTE products or services unless otherwise authorized by USTELCOM.
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ARTICLE V
RESALE OF SERVICES
1 General. The purpose of this Article V is to define the Exchange
Services and related Vertical Features and other services (collectively
referred to for purposes of this Article V as the "services") that
may be purchased from GTE and resold by USTELCOM and the terms and
conditions applicable to such resold services. Except as specifically
provided otherwise in this Agreement, provisioning of Exchange Services
for resale will be governed by the GTE Guide. GTE will make available
to USTELCOM for resale any Telecommunications Service that GTE
currently offers, or may offer hereafter, on a retail basis to
subscribers that are not telecommunications carriers, except as
qualified by Section 2.1 below.
2. Terms and Conditions.
2.1 Restrictions on Resale. The following restrictions shall apply
to the resale of retail services by USTELCOM.
2.1.1 USTELCOM shall not resell to one class of customers a
service that is offered by GTE only to another class
of customers in accordance with state requirements
(e.g., R-1 to B-1, disabled services or lifeline
services to non-qualifying customers).
2.1.2 USTELCOM shall not resell lifeline services and
services for the disabled.
2.1.3 USTELCOM shall not resell promotional offerings of 90
days or less in duration. These promotional offerings
are not available to USTELCOM for resale. GTE will
apply any applicable resale discount to the ordinary
rate for a retail service rather than the special
promotional rate.
2.2 Interim Universal Service Support Charge for Resale Services.
USTELCOM wishes to resell GTE's Basic Exchange Residential and
Business services. It is GTE's position that GTE's current
intraLATA toll rates include implicit subsidies that support
below-cost prices for other services and thus promote
universal service. This universal service support is lost
where a CLEC resells GTE's local service but does not resell
GTE's intraLATA toll service. For this reason, GTE will not
resell Basic Exchange Residential or Business services unless
USTELCOM pays the monthly interim universal service support
charge set forth in Appendix A. GTE believes that this interim
surcharge is required by state and federal law.
The lawfulness of GTE's interim surcharge is being addressed
(or will be addressed) by the Commission or a court of
competent jurisdiction. The parties agree that GTE will offer
for resale Basic Local Exchange Residential and Business
services at the avoided cost discount rate set forth in
Appendix A without the interim surcharge, but subject to the
following terms and conditions:
2.2.1 USTELCOM agrees that within thirty (30) days after
the effective date of a Commission or court order
affirming GTE's interim surcharge, USTELCOM will (i)
begin paying the monthly interim surcharge in accord
with Appendix A, and (ii) make a lump sum payment to
GTE of the total interim surcharges retroactive to
the effective date of this agreement.
2.2.2 Notwithstanding any provision in this Agreement, GTE
may, at its sole discretion and at any time, seek
injunctive or other relief (i) requiring the CLEC to
pay GTE's interim surcharge or (ii) requiring the
Commission to immediately impose the interim
surcharge.
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<PAGE> 29
2.2.3 Nothing in this Agreement shall restrict or impair
GTE from seeking injunctive relief or any other
remedy at any time and in any court regarding GTE's
interim surcharge or the Commission's rejection or
modification of GTE's interim surcharge.
2.3 Restrictions on Discount of Retail Services. The discount
specified in Section 5.3 herein shall apply to all retail
services except for the following:
2.3.1 USTELCOM may resell services that are provided at a
volume discount in accordance with terms and
conditions of applicable tariff. USTELCOM shall not
aggregate end user lines and/or traffic in order to
qualify for volume discount.
2.3.2 USTELCOM may resell ICB/Contract services without a
discount and only to end user customers that already
have such services.
2.3.3 USTELCOM may resell COCOT coin or coinless line,
however, no discount applies.
2.3.4 USTELCOM may resell special access; however, no
discount applies.
2.3.5 USTELCOM may resell operator services and directory
assistance as specified in Section 5.6 herein;
however, no discount applies.
2.4 Resale to Other Carriers. Services available for resale may
not be used by USTELCOM to provide access to the local network
as an alternative to tariffed switched and special access by
other carriers, including, but not limited to: interexchange
carriers, wireless carriers, competitive access providers, or
other retail telecommunications providers.
3. Ordering and Billing.
3.1 Local Service Request. Orders for resale of services will be
placed utilizing standard Local Service Request (LSR) forms.
GTE will continue to participate in industry forums for
developing service order/disconnect order formats and will
incorporate appropriate industry standards. Complete and
accurate LSR forms (containing the requisite end user
information as described in the Guide) must be provided by
USTELCOM before a request can be processed.
3.1.1 GTE will accept orders for As-Is Transfer (AIT) of
services from GTE to USTELCOM where GTE is the end
user's current local exchange company. GTE cannot
provide an AIT of service from another CLEC selling
GTE's services to USTELCOM.
3.2 Certificate of Operating Authority. When ordering, USTELCOM
must represent and warrant to GTE that it is a certified
provider of local dial-tone service. USTELCOM will provide a
copy of its Certificate of Operating Authority or other
evidence of its status to GTE upon request.
3.3 Directory Assistance (DA) Listings. GTE shall include a
USTELCOM customer listing in its DA database as part of the
LSR process. GTE will honor USTELCOM Customer's preferences
for listing status, including non-published and unlisted, and
will enter the listing in the GTE database which is used to
perform DA functions as it appears on the LSR.
3.4 Nonrecurring Charges. USTELCOM shall be responsible for the
payment of all nonrecurring charges (NRCs) applicable to
resold services (e.g., installation, changes,
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ordering charges) as listed in Appendix A. In addition, NRCs
for Field Service work (Installation/Repair requiring on site
visits will be charged from the appropriate tariff. No
discount applies to nonrecurring charges.
3.5 Transfers Between USTELCOM and Another Reseller of GTE
Services. When USTELCOM has obtained an end user customer from
another reseller of GTE services, USTELCOM will inform GTE of
the transfer by submitting standard LSR forms to GTE.
3.5.1 GTE cannot accept an order for AIT of service from one CLEC
reselling GTE services to another reseller of GTE services.
3.6 Local Calling Detail. Except for those services and in those
areas where measured rate local service is available to end
users, monthly billing to USTELCOM does not include local
calling detail. However, USTELCOM may request and GTE shall
consider developing the capabilities to provide local calling
detail in those areas where measured local service is not
available for a mutually agreeable charge.
3.7 Procedures. An overview of the procedures for preordering,
ordering, provisioning and billing for resold services are
outlined in Appendix B, attached hereto and made a part
hereof.
3.8 LIDB. For resale services, the LSR will generate updates to
GTE's LIDB for validation of calling card, collect, and third
number billed calls.
3.9 Originating Line Number Screening (OLNS). Upon request, GTE
will update the database to provide OLNS which indicates to an
operator the acceptable billing methods for calls originating
from the calling number (e.g., penal institutions, COCOTS).
4. Maintenance.
4.1 Maintenance, Testing and Repair. GTE will provide repair and
maintenance services to USTELCOM and its end user customers
for resold services in accordance with the same standards and
charges used for such services provided to GTE end user
customers. GTE will not initiate a maintenance call or take
action in response to a trouble report from a USTELCOM end
user until such time as trouble is reported to GTE by
USTELCOM. USTELCOM must provide to GTE all end user
information necessary for the installation, repair and
servicing of any facilities used for resold services according
to the procedures described in the Guide.
4.2 Specifics and Procedures for Maintenance. An overview of the
procedures for maintenance of resold services and additional
matters agreed to by the Parties concerning maintenance are
set forth in Appendix B.
5. Services Available for Resale.
5.1 Description of Local Exchange Services Available for Resale.
Resold basic Exchange Service includes, but is not limited to,
the following elements:
(a) Voice Grade Local Exchange Access Line - includes a
telephone number and dial tone.
(b) Local Calling - at local usage measured rates if
applicable to the end user customer.
(c) Access to long distance carriers
V-3
<PAGE> 31
(d) E-911 Emergency Dialing
(e) Access to Service Access Codes - e.g., 800, 888, 900
(f) Use of AIN Services (those Currently Available to end
users)
(g) End-User Private Line Services
(h) Listing of telephone number in appropriate "white
pages" directory; and
(i) Copy of "White Pages" and "Yellow Pages" directories
for the appropriate GTE service area
(j) IntraLATA toll
5.2 Other Services Available for Resale. GTE will provide resold services
at retail less the avoided cost discount as defined in Article V,
Section 5.3. Subject to the limitations enumerated in Article V of this
Agreement, the type of resold services made available to USTELCOM are
those telecommunication services described in GTE's retail tariffs, as
amended from time to time. Any new retail services that GTE offers in
such tariffs to customers who are not telecommunications carriers may
also be available to USTELCOM for resale under the same terms and
conditions contained in this Agreement.
5.2.1 Promotional Services. GTE shall make available for resale,
those promotional offerings that are greater than 90 days in
duration and the special promotional rate will be subject to
the applicable resale discount.
5.3 Rates. The prices charged to USTELCOM for local services shall be
calculated as follows:
5.3.1 Avoided Cost Discount as shown on Appendix A shall apply to
all retail services except those services listed in Section
2.1 and Section 2.3 herein.
5.3.2 The discount dollar amount calculated under Section 5.3.1
above will be deducted from the retail rate.
5.3.3 The resulting rate is the resale rate.
5.4 Grandfathered Services. Services identified in GTE Tariffs as
grandfathered in any manner are available for resale only to end user
customers that already have such grandfathered service. An existing end
user customer may not move a grandfathered service to a new service
location. Grandfathered services are subject to a resale discount.
5.5 Access. GTE retains all revenue due from other carriers for access to
GTE facilities, including both switched and special access charges.
5.6 Operator Services (OS) and Directory Assistance (DA). OS for local and
toll assistance (for example, call completion, busy line verification
and emergency interruption) and DA (e.g., 411 calls) are provided as a
part of Exchange Services offered for resale. GTE may brand this
service as GTE. USTELCOM will be billed in accordance with GTE's retail
tariff.
5.6.1 If USTELCOM requests branding or unbranding, GTE will provide
such unbranding or rebranding with USTELCOM's name.
V-4
<PAGE> 32
5.6.2 USTELCOM will be billed a charge for unbranding or rebranding
and customized routing.
5.6.3 For those offices that USTELCOM has requested GTE to rebrand
and/or unbrand OS and DA, GTE will provide it where GTE
performs its own OS and DA service subject to capability and
capacity limitations where customized routing is Currently
Available. If GTE uses a third-party contractor to provide OS
or DA, GTE will not provide branding nor will GTE negotiate it
with a third party on behalf of USTELCOM. USTELCOM must
negotiate with the third party. In these instances, USTELCOM
will need to purchase customized routing and dedicated
trunking to differentiate its OS/DA traffic from GTE's.
6. Misdirected Calls. The Parties will employ the following procedures for
handling any misdirected calls (e.g., Business office, repair bureau,
etc.).
6.1 To the extent the correct provider can be determined, each
Party will refer misdirected calls to the proper provider of
local exchange service. When referring such calls, both
Parties agree to do so in a courteous manner at no charge.
6.2 For misdirected repair calls, the Parties will provide their
respective repair bureau contact number to each other on a
reciprocal basis and provide the end user the correct contact
number.
6.3 In responding to misdirected calls, neither Party shall make
disparaging remarks about each other, nor shall they use these
calls as a basis for internal referrals or to solicit end
users or to market services.
7. 911-II/E911 Arrangements.
7.1 Description of Service. Where GTE is the 911 service provider,
GTE shall provide 911 Service as described in this Section as
an element of local exchange services available for resale.
7.1.1 GTE will provide 911 map as described in Appendix C.
7.2 Cooperation and Level of Performance. The Parties agree to
provide access to 911/E911 in a manner that is transparent to
the end user. The Parties will work together to facilitate the
prompt, reliable and efficient level of performance that will
provide the same grade of service as that which GTE provides
to its own end users.
7.3 Updates to Master Street Address Guide (MSAG). It shall be the
responsibility of USTELCOM to ensure that the address of each
of its end users is included in the MSAG. Where GTE is the
lead telco, GTE will accept address records provided on
USTELCOM's LSR. GTE and USTELCOM will work together to develop
the process by which LSR errors out of the MSAG will be
handled, with appropriate cost recovery to GTE. Where GTE is
not the lead telco, GTE has no action and USTELCOM must
establish a separate relationship with the lead telco to
submit records for MSAG validation. Where GTE is the lead
telco, it will have a copy of the MSAG and will provide a copy
to USTELCOM upon request at the rate in Appendix C.
7.4 Updates to Database. The 911/E911 database will be updated
with USTELCOM's end user 911/E911 information. If USTELCOM
provides its updated data to GTE as frequently as does GTE's
internal systems, the update will be as timely. In any case,
GTE will not update the ALI database any later than one
working day subsequent to receipt of data from USTELCOM.
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<PAGE> 33
7.5 Compensation.
7.5.1 In situations in which GTE is responsible for
maintenance of the 911/E-911 database and can be
compensated for maintaining USTELCOM's information by
the 911 district, GTE will seek such compensation
from the 911 district. GTE will seek compensation
from USTELCOM only if and to the extent that GTE is
unable to obtain such compensation from the 911
district.
7.5.2 Compensation to GTE for provision of services it
provides USTELCOM hereunder shall be according to
reasonable rates developed by GTE and agreed upon by
USTELCOM.
7.6 Liability. GTE will not be liable for errors with respect to
911/E911 services except for its gross negligence as
addressed in applicable tariffs.
8. Dialing Format Changes. GTE will provide reasonable notification to
USTELCOM of changes to local dialing format, i.e., 7 to 10 digit, by
end office.
V-6
<PAGE> 34
IN WITNESS WHEREOF, each Party has executed this Agreement to be effective as of
the date first above written.
<TABLE>
<CAPTION>
<S> <C>
GTE NORTH Incorporated UNITED STATES TELECOMMUNICATIONS,
AND CONTEL OF THE SOUTH, I
INCORPORATED d/b/a GTE SYSTEMS
OF THE SOUTH
By By \s\ Joseph Cillo
------------------------------------------- ---------------------------------------------
Name Name Joseph Cillo
----------------------------------------- -------------------------------------------
Title Title Vice President
---------------------------------------- ------------------------------------------
Date Date 12/23/98
----------------------------------------- -------------------------------------------
</TABLE>
/s/ Daenia Floy
- ---------------
12-18-98
<PAGE> 35
APPENDIX A
SERVICES AVAILABLE FOR RESALE
General. The rates contained in this Appendix A are based upon an avoided cost
discount from GTE's retail rates as provided in Article V, Section 5.3 of the
Agreement to which this Appendix A is attached. The avoided cost discount is
based upon GTE's most current available cost studies and are subject to change
resulting from future Commission or other proceedings, including but not limited
to any generic proceeding to determine GTE's unrecovered costs (e.g., historic
costs, contribution, undepreciated reserve deficiency, or similar unrecovered
GTE costs (including GTE's interim Universal Service Support Surcharge)), the
establishment of a competitively neutral universal service system, or any appeal
or other litigation.
GTE assesses a separate interim universal service fund surcharge for resale of
Basic Local Exchange Residential and Business Services at the avoided cost
discount set forth to provide continued universal service support that is
implicit in GTE's current retail services prices. This surcharge is being
addressed (or will be addressed) by the Commission or a court of competent
jurisdiction. The parties agree that GTE will offer for resale Basic Local
Exchange Residential and Business Services set forth in Appendix A without the
interim surcharge, but subject to the following terms and conditions:
A. USTELCOM agrees that within thirty (30) days after the
effective date of a Commission or court order affirming GTE's
interim surcharge, USTELCOM will (i) begin paying the monthly
interim surcharge in accord with Appendix C, and (ii) make a
lump sum payment to GTE of the total interim surcharges
retroactive to the effective date of this Agreement.
B. Notwithstanding any provision in this Agreement, GTE may, at
its sole discretion and at any time, seek injunctive or other
relief (i) requiring USTELCOM to pay GTE's interim surcharge
or (ii) requiring the Commission to immediately impose the
interim surcharge.
C. Nothing in this Agreement shall restrict or impair GTE from
seeking injunctive relief or any other remedy at any time and
in any court regarding GTE's interim surcharge or the
Commission's rejection or modification of GTE's interim
surcharge.
The avoided cost discount is 15.8% with OS/DA; 16.76% without OS/DA.
NON-RECURRING CHARGES FOR RESALE SERVICES
Initial Service Order (per order) $47.25
Transfer of Service Charges (per order) $24.00
Subsequent Service Order (per order) $24.00
Customer Service Record Research (per request) $ 5.25
Resale Line Installation (per line) $21.75
Outside Facility Connection Charge* $51.00
* Per Tariff: This charge will apply when field work is required for
establishment of new resale service. The terms, conditions and rates that apply
for this work are described in GTE's retail local service tariffs.
UNIVERSAL SERVICE FUND (USF) SUPPORT SURCHARGE
Residential (per line) $ 4.65
Business (per line) $ 1.54
A-1
<PAGE> 36
APPENDIX B
SERVICE ORDERING, PROVISIONING, BILLING AND MAINTENANCE
1. Service Ordering, Service Provisioning, and Billing Systems Generally.
The following describes generally the operations support systems that
GTE will use and the related functions that are available for ordering,
provisioning and billing for resold services. Except as specifically
provided otherwise in this Agreement, service ordering, provisioning,
billing and maintenance shall be governed by the GTE Guide. Before
orders can be taken, the USTELCOM Profile must be completed and
returned; and, if required, an advanced deposit paid. USTELCOM will
provide GTE with its Operating Company Number (OCN) and Company Code
(CC) as follows:
(a) USTELCOM must provide its OCN (four-digit alpha-numeric
assigned by NECA or number administrator) on the USTELCOM
Profile. The GTE Guide provides the necessary information for
USTELCOM to contact NECA to obtain the OCN. There are no
optional fields on the Profile.
(b) Before the LSR and Directory Service Request (DSR) order forms
can be processed USTELCOM must provide the OCN and Customer
Carrier Name Abbreviation (CCNA).
1.1 Operations Support Systems for Resold Services
1.1.1 USTELCOM will also be able to order services for
resale, as well as interim number portability,
directly from GTE through an electronic interface. To
initiate an order for these services, USTELCOM will
submit a Local Service Request ("LSR") from its data
center to GTE's Data Center using an electronic NDM
interface. If no NDM interface exists or if USTELCOM
chooses to establish a separate NDM interface,
USTELCOM must request an NDM facility. For new
entrants that elect not to interface electronically,
GTE will accommodate submission of LSR orders by
E-mail, Internet or a dial NDM arrangement. An LSR is
very similar to an ASR, except that it will be used
exclusively for line-side interconnection requests.
GTE will transfer LSRs to GTE's NOMC centralized
service order processing center electronically.
1.1.2 Most LSRs will be used either to transfer an existing
GTE customer to USTELCOM or to request service for a
new customer who is not an existing GTE customer.
Depending on the situation, different information
will be required on the LSR. LSRs for a conversion of
a GTE local customer to USTELCOM must include
information relating to all existing, new and
disconnected services for that customer, including
the customer's name, type of service desired,
location of service and features or options the
customer desires. USTELCOM will be able to obtain
this customer information after GTE has received the
customer's written consent as specified in Article
IV, Section 8. For service to a new customer who is
not an existing GTE customer, the LSR must contain
the customer's name, service address, service type,
services, options, features and Services data. If
known, the LSR should include the telephone number
and due date/desired due date.
1.1.3 While USTELCOM would have its own customer
information and may have the SAG/GTE products on tape
from GTE, USTELCOM would not have the due date or new
telephone number for new customers since that
information is contained in GTE's systems. Therefore,
a process is required to provide this information to
USTELCOM. GTE itself does not have uniform access to
this information electronically. Until GTE and
USTELCOM have agreed and established electronic
interfaces, USTELCOM agrees that an 800 number is the
method that
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<PAGE> 37
will be used. The 800 telephone number will connect
USTELCOM directly to GTE's NOMC service
representatives. When USTELCOM receives a request for
basic services from a new local service customer,
USTELCOM will call GTE's NOMC through the 800 number,
and, while the new customer is on hold, GTE will
provide the due date for service and the new
telephone number for that customer. At the same time,
USTELCOM will give GTE the new customer's name,
service address and type of requested service (i.e.,
R1, Bl). GTE will enter that information into its
SORCES or SOLAR service ordering systems to be held
in suspense until USTELCOM sends the confirming LSR.
USTELCOM will then return to its customer holding on
the line and provide the due date and new telephone
number.
1.1.4 After concluding the telephone call with the new
customer, USTELCOM will complete a confirming LSR for
the new service and send it electronically to GTE's
data center for processing. Upon receipt, GTE will
match the LSR with the service order suspended in
GTE's system, and if there is a match, GTE will
process the LSR. After the LSR is processed, GTE will
transmit confirmation electronically to USTELCOM
through the NDM that the LSR has been processed,
providing a record of the telephone number and due
date. USTELCOM will be required to submit the
confirming LSR by 12:00 p.m. each day local time, as
defined by the location of the service address. If
USTELCOM fails to submit the LSR in a timely manner,
the suspended LSR will be considered in jeopardy, at
which time GTE will assign a new due date upon
receipt of the delayed LSR for such customer requests
and notify USTELCOM of the change.
1.1.5 Number assignments and due date schedules for
services other than single line service and hunt
groups up to 12 lines will be assigned within
approximately twenty-four (24) hours after GTE's
receipt of the LSR using the standard Local Service
Confirmation ("LSC") report sent electronically to
USTELCOM over the NDM, thereby providing a record
of the newly established due date. An exception would
be a multi-line hunt group for 12 lines or fewer.
The other numbers then will be provided through the
normal electronic confirmation process.
1.1.6 The processing of specifically requested telephone
numbers (called "vanity numbers") is as follows. GTE
will work with USTELCOM on a real time interface to
process vanity numbers while USTELCOM's customer is
still on the line. If a number solution can be
established expeditiously, it will be done while the
customer is still on the line. If extensive time will
be required to find a solution, GTE service
representatives will work with USTELCOM
representatives off line as GTE would for its own
customers. For all of this, the basic tariff
guidelines for providing telephone numbers will be
followed.
1.1.7 Once the order for resold service is established, it
is moved for provisioning to the next system level.
Here, GTE will validate and process the LSR to
establish an account for USTELCOM and, if GTE
continues to provide some residual services to the
customer, GTE will maintain a GTE account. In GTE's
system, GTE's account is called the Residual Account
and USTELCOM's account is referred to as the USTELCOM
Account. If any engineering for the service is
necessary, the account would be distributed to the
SSCC. Otherwise, it will be distributed for facility
assignment.
1.1.8 With the account established and any engineering and
facility assignment complete, GTE then will transmit
electronically a record to GTE's CZT field personnel
if physical interconnection or similar activity is
required. The CZTs will provision the service and
then electronically confirm such provision in the
SOLAR/SORCES system when completed. The accounts then
will be
B-2
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transmitted to GTE's Customer Billing Services System
("CBSS"). GTE shall provide to USTELCOM a service
completion report. Call records for actual service
provided to USTELCOM's customers on GTE facilities
will be transmitted from GTE's switches through some
usage rating systems (BIP, UMS), screened and
eventually delivered to CBSS for the generation of
bills.
1.1.9 CBSS is a different system than CABS, and it is the
one that GTE will utilize to produce the required
bills for resold services and local number
portability. CBSS will create a bill to USTELCOM for
resold services along with a summary bill master.
Daily unrated records for intraLATA toll usage and
local usage (incollect usage data will be provided on
rated basis) on USTELCOM's accounts will be generated
and transmitted electronically to USTELCOM.
1.1.10 On resold accounts, GTE will provide usage in EMR
format per existing file exchange schedules. The
usage billing will be in agreed upon level of detail
for USTELCOM to issue a bill to its end users.
1.1.11 GTE will provide USTELCOM with detailed monthly
billing information in a paper format until an agreed
upon Electronic Data Interchange 811 electronic bill
format is operational.
1.1.12 State or sub-state level billing will include up to
ten (10) summary bill accounts.
1.1.13 GTE accepts USTELCOM's control reports and agrees to
utilize industry standard return codes for unbillable
messages. Transmission will occur via the NDM. Tape
data will conform to Attachment "A" of the LRDTR.
Data will be delivered Monday through Friday except
for Holidays as agreed. Data packages will be tracked
by invoice sequencing criteria. GTE contacts will be
provided for sending/receiving usage files.
1.1.14 GTE will retain data backup for 45 Business Days. To
the extent USTELCOM requires a longer retention
period, USTELCOM shall reimburse GTE for all
expenses related to that retention.
1.1.15 In addition to the LSR delivery process, USTELCOM
will distribute DA and directory listing information
(together sometimes referred to hereafter as "DA/DL
information") to GTE via the LSR ordering process
over the NDM. GTE will provide listings service via
its "listing continuity" offering.
1.1.16 Charges and credits for PIC changes ordered via an
LSR will appear on the resale bill. As USTELCOM
places a request for a PIC change via LSR, the
billing will be made on USTELCOM account associated
with each individual end user. GTE will process all
PIC changes from IXCs that are received for USTELCOM
end users by rejecting back to the IXC with the
USTELCOM OCN. Detail is provided so that USTELCOM can
identify the specific charges for rebilling to its
end user.
1.1.17 CMDS. The parties will provide for the distribution
of intraLATA CMDS incollect messages and/or selected
local measured service messages as follows:
1.1.17.1 Messages to be Screened. GTE receives CMDS I
transmissions containing intraLATA incollect
messages from the state RBOC CMDS host
each Business Day. Per USTELCOM's request,
GTE will screen the incollects by NPA and
line number and accumulate the Collect,
Third Number Billed and Credit Card
(collectively called incollects) messages in
a data file. The screening will be for end
B-3
<PAGE> 39
users who have chosen USTELCOM as their
local service provider through a Resale or
Unbundled Network arrangement. The screened
incollect messages and any Local Measured
Service (LMS) usage will be accumulated and
forwarded to USTELCOM. The Parties will
mutually agree on the frequency of the data
exchange and the method of transmission
(i.e., magnetic tape or direct electronic
transmission). GTE will forward the screened
messages in the industry standard EMR
format. GTE intraLATA toll messages that
are recorded by GTE and dialed on a one plus
or zero plus basis are not part of this
section and will not be screened.
1.1.17.2 Compensation. GTE will bill USTELCOM monthly
for all services related to the screening,
accumulating, processing and transmitting of
incollect messages and LMS usage, if
applicable, at a reasonable and mutually
agreeable charge. In addition, any message
processing fee associated with USTELCOM's
incollect messages that are charged to GTE
by the CMDS Host will be passed on to
USTELCOM on the monthly statement. All
revenue, surcharges, taxes and any other
amounts due to the CMDS Host for USTELCOM's
incollect messages will be billed on the
monthly statement. It is USTELCOM's
responsibility to bill and collect all
incollect and LMS amounts due from its end
users. The incollect and LMS revenue amounts
that are listed on the monthly invoice are
payable to GTE in total. The Parties agree
that the arrangement for invoicing the
incollect and LMS revenue amounts due GTE is
not a settlement process with USTELCOM.
1.1.18 Backbilling. GTE shall bill USTELCOM on a timely
basis. In no case shall GTE bill USTELCOM for
previously unbilled charges that are for more than
one year prior to the current bill date.
1.2 Order Processing.
1.2.1 Order Expectations. USTELCOM agrees to warrant to GTE that it
is a certified provider of telecommunications service.
USTELCOM will document its Certificate of Operating Authority
on the USTELCOM Profile and agrees to update this USTELCOM
Profile as required to reflect its current certification. The
Parties agree to exchange and to update end user contact and
referral numbers for order inquiry, trouble reporting, billing
inquiries, and information required to comply with law
enforcement and other security agencies of the government. The
Parties also agree to exchange and to update internal order,
repair and billing point of contacts. Prior to submitting an
order under this Agreement, USTELCOM shall obtain such
documentation as may be required by state and federal laws and
regulations.
1.2.2 GTE shall provide USTELCOM with a specified customer contact
center for purposes of placing service orders and coordinating
the installation of services, These activities shall be
accomplished by telephone call or facsimile until electronic
interface capability has been established. The Parties adopt
the OBF LSR and DSR forms for the ordering, confirmation and
billing of resale services.
1.2.3 GTE will process such service orders during normal operating
hours, and shall implement service orders within the same time
intervals used to implement service orders for similar
services for its own users.
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1.2.4 GTE will provide current GTE customer proprietary network
information (name, address, telephone number and description
of services provided by GTE including PIC and white page
directory listing information) as provided in Article V,
Section 3. The return of customer information will be via
facsimile or via electronic transmission.
2. Maintenance Systems.
2.1 General Overview
2.1.1 If USTELCOM requires maintenance for its local
service customers, USTELCOM will initiate a request
for repair (sometimes referred to as a "trouble
report") by calling GTE's Customer Care Repair
Center. During this call, GTE service
representatives will verify that the end-user is a
USTELCOM customer and will then obtain the necessary
information from USTELCOM to process the trouble
report. While USTELCOM representatives are still on
the line, GTE personnel will perform an initial
analysis of the problem and remote line testing for
resale services. If engineered services are involved,
the call will be made to the GTE SSCC for handling.
If no engineering is required and the line testing
reveals that the trouble can be repaired remotely,
GTE personnel will correct the problem and close the
trouble report while USTELCOM representatives are
still on the line. If on-line resolution is not
possible, GTE personnel will provide USTELCOM
representatives a commitment time for repair, and the
GTE personnel then will enter the trouble ticket into
the GTE service dispatch queue. USTELCOM's repair
service commitment times will be within the same
intervals as GTE provides to its own end users.
Maintenance and repair of GTE facilities is the
responsibility of GTE and will be performed at no
incremental charge to USTELCOM. If, as a result of
USTELCOM-initiated trouble report, trouble is found
to be the responsibility of USTELCOM (e.g.,
non-network cause) GTE will charge USTELCOM for
trouble isolation. USTELCOM will have the ability to
report trouble for its end users to appropriate
trouble reporting centers 24 hours a day, 7 days a
week. USTELCOM will be assigned a customer contact
center when initial service agreements are made.
2.1.2 Repair calls to the SSCC for engineered services will
be processed in essentially the same manner as those
by the GTE Customer Care Center. GTE personnel will
analyze the problem, provide the USTELCOM
representative with a commitment time while they are
still on the line, and then place the trouble ticket
in the dispatch queue.
2.1.3 GTE then will process all USTELCOM trouble reports
in the dispatch queue along with GTE trouble reports
in the order they were filed (first in, first out),
with priority given to out-of-service conditions. If,
at any time, GTE would determine that a commitment
time given to USTELCOM becomes in jeopardy, GTE
service representatives will contact USTELCOM by
telephone to advise of the jeopardy condition and
provide a new commitment time.
2.1.4 Trouble reports in the dispatch queue will be
transmitted electronically to GTE CZT service
technicians who will repair the service problems and
clear the trouble reports. For cleared USTELCOM
trouble reports, GTE service technicians will make a
telephone call to USTELCOM directly to clear the
trouble ticket. GTE service technicians will make the
confirmation call to the telephone number provided by
USTELCOM. If USTELCOM is unable to process the call
or places the GTE technician on hold, the call will
be terminated. To avoid disconnect, USTELCOM may
develop an answering system, such as voice mail, to
handle the confirmation calls expeditiously.
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2.1.5 GTE will provide electronic interface access to
operation support systems functions which provide the
capability to initiate, status and close a repair
trouble ticket. GTE will not provide to USTELCOM real
time testing capability on USTELCOM end user
services. GTE will not provide to USTELCOM an
interface for network surveillance (performance
monitoring).
3. Electronic Interface. The Parties shall work cooperatively in the
implementation of electronic gateway access to GTE operational support
systems functions in the long-term in accordance with established
industry standards.
3.1 USTELCOM shall have immediate access to the following OSS
electronic interfaces that will provide functionality to
enable USTELCOM to service customers in an equal and non
discriminatory manner
3.1.1 Pre-Order functions, e.g., TN Assignment, DD
Reservation, Address Validation, Product
Availability, that are available on a dial-up or
dedicated basis using the Secure Integrated Gateway
System (SIGS).
3.1.2 Order functions that are available on a dial-up or
dedicated basis using CONNECT: Mail file transfer.
3.1.3 Initial trouble reports via SIGS.
3.1.4 Electronic transfer of the USTELCOM bill in
electronic data 811 format.
3.2 USTELCOM may migrate to fully interactive system to system
interconnectivity. GTE, with input from USTELCOM and other
carriers, shall provide general interface specifications for
electronic access to this functionality. These specifications
will be provided to enable USTELCOM to design system interface
capabilities. Development will be in accordance with
applicable national standards committee guidelines. Such
interfaces will be available as expeditiously as possible.
3.3 All costs and expenses for any new or modified electronic
interfaces exclusively to meet USTELCOM requirements that GTE
determines are Currently Available and GTE agrees to develop
will be paid by USTELCOM.
3.4 USTELCOM shall be responsible for modifying and connecting any
of its pre-ordering and ordering systems with GTE provided
interfaces as described in this Appendix.
4. GTE Initiated Electronic System Redesigns. GTE will not charge USTELCOM
when GTE initiates its own electronic system
redesigns/reconfigurations.
B-6
<PAGE> 42
APPENDIX C
RATES/CHARGES FOR MISCELLANEOUS 911/E911 ITEMS
The following services are offered by GTE when USTELCOM resells GTE's local
exchange services where an item is not superseded by a tariffed offering:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
A. 9-1-1 Selective Router Map $125.00 N/A
Provided is a color map showing a selective router's location
and the GTE central offices that send 9-1-1 calls to it. The
selective router and central office information will include
CLLI codes and NPA/NXXs served. The map will include boundaries
of each central office and show major streets and the county
boundary. Permission to reproduce by USTELCOM for its internal
use is granted without further fee. Non-tariffed price.
B. MSAG Copy
Production of one copy of a 911 Customer's
Master Street Address Guide, postage paid
1. Copy provided in proper format
$238.50 $54.00
2. Copy provided in flat ASCII file on a 3 1/2" diskette $276.00 $36.00
</TABLE>
C-1
<PAGE> 43
APPENDIX 45A
GTE/USTELCOM OPT-IN NEGOTIATION ISSUES
GTE TERMS
Pursuant to Article III, Section 45 of this Agreement, the following terms shall
be applied in place of the terms in Appendix 45B (AT&T Terms) in the event the
terms from the selected arbitrated agreement are deemed to be unlawful, or are
stayed or enjoined by a court or commission of competent jurisdiction.
The Resale Terms in Article V will apply.
The Resale Discount in Appendix A will apply.
45A-1
<PAGE> 44
APPENDIX 45B
GTE/USTELCOM OPT-IN NEGOTIATION ISSUES
AT&T/GTE TERMS
Pursuant to Section 45 of Article III of this Agreement and subject to all of
the terms and conditions thereof, and after notice as called for in Section 45,
the following AT&T TERMS will be substituted for the GTE TERMS which are set out
in Appendix 45A. The Parties shall modify this Appendix with specific rates and
terms and conditions of the AT&T Agreement if/when the Commission approves the
AT&T arbitrated agreement.
<TABLE>
<CAPTION>
ISSUE ISSUE AGREEMENT REFERENCE
NUMBER DESCRIPTION
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
I. The arbitrated rates for:
Resale Avoided Cost Discount The resale discount percentage(s) ordered
Nonrecurring Charges in the final Agreement for the specific
Avoided Cost Discount in Appendix A.
- ------------------------------------------------------------------------------------------------------------
II. Whether, if any, of the following arbitrated The services that were ordered in the final
resale restrictions or discounts, except for Agreement to be made available for resale
cross class selling, may be removed. which would otherwise be excluded from
available resale services under Article V
Services not available for resale: lifeline Sections 2.1 and 2.2 of this Agreement.
services, services for the disabled, and
promotional offerings of 90 days or less in
duration.
Basic Exchange Residential and Business
Services not available for resale unless
USTELCOM pays monthly interim
universal service support charge.
Services available for resale but not at a The services that were ordered in the final
discount: services provided at a volume Agreement to be made available for resale
discount which cannot be aggregated to at a discount which would otherwise be
qualify for volume discount, ICBs/Contract made available but not at a discount under
Services, COCOT coin or coinless, Article V, Section 2.3 of this Agreement.
special access, operator services and
directory assistance, and nonrecurring
charges (including ordering charges).
- ------------------------------------------------------------------------------------------------------------
</TABLE>
45B-1
<PAGE> 1
EXHIBIT 10.2
EXHIBIT A
EXECUTION ORIGINAL
LOCAL EXCHANGE TELECOMMUNICATIONS
SERVICES RESALE AGREEMENT
dated as of August 10, 1998
by and between
AMERITECH INFORMATION INDUSTRY SERVICES,
a division of Ameritech Services, Inc.
on behalf of Ameritech Indiana
and
UNITED STATES TELECOMMUNICATIONS, INC.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
1.0 DEFINITIONS AND CONSTRUCTION .............................................................1
2.0 RESALE SERVICES AND RATES ................................................................5
3.0 LIMITATIONS ON AVAILABILITY OF RESALE SERVICES ...........................................6
4.0 RESTRICTIONS ON RESALE SERVICES ..........................................................6
5.0 TERM, FORECASTS, IMPLEMENTATION, PROVISIONING AND
MAINTENANCE ............................................................................. 7
6.0 BRANDING ................................................................................10
7.0 RESPONSIBILITIES OF RESELLER ............................................................11
8.0 RESPONSIBILITIES OF AMERITECH ...........................................................13
9.0 BILLING .................................................................................17
10.0 USE OF SERVICE ..........................................................................18
11.0 PAYMENTS; TAXES AND AUDITS ..............................................................19
12.0 DISCLAIMER OF REPRESENTATIONS AND WARRANTIES ............................................23
13.0 INDEMNIFICATION .........................................................................23
14.0 LIMITATION OF LIABILITY .................................................................25
15.0 TERMINATION .............................................................................26
16.0 REGULATORY APPROVAL .....................................................................27
17.0 PROPRIETARY INFORMATION .................................................................28
18.0 DISPUTE RESOLUTION ......................................................................31
19.0 PUBLICITY ...............................................................................32
20.0 SEVERABILITY ............................................................................32
21.0 MISCELLANEOUS ...........................................................................32
</TABLE>
i
<PAGE> 3
SCHEDULES
Schedule 2.2 - Resale Services
Schedule 5.3 - Implementation Plan
Schedule 5.4 - Service Ordering and Provisioning EI
Functionality
Schedule 5.12 - Resale Maintenance Procedures
Schedule 7.1 - Form of Representation of Authorization
Schedule 7.2 - Procedures for the Selection of Primary Local
Exchange Carriers
Schedule 8.7 - Resale Performance Activities
Schedule 8.8 - Directory Listings
Schedule 9.2 - Billing and Collection Services for Ancillary
Services
Schedule 10.6 - Law Enforcement Interfaces
ii
<PAGE> 4
LOCAL EXCHANGE TELECOMMUNICATIONS
SERVICES RESALE AGREEMENT
This Local Exchange Telecommunications Services Resale Agreement (this
"AGREEMENT") is effective as of the 10th day of August 1998 (the "EFFECTIVE
DATE"), by and between Ameritech Information Industry Services, a division of
Ameritech Services, Inc., a Delaware corporation with offices at 350 North
Orleans Street, Third Floor, Chicago, Illinois 60654, on behalf of Ameritech
Indiana ("AMERITECH") and United States Telecommunications, Inc., a Florida
corporation, with offices at 13902 North Dale Mabry, Suite 212, Tampa, Florida
33618 ("RESELLER").
WHEREAS, Section 251(c)(4) of the Act provides, inter alia, that
Ameritech offer for resale at wholesale rates any Telecommunications Services
that it provides at retail to subscribers who are not Telecommunication
Carriers;
WHEREAS, Ameritech provides certain local exchange Telecommunications
Services to subscribers within the State of Indiana (the "TERRITORY");
WHEREAS, Reseller desires to purchase certain local exchange
Telecommunications Services from Ameritech and resell such services to its
Customers in the Territory; and
WHEREAS, the Parties are entering into this Agreement to set forth the
respective obligations of the Parties and the terms and conditions under which
Ameritech shall provide, and Reseller shall purchase, local exchange
Telecommunications Services as set forth herein for resale to Reseller's
Customers in the Territory.
NOW, THEREFORE, in consideration of the mutual obligations set forth herein, and
for other good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, the Parties agree as follows:
1.0 DEFINITIONS AND CONSTRUCTION
1.1. Specified Meanings. As used in this Agreement, the following terms
have the meanings specified below:
"ACT" means the Communications Act of 1934 (47 U.S.C. ss. 151 et seq.),
as amended by the Telecommunications Act of 1996, and as from time to time
interpreted in the duly authorized rules and regulations of the FCC or the
Commission.
"AFFILIATE" is as defined in the Act.
<PAGE> 5
"ANCILLARY SERVICE TRAFFIC" means calling party pays cellular, calling
party pays paging, abbreviated dialing, 555-xxxx service traffic and similar
traffic identified by Ameritech.
"BELLCORE" means Bell Communications Research, Inc.
"BLOCKING OF CALLER ID" means a service in which a customer may prevent
the disclosure of the calling telephone number and name on calls made to an
exchange service equipped with Caller ID Service.
"BUSINESS DAY" means a day on which banking institutions are required
to be open for business in Chicago, Illinois.
"COMMISSION" or "IURC" means the Indiana Utility Regulatory Commission.
"CUSTOMER" means a third party end-user who (i) contracts with Reseller
for Resale Services or (ii) purchases local exchange Telecommunications Services
at retail from Ameritech.
"CUSTOMER LISTING(S)" means a list containing the names, the telephone
numbers, addresses and zip codes of Customers within a defined geographical
area, except to the extent such Customers have requested not to be listed in a
directory.
"CUSTOMER PROPRIETARY NETWORK INFORMATION" is as defined in the Act.
"DELAYING EVENT" means (a) any failure of a Party to perform any of its
obligations set forth in this Agreement, caused in whole or in part by (i) the
failure of the other Party to perform any of its obligations set forth in this
Agreement (including the Implementation Plan), or (ii) any delay, act or failure
to act by the other Party or its Customer, agent or subcontractor or (b) any
Force Majeure Event.
"EXCHANGE MESSAGE RECORD" or "EMR" means the standard used for exchange
of Telecommunications message information among Telecommunications providers for
billable, non-billable, sample, settlement and study data. EMR format is
contained in Bellcore Practice BR-010-200-010 CRIS Exchange Message Record.
"FCC" means the Federal Communications Commission.
"FORCE MAJEURE EVENT" is as defined in SECTION 21.5
"INFORMATION SERVICE TRAFFIC" means local traffic or IntraLATA toll
traffic which originates on a Telephone Exchange Service line and which is
addressed to an information service provided over an information services
platform (e.g., 976).
"INTELLECTUAL PROPERTY" means copyrights, patents, trademarks,
trade-secrets, mask works and all other intellectual property rights.
2
<PAGE> 6
"LEC" means local exchange carrier.
"LISTING UPDATE(S)" means information with respect to Customers
necessary for Publisher to publish directories under this Agreement in a form
and format acceptable to Publisher. For Customers whose telephone service has
changed since the last furnished Listing Update because of new installation,
disconnection, change in address, change in name, change in non-listed or
non-published status, or other change which may affect the listing of the
Customer in a directory, Listing Updates shall also include information
necessary in order for Publisher to undertake initial delivery and subsequent
delivery of directories, including mailing addresses, delivery addresses and
quantities of directories requested by a Customer. In the case of Customers who
have transferred service from another LEC to Reseller without change of address,
Listing Updates shall also include the Customer's former listed telephone number
and former LEC, if available. Similarly, in the case of Customers who have
transferred service from Reseller to another LEC, Listing Updates shall also
include the Customer's referral telephone number and new LEC, if available.
"LOSSES" means any and all losses, costs (including court costs),
claims, damages (including fines, penalties, and criminal or civil judgments and
settlements), injuries, liabilities and expenses (including attorneys' fees).
"NONDISCLOSURE AGREEMENT" means the Nondisclosure Agreement dated as of
May 12, 1998 by and between the Parties.
"NON-ELECTRONIC ORDER" shall mean an order for the same location and
the same customer account and which is submitted by Reseller to Ameritech using
a means other than the Electronic Interface described in SECTION 5.5.
"PARTY" means either Ameritech or Reseller, and "PARTIES" means
Ameritech and Reseller.
"PRIMARY LISTING" means the single directory listing provided to
Customers by Publisher under the terms of this Agreement. Each telephone
configuration that allows a terminating call to hunt for an available time among
a series of lines shall be considered a single Customer entitled to a single
primary listing.
"PUBLISHER" means Ameritech's White Pages Directories publisher.
"RESALE IMPLEMENTATION QUESTIONNAIRE" means that certain document that
contains Reseller information that allows Ameritech to populate its systems and
tables so that Reseller can be established as a reseller in Ameritech's internal
system, a copy of which has been provided to Reseller.
"RESALE TARIFF" means individually and collectively the effective
tariff or tariffs filed by Ameritech with the Commission that set(s) forth
certain relevant terms and conditions relating
3
<PAGE> 7
to Ameritech's resale of certain local exchange Telecommunications Services
within the Territory, including the applicable provisions of IURC Number 20,
Part 22 and the Ameritech Indiana Catalog, Part 22.
"SERVICE START DATE" means the later of the following: (i) the date
Reseller has been certified as a LEC by the Commission and is authorized in the
Territory to provide the local exchange Telecommunications Services contemplated
under this Agreement, (ii) thirty (30) days after Reseller has completed and
delivered to Ameritech the Resale Implementation Questionnaire, (iii) the date
the Commission approves this Agreement under Section 252(e) of the Act or,
absent such Commission approval, this Agreement is deemed approved under Section
252(e)(4) of the Act, and (iv) such other date on which the Parties mutually
agree that Ameritech shall begin to provision services in accordance with the
terms and conditions of this Agreement.
"TELECOMMUNICATIONS" is as defined in the Act.
"TELECOMMUNICATIONS ACT" means the Telecommunications Act of 1996 and
any rules and regulations promulgated thereunder.
"TELECOMMUNICATIONS ASSISTANCE PROGRAM" means any means-tested or
subsidized Telecommunications Service offering, including Lifeline, that is
offered only to a specific category of customers.
"TELEPHONE EXCHANGE SERVICE" is as defined in the Act.
"TELEPHONE RELAY SERVICE" means a service provided to speech and
hearing-impaired callers that enables such callers to type a message into a
telephone set equipped with a keypad and message screen and to have a live
operator read the message to a recipient and to type message recipient's
response to the speech or hearing-impaired caller.
"TELECOMMUNICATIONS SERVICE" is as defined in the Act.
"WHITE PAGES DIRECTORIES" means directories or the portion of co-bound
directories which include a list in alphabetical order by name of the telephone
numbers and addresses of telecommunication company customers.
1.2. INTERPRETATION AND CONSTRUCTION. The definitions in SECTION 1.1
shall apply equally to both the singular and plural forms of the terms defined.
All references to Sections, Exhibits and Schedules shall be deemed to be
references to Sections of, and Exhibits and Schedules to, this Agreement unless
the context shall otherwise require. The headings of the Sections are inserted
for convenience of reference only and are not intended to be a part of or affect
the meaning or interpretation of this Agreement. Unless the context shall
otherwise require, any reference to any agreement, other instrument (including
Ameritech or other third party offerings, guides and practices), statute,
regulation, rule or tariff is to such agreement,
4
<PAGE> 8
instrument, statute, regulation, rule or tariff as amended and supplemented from
time to time (and, in the case of a statute, regulation, rule or tariff, to any
successor provision). In the event of any conflict between the terms and
conditions of any Section of, or Schedule to, this Agreement, and any term or
condition set forth in the Implementation Plan, the terms and conditions of the
Sections and Schedules shall control.
2.0 RESALE SERVICES AND RATES
2.1. Commencing on the Service Start Date, at the request of Reseller
and subject to the terms, conditions and limitations set forth in this
Agreement, Ameritech will make available to Reseller for resale at wholesale
rates those Telecommunications Services that Ameritech provides at retail to
subscribers who are not Telecommunications Carriers, as required in Section
251(c)(4) of the Act (such services collectively referred to herein as the
"RESALE SERVICE" OR "RESALE SERVICES"). The Resale Services which Reseller may
purchase pursuant to this Agreement shall be as described in applicable tariffs.
2.2. The Resale Services shall be made available to Reseller at a
discount rate off of the retail rate for the Telecommunications Services as set
forth on SCHEDULE 2.2. If the rates, charges and prices set forth in this
Agreement are interim or proxy rates established by the Commission or the FCC,
the Parties agree to substitute such interim or proxy rates with the rates,
charges or prices later established by the Commission or the FCC pursuant to the
pricing standards of Section 252 of the Act and such rates, prices and charges
shall be retroactively effective as of the Service Start Date in accordance with
the procedures established by the Commission, including any "true-up" ordered by
the Commission. SCHEDULE 2.2 shall be amended by the Parties from time to time
to reflect any changes to the rates, charges or prices under this Agreement
required by the Commission or the FCC. The wholesale discount set forth on
SCHEDULE 2.2 shall not apply to taxes or other pass-through charges, including
any charges described in SECTION 2.3.
2.3. In addition to the rates set forth on SCHEDULE 2.2, Reseller shall
pay Ameritech (i) for any applicable charges or fees, if any, incident to the
establishment or provision of the Resale Services requested by Reseller,
including channel charges and initial non recurring charges and (ii) the
applicable non-discounted end user common line charge as set forth in F.C.C. No.
2, Section 4. If Reseller requests Resale Services that require special
construction, the Parties shall mutually agree on the nature and manner of any
required special construction, the applicable charges thereto and the negotiated
intervals that will apply to the provisioning of such Resale Services in lieu of
the standard intervals set forth on SCHEDULE 8.7.
2.4. The terms and conditions relating to the rights and obligations of
the Parties regarding the provision of Resale Services shall be as prescribed by
this Agreement and any applicable tariff referenced herein.
5
<PAGE> 9
3.0 LIMITATIONS ON AVAILABILITY OF RESALE SERVICES
The following limitations shall apply to Resale Services:
3.1. The Telecommunications Services that Ameritech offers to existing
retail subscribers, but not to new subscribers ("GRANDFATHERED SERVICES") are
identified in the Resale Tariff, as revised from time to time to include those
additional services that Ameritech may, in its discretion and to the extent
permitted by Applicable Law, classify as Grandfathered Services. Ameritech
agrees to make Grandfathered Services available to Reseller for resale, subject
to the terms of SECTION 3.2, to those Customers that (i) subscribed to the
applicable Telecommunications Service (whether from Ameritech or Reseller as the
provider) at the time such service was classified by Ameritech as a
Grandfathered Service and (ii) continued to subscribe to such Grandfathered
Service at the time of such Customer's selection of Reseller as its primary
local exchange carrier ("PLEC"). Grandfathered Services shall be made available
to Reseller at wholesale rates determined in accordance with the Act. To the
extent that Ameritech is unable to provide wholesale systems support and billing
within the first ninety (90) days from the date each Reseller Customer is
provided such Grandfathered Service, Ameritech shall retroactively apply such
wholesale rate as a credit to Reseller and will bill such service to Reseller
from its retail billing systems.
3.2. The Telecommunication Services that Ameritech currently intends to
discontinue offering to any retail subscriber ("WITHDRAWN SERVICES") are
identified in the Resale Tariff, as revised from time to time to include those
additional Telecommunications Services that Ameritech may, in its discretion and
to the extent permitted by Applicable Law, classify as Withdrawn Services.
Ameritech agrees to make Withdrawn Services available to Reseller for resale to
Begetter's Customers who are subscribers to the Withdrawn Service either from
Ameritech or Reseller at the time so classified (subject to the provisions of
Section 3.1 if such Withdrawn Service was previously classified as a
Grandfathered Service) until the date such service is discontinued.
3.3. Each Party acknowledges that Resale Services shall be available to
Reseller on the same basis as offered by Ameritech to itself or to any
subsidiary, Affiliate, or any other person to which Ameritech directly provides
the Resale Services, including Ameritech's retail Customers and other resellers
of Ameritech's Telecommunications Services (i) only in those service areas in
which such Resale Services (or any feature or capability thereof) are offered by
Ameritech to itself or to any subsidiary, Affiliate, or any other person,
including Ameritech's retail Customers and (ii) to the same extent as
Ameritech's retail Telecommunications Services are subject to the availability
of facilities.
4.0 RESTRICTIONS ON RESALE SERVICES
4.1. Reseller may not offer Resale Services that are made available
only to residential Customers or to a limited class of residential Customers to
classes of Customers that are not eligible to subscribe to such services from
Ameritech.
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<PAGE> 10
4.2. Ameritech shall not be required to provide to Reseller a Resale
Service at a promotional rate that Ameritech offers at retail nor shall
Ameritech be required to provide to Reseller the wholesale discount off such
promotional rate if
(a) Such promotions involve rates that will be in effect for no
more than ninety (90) days; and
(b) Such promotional offerings are not used to evade the wholesale
rate obligation; for example, by making available a sequential series
of ninety (90) day promotional rates.
4.3. Nothing in this Agreement shall require Ameritech to provide to
Reseller promotional service elements that are not Telecommunications Services
(i.e, customer-premises equipment).
4.4. Reseller shall not utilize Resale Services to avoid applicable
access changes.
4.5. Reseller may not purchase Resale Services unless such services are
resold to a person other than Reseller, its subsidiaries and Affiliates.
4.6. Resale Services can only be used in the same manner as specified in
Ameritech's retail tariffs.
4.7. Ameritech may impose additional restrictions on Reseller's
purchase and sale of Resale Services only as permitted by the Act, Commission
and the FCC.
5.0 TERM, FORECASTS, IMPLEMENTATION, PROVISIONING AND MAINTENANCE
5.1. The term of this Agreement shall be one (1) year (the "INITIAL
TERM") which shall begin on the Effective Date. Upon expiration of the Initial
Term, this Agreement shall automatically be renewed for additional one (1) year
periods (each, a "RENEWAL TERM", "the terms "RENEWAL TERM" and "INITIAL TERM"
sometimes collectively referred to as the "TERM") unless a Party delivers to the
other Party written notice of termination of this Agreement at least one hundred
twenty (120) days prior to the expiration of the Initial Term or a Renewal Term.
5.2. On or before the Effective Date and each month during the Term,
Reseller shall provide Ameritech with a rolling, six (6) calendar-month,
nonbinding forecast of its traffic and volume requirements for the Resale
Services in the form and in such detail as may be reasonably requested by
Ameritech. To the extent that Reseller becomes aware of any information or any
fact (that may render a previously submitted forecast inaccurate by more than
five percent (5%), Reseller agrees to immediately notify Ameritech of such fact
or information and provide to Ameritech a revised forecast that reflects such
new fact or information and cures any inaccuracy in the previously submitted
forecast within the earlier of (i) five (5) calendar days after Reseller
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<PAGE> 11
becomes aware of such information or fact and (ii) ten (10) Business Days before
Reseller submits any order to Ameritech that reflects such new information or
fact. In addition, each Party agrees to cooperate with the other Party to ensure
that any orders that reflect such new information or fact are submitted and
processed consistent with the terms and conditions of this Agreement.
Notwithstanding SECTION 17.1.1, the Parties agree that each forecast provided
under this SECTION 5.5 shall be deemed Proprietary Information under SECTION
17.0.
5.3. On or before the date which is the later of (i) ninety (90) days
after the Effective Date and (ii) such other date as mutually agreed upon by
the Parties, the Parties shall jointly agree on certain procedures (collectively
referred to as the "IMPLEMENTATION PLAN") with respect to the provisioning of
the Resale Service. The Implementation Plan shall address, inter alia,
procedures for electronic service ordering, provisioning, billing processes,
trouble administration and repair, other electronic interfaces, marketing
support, and such other matters as the Parties may agree. Notwithstanding the
foregoing, the Implementation Plan as agreed upon by the Parties shall be
consistent with and subject to any applicable provision of this Agreement,
including SECTION 1.2. Upon agreement of the Parties on the Implementation Plan,
the Implementation Plan will be attached hereto as SCHEDULE 5.3 and become part
of this Agreement.
5.4. (a) Ameritech shall provide, and Reseller shall use, the
electronic interface described in Ameritech's Electronic Service Ordering Guide,
Version 4.0 (the "PROVISIONING EI") for the transfer and receipt of data
necessary to perform each of the pre-ordering, ordering and provisioning
functions associated with Reseller's order of Resale Services. The Provisioning
EI will be administered through a gateway that will serve as a single point of
contact for the transmission of such data and will provide the functionality
described in Schedule 5.4.
(b) Reseller shall also use the Provisioning EI to access all of
the other Operations Support Systems functions that are available
through such Provisioning EI and which are described on SCHEDULE 5.4
and/or made available to Reseller after the Effective Date. Any request
by Reseller to Ameritech for such other Operations Support Systems
functions that are directed to the Service Center through a means other
than the Provisioning EI shall be subject to additional non-recurring
charges and restrictions.
5.5 On or before the Service Start Date, Reseller shall establish the
Provisioning EI so that it may submit all orders for Resale Services to
Ameritech through such Provisioning EI If Reseller fails to establish the
Provisioning EI so that it is unable to submit "live" orders through the
Provisioning EI by the Service Start Date, the Parties agree that the terms and
conditions set forth in the Resale Tariff (including any forecasting
requirements associated therewith that are inconsistent with any requirements
contained in this Agreement) shall apply to Reseller's submission of
Non-Electronic Orders or, if no such terms or conditions are then set forth in
the Resale Tariff or if the Resale Tariff is not then in effect, the following
terms and conditions set forth in this SECTION 5.5 shall apply to such
submission of Non-Electronic Orders.
(i) In addition to, and not in lieu of SECTION 5.2,
not less than forty-five (45) days prior to the first
Non-Electronic Order submitted by Reseller
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hereunder, and every calendar month thereafter, Reseller
shall provide to Ameritech a three (3) month rolling forecast
of the number of daily Non-Electronic Orders that Reseller
shall submit to Ameritech Monday through Friday (excluding
holidays on which the Service Center is closed) for a given
calendar month (the "NON-ELECTRONIC FORECAST"). The
Non-Electronic Forecast shall be developed using standard
commercial and industry practices and procedures, including
daily demand data updated to reflect actual demand. The
Non-Electronic Forecast shall be submitted to Ameritech in a
standard format provided by Ameritech.
(ii) Reseller may submit to Ameritech Monday through
Friday (excluding holidays on which the Service Center is
closed) up to the number of Non-Electronic Orders forecasted
for that given day. Each Non-Electronic Order shall be
submitted in a standard, legible typewritten format provided
by Ameritech and shall be submitted to Ameritech through the
use of a dedicated facsimile number to be identified in the
Implementation Plan.
(iii) Ameritech shall process Reseller's
Non-Electronic Orders on a first-in, first-out basis with
respect to all Non-Electronic Orders received by Ameritech.
(iv) In addition to the non-recurring charges
described in SECTION 2.3, each Non-Electronic Order submitted
by Reseller to Ameritech shall be subject to a non-recurring
charge of $9.02 per Non-Electronic Order and any additional
charges authorized by the Commission that compensate Ameritech
for its costs in accordance with Section 252(d) of the Act
to process such Non-Electronic Orders.
(v) Reseller shall provide to Ameritech not less than
ninety (90) days notice prior to Reseller's first order for
"live" Resale Services through the Provisioning EI.
5.6. Each Party shall be responsible for providing to its Customers and
to the other Party a telephone number or numbers that its Customers can use to
contact the first Party in the event of a repair request. If a Customer contacts
the Party that is not its local provider with regard to a repair request, such
Party shall inform such Customer that it should call its local provider and may
provide to that Customer its local provider's contact number.
5.7. Service Orders will be placed by Reseller and provisioned by
Ameritech in accordance with the procedures described in SECTION 8.4. Any
Service Order activity resulting in primary local exchange carrier changes will
comply with the requirements of SECTION 7.1.
5.8. Ameritech shall provide provisioning support to Reseller on the
same basis Ameritech provides to its retail Customers.
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5.9. Where Ameritech provides installation, Ameritech's representatives
shall inform Reseller Customers to contact Reseller if such Customers request a
service change at the time of installation.
5.10. Except as specifically provided in this Agreement or pursuant to
an order of a court or commission of competent jurisdiction, Ameritech may not
initiate any disconnect, suspension or termination of a Reseller Customer's
Resale Service, unless directed to do so by Reseller by transmission of a
Service Order or Ameritech's receipt of proper authorization or a Service Order
to change such Customer's PLEC to a carrier other than Reseller.
5.11. Ameritech will provide an electronic interface (the "Maintenance
EI") for the transfer and receipt of data necessary to perform the maintenance
and repair functions (e.g., trouble receipt and trouble status). This interface
will be administered through a gateway that will serve as a single point of
contact for the transmission of such data.
5.12. Maintenance will be provided by Ameritech as set forth on
SCHEDULE 5.12.
6.0 BRANDING
6.1. If operator call completion or directory assistance service is a
feature of an-offered Resale Service, Ameritech shall rebrand such features of
such offered Resale Service as requested by Reseller for Reseller's Customers,
unless Ameritech lacks the technical capability to comply with such rebranding
request.
6.2. Ameritech shall make available to Reseller, upon Reseller's
request, the ability to route:
(i) Local directory assistance calls dialed by
Reseller's Customers directly to Reseller directory assistance
services platform, to the extent that such routing is
technically feasible; and
(ii) Local operator services calls (0+, 0-) dialed by
Reseller Customers directly to the Reseller local operator
services platform. Such traffic shall be routed over trunk
groups between Ameritech End Offices and the Reseller local
operator services platform, using standard operator services
dialing protocols of 0+ or 0-, to the extent that such routing
is technically feasible.
The routing capabilities described in this SECTION 6.2 will be
implemented according to the Implementation Plan. To the extent technically
feasible, all direct routing capabilities described in this SECTION 6.2 shall
permit Reseller Customers to dial the same telephone numbers for Ameritech
directory assistance and local operator service that similarly situated
Ameritech Customers dial for reaching equivalent Ameritech services.
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6.3. Notwithstanding anything to the contrary in this Agreement, the
Parties agree that Ameritech shall have no obligation to unbrand or rebrand its
service technicians or trucks, any customer premises equipment, other
Customer-owned facilities or its outside plant.
6.4. Reseller shall not, without Ameritech's prior written consent,
offer any Resale Service to any Customer under any brand name of Ameritech, its
subsidiaries or its Affiliates nor shall Reseller state or imply that there is
any joint business association or any similar arrangement with Ameritech in the
provision of Resale Services to Reseller's Customers. Notwithstanding the
foregoing, Reseller may verbally advise an inquiring Customer or potential
Customer that Ameritech personnel will perform work on behalf of Reseller under
this Agreement or that some that facilities used in provisioning the Resale
Service are owned and maintained by Ameritech; provided, however, that Reseller
shall make no disparaging statements about Ameritech or its facilities, services
or products.
6.5. In those instances where Reseller requires Ameritech personnel to
interface directly with Reseller Customers, either orally in person or by
telephone, or in writing, such personnel shall identify themselves as
Ameritech's employees representing Reseller.
6.6. Any "NO ACCESS" cards and time and materials invoices furnished
during service calls by Ameritech personnel to Reseller Customers shall be
available to Reseller for review and shall be provided to Reseller Customers in
an unbranded form.
6.7. In no event shall Ameritech personnel acting on behalf of Reseller
pursuant to this Agreement provide information to any existing Reseller Customer
about Ameritech products or services or disparage Reseller's facilities,
services, or products.
6.8. Reseller shall pay Ameritech's costs, if any, pursuant to the
pricing standard in Section 252(d)(1) of the Act and in such amounts or levels
as determined by the Commission for providing any requested routing or branding
under this SECTION 6.0.
7.0 RESPONSIBILITIES OF RESELLER
7.1. The Parties shall apply all of the principles set forth in 47 C.
F. R. ss. 64. 1100 to the process for Customer selection of a PLEC. Ameritech
shall not require a disconnect order from a Reseller Customer, or another LEC,
in order to process a Reseller order for Resale Service for a Reseller Customer.
Ameritech shall advise Reseller whenever a Reseller Customer has selected
another PLEC by giving notice via the Provisioning EI within twenty-four (24)
hours of the change being completed by Ameritech. Until the FCC or the
Commission adopts final rules and procedures regarding a Customer's selection of
a PLEC, each Party shall deliver to the other Party a representation of
authorization in the form set forth on SCHEDULE 7.1 that applies to all orders
submitted by the first Party to the other Party that require a PLEC change. Such
representation of authorization shall be delivered to a Party prior to the first
order submitted by the other Party and each Party agrees to comply with the
procedures contained in such representation of authorization. Reseller shall
retain on file all applicable Documentation
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of Authorization (as defined in SCHEDULE 7.1), including letters of agency,
relating to the Customer's selection of Reseller as its PLEC, which
documentation shall be available for inspection by Ameritech at its request
during normal business hours.
7.2. If any disputes should occur concerning the selection of a PLEC by
a Customer of a Party, the following procedures shall apply:
(a) If a Customer of either Party or a customer of another
carrier denies authorizing a change in his or her PLEC selection to a
different LEC ("UNAUTHORIZED SWITCHING"), Ameritech shall switch that
customer back to the authorized PLEC in accordance with the terms of
SCHEDULE 7.2. However, in the case of unauthorized changes of Reseller
Customers to Ameritech, Ameritech shall also have the duties as
enumerated in such SCHEDULE 7.2, and will pay to Reseller the
Unauthorized Switching charge described in SCHEDULE 7.2.
(b) If Ameritech reports or otherwise provides information on
unauthorized PLEC changes to the FCC, the Commission or any other
governmental entity, Ameritech agrees to report on Reseller
unauthorized PLEC changes separately from unauthorized primary
interexchange carrier ("PIC") changes.
7.3. When Ameritech receives an order for Resale Service from Reseller
for Reseller's Customer, and Ameritech currently provides resale local exchange
Telecommunications Services to another carrier ("CARRIER OF RECORD") for the
same Customer, Ameritech shall notify such Carrier of Record of such order in
the same manner as described in SECTION 7.1. It shall then be the responsibility
of the Carrier of Record and Reseller to resolve any issues related to that
Customer. Reseller agrees to indemnify and hold Ameritech harmless against any
and all Losses that may result from Ameritech acting under this SECTION 7.3.
7.4. When Ameritech is notified by Reseller that a Reseller Customer
has changed its PIC from one IXC to another IXC, Ameritech shall provision the
PIC-only change.
7.5. (a) From the Effective Date until thirty (30) Business Days after
Reseller makes the election described in SUBSECTION (B), when Ameritech is
notified through the Customer Access Record Exchange (CARE) system that a
Reseller Customer has changed its PIC from one IXC to another IXC, Ameritech
shall provision the PIC-only change.
(b) At some future date, Ameritech will provide PLECs the option
to have Ameritech reject all CARE-Initiated request that Ameritech receives to
change the PIC of a PLEC's customer. Ameritech will provide Reseller prior
written notice of the availability of this option. Within ten (10) Business Days
after Ameritech provides notice of the availability of this option to Reseller
(the "ELECTION PERIOD"), Reseller shall notify Ameritech in writing whether it
elects this option, which option shall then apply to all Reseller Resale Service
orders received thirty (30) Business Days after Ameritech receives Reseller's
written notice of election. If Reseller fails to make the election described in
this SUBSECTION (B) within the Election Period,
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Ameritech shall provision CARE-Initiated PIC Changes under SUBSECTION (A), and
not under this SUBSECTION (B).
7.6. Each Party shall be responsible for providing to its Customers and
to the other Party a telephone number or numbers that its Customers can use to
contact the first Party in the event of a repair request. If a Customer contacts
the Party that is not its local provider with regard to a repair request, such
Party shall inform such Customer that they should call their local provider and
may provide to the Customer such local provider's contact number.
7.7. If Ameritech maintains an Emergency Telephone Number Service
Database, Reseller shall provide Ameritech with accurate and complete
information regarding Reseller's Customers in a method reasonably prescribed by
Ameritech to allow Ameritech to update such Emergency Telephone Number Service
database.
7.8. Prior to the Service Start Date, Reseller shall have received and
communicated to Ameritech its Carrier Identification Code and its Access Carrier
Name Abbreviation or Interexchange Access Customer Code.
7.9. Notwithstanding anything to the contrary in this Agreement,
Reseller is solely responsible for the payment of charges for all Resale
Services furnished pursuant to this Agreement, including calls originated or
accepted by it and its Customers.
7.10. If Reseller ceases to resell the Resale Services to its Customers
and fails to make arrangements for the continuation of such Resale Service,
Reseller shall provide an option to its Customers to select an alternate carrier
to provide resale local exchange Telecommunications Services to such Customers.
8.0 RESPONSIBILITIES OF AMERITECH
8.1. Ameritech shall provide access to the following services:
(a) Universal Emergency Number Service (9-1-1), a telephone
exchange communication service that includes lines and equipment
necessary for the answer, transfer and dispatch of public emergency
telephone calls originated by persons within the telephone central
office areas arranged for 9-1-1 calling.
(b) Basic 9-1-1 service (where available), a service that provides
for the routing of all 9-1-1 calls originated by Customers that have
telephone numbers beginning with a given central office prefix code or
codes to a single Public Safety Answering Point ("PSAP") equipped to
receive those calls.
(c) Enhanced 9-1-1 ("E9-1-1") service, a service that provides
additional features to Basic 9-1-1- service, such as selective routing
of 9-1-1 calls to a specific
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PSAP which is selected from the various PSAPs serving Customers within
that central office area.
Both Reseller and its Customers purchasing Resale Services under this
Agreement are not charged for calls to the 9-1-1 number except as provided in
any applicable tariff or pursuant to any Applicable Law.
8.2. Ameritech shall provide to Reseller, for Reseller Customers, 9-1-1
call routing to the appropriate PSAP. Ameritech shall provide and validate
Reseller Customer information to the PSAP. Ameritech shall use its service order
process to update and maintain, on the same schedule that it uses for its retail
Customers, the Reseller Customer service information in the ALI/DMS (Automatic
Location Identification/Data Management System) used to support 9-1-1 services.
Any 9-1-1 surcharges assessed by a municipality on Resale Services provided to
Reseller Customers shall be included by Ameritech on Reseller's invoice and
Reseller agrees to pay Ameritech all such surcharges. Ameritech shall then be
responsible for submitting to the applicable municipalities all surcharges
collected from Reseller.
8.3. Ameritech shall make available to Reseller's personnel, at then
prevailing prices, training related to the use and operation of the Resale
Services.
8.4. Upon Reseller's request, Ameritech shall provide Reseller
nondiscriminatory access to, and Reseller agrees to use, Ameritech's Operations
Support Systems functions for pre-ordering, ordering, provisioning, maintenance
and repair, and billing.
8.5. Resale Services made available by Ameritech for resale hereunder
and Operations Support Systems functions for ordering, provisioning, repair,
maintenance and billing shall be equal in quality to that provided by Ameritech
to itself or to any subsidiary, Affiliate or any other person to which Ameritech
directly provides the Resale Service, including Ameritech's retail Customers.
8.6. Consistent with Reseller's forecasted volumes and subject to the
terms and conditions of SECTION 5.2, Ameritech shall provision Resale Services
with the same timeliness that such Resale Services are provisioned to
Ameritech's subsidiaries, Affiliates or other persons to whom Ameritech directly
provides the Resale Service, including Ameritech's retail Customers; provided
that if Reseller submits Non-Electronic Orders for Resale Service pursuant to
SECTION 5.5, Ameritech shall provision such orders as provided in such
SECTION 5.5.
8.7. PERFORMANCE BENCHMARKS
8.7.1. Ameritech shall provide Resale Services to Reseller in
accordance with the performance benchmarks set forth on SCHEDULE 8.7
(collectively, THE "RESALE PERFORMANCE BENCHMARKS") but subject to the last
sentence of SECTION 2.3.
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8.7.2. To determine Ameritech's compliance with the Resale Performance
Benchmarks, Ameritech shall maintain records of specific criteria listed on
SCHEDULE 8.7 (each, a "Resale Performance Activity") relating to Resale Services
it provides to itself and to its subsidiaries, Affiliates and retail Customers
(the "AMERITECH RESALE RECORDS") and parallel records of the Resale Services
provided to (i) Reseller (the "Reseller Records") and (ii) on an aggregate
basis, resellers of Ameritech's Telecommunications Services other than Reseller
(the "Other Reseller Records"), in each case segregated on the basis of whether
the Resale Services were ordered through Provisioning EI or by Non-Electronic
Orders. The Resale Performance Activities will be revised in accordance with the
procedures set forth in the Implementation Plan if Ameritech no longer measures
criterion in assessing its performance in providing such Resale Service to
Ameritech's retail Customers or begins to measure additional criteria.
8.7.3. Subject to the last sentence of this SECTION 8.7.3, Ameritech
shall provide to Reseller for each calendar month (a "Reporting Period"), by the
twenty-second (22nd) day of the following month, in a self-reporting format, the
applicable Ameritech Resale Records, the Reseller Resale Records and the Other
Reseller Records so that the Parties can determine Ameritech's compliance with
the Resale Performance Benchmarks. If (i) Ameritech fails to comply with a
Resale Performance Benchmark with respect to a Resale Performance Activity for a
Reporting Period, (ii) the sample size of the Resale Performance Activity
measured for such Reporting Period is statistically valid, and (iii) the amount
by which the applicable Resale Performance Activity deviates from the
corresponding Resale Performance Benchmark is statistically significant, then
Ameritech shall have committed a "RESALE SPECIFIED PERFORMANCE BREACH."
Notwithstanding anything to the contrary in this SECTION 8.7, the Parties
acknowledge that the Other Reseller Records shall be provided to Reseller (x) on
an aggregate basis and (y) in a manner that preserves the confidentiality of
each other reseller and any of such reseller's proprietary information
(including CPNI). Notwithstanding anything to the contrary in this SECTION 8.7,
Ameritech shall not be required to provide Reseller any records as set forth in
this SECTION 8.7.3 for a Reporting Period if Reseller is reselling less than one
thousand (1000) resold lines in such Reporting Period.
8.7.4. In no event shall Ameritech be deemed to have committed a Resale
Specified Performance Breach if Ameritech's failure to meet or exceed a Resale
Performance Benchmark is caused by a Delaying Event. If a Delaying Event (i)
prevents Ameritech from performing a certain function or action that affects a
Resale Performance Activity, then such occurrence shall be excluded from the
calculation of such Resale Performance Activity and the determination of
Ameritech's compliance with the applicable Resale Performance Benchmark or (ii)
only suspends Ameritech's ability to timely perform such Resale Performance
Activity, then the applicable time frame in which Ameritech's compliance with
the Resale Performance Benchmark is measured shall be extended on a like-time
basis equal to the duration of such Delaying Event.
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8.7.5. Upon the occurrence of a Resale Specified Performance
Breach by Ameritech, Reseller may elect one of the following two
remedies:
(a) Forego the dispute escalation procedures set forth in
SECTION 18.0 and seek any relief it is entitled to under Applicable
Law; or
(b) Ameritech shall pay to Reseller as liquidated damages any
amounts that Reseller is entitled to receive under then existing
Commission procedures relating to the failure by Ameritech to comply
with the Commission performance standards.
8.7.6. Reseller shall also be entitled to any Credit
Allowances pursuant to the same terms and conditions that Ameritech
offers Credit Allowances to its retail Customers.
8.8. Ameritech shall make available to Reseller for its Customers
directory listings in accordance with SCHEDULE 8.8.
8.9. Effective as of the date of a Reseller's Customer's subscription
to Reseller local exchange Telecommunications Service, Ameritech will block the
LEC-assigned telephone line calling card number (including area code) from the
Line Identification Database.
8.10. Upon conversion to Reseller local exchange Telecommunications
Service of an existing Telecommunications Assistance Program Customer, no
exchange of qualification documentation is necessary. Notwithstanding the
foregoing, Reseller, and not Ameritech, shall be responsible for maintaining,
recertifying and enforcing any necessary qualifications for a Telecommunications
Assistance Program Customer to which Reseller provides local exchange
Telecommunications Services.
8.11. Reseller, and not Ameritech, shall be responsible for
maintaining, certifying and enforcing any necessary qualifications in accordance
with Applicable Law for a Customer electing per line Blocking for Caller ID to
which Reseller provides local exchange Telecommunications Service.
8.12. If Ameritech makes a notation on the Customer Service Records
("CSR") of Customers who qualify for certain services available to physically
challenged individuals (e.g., special discounts) ("SPECIAL SERVICES"),
Ameritech shall provide such data to Reseller on the CSR made available to
Ameritech for its Customers. For usage by a Reseller Customer of a Telephone
Relay Service, Ameritech will provide Reseller with all billing information
furnished to Ameritech by the provider of the Telephone Relay Service.
8.13. Ameritech shall, via tariff filings and as provided in the
Implementation Plan, notify Reseller of any changes in the terms and conditions
under which Ameritech offers Resale Services, including the introduction of any
new features, functions, or services. Notwithstanding anything to the contrary
in this Agreement, any notice or information provided by Ameritech
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pursuant to this SECTION 8.12 (other than a publicly filed tariff) shall be
deemed "PROPRIETARY INFORMATION" and subject to the terms and conditions of
SECTION 17.0.
9.0 BILLING
9.1. Ameritech shall provide Reseller a specific Daily Usage File
("DUF") for Resale Services provided hereunder ("CUSTOMER USAGE DATA"). Such
Customer Usage Data shall be recorded by Ameritech in accordance with the
Ameritech Electronic Billing System (AEBS) and Exchange Message Record (EMR).
The DUF shall include (i) specific daily usage, in EMR format (if and where
applicable) for each individual Resale Service that is provided to Ameritech's
Customers on a usage sensitive basis and (ii) sufficient detail to enable
Reseller to bill its Customers for Resale Services provided by Ameritech.
Ameritech will provide to Reseller detailed specifications which will enable
Reseller to develop an interface for the exchange of Customer Usage Data.
Procedures and processes for implementing the interface will be included in the
Implementation Plan. Except as provided in SECTION 9.4, no other detailed
billing shall be provided by Ameritech to Reseller.
9.2. Interexchange call detail on resold lines that is forwarded to
Ameritech for billing, which would otherwise be processed by Ameritech for its
retail Customers, will be returned to the IXC and will not be passed through to
Reseller. This call detail will be returned to the IXC with a transaction code
indicating that the returned call originated from a resold account. Billing for
Information Services Traffic (including 976 calls) and Ancillary Service Traffic
on resold lines will be passed through when Ameritech records the message. If
Reseller does not wish to be responsible for Information Services Traffic
(including 976 calls) or Ancillary Service Traffic, it must order blocking for
resold lines at the time of submitting an order. If Reseller wishes to be
responsible for Information Services Traffic (including 976 calls) and Ancillary
Service Traffic, Reseller must indicate its agreement to comply with the terms
and conditions set forth in SCHEDULE 9.2. to facilitate processing the foregoing
messages. If Reseller has elected to be responsible for Information Services
Traffic and Ancillary Service Traffic but fails to comply with the terms and
conditions set forth in SCHEDULE 9.2, Ameritech may block such Information
Services traffic (including 976 calls) and Ancillary Service Traffic.
9.3. Reseller shall be responsible for providing all billing
information to its Customers who purchase Resale Services from Reseller.
9.4. Ameritech shall bill Reseller for Resale Services provided by
Ameritech to Reseller pursuant to the provisions of SECTION 9.0., Ameritech
shall recognize Reseller as the Customer of Record for all Resale Services and
will send all notices, bills and other pertinent information directly to
Reseller. The bill will include sufficient data to enable Reseller to (i) bill
all charges to its Customers which are not included as Customer Usage Data and
(ii) reconcile the billed charges with the Customer Usage Data.
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9.5. The Parties may agree on other billing and collection services to
be provided by Ameritech to Reseller on a contract basis. The terms and
conditions under which these services are provided will be defined in a separate
billing and collection agreement.
10.0 USE OF SERVICE
10.1. Reseller, and not Ameritech, shall be responsible to ensure that
its and its Customers' use of the Resale Services comply at all times with
Applicable Law. Ameritech may refuse to furnish or may disconnect Resale
Services to a Reseller Customer when:
(a) An order is issued by a court, the Commission or any other
duly authorized agency, finding that probable cause exists to believe
that the use made or to be made of a resale local exchange
Telecommunications Service is prohibited by Applicable Law, or
(b) Ameritech is notified in writing by a law enforcement agency
acting within its jurisdiction that any facility furnished by Ameritech
is being used or will be used for the purpose of transmitting or
receiving gambling information in interstate or foreign commerce in
violation of law.
10.2. Termination of Resale Service shall take place after reasonable
notice is provided to Reseller by Ameritech or as ordered by a court.
10.3. To the extent provided under the Telephone Consumer Protection
Act (47 U.S.C. ss. 227) and regulations thereunder, Resale Service shall not be
used for the purpose of solicitation by recorded message when such solicitation
occurs as a result of unrequested calls initiated by the solicitor by means of
automatic dialing devices. Such devices, with storage capability of numbers to
be called or a random or sequential number generator that produces numbers to be
called and having the capability, working alone or in conjunction with other
equipment, of disseminating a prerecorded message to the number called and which
are calling party or called party controlled, are expressly prohibited.
10.4. Reseller shall not use any product or service provided under this
Agreement or any other service related thereto or used in combination therewith
in any manner that interferes with any person in the use of such person's
Telecommunications Service, prevents any person from using its
Telecommunications Service, impairs the quality of Telecommunications Service to
other carriers or to either Party's Customers, causes electrical hazards to
either Party's personnel, damage to either Party's equipment or malfunction of
either Party's billing equipment. If Reseller's use of Resale Services
interferes unreasonably with the Resale Services of other carriers or their
customers or Ameritech or Reseller's Customers, Reseller shall be required to
take Resale Services in sufficient quantity or of a different class or grade to
correct such interference.
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10.5. The determination as to whether Resale Service provided under
this Agreement should be classified as a business service or residential service
shall be based on the character of the use to be made of such Resale Service by
Reseller's Customer.
10.6. Interfaces with law enforcement agencies and other security
matters shall be conducted as specified in SCHEDULE 10.6.
11.0 PAYMENTS; TAXES AND AUDITS
11.1. PAYMENT OF CHARGES. Subject to the terms of this Agreement,
Reseller shall pay Ameritech all undisputed amounts on or before the date (the
"Bill Due Date") which is the later of (i) thirty (30) calendar days after
Reseller's receipt of an invoice and (ii) forty-five (45) calendar days from the
date of invoice. If the Bill Due Date is on a day other than a Business Day,
payment will be made on the next Business Day. Payments shall be made in U.S.
Dollars via electronic funds transfer ("EFT") to Ameritech's bank account.
Within thirty (30) days of the Effective Date, Ameritech shall provide Reseller
the name and address of its bank, its account and routing number and to whom
payments should be made payable. If such banking information changes, Ameritech
shall provide Reseller at least sixty (60) days' written notice of the change
and such notice shall include the new banking formation. If Reseller receives
multiple invoices which are payable on the same date, Reseller may remit one (1)
payment for the sum of all amounts payable to Ameritech's bank. Each Party shall
provide the other Party with a contact person for the handling of payment
questions, or problems.
11.2. TAXES.
11.2.1. Reseller shall pay or otherwise be responsible for all
federal, state, or local sales, use, excise, gross receipts,
transaction or similar taxes, fees or surcharges levied against or upon
Reseller (or Ameritech when Ameritech is permitted to pass along to
Reseller such taxes, fees or surcharges), except for any tax on either
Party's corporate existence, status or income. Whenever possible, these
amounts shall be billed as a separate item on the invoice. Reseller
shall furnish Ameritech a proper resale tax exemption certificate as
authorized or required by statute or regulation by the jurisdiction
providing said resale tax exemption. Failure to timely provide said
resale tax exemption certificate will result in no exemption being
available to Reseller for any charges invoiced prior to the date such
exemption certificate is furnished. To the extent that a Party includes
gross receipts taxes in any of the charges or rates of services
provided hereunder, no additional gross receipts taxes shall be levied
against or upon Reseller.
11.2.2. The Party obligated to pay any such taxes may contest
the same in good faith, at its own expense, and shall be entitled to
the benefit of any refund or recovery; provided that such contesting
Party shall not permit any lien to exist on any asset of the other
Party by reason of such contest. The Party obligated to collect and
remit shall cooperate in any such contest by the other Party. As a
condition of contesting any taxes due hereunder, the contesting Party
agrees to be liable and indemnify and reimburse the
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other Party for any additional amounts that may be due by reason of
such contest, including any interest and penalties.
11.3. INTEREST CHARGES. If Reseller fails to remit payment for any
charges for services by the Bill Due Date, or if a payment or any portion of a
payment is received by Ameritech after the Bill Due Date, or if a payment or any
portion of a payment is received in funds which are not immediately available to
Ameritech as of the Bill Due Date (individually and collectively, "PAST DUE"),
then an interest charge shall be assessed for late payment. Past Due amounts
shall accrue interest as provided in SECTION 11.6. Any interest charges assessed
on any Disputed Amounts shall be paid or credited, as the case may be, as
provided in SECTION 11.4.2. In no event, however, shall interest be assessed on
any previously assessed interest charges.
11.4. DISPUTED AMOUNTS.
11.4.1. If any portion of an amount due to Ameritech under
this Agreement is subject to a bona fide dispute between the Parties,
Reseller shall, prior to the Bill Due Date, give written notice to
Ameritech of the amounts it disputes ("DISPUTED AMOUNTS") and include
in such written notice the specific details and reasons for disputing
each item; provided, however, a failure to provide such notice by that
date shall not preclude Reseller from subsequently challenging billed
charges. Reseller shall pay when due (i) all undisputed amounts to
Ameritech and (ii) all Disputed Amounts into an interest-bearing escrow
account with a third party escrow agent satisfactory to Ameritech.
Notwithstanding the foregoing, except as provided in SECTION 11.5,
Reseller shall be entitled to dispute only those charges for which the
Bill Due Date was within the immediately preceding twelve (12) months
of the date on which Ameritech received notice of such Disputed
Amounts. Reseller shall, however, pay Ameritech all undisputed amounts
on or before the Bill Due Date.
11.4.2. Disputed Amounts in escrow shall be subject to
interest charges as set forth in SECTION 11.3. If the dispute regarding
the Disputed Amounts is resolved in favor of Reseller, Ameritech shall
credit Reseller's invoice for the amount of the Disputed Amounts,
together with any applicable interest charges assessed, no later than
the second Bill Due Date after the resolution of the dispute.
Accordingly, if the dispute regarding the Disputed Amounts is resolved
in favor of Ameritech, Reseller shall pay Ameritech the amount of the
Disputed Amounts, together with any associated interest charges
assessed, no later than the second Bill Due Date after the resolution
of the dispute.
11.4.3. If the Parties are unable to resolve the issues
related to the Disputed Amounts in the normal course of business within
sixty (60) days after delivery to Ameritech of notice of the Disputed
Amounts, each of the Parties shall appoint a designated representative
who has authority to settle the Disputed Amounts and who is at a higher
level of management than the persons with direct responsibility for
administration of this Agreement. The designated representatives shall
meet as often as they reasonably deem necessary in order to discuss the
Disputed Amounts and negotiate
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in good faith in an effort to resolve such Disputed Amounts. The
specific format for such discussions will be left to the discretion of
the designated representatives, however all reasonable requests for
relevant information made by one Party to the other Party shall be
honored.
11.4.4. If the Parties are unable to resolve issues related to
the Disputed Amounts within forty-five (45) days after the Parties'
appointment of designated representatives pursuant to SECTION 11.4.3,
then either Party may file a complaint with the Commission to resolve
such issues or proceed with any other remedy pursuant to law or equity.
The Commission, the FCC, or a court of competent jurisdiction may
direct payment of any or all Disputed Amounts (including any accrued
interest) thereon or additional amounts awarded to be paid to either
Party.
11.4.5. The Parties agree that all negotiations pursuant to
this SECTION 11.4 shall remain confidential in accordance with SECTION
17.0 and shall be treated as compromise and settlement negotiations for
purposes of the Federal Rules of Evidence and state rules of evidence.
11.5. AUDIT RIGHTS.
11.5.1. Subject to the restrictions set forth in SECTION 17.0, and
except as may be otherwise specifically provided in this Agreement, a Party
("AUDITING PARTY") may audit the other Party's ("AUDITED PARTY") books, records,
data and other documents, as provided herein, once annually (commencing on the
Service Start Date) for the purpose of evaluating the accuracy of Audited
Party's billing, invoicing and/or payment under this Agreement. The scope of the
audit shall be limited to the services provided and purchased by the Parties and
the associated charges, books, records, data and other documents relating
thereto for the period which is the shorter of (i) the period subsequent to the
last day of the period covered by the audit which was last performed (or if no
audit has been performed, the Service Start Date) and (ii) the twelve (12) month
period immediately preceding the date the Audited Party received notice of such
requested audit, but in any event not prior to the Service Start Date. Such
audit shall begin no fewer than thirty (30) days after Audited Party receives a
written notice requesting an audit and shall be completed no later than thirty
(30) days after the start of such audit. Such audit shall be conducted by an
independent auditor acceptable to both Parties. The Parties shall select an
auditor by the thirtieth (30) day following the Audited Party's receipt of a
written audit notice. The Auditing Party shall cause the independent auditor to
execute a nondisclosure agreement in a form agreed upon by the Parties.
Notwithstanding the foregoing, an Auditing Party may audit the Audited Party's
books, records and document more than once (1) during any annual period if the
previous audit found previously uncorrected net variances or errors in invoices
in the Auditing Party's favor with an aggregate value of at least two percent
(2%) of the amounts due or payable by Auditing Party for audited services
provided during the period covered by the audit.
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11.5.2. Each audit shall be conducted on the premises of the Audited
Party during normal business hours. Audited Party shall cooperate fully in any
such audit, providing the independent auditor reasonable access to any and all
appropriate Audited Party employees and books, records and other documents
reasonably necessary to assess the accuracy of Audited Party's bill. No Party
shall have access to the data of the other Party, but shall rely upon summary
results provided by the independent auditor. Audited Party may redact from the
books, records and other documents provided to the independent auditor any
confidential Audited Party information that reveals the identity of Customers of
Audited Party or CPNI of any such Customer. Each Party shall maintain reports,
records and data relevant to the billing of any services that are the subject
matter of this Agreement for a period of not less than twenty-four (24) months
after creation thereof, unless a longer period is required by Applicable Law.
11.5.3. If any audit confirms any undercharge or overcharge, then
Audited Party shall (i) for any overpayment promptly correct any billing error,
including making refund of any overpayment by Auditing Party in the form of a
credit on the invoice for the first full billing cycle after the Parties have
agreed upon the accuracy of the audit results and (ii) for any undercharge
caused by the actions of or failure to act by the Audited Party, immediately
compensate Auditing Party for such undercharge, in each case with interest at
the lesser of (x) one and one-half percent (1 1/2%) per month and (y) the
highest rate of interest that may be charged under Applicable Law, compounded
daily, for the number of days from the date on which such undercharge or
overcharge originated until the date on which such credit is issued or payment
is made and available, as the case may be.
11.5.4. Audits shall be at Auditing Party's expense, subject to
reimbursement by Audited Party in the event that an audit finds, and the Parties
subsequently verify, adjustment in the charges or in any invoice paid or payable
by Auditing Party hereunder by an amount that is, on an annualized basis,
greater than two percent (2%) of the aggregate charges for the audited services
during the period covered by the audit.
11.5.5. Any disputes concerning audit results shall be referred to the
Parties' respective responsible personnel for informal resolution. If these
individuals cannot resolve the dispute within thirty (30) days of the referral,
either Party may request in writing that an additional audit shall be conducted
by an independent auditor acceptable to both Parties, subject to the
requirements set forth in this SECTION 11.0. Any additional audit shall be at
the requesting Party's expense.
11.6 INTEREST RATE. Any undisputed amounts not paid and immediately
available when due shall accrue interest from the date such amounts were due at
the lesser of (i) one and one-half percent (1-1/2%) per month and (ii) the
highest rate of interest that may be charged under Applicable Law, compounded
daily from the number of days from the Bill Due Date to and including the date
that payment is actually made and available.
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11.7 FAILURE TO PAY. If (i) Reseller fails to pay any undisputed
amounts that are past due within fifteen (15) Business Days of its receipt of
demand from Ameritech that such undisputed amounts are then due, (ii) Ameritech
discontinues Reseller's Resale Services in accordance with Applicable Law upon
Reseller's failure to pay such past due undisputed amounts and (iii) a Reseller
Customer fails to select a new carrier prior to such discontinuation of
Reseller's Resale Services, then Ameritech may, subject to tariffed eligibility
requirements, provide local exchange Telecommunications Service to such Customer
at Ameritech's then current tariff rates, except that Reseller agrees that it
shall pay to Ameritech all applicable service establishment charges that would
otherwise have been assessed to such Customer. Reseller acknowledges that
Ameritech shall have no liability to Reseller or Reseller's Customers in the
event Ameritech discontinues the provision of Resale Services for Reseller's
failure to pay past due undisputed amounts as provided in this SECTION 11.7.
12.0 DISCLAIMER OF REPRESENTATIONS AND WARRANTIES
EXCEPT AS EXPRESSLY PROVIDED HEREIN, NO PARTY MAKES OR RECEIVES ANY
WARRANTY, EXPRESS OR IMPLIED, WITH RESPECT TO THE RESALE SERVICES CONTEMPLATED
BY THIS AGREEMENT, AND EACH PARTY DISCLAIMS THE IMPLIED WARRANTIES OF
MERCHANTABILITY OR OF FITNESS FOR A PARTICULAR PURPOSE.
13.0 INDEMNIFICATION
13.1. A Party (the "INDEMNIFYING PARTY") shall defend and indemnify the
other Party, its officers, directors, employees and permitted assignees
(collectively, the "INDEMNIFIED PARTY") and hold such Indemnified Party harmless
against
(a) any Loss to a third person arising out of the negligence or
willful misconduct by Indemnifying Party or its agents, contractors, or
others retained by such parties in connection with its provision of
services under this Agreement;
(b) any Loss arising from such Indemnifying Party's use of
services offered under this Agreement, involving pending or threatened
claims, actions, proceedings or suits ("CLAIMS") for libel, slander,
invasion of privacy, or infringement of Intellectual Property rights
arising from the Indemnifying Party's own communications or the
communications of such Indemnifying Party's Customers;
(c) any Loss arising from Claims for actual or alleged infringement
of any Intellectual Property right of a third person to the extent that
such Loss arises from an Indemnified Party's or an Indemnified Party's
Customer's use of a service provided under this Agreement; provided,
however, that an Indemnifying Party's obligation to defend and
indemnify the Indemnified Party shall not apply in the case of (i) (A)
any use by an Indemnified Party of a service (or element thereof) in
combination with elements, services or systems supplied by the
Indemnified Party or persons other than the
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Indemnifying Party or (B) where an Indemnified Party or its Customer
modifies or directs the Indemnifying Party to modify such service and
(ii) no infringement would have occurred without such combined use or
modification; and
(d) any and all penalties imposed upon the Indemnifying
Party's failure to comply with the Communications Assistance to Law
Enforcement Act of 1994 ("CALEA") and, at the sole cost and expense of
the Indemnifying Party, any amounts necessary to modify or replace any
equipment, facilities or services provided to the Indemnified Party
under this Agreement to ensure that such equipment, facilities and
services fully comply with CALEA.
13.2. Notwithstanding anything to the contrary contained herein, in no
event shall an Indemnifying Party have an obligation to indemnify, defend, hold
the Indemnified Party harmless or reimburse the Indemnified Party or its
Customers for any Loss arising out of a Claim for liquidated damages asserted
against such Indemnified Party.
13.3. Whenever a Claim shall arise for indemnification under this
SECTION 13.0. the relevant Indemnified Party, as appropriate, shall promptly
notify the Indemnifying Party and request the Indemnifying Party to defend the
same. Failure to so notify the Indemnifying Party shall not relieve the
Indemnifying Party of any liability that the Indemnifying Party might have,
except to the extent that such failure prejudices the Indemnifying Party's
ability to defend such Claim. The Indemnifying Party shall have the right to
defend against such liability or assertion in which event the Indemnifying Party
shall give written notice to the Indemnified Party of acceptance of the defense
of such Claim and the identity of counsel selected by the Indemnifying Party.
Until such time as Indemnifying Party provides such written notice of acceptance
of the defense of such Claim, the Indemnified Party shall defend such Claim, at
the expense of the Indemnifying Party, subject to any right of the Indemnifying
Party, to seek reimbursement for the costs of such defense in the event that it
is determined that Indemnifying Party had no obligation to indemnify the
Indemnified Party for such Claim. The Indemnifying Party shall have exclusive
right to control and conduct the defense and settlement of any such Claims
subject to consultation with the Indemnified Party. The Indemnifying Party shall
not be liable for any settlement by the Indemnified Party unless such
Indemnifying Party has approved such settlement in advance and agrees to be
bound by the agreement incorporating such settlement. At any time, an
Indemnified Party shall have the right to refuse a compromise or settlement and,
at such refusing Party's cost, to take over such defense; provided that in such
event the Indemnifying Party shall not be responsible for, nor shall it be
obligated to indemnify the relevant Indemnified Party against, any cost or
liability in excess of such refused compromise or settlement. With respect to
any defense accepted by the Indemnifying Party, the relevant Indemnified Party
shall be entitled to participate with the Indemnifying Party in such defense if
the Claim requests equitable relief or other relief that could affect the rights
of the Indemnified Party and also shall be entitled to employ separate counsel
for such defense at such Indemnified Party's expense. If the Indemnifying Party
does not accept the defense of any indemnified Claim as provided above, the
relevant Indemnified Party shall have the right to employ counsel for such
defense at the expense of the Indemnifying Party. Each Party agrees to cooperate
and
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to cause its employees and agents to cooperate with the other Party in the
defense of any such Claim and the relevant records of each Party shall be
available to the other Party with respect to any such defense, subject to the
restrictions and limitations set forth in SECTION 17.0.
14.0 LIMITATION OF LIABILITY
14.1. A Party shall be responsible only for the service(s) and
facility(ies) (including Resale Services provided by Reseller and other
Telecommunications Services provided by Ameritech) which are provided by that
Party, its authorized agents, subcontractors, or others retained by such
parties, and neither Party shall bear any responsibility for the services and
facilities provided by the other Party, its agents, subcontractors, or others
retained by such parties. Except as otherwise provided in SECTION 13.0, a Party
shall not be liable to the other Party for any Loss, defect or equipment failure
caused by the conduct of the other Party, the other Party's Customers, agents,
servants, contractors or others acting in aid or in concert with the other
Party.
14.2. Except for indemnity obligations under SECTION 13.0, Ameritech's
liability to Reseller for any Loss relating to or arising out of any negligent
act or omission in its performance of this Agreement, whether in contract, tort
or otherwise, shall be limited to the total amount properly charged to Reseller
by Ameritech for the service(s) or function(s) not performed or improperly
performed. Notwithstanding the foregoing, in cases involving any Claim for a
Loss associated with the installation, provision, termination, maintenance,
repair or restoration of a Resale Service provided for a specific Reseller
Customer, liability shall be limited to the greater of: (i) the total amount
properly charged to Reseller for the service or function not performed or
improperly performed and (ii) the amount Ameritech would have been liable to its
Customer if the comparable retail service was provided directly to its Customer.
14.3. A Party may, in its sole discretion, provide in its tariffs and
contracts with its Customers or third parties that relate to any service,
product or function provided or contemplated under this Agreement that, to the
maximum extent permitted by Applicable Law, such Party shall not be liable to
such Customer or third party of (i) any Loss relating to or arising out of this
Agreement, whether in contract, tort or otherwise, that exceeds the amount such
Party would have charged the applicable person for the service, product or
function that gave rise to such Loss and (ii) any Consequential Damages (as
defined in SECTION 14.4). To the extent a Party elects not to place in its
tariffs or contracts such limitation(s) of liability, and the other Party incurs
a Loss as a result thereof, such Party shall indemnify and reimburse the other
Party for that portion of the Loss that would have been limited had the first
Party included in its tariffs and contracts the limitation(s) of liability
provisions referenced in this SECTION 14.3.
14.4. In no event shall either Party have any liability whatsoever to
the other Party for any indirect, special, consequential, incidental or punitive
damages, including but not limited to loss of anticipated profits or revenue or
other economic loss in connection with or arising from anything said, omitted or
done hereunder (collectively, "CONSEQUENTIAL DAMAGES"), even if the other Party
has been advised of the possibility of such damages; provided, that the
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foregoing shall not limit a Party's obligation under SECTION 13.0 to indemnify,
defend and hold the other Party harmless against any amounts payable to a third
party, including any losses, costs, fines, penalties, criminal or civil
judgments or settlements, expenses (including attorneys' fees) and
Consequential Damages of such third party.
14.5. Ameritech shall not be responsible for mistakes that appear in
Ameritech's listings, 9-1-1 and information databases or for incorrect referrals
of customers to Reseller for any ongoing Reseller services, sales or repair
inquiries, and with respect to such mistakes or incorrect referrals, Reseller
shall indemnify and hold Ameritech harmless from any and all Losses incurred on
account thereof by third parties (including Reseller's Customers or employees).
Notwithstanding anything to the contrary contained herein, Ameritech's liability
to Reseller and any third party shall be limited to the maximum extent permitted
by Section 36-8-16-18 of the Indiana Code.
14.6 Ameritech shall not be responsible for Reseller's or Reseller's
Customer's integration of service components. Ameritech shall not be responsible
for the manner in which the use of Resale Services or the associated charges of
Resale Services are allocated to others by Reseller in reselling the Resale
Services. All applicable rates and charges for the Resale Service shall be
billed to and be the responsibility of Reseller.
14.7 No remedy set forth in this Agreement is intended to be exclusive
and each and every remedy shall be cumulative and in addition to any other
rights or remedies now or hereafter existing under Applicable Law or otherwise.
15.0 TERMINATION
15.1. Ameritech shall have the right to terminate this Agreement if
Reseller has not obtained within ninety (90) days after the Effective Date
certification from the Commission as a reseller or LEC within the State of
Indiana. Termination shall be effective upon Reseller's receipt of written
notice thereof.
15.2. If Reseller terminates this Agreement prior to the Service Start
Date, or if Ameritech terminates this Agreement pursuant to SECTION 15.1,
Reseller shall reimburse Ameritech for its reasonable and demonstrable costs
(including any direct, out-of-pocket costs incurred by Ameritech on behalf of
Reseller) of implementing the terms of this Agreement up to the date of
cancellation.
15.3. Except with respect to Reseller's failure to pay past due
undisputed amounts as set forth in SECTION 11.7, when a Party believes that the
other Party is in violation of a material term or condition of this Agreement
("DEFAULTING PARTY"), it shall provide written notice to such Defaulting Party
of such violation prior to commencing the dispute resolution procedures set
forth in SECTION 18.1 and it shall be resolved in accordance with the procedures
established in Section 18.1.
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15.4. Upon termination or expiration of this Agreement in accordance
with this SECTION 15.0:
(a) each Party shall comply immediately with its obligations set
forth in SECTION 17.4; and
(b) each Party shall promptly pay all amounts (including any
interest charges) for all services provided to and/or performed for
such Party and all expenses that are properly accrued or incurred on
behalf of such Party by the other Party prior to such expiration or
termination.
16.0 REGULATORY APPROVAL
16.1. The Parties understand and agree that this Agreement will be
filed with the Commission for approval by such Commission pursuant to Section
252 of the Act. If the Commission, the FCC or any court rejects any portion of
this Agreement, the Parties agree to meet and negotiate in good faith to arrive
at a mutually acceptable modification of the rejected portion and related
provisions; provided that such rejected portion shall not affect the validity of
the remainder of this Agreement.
16.2. The Parties acknowledge that the respective rights and
obligations of each Party as set forth in this Agreement are based on the text
of the Act and the rules and regulations promulgated thereunder by the FCC and
the Commission as of the Effective Date. In the event of any amendment of the
Act, or any legislative, regulatory, judicial order, rule or regulation or other
legal action that revises or reverses the Act, the FCC's First Peport and Order
in CC Docket Nos. 96-98 and 95-185 or any applicable Commission order or
arbitration award purporting to apply the provisions of the Act (individually
and collectively, an "AMENDMENT TO THE ACT"), either Party may by providing
written notice to the other Party require that the affected provisions be
renegotiated in good faith and this Agreement be amended accordingly to reflect
the pricing, terms and conditions of each such Amendment to the Act relating to
any of the provisions in this Agreement. If any such amendment to this Agreement
affects any rates or charges of the services provided hereunder, such amendment
shall be retroactively effective as determined by the Commission and each Party
reserves its rights and remedies with respect to the collection of such rates or
charges, including the right to seek a surcharge before the applicable
regulatory authority.
16.3. If any legislative, regulatory, judicial or other legal action
(other than an Amendment to the Act, which is provided for in SECTION 16.2)
materially affects the ability of a Party to perform any material obligation
under this Agreement, a Party may, on thirty (30) days' written notice
(delivered not later than thirty (30) days following the date on which such
action has become legally binding), require that the affected provision(s) be
renegotiated, and the Parties shall renegotiate in good faith such mutually
acceptable new provision(s) as may be required; provided that such affected
provisions shall not affect the validity of the remainder of this Agreement.
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17.0 PROPRIETARY INFORMATION
17.1. DEFINITION OF PROPRIETARY INFORMATION.
17.1.1. "PROPRIETARY INFORMATION" means:
(a) all proprietary or confidential information of a Party (a
"Disclosing Party") including specifications, drawings, sketches,
business information, forecasts, records (including each Party's
records regarding Performance Benchmarks), Customer Proprietary Network
Information, Customer Usage Data, audit information, models, samples,
data, system interfaces, computer programs and other software and
documentation that is furnished or made available or otherwise
disclosed to the other Party or any of such other Party's Affiliates
(individually and collectively, a "Receiving Party") pursuant to this
Agreement and, if written, is marked "CONFIDENTIAL" or "PROPRIETARY" or
by other similar notice or if oral or visual, is identified as
"CONFIDENTIAL" OR "PROPRIETARY" at the time of disclosure; and
(b) any portion of any notes, analyses, data, compilations,
studies, interpretations or other documents prepared by any Receiving
Party to the extent that the same contain, reflect, are derived from,
or are based upon, any of the information described in subsection (a)
above, unless such information contained or reflected in such notes,
analyses, etc. is so commingled with the Receiving Party's information
that disclosure could not possibly disclose the underlying proprietary
or confidential information (such portions of such notes, analyses,
etc. referred to herein as "Derivative Information").
17.1.2. The Disclosing Party will use its reasonable efforts
to follow its customary practices regarding the marking of tangible
Proprietary Information as "CONFIDENTIAL," "PROPRIETARY," or other
similar designation. The Parties agree that the designation in writing
by the Disclosing Party that information, is confidential or
proprietary shall create a presumption that such information is
confidential or proprietary to the extent such designation is
reasonable.
17.1.3. Notwithstanding the requirements of this SECTION 17.0,
all information relating to the Customers of a Party, including
information that would constitute Customer Proprietary Network
Information of a Party pursuant to the Act and FCC rules and
regulations, and Customer Usage Data, whether disclosed by one Party to
the other Party or otherwise acquired by a Party in the course of the
performance of this Agreement, shall be deemed "Proprietary
Information."
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17.2. DISCLOSURE AND USE.
17.2.1 Each Receiving Party agrees that from and after the Effective
Date:
(a) all Proprietary Information communicated, whether before,
on or after the Effective Date, to it or any of its contractors,
consultants or agents ("REPRESENTATIVES") in connection with this
Agreement shall be held in confidence to the same extent as such
Receiving Party holds its own confidential information; provided that
such Receiving Party or Representative shall not use less than a
reasonable standard of care in maintaining the confidentiality of such
information;
(b) it will not, and it will not permit any of its employees,
Affiliates or Representatives to disclose such Proprietary Information
to any third person;
(c) it will disclose Proprietary Information only to those of
its employees, Affiliates and Representatives who have a need for it in
connection with the use or provision of services required to fulfill
this Agreement; and
(d) it will, and will cause each of its employees, Affiliates
and Representatives to use such Proprietary Information only to perform
its obligations under this Agreement or to use services provided by the
Disclosing Party hereunder and for no other purpose, including its own
marketing purposes.
17.2.2 A Receiving Party may disclose Proprietary Information of a
Disclosing Party to its Representatives who need to know such information to
perform their obligations under this Agreement; provided that before disclosing
any Proprietary Information to any Representative, such Party shall notify such
Representative of such person's obligation to comply with this Agreement. Any
Receiving Party so disclosing Proprietary Information shall be responsible for
any breach of this Agreement by any of its Representatives and such Receiving
Party agrees, at its sole expense, to use its reasonable efforts (including
court proceedings) to restrain its Representatives from any prohibited or
unauthorized disclosure or use of the Proprietary Information. Each Receiving
Party making such disclosure shall notify the Disclosing Party as soon as
possible if it has knowledge of a breach of this Agreement in any material
respect. A Disclosing Party shall not disclose Proprietary Information directly
to a Representative of the Receiving Party without the prior written
authorization of the Receiving Party.
17.2.3 Proprietary Information shall not be reproduced by any Receiving
Party in any form except to the extent (i) necessary to comply with the
provisions of SECTION 17.3 and (ii) reasonably necessary to perform its
obligations under this Agreement. All such reproductions shall bear the same
copyright and proprietary rights notices as are contained in or on the original.
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17.2.4 This SECTION 17.2 shall not apply to any Proprietary Information
which the Receiving Party can establish to have:
(a) been disclosed by the Receiving Party with the Disclosing Party's
prior written consent;
(b) become generally available to the public other than as a result of
disclosure by a Receiving Party;
(c) been independently developed by a Receiving Party by an individual
who has not had knowledge of or direct or indirect access to such Proprietary
Information;
(d) been rightfully obtained by the Receiving Party from a third person
without knowledge that such third person is obligated to protect its
confidentiality; provided that such Receiving Party has exercised commercially
reasonable efforts to determine whether such third person has any such
obligation; or
(e) been obligated to be produced or disclosed by Applicable Law;
provided that such production or disclosure shall have been made in accordance
with SECTION 17.3.
17.3. GOVERNMENT DISCLOSURE.
17.3.1. If a Receiving Party desires to disclose or provide to the
Commission, the FCC or any other governmental authority any Proprietary
Information of the Disclosing Party, such Receiving Party shall, prior to and as
a condition of such disclosure, (i) provide the Disclosing Party with written
notice and the form of such proposed disclosure as soon as possible but in any
event early enough to allow the Disclosing Party to protect its interests in the
Proprietary Information to be disclosed and (ii) attempt to obtain in accordance
with the applicable procedures of the intended recipient of such Proprietary
Information an order, appropriate protective relief or other reliable assurance
that confidential treatment shall be accorded to such Proprietary Information.
17.3.2. If a Receiving Party is required by any governmental authority
or by Applicable Law to disclose any Proprietary Information, then such
Receiving Party shall provide the Disclosing Party with written notice of such
requirement as soon as possible and prior to such disclosure. Upon receipt of
written notice of the requirement to disclose Proprietary Information, the
Disclosing Party, at its expense, may then either seek appropriate protective
relief in advance of such requirement to prevent all or part of such disclosure
or waive the Receiving Party's compliance with this SECTION 17.3 with respect to
all or part of such requirement.
17.3.3. The Receiving Party shall use all commercially reasonable
efforts to cooperate with the Disclosing Party in attempting to obtain any
protective relief which
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such Disclosing Party chooses to seek pursuant to this SECTION 17.3. In the
absence of such relief, if the Receiving Party is legally compelled to disclose
any Proprietary Information, then the Receiving Party shall exercise all
commercially reasonable efforts to preserve the confidentiality of the
Proprietary Information, including cooperating with the Disclosing Party to
obtain an appropriate order or other reliable assurance that confidential
treatment will be accorded the Proprietary Information.
17.4. OWNERSHIP.
17.4.1. All Proprietary Information, other than Derivative Information,
shall remain the property of the Disclosing Party, and all documents or other
tangible media delivered to the Receiving Party that embody such Proprietary
Information shall be, at the option of the Disclosing Party, either promptly
returned to Disclosing Party or destroyed, except as otherwise may be required
from time to time by Applicable Law (in which case the use and disclosure of
such Proprietary Information will continue to be subject to this Agreement),
upon the earlier of (i) the date on which the Receiving Party's need for it has
expired and (ii) the expiration or termination of this Agreement.
17.4.2. At the request of the Disclosing Party, any Derivative
Information shall be, at the option of the Receiving Party, either promptly
returned to the Disclosing Party or destroyed, except as otherwise may be
required from time to time by Applicable Law (in which case the use and
disclosure of such Derivative Information will continue to be subject to this
Agreement), upon the earlier of (i) the date on which the Receiving Party's need
for it has expired and (ii) the expiration or termination of this Agreement.
17.4.3. The Receiving Party may at any time either return Proprietary
Information to the Disclosing Party or destroy such Proprietary Information. If
destroyed, all copies shall be destroyed and upon the written request of the
Disclosing Party, the Receiving Party shall provide the Disclosing Party written
certification of such destruction. The destruction or return of Proprietary
Information shall not relieve any Receiving Party of its obligation to treat
such Proprietary Information in the manner required by this Agreement.
18.0 DISPUTE RESOLUTION
18.1. Except as otherwise provided herein, any dispute, controversy or
claim (individually and collectively, a "Dispute") arising under this Agreement
shall be resolved in accordance with the procedures set forth in this SECTION
18.1. In the event of a Dispute between the Parties relating to this Agreement
and upon the written request of either Party, each of the Parties shall appoint
within five (5) Business Days after a Party's receipt of such request a
designated representative who has authority to settle the Dispute and who is at
a higher level of management than the persons with direct responsibility for
administration of this Agreement. The designated representatives shall meet as
often as they reasonably deem necessary in order to discuss the Dispute and
negotiate in good faith in an effort to resolve such Dispute. The
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specific format for such discussion will be left to the discretion of the
designated representatives, however, all reasonable requests for relevant
information made by one Party to the other shall be honored. If the Parties are
unable to resolve issues related to a Dispute within thirty (30) days after the
Parties' appointment of designated representatives as set forth above, the
Parties shall attempt in good faith to resolve the Dispute according to the
rules, guidelines or regulations of the Commission. Notwithstanding the
foregoing, in no event shall the parties permit the pending of a Dispute to
disrupt service to any Reseller Customer.
18.2. Notwithstanding the foregoing, this SECTION 18.0 shall not be
construed to prevent either Party from seeking and obtaining temporary equitable
remedies, including temporary restraining orders, if, in its judgment, such
action is necessary to avoid irreparable harm. Despite any such action, the
Parties will continue to participate in good faith in the dispute resolution
procedures described in this SECTION 18.0.
19.0 PUBLICITY
Neither Party nor its subcontractors or agents shall use the other
Party's trademarks, trade names, service marks or other proprietary marks in any
advertising, press releases, publicity matters or other promotional materials
without such other Party's prior written consent, except as permitted by
Applicable Law. In no event shall either Party mischaracterize the contents of
this Agreement or the business relationship of the Parties in any public
statement or in any representation to a governmental entity or business thereof.
20.0 SEVERABILITY
If any provision of this Agreement shall be held to be illegal, invalid
or unenforceable, each Party agrees that such provision shall be enforced to the
maximum extent permissible so as to effect the intent of the Parties, and the
validity, legality and enforceability of the remaining provisions of this
Agreement shall not in any way be affected or impaired thereby. If necessary to
effect the intent of the Parties, the Parties shall negotiate in good faith to
amend this Agreement to replace the unenforceable language with enforceable
language that reflect such intent as closely as possible.
21.0 MISCELLANEOUS
21.1. AUTHORIZATION.
21.1.1 Ameritech Services, Inc. is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Delaware. Ameritech Information Industry Services, a division
of Ameritech Services, Inc., has full power and authority to execute
and deliver this Agreement and to perform the obligations hereunder on
behalf of and as agent for Ameritech Indiana.
32
<PAGE> 36
21.1.2 Reseller is a corporation duly organized, validly
existing and in good standing under the laws of the state of Florida
and has full power and authority to execute and deliver this Agreement
and to perform its obligations hereunder. Reseller represents and
warrants to Ameritech that it has been certified as an LEC by the
Commission and is authorized to provide in the Territory the services
contemplated hereunder.
21.1.3 Each Party represents to the other Party that the
person signing this Agreement on behalf of such Party is properly
authorized to enter into this Agreement. Each Party further
acknowledges that it has read this Agreement, understood it, and agrees
to be bound by all of its terms and conditions.
21.2. COMPLIANCE WITH APPLICABLE LAW. Each Party shall comply with all
applicable federal, state, and local laws, rules, and regulations (collectively,
"APPLICABLE LAW") applicable to its performance under this Agreement. Nothing in
this Agreement shall be construed as requiring or permitting either Party to
contravene any mandatory requirement of Applicable Law.
21.3. SUBCONTRACTING. Either Party may subcontract the performance of
its obligations under this Agreement without the prior written consent of the
other Party; provided, however, that the Party subcontracting such obligation
shall remain fully responsible for (i) the performance of such obligation, (ii)
payments due its subcontractors and (iii) such subcontractors' compliance with
the terms, conditions and restrictions of this Agreement.
21.4. INDEPENDENT CONTRACTOR. Ameritech shall provide the Resale
Services hereunder as an independent contractor and nothing herein shall be
construed as creating any other relationship between the Parties. Each Party and
each Party's contractor shall be solely responsible for the withholding or
payment of all applicable federal, state and local income taxes, social security
taxes and other payroll taxes with respect to their employees, as well as any
taxes, contributions or other obligations imposed by applicable state
unemployment or workers' compensation acts. Each Party has sole authority and
responsibility to hire, fire and otherwise control its employees.
21.5. FORCE MAJEURE. Neither Party shall be liable for any delay or
failure in the performance of any part of this Agreement from any cause beyond
its control and without its fault or negligence, including, without limitation,
acts of nature, acts of civil or military authority, government regulations,
embargoes, epidemics, terrorist acts, riots, insurrections, fires, explosions,
earthquakes, nuclear accidents, floods, work stoppages, equipment failure, power
blackouts, volcanic action, other major environmental disturbances, unusually
severe weather conditions, inability to secure products or services of other
persons or transportation facilities or acts or omissions of transportation
carriers (collectively, a "FORCE MAJEURE EVENT"). If a Force Majeure Event shall
occur, the Party affected shall give prompt notice to the other Party of such
Force Majeure Event specifying the nature, date of inception and expected
duration of such Force Majeure Event, whereupon such obligation or performance
shall
33
<PAGE> 37
be suspended to the extent such Party is affected by such Force Majeure Event
during the continuance thereof or be excused from such performance depending on
the nature, severity and duration of such Force Majeure Event (and the other
Party shall likewise be excused from performance of its obligations to the
extent such Party's obligations relate to the interfered performance). The
affected Party shall use its reasonable efforts to avoid or remove the cause of
nonperformance and the Parties shall give like notice and proceed to perform
with dispatch once the causes are removed or cease.
21.6. GOVERNING LAW. Unless otherwise provided by Applicable Law,
this Agreement shall be governed by the domestic laws of the State of Indiana
without reference to conflict of law provisions.
21.7. NON-ASSIGNMENT. Reseller may not assign or transfer (whether by
operation of law or otherwise) this Agreement (or any rights or obligations
hereunder) to a third person without the prior written consent of Ameritech;
provided that Reseller may assign or transfer this Agreement to its Affiliate by
providing prior written notice to Ameritech of such assignment or transfer;
provided, further, that such assignment is not inconsistent with Applicable Law
(including, the Affiliate's obligation to obtain proper Commission certification
and approvals) or the terms and conditions of this Agreement. Notwithstanding
the foregoing, Reseller may not assign or transfer this Agreement (or any rights
or obligations hereunder) to its Affiliate if that Affiliate is a party to an
agreement with Ameritech under Sections 251/252 of the Act. Any attempted
assignment or transfer that is not permitted is void ab initio.
21.8. NON-WAIVER. No waiver of any provision of this Agreement shall be
effective unless the same shall be in writing and properly executed by or on
behalf of the Party against whom such waiver or consent is claimed. Failure of
either Party to insist on performance of any term or condition of this Agreement
or to exercise any right or privilege hereunder shall not be construed as a
continuing or future waiver of such term, condition, right or privilege.
21.9. NOTICES. Notices given by one Party to the other Party under this
Agreement shall be in writing and shall be (a) delivered personally, (b)
delivered by express delivery service, (c) mailed, certified mail or first class
U.S. mail postage prepaid, return receipt requested or (d) delivered by
facsimile to the following addresses of the Parties:
To Reseller:
United States Telecommunications, Inc.
13902 North Dale Mabry
Suite 212
Tampa, FL 33618
Attn: Richard Pollara/Joseph Cillo
Facsimile: (813) 961-1460
34
<PAGE> 38
To Ameritech:
Ameritech Information Industry Services
350 North Orleans, Floor 3
Chicago, IL 60654
Attn.: Vice President - Network Providers
Facsimile: (312) 335-2927
with a copy to:
Ameritech Information Industry Services
350 North Orleans, Floor 5
Chicago, IL 60654
Attn.: Vice President and General Counsel
Facsimile: (312) 245-0254
or to such other address as either Party shall designate by proper notice.
Notices will be deemed given as of the earlier of (i) the date of actual
receipt, (ii) the next Business Day when notice is sent via express mail or
personal delivery, (iii) three (3) days after mailing in the case of first
class or certified U.S. mail or (iv) on the date set forth on the confirmation
in the case of facsimile.
21.10. JOINT WORK PRODUCT. This Agreement is the joint work product of
the Parties and has been negotiated by the Parties and their respective counsel
and shall be fairly interpreted in accordance with its terms and, in the event
of any ambiguities, no inferences shall be drawn against either Party.
21.11. NO THIRD PARTY BENEFICIARIES; DISCLAIMER OF AGENCY. This
Agreement is for the sole benefit of the Parties and their permitted assigns,
and nothing herein express or implied shall create or be construed to create any
third party beneficiary rights hereunder. Except for provisions herein expressly
authorizing a Party to act for another, nothing in this Agreement shall
constitute a Party as a legal representative or agent of the other Party, nor
shall a Party have the right or authority to assume, create or incur any
liability or any obligation of any kind, express or implied, against or in the
name or on behalf of the other Party unless otherwise expressly permitted by
such other Party. Except as otherwise expressly provided in this Agreement, no
Parry undertakes to perform any obligation of the other Party, whether
regulatory or contractual, or to assume any responsibility for the management of
the other Party's business.
21.12. NO LICENSE; AFFIRMATION OF PROPRIETARY RIGHTS. No license under
patents, copyrights or any other Intellectual Property right (other than the
limited license to use consistent with the terms, conditions and restrictions of
this Agreement) is granted by Ameritech to Reseller nor shall any license be
implied or arise by estoppel with respect to any transactions contemplated under
this Agreement. Both Parties acknowledge that each shall not acquire any
proprietary or Intellectual Property rights in any Proprietary Information
disclosed, furnished
35
<PAGE> 39
or made available by the other Party hereunder or any enhancement, improvement,
revision, derivative work, extension, update or modification to any such
Proprietary Information or any aspect thereof.
21.13. NECESSARY APPROVALS. Each Party shall be responsible for
obtaining and keeping in effect all approvals from, and rights granted by,
governmental authorities, building and property owners, other carriers, and any
other persons that may be required in connection with the performance of its
obligations under this Agreement. Each Party shall reasonably cooperate with the
other Party in obtaining and maintaining any required approvals and rights for
which such Party is responsible.
21.14. INSURANCE. At all times during the term of this Agreement, each
Party shall keep and maintain in force at such Party's expense all insurance
required by Applicable Law, general liability insurance in the amount of at
least $10,000,000 and worker's compensation insurance. Upon request from the
other Party, each Party shall provide to the other Party evidence of such
insurance (which may be provided through a program of self-insurance).
21.15. GOOD FAITH PERFORMANCE. Each Party shall act in good faith in
its performance under this Agreement and, in each case in which a Party's
consent or agreement is required or requested hereunder, such Party shall not
unreasonably withhold or delay such consent or agreement, as the case may be.
21.16. NOTICE OF CHANGES. If a Party (i) makes a change in its network
that will materially affect the interoperability of its network with the other
Party or (ii) changes Operations Support Systems functions that affect the
operations of the other Party, the Party making the change shall provide
reasonable advance written notice of such change to the other Party to the
extent required by and within such time period as determined by the FCC or the
Commission and their respective rules and regulations.
21.17. DESIGNATION OF AFFILIATE. Each Party may without the consent of
the other Party fulfill its obligations under this Agreement by itself or may
cause its Affiliates to take some or all of such actions to fulfill such
obligations. Upon such designation, the Affiliate shall become a primary obligor
hereunder with respect to the delegated matter, but such designation shall not
relieve the designating Party of its obligations as co-obligor hereunder. Any
Party which elects to perform its obligations through an Affiliate shall cause
its Affiliate to take all action necessary for the performance hereunder of such
Party's obligations. Each Party represents and warrants that if an obligation
under this Agreement is to be performed by an Affiliate, such Party has the
authority to cause such Affiliate to perform such obligation and such Affiliate
will have the resources required to accomplish the delegated performance.
21.18. SURVIVAL. The Parties' obligations under this Agreement which by
their nature are intended to continue beyond the termination or expiration of
this Agreement shall survive the termination or expiration of this Agreement,
including without limitation, SECTIONS 6.8, 7.9, 11.0, 12.0, 13.0, 14.0, 15.0,
17.0, and 21.11.
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<PAGE> 40
21.19. ENTIRE AGREEMENT. The terms contained in this Agreement and any
Schedules, Exhibits, tariffs and other documents or instruments referred to
herein, which are incorporated into this Agreement by this reference, constitute
the entire agreement between the Parties with respect to the subject matter
hereof, superseding all prior understandings, proposals and other
communications, oral or written, other than the Nondisclosure Agreement.
Notwithstanding the Nondisclosure Agreement and except as otherwise provided
herein, the provisions of this Agreement (and not the Nondisclosure Agreement)
shall apply to the treatment, disclosure and use following the date of this
Agreement of all Proprietary Information which is communicated to a Receiving
Party on or after the date of this Agreement. Neither Party shall be bound by
any pre-printed terms additional to or different from those in this Agreement
that may appear subsequently in the other Party's form documents, purchase
orders, quotations, acknowledgments, invoices or other communications. This
Agreement may only be modified by a writing signed by an officer of each Party.
IN WITNESS WHEREOF, this Agreement has been executed by the Parties as
of the Effective Date.
UNITED STATES AMERITECH INFORMATION
TELECOMMUNICATIONS, INC. INDUSTRY SERVICES, A DIVISION
OF AMERITECH SERVICES, INC.,
ON BEHALF OF AMERITECH
INDIANA
By: /s/ Joesph Cillo By: /s/ Neil E. Cox
----------------------------- ------------------------------
Name: Joesph Cillo Name: Neil E. Cox
--------------------------- ----------------------------
Title: Vice President Title: President
-------------------------- ---------------------------
<PAGE> 41
SCHEDULE 2.2
RESALE SERVICES
The Resale Services provided hereunder are those Telecommunications
Services set forth in the Resale Tariff(s). The interim rates, charges and
prices for such Resale Services are as ordered by the Commission in Causes Nos.
39983 and 40571-INT-01 and shall be replaced by these rates, charges and prices
established by the Commission in the Permanent Rate Docket.
<PAGE> 42
SCHEDULE 5.3
IMPLEMENTATION PLAN
[To be agreed upon by the Parties.)
Sch. 5.3 - 1
<PAGE> 43
SCHEDULE 5.4
SERVICE ORDERING AND PROVISIONING EI FUNCTIONALITY
The Provisioning EI will provide Reseller with the ability to:
a) Obtain, during sales discussions with a Customer, access to the
following Ameritech Customer service record data in a manner which is
transparent to the Customer:
- Billing telephone number/name/address
- Service Location Address
- Working telephone number(s) on the account
- Existing service and features
- Blocking
- CLASS Features
- Telephone Assistance Programs, Telephone Relay Service and
similar services indicator
- Special Exemption Status indicator
- Directory Listing Information
- Information necessary to identify the IntraLATA toll provider
and InterLATA provider, as applicable.
b) Obtain information on all features and services available;
c) Enter the Reseller Customer order for all desired features and
services;
d) Assign a telephone number (if the Reseller Customer does not have one
assigned);
e) Establish the appropriate directory listing;
f) Determine if a service call is needed to install the line or service;
g) Schedule dispatch and installation, if applicable;
h) Provide installation dates to Customer;
i) Order local intraLATA toll service and enter Reseller Customer's choice
of primary interexchange carrier on a single, unified order; and
j) Suspend, terminate or restore service to a Reseller Customer.
Ameritech will support four (4) transaction types: Assume; Change; New;
and Delete, as described in Ameritech's Electronic Service Guide, which is based
on TCIF Customer Service, Issue 5. Notwithstanding the foregoing, Reseller shall
be entitled to place orders to
Sch. 5.4 - 1
<PAGE> 44
transfer a Customer to Reseller without identifying the specific features and
services being subscribed by such Customer at the time of the request
("MIGRATION-AS-IS"). However, unless agreed to by Ameritech, Migration-As-Is
will not include any service subscribed which is not a Telecommunications
Service.
Reseller may request that the standard interval for provisioning will
be expedited if Ameritech's standard intervals do not meet the Reseller
Customer's requested due date. Orders will be expedited by Ameritech on the same
basis as it expedites orders for itself and its subsidiaries, Affiliates and
retail Customers.
Sch. 5.4 - 2
<PAGE> 45
SCHEDULE 5.12
RESALE MAINTENANCE PROCEDURES
1. Ameritech shall provide repair, maintenance, and testing, for all
Resale Services in accordance with the terms and conditions of this SCHEDULE
5.12.
2. Ameritech technicians shall provide repair service that is equal in
quality to that provided to Ameritech Customers; trouble calls from Reseller
Customers shall receive response time priority that is at parity to that of
Ameritech Customers and shall be based on trouble severity, regardless of
whether the Customer is a Reseller Customer or an Ameritech Customer.
3. Ameritech shall provide Reseller with the same scheduled and
non-scheduled maintenance, including required and recommended maintenance
intervals and procedures, for all Resale Services provided to Reseller under
this Schedule that it currently provides for the maintenance of its own network.
Ameritech shall provide Reseller notice of any scheduled maintenance activity
which may impact Reseller's Customers on the same basis it provides such notice
to its subsidiaries, Affiliates, other resellers and its retail Customers.
Scheduled maintenance shall include such activities as switch software
retrofits, power tests, major equipment replacements, and cable rolls.
4. Ameritech shall provide notice of non-scheduled maintenance activity
that may impact Reseller Customers. Ameritech shall provide maintenance as
promptly as possible to maintain or restore service and shall advise Reseller
promptly of any such actions it takes.
5. If service is provided to Reseller Customers before the EI for
maintenance is established between Reseller and Ameritech, Reseller will
transmit repair calls to Ameritech repair bureau by telephone.
6. Ameritech repair bureau, including the Maintenance EI shall be
on-line and operational twenty-four (24) hours per day, seven (7) days per week
except when preventative maintenance and software revisions require an
out-of-service condition. Ameritech will provide Reseller a twenty-four (24)
hour advanced notification of such out-of-service conditions.
7. Ameritech shall provide progress reports and status-of-repair
efforts to Reseller upon request, and at a frequency interval to be determined
by Ameritech. Ameritech shall inform Reseller of restoration of Resale Service
after an outage has occurred.
8. Maintenance charges for premises visits by Ameritech technicians
shall be billed by Reseller to its Customer, and not by Ameritech. The Ameritech
technician shall, however, present the Customer with unbranded form detailing
the time spent, the materials used, and an indication that the trouble has
either been resolved or that additional work will be necessary, in which case
the Ameritech technician shall make an additional appointment with the Customer.
Sch. 5.12 - 1
<PAGE> 46
The Ameritech technician shall obtain the Customer's signature when available
upon said form, and then use the signed form to input maintenance charges into
Ameritech's repair and maintenance database.
9. Dispatching of Ameritech technicians to Reseller Customer premises
shall be accomplished by Ameritech pursuant to a request received from Reseller.
The EI established between the Parties shall have the capability of allowing
Reseller to receive trouble reports, analyze and sectionalize the trouble,
determine whether it is necessary to dispatch a service technician to the
Customer's premises, and verify any actual work completed on the Customer's
premises.
10. Upon receiving a referred trouble from Reseller, the Ameritech
technician will offer a dispatch appointment and quoted repair time dependent
upon Ameritech's force-to-load condition. Ameritech's maintenance administrators
will override this standard procedure on a non-discriminatory basis, using the
same criteria as Ameritech uses to expedite intervals for itself and its
subsidiaries, Affiliates and retail Customers.
Sch. 5.12 - 2
<PAGE> 47
SCHEDULE 7.1
FORM OF REPRESENTATION OF AUTHORIZATION (1\)
This Representation of Authorization is delivered by Party A, a
____________ corporation with offices at ______________________________________
___________________________________ ("Party A") to Party B, a corporation
with offices at _______________________________________ ("Party B") pursuant to
that certain Agreement dated as of ________________, 1998 by and between the
Parties (the "Resale Agreement"). Capitalized terms used but not otherwise
defined herein shall have the meanings ascribed in the Resale Agreement.
Party A hereby represents to Party B, for purposes of obtaining a
Customer's Customer Proprietary Network Information ("CPNI") or for placing an
order to change or establish a Customer's service, that it is a duly
certificated LEC and that it is authorized to obtain CPNI and to place orders
for Telephone Exchange Service (including Resale Service) upon terms and
conditions contained herein.
1. With respect to requests for CPNI regarding prospective Customers of
Party A, Party A acknowledges that it must obtain written authorization in the
form of a signed letter ("LETTER") that explicitly authorizes Party A to have
access to the prospective Customer's CPNI. The Letter must be signed by the
prospective Customer or the prospective Customer's authorized representative. In
order to obtain the CPNI of the prospective Customer, Party A must submit to
Party B the Letter. If Party A cannot provide a Letter, then Party B shall not
provide CPNI to Party A.
2. With respect to placing a service order for Telephone Exchange
Service (including Resale Services) for a Customer, Party A acknowledges that it
must obtain (i) a Letter or (ii) authorization through other means permitted by
Applicable Law that governs a PLEC change ("DOCUMENTATION OF AUTHORIZATION"),
in each case that explicitly authorizes Party A to change such Customer's PLEC
and provide Telephone Exchange Service to such Customer. The Documentation of
Authorization must be made by the prospective Customer or Customer's authorized
representative. Party A need not submit the Documentation of Authorization to
process a service order. However, Party A hereby represents that it will not
submit a service order to Party B unless it has obtained appropriate
Documentation of Authorization from the prospective Customer and has such
Documentation of Authorization in its possession.
- --------------------
(1/) For purposes of this SCHEDULE 7.1, "PARTY A" means the carrier
requesting access to a prospective Customer's CPNI and "PARTY B" means
the Party that provides the CPNI. As provided in SECTION 7.1. each
Party shall deliver to the other Party a Representation of
Authorization in the form of this SCHEDULE 7.1.
Sch. 7.1 - 1
<PAGE> 48
3. The Documentation of Authorization must clearly and accurately
identify Party A and the prospective Customer. Party B will only disclose CPNI
to agents of Party A identified in the Letter or Documentation of Authorization.
4. Party A acknowledges that if the PLEC of its prospective Customer is
a carrier other than Party B, Party B may have incomplete, inaccurate or no CPNI
on such prospective Customer. In such cases, Party A agrees that it, and not
Party B, has the sole obligation to request the CPNI of such prospective
Customer from that Customer's PLEC.
5. Party A shall retain all Documentation of Authorization in its files
for as long as Party A provides Telephone Exchange Service to the Customer or
for as long as Party A makes requests for information on behalf of the Customer.
6. Party A shall make Documentation of Authorization available for
inspection by Party B during normal business hours. In addition, Party A shall
provide Documentation of Authorization for Customers or prospective Customers to
Party B upon request.
7. Party A is responsible for, and shall hold Party B harmless from,
any and all Losses resulting from Party B's reliance upon Party A's
representations as to its authority to act on behalf of a Customer or
prospective Customer in obtaining CPNI from Party B or placing a service order
with Party B for Telephone Exchange Service. In addition, Party A acknowledges
that Party B makes no representation or warranty as to the accuracy or
completeness of any CPNI disclosed hereunder and that Party B shall have no
liability to Party A in connection therewith.
8. If Party A fails to abide by the procedures set forth herein, Party
B reserves the right to insist upon the submission of a Letter or other
Documentation of Authorization for each Customer in connection with a request
for a service order.
9. This Representation of Authorization shall commence on the date
noted below and shall continue in effect until termination or expiration of the
Resale Agreement.
Dated this _______ day of _________________ 1998.
PARTY A
By:
--------------------------------
Title:
-----------------------------
Printed Name:
----------------------
Sch. 7.1 - 2
<PAGE> 49
SCHEDULE 7.2
PROCEDURES FOR THE SELECTION OF PRIMARY LOCAL EXCHANGE CARRIERS
In the event that Reseller submits an order under this Agreement, and
the Customer notifies Ameritech within the greater of ninety (90) days or two
(2) billing cycles of the date Reseller submitted such order that it did not
authorize Reseller to provide local exchange Telecommunications Services to such
Customer ("Unauthorized Switching"), Reseller must provide Ameritech with that
Customer's Documentation of Authorization within three (3) Business Days after
Ameritech's request. In the event that Reseller cannot provide the Documentation
of Authorization within three (3) Business Days, Reseller must within three (3)
Business Days thereafter:
- notify Ameritech to change the Customer back to the carrier
providing service to the Customer before the change to
Reseller was made, and
- provide any information and billing records Reseller has
obtained relating to such Customer to the prior carrier; and
- pay Ameritech $50.00 per line to compensate Ameritech for
switching the Customer back to the original carrier.
Reseller's Customer or Ameritech's Customers may request Ameritech to
permit changes of their Primary Local Exchange Company (PLEC) only upon end user
password-based notification to Ameritech that such Customer wishes to change its
PLEC. In such a situation, Ameritech will not change such Customer's PLEC
without such password-based notification.
SCHEDULE 7.2 - 1
<PAGE> 50
SCHEDULE 8.7
Resale Performance Activities (2)
A. Installation
1. Installation Intervals
a. POTS
(1) Percentage Installed on Time
(2) Installation Interval More Than Six (6)
Business Days
b. HICAP: Percentage of Missed Appointments
c. SUBRATE: Percentage of Missed Appointments
2. New Service Failures
a. POTS: Percentage of New Service Failures During First
Seven (7) Calendar Days from Installation Date
b. HICAP: Percentage of New Service Failures During
First Thirty (30) Calendar Days from Installation
Date
c. SUBRATE: Percentage of New Service Failures During
First Thirty (30) Calendar Days from Installation
Date
B. Repair
1. Time to Repair
a. POTS: If and as required by the Commission,
out-of-service in excess of twenty-four (24) hours
b. HICAP: Percentage of Repairs Not Completed within two
(2) hours
- ----------------
(2) As applicable, measured from the date/time of Ameritech's receipt of an
accurate, complete and valid Service Order.
Sch. 8.7 - 1
<PAGE> 51
c. SUBRATE: Percentage of Repairs Not Completed within
three and one-half (3 1/2) hours
2. Percentage of Initial Trouble Reports
Percentage of Code 4 Troubles
C. Time to Provide Firm Order Confirmation
1. Switched Services: Percentage of Firm Order Confirmations
Provided within four (4) Business Days of Receipt of Service Order
2. HICAP Services: Percentage of Firm Order Confirmations
provided within one (1) Business Day of Receipt of Service Order
D. Speed of Answer - Measured on an aggregate basis of all calls placed
to:
1. Service Center: Percentage of Calls to Service Center made
during normal business hours that are answered within ten (10) seconds
2. Repair Center: Percentage of Calls to Repair Center that are
answered within twenty (20) seconds.
3. Operator Services: Toll Assistance Speed of answer (seconds).
4. Operator Services: Directory Assistance Speed of answer
(seconds).
Sch. 8.7 - 2
<PAGE> 52
SCHEDULE 8.8
DIRECTORY LISTINGS
1.0 DIRECTORY LISTINGS. Ameritech shall cause the Publisher to include
Primary Listings of Reseller's Customers ("Reseller Directory
Customers") in its White Pages Directories under the following terms
and conditions:
1.1 Publisher will publish the Primary Listing of Reseller Directory
Customers located within the geographic scope of Publisher's
directories at no charge.
1.2 Listings of such Reseller Directory Customers will be interfiled
with listings of customers of Ameritech and other LEC's serving the
same geographic area where such listings are included within a
directory.
1.3 Ameritech or its Publisher must receive all Primary Listings of
Reseller Directory Customers prior to the service order close date for
the directory in which those listings are to appear. Ameritech or its
Publisher will provide Reseller with appropriate service order close
dates within thirty (30) days of this information becoming available.
1.4 At no charge, Publisher may include the Primary Listings of
Reseller Directory Customers that are provided to Ameritech in other
directories published by Publisher or its Affiliate.
1.5 Nothing in this Agreement shall restrict Ameritech's Publisher's
authority as publisher of the directories from altering the geographic
scope, directory life, headings, content or format of the directories.
Publisher will provide information on such alterations at the same time
such information is provided to Ameritech.
2.0 LISTING AND LISTING UPDATES. Reseller will provide Reseller Directory
Customer Listings and Listing Updates to Ameritech or its Publisher on
a nonexclusive basis as follows:
2.1 Reseller shall provide its Reseller Directory Customer Listings to
Ameritech in a mutually agreeable form and format. Reseller
acknowledges that Ameritech or its Publisher may impose a charge for
changes to Reseller Directory Customer Listings previously provided by
Reseller to Ameritech.
2.2 Within one (1) Business Day of installation, disconnection or other
change in service (including change of nonlisted or nonpublished
status) affecting the directory assistance database or the directory
listing of a Reseller Directory Customer, Reseller shall provide
Listing Updates to Ameritech in a form and format acceptable to
Ameritech.
Sch. 8.8 - 1
<PAGE> 53
2.3 Subject to the rates, guidelines and regulations of the Commission,
Publisher or Ameritech may sell or license the use of Customer
Listings, or Listing Updates to third persons without the prior written
consent of Reseller; provided, however, that Publisher or Ameritech
will not:
(a) disclose nonlisted name and address information to any
third person, except as may be necessary to undertake delivery of
directories, or to perform other services contemplated under this
Agreement;
(b) disclose to any third person the identity of a Customer's LEC;
(c) sell or license such Customer listing information sorted by
carrier; or
(d) disclose listing information for individual cases where
Reseller has notified Ameritech not to include listing for third party
publication.
2.4 Publisher shall provide initial and secondary delivery of
appropriate White Page Directories for Reseller Directory Customers on
the same basis as Publisher delivers White Pages Directories to
Ameritech's retail Customers.
Sch. 8.8 - 2
<PAGE> 54
SCHEDULE 9.2
BILLING AND COLLECTION SERVICES FOR ANCILLARY SERVICES
PLEASE INITIAL ONE:
- ------ Reseller elects not to be responsible for Information Services Traffic
and Ancillary Service Traffic and Reseller shall be solely responsible
for ordering blocking of such traffic on a per line basis when Reseller
submits an order. Reseller shall indemnify and hold Ameritech harmless
from any Losses arising out of Reseller's failure to order blocking for
resold lines.
- ------ Reseller shall be responsible for Information Services Traffic and
Ancillary Service Traffic and agrees to comply with the remaining terms
and conditions in this SCHEDULE 9.2.
1.0 DEFINITIONS
"555" is a service in which Providers offer information services for a
fee to Callers who dial a number using the "555" prefix.
"976" is a service in which Providers offer audio services for a fee to
Callers who dial a number using the "976" prefix.
"Abbreviated Dialing" is a service in which Providers offer information
services for a fee to Callers who dial a telephone number with less than seven
digits.
"Ancillary Services" include, but are not limited to, Abbreviated
Dialing, 555 services, 976 services, CPP Cellular services and CPP Paging
services.
"Caller" is the individual or entity placing a call to an Ancillary
Service and who thereby agrees to pay a charge associated with placing the call.
"Calling Party Pays Cellular" or "CPP Cellular" is a service where a
Caller placing a call to a cellular telephone agrees to pay the charges for the
call. Typically, an announcement is played to the Caller giving the Caller the
option to accept the charges to end the call without incurring charges.
"Calling Party Pays Paging" or "CPP Paging" is a service where a Caller
placing a call to a pager agrees to pay the charges for the call. Typically, an
announcement is played to the Caller giving the Caller the option to accept the
charges or to end the call without incurring charges.
"Provider" is the entity which offers an Ancillary Service to a Caller.
Sch. 9.2 - 1
<PAGE> 55
BILLING AND COLLECTION SERVICES
2.1 Billing Services
Ameritech will provide Reseller with formatted records for
each Ancillary Services billable call in accordance with each
Provider's requested rates as specified in Exhibit A. Reseller shall
confirm receipt of such formatted records within twenty-four (24) hours
of receipt. Reseller will render bills on behalf of Ameritech on
Reseller's bills to Reseller's Customers in accordance with standard
Reseller billing processes and in the format specified in Exhibit B
("Bill Displays"). Reseller must bill for all calls using the Ancillary
Services when those calls are contained on the formatted records.
Reseller shall bill all calls within thirty (30) days of receiving the
tape.
Reseller must comply with all federal and state requirements
applicable to the provision of the Billing Services.
Reseller will provide Billing Services to Ameritech for the
Ancillary services described in this Agreement and for additional
Ancillary services that may be developed during the term of this
Agreement.
2.2 Collection Services
Reseller will provide collection services in connection with
bills rendered by Reseller ("Collection Services"). These Collection
Services consist of:
- Collecting payments remitted by Reseller's Customers for calls
placed to Ancillary Services billed hereunder;
- Adjusting Customer bills for Ameritech as set forth in
Paragraph 6.0 of this SCHEDULE 9.2;
- Responding to Customer inquiries and disputes;
- Remitting net proceeds to Ameritech, as provided in Paragraph
5.0 of this SCHEDULE 9.2;
- Undertaking preliminary collection activity for delinquent
accounts.
When an account being treated for collection by Reseller remains
delinquent in excess of thirty (30) days, or in the event telephone service to a
delinquent account is terminated, Reseller may, at its sole discretion, adjust
the amount due or declare the account uncollectible and remove the delinquent
amount from its Customer's bill.
SCH. 9.2 - 2
<PAGE> 56
2.3 Administration.
Attached as Exhibit C is a description of the process flow,
record types, and report format for the Settlement process under this Schedule
9.2.
3.0 COMPENSATION TO RESELLER
Ameritech shall pay for the Billing and Collection Services described
herein at the rates set forth in Exhibit D.
4.0 CHANGES TO PROVIDER'S SERVICES AND RATES
The amount which a Provider elects to charge those who place calls to
an Ancillary Service will be at Provider's sole discretion. Ameritech shall
provide to Reseller information concerning Provider's programs, including but
not limited to Provider's name, rates, type of program and tax status. This
information shall be provided as described in Exhibit E. Reseller's Customers
who place calls to a Provider's service will be invoiced monthly for all
billable Ancillary calls submitted by Ameritech. The charges for such submitted
billable Ancillary Service calls will be shown on the Caller's bill in the
format specified in Exhibit B.
5.0 SETTLEMENT WITH RESELLER
The amount due to Ameritech shall be the total of all billable charges
submitted to Reseller, less:
a. All charges due Reseller under Section 3.0 of this Schedule
9.2;
b. Amounts declared uncollectible as provided in Section 7.0 of
this Schedule 9.2;
c. Adjustments as provided in Section 6.0 of this Schedule 9.2;
Taxes collected from end user.
Reseller shall provide Ameritech with monthly reports of amounts
billed, amounts collected, amounts adjusted, uncollectible amounts and end user
taxes by taxing authority and by Provider including the program number and the
amount of taxes applied to the services, as described in Exhibit C. The monthly
statement is due to Ameritech by the fifth business day of every month. Payment
of amounts owed to Ameritech by Reseller shall be due within thirty (30) days
from the date of the monthly report. Late charges on past due amounts shall
accrue interest at the rate of 1.5% per month, or the highest rate allowed by
law, whichever is lower.
Upon termination of this Agreement for any reason, all sums due to
Ameritech hereunder shall be immediately due and payable.
Sch. 9.2 - 3
<PAGE> 57
6.0 ADJUSTMENTS
Reseller may remove a disputed charge from a Customer's account within
sixty (60) days from the date of the message, provided that notice of the
adjustment is given by Reseller to Ameritech within sixty (60) days from the
date of the message. The form and procedure of this notice is specified in
Exhibit F.
7.0 UNCOLLECTIBLES
Reseller may recourse to Ameritech an actual uncollectible amount from
a Customer's account, provided that notice of the recourse of the uncollectible
amount is given by Reseller to Ameritech within one-hundred twenty (120) days
from the date of the message. The form and procedure of this notice is specified
in Exhibit F.
8.0 TAXES
8.1 Taxes Imposed on Services Performed by Reseller. Reseller shall be
responsible for payment of all sales, use or other taxes of a similar nature,
including interest and penalties, imposed on Reseller's performance of Services
under this Agreement.
8.2 Taxes on Ancillary Services. Reseller shall be responsible for
applying taxes as determined by Provider for all Ancillary messages billed
hereunder as specified in Exhibit E. Each Provider shall be responsible for
determining what taxes apply to the service it provides and for notifying
Ameritech of those taxes. Ameritech shall notify Reseller of this information
and pursuant to this Agreement Reseller shall bill and collect such taxes based
on information supplied by Provider and shall remit such taxes to Ameritech.
Reseller shall identify the amount of taxes and type of taxes, by Provider.
Ameritech shall then remit such collected taxes to the Provider. Provider shall
remit any taxes it owes to the taxing authority.
9.0 BLOCKING
Reseller shall comply with all federal and state requirements to block
Customer access to Ancillary Services upon Customer's request. Reseller shall
also block Customer access to Ancillary Services upon Ameritech's request, as
set forth in the Guidelines.
Sch. 9.2 - 4
<PAGE> 58
EXHIBIT A
DAILY USAGE INFORMATION
Ameritech will send daily usage tapes, in EMR standard format, to
Reseller containing the following message information for services specified in
this agreement:
- date of the call
- calling number
- called number
- duration of call
- charge for the call excluding taxes
- identity of Provider (IP's Pseudo CIC Code as shown on the EMR
record, in the CIC Code field, positions 166 and 150-153)
Exh. A-1
<PAGE> 59
EXHIBIT B
GENERAL GUIDELINES AND BILL DISPLAYS
General Guidelines:
(1) Per regulatory guidelines, Provider's itemized call detail need to
appear on a separate section or separate page of end user's bill.
(2) Adjustments must be shown on the end user's bill. Adjustments may be
shown as individual line items or as a total adjustment amount.
(3) The adjustment phrase on the user's bill will read:
976 Information Provider Adj.
Adjustments CPP/C
Adjustments CPP/P
(4) See Bill Displays on pages 61 and 62.
Exh. B - 1
<PAGE> 60
EXHIBIT B
976 BILL DISPLAY
- --------------------------------------------------------------------------------
(1) IMPORTANT INFORMATION Charges for 976 messages are for
non-telecommunications services. You have 60 days of this bill to dispute a
billing error. You also have the right to withhold payment of the disputed
charges during the billing error review. No collection activity for disputed
charges will occur while the charges are under investigation. Your local and
long distance service cannot be disconnected for non-payment of 976 charges.
After investigation if it is determined that the disputed charges are
legitimate, the Information Provider may proceed with outside collections
against your account. Failure to pay legitimate 900 charges may result in
involuntary blocking of access to 976 services. Voluntary blocking of access to
976 services is available upon request from your local Exchange Provider.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(2) NO. (3) DATE (4) TIME (5) PLACE CALLED (6) NUMBER (7) CODE (8) MIN (9) AMOUNT (10) TOTAL
976 CALLS
1 5-27 924A WEATHER IL 312 976 1212 1 .65
2 6-16 1040P RACINGXTRA IL 312 976 2222 2 1.70
3 6-16 1042P RACINGXTRA IL 312 976 2222 1 .85
4 6-16 1055P SPORTSPHN IL 312 976 1313 1 .85
5 6-16 1056P RACINGXTRA IL 312 976 2222 1 .85
6 6-16 1056P SPORTSPHN IL 312 976 1313 1 .85
7 6-16 1057P WEATHER IL 312 976 1212 1 .05
8 6-16 1105P RACINGXTRA IL 312 976 2222 1 .85
(11) 976 INFORMATION 7.65
PROVIDER ADJ. 0.00
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
LEGEND:
(1) Important Information = End User's rights for Pay-Per-Call Services.
(2) No. = Message Number
(3) Date = Date of message
(4) Time = Time of the call
(5) Place called = Name of 976 Program
(6) Number = Telephone Number of 976 Program
(7) Code - Not applicable
(8) MIN - Length of call in minutes
(9) Amount = Amount of the Call (rate on daily usage feed)
(10) Total 976 Calls = Total Amount due for all 976 calls
(11) Adjustments = Adjustments per line item or total adjustment amount.
Exh. B - 2
<PAGE> 61
<TABLE>
<CAPTION>
EXHIBIT B
CPP CELLULAR AND CPP PAGING BILL DISPLAY
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
(1) (2) (3) (4) Place Called (5) Number (6) (7) (8) Amount
No. Date Time Code Min
- ---------------------------------------------------------------------------------------------------------------------------------
CALLS TO PAGING NETWORK, INC.
1 12-1 1028A MOBILE USE CH 312 000 0002 AD 1 .25
2 12-1 1029A MOBILE USE CH 312 000 0002 AD 1 .25
3 12-1 1029A MOBILE USE CH 312 000 1234 AD 4 1.00
Subtotal 1.50
CALLS TO FREEDOM PAGE
9 12-1 1028A MOBILE USE CH 312 000 0001 AD 1 .25
10 12-1 1029A MOBILE USE CH 630 000 1234 AD 1 .25
11 12-1 1029A MOBILE USE CH 312 000 0001 AD 1 .25
12 12-2 1028A MOBILE USE CH 312 000 0001 AE 1 .25
(9) Subtotal 1.00
CALLS TO AMERITECH CELLULAR
15 12-1 1028A MOBILE USE CH 708 000 2468 AD 1 .20
16 12-1 1028A MOBILE USE CH 708 000 1357 AD 1 .20
17 12-1 1028A MOBILE USE CH 312 000 0009 AD 11 2.20
Subtotal 2.60
CALLS TO CELLULAR ONE
25 12-2 1046A MOBILE USE CH 312 000 6779 AE 1 .40
26 12-3 1047A MOBILE USE CH 312 000 6779 AE 3 1.20
Subtotal 1.60
(10) TOTAL ITEMIZED CALLS .70
(11) ADJUSTMENTS CPP/P 0.00
ADJUSTMENTS CPP/C 0.25
- ---------------------------------------------------------------------------------------------------------------------------------
LEGEND:
(1) No. = Message Number AE = Evening (11) Adjustments = Adjustments per line item
(2) Date = Date of message AN = Night and weekend or tool adjustment amount per service
(3) Time = Time of the call (7) MIN. = Length of call in units
(4) Place called = MOBILE USE CH
(5) Number = Called Number (8) Amount = Amount of the Call (rate on
daily usage feed)
(6) Code = Code: Time of day (9) Subtotal = Subtotal Per Provider
AD = Day (10) Total Itemized Calls = Total Amount
due for all cellular and paging services
</TABLE>
Exh. B - 3
<PAGE> 62
EXHIBIT C
SETTLEMENT STATEMENT GUIDELINES
See the 976, CPP/C and CPP/P flow for Resellers
Separate Settlement Statement required by service type, per state. See
Settlement Statement Format on Pages 7 and 8.
Use Pages 9-14 for data exchange guidelines.
Use the following information for sending the electronic details, Settlement
Statement and payments to Ameritech.
Electronic data:
Arrangements will be worked out with each Reseller based on Reseller's
Questionnaire.
Send Settlement Statement to:
AIIS- Billing Operations
804 N. Milwaukee St. - Third Floor
Milwaukee, WI 53202
Tel: (414) 678-3159
Fax: 1-800-858-6960
Bank information:
Ameritech-Resale Account
P.O. Box 689775
Milwaukee, WI 53268-9775
Wire Transfer information:
Bank-One Milwaukee
Account Number: 020904860
Reference Lockbox Number: 689775
ABA Routing Number: 075000019
In addition, fax a transmittal referencing lockbox number and service
type to AIIS Billing Operations at the address listed above.
Exh. C - I
<PAGE> 63
Agreement for the Provision of Billing and
Collection Services for Ancillary Services
Exhibit C
976.CPP/C. and CPP/P Flow For Resellers
AIIS SETTLEMENT SYSTEM
* Resellers copy of 976, CPP/C and
CPP/P daily usage from Camps
<TABLE>
<CAPTION>
- -----------------------------
<S> <C> <C>
CAMPS for
audit trail purposes. *Information Provider
*Sends Daily Usage File to ---------------> * Receives billing detail record ----> receives settlement statement
and CPP/P (electronic) from Reseller to from AIIS
Reseller including 976.CPP/C * Generate settlement statement to
---------------------------- Provider. ----------------------------
* Billed message
* Unbilled message
* Adjustments
* Uncollectibles
* Billed Taxes
- -------------------------------
---------------------------------
RESELLER
*Receives Daily usage File From
Camps.
- ------------------------------
- -------------------------------------------------
RESELLER AIIS Billing Operations
* Bills Usage to their end user. * Receives paper copy of settlement
* Sends billing details record (electronic data) to AIIS --------------------------> Statement from Reseller
- Billed messages * Receives fax identifying payment
- Unbilled message from Reseller
- Adjustments
- Uncollectibles
- Billed Taxes
* Sends paper copy of settlement statement to AIIS * End
Billing Operations ------------> User receives
- Billed Revenue Invoice from reseller
- Unbilled messages
- Taxes withheld
- Adjustments and
- Uncollectibles.
* Sends payment to Bank or Lockbox
* Sends fax identifying payment to AIIS Billing Operations
---------------------------> Bank/Lockbox
* Receives payment from Reseller
</TABLE>
Exh. C - 2
<PAGE> 64
EXHIBIT C
SETTLEMENT STATEMENT FORMAT
RESELLER NAME
PURCHASE OF ACCOUNTS RECEIVABLE STATEMENT-SERVICE TYPE
<TABLE>
<S> <C>
CARRIER: Ameritech - IL
BILL MONTH: JAN., 1997
PAGE: 1 OF 2
ISSUE DATE: 2/5/97
DUE DATE: 3/5/97
INVOICE NO.: 12345
Total Billed Revenue $ 1,000.00
Total Billed Taxes $ 180.00
Federal Tax $ 75.00
Detail by IP
IP#1 $ 50.00
IP#2 $ 25.00
State Taxes $ 40.00
Detail by IP
IP#1 $ 30.00
IP#2 $ 10.00
Local Taxes $ 65.00
Local Tax 1 (Identify Taxing Authority)
Detail by IP
IP#1 $ 10.00
IP#2 $ 5.00
Local Tax 2 (Identify Taxing Authority)
Detail by IP
IP#1 $ 5.00
IP#2 $ 5.00
</TABLE>
LEGEND:
Carrier = Ameritech - (State), State = IL, IN, MI, OH, WI
Invoice NO = ?
IP#N = Information Provider Name
Exh. C-3
<PAGE> 65
EXHIBIT C
SETTLEMENT STATEMENT FORMAT
RESELLER NAME
PURCHASE OF ACCOUNTS RECEIVABLE STATEMENT-SERVICE TYPE
CARRIER: Ameritech - IL
BILL MONTH: JAN., 1997
PAGE: 1 OF 2
ISSUE DATE: 2/5/97
DUE DATE: 3/5/97
INVOICE NO.: 12345
<TABLE>
<S> <C> <C> <C>
3. Resourced Adjustments/Uncollectibles $ 100.00
Adjustments $ 40.00
Detail by IP $ 15.00
IP#1 $ 25.00
IP#2 $ 10.00
Federal Tax
Detail by IP $ 5.00
IP#1 $ 5.00
IP#2 $ 25.00
State Taxes
Detail by IP $ 10.00
IP#1 $ 15.00
IP#2 $ 25.00
Local Taxes
Local Tax 1 (Identify Taxing Authority)
Detail by IP $ 10.00
IP#1 $ 5.00
IP#2
Local Tax 2 (Identify Taxing Authority)
Detail by IP $ 5.00
Adjust IP#1 $ 5.00
---------
Late P IP#2 $1,080.00
Net Due (Line 4 + 5) $ 50.00
---------
$1,130.00
Billing Service Charge (7D*$.03) ($ 295.35)
10,000
Total Messages (5)
Duplicate Messages (150)
Unbilled Messages 9,845
Total A D. Actual Messages Billed ---------
$ 834.65
</TABLE>
Exh. C-4
<PAGE> 66
EXHIBIT C
RECORD TYPES FOR DATA EXCHANGE
<TABLE>
<CAPTION>
Record Type CPP PPP 976
<S> <C> <C> <C>
DAILY USAGE TO CLEC 010133 010133 010116
HEADER 202201 202201 202201
TRAILER 202202 202202 202202
BILL REVENUE OR UNBILLABLE USAGE FROM CLEC 010133 010133 010116
HEADER 202203 202203 202203
TRAILER 202204 202204 202204
ADJUSTMENTS/UNCOLLECTIBLES FROM CLEC 450133 450133 450116
HEADER 202219 202219 202219
TRAILER 202220 202220 202220
TAX SUMMARY FROM CLEC RITR01 RITR01 RITR01
HEADER 202203 202203 202203
TRAILER 202204 202204 202204
</TABLE>
A copy of all messages received by the Reseller from CAMPS for end-user
billing of Ancillary Services should be sent to AIIS with the Return Code (pos.
70-71) populated with one of the Bellcore standard values. Some expected values
to be used in this case are:
00 - no return code; the call was billed to the end-user
06 - the end Customer has already been disconnected
09 - other; there is no return code to match the reason
10 - the Customer does not belong to the CLEC receiving the billing
record
38 - the Customer has uncollectible final account status
39 - duplicate record
40-99 - represent invalid or unreadable formatting in the records;
refer to Bellcore guide (may use 40 for all if guide is unavailable)
Exh. C-5
<PAGE> 67
EXHIBIT C
RECORD TYPES FOR DATA EXCHANGE
Those messages returned with value 00 are expected to have been used in
the calculations of the Total Billed Revenue on the Purchase of Accounts
Receivable Statements. Those with values greater than 00 are counted on the
statements as Unbilled Messages. All messages for all statements for the month
for a specific Issue Date may be placed in one file with the header and trailer
given above unless the file exceeds 100,000 records.
The Reseller must populate these fields in the 202203 and 202219
headers:
- Record ID
- Date Created
- Invoice Number (2-digit sequence number per dataset name for
tracking missing files)
- Local IC Info (pos. 40-46) must contain the Reseller's ID:
- the ACNA in positions 40-42
- the CIC in positions 43-45
- space filler in position 46
- Reserved area at positions 123-127 must contain the last five digits
of the Invoice Number of the Purchase of Accounts Receivable
Statement
- Host Receipt Date (pos. 129-134) must match the Issue Date of the
Purchase of Accounts Receivable Statements
The Reseller must populate these fields in the 2022C4 and 202220
trailers:
- Record ID
- Date Created
- Grand Total Count (pos. 111-117) must contain the number of records
or messages in the file not including the header or trailer.
Adjustments and Uncollectible billed charges must be returned in record
types 450133 and 450116. These are 175 byte records with an added module
containing billing name and address information. The following fields must be
populated in these records (here we are employing non-standard use of some of
the data fields):
- Record ID
- Date Created
- From Number
- Customer Code (if applicable)
- To Number
- Customer Code (if applicable)
- Adjustment Amount (signed decimal field)
- Connect Time (of original call)
- Connect Date (of original call; use Date of Record field)
- Adjustment Reason (extended into From OCN field) as:
Exh. C-6
<PAGE> 68
1. Adjustment Reason (pos. 70-71) values:
A = adjustment
U = uncollectible/writeoff
2. Adjustment Type (pos. 72-74) values:
CNC = Call not completed
CTO = Cut off
DAK = Denies all knowledge (see Reason Code Modifier below)
INR = Incorrect rate
PTR = Poor transmission
RCG = Rebill
SIA = Uncollectible final bill
TNC = Disputed call duration
WNO = Wrong number reached
3. Adjustment Type Modifier (pos. 75); only used when Adjustment
Type is DAK, values:
A = Refusal to pay
D = Denies all knowledge - other
E = Duplicate billing
F = Fraud
L = PIC change not authorized
M = Misquoted charges
S = Customer unaware of info service charges
T = Paid directly to provider
U = Misleading advertising, info service
V = Never received info or offering, product damaged or poor
quality
- Non-published indicator (use pos. 76 of From OCN field)
values:
N = Customer's number is not published
P = Customer's number is published
- Billing Number
- Billed Date
- Settlement Period (Issue Date of PAR)
- Indicator 14 should have value of '5' to indicator
the existence of Module 006-A
- Billing Name and Address Module 006-A (starts at
position 176) follow exhibit C-2
- Ending Module 999-A
Billed and adjusted taxes are to be returned in record types RITRO1. (Format
TBD)
Exh. C-7
<PAGE> 69
Billing Name and Address
Module 006-A
<TABLE>
<CAPTION>
Number Version Module ID Module Length
<S> <C> <C> <C> <C> <C>
001 002 003 Name/Address Indicator X
004 A 9
005 006 007 9
008 009 X
010 - 034 Billing Name X
035 - 059 Billing Name/Address
060 - 084 Billing Name/Address X
085 - 109 Billing Name/Address X
110-134 Post Office, State, Zip Code
</TABLE>
FIELD CHARACTERISTICS
9 - Numeric
X - Alphanumeric
MODULE DESCRIPTION
A 134-position module consisting of a 2-digit; NAME/ADDRESS INDICATOR,
a 25 position BILLING NAME field, two 25-position BILLING NAME/ADDRESS fields, a
25-position BILLING ADDRESS and a 25-position POST OFFICE, STATE, ZIP CODE
field.
This module is designed for use whenever a billing name and address
must be associated with a record (e.g., billing name and address associated with
a post-billing adjustment).
The content of this module are designed by the NAME/ADDRESS INDICATOR
as follows:
21 = Name 1, Post Office 5
23 = Name 1, Name/Address 2, Name/Address 3, Post Office 5
27 = Name 1, Name/Address 2, Name/Address 3, Address 4, Post Office 5
37 = Name 1, Name/Address 2, Name/Address 3, Address 4, Post Office 5
NOTE: Fields not used will be overlaid with next used field. For example, if
Name/Address 2, Name/Address 3, and Address 4 are not used, Post Office
5 will be in the second field (Name/Address 2) and the Name/Address
Indicator will be set to 21.
The NAME/ADDRESS INDICATOR is numeric.
THE BILLING NAME, BILLING NAME/ADDRESS, BILLING ADDRESS and POST OFFICE, STATE,
ZIP CODE fields are to be alphanumeric, left justified, with trailing blanks.
Exh. C-8
<PAGE> 70
END OF MODULES
MODULE 999-A
<TABLE>
<CAPTION>
Number Version Module ID
<S> <C> <C>
001 999 A
002 X
003
004
999
</TABLE>
FIELD CHARACTERISTICS
9 - Numeric
X - Alphanumeric
MODULE DESCRIPTION
A 4-position module indicating that there are no more modules appended
to this record.
This module must be placed at the end of a record which contains at
least one module.
Exh. C-9
<PAGE> 71
EXHIBIT D
RESELLER COMPENSATION
Rate per billed message:
$0.03
Exh. D-1
<PAGE> 72
EXHIBIT E
PROVIDER'S INFORMATION
INITIAL NOTIFICATION:
Ameritech will fax a copy of the 976, CPP/C, CPP/P Sponsor and Program
List to Reseller within three (3) business days of receiving the following
information. Fax completed page to the Resale Service Center at 1-800-260-5480.
Reseller
-----------------------------------------------------
Contact Name
-------------------------------------------------
Phone Number
-------------------------------------------------
Fax Number
--------------------------------------------------
Pager Number
--------------------------------------------------
Address
-----------------------------------------------------
City/State
---------------------------------------------------
Zip Code
-----------------------------------------------------
NOTE: Call the Resale Service Center at 1-800-924-3666 with questions
regarding Sponsors and Program Lists.
UPDATES:
Ameritech will fax to the Reseller 976, CPP/C, CPP/P Program changes,
additions and/or deletions as they become available.
Exh. E-1
<PAGE> 73
EXHIBIT F
GENERAL INFORMATION
Optional Blocking is available to consumer and business Customers that
want the capability to block direct calls to Provider's services covered in this
Schedule.
Customers attempting to reach programming from accounts where blocking
has been established will reach a recording informing them that the call cannot
be completed.
Adjustments - a dollar amount, either partial or full, that is credited
to a Customers account. The primary reason for adjustments are typically
Customers denying the call was made from their phone.
Uncollectible - the amount of a callers phone bill that has undeniable
charges that have never been paid by the caller. Undeniable charges are
determined by the state regulatory commissions and are typically Pay-Per-Call
services. When a caller's service is being terminated for non-payment, the
Pay-Per-Call charges are written off as uncollectible and passed back to the
Information Provider. The remainder of the bill is what must be paid by the
caller to reinstate their service.
Access to 976 service is prohibited by tariff from providing Group
Access Bridging (GAB) services whereby a caller can be connected to parties
other than the IP for the purpose of establishing a conference call.
Collect, operator assisted, calling card, and person-to-person calls to
976 are not allowed.
Collect and person-to-person calls to CPP/C and CPP/P are not allowed.
Calls from WATS, hotel/motel, Ameritech Public /semi-public telephones
and lines with Call Blocking will not be allowed to 976 service.
976 Call Blocking should not be added to accounts that have
Consumer/Business Toll Restrictions.
Call Blocking will be provided only where CO facilities permit.
Call Blocking may not be limited to specific programs.
Call Blocking does not block calls to other telephone companies'
numbers.
Call Blocking does not block long distance charges.
Exh. F-1
<PAGE> 74
Reseller reserves the right to provide to the general public, upon
request, the complete name, address, and telephone number of the Information
Providers in response to inquiries and comments referring to the Information
Provider's service.
The first time an end user specifically disputes Pay-Per-Call charges,
end user must be informed of the availability of Call Blocking and disputed
charges are adjusted accordingly on end user's bill. Inform end user that the
Information Provider may pursue collection of charges directly with end user.
After the end user specifically disputes charges, inform end user that
mandatory blocking will be established on end user's line and disputed amount is
adjusted accordingly on end user's bill. Inform end user that the Information
Providers may pursue collection of charges directly with end user.
Adjustments granted as the result of refusal to pay, denies all
knowledge, unsatisfactory payment arrangements, etc., should be classified as an
uncollectible adjustment and blocking should be established after second
request.
On the database, call adjustments granted as the result of poor
transmission, call not completed or calls completed due to company failure to
establish blocking, such as service order issued incorrectly, should be
classified as correct charges on the Ameritech entity code (R or NBT).
MICHIGAN ONLY: Reseller-initiated Blocking can be added or removed as
needed. Blocking ran remain on the account until adjustments are cleared. There
is no time limit on how long blocking can be in effect.
Every reasonable effort should be made to collect legitimate
Pay-Per-Call charges. However, Reseller must not intentionally disconnect local
exchange telephone service for nonpayment of Pay-Per-Call charges.
Blocking must be imposed on those Customers who refuse to pay
legitimate Pay-Per-Call charges.
Exh. F-2
<PAGE> 75
SCHEDULE 10.6
LAW ENFORCEMENT INTERFACES
1.0 INTRODUCTION. Consistent with Applicable Law, it is necessary for Reseller
and Ameritech to provide interface requirements to allow Reseller to use a
standard set of procedures for meeting the requirements of applicable law
enforcement agencies ("LAW ENFORCEMENT PROCESS"). The Law Enforcement Process
will enable Reseller to provide identical services to its Customers. These
services include Annoyance Call Bureau, wire intercept, wire trap, wire trace,
fraud control, physical security and subpoena management.
2.0 LAW ENFORCEMENT. Definition - The Law Enforcement Process assures that
Reseller (as a reseller of Resale Services) is in total compliance with law
enforcement requirements related to providing local Services to its Customers.
Ameritech (switch owner or access provider) agrees to support law enforcement
requirements as provided by the CALEA.
3.0 ANNOYANCE CALL BUREAU.
3.1. Definition - Ameritech Annoyance Call Bureau (AACB) conducts
investigations to help determine who the unwanted callers are after victims
receive annoying calls and files an official complaint with the local law
enforcement agency. Annoying calls are: threatening, harassing, obscene, prank,
hang-ups, unwanted sales pitches, and survey calls. The information obtained
will only be released to the local law enforcement agency.
3.2. When Reseller must initiate a wire trap or trace as a result of its
Customer receiving an annoying call (e.g., threatening, harassing, obscene,
prank, hang-ups, unwanted sales pitches, and survey calls), the following
operational interfaces should occur:
3.2.1. Reseller (the reseller) shall inform its Customer that they must
file a formal complaint with the local police department and obtain agency's
name, officer's name and case or report number.
3.2.2. Reseller shall contact Ameritech Annoyance Call Bureau on behalf
of its Customer and provide the required information to initiate trap or
call trace.
3.2.3. The AACB shall conduct investigations to determine who the
unwanted caller is; work with local police departments to gather evidence;
and even testify in court on behalf of Reseller Customers who have received
annoying calls. AACB will build case for and establish trap for twenty-one
(21) days. Reseller shall contact the AACB to renew the trap beyond
twenty-one (21) days.
3.2.4. The AACB shall provide to Reseller a toll free number which will
be accessible daily Monday through Friday from 8:00 a.m. - 5:00 p.m.
Sch. 10.6-1
<PAGE> 76
3.2.5. For non-emergency (not life threatening) situations, Reseller
shall advise its Customer to contact its local Law Enforcement Agency and to
provide Reseller with required information to initiate a trap or call trace.
Reseller will contact AACB during standard operating hours to establish a
case. For emergency (life threatening) situations, Reseller shall inform its
Customer to contact its local Law Enforcement Agency and this Agency will
contact Ameritech to initiate a trap or call trace.
3.2.6. Additionally, for emergency situations, Ameritech corporate
security will provide Reseller representatives with an emergency security
contact number.
3.2.7. Reseller's Customer must contact Reseller with the dates and
times of the unwanted calls. Reseller shall fax the dates and times of the
unwanted calls to the Annoyance Call Bureau.
3.2.8. At the end of the tracing investigation (twenty-one (2l)-day
period), Ameritech Annoyance Call Bureau shall send written confirmation to
Reseller informing Reseller of the disposition of the case (i.e. successful
or non-successful). All evidence obtained on a successful case will be
forwarded to the local law enforcement agency that Reseller provided to the
AACB. Reseller shall inform its Customer of the results of the
investigation.
3.2.9. If Reseller Customers call Ameritech to initiate an annoying
call report, Ameritech shall advise the person receiving the annoying or
harassing to call Reseller.
4.0 WIRE INTERCEPT.
4.1. Definition - Requests from law enforcement agencies to conduct a form
of electronic or mechanical eavesdropping where, upon court order, law
enforcement officials surreptitiously monitor phone calls (e.g., conversations
or data) of Reseller Customers.
4.2. Operational Interface Requirements - The Law Enforcement Agency (e.g.,
local police department or government organization) shall serve Ameritech with a
court order, authorizing Ameritech to conduct a wire intercept on the Reseller
Customer line.
5.0 PEN REGISTER (DIAL NUMBER RECORDER).
5.1. Definition - Requests from law enforcement agencies to conduct a "form"
of identifying calls dialed by Reseller Customers in local Exchange Areas. A pen
register is a mechanical device that records the numbers dialed or pulsed on a
telephone by monitoring the electrical impulses caused when the dial on the
telephone is released. A pen register does not overhear oral communications and
does not indicate whether calls are actually completed; thus, there is no
recording or monitoring of the conversations.
5.2. Operational Interface Requirements - See Wire Intercept SECTION 4.1
Sch. 10.6-2
<PAGE> 77
6.0 TRACE.
6.1. Definition - A form of electronic identification of calling numbers,
where, upon consent from the Reseller Customer (via Reseller) or court order,
law enforcement officials request a record of calling numbers to the premises of
the Reseller Customer.
6.2. Central Office Features - Call Trace is an advanced custom calling
feature which provides Reseller direct line Customers the ability to activate
the feature by dialing a designated code. This will automatically trace the
telephone number of the line used for the last call received by the Customer.
The traced number will not be provided to the Customer, but will be provided to
law enforcement officials.
7.0 SUBPOENA MANAGEMENT.
7.1. Definition - The law enforcement process initiated to compel the
production of certain specific documents (e.g. Customer information, name,
address, service type, call usage records, etc.) relevant to a legal proceeding,
are made and make them readily retrievable by local police departments,
government organizations, and attorneys. Other legal demands require the
capability to honor other legal process demands (e.g., establishment of dialed
number recorders, wire intercepts, & trace services, etc.)
7.2. Operational Interface Requirements - The law enforcement agency (e.g.,
local police department, government organization, or attorney) shall serve
Ameritech an original subpoena naming Ameritech in its court document for
requests for Customer information (see above definition). Ameritech shall
forward call trace information to the law enforcement agency for inquiries
regarding Reseller Customers. If the law enforcement agency serves Reseller the
original subpoena, Reseller shall forward a copy of the original subpoena to
Ameritech and advise the law enforcement agency to re-send an original subpoena
naming Ameritech in its court document. Ameritech shall notify Reseller of the
resolution of the investigation. However, Ameritech shall only provide the
results of the investigation to the proper law enforcement agency.
7.3. Operations Interface Requirements for calls originating from a long
distance carrier, computer, fax machine, pay phones, and telemarketing calls to
Reseller's Customers are pending further discussions with Ameritech.
Sch. 10.6-3
<PAGE> 78
REPRESENTATION OF AUTHORIZATION
This Representation of Authorization is delivered by United States
Telecommunications, Inc., a Florida corporation with offices at 13902 North Dale
Mabry, Suite 212, Tampa, Florida 33618 ("RESELLER") to Ameritech Industry
Services, a division of Ameritech Services, Inc., a Delaware corporation with
offices at 350 North Orleans Street, Third Floor, Chicago, Illinois 60654, on
behalf of Ameritech Indiana ("AMERITECH") pursuant to that certain Agreement
dated as of August 10, 1998 by and between the Parties (the "RESALE AGREEMENT").
Capitalized terms used but not otherwise defined herein shall have the meanings
ascribed in the Resale Agreement.
Reseller hereby represents to Ameritech, for purposes of obtaining a
Customer's Customer Proprietary Network Information ("CPNI") or for placing an
order to change or establish a Customer's service, that it is a duly
certificated LEC and that it is authorized to obtain CPNI and to place orders
for Telephone Exchange Service (including Resale Service) upon terms and
conditions contained herein.
1. With respect to requests for CPNI regarding prospective Customers of
Reseller, Reseller acknowledges that it must obtain written authorization in the
form of a signed letter ("LETTER") that explicitly authorizes Reseller to have
access to the prospective Customer's CPNI. The Letter must be signed by the
prospective Customer or the prospective Customer's authorized representative. In
order to obtain the CPNI of the prospective Customer, Reseller must submit to
Ameritech the Letter. If Reseller cannot provide a Letter, then Ameritech shall
not provide CPNI to Reseller.
2. With respect to placing a service order for Telephone Exchange
Service (including Resale Services) for a Customer, Reseller acknowledges that
it must obtain (i) a Letter or (ii) authorization through other means permitted
by Applicable Law that governs a PLEC change ("DOCUMENTATION OF AUTHORIZATION"),
in each case that explicitly authorizes Reseller to change such Customer's PLEC
and provide Telephone Exchange Service to such Customer. The Documentation of
Authorization must be made by the prospective Customer or Customer's authorized
representative. Reseller need not submit the Documentation of Authorization to
process a service order. However, Reseller hereby represents that it will not
submit a service order to Ameritech unless it has obtained appropriate
Documentation of Authorization from the prospective Customer and has such
Documentation of Authorization in its possession.
3. The Documentation of Authorization must clearly and accurately
identify Reseller and the prospective Customer. Ameritech will only disclose
CPNI to agents of Reseller identified in the Letter or Documentation of
Authorization.
<PAGE> 79
4. Reseller acknowledges that if the PLEC of its prospective Customer
is a carrier other than Ameritech, Ameritech may have incomplete, inaccurate or
no CPNI on such prospective Customer. In such cases, Reseller agrees that it,
and not Ameritech, has the sole obligation to request the CPNI of such
prospective Customer from that Customer's PLEC.
5. Reseller shall retain all Documentation of Authorization in its
files for as long as Reseller provides telephone Exchange Service to the
Customer or for as long as Reseller makes requests for information on behalf of
the Customer.
6. Reseller shall make Documentation of Authorization available for
inspection by Ameritech during normal business hours. In addition, Reseller
shall provide Documentation of Authorization for Customers or prospective
Customers to Ameritech upon request.
7. Reseller is responsible for, and shall hold Ameritech harmless from,
any and all Losses resulting from Ameritech's reliance upon Reseller's
representations as to its authority to act on behalf of a Customer or
prospective Customer in obtaining CPNI from Ameritech or placing a service order
with Ameritech for Telephone Exchange Service. In addition, Reseller
acknowledges that Ameritech makes no representation or warranty as to the
accuracy or completeness of any CPNI disclosed hereunder and that Ameritech
shall have no liability to Reseller in connection therewith.
8. If Reseller fails to abide by the procedures set forth herein,
Ameritech reserves the right to insist upon the submission of a Letter or other
Documentation of Authorization for each Customer in connection with a request
for a service order.
9. This Representation of Authorization shall commence on the date
noted below and shall continue in effect until termination or expiration of the
Resale Agreement.
Dated this 10th day of August 1998.
UNITED STATES TELECOMMUNICATIONS, INC.
By: /s/ Joseph Cillo
------------------------------------
Title: Vice President
---------------------------------
Printed Name: Joseph Cillo
--------------------------
2
<PAGE> 1
EXHIBIT 10.3
NEW ENGLAND TELEPHONE AND TELEGRAPH COMPANY
RESALE SERVICE AGREEMENT
This Agreement is by and between New England Telephone and Telegraph
Company ("Company") d/b/a Bell Atlantic - Massachusetts and United States
Telecommunications, Inc. d/b/a Tel Com Plus ("Customer").
WHEREAS, the Company will offer local exchange services ("Service(s)")
for resale;
WHEREAS, the Customer is a reseller operating in the Commonwealth of
Massachusetts,;
WHEREAS, the Company and the Customer have negotiated in good faith for
the resale of such Services pursuant to and consistent with the
Telecommunications Act of 1996.
NOW, THEREFORE, in consideration of the mutual obligations set forth
herein, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the Company and the Customer agree
as follows:
1. RESALE ARRANGEMENT
The Company will offer telecommunications services it provides at
retail to end users in the Commonwealth of Massachusetts for resale by
the Customer in accordance with the attached Terms and Conditions --
Resale Services ("Terms and Conditions") contained in Attachment A.
Attachment A is incorporated herein as an integral and necessary part
of the parties agreement. Whenever reference is made herein to the
Agreement, the reference includes Attachment A.
2. TERM OF AGREEMENT
A. The Company will file the Agreement promptly following its
execution with the Department for approval pursuant to section
252 of the Telecommunications Act of 1996. The Agreement will
be effective in accordance with the Department's order or
decision which approves the Agreement.
B. Upon execution of the Agreement by both parties, the Company
and Customer shall endeavor to jointly develop an
implementation plan for the services that Customer will
resell.
C. Each Party agrees to fully support approval of the Agreement
by the Department without modification. The Parties, however,
reserve the right to seek regulatory relief and otherwise seek
redress from each other regarding performance and
implementation of this Agreement. In the event the Department
rejects this Agreement in whole or in part, the Parties agree
to meet and negotiate in good faith to arrive at a mutually
acceptable modification of the rejected portions); provided
that such rejected portion(s) shall not affect the validity of
the Remainder of this Agreement.
D. The Agreement is subject to change, modification, or
cancellation as may be required and mutually agreed by a
either Party based on any significant change in Federal
Communications Commission or Department rules which may impact
the provision of service under this Agreement or the rights
and obligations of the Parties under the Act. Either Party may
terminate this Agreement with 90 days written notice to the
other Party.
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<PAGE> 2
3. CHARGES
The Customer shall pay the Company the charges contained in Attachment
A. The Parties understand that the charges contained in Attachment A
are interim charges subject to revision by the Department. If the
Department issues any decision or order which approves for any
telecommunications carrier different charges for any of the services
contained in Attachment A within six months following the effective
date of this Agreement, the Parties will true-up the charges paid under
this Agreement retroactive to the effective date of the Agreement based
upon the decision or order of the Department. However, if the
Department does not issue such a decision or order within six months,
the Parties agree that there will be no true-up, and any new charges
approved thereafter by the Department will apply to the services
provided under this Agreement as of the date of the Department order or
decision.
4. PROMOTIONAL MATERIAL
The Company shall provide the Customer with a reasonable amount of
information related to the use of the services it will resell for
Customer's use in its marketing and product materials. The Company, in
consultation with Customer, shall determine the type, quantity, and
availability of the information to be provided to Customer. The Company
shall also make available to Customer's personnel basic training
related to the use and operation of the services. The Company shall
reasonably determine the timing and content of such training. Such
training and promotional material shall be provided to the Customer
only and the Company is under no obligation to provide any training or
promotional material to any other person or entity the Customer may
engage in the sale, provision, or use of the Services.
5. GOVERNING LAW
This Agreement shall be governed by and construed in accordance with
the laws of the Commonwealth of Massachusetts, except a provision of
law which would refer any issue to another jurisdiction.
6. ENTIRE AGREEMENT
This Agreement constitutes the entire understanding between the
Parties with respect to the subject matter hereof and supersedes all
prior understandings, oral or written representations, statements,
negotiations, proposals and undertakings in oral written form.
7. AMENDMENTS AND WAIVERS
A. This Agreement may be amended or additional provisions may be
added by written agreement signed by or on behalf of both
parties. No amendment or waiver of any provisions of this
Agreement, and no consent to any default under this Agreement,
shall be effective unless the same shall be in writing and
signed by a duly authorized representative on behalf of the
party against whom such amendment, waiver or consent is
claimed, except as otherwise provided in this Agreement
preceding. In addition, no course of dealing or failure of any
party to enforce strictly any term, right or condition of this
Agreement shall be construed as a waiver of such term, right
or condition.
B. Either party's failure at any time to enforce any of the
provisions of this Agreement or any right with respect
thereto, or to exercise any option herein provided, will in no
way be construed to be a waiver of such provisions, rights, or
options or in any way to affect the validity of this
Agreement. The exercise by either party of any rights or
options
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<PAGE> 3
under the terms herein shall not preclude or prejudice the
exercise thereafter of the same or other rights under this
Agreement.
8. ASSIGNMENT
Neither party may assign or transfer (whether by operation of law or
otherwise) this Agreement (or any rights or obligations hereunder) to a
third party without the prior written consent of the other party which
consent shall not be unreasonably withheld; provided, however, each
party may assign this Agreement to a corporate affiliate or an entity
under its common control or an entity acquiring all or substantially
all of its assets or equity by providing prior written notice to the
other party of such assignment or transfer. Any attempted assignment or
transfer that is not permitted shall be void ab initio. All obligations
and duties of any party shall be binding on all successors in interest
and assigns of such party.
9. NOTICE AND DEMAND
Except as otherwise provided under this Agreement, all notices,
demands, or requests which may be given by any party to the other party
shall be in writing and shall be deemed to have been duly given on the
date delivered in person or deposited, postage prepaid, in the United
States Mail via Certified Mail or nationally recognized overnight
carrier, return receipt requested, and addressed as follows:
To Customer: United States Telecommunications, Inc.
d/b/a Tel Com Plus
13902 N. Dale Mabry Ste 212
Tampa, Fl 33618
Attn: Richard Pollana
President
Tel: 813 963-0004
Fax: 813 968-6415
To Company: Account Manager - Resale Services
222 Bloomingdale Road
2nd floor
White Plains, NY 10605
cc: NYNEX Corporation
General Counsel
1095 Avenue of the Americas
41st floor
New York, NY 10036
If personal delivery is selected as the method of giving notice under
this Section, a receipt of such delivery shall be obtained. The address
to which such notices, demands, requests, elections or other
communications are to be given by either party may be changed by
written notice given by such party to the other party pursuant to this
Section.
10. THIRD-PARTY BENEFICIARIES
This Agreement shall not provide any person not a party to this
Agreement with any remedy, claim, liability, reimbursement, claim of
action or other right in excess of those existing without reference to
this Agreement.
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<PAGE> 4
11. FORCE MAJEURE
Neither party shall be deemed to be negligent, at fault, or otherwise
liable in any respect for any delay or failure in performance of any
part of this Agreement to the extent that such failure or delay is
caused by acts of God, acts of civil or military authority, government
regulations, embargoes, epidemics, war, terrorist acts, riots,
insurrections, fires, explosions, earthquakes, nuclear accidents,
floods, strikes, power blackouts, volcanic action, other major
environmental disturbances, unusually severe weather conditions,
inability to secure products or services of other persons or
transportation facilities, or acts or omissions of transportation
common carriers or other causes beyond the control of the party
obligated to perform. If any force majeure condition occurs, the party
delayed or unable to perform shall give immediate notice to the other
Party and shall take all reasonable steps to correct the force majeure
condition. During the pendency of the force majeure, the duties of the
parties under this Agreement affected by the force majeure condition
shall be abated and shall resume without liability thereafter.
12. CONTINGENCY
Notwithstanding any other provision of this Agreement, this Agreement
is subject to change, modification, or cancellation as may be required
by a regulatory authority or court in the exercise of its lawful
jurisdiction.
13. COMPLIANCE
Each Party shall comply with all applicable federal, state, and local
laws, rules, and regulations applicable to its performance under this
Agreement.
14. NON-EXCLUSIVE AGREEMENT
This Agreement is non-exclusive. The Company reserves the right to
extend to others the Services and rights provided for herein.
15. NON-PUBLICITY
Both the Company and the Customer agree that neither will use the
other's name without the written permission of the other in connection
with promotional, advertising or other marketing material.
16. SEVERABILITY
In the event any of the provisions of this Agreement are found to be
invalid by any administrative agency, arbitrator or court or competent
jurisdiction, the remaining provisions of this Agreement, whether
relating to similar or dissimilar subjects, shall nevertheless be
binding with the same effect as though the invalid provisions were
deleted, unless the result would be to substantially change the rights
or obligations of either party, in which event the parties shall seek
to negotiate in good faith revisions to the Agreement consistent with
their earlier intent. Failing further agreement, this Agreement shall
terminate and no party shall be liable to the other, except for
outstanding amounts due under this
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Agreement, including, but not limited to, amounts due pursuant to the
payment terms, the carryover pool, and any other amounts which survive
termination as stated in this Agreement.
17. EXECUTED IN COUNTERPARTS
This Agreement may be executed in any number of counterparts, each of
which shall be an original, but such counterparts shall together
constitute but one and the same document.
18. HEADINGS
The headings in this Agreement are for convenience and shall not be
construed to define or limit any of the terms herein or affect the
meanings or interpretation of this Agreement.
19. DISCLAIMER OF REPRESENTATIONS AND WARRANTIES
EXCEPT AS EXPRESSLY PROVIDED UNDER THIS AGREEMENT, NO PARTY MAKES OR
RECEIVES ANY WARRANTY, EXPRESS OR IMPLIED, WITH RESPECT TO THE
SERVICES, FUNCTIONS AND PRODUCTS IT PROVIDES UNDER OR CONTEMPLATED BY
THIS AGREEMENT AND THE PARTIES DISCLAIM THE IMPLIED WARRANTIES OF
MERCHANTABILITY OR OF FITNESS FOR A PARTICULAR PURPOSE.
20. JOINT WORK PRODUCT
This Agreement is the joint work product of the Parties and has been
negotiated by the Parties and their respective counsel and shall be
fairly interpreted in accordance with its terms and, in the event of
any ambiguities, no inferences shall be drawn against either party.
IN WITNESS WHEREOF, the parties have executed this Agreement.
NEW ENGLAND TELEPHONE AND UNITED STATES TELECOMMUNICATIONS,
TELEGRAPH COMPANY D/B/A BELL INC. D/B/A TEL COM PLUS
ATLANTIC MASSACHUSETTS
By: /s/ By: /s/
------------------------- -----------------------
Date: 7/8/98 Date: March 19, 1998
------------------------- -----------------------
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<PAGE> 6
6.1 TERMS AND CONDITIONS INFORMATION
6.1.1 General
6.1.1.1 Terms and Conditions Structure
A. The terms and conditions are divided into sections
which are structured numerically, (e.g., Section 6.1,
6.2, 6.3 etc.).
6.1.2 Referencing
6.1.2.1 Reference to Terms and Conditions
A. Whenever reference is made in these terms and
conditions to tariffs of the Telephone Company, the
reference is to the tariffs in force as of the
effective date of these terms and conditions, and to
amendments thereto and successive issues thereof. The
regulations, rates and charges contained herein are
in addition to the applicable regulations, rates and
charges specified in tariffs of the Telephone Company
which may be referenced. To the extent that sections
of referenced tariffs violate the Telecommunications
Act of 1996 or other FCC regulations, they are void
and not applicable under these terms and conditions.
B. Upon completion of the investigation of these
generally available terms and conditions, the
Telephone Company will, in compliance with the
Department's Order, file resale tariffs, which when
approved by the Department, will supersede these
terms and conditions.
6.1.2.2 Trademarks and Service Marks
A. Refer to D.P.U. Mass. No. 10.
6.13 Terms and Conditions Terminology
Unless otherwise defined herein, terminology contained within
these terms and conditions are as defined in D.P.U. Mass. No.
10.
6.1.3.1 Definitions
END USER - Any person purchasing service for their own use
rather than for sale to another person, party or entity etc.
PREMISES - This term as defined in D.P.U. Mass. No. 10 is a
reference to the premises at which the service is provided,
and not a reference to the reseller's premises.
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RESALE - The sale to another person of telecommunications
services purchased from the Telephone Company. A person
purchases for resale when such a person purchases a service
for the purpose of reselling it to another (rather than the
purpose of using the service itself).
RESELLER/CUSTOMER - Any individual, partnership, association,
joint stock company, trust, corporation, governmental entity
or other entity which subscribes to the telecommunications
services offered under these terms and conditions.
TELEPHONE COMPANY - The New England Telephone and Telegraph
Company.
6.2 GENERAL REGULATIONS
In addition to the general regulations contained herein, the general
regulations specified in D.P.U. Mass. No. 10 also apply.
6.2.1 Application of Terms and Conditions
6.2.1.1 Scope
A. Regulations, rates and charges in these terms and
conditions apply to the offering of Telephone Company
telecommunications services for resale.
B. Only a carrier authorized by law to resell
telecommunications services in the Commonwealth of
Massachusetts may purchase under these terms and
conditions. These terms and conditions are not
intended to enlarge, restrict, or otherwise affect
any provision of law relating to the authority to
resell telecommunications services.
1. Resellers do not surrender any right to purchase
from any of the Telephone Company's intrastate
tariffs by purchasing from these terms and
conditions. However, the discounts contained herein
will apply only to purchases from these terms and
conditions. Resellers purchasing services from the
Telephone Company's intrastate tariffs will do so
through traditional retail channels.
C. In addition to the responsibilities and obligations
specified in D.P.U. Mass No. 10, the reseller must
conform to any applicable rules and regulations set
forth by the Department Of Public Utilities.
D. The resale of telecommunications services and the
provision thereof by the Telephone Company as set
forth in these terms and conditions does not
constitute a joint undertaking nor does it constitute
an agency, contractual or any other type of
relationship between the reseller and the Telephone
Company (other than that of purchaser and seller) or
between the Telephone Company and the reseller's end
user.
E. A reseller ordering a resold service under these
terms and conditions has all of the obligations that
would be imposed under the applicable Telephone
Company tariff upon an end user who orders the
service
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directly from the Telephone Company. Such obligations
include, without limitation, the obligation to pay
for the service, whether or not the reseller is being
paid by its own customers. The rate charged for such
service, when sold to a reseller under these terms
and conditions is to be determined in accordance with
rates and charges specified in these terms and
conditions.
6.2.2 Responsibility of the Telephone Company
6.2.2.1 Provision of Service
A. The Telephone Company's obligation to furnish
service, or to continue to furnish service, is
dependent on its ability to obtain without charge,
danger or undue difficulty access to the premises
where the service is to be provided.
1. Should a reseller's end user request that a
Telephone Company technician prove his/her identity
as an employee of the Telephone Company before the
end user will permit access to their premises, the
technician's Telephone Company identification badge
or the NYNEX registered trademark/servicemark (logo)
that is visibly displayed on the technician's service
vehicle will be evidence of such proof. If the
Telephone Company misses the scheduled service
appointment as a result of the reseller's end user's
refusal to permit access to the Telephone Company
technician, neither the reseller nor the reseller's
end user will be entitled to any waivers of charges
for missed service appointments that may be offered
by the Telephone Company under service guarantee
programs that are associated with the service being
provided.
B. The Telephone Company reserves the right to refuse an
application for service made by, or for the benefit
of, a reseller who is indebted to the Telephone
Company for telephone service previously furnished.
1. In the event that service is connected for a
reseller who is indebted to the Telephone Company for
service previously furnished to such reseller, the
Telephone Company will notify the reseller in writing
via Certified U.S. Mail, that the service will be
terminated by the Telephone Company unless the
reseller satisfies the indebtedness within 10 days of
the date of the reseller's receipt of such
notification.
C. The services offered under the provisions of these
terms and conditions are subject to the availability
of facilities, including switching capacity, and
necessary operational support systems.
1. If existing facilities will not enable the
Telephone Company to meet all outstanding service
orders, such orders will be handled in accordance
with reasonable priority rules that do not
discriminate between resellers purchasing under these
terms and conditions and end user customers of the
Telephone Company.
D. Resold services offered by the Telephone Company are
at least technically equivalent to the corresponding
service offerings that the Telephone Company provides
to its own end users provided that the
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reseller complies with the regulations contained in
these terms and conditions.
E. The Telephone Company will provide service (including
the installation and repair thereof) to resellers at
standards that meet the capabilities, functions and
performance standards available to Telephone Company
similarly situated end users providing that the
reseller complies with the regulations contained in
these terms and conditions.
1. Telephone Company personnel dispatched to a
reseller's end user premises for purposes of
installation or repair will not accept requests for
new or modified service beyond that requested by the
reseller.
6.2.2.2 Interruption of Service
A. Allowances for interruption of service are available
to resellers to the extent and under the same
circumstances as they would be available to Telephone
Company end users under D.P.U. Mass. No. 10.
6.2.3 Responsibility of the Reseller
6.2.3.1 Reseller Notification and Coordination
A. Unless otherwise specified herein, whenever customer
notification is required, the Telephone Company is
responsible for providing notice only to the reseller
who is the customer of record.
1. The reseller, and not the Telephone Company is
responsible for providing any notices, bill inserts
or other information as may be required to the
reseller's end users.
6.2.3.2 Liability
A. The reseller shall reimburse the Telephone Company
for damages to Telephone Company facilities utilized
to provide services under these terms and conditions
caused by negligence or willful act of the reseller
or the reseller's end user or resulting from the
reseller's or reseller's end user's improper use of
the Telephone Company facilities, or due to
malfunction of any facilities or equipment provided
by other than the Telephone Company. Nothing in the
foregoing provision shall be interpreted to hold one
reseller liable for another reseller's actions. The
Telephone Company will, upon reimbursement for
damages, cooperate with the reseller in prosecuting a
claim against the person causing such damage and the
reseller shall be subrogated to the right of recovery
by the Telephone Company for the damages to the
extent of such payment.
B. With respect to claims of patent infringement made by
third persons, the reseller shall defend, indemnify,
protect and save harmless the Telephone Company from
and against all claims arising out of the combining
with, or use in connection with, the services
provided under these terms and conditions, any
circuit, apparatus, system or method provided by the
reseller or reseller's end user.
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C. The reseller shall defend, indemnify and save
harmless the Telephone Company from and against
suits, claims, losses or damages including punitive
damages, attorney's fees and court cost by third
persons arising out of the construction,
installation, operation, maintenance or removal of
the circuits, facilities or equipment connected to
the Telephone Company's services provided under these
terms and conditions, including, without limitation,
Workmen's Compensation claims, actions for
infringement of copyright and/or unauthorized use
of program material, libel and slander actions based
on the content of communications transmitted over the
reseller's circuits, facilities or equipment, and
proceedings to recover taxes, fines, or penalties for
failure of the reseller to obtain or maintain in
effect any necessary certificates, permits, licenses,
or other authority to acquire or operate the services
provided under these terms and conditions; provided,
however, the foregoing indemnification shall not
apply to suits, claims, and demands to recover
damages for damage to property, death or personal
injury unless such suits, claims or demands are based
on the tortious conduct of the reseller, its
officers, agents or employees.
D. The reseller shall defend, indemnify and save
harmless the Telephone Company from and against any
suits, claims, losses or damages, including punitive
damages, attorneys fees and court costs by the
customer or third parties arising out of any act or
omission of the reseller or the reseller's end user
in the course of using services provided under these
terms and conditions.
E. In case of damage, loss, theft or destruction of
equipment and facilities furnished by the Telephone
Company due to negligence or willful act of the
reseller or the reseller's end user or other persons
authorized to use the service, the reseller or
reseller's end user may be required to pay the
expense incurred by the Telephone Company to replace
or restore the equipment and facilities to its
original condition.
F. The reseller assumes the responsibility for
enforcement of all tariff regulations and class of
service restrictions imposed for any particular
service (e.g. prohibitions against unlawful use,
damage to Telephone Company property, distinctions
between residence and business) and any liability
arising from violations thereof.
6.2.3.3 Certifications and Proof of Exemptions
A. Upon reasonable request the reseller shall certify to
the Telephone Company in writing that the services
the reseller is purchasing under these terms and
conditions are being purchased for resale.
B. The reseller shall provide the Telephone Company with
any certificates or other documentation that may be
required under state law pertaining to tax
exemptions.
6.2.3.4. References to the Telephone Company
A. The reseller may advise end users that certain
services are provided by the Telephone Company in
connection with the service the reseller furnishes to
end users; however, the reseller shall not state,
imply or
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represent that the Telephone Company jointly
participates in or is part of any partnership or
joint business arrangement for the provision of
services to the reseller's customers.
6.2.4 Customer Notification and Coordination
6.2.4.1 Provision and Ownership of Telephone Numbers
A. The Telephone Company reserves the reasonable right
to assign, designate or change telephone numbers, or
any other call number designations associated with
resold service, or the Telephone Company serving
central office prefixes associated with such numbers,
when necessary in the conduct of business.
B. Should it become necessary to make a change in such
number(s), the Telephone Company will give the
reseller six months notice of the change(s),
including an explanation of the reason(s) for the
change(s), by Certified U.S. Mail.
1. In the case of emergency conditions, (e.g. a fire
in a wire center), it may be necessary to change a
telephone number without six months notice in order
to provide service to the reseller.
6.3 ORDERING OF SERVICE
6.3.1 Orders for Resold Services
6.3.1.1 General
A. The reseller shall supply all the information
reasonably necessary for the Telephone Company to
provide and bill for the requested service, to
include the reseller's customer in its directory
listing service and to otherwise fulfill its
obligations under these terms and conditions [e.g.,
customer name and premises location, configuration of
service, and facility interface].
1. The reseller is responsible to submit complete and
accurate orders. Failure to do so may result in
service discrepancies for which the Telephone Company
will not be responsible.
B. If the reseller assumes the account of an existing
Telephone Company end user at the end user's existing
premises, the order must identify the end user's
billing telephone number and line(s) and indicate
that the end user's existing service (or any
specified modification to and/or cancellation of the
existing service) is to be transferred to the
reseller.
1. Authorization to Assume an Account - A reseller
placing an order under which it will assume the
account of an existing Telephone Company end user
customer, or the account of an existing end user
customer of another reseller, must obtain appropriate
authorization from that end user for the change of
service provider. The reseller must verify and
confirm that authorization is in accordance with the
laws and provisions that govern such matters as
established or may be established in the Commonwealth
of Massachusetts.
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C. Resellers may not order services in a particular
building or other location where a reseller has not
yet obtained end user customers at the time that the
reseller's order is placed with the Telephone
Company.
D. Resellers may not order service in a particular
building or other location when doing so would
preclude or delay other potential providers from
offering services in that particular building or
other location.
E. Resellers may not order service under these terms and
conditions without a reasonable basis for believing
that such services will actually be needed by the
reseller to meet anticipated demand.
F. The Telephone Company will not process any orders,
complaints or other requests received from the
reseller's end user.
G. Primary Interexchange Carrier (PIC) Changes-The
Telephone Company will only accept an order to change
the PIC, whether interLATA or intraLATA, for a resold
Telephone Company exchange service line from the
reseller. The Telephone Company will only accept an
order to freeze the PIC from the reseller. The
reseller will be responsible for all PIC change
charges.
H. If the order is for modification or discontinuance of
service, the order shall identify the billing
telephone number and telephone number of the service
and the changes desired, and any additional
information required by the Telephone Company.
6.3.1.2 Automated Order Interface
A. Orders for resold services and modifications to or
cancellation of an existing order must be placed by
the reseller with the Telephone Company through the
appropriate automated interface established by the
Telephone Company. Such interface will facilitate the
following order processes.
1. Establishment of end user accounts
2. Assignment of telephone numbers
3. Entry of service orders into Telephone Company
systems
4. Installation scheduling and negotiation with end
users
5. Reservation of installation appointments
6. Entry of end user service and repair inquiries
7. Verification of the network status of an
associated telephone line in conjunction with
Telephone Company systems
8. Other processes that would facilitate the
processing of the reseller's order.
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B. The Telephone Company will establish automated
interface specifications (e.g. formats) for data,
delivery (transport) and network descriptions, etc.
1. Resellers, must comply with methods, procedures
and operational guidelines in utilizing the interface
specifications established by the Telephone Company.
2. Any use of the interface(s) by the reseller or any
other party for unauthorized purposes (e.g., access
to data or to enter false information) will be
considered abuse or fraudulent use of the interface
and is prohibited. Such action may result in the
Telephone Company terminating the resellers use of
the interface.
D. If the Telephone Company determines or suspects that
abuse or fraudulent use of the interface has
occurred, the Telephone Company will, as required by
law, refer the matter to the appropriate law
enforcement agency.
6.3.1.3 Disclosure of Reseller Information
A. Telephone Company personnel primarily involved in the
marketing of services to end user customers or other
resellers will not have access to order information
provided by the reseller to the Telephone Company
except under the following situations.
1. The Telephone Company will disclose to any local
exchange carrier the fact that a given end user who
was previously a customer of such carrier is no
longer one of the carriers customers.
2. In order for the Telephone Company to be able to
conduct its business, the Telephone Company will
access service information in order to aggregate data
relating to its sale of resold services to resellers.
3. Where a reseller's customer consents to and
authorizes the disclosure of information related to
the customer's order, the Telephone Company may
disclose such data to Telephone Company retail
marketing personnel or to other resellers.
4. If a Telephone Company end user subsequently
becomes an end user of a reseller, the Telephone
Company will, without the consent and authorization
of the end user customer, provide the reseller with
all information necessary to enable it to assume the
end users account including the customer's service
configuration and billing name and address.
5. The Telephone Company will disclose, without the
consent and authorization of the reseller's end user
customer, information pursuant to industry-wide
arrangements for the exchange of information on end
users credit histories, consistent with applicable
legal requirements.
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B. Section 6.3.1.3A shall not prohibit attempts to sell
Telephone Company telecommunications services by
Telephone Company employees who have access to
information relating to specific orders placed by
resellers under these terms and conditions, so long
as:
1. The employee spends a de-minimus amount of his or
her time involved in the marketing of Telephone
Company telecommunications services, and
2. The employee does not utilize the reseller
information in such sales.
C. In the case of a reseller's end user who requests a
change from their present reseller to the Telephone
Company or to another reseller, the Telephone Company
will disclose the information necessary to enable the
Telephone Company or other resellers to assume the
account. Such information includes the customer's
service configuration, billing name and address.
D. The Telephone Company will disclose the identity of
the reseller providing service to an end user for the
purposes of Telephone Company marketing personnel who
are responding to a question from an end user about
the identity of their service provider.
6.3.1.4 Evidence of End User Consent and Authorization
A. Where the Telephone Company identifies that end user
consent is required for the disclosure of
information, the Telephone Company will obtain
consent and authorization in writing from the end
user.
6.3.1.5 Additional Engineering and Special Construction
A. Additional charges will be applied to an order for
service when the Telephone Company determines
additional engineering or special construction is
necessary to accommodate a reseller request.
1. When it is required, the reseller will be so
notified and will be furnished with a written
statement setting forth the justification for the
additional engineering and/or special construction as
well as an estimate of the charges in conjunction
with the terms and conditions specified in D.P.U.
Mass. No. 10.
6.3.2 Responsibility of the Telephone Company
6.3.2.1 Refusal and Discontinuance of Service
A. If the reseller fails to comply with the rules and
regulations of these terms and conditions, including
any payments to be made by it on the dates and times
herein specified, the Telephone Company may, on 30
days written notice by Certified U.S. Mail to the
reseller refuse additional applications for service
and/or refuse to complete any
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pending orders for service at any time thereafter. If the
Telephone Company does not refuse additional applications for
service on the date specified in the 30 days notice, and the
reseller's noncompliance continues, nothing contained herein
shall preclude the Telephone Company from refusing additional
applications for service without further notice.
B. If the reseller fails to comply with the rules and regulations
of these terms and conditions, including any payments to be
made by it on the dates and times herein specified, the
Telephone Company may, on 30 days written notice by Certified
U.S. Mail to the reseller, discontinue the provision of the
services involved at any time thereafter. In the case of such
discontinuance, all applicable charges, including termination
charges, shall become due. If the Telephone Company does not
discontinue the provision of the services involved on the date
specified in the 30 days notice, and the reseller's
noncompliance continues, nothing contained herein shall
preclude the Telephone Company from discontinuing the provision
of the services involved without further notice.
6.3.3 Responsibility of the Reseller
6.3.3.1 Point of Contact for End Users
A. The reseller shall serve as the single point of contact for its
customers on such matters as billing, requests for new service,
requests for the modification or discontinuance of existing
services, service trouble reports, repair requests, complaints.
etc. The reseller shall be obligated to transmit such requests
or reports to the Telephone Company through the automated order
interface to the extent reasonably necessary to enable the
Telephone Company to fulfill its obligations under these terms
and conditions.
6.3.3.2 Forecasting of Service Requirements
A. To the extent reasonably necessary for the planning of
Telephone Company facilities, the reseller shall provide, upon
request of the Telephone Company, forecasts of the approximate
number of units of exchange and other services that the
reseller expects to require in specific geographic areas. Such
forecasts are considered by the Telephone Company as
confidential information of the reseller and will be treated in
accordance with the provisions specified in these terms and
conditions for confidential reseller information.
6.3.3.3 Refusal, Discontinuance or Transfer of Service
A. Where a reseller discontinues its provision of service to all
or substantially all of its end users, whether by its own
decision, as a result of involuntary bankruptcy or for any
other reason, the reseller must send advance written notice of
such discontinuance to the Telephone Company, the Department,
and to each of the reseller's end users. If service to the
reseller is discontinued by the Telephone Company, the reseller
must send written notice to each of its end users.
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1. Such notice must advise the end users that unless they take
action to switch to a different carrier with 15 days, provision
of their service will be discontinued. Where the end user
elects a specific carrier within the 15 day period, the
relevant charges associated with the change shall be paid by
that carrier.
2. Should the end user elect to transfer service to the
Telephone Company, the Telephone Company will provide service
to the end user in accordance with the terms, conditions, rates
and charges set forth in D.P.U. Mass. No. 10 and not the rates
specified herein.
B. If a reseller end user subsequently becomes an end user of the
Telephone Company, the reseller must provide the Telephone
Company with all information necessary to enable the Telephone
Company to assume the end user's account, including the end
user's service configuration and billing name and address.
6.4 ISSUANCE, PAYMENT AND CREDITING OF RESELLER BILLS
6.4.1 Responsibility of the Telephone Company
6.4.1.1 General
A. The Telephone Company bills only the reseller who is considered
the customer of record who is at all times responsible for
payment of the full amount of all charges incurred.
1. The reseller as customer of record is responsible for any
allocation of end user charges for resold service.
2. Regardless of whether the reseller's end user is still using
service, the reseller is responsible for charges incurred by
the end user or reseller for all services on a line until the
reseller submits an order to discontinue such service.
6.4.1.2 Billing Convention Methods
A. The Telephone Company shall bill all charges incurred by and
credits due to the reseller under these terms and conditions
attributable to services established or discontinued or
provided during the preceding billing period.
6.4.1.3 Billing Periods
A. The billing date of a bill for a reseller for service provided
under these terms and conditions is referred to as the bill
day. The period of service each bill covers is as follows.
1. The Telephone Company will establish a bill day each month
for each reseller account.
2. The bill will cover all non-usage sensitive service charges
and usage charges for the period beginning with the day
following the last bill day and extends up to and includes the
current bill day. Any known
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unbilled non-usage charges for prior periods and any known
unbilled adjustments will be applied to this bill.
6.4.1.4 Late Payment Penalty
A. If any portion of the payment is received by the Telephone
Company after the payment date (refer to Section 6.4.1.5), or
if any portion of the payment is received by the Telephone
Company in funds which are not immediately available to the
Telephone Company, then a late payment penalty shall be due to
the Telephone Company.
B. The late payment penalty shall be the portion of the payment
not received by the payment date times a late factor. The late
factor shall be the lesser of the following.
1. The highest interest rate (in decimal value) which may be
levied by law for commercial transactions for the number of
days from the payment date to and including the date that the
reseller actually makes the payment to the Telephone Company,
or
2. The rate of 0.0005 per day for the number of days from the
payment date to and including the date that the reseller
actually makes the payment to the Telephone Company.
6.4.1.5 Payment Date
A. The payment date of bills rendered to resellers for service
provided under these terms and conditions is as follows.
1. All bills rendered as set forth in this section are due 31
days after the bill day or by the next bill date, whichever is
the shortest interval.
2. If such payment date falls on a Sunday or on a legal holiday
which is observed on a Monday, the payment date shall be the
first non holiday day following such Sunday or legal holiday.
3. If such payment date falls on a Saturday or on a legal
holiday which is observed on Tuesday, Wednesday, Thursday or
Friday, the payment date shall be the last non holiday day
preceding such Saturday or legal holiday.
6.4.1.6 Medium of Payment
A. Bills are payable in immediately available funds
1. Immediately Available Funds denotes a corporate or personal
check drawn on a bank account and funds which are available for
use by the receiving party on the same day on which they are
received and include U.S. Federal Reserve bank wire transfers,
U.S. Federal Reserve notes (paper cash), U.S. coins and U.S.
Postal Money Orders.
6.4.1.7 Customer Deposits
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A. The Telephone Company will, in order to safeguard its
interests, require a reseller, if the reseller has a proven
history of late payments or if the reseller's parent or holding
company has a proven history of late payments to the Telephone
Company or if the reseller does not have established credit
(except for a reseller which is a successor of a company which
has established credit and the successor has no history of late
payments to the Telephone Company), to make a deposit prior to
or at any time after the provision of a service to the reseller
to be held by the Telephone Company as a guarantee of the
payment of rates and charges.
B. Such deposit may not exceed the actual or estimated rates and
charges for the service for a two month period.
C. The fact that a deposit has been made in no way relieves the
reseller from complying with the Telephone Company's
regulations as to the prompt payment of bills.
D. At such time as the provision of the service to the reseller is
terminated, the amount of the deposit will be credited to the
reseller's account and any credit balance which may remain will
be refunded.
E. At the option of the Telephone Company, such a deposit will be
refunded or credited to the reseller's account when the
reseller has established credit or after the reseller has
established a one year prompt payment record at any time prior
to the termination of the provision of the service to the
reseller.
F. In the case of a cash deposit, the reseller will receive
interest as set forth in Section 6.4.1.4 for the period the
deposit is held by the Telephone Company. Interest will accrue
for the number of days from the date the reseller deposit is
received by the Telephone Company to and including the date
such deposit is credited to the reseller's account or the date
the deposit is refunded by the Telephone Company.
G. Should a deposit be credited to the reseller account, as
indicated above, no interest will accrue on the deposit from
the date such deposit is credited to the reseller's account.
6.4.1.8 Billing Dispute
In the event that a billing dispute occurs concerning any charges
billed to the reseller by the Telephone Company, the following
regulations apply:
A. The first day of the dispute shall be the date on which the
reseller furnishes the Telephone Company with the account
number under which the bill has been rendered, the date of the
bill and the specific items on the bill being disputed.
B. The date of resolution shall be the date on which the Telephone
Company completes its investigation of the dispute, notifies
the reseller of the disposition and, if the billing dispute is
resolved in favor of the reseller, applies credit for the
correct disputed amount, the disputed amount penalty and/or
late payment penalty as appropriate.
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C. If a billing dispute is resolved in favor of the Telephone
Company, any payments withheld pending resolution of the
dispute shall be subject to the late payment penalty (refer to
Section 6.4.1.4). Further, the reseller will not receive credit
for the disputed amount of the disputed amount penalty.
D. If a reseller disputes a bill within three months of the
payment date and pays the total billed amount on or before the
payment date and the billing dispute is resolved in favor of
the reseller, the reseller will receive a credit for a disputed
amount penalty from the Telephone Company for the period
starting with the date of payment and ending on the date of
resolution. The credit for a disputed amount penalty shall be
as set forth following.
E. If a reseller disputes a bill within three months of the
date and pays the total billed amount after the payment
date and the billing dispute is resolved in favor of the
reseller, the reseller will receive a credit for a disputed
amount penalty from the Telephone Company for the period
starting with the date of payment and ending on the date of
resolution. The late payment penalty applied to the disputed
amount resolved in the reseller's favor (refer to Section
6.4.1.4) will be credited.
F. If a reseller disputes a bill within three months of the
payment date and does not pay the disputed amount or does not
pay the billed amount (i.e., the nondisputed and disputed
amount), and the billing dispute is resolved in favor of the
reseller, the reseller will not receive a credit for a disputed
amount penalty from the Telephone Company. The late payment
penalty applied to the disputed amount resolved in the
reseller's favor (refer to Section 6.4.1.4) will be credited.
G. If a reseller disputes a bill after three months from the
payment date and pays the total billed amount on or before the
dispute date, and the billing dispute is resolved in favor of
the reseller, the reseller will receive a credit for a disputed
amount penalty from the Telephone Company for the period
starting with the date of dispute and ending on the date of the
resolution. The credit for a disputed amount penalty shall be
as set forth following. The reseller shall not receive a credit
for the late payment penalty.
H. If a reseller disputes a bill after three months from the
payment date and does not pay the disputed amount or does not
pay the billed amount (i.e., the nondisputed amount and
disputed amount) and the billing dispute is resolved in favor
of the reseller, the reseller will not receive a credit for a
disputed amount penalty from the Telephone Company. However, if
the reseller pays the disputed amount or the billed amount
after the date of dispute and before the date of resolution,
the reseller will receive a credit for a disputed amount
penalty from the Telephone Company for the period starting with
the date of payment and ending on the date of resolution as a
credit for a disputed amount penalty. The reseller will receive
a credit for the late payment penalty, if applicable, from the
Telephone Company.
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1. The late payment penalty credit shall be the disputed
amount resolved in the reseller's favor times a late payment
penalty factor (refer to Section 6.4.1.4) for the period
starting with the date of dispute and ending on the date of
payment of the disputed amount or the date of resolution
whichever occurs first.
2. The disputed amount penalty shall be the disputed amount
resolved in the reseller's favor times a penalty factor. The
penalty factor shall be the lesser of the following
calculations.
(a) The highest interest rate in decimal value, which may
be levied by law for commercial transactions for the number of
days from the first date to and including the last date of the
period involved.
(b) 0.0005 per day for the number of days from the first
date to and including the last date of the period involved.
I. The reseller is responsible for monitoring the accuracy of
the Telephone Company's bills and for notifying the Telephone
Company of any discrepancies between such bills and the
services provided by the Telephone Company.
6.4.1.9 Billing Adjustments and Verification
A. Adjustments for the quantities of services established or
discontinued in any billing period beyond the minimum period
set forth for services in other sections of these terms and
conditions will be prorated to the number of days or major
fraction of days based on a 30 day month.
B. The Telephone Company will, upon request and if available,
furnish the reseller such detailed information as may
reasonably be required for verification of any bill.
6.4.1.10 Computation of Billed Charges
A. When a rate as set forth in these terms and conditions is
shown to more than two decimal places, the charges will be
determined using the rate shown. The resulting amount will
then be rounded to the nearest penny (i.e., rounded to two
decimal places).
6.4.2 Responsibility of the Customer
6.4.2.1 Transfer of End User Account Balance
A. Should a Telephone Company end user discontinue service in
order to become an end user of a reseller, the Telephone
Company will render a final bill to such end user. Balances
and/or credits in a Telephone end user's account will not be
carried over to the resellers account with the Telephone
Company.
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6.4.2.2 End User Information
A. In order to accommodate billing and collection of end user
accounts, resellers must make the billing names and addresses
of their end users available to all telecommunication carriers.
6.5 RESALE
6.5.1 Description
6.5.1.1 General
A. Resale is the sale to another person of telecommunications
services purchased from the Telephone Company. A person
purchases for resale when such person purchases a service for
the purpose of reselling it to another (rather than the purpose
of using the service itself).
1. A purchasing agent who orders services for its principal,
and who does not itself agree to assume the obligations of a
reseller under these terms and conditions, is not purchasing
for resale within the meaning of these terms and conditions.
2. The purchase of telecommunications services or unbundled
network elements for the purpose of provisioning a different
service (such as the purchase of the Telephone Company's
switched carrier access service for the purpose of provisioning
an interexchange carrier's toll service) is not resale within
the meaning of these terms and conditions.
B. Where a reseller purchases Telephone Company exchange service
from the Telephone Company and resells it to an end user, such
reseller's end user will be able to access any and all services
that a Telephone Company end user would be able to access on a
Telephone Company exchange service line. Such services to the
extent provided by the Telephone Company will be deemed to have
been sold to the reseller by the Telephone Company as they are
utilized by the reseller's end user, and the reseller will be
responsible to the Telephone Company for payment of such
services.
6.5.1.2 Services Offered for Resale
A. The services offered under these terms and conditions are any
and all features, functions and capabilities that are
separately offered by the Telephone Company to end users under
the regulations, terms and conditions of D.P.U. Mass. No. 10,
except for public and semipublic telephone service, and in
accordance with the following limitations.
1. Services that are sold to Telephone Company end users only
in conjunction with the purchase of basic dial tone service
will be available for resale only in conjunction with the
resale of basic dial tone service and not on a stand alone
basis.
2. Services in D.P.U. Mass. No. 10 that have been designated as
no longer available for new installations or no longer offered
are not
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offered for resale except that such services are only available
for resale to the embedded base of end users who were
permitted to retain such service(s) in accordance with the
regulations contained in D.P.U. Mass. No. 10.
3. Promotional program offerings (e.g., discounts, waivers,
credits, certificates, premiums, discounted product trials or
other inducements that would apply to a particular customer for
a period of 90 days or less, and that are offered in order to
promote the sale of a service) are offered for resale, however
they are not subject to the resale discount specified in
Section 6.5.1.3.
4. Directory Assistance Services are offered for resale but
when associated with Residence, Centrex and/or PBX services
they are not subject to the resale discount specified in
Section 6.5.1.3 due to Massachusetts E-9-1-1 funding.
B. Lifeline - The resale of Lifeline is permitted only to Lifeline
eligible end users. The reseller is responsible for confirming
the eligibility of such end users for Lifeline.
1. The Telephone Company (to the extent it would otherwise be
eligible), and not the reseller will be eligible for any
universal service funding resulting from the provision of
Lifeline in conjunction with this tariff.
C. Linkup America may only be resold to Linkup America eligible
end users. The reseller is responsible for confirming the
eligibility of such end users for Linkup America.
D. Blocking - Resellers are allowed to purchase blocking services
to restrict end user access to particular capabilities to the
extent such services are available under and on the same terms
and conditions as set forth in D.P.U. Mass. No. 10.
6.5.2 Regulations
6.5.2.1 Restrictions
A. Class of Customer - This is a restriction contained in D.P.U.
Mass. No. 10 that limits the availability of a service to a
particular type of customer, such as a business customer, a
residence customer, carrier, end user, etc.
1. Where a resold service is subject to such restriction the
reseller may not resell such service to any customer not in the
relevant class. The reseller may purchase the service for
resale to a customer in the relevant class whether or not the
reseller itself is within the class.
(a) Business services may be resold to residence end users
as long as the end user is served by a business exchange line
and as long as all other services provided on that line are
also under the business class and charged for at the
appropriate business service rates and charges.
22
<PAGE> 23
2. Where a reseller resells a service to another person, and
such other person is itself a reseller rather than an end user,
the reseller purchasing from the Telephone Company must require
its end users (by tariff or by contract), to conform to any
applicable class of service restrictions for end users and all
other requirements of resellers under these terms and
conditions.
B. Aggregation of Usage - Regulations on limitations on
aggregation of traffic contained in D.P.U. Mass. No. 10 are
applicable.
C. The reseller is not allowed to offer resold service to its
customers under any of the Telephone Company trademarks,
service marks, registered trademark, registered service mark or
brand-names, or use the logos of the Telephone Company or the
Telephone Company's affiliates without the expressed written
authorization of the Telephone Company.
6.5.3 Application of Rates and Charges
6.5.3.1 Underlying Services
A. Discount - The rates and charges that apply for the underlying
services that are sold to a reseller in accordance with the
terms and conditions described herein, are specified in D.P.U.
Mass. No. 10. The Telephone Company will discount the D.P.U.
Mass. No. 10 rates and charges by applying the resale discounts
specified in Section 6.10 of these terms and conditions to
the applicable D.P.U. Mass. No. 10 rates and charges for resold
services offered under these terms and conditions in accordance
with Section 6.5.1.2.
1. Public Access Line service purchased for use by the reseller
or any of its affiliates who are independent payphone providers
is not subject to the wholesale discount and therefore retail
rates apply. In all other cases Public Access Line service is
available for resale at wholesale discounted rates.
6.5.3.2 Service Establishment
A. Service establishment charges apply to recover the
establishment costs for electronic interfaces and other support
systems.
6.5.3.3 Service Charges and Other Nonrecurring Charges
A. Service charges and other nonrecurring charges apply to recover
the establishment costs for electronic interfaces and other
support systems.
6.5.3.4 Monthly Rates
A. Other monthly rates apply to recover the ongoing costs to
maintain the service center for resellers and the automated
order interface systems.
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<PAGE> 24
6.5.3.5 Customer Specific Pricing (CSP)
A. Services that the Telephone Company provides to its end users
on a customer specific basis under D.P.U. Mass. No. 12 will be
made available for resale, and upon request of the reseller,
the Telephone Company shall determine for the customer specific
service configuration that is the subject of the request
wholesale rates that reflect NYNEX's avoided costs associated
with customer specific arrangement.
6.6 RESERVED FOR FUTURE USE
6.7 RESERVED FOR FUTURE USE
6.8 OPTIONAL SERVICES
6.8.1 Call Usage Detail
6.8.1.1 Description
A. Call usage detail is available to resellers for local calls
associated with the Telephone Company's resold message rate
service, and for intraLATA toll service. Call usage data is
offered as local call usage detail or intraLATA call usage
detail and is provided via transmission or tape/cartridge.
B. Local Call Usage Detail-Provided as complete call detail.
1. Complete Call Detail-Provided by retail billing telephone
number and by line, consisting of calling telephone number,
called telephone number, call date, call connect time, and call
elapsed time.
C. IntraLATA Call Usage Detail-Provides complete call detail by
retail billing telephone number and by line consisting of
calling telephone number, called telephone number, call date,
call connect time, and call elapsed time.
6.8.1.2 Regulations
A. Responsibility of the Telephone Company
1. The lapsed time between usage recorded by the Telephone
Company and delivery to the reseller will not exceed eight
business days.
2. The Telephone Company will store reseller usage data for 45
days from the date of transmission to the reseller.
6.8.1.3 Application of Rates and Charges
A. Record Processing - A per record processed charge applies.
1. A record consists of a call with called number, call date,
connect time, and elapsed time.
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<PAGE> 25
B. Data Transmission - A per record transmitted charge applies.
C. Tape or Cartridge - Available in addition to or in place of
data transmission.
1. When a tape or cartridge is provided in place of data
transmission, data transmission charges are not applicable and
a per tape or cartridge charge will apply. If a tape or
cartridge is requested in addition to data transmission, both
the per tape or cartridge charge and the per data transmission
charge applies.
6.8.2 Electronic Customer Service Record Retrieval
6.8.2.1 Description
A. This service provides the reseller with the ability to
electronically request the customer service record of an end
user. The current customer service record will be formatted by
the Telephone Company and transmitted back to the reseller. The
customer service record reflects the most recent, completed
service order activity and provides the service and equipment
billed by the Telephone Company to a Telephone Company end user
or to a reseller.
6.8.2.2 Application of Rates and Charges
A. A service record retrieval charge applies to each customer
service record electronically delivered to the reseller.
B. A reseller may request any number of electronic customer
service records, but will only be charged for the number of
electronic customer service records successfully transmitted to
the reseller.
6.8.3 Directory Services
6.8.3.1 Directory Assistance (DA) and Directory Listing Services
A. The Telephone Company will include in its published white pages
directories and in its directory assistance records, the name,
address and telephone number of the reseller's telephone
exchange service customers (one listing per end user line), in
accordance with the Telephone Company tariff provisions
relating to alphabetical listings and to directory assistance
as specified in D.P.U. Mass. No. 10. Such listings will not be
provided for any lines for which the reseller purchases
nonpublished and nonlisted number service. Additional listing
will be provided under the terms and conditions set forth in
D.P.U. Mass. No. 10.
B. Yellow Page Listing - Upon request of the reseller, the
Telephone Company will include in its published yellow page
directories a single line, light-face (non-bold) listing for
the reseller's telephone exchange service business customer.
6.8.4 Enhanced Universal Emergency Number Service E-9-1-1
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<PAGE> 26
6.8.4.1 Description
A. The Telephone Company will include the resellers telephone
exchange service customers in the relevant E-9-1-1
database(s).
6.8.5 Annoyance Call Bureau
6.8.5.1 Description
A. Resellers are entitled to use the services provided by the
Telephone Company's annoyance call bureau.
6.9 RESERVED FOR FUTURE USE
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<PAGE> 27
MASSACHUSETTS RESALE AGREEMENT
SECTION 6
6.10 RATES AND CHARGES
6.10.1 Terms and Conditions Information
There are no rates and charges contained in this section.
6.10.2 General Regulations
There are no rates and charges contained in this section.
6.10.3 Ordering of Service
There are no rates and charges contained in this section.
6.10.4 Issuance, Payment and Crediting of Reseller Bills
There are no rates and charges contained in this section.
6.10.5 Resale
Note: Discounts and rates are subject to "true-ups" as determined by
the Massachusetts DPU.
6.10.5.1 DISCOUNTS TO UNDERLYING SERVICES
<TABLE>
<CAPTION>
ID SERVICE CATEGORY RATE ELEMENT RATE
<S> <C> <C> <C>
A. With Bell Atlantic Discounted Services 24.99%
Operator Provided
Handling and Directory
Assistance Provided
B. Without Bell Atlantic Discounted Services 29.47%
Operator Provided
Handling and Directory
Assistance Provided
</TABLE>
6.10.5.2 SERVICE ESTABLISHMENT AND MAINTENANCE CHARGES
<TABLE>
<CAPTION>
ID SERVICE CATEGORY RATE ELEMENT RATE
<S> <C> <C> <C>
NRC Per OSS Transaction $ 1.19
Recurring Monthly-Per Reseller $2557.00
</TABLE>
<PAGE> 28
6.10.5.3 OTHER NONRECURRING CHARGES
<TABLE>
<CAPTION>
ID SERVICE CATEGORY RATE ELEMENT RATE
<S> <C> <C> <C>
Complex Order NRC - Per Centrex Line Ordered $16.27
Service Center Monthly - Per resold line .21
</TABLE>
6.10.6 Reserved for Future Use
There are no rates and charges contained in this section.
6.10.7 Reserved for Future Use
There are no rates and charges contained in this section.
6.10.8 Optional Services
Note: Rates are subject to "true-ups" as determined by the Massachusetts
DPU.
6.10.8.1 CALL USAGE DETAIL
<TABLE>
<CAPTION>
ID SERVICE CATEGORY RATE ELEMENT RATE
<S> <C> <C> <C>
Record Processing Per Record Processed $ O.004085
Data Transmission Per Record Transmitted $ 0.000118
Tape or Cartridge Per Tape or Cartridge $ 20.12
</TABLE>
6.10.8.2 ELECTRONIC CUSTOMER SERVICE RECORD RETRIEVAL
<TABLE>
<CAPTION>
ID SERVICE CATEGORY RATE ELEMENT RATE
<S> <C> <C> <C>
Electronic Customer
Service Record Per Customer Record $0.12
Retrieval
</TABLE>
6.10.8.3 OPERATOR AND DIRECTORY SERVICES
<TABLE>
<CAPTION>
ID SERVICE CATEGORY RATE ELEMENT RATE
<S> <C> <C> <C>
Customized Routing Service Establishment - Per rerouting request ICB
Service Establishment - Per central office ICB
switch equipped
</TABLE>
<PAGE> 29
6.10.8.3 OPERATOR AND DIRECTORY SERVICES
<TABLE>
<S> <C> <C> <C>
Per Rerouted Subscriber Line - Per month TBD
Announcement Service Establishment - Per reseller TBD
Services request for unbranded service
Service Establishment - Per reseller TBD
request for branded service
Branded Service - Surcharge - Per call .050629
</TABLE>
6.10.8.4 ENHANCED UNIVERSAL EMERGENCY NUMBER SERVICE E911
<TABLE>
<CAPTION>
ID SERVICE CATEGORY RATE ELEMENT RATE
<S> <C> <C> <C>
E911 .61
Monthly - Per resold telephone number
included in the E911 database
</TABLE>
6.10.9 Reserved for Future Use
There are no rates and charges contained in this section.
<PAGE> 1
EXHIBIT 10.4
AGREEMENT BETWEEN BELLSOUTH TELECOMMUNICATIONS, INC. AND UNITED STATES
TELECOMMUNICATIONS, INC. REGARDING THE SALE OF BELLSOUTH TELECOMMUNICATIONS
SERVICES TO UNITED STATES TELECOMMUNICATIONS, INC. FOR THE PURPOSES OF RESALE
THIS AGREEMENT is by and between BellSouth Telecommunications, Inc.,
("BELLSOUTH" or "Company"), a Georgia corporation, and United States
Telecommunications, Inc. ("US Telcom"), a Florida corporation, and shall be
deemed effective as 5/28/98.
WITNESSETH
WHEREAS, BellSouth is a local exchange telecommunications company
authorized to provide telecommunications services in the states of Alabama,
Florida, Georgia, Kentucky, Louisiana, Mississippi, North Carolina, South
Carolina, and Tennessee; and
WHEREAS, US Telcom is or seeks to become an alternative local exchange
telecommunications company authorized to provide telecommunications services in
the state(s) of Alabama, Florida, Georgia, Kentucky, Louisiana, Mississippi,
North Carolina, South Carolina, and Tennessee; and;
WHEREAS, US Telcom desires to resell BellSouth's telecommunications
services; and
WHEREAS, BellSouth has agreed to provide such services to US Telcom for
resale purposes and pursuant to the terms and conditions set forth herein:
NOW, THEREFORE, for and in consideration of the mutual premises and
promises contained herein, BellSouth and US Telcom do hereby agree as follows:
I. Term of the Agreement
A. The term of this Agreement shall be two years beginning 5/28/98 and
shall apply to all of BellSouth's serving territory as of January 1,
1998 in the state(s) of Alabama, Florida, Georgia, Kentucky,
Louisiana, Mississippi, North Carolina, South Carolina, and Tennessee;
and
B. This Agreement shall be automatically renewed for two additional one
yea periods unless either party indicates its intent not to renew the
Agreement. Notice of such intent must be provided, in writing, to the
other party no later than 60 days prior to the end of the
then-existing contract period. The terms of this Agreement shall
remain in effect after the term of the existing agreement has expired
and while a new agreement is being negotiated.
The rates pursuant by which US Telcom is to purchase services from BellSouth for
resale shall be at a discount rate off of the retail rate for the
telecommunications service. The discount rates shall be as set forth in Exhibit
A, attached hereto and incorporated herein by this reference. Such discount
shall reflect the costs avoided by BellSouth when selling a service for
wholesale purposes.
II. Definition of Terms
A. CUSTOMER OF RECORD means the entity responsible for placing
application for service; requesting additions, rearrangements,
maintenance or discontinuance of service; payment in full of charges
incurred such as non-recurring, monthly recurring, toll, directory
assistance, etc.
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<PAGE> 2
B. DEPOSIT means assurance provided by a customer in the form of cash,
surety bond or bank letter of credit to be held by the Company.
C. END USER means the ultimate user of the telecommunications services.
D. END USER CUSTOMER LOCATION means the physical location of the
premises where an end user makes use of the telecommunications
services.
E. NEW SERVICES means functions, features or capabilities that are not
currently offered by BellSouth. This includes packaging of existing
services or combining a new function, feature or capability with an
existing service.
F. OTHER LOCAL EXCHANGE COMPANY (OLEC) means a telephone company
certificated by the public service commissions of the Company's
franchised area to provide local exchange service within the Company's
franchised area.
G. RESALE means an activity wherein a certificated OLEC, such as US
Telcom subscribes to the telecommunications services of the Company
and then reoffers those telecommunications services to the public
(with or without "adding value").
H. RESALE SERVICE AREA means the area, as defined in a public service
commission approved certificate of operation, within which an OLEC,
such as US Telcom, may offer resold local exchange telecommunications
service.
III. General Provisions
A. US Telcom may resell the tariffed local exchange and toll
telecommunications services of BellSouth contained in the General
Subscriber Service Tariff and Private Line Service Tariff subject to
the terms, and conditions specifically set forth herein.
Notwithstanding the foregoing, the exclusions and limitations on
services available for resale will be as set forth in Exhibit B,
attached hereto and incorporated herein by this reference.
BellSouth shall make available telecommunications services for resale
at the rates set forth in Exhibit A to this agreement and subject to
the exclusions and limitations set forth in Exhibit B to this
agreement. It does not however waive its rights to appeal or otherwise
challenge any decision regarding resale that resulted in the discount
rates contained in Exhibit A or the exclusions and limitations
contained in Exhibit B. BellSouth reserves the right to pursue any and
all legal and/or equitable remedies, including appeals of any
decisions. If such appeals or challenges result in changes in the
discount rates or exclusions and limitations, the parties agree that
appropriate modifications to this Agreement will be made promptly to
make its terms consistent with the outcome of the appeal.
B. The service and service provisioning that BellSouth provides US Telcom
for resale will be at least equal in quality to that provided to
BellSouth, or any BellSouth subsidiary, affiliate or end-user. In
connection with resale, BellSouth will provide US Telcom with
pre-ordering, ordering, maintenance and trouble reporting, and daily
usage data functionality that will enable US Telcom to provide
equivalent levels of customer service to their local exchange
customers as BellSouth provides to it own end users.
C. US Telcom may purchase resale services from BellSouth for their own
use in operating their business. The resale discount will apply to
those services under the following conditions:
1. US Telcom must resell services to other end users.
2. US Telcom must order services through resale interfaces, i.e.,
the LCSC and/or appropriate Resale Account Teams.
Page 2
<PAGE> 3
3. US Telcom cannot be an alternative local exchange
telecommunications company for the single purpose of selling to
themselves.
D. The provision of services by the Company to US Telcom does not
constitute a joint undertaking for the furnishing of any service.
E. US Telcom will be the customer of record for all services purchased
from BellSouth. Except as specified herein, the Company will take
orders from, bill and expect payment from US Telcom for all services.
F. US Telcom will be the Company's single point of contact for all
services purchased pursuant to this Agreement. The Company shall have
no contact with the end user except to the extent provided for herein.
G. The Company will continue to bill the end user for any services that
the end user specifies it wishes to receive directly from the Company.
H. The Company maintains the right to serve directly any end user within
the service area of US Telcom. The Company will continue to directly
market its own telecommunications products and services and in doing
so may establish independent relationships with end users of US
Telcom.
I. Neither Party shall interfere with the right of any person or entity
to obtain service directly from the other Party.
J. Current telephone numbers may normally be retained by the end user.
However, telephone numbers are the property of the Company and are
assigned to the service furnished. US Telcom has no property right to
the telephone number or any other call number designation associated
with services furnished by the Company, and no right to the
continuance of service through any particular central office. The
Company reserves the right to change such numbers, or the central
office designation associated with such numbers, or both, whenever the
Company deems it necessary to do so in the conduct of its business.
K. The Company may provide any service or facility for which a charge is
not established herein, as long as it is offered on the same terms to
US Telcom.
L. Service is furnished subject to the condition that it will not be used
for any unlawful purpose.
M. Service will be discontinued if any law enforcement agency advises
that the service being used is in violation of the law.
N. The Company can refuse service when it has grounds to believe that
service will be used in violation of the law.
0. The Company accepts no responsibility to any person for any unlawful
act committed by US Telcom or its end users as part of providing
service to US Telcom for purposes of resale or otherwise.
P. The Company will cooperate fully with law enforcement agencies with
subpoenas and court orders for assistance with the Company's
customers. Law enforcement agency subpoenas and court orders regarding
end users of US Telcom will be directed to US Telcom. The Company will
bill US Telcom for implementing any requests by law enforcement
agencies regarding US Telcom end users.
Q. The characteristics and methods of operation of any circuits,
facilities or equipment provided by any person or entity other than
the Company shall not:
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<PAGE> 4
1. Interfere with or impair service over any facilities of the
Company, its affiliates, or its connecting and concurring
carriers involved in its service;
2. Cause damage to their plant;
3. Impair the privacy of any communications; or
4. Create hazards to any employees or the public.
R. US Telcom assumes the responsibility of notifying the Company
regarding less than standard operations with respect to services
provided by US Telcom.
S. Facilities and/or equipment utilized by BellSouth to provide service
to US Telcom remain the property of BellSouth.
T. White page directory listings will be provided in accordance with
regulations set forth in Section A6 of the General Subscriber Service
Tariff and will be available for resale.
U. BellSouth will provide customer record information to US Telcom
provided US Telcom has the appropriate Letter(s) of Authorization.
BellSouth may provide customer record information via one of the
following methods: US mail, fax, or by electronic interface. BellSouth
will provide customer record information via US mail or fax on an
interim basis only.
1. US Telcom agrees to compensate BellSouth for all BellSouth
incurred expenditures associated with providing such information
to US Telcom. US Telcom will adopt and adhere to the BellSouth
guidelines associated with each method of providing customer
record information.
2. All costs incurred by BellSouth to develop and implement
operational interfaces shall be recovered from US Telcom who
utilize the services.
V. BellSouth will provide certain selected messaging services to US
Telcom for resale of messaging service without the wholesale discount.
W. BellSouth's Inside Wire Maintenance Plans may be made available for
resale at rates, terms and conditions as set forth by BellSouth and
without the wholesale discount.
X. All costs incurred by BellSouth for providing services to US Telcom
that are not covered in the BellSouth tariffs shall be recovered from
the US Telcom who utilizes those services.
IV. BELLSOUTH'S PROVISION OF SERVICES TO US TELCOM
A. US Telcom agrees that its resale of BellSouth services shall be as
follows:
1. The resale of telecommunications services shall be limited to
users and uses conforming to the class of service restrictions.
2. To the extent US Telcom is a telecommunications carrier that
serves greater than 5 percent of the Nation's presubscribed
access lines, US Telcom shall not jointly market its interLATA
services with the telecommunications services purchased from
BellSouth pursuant to this Agreement in any of the states covered
under this Agreement. For the purposes of this subsection, to
jointly market means any advertisement, marketing effort or
billing in which the telecommunications services purchased from
BellSouth for purposes of resale to customers and interLATA
services offered by US Telcom are packaged, tied, bundled,
discounted or offered together in any way to the end user. Such
efforts include, but are not limited to, sales referrals, resale
arrangements, sales agencies or billing agreements. This
subsection shall be void and of no effect for a particular state
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<PAGE> 5
covered under this Agreement as of February 8, 1999 or on the
date BellSouth is authorized to offer interLATA services in that
state, whichever is earlier.
3. Hotel and Hospital PBX service are the only telecommunications
services available for resale to Hotel/Motel and Hospital end
users, respectively. Similarly, Access Line Service for Customer
Provided Coin Telephones is the only local service available for
resale to Independent Payphone Provider (IPP) customers. Shared
Tenant Service customers can only be sold those
telecommunications services available in the Company's A23 Shared
Tenant Service Tariff.
4. US Telcom is prohibited from furnishing both flat and measured
rate service on the same business premises to the same
subscribers (end users) as stated in A2 of the Company's Tariff
except for backup service as indicated in the applicable state
tariff Section A3.
5. If telephone service is established and it is subsequently
determined that the class of service restriction has been
violated, US Telcom will be notified and billing for that service
will be immediately changed to the appropriate class of service.
Service charges for changes between class of service, back
billing, and interest as described in this subsection shall apply
at the Company's sole discretion. Interest at a rate as set forth
in Section A2 of the General Subscriber Service Tariff and
Section B2 of the Private Line Service Tariff for the applicable
state, compounded daily for the number of days from the back
billing date to and including the date that US Telcom actually
makes the payment to the Company may be assessed.
6. The Company reserves the right to periodically audit services
purchased by US Telcom to establish authenticity of use. Such
audit shall not occur more than once in a calendar year. US
Telcom shall make any and all records and data available to the
Company or the Company's auditors on a reasonable basis. The
Company shall bear the cost of said audit.
B. Resold services can only be used in the same manner as specified in
the Company's Tariff. Resold services are subject to the same terms
and conditions as are specified for such services when furnished to an
individual end user of the Company in the appropriate section of the
Company's Tariffs. Specific tariff features, e.g. a usage allowance
per month, shall not be aggregated across multiple resold services.
Resold services cannot be used to aggregate traffic from more than one
end user customer except as specified in Section A23. of the Company's
Tariff referring to Shared Tenant Service.
C. US Telcom may resell services only within the specific resale service
area as defined in its certificate.
D. Telephone numbers transmitted via any resold service feature are
intended solely for the use of the end user of the feature. Resale of
this information is prohibited.
E. No patent, copyright, trademark or other proprietary right is
licensed, granted or otherwise transferred by this Agreement. US
Telcom is strictly prohibited from any use, including but not limited
to sales, marketing or advertising, of any BellSouth name or
trademark.
V. MAINTENANCE OF SERVICES
A. US Telcom will adopt and adhere to the standards contained in the
applicable BellSouth Work Center Interface Agreement regarding
maintenance and installation of service.
B. Services resold under the Company's Tariffs and facilities and
equipment provided by the Company shall be maintained by the Company.
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<PAGE> 6
C. US Telcom or its end users may not rearrange, move, disconnect, remove
or attempt to repair any facilities owned by the Company, other than
by connection or disconnection to any interface means used, except
with the written consent of the Company.
D. US Telcom accepts responsibility to notify the Company of situations
that arise that may result in a service problem.
E. US Telcom will be the Company's single point of contact for all repair
calls on behalf of US Telcom's end users. The parties agree to provide
one another with toll-free contact numbers for such purposes.
F. US Telcom will contact the appropriate repair centers in accordance
with procedures established by the Company.
G. For all repair requests, US Telcom accepts responsibility for adhering
to the Company's prescreening guidelines prior to referring the
trouble to the Company.
H. The Company will bill US Telcom for handling troubles that are found
not to be in the Company's network pursuant to its standard time and
material charges. The standard time and material charges will be no
more than what BellSouth charges to its retail customers for the same
services.
I. The Company reserves the right to contact US Telcom's customers, if
deemed necessary, for maintenance purposes. When interacting with US
Telcom resale customers on behalf of US Telcom, BellSouth employees
shall not market BellSouth services and shall ensure that service
provided US Telcom, end users is at least equal in quality to that
which BellSouth provides its own end users.
VI. ESTABLISHMENT OF SERVICE
A. After receiving certification as a local exchange company from the
appropriate regulatory agency, US Telcom will provide the appropriate
Company service center the necessary documentation to enable the
Company to establish a master account for US Telcom. Such
documentation shall include the Application for Master Account, proof
of authority to provide telecommunications services, an Operating
Company Number ("OCN") assigned by the National Exchange Carriers
Association ("NECA") and a tax exemption certificate, if applicable.
When necessary deposit requirements are met, the Company will begin
taking orders for the resale of service.
B. Service orders will be in a standard format designated by the Company.
C. When notification is received from US Telcom that a current customer
of the Company will subscribe to US Telcom's service, standard service
order intervals for the appropriate class of service will apply.
D. The Company will not require and user confirmation prior to
establishing service for US Telcom's end user customer. US Telcom
must, however, be able to demonstrate end user authorization upon
request.
E. US Telcom will be the single point of contact with the Company for all
subsequent ordering activity resulting in additions or changes to
resold services except that the Company will accept a request directly
from the end user for conversion of the end user's service from US
Telcom to the Company or will accept a request from another OLEC for
conversion of the end user's service from US Telcom to the other LEC.
The Company will notify US Telcom that such a request has been
processed.
F. If the Company determines that an unauthorized change in local service
to US Telcom has occurred, the Company will reestablish service with
the appropriate local service provider and will assess US Telcom as
the OLEC initiating the unauthorized change, the unauthorized change
charge described in F.C.C. Tariff No. 1, Section 13. Appropriate
nonrecurring charges, as set forth in Section A4. of the General
Page 6
<PAGE> 7
Subscriber Service Tariff, will also be assessed to US Telcom. These
charges can be adjusted if US Telcom provides satisfactory proof of
authorization.
G. In order to safeguard its interest, the Company reserves the right to
secure the account with a suitable form of security deposit, unless
satisfactory credit has already been established.
1. Such security deposit shall take the form of an irrevocable
Letter of Credit or other forms of security acceptable to the
Company. Any such security deposit may be held during the
continuance of the service as security for the payment of any and
all amounts accruing for the service.
2. If a security deposit is required, such security deposit shall be
made prior to the inauguration of service.
3. Such security deposit may not exceed two months' estimated
billing.
4. The fact that a security deposit has been made in no way relieves
US Telcom from complying with the Company's regulations as to
advance payments and the prompt payment of bills on presentation
nor does it constitute a waiver or modification of the regular
practices of the Company providing for the discontinuance of
service for non-payment of any sums due the Company.
5. The Company reserves the right to increase the security deposit
requirements when, in its sole judgment, circumstances so warrant
and/or gross monthly billing has increased beyond the level
initially used to determine the security deposit.
6. In the event that US Telcom defaults on its account, service to
US Telcom will be terminated and any security deposits held will
be applied to its account.
7. In the case of a cash deposit, interest at a rate as set forth in
the appropriate BellSouth tariff shall be paid to US Telcom
during the continuance of the security deposit. Interest on a
security deposit shall accrue annually and, it requested, shall
be annually credited to US Telcom by the accrual date.
VII. PAYMENT AND BILLING ARRANGEMENTS
A. When the initial service is ordered by US Telcom, the Company will
establish an accounts receivable master account for US Telcom.
B. The Company shall bill US Telcom on a current basis all applicable
charges and credits.
C. Payment of all charges will be the responsibility of US Telcom. US
Telcom shall make payment to the Company for all services billed. The
Company is not responsible for payments not received by US Telcom from
US Telcom's customer. The Company will not become involved in billing
disputes that may arise between US Telcom and its customer. Payments
made to the Company as payment on account will be credited to an
accounts receivable master account and not to an and user's account.
D. The Company will render bills each month on established bill days for
each of US Telcom's accounts.
E. The Company will bill US Telcom, in advance, charges for all services
to be provided during the ensuing billing period except charges
associated with service usage, which charges will be billed in
arrears. Charges will be calculated on an individual end user account
level, including, if applicable, any charges
Page 7
<PAGE> 8
for usage or usage allowances. BellSouth will also bill all charges,
including but not limited to 911 and E911 charges, telecommunications
relay charges, and franchise fees, to US Telcom.
F. The payment will be due by the next bill date (i.e., same date in the
following month as the bill date) and is payable in immediately
available funds. Payment is considered to have been made when received
by the Company.
1. If the payment due date falls on a Sunday or on a Holiday which
is observed on a Monday, the payment due date shall be the first
non-Holiday day following such Sunday or Holiday. If the payment
due date falls on a Saturday or on a Holiday which is observed on
Tuesday, Wednesday, Thursday, or Friday, the payment due date
shall be the last non-Holiday day preceding such Saturday or
Holiday. If payment is not received by the payment due date, a
late payment penalty, as set forth in I. following, shall apply.
G. Upon proof of tax exempt certification from US Telcom, the total
amount billed to US Telcom will not include any taxes due from the end
user. US Telcom will be solely responsible for the computation,
tracking, reporting and payment of all federal, state and/or local
jurisdiction taxes associated with the services resold to the end
user.
H. As the customer of record, US Telcom will be responsible for, and
remit to the Company, all charges applicable to its resold services
for emergency services (E911 and 911) and Telecommunications Relay
Service (TRS) as well as any other charges of a similar nature.
I. If any portion of the payment is received by the Company after the
payment due date as set forth preceding, of if any portion of the
payment is received by the Company in funds that are not immediately
available to the Company, then a late payment penalty shall be due to
the Company. The late payment penalty shall be the portion of the
payment not received by the payment due date times a late factor. The
late factor shall be as set forth in Section A2 of the General
Subscriber Service Tariff and Section B2 of the Private Line Service
Tariff.
J. Any switched access charges associated with interexchange carrier
access to the resold local exchange lines will be billed by, and due
to, the Company. No additional charges are to be assessed to US
Telcom.
K. The Company will not perform billing and collection services for US
Telcom as a result of the execution of this Agreement. Requests by the
US Telcom for assistance with billing services should be referred to
the appropriate entity or operational group within the Company.
L. Pursuant to 47 CFR Section 51.617, the Company will bill US Telcom
end user common line charges identical to the end user common line
charges the Company bills its end users.
M. In general, the Company will not become involved in disputes between
US Telcom and US Telcom's end user customers over resold services. If
a dispute does arise that cannot be settled without the involvement of
the Company, US Telcom shall contact the designated Service Center for
resolution. The Company will make every effort to assist in the
resolution of the dispute and will work with US Telcom to resolve the
matter in as timely a manner as possible. US Telcom may be required to
submit documentation to substantiate the claim.
VIII. TERMINATION
A. Either, Party may terminate this Agreement in whole or in part in the
event of a default by the other Party; provided however, that the
non-defaulting Party notifies the defaulting Party in writing of the
alleged default and that the defaulting Party does not cure the
alleged fault within thirty (30) days of receipt of written notice
thereof. Default is defined to include:
Page 8
<PAGE> 9
1. A Party's refusal or failure in any material respect properly to
perform its obligations under this Agreement, or the violation of
any of the material terms or conditions of this Agreement; or
2. A Party's violation or noncompliance with the applicable federal
and state statutes, rules, regulations, and orders.
B. Termination of this Agreement, or any part hereof, for any cause shall
not release either Party from any liability which at the time of
termination had already accrued to the other Party or which thereafter
accrues in any respect to any act or omission occurring prior to the
termination or from an obligation which is expressly stated in this
Agreement to survive termination.
IX. DISCONTINUANCE OF SERVICE
A. The procedures for discontinuing service to an end user are as
follows:
1. Where possible, the Company will deny service to US Telcom's end
user on behalf of, and at the request of, US Telcom. Upon
restoration of the and user's service, restoral charges will
apply and will be the responsibility of US Telcom.
2. At the request of US Telcom, the Company will disconnect a US
Telcom end user customer.
3. All requests by US Telcom for denial or disconnection of an end
user for nonpayment must be in writing.
4. US Telcom will be made solely responsible for notifying the end
user of the proposed disconnection of the service.
5. The Company will continue to process calls made to the Annoyance
Call Center and will advise US Telcom when it is determined that
annoyance calls am originated from one of their end user's
locations. The Company shall be indemnified, defended and held
harmless by US Telcom and/or the end user against any claim, loss
or damage arising from providing this information to US Telcom.
It is the responsibility of US Telcom to take the corrective
action necessary with its customers who make annoying calls.
Failure to do so will result in the Company's disconnecting the
end user's service.
B. The procedures for discontinuing service to US Telcom are as follows:
1. The Company reserves the right to suspend or terminate service
for nonpayment or in the event of prohibited, unlawful or
improper use of the facilities or service, abuse of the
facilities, or any other violation or noncompliance by US Telcom
of the rules and regulations of the Company's Tariffs.
2. If payment of account is not received by the bill day in the
month after the original bill day, BellSouth may provide written
notice to US Telcom that additional applications for service will
be refused and that any pending orders for service will not be
completed if payment is not received by the fifteenth day
following the date of the notice. In addition BellSouth may, at
the same time, give thirty days notice to the person designated
by US Telcom to receive notices of noncompliance, discontinue the
provision of existing services to US Telcom at any time
thereafter.
3. In the case of such discontinuance, all billed charges, as well
as applicable termination charges, shall become due.
Page 9
<PAGE> 10
4. If BellSouth does not discontinue the provision of the services
involved on the date specified in the thirty days notice and US
Telcom's noncompliance continues, nothing contained herein shall
preclude BellSouth's right to discontinue the provision of the
services to US Telcom without further notice,
5. If payment is not received or arrangements made for payment by
the date given in the written notification, US Telcom's services
will be discontinued. Upon discontinuance of service on a US
Telcom's account, service to US Telcom's end users will be
denied. The Company will also reestablish service at the request
of the end user or US Telcom's upon payment of the appropriate
connection fee and subject to the Company's normal application
procedures. US Telcom's is solely responsible for notifying the
end user of the proposed disconnection of the service.
6. If within fifteen days after an end user's service has been
denied no contact has been made in reference to restoring
service, the end user's service will be disconnected.
X. LIABILITY
A. The liability of the Company for damages arising out of mistakes,
omissions, interruptions, preemptions, delays errors or defects in
transmission, or failures or defects in facilities furnished by the
Company, occurring in the course of furnishing service or other
facilities and not caused by the negligence of US Telcom, or of the
Company in failing to maintain proper standards of maintenance and
operation and to exercise reasonable supervision shall in no event
exceed an amount equivalent to the proportionate charge to US Telcom
for the period of service during which such mistake, omission,
interruption, preemption, delay, error or defect in transmission or
defect or failure in facilities occur. The Company shall not be
liable for damage arising out of mistakes, omission, interruptions,
preemptions, delays, errors or defects in transmission or other
injury, including but not limited to injuries to persons or property
from voltages or currents transmitted over the service of the Company,
(1) caused by customer-provided equipment (except where a contributing
cause is the malfunctioning of a Company-provided connecting
arrangement, in which event the liability of the Company shall not
exceed an amount equal to a proportional amount of the Company billing
for the period of service during which such mistake, omission,
interruption, preemption, delay, error, defect in transmission or
injury occurs), or (2) not prevented by customer-provided equipment
but which would have been prevented had Company-provided equipment
been used.
B. The Company shall be indemnified and saved harmless by US Telcom
against any and all claims, actions, causes of action, damages,
liabilities, or demands (including the costs, expenses and reasonable
attorneys' fees, on account thereof) of whatever kind or nature that
may be made by any third party as a result of the Company's furnishing
of service to US Telcom.
C. The Company shall be indemnified, defended and held harmless by US
Telcom and/or the end user against any claim, loss or damage arising
from the use of services offered for resale involving:
1. Claims for libel, slander, invasion of privacy or infringement of
copyright arising from US Telcom's or end user's own
communications.
2. Claims for patent infringement arising from acts combining or
using Company services in connection with facilities or equipment
furnished by the end user or US Telcom.
3. All other claims arising out of an act or omission of US Telcom
or its end User in the course of using services.
Page 10
<PAGE> 11
D. US Telcom accepts responsibility for providing access for maintenance
purposes of any service resold under the provisions of this Tariff.
The Company shall not be responsible for any failure on part of US
Telcom with respect to any end user of US Telcom.
XI. TREATMENT OF PROPRIETARY AND CONFIDENTIAL INFORMATION
A. Both parties agree that it may be necessary to provide each other
during the term of this Agreement with certain confidential
information, including trade secret information, including but not
limited to, technical and business plans, technical information,
proposals, specifications, drawings, procedures, customer account data
and like information (hereinafter collectively referred to as
"Information"). Both parties agree that all Information shall either
be in writing or other tangible format and clearly marked with a
confidential, private or proprietary legend, or, when the Information
is communicated orally, it shall also be communicated that the
Information is confidential, private or proprietary. The Information
will be returned to the owner within a reasonable time. Both parties
agree that the Information shall not be copied or reproduced in any
form. Both parties agree to receive such Information and not disclose
such Information. Both parties agree to protect the Information
received from distribution, disclosure or dissemination to anyone
except employees of the parties with a need to know such Information
and which employees agree to be bound by the terms of this Section.
Both parties will use the same standard of care to protect Information
received as they would use to protect their own confidential and
proprietary Information.
B. Notwithstanding the foregoing, both parties agree that there will be
no obligation to protect any portion of the Information that is
either: 1) made publicly available by the owner of the Information or
lawfully disclosed by a nonparty to this Agreement; 2) lawfully
obtained from any source other than the owner of the Information; or
3) previously known to the receiving party without an obligation to
keep it confidential.
XII. RESOLUTION OF DISPUTES
Except as otherwise stated in this Agreement, the parties agree that if
any dispute arises as to the interpretation of any provision of this Agreement
or as to the proper implementation of this Agreement, either Party may petition
the Commission for a resolution of the dispute. However, each party reserves any
rights it may have to seek judicial review of any ruling made by the Commission
concerning this Agreement.
XIII. LIMITATION OF USE
The parties agree that this Agreement shall not be proffered by either
party in another jurisdiction as evidence of any concession or as a waiver of
any position taken by the other party in that jurisdiction or for any other
purpose.
XIV. WAIVERS
A failure or delay of either Party to enforce any of the provisions
hereof, to exercise any option which is herein provided, or to require
performance of any of the provisions hereof shall in no way be construed to be a
waiver of such provisions or options, and each Party, notwithstanding such
failure, shall have the right thereafter to insist upon the specific performance
of any and all of the provisions of this Agreement.
Page 11
<PAGE> 12
XV. GOVERNING LAW
This Agreement shall be governed by, and construed and enforced in
accordance with, the laws of the State of Georgia, without regard to its
conflict of laws principles.
XVI. ARM'S LENGTH NEGOTIATIONS
This Agreement was executed after arm's length negotiations between the
undersigned parties and reflects the conclusion of the undersigned that this
Agreement is in the best interests of all parties.
XVII. NOTICES
A. Every notice, consent, approval, or other communications required or
contemplated by this Agreement shall be in writing and shall be
delivered in person or given by postage prepaid mail, address to:
BellSouth Telecommunications, Inc. United States Telecommunications, Inc.
CLEC Account Team Mr. Richard Pollara
3535 Colonnade Parkway United States Telecommunications. Inc.
Room E4E1 13902 North Dale Mabry
Birmingham, AL 35243 Suite 212
Tampa, FL 33618
or at such other address as the intended recipient previously shall have
designated by written notice to the other party.
B. Where specifically required, notices shall be by certified or
registered mail. Unless otherwise provided in this Agreement, notice
by mail shall be effective on the date it is officially recorded as
delivered by return receipt or equivalent, and in the absence of such
record of delivery, it shall be presumed to have been delivered the
fifth day, or next business day after the fifth day, after it was
deposited in the mails.
XVIII. AMENDMENTS
This Agreement may be amended at any time upon written agreement of
both parties.
XIX. ENTIRE AGREEMENT
This Agreement sets forth the entire understanding and supersedes
prior agreements between the parties relating to the subject matter contained
herein and merges all prior discussions between them, and neither party shall be
bound by any definition, condition, provision, representation, warranty,
covenant or promise other than as expressly stated in this Agreement or as is
contemporaneously or subsequently set forth in writing and executed by a duly
authorized officer or representative of the party to be bound thereby.
BELLSOUTH TELECOMMUNICATIONS, INC. UNITED STATES TELECOMMUNICATIONS, INC.
BY: /s/ Jerry Hendrix BY: /s/ Richard Pollara
------------------------------ ----------------------------------
Signature Signature
NAME: Jerry Hendrix NAME: Richard Pollara
-------------------------- -------------------------------
Printed Name Printed Name
TITLE: Director TITLE: President
---------------------------- -------------------------------
DATE: 5/28/98 DATE: 5/27/98
---------------------------- -------------------------------
Page 12
<PAGE> 13
EXHIBIT A
APPLICABLE DISCOUNTS
The telecommunications services available for purchase by US Telcom for the
purposes of resale to US Telcom end users shall be available at the following
discount off of the retail rate.
<TABLE>
<CAPTION>
DISCOUNT*
- -------------------------------------------------------------------------------
STATE RESIDENCE BUSINESS
- -------------------------------------------------------------------------------
<S> <C> <C>
ALABAMA 16.3% 16.3%
- -------------------------------------------------------------------------------
FLORIDA 21.83% 16.81%
- -------------------------------------------------------------------------------
GEORGIA 20.3% 17.3%
- -------------------------------------------------------------------------------
KENTUCKY 16.79% 15.54%
- -------------------------------------------------------------------------------
LOUISIANA 20.72% 20.72%
- -------------------------------------------------------------------------------
MISSISSIPPI 15.75% 15.75%
- -------------------------------------------------------------------------------
NORTH CAROLINA 21.5% 17.6%
- -------------------------------------------------------------------------------
SOUTH CAROLINA 14.8% 14.8%
- -------------------------------------------------------------------------------
TENNESSEE** 16% 16%
- -------------------------------------------------------------------------------
</TABLE>
* In the case of a cross boundary situation, the discount which applies is the
discount applicable to the location of the end user's central office.
** In Tennessee, if US Telcom provides its own operator services and directory
services, the discount shall be 21.56%. US Telcom must provide written
notification to BellSouth within 30 days prior to providing its own operator
services and directory services to qualify for the higher discount rate of
21.56%.
OPERATIONAL SUPPORT SYSTEMS (OSS) RATES
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
Interactive Ordering and Trouble OSS Order Charge
Maintenance System (per end user account)
------------------------------------ --------------------------------------
Non-Recurring Recurring Charge, Charge per order Surcharge for
Establishment per month manually placed
Charge orders
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------
ALABAMA $100.00 00.00 $10.80 $22.00
- -----------------------------------------------------------------------------------------------------------------
FLORIDA $100.00 $30.00 $10.80 $22.00
- -----------------------------------------------------------------------------------------------------------------
GEORGIA $200.00 $550.00 per first 1000 Note(2) $22.00
electronic orders(1)
$10.00 per next 1000
electronic orders(1)
- -----------------------------------------------------------------------------------------------------------------
KENTUCKY $100.00 $50.00 $10.80 $22.00
- -----------------------------------------------------------------------------------------------------------------
LOUISIANA $100.00 $50.00 $ 9.16 $18.14
- -----------------------------------------------------------------------------------------------------------------
MISSISSIPPI $100.00 $50.00 $10.80 $22.00
- -----------------------------------------------------------------------------------------------------------------
NORTH CAROLINA $100.00 $50.00 $10.80 $22.00
- -----------------------------------------------------------------------------------------------------------------
SOUTH CAROLINA $100.00 $50.00 $1O.80 $22.00
- -----------------------------------------------------------------------------------------------------------------
TENNESSEE $100.00 $50.00 $10.80 $22.00
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------
(1) The Charge per order applies on a per end user account basis.
(2) The Georgia Public Service Commission ("PSC") ordered in Docket 7061 that
there would be no OSS charge within the Charge per Electronic Order column.
Instead the Georgia PSC ordered monthly recurring charges based on the number of
orders.
Page 13
<PAGE> 14
EXHIBIT B
Page 1 of 2
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Type of AL FL GA KY LA
Service Resale? Discount? Resale? Discount? Resale? Discount? Resale? Discount? Resale? Discount?
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 Grandfathered Services Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes
- ------------------------------------------------------------------------------------------------------------------------------------
2 Contract Service Arrangements Yes Yes Yes Yes Yes No Yes No Note 5 Note 5
- ------------------------------------------------------------------------------------------------------------------------------------
3 Promotions - > 90 Days Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes
- ------------------------------------------------------------------------------------------------------------------------------------
4 Promotion - < 90 Days Yes No Yes No Yes No No No Yes No
- ------------------------------------------------------------------------------------------------------------------------------------
5 Lifeline/Link Up Services Yes Yes Yes Yes Yes Yes No No Yes Yes
- ------------------------------------------------------------------------------------------------------------------------------------
6 911/E911 Services (See Note 9) Yes Yes Yes Yes Yes Yes Yes Yes No No
- ------------------------------------------------------------------------------------------------------------------------------------
7 N11 Services (See Note 9) Yes Yes Yes Yes Yes Yes No No No No
- ------------------------------------------------------------------------------------------------------------------------------------
8 AdWatch(SM) Svc (See Note 8) Yes No Yes No Yes No Yes No Yes No
- ------------------------------------------------------------------------------------------------------------------------------------
9 MemoryCall(R) Service Yes No Yes No Yes No Yes No Yes No
- ------------------------------------------------------------------------------------------------------------------------------------
10 Mobile Services Yes No Yes No Yes No Yes No Yes No
- ------------------------------------------------------------------------------------------------------------------------------------
11 Federal Subscriber Line Charges Yes No Yes No Yes No Yes No Yes No
- ------------------------------------------------------------------------------------------------------------------------------------
12 Non-Recurring Charges Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
Type of MS NC SC TN
Service Resale? Discount? Resale? Discount? Resale? Discount? Resale? Discount?
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 Grandfathered Services Yes Yes Yes Yes Yes Yes Yes Yes
- --------------------------------------------------------------------------------------------------------------------
2 Contract Service Arrangements Note 5 Note 5 Note 6 Note 6 Yes No Yes Yes
- --------------------------------------------------------------------------------------------------------------------
3 Promotions - > 90 Days Yes Yes Yes Yes Yes Yes Yes Note 3
- --------------------------------------------------------------------------------------------------------------------
4 Promotions - < 90 Days Yes No No No Yes No No No
- --------------------------------------------------------------------------------------------------------------------
5 Lifeline/Link Up Services Yes Yes Yes Yes Yes Yes Yes Note 4
- --------------------------------------------------------------------------------------------------------------------
6 911/E911 Services (See Note 9) Yes Yes Yes Yes Yes Yes Yes Yes
- --------------------------------------------------------------------------------------------------------------------
7 N11 Services See Note 9) No No No No Yes Yes Yes Yes
- --------------------------------------------------------------------------------------------------------------------
8 AdWatch(SM) Svc (See Note 8) Yes No Yes No Yes No Yes No
- --------------------------------------------------------------------------------------------------------------------
9 MemoryCall(R) Service Yes No Yes No Yes No Yes No
- --------------------------------------------------------------------------------------------------------------------
10 Mobile Services Yes No Yes No Yes No Yes No
- --------------------------------------------------------------------------------------------------------------------
11 Federal Subscriber Line Charges Yes No Yes No Yes No Yes No
- --------------------------------------------------------------------------------------------------------------------
12 Non-Recurring Charges Yes Yes Yes Yes Yes Yes Yes No
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
Applicable Notes:
1 Grandfathered services can be resold only to existing subscribers of the
grandfathered service.
2 Where available for resale, promotions will be made available only to end
users who would have qualified for the promotion had it been provided by
BellSouth directly.
3 In Tennessee, long-term promotions (offered for more than ninety (90) days)
may be obtained at one of the following rates:
(a) the stated tariff rate, less the wholesale discount;
(b) the promotional rate (the promotional rate offered by BellSouth will
not be discounted further by the wholesale discount rate)
4 Lifeline/Link Up services may be offered only to those subscribers who meet
the criteria that BellSouth currently applies to subscribers National
Exchange Carriers Association interstate toll settlement pool just as
BellSouth does today. The maximum rate that US Telcom may charge for
LifeLine Service shall be capped at the flat retail rate offered by
BellSouth.
5 In Louisiana and Mississippi; all Contract Service Arrangements entered
into by BellSouth or terminating after the effective date of the Commission
Order (1/28/97 for LA and 3/10/97 for MS) will be subject to resale without
the wholesale discount. All CSAs which are in place as of the effective
date of the Commission order (1/28/97 for LA and 3/10/97 for MS) will not
be eligible for resale.
Page 14
<PAGE> 15
EXHIBIT B
Page 2 of 2
6 In North Carolina, Contract Service Arrangements entered into by BellSouth
before April 15, 1997, shall be subject to resale at no discount, while
BellSouth CSAs entered into after that date shall be subject to resale with
the discount.
7 Some of BellSouth's local exchange and toll telecommunications services are
not available in certain central offices and areas.
8 AdWatch(SM) Service is tariffed as BellSouth(R) AIN Virtual Number Call
Detail Service
9 Exclusions for N11/911/E911 are also applicable to equipment associated
with the service
Page 15
<PAGE> 16
Amendment No. 2 to Resale Agreement
by and between BellSouth Telecommunications, Inc.
and United States Telecommunications, Inc.
dated May 28, 1998
This Agreement refers to the Resale Agreement ("the Agreement") entered
into by United States Telecommunications Inc. ("US Telcom") and BellSouth
Telecommunications, Inc. ("BellSouth") on May 28, 1998. This Amendment
("Amendment") is made by and between US Telcom and BellSouth and shall be deemed
effective on the date executed by US Telcom and BellSouth.
NOW THEREFORE, in consideration of the mutual provisions contained herein
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, Us Telcom and BellSouth (individually, a "Party" and
collectively, the "Parties") hereby covenant and agree as follows:
1. BellSouth and US Telcom are entering into this Agreement for the purpose
of deleting the table of Operational Support System (OSS) Rates contained in
Exhibit A of their existing Agreement in its entirety and replacing it with the
new OSS rates as follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
OPERATIONAL Electronic Manual
SUPPORT SYSTEM Per LSR received from the CLEC Per LSR received from the CLEC
(OSS) RATES by one of the OSS Interactive by means other than one of the
Interfaces OSS interactive Interfaces
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
OSS Order Charge $3.50 $19.99
- ---------------------------------------------------------------------------------------------------
</TABLE>
In addition to the OSS Charges, applicable discounted service order and related
charges apply per the tariff.
2. The Parties agree that US Telcom, will incur the mechanized rate for all
LSRS, both mechanized and manual, if the percentage of mechanized LSRs to total
LSRs exceeds the threshold percentages shown below:
Year Ratio: Mechanized/Total LSRs
1999 70%
2000 80%
2001 90%
The threshold plan will be discontinued in 2002.
3. The Parties agree that the threshold plan described in Paragraph 2 above
may be superceded by an LSR specific process that would apply the mechanized LSR
rate to only those manual LSRs, which cannot be submitted over a mechanized
system.
4. The Parties agree that all other provisions of the Agreement, dated May
28, 1998, shall remain in full force and effect.
5. The Parties further agree that either or both of the Parties is
authorized to submit this Amendment to the Public Service Commission or other
regulatory body having jurisdiction over the
United States Telecommunications, Inc.
OSS Amendment
Page 1 of 2
<PAGE> 17
subject matter of this Amendment, for approval subject to Section 252(e) of the
federal Telecommunications Act of 1996.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be executed by their respective duly authorized representatives on the date
indicated below.
BELLSOUTH TELECOMMUNICATIONS, INC. UNITED STATES TELECOMMUNICATIONS, INC.
/s/ Jerry D. Hendrix /s/ Richard Pollara
- ----------------------------------- -------------------------------------
Signature Signature
Jerry D. Hendrix Richard Pollara
- ----------------------------------- -------------------------------------
Name Name
Director - Interconnection Services President
- ----------------------------------- -------------------------------------
Title Title
4/1/99 3/30/99
- ----------------------------------- -------------------------------------
Date Date
United States Telecommunications, Inc.
OSS Amendment
Page 2 of 2
<PAGE> 18
AMENDMENT TO
RESALE AGREEMENT BETWEEN
BELLSOUTH TELECOMMUNICATIONS, INC.
AND UNITED STATES TELECOMMUNICATIONS, INC.
DATED MAY 28,1998
Pursuant, to this Agreement (the "Amendment"), BellSouth
Telecommunications, Inc. ("BellSouth") and United States Telecommunications,
Inc., ("US Telcom") hereinafter referred to collectively as the "Parties"
hereby agree to amend that certain Resale Agreement between the Parties dated
May 28,1998 ("Resale Agreement").
NOW THEREFORE, in consideration of the mutual provisions contained
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the Parties hereby covenant and agree as follows:
1. Section IV.3 of the Resale Agreement is hereby amended to included
the appropriate Shared Tenant Service tariff reference, A.27; for the states of
Alabama, Kentucky, Louisiana, Mississippi and Tennessee.
2. All of the other provisions of the Resale Agreement, dated May 28,
1998 shall remain in full force and effect.
3. The Parties further agree that either or both of the Parties is
authorized to submit this Amendment to the appropriate Commission or other
regulatory body having jurisdiction over the subject matter of this Amendment,
for approval subject to Section 252(e) of the federal Telecommunications Act of
1996.
IN WITNESS WHEREOF, the Parties hereto have caused this Amendment to be
executed by their respective duly authorized representatives on the date
indicated below.
UNITED STATES TELECOMMUNICATIONS, INC. BELLSOUTH TELECOMMUNICATIONS, INC.
BY: BY:
--------------------------------- -----------------------------
DATE: 2/9/99 DATE: 2/8/99
------ ------
<PAGE> 1
EXHIBIT 10.5
RESALE AGREEMENT - G (MISSOURI)
PAGE 1 OF 3
SWBT;CLEC
100198
RESALE AGREEMENT BETWEEN
SOUTHWESTERN BELL TELEPHONE COMPANY
UNITED STATES TELECOMMUNICATIONS, INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
I. DESCRIPTION AND CHARGES FOR SERVICES .......................................................1
II. TERMS AND CONDITIONS FOR RESALE OF SERVICES ................................................3
A Permitted Use of Resold Services by CLEC and Its End Users ...............................3
B. Use of SWBT Trademarks ..................................................................5
C. Network and Service Order Conditions ....................................................5
III. ADDITIONAL SERVICES ........................................................................6
A. 911/E911 ................................................................................6
B. Dialing Parity ..........................................................................6
C. White Page Directories: Listings, Distribution and Information Page .....................7
D. Directory Assistance (DA) ...............................................................8
E. Operator Services (OS) ..................................................................8
F. Payphone Services .......................................................................9
IV. RESPONSIBILITIES OF SWBT ...................................................................9
V. ADDITI0NAL RESPONSIBILITIES OF THE PARTIES ................................................11
A. Cooperation on Fraud ...................................................................11
B. Filing the Agreement ...................................................................11
VI. CHANGES IN SUBSCRIBER CARRIER SELECTIONS ...................................................12
VII. ADDITIONAL RESPONSIBILITIES OF CLEC ........................................................13
A. Payment of Rates and Charges ............................................................13
B. Interfaces with SWBT ....................................................................17
C. Repair Contact Arrangements .............................................................17
D. CLEC Operating Company Number (OCN) .....................................................17
E. Special Service Arrangements ............................................................17
F. DA/OS Branding ..........................................................................18
VIII. NONEXCLUSIVITY .............................................................................19
IX. SUPPORT SYSTEMS SERVICES ...................................................................19
A. Support Systems Services ................................................................19
B. Network Management Controls .............................................................21
C. Law Enforcement and Civil Process .......................................................21
</TABLE>
<PAGE> 2
RESALE AGREEMENT - G (MISSOURI)
PAGE 2 OF 3
SWBT;CLEC
100198
<TABLE>
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<S> <C>
X. CALL TRACE .................................................................................22
X1. TAXES ......................................................................................22
XII. TERMINATION OF SERVICE TO CLEC .............................................................22
X111. FORCE MAJEURE ..............................................................................24
XIV. LIMITATION OF LIABILITY ....................................................................25
XV. NONDISCLOSURE ..............................................................................26
XVI. PUBLICITY ..................................................................................27
XVII. ASSIGNMENT ................................................................................27
XVIII. DISPUTE RESOLUTION .........................................................................27
A. Finality of Disputes ................................... ................................27
B. Alternative to Litigation ...............................................................27
C. Commencing Dispute Resolution ...........................................................28
D. Informal Resolution of Disputes .........................................................28
E. Formal Dispute Resolution ..............................................................28
F. Arbitration .............................................................................30
G. Billing Disputes ........................................................................31
H. No Conflict .............................................................................32
XIX. VERIFICATION REVIEWS .......................................................................32
XX. COMPLIANCE WITH LAWS .......................................................................33
XXI. CERTIFICATION REQUIREMENTS .................................................................34
XXII. EFFECT OF OTHER AGREEMENTS .................................................................34
XXIII. NOTIFICATION ...............................................................................34
XXIV NOTICES ....................................................................................35
XXV. BENEFICIARIES ..............................................................................35
XXVI. TERM .......................................................................................35
XXVII. EFFECTIVE DATE .............................................................................35
</TABLE>
<PAGE> 3
RESALE AGREEMENT - G (MISSOURI)
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SWBT/CLEC
100198
<TABLE>
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<S> <C>
XXVIII. WAIVER......................................................................................35
XXIX. DISCLAIMER OF WARRANTIES ...................................................................36
XXX. RELATIONSHIP OF THE PARTIES ................................................................36
XXXI. REFORMATION ................................................................................36
XXXII. COMPLETE TERMS .............................................................................37
</TABLE>
<PAGE> 4
RESALE AGREEMENT - G (MISSOURI)
PAGE 1 OF 38
SWBT/UNITED STATES TELECOMMUNICATIONS, INC.
100198
RESALE AGREEMENT BETWEEN
SOUTHWESTERN BELL TELEPHONE COMPANY
UNITED STATES TELECOMMUNICATIONS, INC.
This Agreement is between Southwestern Bell Telephone Company
("SWBT"), a Missouri corporation, and United States Telecommunications, Inc.
("CLEC") (collectively, "the Parties") entered into this 22nd day of October,
1998.
WHEREAS, pursuant to the Telecommunications Act of 1996 (the
"Act"), the Parties wish to establish terms for the purchase by CLEC of certain
SWBT retail telecommunications services and certain other services for resale by
CLEC to its local exchange end users in the State of Missouri. Therefore, the
Parties hereby agree as follows:
The geographic SCOPE of this Agreement shall include all
exchanges served by SWBT where SWBT serves as the incumbent Independent Local
Exchange Carrier in the state of Missouri. This Agreement shall exclusively
govern CLEC'S purchases of the services which are the subject of this Agreement,
including any Appendices, Exhibits, Attachments and/or Amendments hereto. By
entering into this Agreement, CLEC agrees that it is purchasing services
pursuant to this Agreement and shall continue to abide by all terms of this
Agreement unless terminated as provided herein.
1. DESCRIPTION AND CHARGES FOR SERVICES
A. Attached hereto as Exhibit A is a list of
Telecommunications Services currently available for
resale at the wholesale discount rate of 19.2% off
the retail rate for each service. Except as otherwise
expressed herein and consistent with SWBT's
obligation under Sec. 251(c)(4)(A) of the Act,
CLEC may resell other Telecommunications Services
offered by SWBT and not listed in Exhibit A. Exhibit
B contains a list of other services available for
resale at the discount included in the exhibit.
B. SWBT will make available to CLEC for resale SWBT's
Bill Plus and Consolidated Billing service at a
discount of five per cent (5%) off of SWBT's tariffed
rate for each service (or in the event either of
these services is not tariffed, at the rate SWBT
charges it subscribers).
<PAGE> 5
RESALE AGREEMENT - G (MISSOURI)
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SWBT/UNITED STATES TELECOMMUNICATIONS, INC.
100198
C. SWBT shall make available for resale by CLEC the
following SWBT services at SWBT's tariffed rate for
each service (or in the event a service is not
tariffed, at the rate SWBT charges its subscribers,
except as otherwise provided herein):
- Construction Charges
- Distance Learning
- Connections with Terminal Equipment and
Communication Systems
- Maintenance of Service Charges
- Suspension Services
- Telecommunications Service Priority Systems
- Access Services
- Cellular Mobile Telephone Interconnection Services
- Exchange Connection Services
- Shared Tenant Service
D. Suspension of Service discounts apply to the
discounted rate for the underlying service. When
CLEC resells Shared Tenant Service, CLEC will receive
the discount associated with the underlying service
used in the shared tenant arrangement.
E. SWBT shall be under no obligation to offer the
following for resale:
- BDS/LAN
- Customer Provided Equipment
- Customized Billing Reports
- InLine(R) Products
- Inside Wiring
- Semi-Public Telephone Booths and Enclosures
- 911 Universal Emergency Number Equipment
F. Educational and Lifeline/Linkup services will be
wholesale priced at zero discount.
G. Grandfathered services are also available for resale
at the applicable wholesale discount to the same
customers at the same location to which SWBT offers
the service.
H. Telecommunications Services will be resold to CLEC
on terms and conditions that are reasonable and
nondiscriminatory.
<PAGE> 6
RESALE AGREEMENT - G (MISSOURI)
PAGE 3 OF 38
SWBT/UNITED STATES TELECOMMUNICATIONS, INC.
100198
I. Unless otherwise provided in this Agreement, SWBT will perform all of
its obligations hereunder throughout the entire service area where SWBT
is the incumbent local exchange carrier. SWBT will provide the services
covered by this Attachment subject to the availability of facilities in
this state on a nondiscriminatory basis with its other customers.
J. CLEC may offer to resell Customer Initiated Suspension and Restoral
Service to their end users as outlined in the corresponding retail
tariff. SWBT will offer to CLEC Company Initiated Suspension Service
for their own purposes at the SWBT retail tariffed rate. Should CLEC
choose to suspend their end user through Company Initiated Suspension
Service, this suspension period shall not exceed fifteen (15) calendar
days. If CLEC issues a disconnect on their end user account within the
fifteen (15) day period, appropriate services will not be billed for
the suspension period. However, should CLEC issue a disconnect after
the fifteen (15) day suspension period, CLEC will be responsible for
all appropriate charges on the account back to the suspension date.
Should CLEC restore their end user, restoral charges at the SWBT retail
tariffed rate will apply and CLEC will be billed for the appropriate
service from the time of suspension.
II. TERMS AND CONDITIONS FOR RESALE OF SERVICES
The following terms and conditions are applicable to all services
purchased under this Agreement.
A. Permitted Use of Resold Services by CLEC and Its End Users
1. For services included in this Agreement, which are offered
through tariffs by SWBT to its end users, the rules and
regulations associated with the applicable State General
Exchange Tariff, Local Exchange Service Tariff, and the other
tariffs for the resold service (such tariffs collectively
referred to herein as "corresponding tariffs"), apply except
as otherwise provided herein.
2. CLEC shall only sell Plexar(R) services to a single end user.
3. Except where otherwise explicity provided in the corresponding
tariffs, CLEC shall not permit the sharing of a service or
services by multiple end users or the aggregation of traffic
from multiple end users onto a single service.
<PAGE> 7
RESALE AGREEMENT - G (MISSOURI)
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SWBT/UNITED STATES TELECOMMUNICATIONS, INC.
100198
4. CLEC shall only resell services purchased under this Agreement
to the same class of end users to whom SWBT sells such services
(e.g. residence service shall not be resold to business end
users). CLEC may only resell Lifeline Assistance, Link-Up, and
other like services to similarly situated customers who are
eligible for such services. Further, to the extent CLEC resells
services that require certification on the part of the buyer,
CLEC will ensure that the buyer has received proper
certification and complies with all rules and regulations
as established by the Commission.
5. SWBT promotions of ninety (90) days or less shall not be
available to CLEC for resale.
6. CLEC shall not use a resold service to avoid the rates, terms
and conditions of SWBT's corresponding tariffs.
7. CLEC shall not use resold local exchange telephone service to
provide access or interconnection services to itself,
interexchange carriers (IXCs), wireless carriers, competitive
access providers (CAPs), or other telecommunitions providers.
Provided however, that CLEC may permit its end users to use
resold local exchange telephone service to access IXCs,
wireless carriers, CAPs, or other retail telecommunications
providers.
8. If CLEC is in violation of a provision of this Agreement, SWBT
shall notify CLEC of the violation in writing of the specific
provision being violated. At such time, CLEC shall have thirty
(30) days to correct the violation and notify SWBT in writing
that the violation has been corrected. SWBT shall then bill
CLEC for the charges which should have been collected by SWBT
or the actual revenues collected by CLEC from its end users for
the stated violation, whichever is greater. If CLEC disputes
the violation, it shall notify SWBT in writing within fourteen
(14) days of receipt of notice from SWBT. Disputes shall be
resolved as outlined in the Dispute Resolution section of the
Agreement.
9. SWBT will apply any Commission mandated end-user charges
including an End User Common Line (EUCL) charge to each local
exchange line resold under this agreement. All federal rules
and regulations associated with EUCL charges, as found in
Tariff FCC 73, also apply to such EUCL charges.
<PAGE> 8
RESALE AGREEMENT - G (MISSOURI)
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SWBT/UNITED STATES TELECOMMUNICATIONS, INC.
100198
10. To the extent allowable by law, CLEC shall be responsible
for Primary Interexchange Carrier (PIC) change charges
associated with such local exchange line. CLEC shall pay
for PIC changes at the tariffed rate.
11. SWBT is not required to make services available for resale
at wholesale rates to CLEC for its own use or to CLEC's
affiliates, subsidiaries, predecessors, successors,
assignees or anyone or any entity claiming by or through
CLEC.
B. USE OF SWBT TRADEMARKS
Except where otherwise required by law, CLEC shall not,
without SWBT's written authorization, offer the services
covered by this Agreement using the trademarks, service
marks, trade names, brand names, logos, insignia, symbols or
decorative designs of SWBT or its affiliates. Nor shall CLEC
state or imply that there is any joint business association or
similar arrangement with SWBT in the provision of
telecommunications services to CLEC's own end users. CLEC may
brand services included in this Agreement with its own brand
name, but SWBT shall not be responsible for providing such
branding.
C. NETWORK AND SERVICE ORDER CONDITIONS
1. SWBT shall provide the services covered by this Agreement
subject to availability of existing facilities and on a
nondiscriminatory basis with its other customers. CLEC
shall resell the services provided herein only in those
service areas in which such resale services or any feature
or capability thereof are offered at retail by SWBT as the
incumbent local exchange carrier to its end users.
2. When CLEC converts an end user currently receiving
noncomplex service from the SWBT network without any
changes to SWBT's network, CLEC will be charged a per
order (i.e., per billable telephone number) conversion
charge of twenty-five dollars ($25.00) in Missouri.
Conversion orders processed and completed electronically
with be charged five dollars ($5.00) per order on an
interim basis. Complex orders will be charged at a rate of
one hundred twenty-five dollars ($125.00). Custom Services
conversions (e.g. Plexar Custom) will be handled on a
Customer Specific Proposal basis.
<PAGE> 9
RESALE AGREEMENT - G (MISSOURI)
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SWBT/UNITED STATES TELECOMMUNICATIONS, INC.
100198
When CLEC converts an end user and adds or changes are
made to the network, the respective conversion charge will
apply, as well as any normal service order charges
associated with said changes. All nonrecurring service
connection charges, excluding the conversion charge
mentioned above, will be charged at a discount for those
services listed in Exhibits A and B.
3. For the pruposes of ordering new service under this
Agreement, each request for service shall be handled as a
spearate and initial request for service per billable
telephone number. The additonal line rate for Service
Order Charges shall apply only to those requests for
additional residential service at the end user's same
location where a residential line is currently provided on
SWBT's network, regardless of the nonfacilities based
Local Service Provider of record.
4. For purposes of this section, CLEC service orders shall
be handled in the same fashion as SWBT employs for its own
end users.
III. ADDITIONAL SERVICES
A. 911/E911
1. Access to the 911 or E911 service, available to SWBT
end users in the area(s) served by CLEC, shall be made
available to CLEC's end users.
2. CLEC shall be responsible for collecting and remitting
all applicable 911 surcharges on a per line basis to
the Public Safety Answering Point (PSAP).
3. When requested by SWBT, CLEC shall timely provide
accurate and complete information on each of CLEC's
end users as needed for the provisioning of 911
service to CLECs end users. Such information shall be
in a format determined by SWBT.
B. DIALING PARITY
1. LOCAL DIALING PARITY
SWBT agrees that local dialing parity shall be
avalaible to CLEC. That is, end users of SWBT and end
users of CLEC shall have the
<PAGE> 10
RESALE AGREEMENT - G (MISSOURI)
PAGE 7 OF 38
SWBT/UNITED STATES TELECOMMUNICATIONS, INC.
100198
same exchange boundaries, such end users shall be able
to dial to same number of digits when making a "local"
call.
2. IntraLATA TOLL DIALING PARITY.
SWBT agrees to make intraLATA toll dialing parity
available in accordance with Section 251(b)(3) of the
Telecommunications Act of 1996.
C. WHITE PAGE DIRECTORIES: LISTINGS, DISTRIBUTION AND
INFORMATION PAGE
1. At CLEC's request, SWBT shall provide nondiscriminatory
access to White Pages directory listing and distribution
services under the terms and conditions described
herein:
a) SWBT shall provide, at no additional charge, a
straight line listing in the appropriate SWBT white
pages for each of CLEC's local exchange service end
users. Subscriber listing information shall,
however, remain the property of SWBT.
b) Additional Listing Services (e.g., foreign and
signature listings) can be purchased by CLEC for
its end users on a per listing basis. CLEC shall
pay SWBT for all such listings provided to CLEC's
end users. The discounts applicable to Listing
Services are contained in Exhibits A and B to this
Agreement.
c) CLEC end users shall be entitled to one directory
per basic residential or business line provided by
SWBT pursuant to this Agreement.
d) SWBT, or its agents shall deliver a White Pages
Directory to CLEC end user's premises at the same
time that such directories are delivered to SWBT
end users. If an CLEC's end user already has a
current SWBT directory, SWBT shall not be required
to deliver a new directory to that end user until
the new directories are published for that end
user's location.
e) CLEC hereby releases SWBT from any and all
liability for damages due to errors or omissions in
CLEC's subscriber listing information as it appears
in the White Pages
<PAGE> 11
RESALE AGREEMENT - G (MISSOURI)
PAGE 8 OF 38
SWBT/UNITED STATES TELECOMMUNICATIONS, INC.
100198
directory, including, but not, limited to, special,
indirect, consequential. punitive or incidental
damages. To the extent CLEC reimburses its end user
subscriber any listing charge due to errors or
omissions caused directly by SWBT, SWBT shall reimburse
CLEC any associated wholesale rate.
2. INFORMATION PAGE
a) At CLEC'S request, SWBT shall include in the
"Informational Page" section of SWBT's White Pages
directory, for those geographical areas which CLEC
provides local exchange services, CLEC's customer
contact information regarding emergency services,
billing and service information, repair services and
other pertinent information similar to that provided by
SWBT in its "Informational Pages." Such information
shall be included on the same page with other CLEC
information.
b) At CLEC's option, CLEC shall be a single "Informational
Page" (one side of one page) in the informational
section of the White Pages directory covering a
geographic area where an CLEC provides local exchange
service. This page shall be no different in style,
size, color and format than SWBT "Informational Pages."
Sixty (60) days prior to the directory close date, CLE
shall provide to SWBT the "Informational Page" in the
form of camera-copy. The charges associated with this
service vary from geographic market to market, and are
charged outside this Agreement.
D. DIRECTORY ASSISTANCE (DA)
SWBT shall provide access to the same DA services it makes
available to its own end users to CLEC's end users. CLEC shall
pay the charges associated with the use of such services by
CLEC's end users. The discounts applicable to such services are
contained in Exhibits A and B, which is attached hereto and
made a part hereof.
E. OPERATOR SERVICES (OS)
1. SWBT shall provide access to Operator Services to CLEC's end
users. CLEC shall pay the charges associated with the use of
such
<PAGE> 12
RESALE AGREEMENT - G (MISSOURI)
PAGE 9 OF 38
SWBT/UNITED STATES TELECOMMUNICATIONS, INC.
100198
services by CLEC'S end users. The discounts applicable to such
services arc contained in Exhibits A and B, which is attached
hereto and incorporated by reference.
2. SWBT shall provide Line Status Verification and Busy Line
Interrupt on calls made on SWBT's network to CLEC end users.
CLEC shall pay SWBT associated charges when its end users
request such services, with discounts to apply as listed in
Exhibits A and B.
F. PAYPHONE SERVICES
1. CLEC may enter the business of providing local
telecommunications services to payphone service providers
(PSPs) for PSPs' use in providing payphone service Local
telecommunications services which PSPs use in providing and
which are provided to PSPs by CLEC by means of reselling those
of SWBT's services offered pursuant to the General Exchange
Tariff are referred to in this Agreement as "Payphone Lines".
In its Common Carrier Docket No. 96-128, the Federal
Communications Commission ("FCC") has ordered SWBT to
compensate PSP customers of CLECs that resell SWBT's services
for certain calls originated from pay telephones and received
by the resale-based carriers. (IMPLEMENTATION OF THE PAY
TELEPHONE RECLASSIFICATION AND COMPENSATION PROVISIONS OF THE
TELECOMMUNICATIONS ACT OF 1996, FCC Docket No. 96-128, Report
and Order, para. 86 (1996)). This compensation is referred to
in this Agreement as "Payphone Compensation".
2. The Parties desire that SWBT satisfy its obligation to pay
Payphone Compensation to Payphone Service Providers (PSPs) who
are customers of CLEC by paying the Payphone Compensation to
the CLEC who will then forward the Payphone Compensation
directly to the PSPs.
IV. RESPONSIBILITIES OF SWBT
A. SWBT shall allow CLEC to place service orders and receive phone number
assignments (for new lines). These activities shall be accomplished by
telephone call or facsimile until electronic interface capability has
been established. SWBT, with input from CLEC, shall provide interface
specifications for electronic access for these functions to CLEC once
such electronic interfaces become technically feasible and are
<PAGE> 13
RESALE AGREEMENT - G (MISSOURI)
PAGE 10 OF 38
SWBT/UNITED STATES TELECOMMUNICATIONS, INC.
100198
in place. However, CLEC shall be responsible for modifying and
connecting any of its systems with SWBT provided interfaces when such
interfaces become available, as outlined in Appendix OSS.
B. SWBT shall implement CLEC service orders within the same time
intervals SWBT uses to implement service orders for similar services
for its own end users.
C. CLEC will have the ability to report trouble for its end users to
appropriate SWBT trouble reporting centers 24 hours a day, 7 days a
week. CLEC will be assigned a customer contact center when initial
service agreements are made. CLEC end users calling SWBT may be
referred to CLEC at the number provided by CLEC. SWBT shall at all
times be responsible for the repair and maintenance of its network.
Nothing herein shall be interpreted to authorize CLEC to repair,
maintain, or in my way touch SWBT's network facilities, including those
on end user premises.
Operational procedures for ordering and trouble reporting are outlined
in SWBT'S CLEC as amended by SWBT from time to time. Both parties agree
to abide by the procedures contained therein.
D. On no less than sixty (60) days advance written notice, CLEC may
request SWBT to make certain usage information available to CLEC on a
daily basis in a standard electronic format. The information will
consist of usage sensitive charges SWBT will bill to CLEC arising out
of the use of resold lines. CLEC agrees to pay SWBT three tenths of a
cent ($.003) per message for this service, plus other charges outlined
in Appendix OSS.
E. Subject to any future order of the FCC which obligates SWBT to pay an
amount different from the following, SWBT will pay Payphone
Compensation due with respect to the Payphone lines in the amount of
$0.284 per call. SWBT will pay to CLEC such Payphone Compensation only
for (i) intraLATA subscriber 800 calls for which SWBT provides the 800
service to the subscriber and carries the call and (ii) intraLATA calls
placed using SWBT's prepaid calling card platform and carried by SWBT.
SWBT will not pay to CLEC any Payphone Compensation for non-sent paid
calls.
1. SWBT will pay CLEC the Payphone Compensation due to CLEC Customer
(PSP) within sixty (60) days after the close of the calendar
quarter in which the call for which Payphone Compensation is due is
made. However, payment may be made later than sixty (60) days if
SWBT deems it necessary to
<PAGE> 14
RESALE AGREEMENT - G (MISSOURI)
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SWBT/UNITED STATES TELECOMMUNICATIONS, INC.
100198
investigate a call or calls for possible
fraud. To the extent to which SWBT's first
payment includes Payphone Compensation for
calls made prior to any calendar quarter
which ended thirty (30) days after this
Agreement takes effect and will include as
Payphone Compensation under this Agreement
an amount equal to the Payphone Compensation
which would have been due to CLEC under this
Agreement had this Agreement taken effect on
October 7, 1997.
2. SWBT will make any payment due to CLEC under this
Agreement by crediting CLEC's bill for the
Payphone Line over which the call which give rise
to the Payphone Compensation is placed. SWBT will
not issue a check to CLEC if the credit for
Payphone Compensation exceeds the balance due to
SWBT on the bill.
3. Nothing in this Agreement entitles CLEC to receive
or obligates SWBT to provide any call detail or
other call record.
V. ADDITIONAL RESPONSIBILITIES OF THE PARTIES
A. COOPERATION ON FRAUD
SWBT shall not be liable to CLEC for any fraudulent
usage on CLEC's end users' accounts.
The Parties agree to cooperate with one another to
investigate, minimize and take corrective action in
cases of fraud. The Parties' fraud minimization
procedures are to be cost effective and implemented
so as not to unduly burden or harm one Party as
compared to the other.
At a minimum, such cooperation shall include
providing to the other Party, upon request,
information concerning end users who terminate
services to that Party without paying all outstanding
charges, when such end user seeks service from the
other Party. The Party seeking such information is
responsible for securing the end user's permission to
obtain such information.
B. FILING THE AGREEMENT
Unless otherwise agreed, if the designated Party
fails to file the jointly signed agreement with the
Commission within forty-five (45) days of both
<PAGE> 15
RESALE AGREEMENT - G (MISSOURI)
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SWBT/UNITED STATES TELECOMMUNICATIONS, INC.
100198
Parties signatures, then the signed agreement is
null and no longer valid. If the contract becomes
null, either Party can initiate negotiations to a new
agreement.
VI. CHANGES IN SUBSCRIBER CARRIER SELECTIONS
A. Prior to submitting an order under this Agreement,
CLEC shall obtain end user authorization as required
by applicable state or federal laws and regulations,
and assumes responsibility for applicable charges as
specified in Section 258(b) of the Telecommunications
Act of 1996. SWBT shall abide by the same applicable
laws and regulations.
B. Only an end user can initiate a challenge to a change
in its local exchange service provider. If an end
user notifies SWBT or CLEC that the end user requests
local exchange service, the Party receiving such
request shall be free to immediately provide service
to such end user, except in those instances where the
end user's account is local PIC protected. It is the
responsibility of the end user to provide written
authorization to the current provider of record to
remove local service provider protection before any
changes in local exchange service provider are
processed.
SWBT shall be free to connect the end user to any
Competitive Local Exchange Carrier based upon the
Competitive Local Exchange Carrier's request and
Competitive Local Exchange Carrier's assurance that
proper end user authorization has been obtained. CLEC
shall mike authorization available to SWBT upon
request and at no charge.
C. When an end user changes or withdraws authorization,
each Party shall release customer-specific facilities
in accordance with the end user customer's direction
or the direction of the end user's authorized agent.
Further, when an end user abandons the premise, SWBT
is free to reclaim the facilities for use by another
customer and is free to issue service orders required
to reclaim such facilities.
D. Neither Party shall be obligated by this Agreement
to investigate any allegations of unauthorized
changes in local exchange service (slamming) on
behalf of the other Party or a third party. If SWBT,
on behalf of CLEC, agrees to investigate an alleged
incidence of slamming, SWBT shall charge CLEC a fifty
dollar ($50) investigation fee.
E. When SWBT receives an order from CLEC for services
under this Agreement and SWBT is currently providing
the same services to another Competitive Local
Exchange Carrier for the same end user. SWBT shall
<PAGE> 16
RESALE AGREEMENT - G (MISSOURI)
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SWBT/UNITED STATES TELECOMMUNICATIONS, INC.
100198
notify the end user's Competitive Local Exchange Carrier of
record of such order coincident with processing the order. It
shall then be the responsibility of the Competitive Local
Exchange Carrier of record and CLEC to resolve any issues
related to the end user. This paragraph shall not apply to new
additional lines and services purchased by an end user from
multiple CLECs or from SWBT.
F. On no less than sixty (60) days notice, CLEC may request the
Local Disconnect Report. SWBT agrees to furnish to CLEC the
Billing Telephone Number (BTN), Working Telephone Number
(WTN), and terminal number of all end users who have
disconnected CLEC's service. CLEC understands and agrees that
the CARE interface will be used to provide such information
and such information will only be available via the CARE
electronic data transmission. Information will be provided on
a per-WTN basis to be priced on a per-WTN basis. SWBT will
provide CLEC no less than thirty (30) days notice prior to any
change of the per-WTN charge. SWBT grants to CLEC a
non-exclusive right to use the information provided by SWBT.
CLEC will not permit anyone but its duly authorized employees
or agents to inspect or use this information. CLEC agrees to
pay SWBT ten cents ($0.10) per WTN and any applicable
transmission charges for the Local Disconnect Report.
G. The CLEC agrees to hold harmless and indemnify SWBT against
any and all liability and claims, including reasonable
attorney's fees, that may result from SWBT acting under this
Article.
H. Nothing herein shall be interpreted to apply to conversion of
CLEC end users pursuant to Article XII. (TERMINATION OF
SERVICE TO CLEC).
VII. ADDITIONAL RESPONSIBILITIES OF CLEC
A. PAYMENT OF RATES AND CHARGES
1. CLEC is solely responsible for the payment of charges for all
services furnished under this Agreement including, but not
limited to, calls originated or accepted at CLEC's location and
its end users' service locations, with the exception of any
retail services provided directly by SWBT to the end user which
SWBT shall be responsible for billing.
Interexchange carried traffic (e.g., sent-paid, information
services and alternate operator services messages) received by
SWBT for billing to resold end-user accounts will be returned as
unbillable
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and will not be passed on to CLEC for billing. An unbillable code
returned with those messages to the carrier will indicate that the
messages originated from a resold account and will not be billed by
SWBT.
2. SWBT shall not be responsible for the manner in which the use of
resold service, or the associated charges are allocated to others by
CLEC. All applicable rates and charges for such services will be
billed to and shall be the responsibility of CLEC, with the
exception of retail services provided directly the end user by SWBT
as described in paragraph 1 above.
3. Compensation for all services shall be paid by CLEC regardless of
CLEC's ability or inability to collect charges from its end user for
such service.
4. If CLEC does not wish to be responsible for collect, third number
billed, toll, and information services (e.g., 900) calls, it must
order the appropriate blocking for resold lines under this Agreement
and pay any applicable charges. CLEC acknowledges that blocking is
not available for certain types of calls, including 800 numbers. It
is the responsibility of the CLEC to order the appropriate toll
restriction or blocking on all of their resold end user lines.
5. CLEC agrees to pay all costs associated with a CLEC name change.
6. Deposit Requirements
a. If CLEC has not established a minimum of twelve (12) months
good credit history with SWBT as a local service provider, CLEC
shall remit a deposit in the amount of $17,000 to SWBT prior to
the furnishing of service under this Agreement. This deposit
will be held by SWBT as a guarantee of payment of charges
billed to CLEC. If CLEC has established a minimum of twelve
(12) months good credit history with SWBT as a local service
provider, SWBT shall waive the initial deposit requirement;
provided, however, that the terms and conditions set forth in
Article VII, Section A, Paragraph 6(b) through (i) shall
continue to apply for the term of this Agreement and any
extension(s) hereof.
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b. Any cash deposit held by SWBT shall be credited to CLEC's
account during the month following the expiration of twenty
four (24) months after the cash deposit was remitted, so long
as CLEC has not been sent more than one delinquency
notification letter during the most recent twelve (12) months.
For the purposes of this Article VII, Section A, Paragraph 6,
interest will be calculated as defined by the applicable state
tariff regulating retail deposits and shall be credited to
CLEC's account on an annual basis.
c. So long as CLEC maintains timely compliance with its payment
obligations, SWBT will not increase the deposit amount
required. If CLEC fails to maintain timely compliance with its
payment obligations, SWBT reserves the right to require
additional deposit(s) in accordance with Article VII, Section
A, Paragraphs 6(d) and 6(e) of this Agreement.
d. If during the first six (6) months of operations under this
Agreement, CLEC has been sent one delinquency notification
letter by SWBT, the deposit amount shall be re-evaluated based
upon CLEC's actual billing totals and shall be increased if the
CLEC's actual billing average for a two month period exceeds
the deposit amount held.
e. Any time CLEC has been sent two delinquency notification
letters, by SWBT, the deposit amount shall be re-evaluated
based upon CLEC's actual billing totals and shall be increased
if the CLEC's actual billing average for a two month period
exceeds the deposit amount held.
f. Whenever a deposit is re-evaluated as specified in Article VII,
Section A, Paragraphs 6(d) and 6(e), above, such deposit shall
by calculated in an amount equal to the average billing to CLEC
for a two month period plus the amount of any charges which
would be applicable to transfer all then-existing resold
service to SWBT in the event of CLEC's disconnection for
non-payment of charges. The most recent three (3) months
billing on all of CLEC's CBAs shall be used to calculate CLEC's
monthly average.
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g. Whenever a deposit is re-evaluated as specified in Article
VII, Section A, Paragraphs 6(d) and 6(e), above, CLEC
shall remit the additional deposit amount to SWBT within
thirty (30) calendar days of receipt of written
notification from SWBT requiring such deposit. If CLEC
fails to furnish the required deposit within thirty (30)
calendar days of receipt of written notice requesting such
deposit, SWBT shall begin the process set forth Article
XII, Section A of this Agreement. If CLEC continues to
fail to furnish the required deposit at the expiration
of the fourteen (14) calendar days specified in Article
XII, Section A of this Agreement, then SWBT shall begin
the procedure(s) set forth in Article XII, Sections D, et
seq. of this Agreement.
h. This deposit requirement may be satisfied in whole or in
part with an irrevocable bank letter of credit acceptable
to SWBT. No interest shall be paid by SWBT for any deposit
requirement satisfied in whole or in part by an
irrevocable bank letter of credit.
i. The fact that SWBT holds a cash deposit or irrevocable
bank letter of credit does not relieve CLEC from timely
compliance with its payment obligations under this
Agreement.
7. CLEC represents and warrants that the only SWBT services which
CLEC will make available to PSPs as Payphone Lines are the
services which SWBT offers pursuant to the General Exchange
Tariff P.S.C. Mo. No. 35, Sec. 34.
Except as provided otherwise in this paragraph, CLEC shall pay
the entire amount of the Payphone Compensation due with
respect to a Payphone Line to the PSP who is the CLEC Customer
for the payphone line. CLEC shall make such payment on or
before the last business day of the calendar quarter in which
the call for which the Payphone Compensation is due to the PSP
is made. If SWBT pays any Payphone Compensation to the CLEC
later than sixty (60) days after the close of the calendar
quarter in which the call for which Payphone Compensation is
due is made, then CLEC shall pay the entire amount of such
Payphone Compensation to the PSP who is the CLEC's customer
for the Payphone Line within ten (10) business days after
receiving such Payphone Compensation from SWBT.
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CLEC shall indemnify, defend and hold harmless SWBT from and
against any loss, cost, claim, liability, damage or expense
(including reasonable attorney's fees) to any third party,
including PSP, relating to or arising from any of the
following:
a. CLEC's failure to comply with all the terms and conditions
of Sec. VII A,.6, or
b. Use by a PSP customer of CLEC of any service other than a
Payphone Line to provide pay telephone service or
c. False representation by CLEC.
B. INTERFACES WITH SWBT
CLEC shall be responsible for modifying and connecting any of its
systems with SWBT-provided interfaces as described in this
Agreement.
C. REPAIR CONTACT ARRANGEMENTS
CLEC shall be responsible for providing to its end users and to
SWBT a telephone number or numbers that CLEC's end users can use to
contact CLEC in the event of service or repair requests. In the
event that CLEC's end users contact SWBT with regard to such
requests, SWBT shall inform the end user that they should call CLEC
and may provide CLEC contact number.
D. CLEC COMPANY CODE/OPERATING COMPANY NUMBER (OCN) ALSO KNOWN AS
ALTERNATE EXCHANGE CARRIER NUMBER (AECN)
For the purposes of establishing, provisioning and billing service
to the CLEC, THE CLEC is required to provide to SWBT its OCN/AECN
for resale services in any SWBT state, which must be separate and
distinct from the CLEC's state-specific OCN/AECNs for
facilities-based business (interconnection and/or unbundled network
elements). CLEC name associated with specific resale OCN/AECN must
be consistent among SWBT states.
E. SPECIAL SERVICE ARRANGEMENTS
For special service arrangements for CLEC not covered under this
Agreement, special charges shall apply as provided in the applicable
corresponding tariffs.
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F. DEVELOPMENT OF BRANDIN AND CUSTOMIZED ROUTING FOR DIRECTORY
ASSISTANCE AND OPERATOR SERVICES
1. REQUIREMENTS - Pursuant to Sec. 226 (b) of The
Telecommunications Act of 1996, each provider of Operator
Services is required to:
a. provide its brand at the beginning of each telephone call
and before the consumer incurs any charge for the call; and
b. disclose immediately to the consumer, upon request a quote
of its rates or charges for the call.
c. Where SWBT provides CLECs OS and DA services via the same
trunk, both the OS and DA calls will be branded with the
same brand. Since SWBT's DA and OS utilize the same trunk
group, CLEC will receive the same brand for both DA/0S. Such
branding will be provided pursuant Section 2. below.
2. CALL BRANDING - In compliance with F.1. above, SWBT will
brand DA/OS in CLEC's name based upon the criteria outlined
below:
a. CLEC will provide SWBT with written specification of its
company name to be used in creating CLEC specific branding
messages for its DA/OS calls.
b. An initial non-recurring charge applies per load for the
establishment of Call Branding as well as a charge per
subsequent load to change the brand. In addition, a per call
charge applies for every DA/OS call handled by SWBT on
behalf of CLEC when such services are provided in
conjunction with resale services. Prices for Call Branding
are as outlined in Exhibit C, attached hereto and
incorporated herein.
3. RATE/REFERENCE INFORMATION - SWBT will provide CLEC DA/OS
Rate/Reference Information based upon the criteria outlined
below:
a. CLEC will furnish DA/OS Rate and Reference Information in
a mutually agreed to format or media thirty (30) days in
advance of the date when the DA/OS Services are to be
undertaken.
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b. CLEC will inform SWBT, in writing, of any changes to be
made such Rate/Reference Information ten (10) working days
prior to the effective Rate/Reference change date. CLEC
acknowledges that it is responsible to provide SWBT updated
Rate/Reference Information in advance of when the
Rates/Reference Information are to become effective.
c. In all cases when a SWBT Operator receives a rate request
from a CLEC end user, SWBT will quote the applicable DA/OS
rates as provided by CLEC.
d. An initial non-recurring charge will apply for loading of
CLEC's DA/OS Rate/Reference Information as well as a charge
for each subsequent change to either the CLEC's DA/OS
Services Rate or Reference Information as outlined in
Exhibit C, attached hereto and incorporated herein.
4. CUSTOMIZED ROUTING - SWBT shall also offer CLEC the opportunity
to customize route DA/OS where technically feasible. CLEC agrees
to pay SWBT appropriate charges associated with customized
routing on an ICB basis.
VIII. NONEXCLUSIVITY
This Agreement is nonexclusive. CLEC acknowledges that SWBT will be
providing the same or similar services to other local services
providers in accordance with negotiated agreements which will be filed
with the appropriate state commission(s). CLEC also acknowledges that
SWBT may, upon end user request, provide any and all of the services
provided to CLEC under this Agreement directly to the end users. SWBT
acknowledges that CLEC may obtain the same or similar services from
other local exchange companies.
IX. SUPPORT SYSTEMS SERVICES
A. SUPPORT SYSTEMS SERVICES
1. TRANSFER OF SERVICE ANNOUNCEMENTS (INTERCEPT)
The Party formerly providing service to an end user shall
provide a Basic Referral announcement, reciprocally and free of
charge on the abandoned telephone number. The announcement
states that the called number has been disconnected or changed
and provides
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the end user's new telephone number to the extent that it is listed. SWBT
shall provide an intercept referral on behalf of CLEC to their end user as
indicated on the appropriate service order.
Basic Intercept Referral Announcements are to be provided on residential
numbers for a minimum of thirty (30) days where facilities exist and the
threat of telephone number exhaustion is not imminent.
Basic Intercept Referral Announcements for a single line business end user
and the primary listed telephone number for Direct Inward Dial (DID) and
"Centrex-type" end users, shall be available for a minimum of thirty (30)
days or the life of the white pages directory, whichever is greater. If the
threat of telephone number exhaustion becomes imminent for a particular
central office, the service provider may reissue a disconnected number
prior to the expiration of the directory, but no earlier than thirty (30)
days after the disconnect of the business telephone number.
2. COORDINATED REPAIR CALLS
SWBT shall be responsible for repairing its own network. However, CLEC
shall maintain telephone numbers where its end user may call to report
instances of trouble.
The Parties shall employ the following procedures for handling misdirect
repair calls:
a. The Parties shall inform their respective end users of the correct
telephone numbers to call to access their respective repair bureaus.
b. To the extent the correct provider can be determined, each Party
shall refer misdirected repair calls to the proper provider of local
exchange service, at no charge, and shall provide the end user the
contact telephone number provided by the other party.
In responding to repair calls, neither Party shall make disparaging
remarks about each other, nor shall they use these repair calls as
the basis for internal referrals or to solicit customers or to market
services. Either Party may
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respond with accurate information in answering customer questions.
c. The Parties shall provide each other their respective repair contact
numbers.
B. NETWORK MANAGEMENT CONTROLS
Each Party shall provide a 24-hour contact number for Network Traffic
Management issues to the other. A FAX number must also be provided to
facilitate event notifications for planned mass calling events.
Additionally, both Parties agree that they shall work cooperatively that
all such events shall attempt to be conducted in such a manner as to avoid
degradation or loss of service to other end users.
C. LAW ENFORCEMENT AND CIVIL PROCESS
SWBT and CLEC shall handle law enforcement requests as follows:
1) INTERCEPT DEVICES Local and federal law enforcement agencies
periodically request information or assistance from local telephone
service providers. When either Party receives a request associated
with an end user of the other Party, it shall refer such request to
the appropriate Party, unless the request directs the receiving Party
to attach a pen register, trap and trace or form of intercept on that
Party's own facilities, in which case that Party shall comply with
any valid request.
2) SUBPOENAS If a Party receives a subpoena for information concerning
an end user the Party knows to be an end user of the other Party, it
shall refer the subpoena to the requesting entity with an indication
that the other Party is the responsible company. Provided, however,
if the subpoena request records for a period of time during which the
receiving Party was the end user's service provider, the receiving
Party will respond to any valid request.
3) EMERGENCIES If a Party receives a request from a law enforcement
agency for a temporary number change, temporary disconnect or one way
denial of outbound calls for an end user of the other party, the
receiving Party will comply so long as it is a valid emergency
request. In the case of the CLEC, the CLEC shall refer such request
to SWBT and SWBT shall honor such request in accordance with this
paragraph. However, neither Party shall be
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held liable for any claims or damages arising from compliance with
such requests, and the Party serving the end user agrees to indemnify
and hold the other Party harmless against any and all such claims.
X. CALL TRACE
CLEC end user's activation of Call Trace shall be handled by the SWBT Call
Trace Center (CTC) or its Annoying and Anonymous Call Bureau. SWBT shall
notify CLEC of requests by its end users to provide the call records to the
proper authorities. Subsequent communication and resolution of the case
with CLEC's end user (whether that end user is the victim or the suspect)
shall be the responsibility of CLEC.
CLEC understands that for services where reports are provided to law
enforcement agencies (e.g., Call Trace) only billing number and address
information shall be provided. It shall be the CLEC's responsibility to
provide additional information necessary for any police investigation.
XI. TAXES
CLEC shall be responsible for all federal, state or local, sales, use,
excise or gross receipts taxes or fees imposed on or with respect to the
services provided under this Agreement including those taxes and fees
imposed on SWBT. CLEC shall reimburse SWBT for the amount of any such taxes
or fees which SWBT is required to pay or collect for services provided to
CLEC hereunder. To the extent a sale is claimed to be for resale tax
exemption, the CLEC shall furnish SWBT a proper resale tax exemption
certificate as authorized or required by statute or regulation by the
jurisdiction providing said resale tax exemption. Failure to timely provide
said resale tax exemption certificate will result in no exemption being
available to the CLEC until such time as CLEC presents a valid certificate.
XII. TERMINATION OF SERVICE TO CLEC
A. If CLEC fails to pay when due (within 30 days of the bill date), any
and all charges billed to them under this Agreement, including any
late payment charges (Unpaid Charges) or miscellaneous charges, and
any portion of such charges remain unpaid more than fifteen (15) days
after the due date of such Unpaid Charges, SWBT shall notify CLEC in
writing that in order to avoid having service disconnected, CLEC must
remit all Unpaid Charges to SWBT within fourteen (14) calendar days.
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B. If CLEC disputes the billed charges, it shall, within the fourteen
(14) day period provided for above, inform SWBT in writing which
portion of the charges it disputes, including the specific details
and reasons for its dispute; immediately pay to SWBT all undisputed
charges; and pay all disputed charges into an interest bearing escrow
account established by CLEC with third party escrow agent mutually
agreed upon by the Parties.
C. Disputes hereunder shall be resolved in accordance with the
procedures identified in Article XVIII (Dispute Resolution). Failure
of CLEC to pay charges deemed owed to SWBT after conclusion of the
Arbitration shall be grounds for termination under this Article.
D. If any CLEC charges remain unpaid or undisputed twenty-nine (29) days
past the due date, SWBT shall notify CLEC, the Commission and the end
user's IXC(s) of Record in writing, that unless all charges are paid
within sixteen (16) days, CLEC's service shall be disconnected and
its end users shall be switched to SWBT local service. SWBT will also
suspend order acceptance with the exception of disconnects on the
same day that it sends the letter required by the preceding sentence.
E. If any CLEC charges remain unpaid or undisputed forty (40) days past
the due date, CLEC shall, at its sole expense, notify its end users,
the Commission and the end user's of Record that their service may be
disconnected for CLEC failure to pay Unpaid Charges, and that its end
users must select a new Competitive Local Exchange Carrier within
five (5) days. The notice shall also advise the end user that SWBT
will assume the end user's account at the end of the five (5) day
period should the end user fail to select a new Competitive Local
Exchange Carrier.
F. If any CLEC charges remain unpaid or undisputed forty-five (45) days
past the due date, SWBT shall disconnect CLEC and transfer all CLEC's
end users who have not selected another Competitive Local Exchange
Carrier directly to SWBT's service. These end users shall receive the
same services provided through CLEC at the time of transfer. SWBT
shall inform the Commission and the end user's IXC(s) of Record of
the names of all end users transferred through this process.
Applicable service establishment charges for switching end users from
CLEC to SWBT shall be assessed to CLEC.
G. Within five (5) days of the transfer (50 days past CLEC's due date),
SWBT shall notify all affected end users that because of an CLEC's
failure to pay, their service is now being provided by SWBT. SWBT
shall
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also notify the end user that they have thirty (30) days to select a
Competitive Local Exchange Carrier.
H. SWBT may discontinue service to CLEC upon failure to pay undisputed
charges as provided in this section, and shall have no liability to
CLEC or CLEC end users in the event of such disconnection.
I. If any end user fails to select a Competitive Local Exchange Carrier
within thirty (30) days of the change of providers (80 days past
CLEC's due date), SWBT shall terminate the end user's service. SWBT
shall notify the Commission and the end user's IXC of Record of the
names of all end users whose service has been terminated. The end
user shall be responsible for any and all charges incurred during the
selection period.
J. Nothing herein shall be interpreted to obligate SWBT to continue to
provide service to any such end users. Nothing herein shall be
interpreted to limit any and all disconnection rights SWBT may have
with regard to such end users.
K. After the letter required by Article XII, Section D has been sent to
CLEC, SWBT shall not accept service orders from CLEC until all unpaid
and undisputed charges have been paid. SWBT shall have the right to
require payment of a deposit calculated in accordance with the
provisions of Article VII, Section A, Paragraph 6 of this Agreement
prior to resuming acceptance of service orders from CLEC.
XIII. FORCE MAJEURE
Neither party shall be responsible for delays or failures in
performance resulting from acts or occurrences beyond the reasonable
control of such Party, regardless of whether such delays or failures
in performance were foreseen or foreseeable as of the date of this
Agreement, including, without limitation: fire, explosion, power
failure, cable cuts, acts of God, war, revolution, civil commotion,
or acts of public enemies; any law, order, regulation, ordinance or
requirement of any government or legal body; or labor unrest,
including, without limitation, strikes, slowdowns, picketing or
boycotts; or delays caused by the other party or by other service or
equipment vendors; or any other circumstances beyond the Party's
reasonable control. In such event, the Party affected shall, upon
giving prompt notice to the other Party, be excused from such
performance on a day-to-day basis for the extent of such interference
(and the other Party shall likewise be excused from performance of
its obligations on a day-for-day basis to the extent such Party's
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obligations relate to the performance so interfered with). The affected
party shall use its best efforts to avoid or remove the cause of
nonperformance and both parties shall proceed to perform with dispatch once
the causes are removed or cease.
XIV. LIMITATION OF LIABILITY
A. With respect to any claim or suit arising out of SWBT's performance
under this Agreement, by a CLEC or any others, for damages arising
out of mistakes, omissions, interruptions, delays or efforts, or
defects in transmission occurring in the course of furnishing service
hereunder, SWBT's liability, if any, shall not exceed an amount
equivalent to the proportionate charge to the CLEC for the period of
service during which such mistake, omission, interruption, delay,
error, or defect in transmission or service occurs and continues. In
no event shall SWBT be responsible for any special, indirect,
consequential or exemplary damages. Any mistakes, omissions,
interruptions, delays, errors, or defects in transmission or service
which are caused or contributed to by the negligence or willful act
of the CLEC or which arise from the use of CLEC-provided facilities
or equipment shall not result in the imposition of any liability
whatsoever upon SWBT.
B. SWBT shall have no liability to the end users of the CLEC for claims
arising from the provision of the CLEC's service to its end users
including, but not limited to, claims for interruption of service,
quality of service or billing disputes, unless such loss is caused by
SWBT's own negligence or intentional misconduct in which case
liability shall be limited as provided in paragraph A, above. In the
case of any loss alleged or made by an end user of CLEC, CLEC shall
defend and indemnify SWBT against any and all such claims or loss by
its end users, unless the loss was caused by SWBT's sole negligence
or intentional misconduct.
C. CLEC hereby releases SWBT and agrees that it shall indemnify SWBT
with regard to any and all liability for damages due to errors or
omissions in CLEC's subscriber listing information (including
erroneous inclusion of nonpublished or nonlisted subscriber listing
information) as such information is submitted by CLEC and for
inclusion in the White Pages directory including, but not limited to,
special, indirect, consequential, punitive or incidental damages.
D. CLEC agrees to indemnify, defend and hold harmless SWBT from any Loss
arising out of SWBT's provision of 911 services or out of CLEC's end
users' use of the 911 service, whether suffered, made, instituted, or
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asserted by CLEC or its end users, including for any personal injury
or death of any person or persons, except for Loss which is the direct
result of SWBT's own negligence or willful misconduct.
E. CLEC shall indemnify and hold SWBT harmless from all claims and
damages arising from the discontinuance of service for nonpayment to
SWBT by the CLEC. Notice of discontinuance shall be as specified in
the Substantive Rules of the State Commission.
F. When the lines or services of other companies and carriers are used
in providing service or establishing connections to and/or from
points not reached by SWBT's lines, SWBT is not liable for any act or
omission of the other companies or carriers.
G. CLEC shall be responsible for any and all damage to SWBT equipment or
facilities caused by CLEC's own actions.
XV. NONDISCLOSURE
The Parties to this Agreement anticipate and recognize that they will
exchange or come into possession of data about each other's end users and
each other's business as a result of this Agreement which will be
designated as confidential by that Party. Each Party agrees (1) to treat
all such data as strictly confidential and (2) to use such data only for
purposes of performance under this Agreement. Each Party agrees not to
disclose data on the other Party's end users or business which has been
designated as confidential to any person without first securing the written
consent of the other Party. The foregoing shall not apply to information
which is in the public domain.
If a court or governmental agency orders or a third party requests a Party
to disclose or to provide any data or information covered by this Section,
that Party will immediately inform the other Party of the order or request
both by telephone and overnighted mail before disclosing the data or
information. Notification and consent requirements described above are not
applicable in cases where a court order requires the production of toll
billing records of an individual residence or business end user customer.
This section will not preclude the disclosure by the Parties of information
or material described in this Section to consultants, agents, or attorneys
representing the respective Parties or the Office of the Public Counsel for
the state of Missouri, and state regulatory commissions or staffs, or FCC
Staff, provided that these third parties are bound by the same or
comparable confidentiality requirements as the Parties to this Agreement.
The provisions of this Section will remain in effect
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notwithstanding the termination of this Agreement, unless agreed to in
writing by both Parties.
Pursuant to Section 222 of the Act, both Parties agree to limit their use
of proprietary information received from the other to the permitted
purposes identified in the Act.
XVI. PUBLICITY
The Parties agree not to use in any advertising or sales promotion, press
releases or other publicity matters any endorsements, direct or indirect
quotes, or pictures implying endorsement by the other Party or any of its
employees without such Party's prior written approval. The Parties will
submit to each other for written approval, prior to publication, all
publicity matters that mention or display one another's name and/or marks
or contain language from which a connection to said name and/or marks may
be inferred or implied.
XVII. ASSIGNMENT
Neither Party may assign, subcontract, or otherwise transfer its rights
or obligations under this Agreement except under such terms and
conditions as are mutually acceptable to the other Party (e.g., a
conversion charge will apply per billable telephone number) and with such
Party's prior written consent, which consent shall not be unreasonably
withheld. Assignment without consent shall be grounds for immediate
termination of this Agreement.
XVIII. DISPUTE RESOLUTION
A. Finality of Disputes
1. Except as otherwise specifically provided for in this
Agreement, no claims will be brought for disputes arising
from this Agreement more than 24 months from the date the
occurrence which gives rise to the dispute is discovered or
reasonably should have been discovered with the exercise of
due care and attention.
B. ALTERNATIVE TO LITIGATION
2. The Parties desire to resolve disputes arising out of this
Agreement without litigation. Accordingly, the Parties
agree to use the following Dispute Resolution procedure
with respect to any controversy or claim arising out of or
relating to this Agreement or its breach.
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C. Commencing Dispute Resolution
1. Dispute Resolution shall commence upon the sending from
one Party to the other of written notice of a controversy
or claim arising out of or relating to this Agreement or
its breach. No Party may pursue any claim unless such
written notice has first been given to the other Party.
D. Informal Resolution of Disputes
1. When such written notice has been given, as required by
Section C, Commencing Dispute Resolution, each Party will
appoint a knowledgeable, responsible representative to meet
and negotiate in good faith to resolve any dispute arising
under this Agreement. The location, form, frequency,
duration, and conclusion of these discussions will be left
to the discretion of the representatives. Upon agreement,
the representatives may utilize other alternative dispute
resolution procedures such as mediation to assist in the
negotiations. Discussions and the correspondence among the
representatives for purposes of settlement are exempt from
discovery and production and will not be admissible in the
arbitration described below or in any lawsuit without the
concurrence of both parties. Documents identified in or
provided with such communications, which are not prepared
for purposes of the negotiations, are not so exempted and,
if otherwise admissible, may be admitted in evidence in the
arbitration or lawsuit.
E. Formal Dispute Resolution
1. If the Parties are unable to resolve the dispute through
the informal procedure described above in Section D,
Informal Resolution of Disputes, then either Party may
invoke the following formal Dispute Resolution procedures.
Unless agreed upon by the Parties, Formal Dispute
resolution procedures described below, including
arbitration or other procedures as appropriate, may be
invoked not earlier than sixty (60) days after the date of
the letter initiating dispute resolution under Section C.
Commencing Dispute Resolution.
2. Claims Subject to Mandatory Arbitration. The following
claims, if not settled through informal dispute resolution,
will be subject to mandatory arbitration pursuant to
Section F, Arbitration below:
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a. All unresolved billing disputes involving one (1) percent
or less of the amounts charged to CLEC by SWBT under this
Agreement during the Contract Year in which the dispute
arises. During the first Contract Year the Parties will
annualize the initial months up to one year.
b. All other claims involving one (1) percent or less of the
amounts charged to CLEC by SWBT under this Agreement during
the Contract Year in which the matter in dispute arises,
whether measured by the disputing Party in terms of actual
amounts owed or owing, or as amounts representing its
business or other risks or obligations relating to the
matter in dispute. During the first Contract Year the
Parties will annualize the initial months up to one year.
3. Claims Subject to Elective Arbitration. The following claims will
be subject to arbitration pursuant to Section F, Arbitration if,
and only if, the claim is not settled through informal dispute
resolution and both parties agree to arbitration. If both parties
do not agree to arbitration, then either party may proceed with
any remedy available to it pursuant to law, equity or agency
mechanism.
a. All unresolved billing disputes involving more than one (1)
percent of the amounts charged to CLEC by SWBT under this
Agreement during the Contract Year in which the matter in
dispute arises, whether measured by the disputing Party in
terms of actual amounts owed or owing, or as amounts
representing its business or other risks or obligation
relating to the matter in dispute. During the first
Contract Year the Parties will annualize the initial months
up to one year.
b. All other claims involving more than one (1) percent of the
amounts charged to CLEC by SWBT under this Agreement during
the Contract Year in which the matter in dispute arises,
whether measured by the disputing Party in terms of actual
amounts owed or owing, or as amounts representing its
business or other risks or obligations relating to the
matter in dispute. During the first Contract Year the
Parties will annualize the initial months up to one year.
<PAGE> 33
RESALE AGREEMENT - G (MISSOURI)
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SWBT/UNITED STATES TELECOMMUNICATIONS, INC.
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4. Claims Not Subject to Arbitration If the following claims are not
resolved through informal dispute resolution, they will not be
subject to arbitration and must be resolved through any remedy
available to a Party pursuant to law, equity or agency mechanism.
a. Actions seeking a temporary restraining order or an
injunction related to the purposes of this Agreement.
b. Actions to compel compliance with the Dispute Resolution
process.
c. All claims arising under federal or state statute(s),
including, but not limited to, antitrust claims.
F. ARBITRATION
1. Disputes subject to mandatory or elective arbitration
under the provisions of this Agreement will be submitted to
a single arbitrator pursuant to the Commercial Arbitration
Rules of the American Arbitration Association or pursuant
to such other provider of arbitration services or rules as
the Parties may agree. Each arbitration will be held in
Dallas, Texas, unless the parties agree otherwise. The
arbitration hearing will be requested to commence within
sixty (60) days of the demand for arbitration. The
arbitrator will control the scheduling so as to process the
matter expeditiously. The Parties may submit written briefs
upon a schedule determined by the arbitrator. The Parties
will request that the arbitrator rule on the dispute by
issuing a written opinion within thirty (30) days after the
close of hearings. The Federal Arbitration Act, 9 U.S.C.
Secs. 1-16, not state law, shall govern the arbitrability
of all disputes. The arbitrator will have no authority to
award punitive damages, exemplary damages, consequential
damages, multiple damages, or any other damages not
measured by the prevailing party's actual damages, and may
not, in any event, make any ruling, finding or award that
does not conform to the terms and conditions of the
Agreement. The arbitrator shall be knowledgeable of
telecommunications issues. The times specified in this
Section may be extended or shortened upon mutual agreement
of the Parties or by the arbitrator upon a showing of good
cause. Each Party will bear its own costs of these
procedures, including attorneys' fees. The Parties will
equally split the fees of the arbitration and the
arbitrator. The arbitrator's award shall be
<PAGE> 34
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final and binding and may be entered in any court having
jurisdiction thereof. Judgment upon the award rendered by
the arbitrator may be entered in any court having
jurisdiction.
G. BILLING DISPUTES
1. The following provisions apply specifically to billing
disputes.
a. The Parties agree that all bills, including bills
disputed in whole or in part, are to be paid when
due, that interest applies to all overdue invoices
as set forth in the applicable provisions of this
Agreement, and that no other late payment fee or
charge applies to overdue invoices. The Parties
further agree that if any billing dispute is
resolved in favor of the disputing Party the
disputing Party will receive, by crediting or
otherwise, interest applied to the disputed amount
as set forth in the applicable provisions of this
Agreement.
b. To the extent that any other portions of this
Agreement provide for a bill closure process between
the parties, or if such a process is mutually agreed
to by the Parties, the procedures involved in such
processes will not be deemed to plan a particular
billing item in dispute for purposes of Section
XVIII, Dispute Resolution.
c. Each Party agrees to notify the other Party of a
billing dispute and may invoke the informal dispute
resolution process described in Section D, Informal
Resolution of Disputes. The parties will endeavor to
resolve the dispute within sixty (60) calendar days
of the Bill Date on which such disputed charges
appear, or, if the charges have been subject to the
bill closure process described in Section E, Formal
Resolution, above, within sixty (60) calendar days
of the closure of the billing period covered by such
bill closure process.
<PAGE> 35
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SWBT/UNITED STATES TELECOMMUNICATIONS, INC.
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H. NO CONFLICT
1. The Dispute Resolution procedures set forth in this
Agreement are not intended to conflict with applicable
requirements of the Act or the state commission with regard
to procedures for the resolution of disputes arising out of
this Agreement.
XIX. VERIFICATION REVIEWS
Each Party to this Agreement will be responsible for the accuracy and
quality of its data as submitted to the respective Parties involved. Upon
reasonable written notice, each Party or its authorized representative
(providing such authorized representative does not have a conflict of
interest related to other matters before one of the Parties) shall have
the right to conduct a review and verification of the other Party to give
assurances of compliance with the provisions of this Agreement. This
includes on-site verification reviews as the other Party's or the Party's
vendor locations.
After the initial year of this Agreement verification reviews will
normally be conducted on an annual basis with provision for staged
reviews, as mutually agreed, so that all subject matters are not
required to be reviewed at the same time. Follow up reviews will be
permitted between annual reviews where significant deviations are found.
During the initial year of the Agreement more frequent reviews may occur.
The review will consist of an examination and verification of data
involving records, systems, procedures and other information related to
the services performed by either Party as related to settlement charges
or payments made in connection with this Agreement as determined by
either Party to be reasonably required. Each Party, whether or not in
connection with an on-site verification review, shall maintain
reasonable records for a period of time no less than twenty-four (24)
months from the date such records are created and provide the other
Party with reasonable access to such information as is necessary to
determine amounts receivable or payable under this Agreement.
Each Party's right to access information for verification review
purposes is limited to data not in excess of 24 months in age. Once
specific data has been reviewed and verified, it is unavailable for
future reviews. Any items not reconciled at the end of a review will,
however, be subject to a follow-up review effort. Any retroactive
adjustments required subsequent to previously reviewed and verified data
will also be subject to follow-up review. Information of either Party
involved with a verification review shall be subject to the
nondisclosure terms of this Agreement.
<PAGE> 36
RESALE AGREEMENT - G (MISSOURI)
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SWBT/UNITED STATES TELECOMMUNICATIONS, INC.
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The Party requesting a verification review shall fully bear its costs
associated with conducting the review. The Party being reviewed will
provide access to required information, as outlined in this Section, at
no charge to the reviewing Party. Should the reviewing Party request
information or assistance beyond that reasonably required to conduct
such a review, the Party being reviewed may, as its option, decline to
comply with such request or may bill actual costs incurred in complying
subsequent to the concurrence of reviewing Party.
XX. COMPLIANCE WITH LAWS
The Parties believe in good faith that the Services to be provided under
this Agreement satisfy the requirements of the Act. In the event a court
or regulatory agency of competent jurisdiction should determine that
modifications of this Agreement are required to bring the Services being
provided hereunder into compliance with the Act, the affected Party
shall promptly give the other Party written notice of the modifications
deemed required. Upon delivery of such notice, the Parties shall expend
diligent efforts to arrive at an agreement respecting such modifications
required, and if the Parties are unable to arrive at such agreement,
either Party may terminate this Agreement, without penalty, effective
the day the affected Party is ordered to implement the modifications
deemed required, or effective on the day either Party concludes and
gives notice that the Parties will not be able to arrive at any
agreement respecting such modifications, whichever date shall occur
earlier.
This Agreement is an integrated package that reflects a balancing of
interests critical to the Parties. It will be submitted to the
applicable state regulatory Commission and the FCC as a compliance
filing, and the Parties will specifically request that the applicable
state regulatory Commission and the FCC refrain from taking any action
to change, suspend or otherwise delay implementation of the Agreement.
In the event the Commission or the FCC rejects any portion or provision
of this Agreement or subsequently issues a ruling or order that results
in a provision being contrary to law, or is invalid for any reason, the
parties shall continue to be bound by the terms of this Agreement,
insofar as possible, except for the portion rejected or subsequently
determined to be unlawful, invalid, or unenforceable. In such event, the
Parties shall negotiate in good faith to replace the rejected, unlawful,
invalid, or unenforceable provision and shall not discontinue service to
the other Party during such period if to do so would disrupt existing
service being provided to an end user. So long as the Agreement remains
in effect, the Parties shall not advocate before any legislative,
regulatory, or other public forum that any terms of this specific
Agreement be modified or eliminated. Notwithstanding this mutual
commitment, however, the Parties enter into this Agreement without
prejudice to any positions they have taken previously, or may
<PAGE> 37
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SWBT/UNITED STATES TELECOMMUNICATIONS, INC.
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take in the future in any legislative, regulatory, or other public forum
addressing any matters, including matters related to the types of
arrangements prescribed by this Agreement.
XXI. CERTIFICATION REQUIREMENTS
CLEC warrants that it has obtained all certifications required in those
jurisdictions in which CLEC has ordered services pursuant to this
Agreement. Subject to restrictions in Article II.A. (Permitted Use of
Resold Service by CLEC and Its End Users), CLEC covenants that any
originating service provider utilizing the resold services under this
Agreement has obtained all required certification. Upon request by any
governmental entity, the CLEC is required to provide proof of
certification.
XXII. EFFECT OF OTHER AGREEMENTS
The Parties agree that pursuant to the requirements of the
Telecommunications Act of 1996, a Party shall treat the other Party no
less favorably than it treats similarly situated Competitive Local
Exchange Carriers with whom such Party has an operational
interconnection or resale agreement which has been approved by the State
PUC or PSC. If either Party enters into an agreement (the "Other
Agreement") approved by the Commission pursuant to Section 252 of the
Act which provides for the provision of arrangements covered in this
Agreement to another requesting Telecommunications Carrier, such Party
shall make available to the other Party such arrangements upon the same
rates, terms and conditions as those provided in the Other Agreement.
New prices, terms and conditions become effective thirty (30) days
following local commission notification and/or commission contract
approval, as appropriate and according to commission requirements.
XXIII. NOTIFICATION
SWBT shall make telecommunications services that SWBT provides at retail
to subscribers who are not telecommunications carriers available for
resale consistent with its obligation under Section 251(c)(4)(A) of the
Telecommunications Act. The notification shall advise CLEC of the
category in which such new service shall be placed and the same discount
already applicable to CLEC in that category shall apply to the new
service. SWBT currently uses the Accessible Letter process to notify
CLEC of such changes to the services available for resale. Any change to
the process of notification to the CLEC will provide no less notice than
the current Accessible Letter process.
<PAGE> 38
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SWBT/UNITED STATES TELECOMMUNICATIONS, INC.
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XIV. NOTICES
In the event any notices are required to be sent under the terms of this
Agreement, they shall be sent by registered mail, return receipt
requested to:
To CLEC: To SWBT:
United States Telecommunications, Inc. Jo Ann Lara
Joseph Cillo Account Manager
Vice President Four Bell Plaza, 7th Floor
13902 N. Dale Mabry, Suite 212 311 S. Akard St.
Tampa, FL 33618 Dallas, TX 75202-5398
XXV. BENEFICIARIES
This Agreement shall not provide any nonparty with any remedy, claim,
cause of action or other right.
XXVI. TERM
SWBT and CLEC agree that the initial term of this Agreement shall be for
90 days, and thereafter the Agreement shall continue in force and effect
unless and until terminated as provided herein. Either Party may
terminate this Agreement by providing written notice of termination to
the other Party, at least 60 days in advance of the date of termination.
At the conclusion of the first term, this Agreement shall continue
without interruption unless terminated by either Party or superseded by
a new Agreement between the Parties. By mutual agreement, SWBT and CLEC
may amend this Agreement to modify the term of this Agreement. Where
CLEC has not made arrangements to provide service over its own
facilities to its end users, the notification and transfer of end user
procedures outlined in Article XII.D.-F (Termination of service to CLEC)
shall apply.
XXVII. EFFECTIVE DATE
The effective date of this Agreement shall be ten (10) days after the
date that the appropriate state regulatory Commission approves this
Agreement.
XXVIII. WAIVER
The failure of either Party to enforce or insist that the other party
comply with any of the terms or conditions of this Agreement, or the
waiver by either Party in a particular instance of any of the terms and
conditions of this Agreement, shall not
<PAGE> 39
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SWBT/UNITED STATES TELECOMMUNICATIONS, INC.
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be construed as a general waiver or relinquishment of the terms and
conditions, but the Agreement shall be and remain at all times in full
force and effect.
XXIX. DISCLAIMER OF WARRANTIES
SWBT MAKES NO REPRESENTATION OR WARRANTIES, EXPRESS OR IMPLIED,
INCLUDING BUT NOT LIMITED TO ANY WARRANTY AS TO MERCHANTABILITY OR
FITNESS FOR INTENDED OR PARTICULAR PURPOSE WITH RESPECT TO SERVICES
PROVIDED HEREUNDER. ADDITIONALLY, SWBT ASSUMES NO RESPONSIBILITY WITH
REGARD TO THE CORRECTNESS OF DATA OR INFORMATION SUPPLIED BY CLEC WHEN
THIS DATA OR INFORMATION IS ACCESSED AND USED BY A THIRD PARTY.
XXX. RELATIONSHIP OF THE PARTIES
This Agreement shall not establish, be interpreted as establishing, or
be used by either Party to establish or to represent their relationship
as any form of agency, partnership or joint venture. Neither Party
shall have any authority to bind the other or to act as an agent for
the other unless written authority, separate from this Agreement, is
provided. Nothing in the Agreement shall be construed as providing for
the sharing of profits or losses arising out of the efforts of either
or both of the Parties. Nothing herein shall be construed as making
either Party responsible or liable for the obligations and undertakings
of the other Party.
XXXI. REFORMATION
This agreement is entered into as a result of both private negotiation
between the parties and the incorporation of some of the results of
SWBT/AT&T arbitration by the Missouri Public Service Commission to the
extent such results have been incorporated into an arbitrated and
approved SWBT/AT&T Agreement. If the actions of Missouri or federal
legislative bodies, courts, or regulatory agencies of competent
jurisdiction invalidate, modify, or stay the enforcement of laws or
regulations that were the basis for a provision of the contract or
provisions of the SWBT./AT&T Agreement into which such arbitration
results were incorporated, the affected provision in this Agreement
shall be invalidated, modified or stayed, consistent with the action of
the legislative body, court or regulatory agency. Except in the case of
an invalidation, where the affected provisions shall immediately be
deemed stricken, or in the case of a stay where the stayed provisions
shall be deemed stricken during the period of the stay, the Parties
shall expend diligent efforts to arrive at an agreement respecting
necessary modifications to the Agreement. If negotiations on necessary
modifications fail, disputes between the Parties concerning the
interpretation of the actions required
<PAGE> 40
RESALE AGREEMENT - G (MISSOURI)
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SWBT/UNITED STATES TELECOMMUNICATIONS, INC.
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or provisions affected by such governmental actions shall be resolved
pursuant to the dispute resolution process provided for in this
Agreement.
XXXII. COMPLETE TERMS
This Agreement, together with its Attachments constitutes the entire
agreement between the Parties and supersedes all prior discussions,
representations or oral understandings reached between the Parties.
The corresponding tariffs and this Agreement (including the
Attachments) contain all of the applicable rates and charges to be paid
by the CLEC to SWBT in connection with SWBT's provision of
telecommunications service to CLEC for Resale to its end user
customers.
Neither Party shall be bound by any amendment, modification or
additional terms unless it is reduced to writing signed by an
authorized representative of the Party sought to be bound.
By their signatures in the space provided below, CLEC and SWBT indicate
their acceptance of this Agreement. This agreement shall not bind CLEC
and SWBT until executed by both Parties. This Agreement will be
governed by and interpreted in accordance with the laws of the State of
Missouri.
<PAGE> 41
RESALE AGREEMENT - G (MISSOURI)
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SWBT/UNITED STATES TELECOMMUNICATIONS, INC.
100198
THIS AGREEMENT CONTAINS A BINDING ARBITRATION AGREEMENT.
UNITED STATES SOUTHWESTERN BELL TELEPHONE
TELECOMMUNICATIONS, INC. COMPANY
AECN/OCN: 8631
--------------
/s/ JOSEPH CILLO /s/ LARRY B. COOPER
- ------------------------------- --------------------------------
Signature Signature
Joseph Cillo Larry B. Cooper
- ------------------------------- --------------------------------
Printed Name Printed Name
Vice Presidnet President -- Industry Markets
- ------------------------------- --------------------------------
Position/Title Position/Title
10/14/98 10/22/98
- ------------------------------- --------------------------------
Date Date
<PAGE> 42
RESALE AGREEMENT (MISSOURI) - EXHIBIT A
PAGE 1 OF 5
SWBT/UNITED STATES TELECOMMUNICATIONS, INC.
M0318
SOUTHWESTERN BELL'S RESALE TELECOMMUNICATIONS SERVICES* LIST - BUSINESS
MISSOURI
<TABLE>
<CAPTION>
RESALE DISCOUNTS
RECURRING NON-RECURRING
--------- -------------
<S> <C> <C>
LOCAL EXCHANGE SERVICE
Business 1 Party 19.2% 19.2%
Business - Multi-Line Hunting 19.2% 19.2%
Business Measured 19.2% 19.2%
Business Measured (HTG Class of Service) 19.2% 19.2%
EXPANDED LOCAL CALLING
Mandatory EAS 19.2% 19.2%
Optional Metropolitan Calling Area 19.2% 19.2%
VERTICAL SERVICES
Auto Redial 19.2% 19.2%
Call Blocker 19.2% 19.2%
Call Forwarding 19.2% 19.2%
Call Forwarding - Busy Line 19.2% 19.2%
Call Forwarding - Busy Line/Don't Answer 19.2% 19.2%
Call Forwarding - Don't Answer 19.2% 19.2%
Call Return 19.2% 19.2%
Call Trace 19.2% 19.2%
Call Waiting 19.2% 19.2%
Calling Name 19.2% 19.2%
Calling Number 19.2% 19.2%
CornCall(R) 19.2% 19.2%
Personalized Ring (1 dependent number) 19.2% 19.2%
Personalized Ring (2 dependent numbers - 1st number) 19.2% 19.2%
Personalized Ring (2 dependent numbers - 2nd number) 19.2% 19.2%
Priority Call 19.2% 19.2%
Remote Access to Call Forwarding 19.2% 19.2%
Selective Call Forwarding 19.2% 19.2%
Simultaneous Call Forwarding 19.2% 19.2%
Speed Calling 8 19.2% 19.2%
Speed Calling 30 19.2% 19.2%
Three Way Calling 19.2% 19.2%
</TABLE>
<PAGE> 43
RESALE AGREEMENT (MISSOURI) - EXHIBIT A
PAGE 2 OF 5
SWBT/UNITED STATES TELECOMMUNICATIONS, INC.
M0318
<TABLE>
<CAPTION>
RESALE DISCOUNTS
RECURRING NON-RECURRING
--------- -------------
<S> <C> <C>
DID
DID (First Block of 100 - Category 1) 19.2% 19.2%
DID (First Block of 10 - Category 1) 19.2% 19.2%
DID (Ea. adl. block of 10 after first 10 - Category 1) 19.2% 19.2%
DID (Ea. adl. block of 100 after first 100 - Category 2) 19.2% 19.2%
DID (Ea. adl. block of 10 assigned over 1st 100 - Category 2) 19.2% 19.2%
DID (with Multifrequency) 19.2% 19.2%
DID (with Dual-Tone Multifrequency) 19.2% 19.2%
DID (1st 10 Trunks or access lines) 19.2% 19.2%
DID (11th thru 50th trunk or network access line) 19.2% 19.2%
DID (51st trunk or network access line) 19.2% 19.2%
TRUNKS
Analog Trunks 19.2% 19.2%
Digital Trunks 19.2% 19.2%
AIN
Area Wide Networking 19.2% 19.2%
Disaster Routing Service 19.2% 19.2%
Intelligent Redirect(SM) 19.2% 19.2%
Intellinumber 19.2% 19.2%
Positive ID 19.2% 19.2%
OTHER
Bundled Telecommunications Services (e.g., the Works) 19.2% 19.2%
Customer Alerting Enablement 19.2% 19.2%
Grandfathered Services 19.2% 19.2%
Hot Line 19.2% 19.2%
Hunting 19.2% 19.2%
Local Operator Assistance Service 19.2% 19.2%
Night Number associated with Telephone Number 19.2% 19.2%
Night Number associated with a Terminal 19.2% 19.2%
Promotions (Greater than 90 days) 19.2% 19.2%
Telebranch(R) 19.2% 19.2%
TouchTone 19.2% 19.2%
Voice Dial 19.2% 19.2%
Warm Line 19.2% 19.2%
</TABLE>
<PAGE> 44
RESALE AGREEMENT (MISSOURI) - EXHIBIT A
PAGE 3 OF 5
SWBT/UNITED STATES TELECOMMUNICATIONS, INC.
M0318
<TABLE>
<CAPTION>
RESALE DISCOUNTS
RECURRING NON-RECURRING
--------- -------------
<S> <C> <C>
ISDN
Digiline 19.2 % 19.2 %
Select Video Plus(R) 19.2 % 19.2 %
Smart Trunk(SM) 19.2 % 19.2 %
DIRECTORY ASSISTANCE SERVICES 13.91% 13.91%
OPERATOR SERVICES 13.91% 13.91%
TOLL
IntraLATA MTS 19.2 % 19.2 %
MaxiMizer 800(R) 19.2 % 19.2 %
OutWATS 19.2 % 19.2 %
800 Service 19.2 % 19.2 %
OPTIONAL TOLL CALLING PLANS
1+ SAVER(SM) 19.2 % 19.2 %
1+SAVER Direct 19.2 % 19.2 %
Community Optional Saver 19.2 % 19.2 %
Outstate Calling Area Service 19.2 % 19.2 %
PLEXAR(R)
Plexar I(R) 19.2 % 19.2 %
Plexar II(R) 19.2 % 19.2 %
Plexar Custom(R) 19.2 % 19.2 %
PRIVATE LINE
Analog Private Lines 19.2 % 19.2 %
Business Video Service 19.2 % 19.2 %
Digital Loop Service 19.2 % 19.2 %
DOVLink 19.2 % 19.2 %
Foreign Exchange Service 19.2 % 19.2 %
Foreign Serving Office 19.2 % 19.2 %
Frame Relay 19.2 % 19.2 %
Group Alerting Services 19.2 % 19.2 %
MegaLink II(R) 19.2 % 19.2 %
MegaLink III(R) 19.2 % 19.2 %
MicroLink I(R) 19.2 % 19.2 %
MicroLink II(R) 19.2 % 19.2 %
MultiPoint Video 19.2 % 19.2 %
Service Loop Facility Modification Service 19.2 % 19.2 %
</TABLE>
<PAGE> 45
RESALE AGREEMENT (MISSOURI) - EXHIBIT A
PAGE 4 OF 5
SWBT/UNITED STATES TELECOMMUNICATIONS, INC.
M0318
<TABLE>
<CAPTION>
RESALE DISCOUNTS
RECURRING NON-RECURRING
--------- -------------
<S> <C> <C>
LOCAL EXCHANGE SERVICE
Life Line and Link Up America Services 19.2% 19.2%
Residence 1 Party 19.2% 19.2%
Residence Measured 19.2% 19.2%
EXPANDED LOCAL CALLING
Mandatory EAS 19.2% 19.2%
Optional Metropolitan Calling Area 19.2% 19.2%
VERTICAL SERVICES
Auto Redial 19.2% 19.2%
Call Blocker 19.2% 19.2%
Call Forwarding 19.2% 19.2%
Call Forwarding - Busy Line 19.2% 19.2%
Call Forwarding - Busy Line/Don't Answer 19.2% 19.2%
Call Forwarding - Don't Answer 19.2% 19.2%
Call Return 19.2% 19.2%
Call Trace 19.2% 19.2%
Call Waiting 19.2% 19.2%
Calling Name 19.2% 19.2%
Calling Number 19.2% 19.2%
ComCall(R) 19.2% 19.2%
Personalized Ring (1 dependent number) 19.2% 19.2%
Personalized Ring (2 dependent numbers - 1st number) 19.2% 19.2%
Personalized Ring (2 dependent numbers - 2nd number) 19.2% 19.2%
Priority Call 19.2% 19.2%
Remote Access to Call Forwarding 19.2% 19.2%
Selective Call Forwarding 19.2% 19.2%
Simultaneous Call Forwarding 19.2% 19.2%
Speed Calling 8 19.2% 19.2%
Three Way Calling 19.2% 19.2%
DIRECTORY ASSISTANCE SERVICES 19.2% 19.2%
</TABLE>
<PAGE> 46
RESALE AGREEMENT (MISSOURI) - EXHIBIT A
PAGE 5 OF 5
SWBT/UNITED STATES TELECOMMUNICATIONS, INC.
M0318
<TABLE>
<CAPTION>
RESALE DISCOUNTS
RECURRING NON-RECURRING
--------- -------------
<S> <C> <C>
ISDN
Digiline 19.2% 19.2%
OTHER
Bundled Telecommunications Services (e.g., the Works) 19.2% 19.2%
Customer Alerting Enablement Area 19.2% 19.2%
Grandfathered Services 19.2% 19.2%
Hot Line 19.2% 19.2%
Local Operator Assistance Service 19.2% 19.2%
Promotions (Greater than 90 days) 19.2% 19.2%
Preferred Number Service 19.2% 19.2%
TouchTone 19.2% 19.2%
Voice Dial 19.2% 19.2%
Warm Line 19.2% 19.2%
TOLL
Home 800(SM) 19.2% 19.2%
IntraLATA MTS 19.2% 19.2%
OPTIONAL TOLL CALLING PLANS
1+ SAVER(SM) 19.2% 19.2%
1+ SAVER Direct 19.2% 19.2%
Community Optional Saver 19.2% 19.2%
Outstate Calling Area Service 19.2% 19.2%
</TABLE>
<PAGE> 47
RESALE AGREEMENT (MISSOURI) - EXHIBIT B
PAGE 1 OF 1
SWBT/UNITED STATES TELECOMMUNICATIONS, INC.
M0304
SOUTHWESTERN BELL'S RESALE OTHER SERVICES* LIST
MISSOURI
<TABLE>
<CAPTION>
RESALE DISCOUNTS
RECURRING NON-RECURRING
--------- -------------
<S> <C> <C>
900 Call Restriction 19.2% 19.2%
Access Services 0% 0%
Additional Directory Listing 19.2% 19.2%
Bill Plus 5% 5%
Company Initiated Suspension Service 0% 0%
Connections with Terminal Equipment and Communications Equipment 0% 0%
Consolidated Billing 5% 5%
Construction Charges 0% 0%
Customer Initiated Suspension Service 0% 0%
Exchange Interconnection Service 0% 0%
Maintenance of Service Charges 0% 0%
Prepaid Calling Cards 19.2% 19.2%
Telecommunications Service Priority Systems 0% 0%
Toll Billing Exception (Billed Number Screen) 19.2% 19.2%
Toll Restriction 19.2% 19.2%
Wireless Carrier Interconnection Services 0% 0%
</TABLE>
<PAGE> 48
RESALE AGREEMENT (MISSOURI) - EXHIBIT C
PAGE 1 OF 1
SWBT/UNITED STATES TELECOMMUNICATIONS, INC.
J0116
APPENDIX RESALE
MISSOURI
OS DA PRICING - BRANDING, RATE & REFERENCE
The following rates will apply for each service element:
<TABLE>
<CAPTION>
<S> <C>
A. CALL BRANDING
An initial non-recurring charge applies per TOPS switch, per brand for
the establishment of CLEC specific Call Branding. A Per Call charge also
applies. When there are subsequent changes to the branding announcement,
an additional non-recurring charge will also apply per TOPS, per brand,
for each change.
Rate per initial load group $1,072.00
Rate per load for Brand change $1,072.00
Per Call $0.0425
----------------------------------------------------------------------------------------
B. DIRECTOR ASSISTANCE RATE/REFERENCE INFORMATION
An initial non-recurring charge applies per TOPS switch, per rate
schedule for the initial load of CLEC's DA Services Rate/Reference
Information. An additional non-recurring charge applies per TOPS switch,
per rate schedule for each subsequent change to Rate/Reference
Information.
*Rate per initial load group $1,538.54
Rate per subsequent rate change $623.37
Rate per subsequent reference change $623.37
----------------------------------------------------------------------------------------
C. OPERATOR SERVICES RATE/REFERENCE INFORMATION
An initial non-recurring charge applies per TOPS switch, per rate
schedule for the initial load of CLEC's Operator Services Rate/Reference
Information. An additional non-recurring charge applies per TOPS switch,
per rate schedule for each subsequent change to Rate/Reference
Information.
*Rate per initial load group $1,538.54
Rate per subsequent rate change $623.37
Rate per subsequent reference change $623.37
----------------------------------------------------------------------------------------
</TABLE>
* Initial Load charges for Rate Reference B and C when ordered together, will
incur a single Initial Load Charge. In cases where Rate Reference information
B or C is ordered separately, individual initial Load charges will apply to
each order.
<PAGE> 49
APPENDIX OSS (MISSOURI) - RESALE
PAGE 1 OF 10
SWBT/UNITED STATES TELECOMMUNICATIONS, INC.
072198
APPENDIX OSS-RESALE
<PAGE> 50
APPENDIX OSS (MISSOURI) - RESALE
PAGE 2 OF 10
SWBT/UNITED STATES TELECOMMUNICATIONS, INC.
072198
APPENDIX OSS
ACCESS TO OPERATIONS SUPPORT SYSTEMS FUNCTIONS
1. GENERAL CONDITIONS
1.1 This Appendix sets forth the terms and conditions under which
SWBT provides nondiscriminatory access to SWBT's operations support systems
(OSS) "functions" to CLEC for pre-ordering, ordering, provisioning,
maintenance/repair, and billing.
1.2 Resale functions will be accessible via electronic interface,
as described herein, where such functions are available. Manual access is
available for all pre-ordering, ordering, provisioning, and billing functions
via the Local Service Center (LSC). Repair and maintenance functions are
available in a manual mode through the Local Operations Center (LOC).
1.3 CLEC agrees to utilize SWBT electronic interfaces, as
described herein, only for the purposes of establishing and maintaining Resale
services through SWBT. In addition, CLEC agrees that such use will comply with
the summary of SWBT's Operating Practice No. 113, Protection of Electronic
Information, titled Competitive Local Exchange Carrier Security Policies and
Guidelines. Failure to comply with such security guidelines may result in
forfeiture of electronic access to OSS functionality.
1.4 CLEC's access to pre-order functions described in 2.2.2 and
2.3.2 will only be utilized to view Customer Proprietary Network Information
(CPNI) of another carrier's end-user where CLEC has obtained an authorization
for release of CPNI from the end-user and has obtained an authorization to
become the end user's local service provider. The authorization for release of
CPNI must substantially reflect the following:
1.4.1 "This written consent serves as instruction to all
holders of my local exchange telecommunications Customer Proprietary Network
Information (CPNI) and account identification information to provide such
information to the undersigned. Specifically, I authorize disclosure of my
account billing name, billing address, and directory listing information, and
CPNI, including, service address, service and feature subscription, long
distance carrier identity, and pending service order activity. This
Authorization remains in effect until such time that I revoke it directly or
appoint another individual/company with such capacity or undersigned receives
notice to disconnect my local exchange service or notice that a service
disconnect has been performed. At and from such time, this Authorization is
null and void."
Or
1.4.2 Authorization for change in local exchange service
and release of CPNI with documentation that adheres to all requirements of
state and federal law, as applicable.
1.5 By utilizing electronic interfaces to access OSS functions,
CLEC agrees to perform accurate and correct ordering as it relates to the
application of Resale rates and charges
<PAGE> 51
APPENDIX OSS (MISSOURI) - RESALE
PAGE 3 OF 10
SWBT/UNITED STATES TELECOMMUNICATIONS, INC.
072198
where they are subject to the terms of this Agreement and applicable SWBT
tariffs. All exception handling must be requested manually from the LSC.
1.6 In areas where Resale order functions are not available via
an electronic interface for the pre-order, ordering and provisioning processes,
SWBT and CLEC will use manual processes. Should SWBT develop electronic
interfaces for these functions for itself, SWBT will make electronic access
available to CLEC.
1.7 The Information Services (I.S.) Call Center provides a
technical support function for electronic interfaces. CLEC will also provide a
single point of contact for technical issues related to the electronic
interfaces.
1.8. SWBT and CLEC will establish interface contingency plans and
disaster recovery plans for the pre-order, ordering and provisioning of
Resale services.
1.9 SWBT reserves the right to modify or discontinue the use of
any system or interface as it deems appropriate. Provided however,
(a) SWBT shall provide CLEC with at least 90 days prior written notice
of any planned discontinuance and provide CLEC with a functionally
equivalent interface to access the OSS functions for any system or
interface that is discontinued. Upon CLEC request, SWBT shall also
provide a reasonable transition period.
(b) SWBT shall provide CLEC with reasonable prior written notice of any
significant system modifications.
1.10 If CLEC elects to utilize electronic interfaces based upon
industry guidelines for Resale, SWBT and CLEC agree to participate in the Order
and Billing Forum (OBF) and the Telecommunications Industry Forum (TCIF) to
establish and conform to uniform industry guidelines for electronic interfaces
for pre-order, ordering, and provisioning. Neither Party waives its rights as
participants in such forums or in the implementation of the guidelines. To
achieve system functionality as quickly as possible, the Parties acknowledge
that SWBT may deploy these interfaces with requirements developed in advance of
industry guidelines. Thus, subsequent modifications may be necessary to comply
with emerging guidelines. CLEC and SWBT are individually responsible for
evaluating the risk of developing their respective systems in advance of
guidelines and agree to support their own system modifications to comply with
new requirements. In addition, SWBT has the right to define LSR Usage
requirements according to the General Section 1.0, paragraph 1.4 of the
practices in the OBF Local Service Ordering Guidelines (LSOG), which states:
"Options described in this practice may not be applicable to individual
providers tariffs; therefore, use of either the field or valid entries within
the field is based on the providers tariffs/practices."
1.11 Due to enhancements and on-going development of access to
SWBT's OSS functions, certain interfaces described in this Appendix may be
modified, temporarily
<PAGE> 52
APPENDIX OSS (MISSOURI) - RESALE
PAGE 4 OF 10
SWBT/UNITED STATES TELECOMMUNICATIONS, INC.
072198
unavailable or may be phased out after execution of this Appendix. In
compliance with section 1.9 of this Appendix, SWBT agrees that interfaces
phased out will be accompanied with proper notice.
1.12 CLEC is responsible for obtaining operating system software
and hardware to access OSS functions as specified in the document "Requirements
for Access to Southwestern Bell OSS Functions."
2. PRE-ORDER
2.1 SWBT will provide real time access to pre-order functions to
support CLEC ordering of Resale services. The Parties acknowledge that ordering
requirements necessitate the use of current, real time pre-order information to
accurately build service orders. The following lists represent pre-order
functions that are available to CLEC so that CLEC order requests may be created
to comply with SWBT ordering requirements.
2.2 PRE-ORDERING FUNCTIONS FOR RESALE SERVICES INCLUDE:
2.2.1 features and services available at a valid service
address (as applicable);
2.2.2 access to SWBT retail or resold customer proprietary
network information (CPNI) for preordering will include: billing name, service
address, billing address, service and feature subscription, directory listing
information, long distance carrier identity, and pending service order activity
(CLEC agrees that CLEC's representatives will not access the information
specified in this subsection until after the customer requests that his or her
local exchange service provider be changed to CLEC, and a customer
authorization for release of CPNI complies with conditions as described in
section 1.4 of this Appendix.)
2.2.3 a telephone number (if the customer does not have
one assigned) with the customer on-line;
2.2.4 service availability dates to the customer;
2.2.5 information regarding whether dispatch is required;
2.2.6 Primary Interexchange Carrier (PIC) options for
intraLATA toll (when available) and interLATA toll;
2.2.7 service address verification.
2.4 ELECTRONIC ACCESS TO PRE-ORDER FUNCTIONS: SWBT will provide
CLEC access to one or more of the following systems:
<PAGE> 53
APPENDIX OSS (MISSOURI) - RESALE
PAGE 5 OF 10
SWBT/UNITED STATES TELECOMMUNICATIONS, INC.
072198
2.4.1 RESALE SERVICES PRE-ORDER SYSTEM AVAILABILITY:
2.4.1.1 Residential Easy Access Sales Environment (R-EASE):
R-EASE is an ordering entry system through which SWBT provides CLEC access to
the functions of pre-ordering when R-EASE is utilized to order SWBT Residential
Resale Services.
2.4.1.2 Business Easy Access Sales Environment (B-EASE):
B-EASE is an ordering entry system through which SWBT provides CLEC access to
the functions of pre-ordering when such access is utilized to order SWBT
Business Resale Services.
2.4.1.3 DataGate is a transaction-based data query system
through which SWBT provides CLEC access to pre-ordering functions. This gateway
shall be a Transmission Control Protocol/Internet Protocol (TCP/IP) gateway and
will allow CLEC to access the pre-order functions for Resale services by CLEC
developing its own end-user interface. SWBT and CLEC agree to cooperate in
developing and implementing an electronic communication interface that will be
consistent with industry guidelines developed by the OBF and the TCIF, assuming
they are different from that which SWBT is providing.
2.4.1.4 Verigate is an end-user interface developed by SWBT
that provides access to the pre-ordering functions for Resale Services.
Verigate may be used in connection with electronic or manual ordering. Verigate
is accessible vial Toolbar.
2.4.2 OTHER PRE-ORDER FUNCTION AVAILABILITY:
2.4.2.1 Where pre-ordering functions are not available
electronically CLEC will manually request this information from SWBT's LSC for
inclusion on the service order request.
2.4.2.2 In addition to electronic interface access to
pre-order information, upon request but not more frequently than once a month,
SWBT will provide CLEC certain pre-order information in batch transmission for
the purposes of back-up data for periods of system unavailability.
Specifically, the following database information may be electronically
provided. Street Access Guide (SAG) Guide, Service and Feature Availability by
NXX, and a PIC list, to support address verification, service and feature
availability, respectively. The parties recognize such information must be used
to construct order requests only in exception handling situations.
3. ORDERING/PROVISIONING
3.1 SWBT provides real time access to ordering functions (as
measured from the time SWBT receives accurate service requests from the
interface) to support CLEC provisioning of Resale services via one or more
electronic interfaces. To order Resale services, CLEC will format the service
request to identify what features, services, or elements it wishes SWBT to
<PAGE> 54
APPENDIX OSS (MISSOURI) - RESALE
PAGE 6 OF 10
SWBT/UNITED STATES TELECOMMUNICATIONS, INC.
072198
provision in accordance with SWBT ordering requirements, SWBT will provide CLEC
access to one or more of the following systems or interfaces:
3.2 RESALE SERVICES ORDER REQUEST SYSTEM AVAILABILITY:
3.2.1 R-EASE is available for the generation of
Residential Resale services orders. Ordering flows are available via this
system.
3.2.2 B-EASE is available for the generation of Business
Resale services orders. Ordering flows are available via this system.
3.2.3 Service Order Retrieval and Distribution (SORD)
Supplement interface supports the modification of Resale Service orders
submitted via the EASE systems. Orders submitted manually or from LEX or EDI
may not be modified by the SORD Supplement interface, however, separate
supplement processes exist for these orders.
3.2.4 SWBT makes available to CLEC an Electronic Data
Interchange (EDI) interface for transmission of SWBT ordering requirements via
formats provided on the Local Service Request (LSR) as defined by the Ordering
and Billing Forum (OBF) and via EDI mapping as defined by TCIF. In ordering and
provisioning Resale, CLEC and SWBT will utilize industry guidelines developed
by OBF and TCIF EDI to transmit data based upon SWBT's Resale ordering
requirements.
3.2.5 LEX is an end-user interface that provides access to
the ordering functions for Resale Services.
3.3 PROVISIONING FOR RESALE SERVICES: SWBT will provision
Resale Services as detailed in CLEC order requests. Access to status on such
orders will be provided via the following electronic interfaces:
3.3.1 Order Status will allow CLEC to check service order
status. Order Status is accessible via SWBT Toolbar.
3.3.2 In cases of EDI ordering, SWBT will provide CLEC
with an EDI interface for transferring and receiving orders. Firm Order
Confirmation (FOC), service completion, and, as available, other provisioning
data and information. SWBT will provide CLEC with a FOC for each Resale service
request. The FOC will include: purchase order number, telephone number, Local
Service Request number, due date, Service Order number, and completion date.
Upon work completion, SWBT will provide CLEC with an 855 EDI transaction-based
Order Completion that states when that order was completed. CLEC may submit
supplement requests via the 860 EDI transaction, and, where available, SWBT
will provide CLEC an 865 EDI transaction-based Completion notice.
<PAGE> 55
APPENDIX OSS (MISSOURI) - RESALE
PAGE 7 OF 10
SWBT/UNITED STATES TELECOMMUNICATIONS, INC.
072198
3.3.3 A file transmission may be provided to confirm order
completions for R-EASE or B-EASE order processing. This file will provide
service order information of all distributed and completed orders for CLEC.
4. MAINTENANCE/REPAIR
4.1 Two real time electronic interfaces are accessible to place,
and check the status of trouble reports for both Resale. Upon request, CLEC may
access these functions via the following methods:
4.1.1 Trouble Administration (TA) system access provides
CLEC with SWBT software that allows CLEC to submit trouble reports and
subsequently check status on trouble reports for CLEC end-users. TA will
provide the ability to review the maintenance history of a converted Resale
CLEC account. TA is accessible via SWBT Toolbar.
4.1.2 Electronic Bonding Interface (EBI) is an interface
that is available for trouble report submission and status updates. This EBI
conforms to ANSI guidelines T1:227:1995 and T1.228:1995, Electronic
Communications Implementation Committee (ECIC) Trouble Report Format
Definition (TFRD) Number 1 as defined in ECIC document ECIC/TRA/95-003, and
all guidelines referenced within those documents, as mutually agreed upon by
CLEC and SWBT. Functions currently implemented will include Enter Trouble,
Request Trouble Report Status, Add Trouble Information, Modify Trouble Report
Attributes, Trouble Report Attribute Value Change Notification, and Cancel
Trouble Report, as explained in 6 and 9 of ANSI T1.228:1995. CLEC and SWBT will
exchange requests over a mutually agreeable X.25-based network.
5. BILLING
5.1 SWBT shall bill CLEC for resold services. SWBT shall send
associated billing information to CLEC as necessary to allow CLEC to perform
billing functions. At minimum SWBT will provide CLEC billing information in a
paper format or via magnetic tape, as agreed to between CLEC and SWBT.
5.2 ELECTRONIC ACCESS TO BILLING INFORMATION FOR RESALE SERVICES
WILL ALSO BE AVAILABLE VIA THE FOLLOWING INTERFACES:
5.2.1 CLEC may receive Bill Plus(TM), an electronic
version of their bill as described in and in accordance with SWBT's Local
Exchange Tariff.
5.2.2 CLEC may receive a mechanized bill format via the
EDI 811 transaction set.
5.2.3 CLEC may also view billing information through the
Bill Information interface. Bill Information will be accessible via SWBT
Toolbar.
<PAGE> 56
APPENDIX OSS (MISSOURI) - RESALE
PAGE 8 OF 10
SWBT/UNITED STATES TELECOMMUNICATIONS, INC.
072198
5.2.4 SWBT shall provide CLECs a Usage Extract Feed
electronically, on a daily basis, with information on the usage billed to its
accounts for resale services in the industry standardized Exchange Message
Record (EMR) format.
5.2.5 CLEC may receive Local Disconnect Report records
(via CARE records) electronically that indicate when CLEC's customers change
their Competitive Local Exchange Carrier.
6. REMOTE ACCESS FACILITY
6.1 CLEC must access the following SWBT OSS interfaces via a CLEC
Remote Access Facility (LRAF) located in Dallas, Texas: R-EASEl B-EASE;
DataGate; EDI-Ordering; SORD Supplement and via Toolbar, Trouble
Administration, Order Status, Verigate, LEX, and Bill Information. Connection
to the LRAF will be established via a "port" either through dial-up or direct
connection as described in Section 6.2. CLEC may utilize a port to access these
interfaces to perform the supported functions in any SWBT state where CLEC has
executed an Appendix OSS and purchases System Access in that state.
6.2 CLEC may use three types of access: Switched, Private Line,
and Frame Relay. For Private Line and Frame Relay "Direct Connections," CLEC
shall provide its own router, circuit, and two Channel Service Units/Data
Service Units (CSU/DSU). The demarcation point shall be the router interface at
the LRAF. Switched Access "Dial-up Connections" require CLEC to provide its own
modems and connection to the SWBT LRAF. CLEC shall pay the cost of the call if
Switched Access is used.
6.3 CLEC shall use TCP/IP to access SWBT OSS via the LRAF. In
addition, each CLEC shall have one valid Internet Protocol (IP) network
address. CLEC shall maintain a user-id/password unique to each individual for
accessing a SWBT OSS on CLEC's behalf. CLEC shall provide estimates regarding
its volume of transactions, number of concurrent users, desired number of
private line or dial-up (switched) connections, and length of a typical session.
6.4 CLEC shall attend and participate in implementation meetings
to discuss CLEC LRAF access plans in detail and schedule testing of such
connections.
7. OPERATIONAL READINESS TEST (ORT) FOR ORDERING/PROVISION AND
REPAIR/MAINTENANCE INTERFACES
7.1 Prior to live access to interface functionality, the Parties
must conduct Operational Readiness Testing (ORT), which will allow for the
testing of the systems, interfaces, and processes for the OSS functions ORT
will be completed in conformance with agreed upon processes and implementation
dates.
<PAGE> 57
APPENDIX OSS (MISSOURI) - RESALE
PAGE 9 OF 10
SWBT/UNITED STATES TELECOMMUNICATIONS, INC.
072198
7.2 Prior to live system usage, CLEC must complete user education
classes for SWBT-provided interfaces that affect the SWBT network. Classes are
train-the-trainer format to enable CLEC to devise its own course work for its
own employees. Charges will apply for each class. Classes will be required for
R-EASE, B-EASE, LEX, SORD Supplement and Trouble Administration. Optional
classes will be available for Order Status and Verigate. classes are
train-the-trainer format to enable CLEC to devise its own coursework for its
own employees. Charges apply to training delivery. Schedules will be made
available upon request and are subject to change, with class lengths varying.
Ongoing class schedules may be requested from the CLEC's account manager.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
Training 5 day 4.5 day 4 day 3.5 day 3 day 2.5 day 2 day 1.5 day 1 day 1/2 day
Rates class class class class class class class class class class
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 to 5 $4,050 $3,650 $3,240 $2,835 $2,430 $2,025 $1,620 $1,215 $810 $405
students
6 students $4,860 $4,380 $3,890 $3,402 $2,915 $2,430 $1,945 $1,455 $970 $490
7 students $5,670 $5,100 $4,535 $3,969 $3,400 $2,835 $2,270 $1,705 $1,135 $570
8 students $6,480 $5,830 $5,185 $4,536 $3,890 $3,240 $2,590 $1,950 $1,300 $650
9 students $7,290 $6,570 $5,830 $5,103 $4,375 $3,645 $2,915 $2,190 $1,460 $730
10 students $8,100 $7,300 $6,480 $5,670 $4,860 $4,050 $3,240 $2,430 $1,620 $810
11 students $8,910 $8,030 $7,130 $6,237 $5,345 $4,455 $3,565 $2,670 $1,780 $890
12 students $9,720 $8,760 $7,780 $6,804 $5,830 $4,860 $3,890 $2,920 $1,945 $970
- -----------------------------------------------------------------------------------------------------------
</TABLE>
7.3 A separate agreement will be required as a commitment to pay
for a specific number of CLEC students in each class. CLEC agrees that charges
will be billed by SWBT and CLEC payment is due 30 days later. CLEC agrees that
personnel from other competitive Local Service Providers may be scheduled into
any class to fill any seats for which the CLEC has not contracted. Class
availability is first-come, first served with priority given to CLECs who have
not yet attended the specific class.
7.4 Class dates will be based upon SWBT availability and will be
coordinated between CLEC, Account Manager and Product Management.
7.5 CLEC agrees to pay cancellation fee of the full price noted
in the separate agreement if CLEC cancels scheduled classes less than two weeks
prior to the scheduled start date. CLEC agrees to provide to SWBT completed
registration forms for each student no later than one week prior to the
scheduled training class.
7.6 CLEC agrees that CLEC personnel attending classes are to
utilizing only training databases and training presented to them in class.
Attempts to access any other SWBT or SBC system are strictly prohibited.
7.7 CLEC further agrees that training material, manuals and
instructor guides can be duplicated only for internal use for the purpose of
training employees to utilize capabilities SWBT's OSS in accordance with this
Appendix.
<PAGE> 58
APPENDIX OSS (MISSOURI) - RESALE
PAGE 10 OF 10
SWBT/UNITED STATES TELECOMMUNICATIONS, INC.
072198
8. RATES
8.1 CLEC requesting access to one or more the SWBT OSS functions
(i.e., pre-ordering, ordering/provisioning, maintenance/repair, billing) agrees
to pay the following rate:
System Access $3,345.00/month
8.2 CLEC requesting functions via interfaces that require
connection to the Remote Access Facility, as described in section 6, agrees to
pay the following rate(s) depending upon method of access utilized:
Remote Access Facility Access Methods
Direct Connection Per Port $1,580.00/month
Dial Up Per Port $ 316.00/month
8.3 CLEC requesting the Bill Plus(TM), as described in 5.2.1,
agrees to pay applicable tariffed rate, less Resale discount.
8.4 CLEC requesting the billing function for Usage Billable
Records, as described in 5.2.4 and 5.3.3, agrees to pay $.003 per message
transmitted.
8.5 CLEC requesting the Local Disconnect Report, as described in
5.2.5 and 5.3.4, agrees to pay $0.10 per record transmitted.
8.6 Should unforeseen modifications and costs to provision OSS
functions become required by SWBT or industry guidelines, or by regulatory
rulings, SWBT reserves the right to modify its rate structure. In addition,
should CLEC request custom development of an exclusive interface to support OSS
functions, such development will be considered by SWBT on an Individual Case
Basis (ICB) and priced as such.
9. EFFECTIVE DATE, TERM
9.1 Whereas CLEC is currently operational under an existing,
approved Interconnection Agreement, this Appendix OSS will be effective,
pending commission approval, 10 days after it is filed with the state
commission. Alternatively, this Appendix will be effective upon approval by the
state commission when it is approved as a part of the Interconnection Agreement.
<PAGE> 1
EXHIBIT 10.6
MASTER RESALE AGREEMENT
FOR THE STATE OF INDIANA
NOVEMBER 1, 1998
UNITED STATES TELECOMMUNICATIONS, INC.
AND
UNITED TELEPHONE COMPANY OF INDIANA, INC.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
PART A -- DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1. Defined Terms. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
PART B -- GENERAL TERMS AND CONDITIONS. . . . . . . . . . . . . . . . . . 5
1. Scope of this Agreement. . . . . . . . . . . . . . . . . . . . . . . 5
2. Regulatory Approvals . . . . . . . . . . . . . . . . . . . . . . . . 5
3. Term and Termination . . . . . . . . . . . . . . . . . . . . . . . . 6
4. Post Termination Interim Service Arrangements. . . . . . . . . . . . 7
5. Charges and Payment. . . . . . . . . . . . . . . . . . . . . . . . . 8
6. Audits and Examinations. . . . . . . . . . . . . . . . . . . . . . . 9
7. Intellectual Property Rights . . . . . . . . . . . . . . . . . . . . 10
8. Limitation of Liability. . . . . . . . . . . . . . . . . . . . . . . 10
9. Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . . . 10
10. Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
11. Confidentiality and Publicity. . . . . . . . . . . . . . . . . . . . 12
12. Disclaimer of Warranties . . . . . . . . . . . . . . . . . . . . . . 13
13. Assignment and Subcontract . . . . . . . . . . . . . . . . . . . . . 14
14. Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
15. Relationship of Parties. . . . . . . . . . . . . . . . . . . . . . . 14
16. No Third Party Beneficiaries . . . . . . . . . . . . . . . . . . . . 15
17. Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
18. Waivers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
19. Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
20. Force Majeure. . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
21. Dispute Resolution Procedures. . . . . . . . . . . . . . . . . . . . 16
22. Cooperation on Fraud . . . . . . . . . . . . . . . . . . . . . . . . 17
23. Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
24. Amendments and Modifications . . . . . . . . . . . . . . . . . . . . 17
25. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
26. Headings Not Controlling . . . . . . . . . . . . . . . . . . . . . . 18
27. Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . 18
28. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
29. Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . 18
30. Implementation . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
31. Federal Jurisdiction . . . . . . . . . . . . . . . . . . . . . . . . 19
PART C -- PROVISIONS RELATING TO RESALE . . . . . . . . . . . . . . . . . 20
1. Resale of Local Services . . . . . . . . . . . . . . . . . . . . . . 20
2. Network Maintenance and Management . . . . . . . . . . . . . . . . . 24
3. Additional Services. . . . . . . . . . . . . . . . . . . . . . . . . 26
4. Additional Responsibilities. . . . . . . . . . . . . . . . . . . . . 31
</TABLE>
<PAGE> 3
MASTER RESALE AGREEMENT
This Agreement is between United States Telecommunications, Inc.
("Carrier") and United Telephone Company of Indiana, Inc. ("Sprint")
hereinafter collectively, "the Parties", entered into this 1st day of November,
1998, for the State of Indiana.
WHEREAS, the Parties wish to establish terms and conditions for the
purposes of allowing the Carrier to have access to Sprint services for the
purpose of resale; and
WHEREAS, the Parties intend the rates, terms and conditions of this
Agreement, and their performance of obligations thereunder, to comply with the
Communications Act of 1934, as amended (the "Act"), the Rules and Regulations
of the Federal Communications Commission ("FCC"), and the orders, rules and
regulations of the Indiana Utility Regulatory Commission (the "Commission"); and
WHEREAS, the parties wish to replace any and all other prior
agreements, both written and oral, applicable to the state of Indiana;
THEREFORE, the Parties hereby agree as follows:
<PAGE> 4
PART A -- DEFINITIONS
1. DEFINED TERMS
1.1 Certain terms used in this Agreement shall have the meanings as
otherwise defined throughout this Agreement. Other terms used but
not defined herein will have the meanings ascribed to them in the
Act or in the Rules and Regulations of the FCC or the Commission.
The Parties acknowledged that other terms appear in this Agreement,
which are not defined or ascribed as stated above. The parties agree
that any such terms shall be construed in accordance with their
customary usage in the telecommunications industry as of the
effective date of this Agreement.
1.2. "ACT" means the Communications Act of 1934, as amended.
1.3. "AFFILIATE" is as defined in the Act.
1.4. "CENTRAL OFFICE SWITCH, END OFFICE OR TANDEM (HEREINAFTER "CENTRAL
OFFICE" OR "CO")" means switching facility within the public
switched telecommunications network, including but not limited to:
1.4.1. End Office Switches, which are switches from which
end-user Telephone Exchange Services are directly
connected and offered.
1.4.2. Tandem Switches are switches which are used to connect and
switch trunk circuits between and among Central Office
Switches.
1.5. "COMMISSION" means the Indiana Regulatory Commission.
1.6. "COMMERCIAL MOBILE RADIO SERVICES ("CMRS")" means a radio
communication service as set forth in 47 CFR ss. 20.3.
1.7. "COMPETITIVE LOCAL EXCHANGE CARRIER ("CLEC")" OR "ALTERNATIVE
LOCAL EXCHANGE CARRIER ("ALEC")" means any entity or
person authorized to provide local exchange services in
competition with an ILEC.
1.8. "EFFECTIVE DATE" is either thirty (30) days after the date
referenced in the opening paragraph of the Agreement, the filing
date of this Agreement with the Commission if the Commission has
defined the Effective Date as such, or as otherwise required by
the Commission.
1.9. "ELECTRONIC INTERFACES" means access to operations support systems
consisting of pre-ordering, ordering, provisioning, maintenance and
repair and billing functions.
1.10. "FCC" means the Federal Communications Commission.
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<PAGE> 5
1.11. "INCUMBENT LOCAL EXCHANGE CARRIER ("ILEC")" is any local exchange
carrier that was, as of February 8, 1996, deemed to be a member of
the Exchange Carrier Association as set forth in 47 CFR ss.
69.601(b) of the FCC's regulations.
1.12. "INTEREXCHANGE CARRIER ("IXC")" means a provider of interexchange
telecommunications services.
1.13. "LOCAL SERVICE REQUEST ("LSR")" means an industry standard form
used by the Parties to add, establish, change or disconnect local
services.
1.14. "LOCAL TRAFFIC" means traffic (excluding CMRS traffic) that is
originated and terminated within Sprint's local calling area, or
mandatory expanded area service (EAS) area, as defined by State
commissions or, if not, defined by State commission, then as
defined in existing Sprint Tariffs.
1.15. "ORDERING AND BILLING FORUM ("OBF")" refers to functions under the
auspices of the Carrier Liaison Committee (CLC) of the Alliance for
Telecommunications Industry Solutions (ATIS).
1.16. "PARITY" means, subject to the availability, development and
implementation of necessary industry standard Electronic
Interfaces, the provision by Sprint of services, Network Elements,
functionality or telephone numbering resources under this Agreement
to Carrier on terms and conditions, including provisioning and
repair intervals, at least equal in quality to those offered to
Sprint, its Affiliates or any other entity that obtains such
services, Network elements, functionality or telephone numbering
resources. Until the implementation of necessary Electronic
Interfaces, Sprint shall provide such services, Network Elements,
functionality or telephone numbering resources on a
non-discriminatory basis to Carrier as it provides to is Affiliates.
1.17. "PARTIES" means, jointly, United States Telecommunications, Inc.
and United Telephone Company of Indiana, Inc., and no other entity,
affiliate, subsidiary or assign.
1.18. "REBRANDING" occurs when Carrier purchases a wholesale service from
Sprint when the Carrier brand is substituted for the Sprint brand.
1.19. "TARIFF" means a filing made at the state of federal level for the
provision of a telecommunications service by a telecommunications
carrier that provides for the terms, conditions and pricing of that
service. Such filing may be required or voluntary and may or may
not be specifically approved by the Commission or FCC.
1.20. "TELECOMMUNICATIONS" means the transmission, between or among
points specified by the user, of information of the user's
choosing, without change in the form or content of the information
as sent and received.
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<PAGE> 6
1.21. "TELECOMMUNICATIONS CARRIER" means any provider of
Telecommunications Services as defined in 47 USC ss. 153, (44).
1.22. "TELECOMMUNICATION SERVICES" means the offering of
Telecommunications for a fee directly to the public, or to such
classes of users as to be effectively available directly to the
public, regardless of the facilities used.
1.23. "WHOLESALE SERVICE" means Telecommunication Services that Sprint
provides at retail to subscribers who are not telecommunications
Carriers as set forth in 47 USC ss. 251(c)(4).
1.24. "WIRE CENTER" denotes a building or space within a building which
serves as an aggregation point on a given carrier's network, where
transmission facilities and circuits are connected or switched.
Wire center can also denote a building in which one or more
central offices, used for the provision of Basic Exchange Services
and access services, are located.
4
<PAGE> 7
PART B -- GENERAL TERMS AND CONDITIONS
1. SCOPE OF THIS AGREEMENT
1.1. This Agreement specifies the rights and obligations of each party
with respect to the establishment of rates for resale of local
telecommunications services.
1.2. Sprint shall not discontinue any Telecommunications Service
provided or required hereunder without providing Carrier
reasonable notice, as required by law, of such discontinuation of
such service. Sprint agrees to cooperate with Carrier in any
transition resulting from such discontinuation of service.
1.3. The services and facilities to be provided to Carrier by Sprint in
satisfaction of this Agreement will be provided pursuant to Sprint
Tariffs and then current practices on file with the appropriate
Commission or FCC.
2. REGULATORY APPROVALS
2.1. This Agreement, and any amendment or modification hereof, will be
submitted to the Commission for approval in accordance with ss.
252 of the Act within thirty (30) days after obtaining the last
required contract signature. Sprint and Carrier shall use their
best efforts to obtain approval of this Agreement by any
regulatory body having jurisdiction over this Agreement. Carrier
shall not order services under this Agreement before the Effective
Date as defined herein, except as may otherwise be agreed in
writing between the Parties. In the event any governmental
authority or agency rejects any provision hereof, the Parties
shall negotiate promptly and in good faith such revisions as may
reasonably be required to achieve approval.
2.2. The Parties acknowledge that the respective rights and obligations
of each Party as set forth in this Agreement are based on the text
of the Act and the rules and regulations promulgated thereunder
by the FCC and the Commission as of the Effective Date
("Applicable Rules"). In the event of any amendment to the Act,
any effective legislative action or any effective regulatory or
judicial order, rule, regulation, arbitration award, dispute
resolution procedures under this Agreement or other legal action
purporting to apply the provisions of the Act to the Parties or in
which the FCC or the Commission makes a generic determination that
is generally applicable which revises, modifies or reverses the
Applicable Rules (individually and collectively, Amended Rules),
either Party may, by providing written notice to the other party,
require that the affected provisions of this Agreement be
renegotiated in good faith and this Agreement shall be amended
accordingly to reflect the pricing, terms and
5
<PAGE> 8
conditions of each such Amended Rules relating to any of the
provisions in this Agreement.
2.3. Notwithstanding any other provision of this Agreement to the
contrary ss. 2.2 hereof shall control. Any rates, terms or
conditions thus developed or modified shall be substituted in place
of those previously in effect and shall be deemed to have been
effective under this Agreement as of the effective date established
by the Amended Rules, whether such action was commenced before or
after the Effective Date of this Agreement. Should the Parties be
unable to reach agreement with respect to the applicability of such
order or the resulting party may invoke the Dispute Resolution
provisions of this Agreement, it being the intent of the parties
that this Agreement shall be brought into conformity with the then
current obligations under the Act as determined by the Amended
Rules.
2.4. Additional services, beyond those specified herein, requested by
either party relating to the subject matter of this Agreement will
be incorporated into this Agreement by written amendment hereto.
3. TERM AND TERMINATION
3.1. This Agreement shall be deemed effective upon the Effective Date,
provided however that if the Carrier has any outstanding past due
obligations to Sprint, this Agreement will not be effective until
such time as any past due obligations with Sprint are paid in full.
No order or request for services under this Agreement shall be
processed before the Effective Date.
3.2. Except as provided herein, Sprint and Carrier agree to provide
service to each other on the terms of this Agreement for a period
ending November 1, 2000 ("End Date").
3.3. In the event that Carrier desires uninterrupted service under this
Agreement during negotiations, Carrier shall provide to Sprint
written notification appropriate under the Act, and if the Parties
are actually in arbitration or mediation before the appropriate
Commission or FCC prior to the End Date, this Agreement will
continue in effect only until the issuance of an order, whether a
final non-appealable order or not, by the Commission or FCC
resolving the issues set forth in such arbitration or mediation
request.
3.4. In the event of default, either Party may terminate this Agreement
in whole or in part provided that the non-defaulting Party so
advises the defaulting Party in writing of the event of the alleged
default and the defaulting Party does not remedy the default within
sixty (60) days after written notice thereof. Default is defined to
include:
3.4.1. Either Party's insolvency or initiation of bankruptcy or
receivership proceedings by or against the Party; or
6
<PAGE> 9
3.4.2. Either Party's material breach of any of the terms or
conditions hereof, including the failure to make any
undisputed payment when due.
3.5. Termination of this Agreement for any cause shall not release
either Party from any liability which at the time of termination
has already accrued to the other Party or which thereafter may
accrue in respect to any act or omission prior to termination or
from any obligation which is expressly stated herein to survive
termination.
3.6. In the event this Agreement is terminated under ss. 3.4, Sprint may
immediately discontinue processing orders for new service from
Carrier and file with the Commission to terminate this agreement
and reassign Carrier's customers pursuant to the Commission's
guidelines for Carriers that abandon service.
3.7. Notwithstanding the above, should Sprint sell or trade
substantially all the assets in an exchange or group of exchanges
that Sprint uses to provide Telecommunications Services, then
Sprint may terminate this Agreement in whole or in part as to that
particular exchange or group of exchanges upon sixty (60) days prior
written notice.
4. POST TERMINATION INTERIM SERVICE ARRANGEMENTS
4.1. In the event that this Agreement expires under ss. 3.2, it is the
intent of the Parties to provide in this Section for interim
service arrangements between the Parties at the time of expiration
so that service to end users will not be interrupted should a new
agreement not be consummated prior to the End Date. Therefore,
except in the case of termination as a result of either Party's
default under ss. 3.4, or for termination upon sale under ss. 3.7,
for service made available under this Agreement and existing as of
the End Date, the Parties agree that those services may continue
uninterrupted at the request of either Party provided that
4.1.1. a new agreement is voluntarily entered into by Parties; or
4.1.2. service is provided under such standard terms and
conditions or tariffs approved by and made generally
available by the Commission, if they exist at the time of
termination; or
4.1.3. Carrier elects to take service pursuant to the entire terms
and conditions of an existing agreement between Sprint and
another carrier for the remaining term of that agreement.
If neither ss. 4.1.1 nor ss. 4.1.2 are in effect, and
Carrier does not designate an agreement under this
subsection Sprint may designate such agreement.
<PAGE> 10
5. CHARGES AND PAYMENT
5.1. In consideration of the services provided under this Agreement,
the Parties shall pay the charges set forth in Exhibit 1 subject
to the provisions of ss. 2.2 and ss. 2.3 hereof.
5.2. Subject to the terms of this Agreement, the Parties shall pay
invoices by the due date shown on the invoice. For invoices not
paid when due, late payment charges will be assessed under ss. 5.4.
If the payment due date is a Saturday, Sunday or a designated bank
holiday, payment shall be made the next business day.
5.3. Billed amounts which are being investigated, queried, or for which
claims have been or may be filed, are not due for payment until
such investigations, claims, or queries have been resolved in
accordance with the provisions governing dispute resolution of
this Agreement.
5.4. Sprint will assess late payment charges to the other Carrier just
as it would its own end user in accordance with the applicable
General Exchange tariff or, if there is not specific reference in
the applicable General Exchange tariff, Sprint shall assess a late
payment charge equal to the lesser of one and one-half percent
(1.5%) or the maximum rate allowed by law per month of the balance
due, until the amount due is paid in full.
5.5. In addition to late payment charges, Sprint will use the following
collection procedures in connection with Carrier's past due
amounts.
5.5.1. First, a late payment charge will be added to accounts
that are not paid within a thirty- (30) day period.
5.5.2. Second, a notice will be sent to Carrier on day 31 stating
that unless full payment is received within the next
thirty- (30) days Sprint will suspend processing new
orders.
5.5.3. Third, if the Carrier account remains delinquent on day 61
Sprint will send a second notice to Carrier stating that
Sprint has suspended processing new orders and unless
payment is received by day 90, service for all Carrier end
user customers will be suspended.
5.5.4. Fourth, should the Carrier account remain outstanding on
day 91 Sprint will deny service and send a letter to
Carrier stating that their service has been suspended for
non-payment.
5.6. Sprint reserves the right to periodically revise its collection
procedure to conform to then current business practices and
regulations. Sprint will provide timely notification to Carrier of
changes to its collection practice in a manner consistent with its
own customer notification.
8
<PAGE> 11
6. AUDITS AND EXAMINATIONS
6.1. As used herein "Audit" shall mean a comprehensive review of
services performed under this Agreement. Either party (the
"Requesting Party") may perform one (1) Audit per 12-month period
commencing with the Effective Date.
6.2. Upon thirty (30) days written notice by the Requesting Party to
the other "Audited Party," Requesting Party shall have the right
through its authorized representative to make an Audit, during
normal business hours, of any records, accounts and processes which
contain information bearing upon the provision of the services
provided and performance standards agreed to under this Agreement.
Within the above-described 30-day period, the Parties shall
reasonably agree upon the scope of the Audit, the documents and
processes to be reviewed, and the time, place and manner in which
the Audit shall be performed. Audited Party agrees to provide
Audit support, including appropriate access to and use of Audited
Party's facilities (e.g., conference rooms, telephones, copying
machines).
6.3. Each party shall bear its own expenses in connection with the
conduct of the Audit. The Requesting Party will pay for the
reasonable cost of special data extraction required by the
Requesting Party to conduct the Audit. For purposes of this ss.
6.3, a special data extraction shall mean the creation of an output
record or informational report (form existing data files) that is
not created in the normal course of business. If any program is
developed to Requesting Party's specifications and at Requesting
Party's expense, Requesting Party shall specify at the time of
request whether the program is to be retained by Audited party for
reuse for any subsequent Audit.
6.4. Adjustments, credits or payments shall be made and any corrective
action shall commence within thirty (30) days from Requesting
Party's receipt of the final audit report to compensate for any
errors or omissions which are disclosed by such Audit and are
agreed to by the Parties. One and one-half percent (1.15%) or the
highest interest rate allowable by law for commercial transactions,
whichever is lower, shall be assessed and shall be computed by
compounding monthly form the time of the error or omission to the
day of payment or credit.
6.5. Neither the right to audit nor the right to receive an adjustment
shall be affected by any statement to the contrary appearing on
checks or otherwise, unless a statement expressly waiving such
right appears in writing, is signed by an authorized representative
of the party having such right and is delivered to the other party
in a manner sanctioned by this Agreement.
6.6. This Article 6 shall survive expiration or termination of the
Agreement for a period of one (1) year after expiration or
termination of this Agreement.
9
<PAGE> 12
7. INTELLECTUAL PROPERTY RIGHTS
7.1. Any intellectual property which originates from or is developed by
a Party shall remain in the exclusive ownership of that Party.
Except for a limited license to use patents or copyrights to the
extent necessary for the Parties to use any facilities or
equipment (including software) or to receive any service solely as
provided under this Agreement, no license in patent, copyright,
trademark or trade secret, or other proprietary or intellectual
property right now or hereafter owned, controlled or licensable by
a Party, is granted to the other Party of shall be implied or
arise by estoppel. It is the responsibility of Sprint to ensure,
at no separate or additional cost to the Carrier, that it has
obtained any necessary licenses in relation to intellectual
property of third parties used in Sprint's network to the extent
of Sprint's own use of facilities or equipment (including
software) in the provision of service to its end user customers,
but not that may be required to enable Carrier to use any
facilities or equipment (including software), to receive any
service, to perform its respective obligations under this
Agreement, or to provide service by Carrier to its end user
customers.
7.2. Following notice of an infringement claim against Sprint based on
the use by Carrier of a service or facility, Carrier shall at
Carrier's expense, procure from the appropriate third parties the
right to continue to use the alleged infringing intellectual
property or if Carrier fails to do so, Sprint may charge Carrier
for such costs as permitted under a Commission order.
8. LIMITATION OF LIABILITY
8.1. Neither Party shall be responsible to the other for any indirect,
special, consequential or punitive damages, including (without
limitation) damages for loss of anticipated profits or revenue or
other economic loss in connection with or arising from anything
said, omitted, or done hereunder (collectively "Consequential
Damages:), whether arising in contract or tort, provided that the
foregoing shall not limit a Party's obligation under Article 9 to
indemnify, defend, and hold the other Party harmless against
amounts payable to third parties. Notwithstanding the foregoing,
in no event shall either Party's liability to the other for a
service outage exceed an amount equal to the proportionate charge
for the service(s) provided for the period during which the
service was affected.
9. INDEMNIFICATION
9.1. Each Party agrees to indemnify and hold harmless the other Party
from and against claims for damage to tangible personal or real
property and/or personal injuries arising out of the negligence or
willful misconduct or omission of the indemnifying Party. To the
extent not prohibited by law, each Party shall defend, indemnify,
and hold the other Party harmless against any loss to a third
party arising out of the negligence or willful
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<PAGE> 13
misconduct by such indemnifying Party. Notwithstanding the above,
in the case of any loss alleged or damage claim made by a Customer
of either Party in connection with the service provided by that
Party, and which allegation or claim related in some way to a
service provided under this Agreement, the Party whose customer
alleged such loss shall indemnify the other Party and hold it
harmless against any or all of such loss alleged by each and every
Customer which arises out of the negligence or willful misconduct
of the indemnifying Party. The indemnifying Party under this
Section agrees to defend any suit brought against the other Party
either individually or jointly with the indemnifying Party for any
such loss, injury, liability, claim or demand. The indemnified
Party agrees to notify the other Party promptly, in writing, of any
written claims, lawsuits, or demands for which it is claimed that
the indemnifying Party is responsible under this Section and to
cooperate in every reasonable way to facilitate defense or
settlement of claims. The indemnifying Party shall have complete
control over defense of the case and over the terms of any proposed
settlement or compromise thereof. The indemnifying Party shall not
be liable under this Section for settlement by the indemnified
Party for any claim, lawsuit, or demand, if the indemnifying Party
has not approved the settlement in advance, unless the indemnifying
Party has had defense of the claim, lawsuit, or demand tendered to
it in writing and has failed to promptly assume such defense. In
the event of such failure to assume defense, the indemnifying Party
shall be liable for any reasonable settlement made by the
indemnified Party without approval of the indemnifying Party.
9.2. Each Party agrees to indemnify and hold harmless the other Party
from all claims and damages arising form the Indemnifying Party's
discontinuance of service to one of the Indemnified Party's
subscribers for nonpayment.
9.3. When the lines or services of other companies and Carriers are used
in establishing connections to and/or from points not reached by a
Party's lines, neither Party shall be liable for any act or
omission of the other companies or Carriers.
9.4. In addition to its indemnity obligations hereunder, each Party
shall, to the extent allowed by law or Commission Order, provide,
in its Tariffs and contracts with its subscribers that relate to
any Telecommunications Services provided or contemplated under this
Agreement, that in no case shall such Party or any of its agents,
contractors or others retained by such Party be liable to any
subscriber or third party for (i) any loss relating to or arising
out of this Agreement, whether in contract or tort, that exceeds
the amount such Party would have charged the applicable subscriber
for the service(s) or function(s) that gave rise to such loss, and
(ii) Consequential Damages (as defined in Article 8 above).
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<PAGE> 14
10. REMEDIES
10.1. In addition to any other rights or remedies, and unless
specifically provided herein and to the contrary, either Party may
sue in equity for specific performance.
10.2. Except as otherwise provided herein, all rights of termination
cancellation or other remedies prescribed in this Agreement, or
otherwise available, are cumulative and are not intended to be
exclusive of other remedies to which the injured Party may be
entitled at law or in equity in case of any breach or threatened
breach by the other Party of any provision of this Agreement, and
use of one or more remedies shall not bar use of any other remedy
for the purpose of enforcing the provisions of this Agreement.
11. CONFIDENTIALITY AND PUBLICITY
11.1. All information which is disclosed by one party ("Disclosing
Party") to the other ("Recipient") in connection with this
Agreement, or acquired in the course of performance of this
Agreement, shall be deemed confidential and proprietary to the
Disclosing Party and subject to this Agreement, such information
including but not limited to, orders for services, usage
information in any form, and Customer Proprietary Network
Information ("CPNI") as that term is defined by the Act and the
rules and regulations of the FCC ("Confidential and/or Proprietary
Information").
11.2. During the term of this Agreement, and for a period of one (1) year
thereafter, Recipient shall (i) use it only for the purpose of
performing under this Agreement, (ii) hold it in confidence and
disclose it only to employees or agents who need to know it in
order to perform under this Agreement, and (iii) safeguard it from
unauthorized use or Disclosure using no less than the degree of
care with which Recipient safeguards its own Confidential
Information.
11.3. Recipient shall have no obligation to safeguard Confidential
Information (i) which was in the Recipient's possession free of
restriction prior to its receipt from Disclosing Party, (ii) which
becomes publicly known or available through no breach of this
Agreement by Recipient, (iii) which is rightfully acquired by
Recipient free of restrictions on its Disclosure, or (iv) which is
independently developed by personnel of Recipient to whom the
Disclosing Party's Confidential Information if required by law, a
court, or governmental agency, provided that Disclosing Party has
been notified of the requirement promptly after Recipient becomes
aware of the requirement, and provided that Recipient undertakes
all lawful measures to avoid disclosing such information until
Disclosing Party has had reasonable time to obtain a protective
order. Recipient agrees to
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<PAGE> 15
comply with any protective order that covers the Confidential
Information to be disclosed.
11.4. Each Party agrees that Disclosing Party would be irreparably
injured by a breach of this Article II by Recipient or its
representatives and that Disclosing Party shall be entitled to
seek equitable relief, including injunctive relief and specific
performance, in the event of any breach of this Article 11. Such
remedies shall not be exclusive, but shall be in addition to all
other remedies available at law or in equity.
11.5. Unless otherwise agreed, neither Party shall publish or use the
other Party's logo, trademark, service mark, name, language,
pictures, or symbols or words from which the other Party's name
may reasonably be inferred or implied in any product, service,
advertisement, promotion, or any other publicity matter, except
that nothing in this paragraph shall prohibit a Party from
engaging in valid comparative advertising. This ss. 10.2 shall
confer no rights on a Party to the service marks, trademarks and
trade names owned or used in connection with services by the other
Party or its Affiliates, except as expressly permitted by the
other Party.
11.6. Neither Party shall produce, publish, or distribute any press
release nor other publicity referring to the other Party or its
Affiliates, or referring to this Agreement, without the prior
written approval of the other Party. Each party shall obtain the
other Party's prior approval before discussing this Agreement in
any press or media interviews. In no event shall either Party
mischaracterize the contents of this Agreement in any public
statement or in any representation to a governmental entity or
member thereof.
11.7. Except as otherwise expressly provided in this Article 11, nothing
herein shall be construed as limiting the rights of either Party
with respect to its customer information under any applicable law,
including without limitation ss. 222 of the Act.
12. DISCLAIMER OF WARRANTIES
12.1. EXCEPT AS SPECIFICALLY PROVIDED ELSEWHERE IN THIS AGREEMENT TO THE
CONTRARY, NEITHER PARTY MAKES ANY REPRESENTATIONS OR WARRANTIES,
EXPRESS OR IMPLIED, WITH RESPECT TO QUALITY, FUNCTIONALITY OR
CHARACTERISTICS OF THE SERVICES PROVIDED PURSUANT TO THIS
AGREEMENT, INCLUDING, BUT NOT LIMITED TO, IMPLIED WARRANTIES OF
MERCHANTABILITY AND/OR FITNESS FOR A PARTICULAR PURPOSE. NO
REPRESENTATION OR STATEMENT MADE BY EITHER PARTY OR ANY OF ITS
AGENTS OR EMPLOYEES, ORAL OR WRITTEN, INCLUDING, BUT NOT LIMITED
TO,
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<PAGE> 16
ANY SPECIFICATIONS, DESCRIPTIONS OR STATEMENTS
PROVIDED OR MADE SHALL BE BINDING UPON EITHER
PARTY AS A WARRANTY.
13. ASSIGNMENT AND SUBCONTRACT
13.1. If any Affiliate of either Party succeeds to that portion of
the business of such Party that is responsible for, or
entitled to, any rights, obligations, duties, or other
interests under this Agreement, such Affiliate may succeed to
those rights, obligations, duties, and interest of such Party
under this Agreement. In the event of any such succession
hereunder, the successor shall expressly undertake in writing
to the other Party the performance and liability for those
obligations and duties as to which it is succeeding a Party
to this Agreement. Thereafter, the successor Party shall be
deemed Carrier or Sprint and the original Party shall be
relieved of such obligations and duties, except for matters
arising out of events occurring prior to the date of such
undertaking.
13.2. Except as herein before provided, and except for an
assignment confined solely to moneys due or to become due,
any assignment of this Agreement or of the work to be
performed, in whole or in part, or of any other interest of a
Party hereunder, without the other Party's written consent,
which consent shall not be unreasonably withheld or delayed,
shall be void. It is expressly agreed that any assignment of
moneys shall be void to the extent that it attempts to impose
additional obligations other than the payment of such moneys
on the other Party or the assignee additional to the payment
of such moneys.
14. GOVERNING LAW
14.1. This Agreement shall be governed by and construed in
accordance with the Act and the FCC's Rules and Regulations,
and other authoritative statements, except insofar as state
law may control any aspect of this Agreement, in which case
the domestic laws of the state of Indiana, without regard to
its conflicts of laws principles, shall govern.
15. RELATIONSHIP OF PARTIES
15.1. It is the intention of the Parties that each shall be an
independent contractor and nothing contained herein shall
constitute the Parties as joint venturers, partners,
employees or agents of one another, and neither Party shall
have the right or power to bind or obligate the other.
16. NO THIRD PARTY BENEFICIARIES
16.1. The provisions of this Agreement are for the benefit of the
Parties hereto and not for any other person, and this
Agreement shall not provide any
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<PAGE> 17
person not a party hereto with any remedy, claim, liability,
reimbursement, right of action, or other right in excess of
those existing without reference hereto. This shall not be
construed to prevent Carrier from providing its
Telecommunications Services to other carriers.
17. NOTICES
17.1. Except as otherwise provided herein, all notices or other
communication hereunder shall be deemed to have been duly
given when made in writing and delivered in person, or sent
by certified mail, postage prepaid, return receipt requested,
on the date the mail is delivered or its delivery attempted.
<TABLE>
<S> <C> <C> <C>
If to Sprint: If to
Field Service Manager Carrier: Richard Pollara
555 Lake Border Drive President
Mailstop FLAPKA0202 13902 North Dale Mabry
Apopka, Florida 32703 Suite 212
Tampa, Florida 33618
With a CLEC Account Manager With a
copy to: Sprint Copy to:
P.O. Box 3555
Mansfield, OH 44907-0555
</TABLE>
17.2. If personal delivery is selected to give notice, a receipt of
such delivery shall be obtained. The address to which notices
or communications may be given to either party may be changed
by written notice given by such Party to the other pursuant
to this Article 17.
18. WAIVERS
18.1. No waiver of any provisions of this Agreement and no consent
to any default under this Agreement shall be effective
unless the same shall be in writing and properly executed by
or on behalf of the Party against whom such waiver or consent
is claimed.
18.2. No course of dealing or failure of any Party to strictly
enforce any term, right, or condition of this Agreement in
any instance shall be construed as a general waiver or
relinquishment of such term, right or condition.
18.3. Waiver by either party of any default by the other Party
shall not be deemed a waiver of any other default.
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19. SURVIVAL
19.1. Termination of this Agreement, or any part hereof, for any
cause shall not release either Party from any liability which
at the time of termination had already accrued to the other
Party or which thereafter accrues in any respect to any act
or omission occurring prior to the termination or from an
obligation which is expressly stated in this Agreement to
survive termination including but not limited to ss.ss. 5, 6,
7, 8, 9, 10, 14, 18, 21, 23, and 25.
20. FORCE MAJEURE
20.1. Neither Party shall be held liable for any delay or failure
in performance of any part of this Agreement from any cause
beyond its control and without its fault or negligence, such
as acts of God, acts of civil or military authority,
embargoes, epidemics, war, terrorist acts, riots,
insurrections, fires, explosions, earthquakes, nuclear
accidents, floods, power blackouts, strikes, work stoppage
affecting a supplier or unusually severe weather. No delay or
other failure to perform shall be excused pursuant to this
Article 20 unless delay or failure and consequences thereof
are beyond the control and without the fault or negligence of
the Party claiming excusable delay or other failure to
perform. Subject to Article 3 hereof, in the event of any
such excused delay in the performance of a Party's
obligation(s) under this Agreement, the due date for the
performance of the original obligation(s) shall be extended
by a term equal to the time lost by reason of the delay. In
the event of such delay, the delayed Party shall perform its
obligations at a performance level no less than that which it
uses for its own operations. In the event of such performance
delay or failure by Sprint, Sprint agrees to resume
performance in a nondiscriminatory manner and not favor its
own provision of Telecommunications Services above that of
Carrier.
21. DISPUTE RESOLUTION PROCEDURES
21.1. If any matter is subject to a bona fide dispute between the
Parties, the disputing Party shall within thirty (30) days of
the event giving rise to the dispute, give written notice to
the other Party of the dispute and include in such notice the
specific details and reasons for disputing each item.
21.2. If the Parties are unable to resolve the issues related to
the dispute in the normal course of business within thirty
(30) days after delivery of notice of the Dispute, to the
other Party the dispute shall be escalated to a designated
representative who has authority to settle the dispute and
who is at a higher level of management than the persons with
direct responsibility for administration of this Agreement.
The designated representatives shall meet as often as they
reasonably deem necessary in order to discuss the dispute and
negotiate in good faith in an effort to resolve such dispute,
but
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in no event shall such resolution exceed 60 days from the
initial notice. The specific format for such discussions will
be left to the discretion of the designated representatives,
provided, however, that all reasonable requests for relevant
information made by one Party to the other Party shall be
honored.
21.3. After such period either Party may file a complaint with the
FCC or Commission to resolve such issues.
22. COOPERATION ON FRAUD
22.1. The Parties agree that they shall cooperate with one another
to investigate, minimize and take corrective action in cases
of fraud. The Parties fraud minimization procedures are to be
cost effective and implemented so as not to unduly burden or
harm one party as compared to the other.
23. TAXES
23.1. Any Federal, state or local excise, license, sales, use, or
other taxes or tax-like charges (excluding any taxes levied on
income) resulting from the performance of this Agreement
shall be borne by the Party upon which the obligation for
payment is imposed under applicable law, even if the
obligation to collect and remit such taxes is placed upon the
other party. Any such taxes shall be shown as separate items
on applicable billing documents between the Parties. The
Party obligated to collect and remit taxes shall do so unless
the other Party provides such Party with the required
evidence of exemption. The Party so obligated to pay any such
taxes may contest the same in good faith, at its own expense,
and shall be entitled to the benefit of any refund or
recovery, provided that such party shall not permit any lien
to exist on any asset of the other party by reason of the
contest. The Party obligated to collect and remit taxes shall
cooperate fully in any such contest by the other Party by
providing records, testimony and such additional information
or assistance as may reasonably be necessary to pursue the
contest.
24. AMENDMENTS AND MODIFICATIONS
24.1. No provision of this Agreement shall be deemed waived,
amended or modified by either party unless such a waiver,
amendment or modification is in writing, dated, and signed by
both Parties.
25. SEVERABILITY
25.1. Subject to Article 2, if any part of this Agreement becomes
or is held to be invalid for any reason, such invalidity will
affect only the portion of this Agreement which is invalid.
In all other respects this Agreement will stand
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<PAGE> 20
as if such invalid provision had not been a part thereof, and
the remainder of the Agreement shall remain in full force and
effect.
26. HEADINGS NOT CONTROLLING
26.1. The headings and numbering of Article, Sections, Parts and
Attachments in this Agreement are for convenience only and
shall not be construed to define or limit any of the terms
herein or affect the meaning or interpretation of this
Agreement.
27. ENTIRE AGREEMENT
27.1. This Agreement, including all Parts and Attachments and
subordinate documents attached hereto or referenced herein,
all of which are hereby incorporated by reference, constitute
the entire matter thereof, and supersede all prior oral or
written agreements, representations, statements,
negotiations, understandings, proposals, and undertakings
with respect to the subject matter thereof
28. COUNTERPARTS
28.1. This Agreement may be executed in counterparts. Each
counterpart shall be considered an original and such
counterparts shall together constitute one and the same
instrument.
29. SUCCESSORS AND ASSIGNS
29.1. This Agreement shall be binding upon, and inure to the
benefit of, the Parties hereto and their respective
successors and permitted assigns.
30. IMPLEMENTATION
30.1. This Agreement sets forth the overall terms and conditions,
and standards of performance for services, processes, and
systems capabilities that the Parties will provide to each
other. The Parties understand that the arrangements and
provision of services described in this Agreement shall
require technical and operational coordination between the
Parties. Accordingly, the Parties may agree to form a team
that shall further develop and identify those processes,
guidelines, specifications, standards and additional terms
and conditions necessary to support the terms of this
Agreement.
31. FEDERAL JURISDICTION
31.1. Carrier understands and agrees that this agreement serves as
actual notice that Sprint and its Affiliates have entered
into a binding contract to provide exclusive
telecommunications services for the Army and Air Force
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<PAGE> 21
Exchange Service ("AAFES") during the term of this agreement.
The AAFES contract specifies, among other things, that Sprint
shall provide all telecommunications services to officer and
enlisted temporary living facilities (commonly named Bachelor
Officer Quarters and Bachelor Enlisted Quarters) and to all
unaccompanied enlisted personnel barracks on United States
Army bases. Carrier agrees it will not market to or attempt
to secure any customer located in an area governed by this
exclusive telecommunications service provider contract.
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<PAGE> 22
PART C - PROVISIONS RELATING TO RESALE
1. RESALE OF LOCAL SERVICES
1.1. Scope
1.1.1. Sprint retail Telecommunications Services shall be
available for resale at wholesale prices pursuant to
47 USC ss. 251(c)(4). Services that are not retail
Telecommunications Services and, thus, not covered
by this Agreement and not available for resale at
wholesale prices include, but are not limited to,
Voice Mail/MessageLine, Paging, Inside Wire
Installation and Maintenance, CMRS services,
Lifeline services and similar government programs
(underlying Telecommunications Service will be
resold but Carrier must qualify its offering for
these programs), promotions of ninety (90) days or
less and Employee Concessions.
1.1.2. COCOT lines or Pay Telephone Access Lines will not
be resold at wholesale prices under this Agreement.
1.1.3. Except as set forth above and as may be allowed by
the FCC or Commission, Sprint shall not place
conditions or restrictions on Carrier's resale of
wholesale regulated Telecommunications Services,
except for restrictions on the resale of residential
service to other classifications (e.g., residential
service to business customers) and for promotions of
90-days or less in length. In addition, Carrier
shall be prohibited from marketing its products
using the Sprint product name (i.e., Carrier may
purchase the features package called "Sprint
Essential" but shall be prohibited from reselling
this product using the Sprint brand name or the
Sprint product name.) Every regulated retail service
rate, including promotions over ninety (90) days in
length, discounts, and option plans will have a
corresponding wholesale rate. Sprint will make
wholesale telecommunications service offerings
available for all new regulated services at the same
time the retail service becomes available.
1.1.4. Sprint will continue to provide existing databases
and signaling support for wholesale services at no
additional cost.
1.1.5. Sprint will make any service grandfathered to an
end-user or any Individual Case Basis ("ICB")
service available to Carrier for resale to that same
end-user at the same location(s). Should Sprint
discontinue any grandfathered or ICB service Sprint
will provide to Carrier any legally required notice
as soon as practicable and at least equal in quality
and timeliness to that which is provided to Sprint's
own customers, prior to the effective date of
changes in or
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discontinuation of any product or service that is
available for resale under this Subsection.
1.1.6. Sprint will continue to provide Primary
Interexchange Carrier ("PIC") processing for those
end-users obtaining resold service from Carrier.
Sprint will bill and Carrier will pay any PIC change
charges. Sprint will only accept said requests for
PIC changes from Carrier and not from Carrier's end
users.
1.1.7. Sprint shall allow Carrier customers to retain their
current telephone number when technically feasible
within the same Sprint Wire Center and shall install
Carrier customers at Parity unless Carrier customers
currently subscribe to Vacation Service only or are
currently in the process of having their service
suspended for non-pay. In such cases Sprint will
treat the Carrier customer as a new installation at
the request of the Carrier.
1.2. Charges and Billing
1.2.1. Access services, including revenues associated
therewith, provided in connection with the resale of
services hereunder shall be the responsibility of
Sprint and Sprint shall directly bill and receive
payment on its own behalf from an IXC for access
related to interexchange calls generated by resold
or rebranded customers.
1.2.2. Sprint will be responsible for returning EMI/EMR
records to IXCs with the proper EMR Return Code
along with the Operating Company Number ("OCN") of
the associated Automatic Number Identification
("ANI"), (i.e., Billing Number).
1.2.3. Sprint will deliver a monthly statement for
wholesale services as follows:
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<PAGE> 24
1.2.3.1. Invoices will be provided in a standard Carrier
access billing format or other such format as Sprint
may determine;
1.2.3.2. Where local usage charges apply and message detail
is created to support available services, the
originating local usage at the call detail level in
standard EMR industry format will be exchanged daily
or at other mutually agreed upon intervals;
1.2.3.3. The Parties will work cooperatively to
exchange information to facilitate the
billing of in and out collect and
inter/intra-region alternately billed
messages;
1.2.3.4. Sprint agrees to provide information on the
end-user's selection of special features
where Sprint maintains such information
(e.g., billing method, special language)
when Carrier places the order for service;
1.2.3.5. Monthly recurring charges for
Telecommunications Services sold pursuant
to this Agreement shall be billed monthly
in advance.
1.2.4. For billing purposes, and except as otherwise
specifically agreed to in writing, the
Telecommunications Services provided hereunder are
furnished for a minimum term of one month. Each
month is presumed to have thirty (30) days. Sprint
shall bill for message provisioning, data tape
charges, and for additional copies of the monthly
invoice.
1.3. Pricing
1.3.1. Pricing shall be developed based on 47 USC ss.
252(d)(3), as now enacted or as hereafter amended,
where wholesale prices are retail prices less
avoided costs, net of any additional costs imposed
by wholesale operations, unless otherwise ordered by
the Commission. The wholesale rate shall be as set
forth on Exhibit 1. Additional rates for new or
additional services shall be added at the time said
new or additional services are offered.
1.4. Provisioning and Installation
1.4.1. Electronic Interfaces for the exchange of ordering
information will be adopted and made available to
Carrier in accordance with Sprint operating
procedures.
1.4.2. Carrier and Sprint may order PLC and PIC record
changes using the same order process and on a
unified order (the "LSR").
1.4.3. A general Letter of Agency ("LOA") initiated by
Carrier or Sprint will be required to process a PLC
or PIC change order. No LOA
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<PAGE> 25
signed by the end-user will be required to process a
PLC or PIC change ordered by Carrier or Sprint.
Carrier and Sprint agree that PLC and PIC change
orders will be supported with appropriate
documentation and verification as required by FCC
and Commission rules. In the event of a subscriber
complaint of an unauthorized PLC record change where
the Party that ordered such change is unable to
produce appropriate documentation and verification
as required by FCC and Commission rules, or, if
there are no rules applicable to PLC record changes,
then such rules as are applicable to changes in long
distance carriers of record shall apply, such Party
shall be liable to pay and shall pay all
nonrecurring charges associated with reestablishing
the subscriber's local service with the original
local carrier as well as an Unauthorized Local
Service Provider Change Charge as detailed in the
applicable State Local Access Tariff. Where Sprint
offers, and if the Carrier so desires, a separate
agreement may be entered into with Sprint to
establish themselves as a "No Fault" Carrier. This
option is also detailed in the appropriate State
Local Access Tariff.
1.4.4. Each Party will provide the other, if requested, as
agent of the end-user customer, at the time of the
PLC order, current "As Is" preordering/ordering
information relative to the end-user consisting of
local features, products, services, elements,
combinations, and any customer status qualifying the
customer for a special service (e.g., DA exempt,
lifeline, etc.) provided by the Party to that
end-user. Each Party is responsible for ordering the
Telecommunications Services desired by the end-user
customer.
1.4.5. Sprint shall provide Carrier the ability to obtain
telephone numbers, including vanity numbers from
Sprint where Sprint offers these services to its end
users, and to assign these numbers with the Carrier
customer. Reservation and aging of numbers remain
the responsibility of the Sprint. Carrier shall pay
Sprint the reasonable administrative costs of this
function, and the monthly recurring charges listed
in the appropriate State Local Access Tariff.
1.4.6. Sprint shall provide Carrier the ability to order
all available features on its switches at parity
with what Sprint offers to its own end user
customers (e.g., call blocking of 900 and 976 calls
by line or trunk).
1.4.7. Sprint will direct customer to Carrier for requests
changing their Carrier service. Sprint shall process
all PIC changes provided by Carrier on behalf of
IXCs. If PIC changes are received by Sprint directly
from IXCs, Sprint shall reject the PIC change back
to the IXC with the OCN of Carrier in the
appropriate field of the industry standard CARE
record.
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2. NETWORK MAINTENANCE AND MANAGEMENT
2.1. General Requirements
2.1.1. The Parties will exchange appropriate network
maintenance information (e.g., maintenance contact
numbers, network information, information required
to comply with law enforcement and other security
agencies of the government, etc.).
2.1.2. Each Party shall provide a 24-hour contact number
for network service issues. A fax number must also
be provided to facilitate event notifications for
planned mass calling events. The Parties shall agree
upon appropriate network service control
capabilities,
2.1.3. Voice response units, similar technologies,
intercept solutions or live referrals should be
used, where available to refer/transfer calls from
customers to the proper Telecommunications Carrier
for action. Neither Party shall market to end-users
during a call when that customer contacts the Party
solely as a result of a misdirected call.
2.1.4. Notice of Network Event. Each party has the duty to
alert the other to any network events that can
result or have resulted in service interruption,
blocked calls, or negative changes in network
performance as follows:
2.1.4.1. Any cable or electronics outage that
affects 50% or more of the in-service lines
of a central office or 1000 access lines,
whichever is less with a duration of two
(2) minutes or more.
2.1.4.2. Toll or EAS isolation of an entire exchange
with duration of two (2) minutes or more.
2.1.4.3. Any digital cross-connect or fiber optic
complete system failure lasting two (2)
minutes or more.
2.1.5. Notice of Network Change. The Parties agree to
provide each other reasonable notice of changes
including the information necessary for the
transmission and routing of services using that
local exchange carrier's facilities or networks, as
well as other changes that would affect the
interoperability of those facilities and networks.
Correct Local Exchange Routing Guide (LERG) data is
considered part of this requirement.
2.1.6. Sprint will close all trouble reports with Carrier.
Carrier will close all trouble reports with its
end-user.
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2.1.7. A non-branded, customer-not-at-home card shall be
left by Sprint at the customer's premises when a
Carrier customer is not at home for an appointment
and Sprint performs repair or installation services
on behalf of Carrier.
2.2. Transfer of Service Announcements. When an end-user who
continues to be located within the local calling area changes
from Sprint to Carrier and does not retain its original
telephone number which was provided by Sprint, Sprint will
provide a new number announcement on the inactive telephone
number upon request, for a minimum period of ninety (90) days
(or some shorter reasonable period, as permitted by the
Commission, when numbers are in short supply), at no charge
to the end-user or the Carrier unless Sprint has a Tariff on
file to charge end-users. This announcement will provide
details on the new number to be dialed to reach this
customer.
2.3. Repair Calls. Carrier and Sprint will employ the following
procedures for handling misdirected repair calls:
2.3.1. Carrier and Sprint will educate their respective
customers as to the correct telephone numbers to
call in order to access their respective repair
bureaus.
2.3.2. To the extent the correct provider can be
determined, misdirected repair calls will be
referred to the proper provider of local exchange
service in a courteous manner, at no charge, and the
end-user will be provided the correct contact
telephone number. In responding to repair calls,
neither Party shall make disparaging remarks about
the other, nor shall they use these repair calls as
the basis for internal referrals or to solicit
customers or to market services. Either Party may
respond with accurate information in answering
customer questions.
2.3.3. Carrier and Sprint will provide their respective
repair contact numbers to one another on a
reciprocal basis.
2.4. Restoration of Service in the Event of Outages. Sprint
restoration of service in the event of outages due to
equipment failures, human error, fire, natural disaster, acts
of God, or similar occurrences shall be performed in
accordance with the following priorities. First, restoration
priority shall be afforded to those services affecting its
own end-users and identified Carrier end-users relative to
national security or emergency preparedness capabilities and
those affecting public safety, health, and welfare, as those
elements and services are identified by the appropriate
government agencies. Second, restoration priority shall be
afforded between Sprint and Carrier in general. Third, should
Sprint be providing or performing Tandem Switching
functionality for Carrier, third level priority restoration
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should be afforded to any trunk. Lastly, all service shall be
restored as expeditiously as practicable and in a
non-discriminatory manner.
2.5. Service Projections. Carrier shall make available to Sprint
Periodic Service projections, on a semiannual basis.
2.6. Quality of Service
2.6.1. Upon deployment of Electronic Interfaces, Sprint
shall provide Carrier with the same intervals and
level of service provided by Sprint to its end-users
or other Carriers at any given time.
2.6.2. Upon deployment of Electronic Interfaces, Sprint
shall provide Carrier maintenance and repair
services in a manner that is timely, consistent with
service provided to Sprint end-users and/or other
Carriers.
3. ADDITIONAL SERVICES
3.1. 911/E911
3.1.1. Where Sprint is the owner or operator of the
911/E911 database, Sprint will maintain daily
updating of 911/E911 database information related
to Carrier end-users.
3.1.2. Sprint will provide Carrier a default arrangement/
disaster recovery plan including an emergency
back-up number in case of massive trunk failures.
3.2 Directory Listings and Distribution
3.2.1. White Page Directories; Distribution; Use of Listing
Information
3.2.1.1. Sprint agrees to include one basic White Pages
listing for each Carrier customer located with the
geographic scope of its White Pages directories, at
no additional charge to Carrier. A basic White Pages
listing is defined as a customer name, address and
either the Carrier assigned number for a customer or
the number for which number portability is provided,
but not both numbers. Basic White Pages listing of
Carrier customers will be interfiled with listings
of Sprint and other CLECs' customers.
3.2.1.2. Carrier agrees to provide Carrier customer listing
information, including without limitation directory
distribution information, to Sprint at no charge.
Sprint will provide Carrier with the appropriate
format for provision of Carrier customer listing
information and service order updates to Sprint.
3.2.1.3. Sprint agrees to provide White Pages database
maintenance
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services to Carrier. Carrier will be charged a
Service Order entry fee upon submission of Service
Orders into Sprint's Service Order Entry System,
which will include compensation for such database
maintenance services. Service Order entry fees apply
when Service Orders containing directory records are
entered in Sprint's Service Order Entry System
initially, and when Service Orders are entered in
order to process a requested change to directory
records.
3.2.1.4. Carrier customer listing information will be used
solely for the provision of directory services,
including the sale of directory advertising to
Carrier customers.
3.2.1.5. In addition to a basic White Pages listing, Sprint
will provide, at the rates set forth in the
appropriate Sprint Tariff, Tariffed White Pages
listings (e.g., additional, alternate, foreign and
non-published listings) for Carrier to offer for
resale to Carrier's customers.
3.2.1.6. Sprint agrees to provide White Pages distribution
services to Carrier customers within Sprint's
service territory at no additional charge to
Carrier. Sprint represents that the quality,
timeliness, and manner of such distribution services
will be at parity with those provided to Sprint and
to other CLEC customers provided that Carrier
provides required information and meets criteria and
specifications established by its directory
publisher.
3.2.1.7. Sprint agrees to include critical contact
information pertaining to Carrier in the
"Information Pages" of those of its White Pages
directories provided that Carrier meets criteria
established by its directory publisher.
3.2.2. Sprint will accord Carrier customer listing
information the same level of confidentiality that
Sprint accords its own proprietary customer listing
information. Sprint shall ensure that access to
Carrier customer proprietary listing information
will be limited solely to those of Sprint and
Sprint's directory publisher's employees, agents and
contractors that are directly involved in the
preparation of listings, the production and
distribution of directories, and the sale of
directory advertising. Sprint will advise its own
employees, agents and contractors and its directory
publisher of the existence of this confidentiality
obligation and will take appropriate measures to
ensure their compliance with this obligation.
Notwithstanding any provision herein to the
contrary, the furnishing of White Pages proofs to a
CLEC that contains customer listings of both Sprint
and Carrier will not be deemed a violation of this
confidentiality provision.
3.2.3. Sprint will not sell or license Carrier's customer
listing information
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to any third parties unless Carrier provides written
notice to the contrary. Once Sprint's system is able
to distinguish Sprint and Carrier listings, Sprint
and Carrier will share in revenues derived from the
sale or licensing of customer listing information
net of administration expenses incurred by Sprint in
providing such information to third parties.
3.2.4. Other Directory Services
3.2.4.1. Sprint will exercise reasonable efforts to cause its
directory publisher to enter into a separate
agreement with Carrier which will address other
directory services desired by Carrier as described
in this ss. 3.2. Both parties acknowledge that
Sprint's directory publisher is not a party to this
Agreement and that the provisions contained in this
ss.3.2 are not binding upon Sprint's directory
publisher.
3.2.4.2. Sprint's directory publisher will negotiate with
Carrier concerning the provision of a basic Yellow
Pages listing to Carrier customers located within
the geographic scope of publisher's Yellow Pages
directories and distribution of Yellow Pages
directories to Carrier customers.
3.2.4.3. Directory advertising will be offered to Carrier
customers on a nondiscriminatory basis and subject
to the same terms and conditions that such
advertising is offered to Sprint and other CLEC
customers. Directory advertising will be billed to
Carrier customers by directory publisher.
3.2.4.4. Directory publisher will use commercially reasonable
efforts to ensure that directory advertising
purchased by customers who switch their service to
Carrier is maintained without interruption.
3.2.4.5. Information pages, in addition to any information
page or portion of an information page containing
critical contact information as described above in
ss. 3.2.1.7, may be purchased from Sprint's
directory publisher, subject to applicable directory
publisher guidelines and regulatory requirements.
3.2.4.6. Directory publisher maintains full authority as
publisher over its publishing policies, standards
and practices, including decisions regarding
directory coverage area, directory issue period,
compilation, headings, covers, design, content or
format of directories, and directory advertising
sales.
3.3. Directory Assistance
3.3.1. General Requirements for Resale of Directory
Assistance
28
<PAGE> 31
3.3.1.1. Where Sprint is a directory assistance service
provider, at Carrier's request, subject to any
existing system capacity restraints which Sprint
shall work to overcome, Sprint will provide to
Carrier resale of Carrier branded directory
assistance service which is at parity with the
directory assistance service Sprint makes available
to its own end-users.
3.3.1.2. Sprint will make Carrier's data available to anyone
calling Sprint's DA and will update its database
with Carrier's data at Parity with updates from its
own data.
3.3.1.3. Sprint may store proprietary customer information
provided by Carrier in its Directory Assistance
database; such information should be able to be
identified by source provider in order to provide
the necessary protection of Carrier's or Carrier
customer's proprietary or protected information.
3.3.1.4. Carrier may limit Sprint's use of Carrier's data to
Directory Assistance or, pursuant to written
agreement, grant greater flexibility in the use of
the data subject to proper compensation.
3.3.1.5. Where Directory Assistance is a separate retail
service provided by Sprint, Sprint will allow
wholesale resale of Sprint DA service.
3.3.1.6. To the extent Sprint provides Directory Assistance
service, Carrier will provide its listings to Sprint
via data and processed directory assistance feeds in
accordance with an agreed upon industry format.
Sprint shall include Carrier listings in its
Directory Assistance database.
3.3.1.7. Carrier has the right to license Sprint unbundled
directory databases and sub databases and utilize
them in the provision of its own DA service. To the
extent that Carrier includes Sprint listings in its
own Directory Assistance database, Carrier shall
make Sprint's data available to anyone calling
Carrier's DA.
3.3.1.8. Sprint will make available to Carrier all DA service
enhancements on a non-discriminatory basis.
3.3.2. When requested by Carrier where Carrier provides its own DA,
and if technically feasible, Sprint will route Carrier
customer DA calls to Carrier DA centers at Carrier's expense.
29
<PAGE> 32
3.3.3. Business Processes
3.3.3.1. Sprint will, consistent with ss. 222 of the Act,
update and maintain the DA database with Carrier
data, utilizing the same procedures it uses for its
own customers, for those Carrier customers who:
3.3.3.1.1. Disconnect
3.3.3.1.2. Change Carrier
3.3.3.1.3. Install
3.3.3.1.4. "Change" orders
3.3.3.1.5. Are Non-Published
3.3.3.1.6. Are Non-Listed
3.3.3.1.7. Are Non-Published/Non-Listed
3.3.4. Carrier shall bill its own end-users.
3.3.5. Carrier will be billed in an agreed upon standard format.
3.3.6. Compensation
3.3.6.1. When Carrier is rebranding the local service of
Sprint, directory assistance that is provided
without separate charge to end-users will be
provided to Carrier end-users without separate
charge, subject to any additional actual expense to
brand the service with Carrier's brand. Where DA is
separately charged as a retail service by Sprint,
Carrier shall pay for DA service at retail less
avoided cost.
3.3.6.2. Sprint shall place Carrier end-users listings in its
directory assistance database for no charge.
3.3.6.3. Sprint shall, subject to ss. 222 of the Act, as
enacted or hereafter amended, make its unbundled
directory assistance database available to Carrier.
3.3.6.4. Any additional actual trunking costs necessary to
provide a Carrier branded resold directory
assistance service or routing to Carrier's own
directory assistance service location shall be paid
by Carrier.
3.4. Operator Services
30
<PAGE> 33
3.4.1. General Requirements
3.4.1.1. Where Sprint (or a Sprint Affiliate on
behalf of Sprint) provides operator
services, at Carrier's request (subject to
any existing system capacity restraints)
Sprint will provide to Carrier, Carrier
branded operator service at parity with the
operator services Sprint makes available to
its own end-users.
3.4.1.2. At Carrier's request, subject to any
existing system capacity restraints, Sprint
will route Operator Service traffic of
Carrier's customers to the Carrier's
Operator Service Center at Carrier's
expense.
3.4.1.3. Sprint shall provide operator service
features to include the following: (i)
local call completion 0- and 0+, billed to
calling cards, billed collect, and billed
to third party, and (ii) billable time and
charges, etc. Depending upon the operating
region, Blocking feature associated with
Operator Services may also be available.
3.4.2. Compensation
3.4.2.1. Sprint shall provide operator services for
resale at wholesale prices.
3.4.2.2. When Carrier requests Carrier branded
Sprint operator services for resale any
actual additional trunking costs associated
with Carrier branding shall be paid by
Carrier.
3.4.2.3. Where Carrier provides its own Operator
Services, the Parties shall jointly
establish a procedure whereby they will
coordinate Busy Line Verification ("BLV")
and Busy Line Verification and Interrupt
("BLVI") services on calls between their
respective end-users. BLV and BLVI
inquiries between operator bureaus shall be
routed over the appropriate trunk groups.
Carrier and Sprint will reciprocally
provide adequate connectivity to facilitate
this capability. In addition, upon request
of Carrier, Sprint will make available to
Carrier for purchase under contract BLV and
BLVI services at wholesale rates.
4. ADDITIONAL RESPONSIBILITIES OF THE PARTIES
4.1. Law Enforcement And Civil Process
4.1.1. Intercept Devices. Local and federal law enforcement
agencies periodically request information or
assistance from local telephone
31
<PAGE> 34
service providers. When either Party receives a
request associated with a customer of the other
Party, it shall refer such request to the Party that
serves such customer, unless the request directs the
receiving Party to attach a pen register,
trap-and-trace or form of intercept on the Party's
facilities, in which case that Party shall comply
with any valid request. Charges for the intercept
shall be at Sprint's applicable charges.
4.1.2. Subpoenas. If a Party receives a subpoena for
information concerning an end-user the Party knows
to be an end-user of the other Party, it shall refer
the subpoena back to the requesting Party with an
indication that the other Party is the responsible
Company, unless the subpoena requests records for a
period of time during which the Party was the
end-user's service provider, in which case the Party
will respond to any valid request.
4.1.3. Hostage or Barricaded Persons Emergencies. If a
Party receives a request from a law enforcement
agency for temporary number change, temporary
disconnect or one-way denial of outbound calls for
an end-user of the other Party by the receiving
Party's switch, that Party will comply with any
valid emergency request. However, neither Party
shall be held liable for any claims or damages
arising from compliance with such requests on behalf
of the other Party's end-user and the Party serving
such end-user agrees to indemnify and hold the other
Party harmless against any and all such claims.
IN WITNESS WHEREOF, each of the Parties has caused this Agreement to be
executed by its duly authorized representatives.
CARRIER SPRINT
By: /s/Richard Pollara By: /s/ Michael E. Solon
---------------------------- ----------------------------
Name: Richard Pollara Name: Michael E. Solon
-------------------------- --------------------------
Title: President Title: Reg Dir - Carrier Mkts
------------------------- -------------------------
Date: 9/31/98 Date: October 14, 1998
-------------------------- --------------------------
32
<PAGE> 35
EXHIBIT 1
SPRINT - UNITED TELEPHONE COMPANY OF INDIANA, INC.
RESALE DISCOUNTS
Sprint (United Telephone Company of Indiana, Inc.) is discounting as listed
below from the current tariffed rates until such time as appropriate tariffs are
filed. These discounts are based upon Sprint's Avoided Cost Studies.
<TABLE>
<CAPTION>
SERVICES DISCOUNTS
-------- ---------
<S> <C>
Residential Local Service 9.92%
Simple Business Local Service 9.92%
Local Measured Service 9.92%
Extended Area Service 9.92%
Centrex Line 9.92%
Key System 9.92%
PBX 9.92%
Custom Calling Features 9.92%
CLASS 9.92%
Centrex Features 9.92%
Directory Assistance 7.26%
Operator Assistance 7.26%
Private Line Assistance 9.92%
Intralata Toll 9.92
</TABLE>
33
<PAGE> 1
EXHIBIT 11
STATEMENT REGARDING COMPUTATION OF PER SHARE DATA
<TABLE>
<CAPTION>
Nine Months Ended Periods Ended
September 30 December 31
-------------------------- -------------------------
1999 1998 1998 1997
(unaudited) (unaudited)
----------- ----------- ------------ ---------
<S> <C> <C> <C> <C>
NET LOSS $(4,558,223) $ (360,333) $(34,855,827) $ (250)
----------- ---------- ------------ ---------
Per share data
Basic loss per share $ (0.45) $ (0.07) $ (5.68) $ --
----------- ---------- ------------ ---------
Diluted loss per share $ (0.45) $ (0.07) $ (5.68) $ --
----------- ---------- ------------ ---------
Weighted average number
of common shares
Basic common shares 10,236,796 5,115,114 6,140,532 --
----------- ---------- ------------ ---------
Diluted common shares 10,236,796 5,115,114 6,140,532 --
----------- ---------- ------------ ---------
</TABLE>
<PAGE> 1
(PNCCPAs LOGO)
Consent of Independent Auditors
We hereby consent to the use of our Auditors' opinion, dated December 7, 1999,
in the December 17, 1999 Form S-1 to be filed by United States
Telecommunications, Inc. accompanying the financial statements of United States
Telecommunications, Inc. as of December 31, 1998 and 1997 and Tel Com Plus East,
L.L.C., Tel Com Plus West, L.L.C., and Tel Com Plus Jacksonville, L.L.C. as of
September 30, 1998 and December 31, 1997, and the results of their operations
and cash flows for the years and period then ended.
Certified Public Accountants
Tampa, Florida
December 17, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF UNITED STATES TELECOMMUNICATIONS, INC. AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS AND NOTES THERETO.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 2,700,575
<ALLOWANCES> 1,114,170
<INVENTORY> 0
<CURRENT-ASSETS> 1,764,069
<PP&E> 671,973
<DEPRECIATION> 222,575
<TOTAL-ASSETS> 6,290,977
<CURRENT-LIABILITIES> 5,772,195
<BONDS> 0
0
1,572,951
<COMMON> 0
<OTHER-SE> 35,200,804
<TOTAL-LIABILITY-AND-EQUITY> 6,290,977
<SALES> 12,232,122
<TOTAL-REVENUES> 12,232,122
<CGS> 5,579,939
<TOTAL-COSTS> 10,348,228
<OTHER-EXPENSES> 2,134,322
<LOSS-PROVISION> 1,798,769
<INTEREST-EXPENSE> 43,598
<INCOME-PRETAX> (4,558,223)
<INCOME-TAX> 0
<INCOME-CONTINUING> (4,558,223)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,558,223)
<EPS-BASIC> (0.45)
<EPS-DILUTED> (0.45)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF UNITED STATES TELECOMMUNICATIONS, INC. AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS AND NOTES THERETO.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 627,854
<SECURITIES> 0
<RECEIVABLES> 3,653,566
<ALLOWANCES> 2,638,331
<INVENTORY> 0
<CURRENT-ASSETS> 1,777,023
<PP&E> 501,262
<DEPRECIATION> 47,732
<TOTAL-ASSETS> 6,628,989
<CURRENT-LIABILITIES> 5,165,697
<BONDS> 0
0
1,572,951
<COMMON> 0
<OTHER-SE> (32,477,396)
<TOTAL-LIABILITY-AND-EQUITY> 6,628,989
<SALES> 5,347,642
<TOTAL-REVENUES> 5,347,642
<CGS> 2,317,945
<TOTAL-COSTS> 5,448,535
<OTHER-EXPENSES> 32,423,129
<LOSS-PROVISION> 1,953,860
<INTEREST-EXPENSE> 13,860
<INCOME-PRETAX> (34,841,967)
<INCOME-TAX> 0
<INCOME-CONTINUING> (34,841,967)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (34,855,827)
<EPS-BASIC> (5.68)
<EPS-DILUTED> (5.68)
</TABLE>
